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What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MOORMAN, Circuit Judge.
The patents in suit, Nos. 1,571,801 and 1,730,900, are combination patents rélatiijg to an automobile axle. The appellee, as owner of the patents, makes and sells, without restriction, the patented structures. Among the parts of each of the structures are beveled gear pairs and a wheel driving shaft, neither of which is patented. ^ The appellant makes and sells gears and driving shafts designed for use in appellee’s axles, This is a suit for contributory infringement of the patents resulting from the appellant’s selling such parts. The defenses are invalidity and noninfringement. The court below found the patents valid and infringed, enjoined the appellant from maleing, using, or selling any oí the designated parts usable for rebuilding axles, and awarded the appellee nominal damages in the sum of one dollar. •
In sustaining the first patent the court followed its decision in Timken-Detroit Axle Co. v. Eaton Axle & Spring Co. (D. C.) 56 F.(2d) 651. The appellant, without conceding the correctness of this ruling but suggesting the contrary, relies for a reversal of the decree in its argument before us upon its pleaded defense of noninfringement. We are of opinion that the decisión in the Timken-Detroit Axle Co. Case is right, and since the determination of infringement or noninfringement of the patent there sustained is sufficient for decision of the case here presented, we do not pass upon the validity of the second patent.
Samples of the parts of the combination in controversy were introduced in evidence as Exhibits M, N, and P. The parties agree that these parts may be lawfully sold by appellant for repairs but cannot be sold for building or rebuilding the combination. The controversy between, them revolves, therefore, about the question: What are r ^ ^ .g re£uildi ? The m¿ntg Qn these ^ main with generalizations/without reference to spe*ific sales Qr replacements. The appellant contends that it has the right to sell the parts for replacements in axles sold by the appellee, regardless of the condition of the other parts of such axles. It also says that the parts are not the “gist or essence of the invention,” and on that hypothesis argues tllat replacement under any condition is not rebuilding. The appellee says that the evidence shows that the reasonably expected usage 0f the combination is a hundred thousand miles, and that the sale by the appellant of any of the parts to replace a corresponding broken or worn-out part in the original construction before the axle has undergone such usage is rebuilding,
jtj The invention is for a composite thing, embracing several elements or parts, all of which are necessary to and co-operate in j-he operation of the patented unit. We cannot subscribe to the view that the test of contributory infringement in the furnishjng 0f parts for a combination invention is whether the parts furnished constitute the gist or essence of the invention; indeed, we cannot see how it may be said that any one element or another marks the advance step or js the essence of such an invention, There are cases, it is true, in which the phrase “essence of the invention” is used; but in our view, when the facts in those cases are considered, it cannot be said that the conclusions reached were the result of a logical selection of one or more elements of the combination as the gist or essence of the invention. Neither can we accept the appellee’s theory, for it seems plain to us that if it sells one of its axles and the shaft or gearing breaks by accident or because of defect in the material, the buyer has the right to repair or replace the broken ■ part in order to make the axle operative and perform the functions for which it was designed. Similarly, if one of the parts is made of defective or soft material and wears out, the other parts of the combination being capable of performing their normal and expected functions, the right to replace the worn-out part exists, it seems to us, quite as definitely as in the case of breakage. These rights the appellee confers upon the purchaser by the unconditional sale of the device, and the purchaser having them may employ such services as he wishes to put them into effect. The correct rule is stated, we think, in Wilson v. Simpson, 9 How. 109, 122, 123, 13 L.Ed. 66, as follows: “In either case, repairing partial injuries, whether they occur from accident or from wear and tear, is only refitting a machine for use. And it is no more than that, though it shall be a replacement of an essential part of a combination. It is the use of the whole of that which a purchaser buys, when the patentee sells to him a machine; and when he repairs the damages which may be done to it, it is no more than the exercise of that right of care which every one may use to give duration to that which he owns, or has a right to use as a whole.” See, also, Shickle, Harrison & Howard I. Co. v. St. Louis Car-Coupler Co. (C.C.A.) 77 F. 739, 740.
The rule as stated in these cases do'es not, of course, include replacement of all parts of a combination which may be concurrently broken or exhausted by wear. To permit such replacement would be to permit reconstruction. The right, in our view, must depend in every case upon the special facts of the case as they show the relation of the two classes of parts — those supplied and those remaining in the original construction- — to the patented unit. Tt is not to be decided upon a reasonably expected effective operation of the combination as a whole, the so-called activity or passivity of the parts, or upon convenience or necessities of method in making the replacements. Thus, if the new parts so dominate the structural substance of the whole as to justify the conclusion that it has been made anew, there is a rebuilding or reconstruction; and conversely, where the original parts, after replacement, are so large a part of the whole structural substance as to preponderate over the new, there has not been a reconstruction but only repair. This view is not inconsistent with Foglesong Mach. Co. v. J. D. Randall Co., 239 F. 893 (C.C.A.6), relied upon by the appellant,- or Leeds & Catlin Co. v. Victor Talking Mach. Co., 213 U.S. 301, 29 S.Ct. 495, 53 L.Ed. 805, upon which appellee relies. Its application to the facts in those cases would result, in our opinion, in the conclusions there reached. Every case, as we have said, must be decided on its special facts and circumstances. For example, there might be a structure where the putting in of a certain number of new parts would be “reconstruction,” whereas the putting in of a smaller number would be “repair,” or even where the putting in of one new part would be reconstruction but the putting in of two or three would not be, depending in each case upon whether, after the replacement, the structure as a whole could reasonably be said to be a new structure or the old one. The difficulties that are sometimes encountered in arriving at a correct conclusion in such cases do not arise from any vagueness or uncertainty in the rule or test to be applied, but from the necessity of determining which of the two classes of parts, those supplied or the remaining original parts, dominates the structure as a whole. We are not called upon to make that determination here, for there is no evidence of specific replacements and nothing to show the condition of the original parts of any axle in which a replacement was made or how many of the parts the appellant ever sold for use in a single axle.
The appellee bought two of the parts from the appellant for the purpose of obtaining evidence of infringement. It was not shown whether those parts were ever used for replacements, or, if so, in what circumstances. The appellant nevertheless alleged in its answer that it had sold and offered for sale, and intended to continue to offer for sale, the parts “as substitutes for corresponding worn and damaged parts in the aforesaid axle.” The decree enjoins the appellant from selling any of the parts. We think the injunction is too broad, for plainly the appellant has the right to sell parts to replace broken or worn out corresponding parts in axles where the other original parts are sound, provided the new parts will not so dominate the device as to give it the character of a new structure. The injunction, if enforced, would forbid the exercise of this right. We cannot assume that all of the parts which appellant sold were not rightfully sold for such uses. In view of the averment in the answer, we must assume, however, that some of them were sold for impermissible uses. There were no findings of fact as to specific sales and uses; indeed, as we have stated, there was no evidence offered on which findings on those points could be made. Ordinarily the burden rests upon the plaintiff to show patent infringement, but in circumstances such as are here disclosed, where there is an admission of sales without reservation as to the number sold for a single axle or the condition of the original parts in any such axle, it would seem only fair that the seller should assume the burden of showing that its acts were not infringements. It would be difficult for the appellee to ascertain the facts necessary to the determination of that question. The appellant ought to have records of its sales and customers from which the purpose for which the parts were bought could be ascertained, that is, whether for the purpose of repairs or for reconstruction within the meaning of those terms as we have herein defined them. It should, however, have an opportunity to show that the sales were rightfully made, but pending its attempt to do so, if it wishes to make such an attempt, it should be put under the restraint of a temporary injunction of the scope of the injunction herein complained of.
The order of injunction is vacated, and the cause remanded, with direction to the trial court to rehear the cause and determine whether the appellant’s sales are for the purpose of repairs or reconstruction within the meaning of those terms as herein defined. Pending such determination the court will issue a temporary injunction against the appellant of the character hereinbefore indicated; and should the appellant fail to offer evidence on the hearing showing to the court’s satisfaction that the parts which it proposes to make and sell in the future will be made or sold for no other purpose than repairs as herein defined, the court will issue an order permanently enjoining the appellant from making or selling them for any purpose.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
ORDER
Before EDWARDS, CELEBREZZE and PECK, Circuit Judges.
This is an appeal from a decision of the Tax Court finding a deficiency in income tax due for the year 1972. The case was submitted on the briefs and oral arguments of counsel, and the Court has studied the record and is fully advised in the premises.
The issues are whether taxpayers are entitled to nonrecognition of gains realized on the sale of one or both of two residences sold in 1972, and, if only one gain is recognized, which gain should be so treated. Internal Revenue Code § 1034. Taxpayers contend that they are entitled to nonrecognition of the gains realized on the sale of both residences.
We determine that the findings of the United States Tax Court are not clearly erroneous.
It is therefore ordered that the decision of the United States Tax Court be and hereby is affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
CHAMBERS, Circuit Judge.
The Pierces of Portland, Oregon, are husband and wife who filed separate federal income tax returns for the years 1946 and 1948. Their net incomes as reported for 1946 were over $65,000 each. In 1948 after deductions they had no net income and were required to pay no tax. Naturally out of their misfortunes in 1948 they are looking for “loss carry-backs” to 1946 as a basis for refunds on their taxes that year. Claiming the loss carry-backs to Í946, the taxpayers in June, 1949, filed claims for refunds which the commissioner never allowed. Consequently the taxpayers filed separate suits for refund against the United States in December, 1954, in the United States District Court for the District of Oregon. In those suits the wife prevailed and the husband was denied relief. The losing party in each case has appealed and the appeals have been consolidated.
Some detail of the financial operations of the Pierces is required. They formed a partnership in 1935 known as the L. H. Pierce Auto Service. The partnership was in continuous existence through 1948, and may still exist. In 1946 and perhaps for some years prior thereto this partnership engaged principally in the manufacture of automobile trailers. About the time the Pierces in 1947 made out their returns for 1946 they decided to form and did form an Oregon corporation known as the Pierce Trailer & Equipment Co. This company took over the trailer manufacturing end of the partnership, husband and wife each owning one half of the corporate stock. The partnership thenceforward conducted a more limited business, leasing its property to the. corporation and doing some other unrelated business, principally farming.
In 1948, although the partnership received $12,000 in rents, there was a net loss for the year of $4,193.12. This was reflected on the returns of the taxpayers as a business loss from the partnership of $2,096.56 each. The Pierces also suffered a personal casualty loss of $6,782.-93 from a 1948 flood. This was entered as a non-business loss in the amount of $3,391.47 for each taxpayer on his return. The next major item on the 1948 individual returns of the Pierces is ths sum of $6,000 paid L. H. Pierce, the husband by the Pierce Trailer and Equipment Co. for his management services. In 1948 the state of Oregon was trying out the community property system. The taxpayers properly divided this salary between their returns, showing receipt of $3,000 each.
To resolve problems presented here it must be decided whether this salary-item was:
1. Business or non-business income as to one half for the husband.
2. Business or non-business income as to one half for the wife.
Then the Pierces have a secondary point. If the salary should be ruled business income, still they say that business income or losses from each business of a taxpayer should be compartmentalized. That is to say, if the taxpayer sustained a loss in business venture “A” and made a gain in business venture “B,” he need not match one against the other but may carry back the loss in venture “A” to a highly profitable year on venture “A” reflected in the return for the better earlier year, thus get a refund. Practically, the taxpayers’ necessity is to disengage the salary (gain) from his or her partnership loss, so that the partnership loss need not be deducted from the salary, but may be carried back to the former year where it is really of some value, the taxes in the former year being substantial.
We are wholly concerned here with the 1939 Internal Revenue Code. Section 122, 26 U.S.C.A. § 122, provides:
“(a) Definition of net operating loss. As used in this section, the term ‘net operating loss’ means the excess of the deductions allowed by this chapter over the gross income, with the exceptions, additions, and limitations provided in subsection (d).
“(b) Amount of carry-back and carry-over.
“(1) Net operating loss carry-back.
“(A) Loss for taxable year begin?-ning before 1950.
“If for any taxable year beginning after December 31, 1941, and before January 1, 1950, the taxpayer has a net operating loss, such net operating loss shall be a net operating loss carry-back for each of the two preceding taxable years, except that the carry-back in the case of the first preceding taxable year shall be the excess, if any, of the amount of such net operating loss over the net income for the second preceding taxable year computed—
“(i) with the exceptions, additions, and limitations provided in subsection (d)(1), (2), (4), and (6), and
“(ii) by determining the net operating loss deduction for such second preceding taxable year without regard to such net operating loss and without regard to any reduction specified in subsection (c).
“(B) Loss for taxable year beginning after 1949. If for any taxable year beginning after December 31, 1949, the taxpayer has a net operating loss, such net operating loss shall be a net operating loss carry-back for the preceding taxable year.
* * * * *
“(d) Exceptions, additions, and limitations.
“The exceptions, additions, and limitations referred to in subsections (a), (b), and (c) shall be as follows:
* * * * * *
“(5) Deductions otherwise allowed by law not attributable to the operation of a trade or business regularly carried on by the taxpayer shall (in the case of a taxpayer other than a corporation) be allowed only to the extent of the amount of the gross income not derived from such trade or business. For the purposes of this paragraph deductions and gross income shall be computed with the exceptions, additions, and limitations specified in paragraphs (1) to (4) of this subsection.”
Insofar as the husband’s one half of the salary is concerned this court is satisfied with the holdings in Folker v. Johnson, 2 Cir., 230 F.2d 906, and Overly v. Commissioner, 3 Cir., 243 F.2d 576, wherein it is held that working for a salary puts one in the business of selling one’s own service; that such salary is not non-business income.
The taxpayer’s second contention that he can separate his businesses and carry back a loss in 1948 from business “A” to the same business “A” profit in 1946, ignoring the profit in business “B” (that is, not matching A against B, before carrying back) has some merit as an argument when Section 122(d) (5) uses the words: “such trade or business’’ (emphasis supplied). Of course, every business is a business and a taxpayer may have many businesses. Thus, he ought to be able to compartmentalize according to the statute, it is argued. But our best judgment is that the draftsman at the moment was thinking of all business of the taxpayer as being his business, as “such business.” Imagine the complications that would arise if a taxpayer operated a dozen separate grocery stores and each were to be considered a separate business for the purpose of the loss carry-back provisions. If that pattern were denied to his separate businesses, then what of him with 40 different resident partners? It is just too hard to believe that the Congress intended to open up any such complications. In Section 29.122-3, Treasury Regulations 111, under the Internal Revenue Code of 1939, the commissioner seems to classify (and rightly) for loss carry-back all businesses of a taxpayer as one business.
The pertinent part of the regulation is as follows:
“Sec. 29.122-3. Computation of Net Operating Loss in Case of a Taxpayer Other Than a Corporation. — (a) General. — A net operating loss is sustained by a taxpayer other than a corporation in any taxable year if and to the extent that, for such year, there is an excess of deductions allowed by chapter 1 over gross income, both computed with the following exceptions and limitations :
*****
“(7) Ordinary nonbusiness deductions (i. .e., exclusive of capital . losses) shall be allowed only to the extent of the amount of ordinary nonbusiness gross income (i. e., exclusive of capital gains), plus (A) for any taxable year beginning after December 31j 1938, and before January 1, 1942, the excess, if any, of nonbusiness long-term and short-term capital gains over nonbusiness long-term and short-term capital losses, respectively, and (B) for any taxable year beginning after December 31, 1941, the excess, if any, of nonbusiness capital gains over non-business capital losses.”
The commissioner’s regulation is sensible and one would think in accord with the probable congressional intent. So this court rejects the right to segregate the businesses for the purposes of this carry-back.
Therefore, the district court is afiirmed as to the husband’s case.
Next is the holding that the wife’s half of the salary is non-business income — because she didn’t earn it. This court disagrees. Of course, community property was an evanescent thing in Oregon, born under federal tax weight and expiring when the weight was shifted. So Oregon has no wealth of community property law. Section 122(d) (5), supra, does use the term “business regularly carried on by the taxpayer.” But the warp and woof of community property law in the old community property states is that when the husband or the wife is at work, the community is at work; at least, in working the worker is carrying on the business of the community. Thus, it was business income. See Poe v. Seaborn, 282 U.S. 101, 51 S.Ct. 58, 75 L.Ed. 239 (Washington community property income); Goodell v. Koch, 282 U.S. 118, 51 S.Ct. 62, 75 L.Ed. 247 (Arizona community property income); Bender v. Pfaff, 282 U.S. 127, 51 S.Ct. 64, 75 L.Ed. 252 (Louisiana community property); and Hopkins v. Bacon, 282 U.S. 122, 51 S.Ct. 62, 75 L.Ed. 249 (Texas community property income).
This court’s decision in Graham v. Commissioner, 9 Cir., 95 F.2d 174, holding that the salary paid the husband for services was “earned income” of both the husband and wife may not be an identical case; therefore, not controlling, but it certainly does not call for a different result.
Really, the explanation of the decisions of Graham and of this case on the nature of the husband’s labor lies in the fundamental community property concept. Of course, the Congress could ignore the state concept and reclassify. It could say the wife’s one half of the wages paid the husband was not business income. See United States v. Kintner, 9 Cir., 216 F.2d 418. Here it has not issued either command or the suggestion that such be done.
Therefore, the judgment in favor of the wife is reversed.
. The life of Oregon community property law began on July 5, 1947, and expired on April 11, 1949. See Chapter 525, Oregon Laws of 1947 and Chapter 349, Oregon Laws of 1949. Therefore, it was in effect during all of the year 1948, the second of the two years involved in the within case.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
SWAN, Circuit Judge.
The evidence presented a sharp conflict of testimony on all of the important issues of fact, and, if the District Judge had made detailed findings, we should hesitate to disturb them. Inasmuch, however, as he made no comment on the credibility of any witness, and no finding of the specific facts upon which is predicated his conclusion that both vessels were at fault, we have found it necessary to examine the record and determine for ourselves, as best we can, the truth of the matter.
The Plainfield was on a trip from Communipaw, N. J., to her slip at Liberty street, New York. In a general sense, she crosses and comes up the Hudson river. The Catskill was on a trip from Weehawken, N. J., to her slip at Cortlandt street, New York. In a general sense, she-was bound down the river. Her slip was the middle one of five slips which lie between Pier 13 to the north and Pier 11 to the south. The distance between these piers is about 500 feet. The Plain-field’s slip was adjacent to and south of the New York Central slip, for which the Catskill was bound. On the end of Pier 11 is a fog bell of the Central Railroad of New Jersey. Another fog bell is located on the rack between the New York Central’s slip and the Pennsylvania’s slip adjacent on the north.
The collision occurred at a point close to the ferry slips above mentioned at about 8:55 a. m., Catskill’s time. Her clock was probably somewhat slower than the Plainfield’s, for the latter left Communipaw at 8:52 a. m., her time, and her usual running time to her New York slip is about 7 minutes. In the vicinity of the slips the fog was very dense. Both vessels were blowing proper fog signals. When they sighted each other, they were, according to both captains, only about 75 feet apart on crossing courses; the Catskill having the Plainfield on her starboard bow. The tide was flood. After the collision each vessel proceeded to her slip.
As to the foregoing facts there is substantial agreement, but in respect to all other material facts the stories of the two ferryboats are in great conflict.
The Plainfield contends in .her pleadings that the collision occurred about 200 feet off the end of Pier 11. The testimony of her wheelsman and her lookout is to this effect. Her master seems to place it a little farther north. He says he was headed straight for his slip, which he had in full view. He says, also, that, having previously stopped his engines, he was-just drifting inshore when the Catskill suddenly appeared on his port side, coming with “good speed.” He immediately put the engines full speed astern, and his boat was still in the water at the moment of impact. He testified that the angle of collision was a right angle, the bow of the Catskill striking the port side of the Plainfield about 45 feet from her bow. Eour other members of the crew corroborated in various particulars the master’s version of the events.
The witnesses for the Catskill locate the place of collision farther north, just off her slip. Her master says he fixed her position by the fog bell on Pier 11, which bore dead ahead, and the bell on the Pennsylvania rack, which was abreast of the pilot house. With her engines stopped, she was just stemming the tide and waiting for the ferryboat Utica to come out of the Catskill’s slip. While the Catskill was lying in this position, the Plain-field suddenly appeared out of the fog, about 50 feet away and nearly abreast on the starboard side. The Catskill’s engines were immediately ordered full speed astern, and were backing when the Plainfield rode over the Catskill on the starboard bow. After only a few turns of the propeller, the Catskill’s stern struck the end of Pier 13, indicating that she was moving astern and close to Pier 13 at the moment of the collision. Immediately after the collision the Utica left the slip and passed aeross the bow of the Catskill. Pour other members of her crew and five passengers on the Catskill corroborate various details of this version of the accident. There were seven of the Catskill’s passengers, «ailed as witnesses for the personal injury claimant, whose testimony was less favorable to her.
We are satisfied that the weight of the evidence fixes the location of the collision where the Catskill contends it was, rather than off Pier 11, as the Plainfield contends. The fact that the Catskill backed into Pier 13 immediately after the accident, and the fact that the Utica, in leaving the slip crossed her bow, give corroboration to the testimony of her crew and certain of her passenger witnesses as to her location. Furthermore, it seems inherently improbable that she would so far have lost her way as to have passed hef slip and proceeded down to Pier 11 at good speed, because of the slip bell and the bell on Pier 11.
The location of the Catskill has a hearing on the disputed question of her speed. It gives imobability to her story that she had stopped, waiting for her slip to be clear. Moreov.er, the only witnesses who can be regarded as disinterested are the passengers not involved in the collision as injured persons or as friends of the injured. They had no reason to favor the Catskill. On the other hand, had she been guilty of the negligence charged, they would have been likely to feel outraged and to testify willingly to her faults. Their testimony substantiates her story in many of its details, and particularly in respect to her cessation of nearly all speed when she got abreast of her slip. The character of the damage which she suffered also gives persuasive -evidence that, if she was not actually moving backward at the moment of impact, her speed was much less than that of the Plainfield. The boats came together at an acute angle, and the overhanging guard of the Plainfield swept the starboard bow, shed, and deck of the Catskill, moving from aft forward. Not only do the witnesses so testify, but the photograph of the damage, particularly the bent davit, makes this very clear. Damage of this character is not, we think, consistent with the theory of the surveyor that the Plainfield was still and the Catskill the forward moving vessel.
It is urged that Capt. Penney’s report to the local inspectors refutes the Catskill’s claim that she stopped her engines for a minute or two before the Plainfield was sighted, and contains an admission that she had too much headway, to avoid the collision. We fail to find any essential inconsistency between his testimony and his report. But at most the report would be but an admission, •and subject to refutation by other testimony. It would serve no useful purpose to review in detail all the testimony of the 26 witnesses. We have read it with care, hut it suffices to ^ say that we are satisfied that the more credible testimony and the weight of the evidence establish that the Catskill was practically still in the water when the Plainfield was sighted, and immediately thereafter started her engines full speed astern. We find that the Plainfield was proceeding at a speed too great to enable her to stop within the distance at which she could see the Catskill. Responsibility for the collision is therefore hers. The Rosaleen, 214 F. 252 (C. C. A. 2).
The decree must he modified, to exonerate the Catskill, and to hold the Plainfield solely responsible.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
R. LANIER ANDERSON, III, Circuit Judge:
On February 23, 1978, appellant Roger L. Summer (referred to as “Summer” or “plaintiff” or “appellant”) filed this complaint in the United States District Court for the Southern District of Florida. Subject matter jurisdiction was predicated on alleged violations of the federal securities laws; however, several state law claims were also asserted under the district court’s pendent jurisdiction. Summer was an investor in Land & Leisure, Inc. (“L&L”). Between June 24, 1971, and January 3, 1973, he purchased, in eleven installments, a total of 9,500 shares of L&L common stock at a total cost of approximately $54,000. L&L stock did not fare well over the years. In his complaint, Summer alleges a conspiracy or scheme among the several defendants to defraud investors and to conceal the fraud. Count I of the complaint alleges a claim under § 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C.A. § 78j(b), and Rule 10(b)-5 of the Securities and Exchange Commission; Counts II and VI allege claims of common law fraud; Counts III, IV and V allege claims under §§ 11, 12(2), and 17 of the Securities Act of 1933, 15 U.S.C.A. §§ 77k, 77/(2) and 77q; Count VII alleges a claim under the Florida Blue Sky Law, Fla.Stat. §§ 517.21 and 517.301; Count VIII is a state claim of mismanagement and breach of fiduciary duties by corporate officers and directors; and Count IX is a state law claim for breach of the corporate opportunity doctrine. Defendants are Land & Leisure, Inc.; and Guy B. Bailey, Guy B. Bailey, Jr., Areca Stone Bailey, Charlotte Babcock, Robert Little, Jerome Grossman, and Robert Fischer, who were at one time or another officers or directors or both of L&L; and Raymond James Associates, Inc. (“Raymond”), the lead underwriters for L&L; and the accounting firm of Arthur Young & Co. which prepared the registration statement and prospectus for L&L. We sometimes refer to all defendants collectively as “defendants.” We sometimes refer to all defendants except Arthur Young and Raymond as the “corporate defendants,” 7. e., the corporation, Land and Leisure, Inc., and its several officers or directors. Defendants moved to dismiss the complaint for failure to state a claim upon which relief could be granted. Fed.R.Civ.P. 12(b)(6). The district court granted the motion as to all the claims under federal law on the ground that they were barred on their face by the applicable statutes of limitations and, as there were no pending federal questions, exercised its discretion to dismiss the claims under state law. Furthermore, the district court determined that the complaint was frivolous and awarded attorney’s fees and costs in favor of the defendants, except Little, in the aggregate amount of $32,480. See § 11(e) of the Securities Act of 1933, 15 U.S.C.A. § 77k(e).
I. APPLICABLE STATUTES OF LIMITATIONS FOR CLAIMS UNDER THE FEDERAL SECURITIES LAWS
Our first task is to determine the applicable statutes of limitations for the federal securities claims. We note that more than seven years elapsed between the first purchase of stock and the filing of the complaint, and more than five years passed from the last purchase of stock and the filing of the complaint.
A. The Section 10(b) Claims.
Since § 10(b) of the 1934 Act, 15 U.S.C.A. § 78j(b), provides no statute of limitations, we look to the most analogous state statute of limitations. Under Florida law, Fla.Stat. § 517.21, provides for a two-year statute of limitations on actions for violation of Florida securities laws. See Nortek, Inc. v. Alexander Grant & Co., 532 F.2d 1013 (5th Cir.), rehearing denied, 536 F.2d 624 (1976). Section 517.21 was repealed on July 1, 1976, by Chapter 76-168, § 3 of the Laws of Florida of 1976. See Vigman v. Community National Bank & Trust Co., 635 F.2d 455, 460 n.10 (5th Cir. 1981). Fla.Stat. § 95.-11(5)(d) (amended 1975) provides for a three-year statute of limitations on actions for fraud. See Vigman v. Community National Bank & Trust Co., supra. We note that § 95.11(5)(d) was changed from three to four years on January 1, 1975. See Vigman v. Community National Bank & Trust Co., 635 F.2d at 460 n.11. The district court applied the four-year statute. Since the last sale was on January 3, 1973, and since the complaint was filed on February 23, 1978, which is more than four years, the district court concluded that plaintiff’s § 10(b) and Rule 10(b)-5 claims were barred. We need not decide which of the foregoing statutes of limitations apply in this case. Even assuming that the longest, the four-year statute, applies, it is clear that plaintiff’s § 10(b) and Rule 10(b)-5 claims are barred, in the absence of circumstances which would toll the statutes.
B. The Section 17 Claims.
With respect to the claims under § 17 of the 1933 Act (a portion of Count III), the appropriate state statute of limitation also governs. See Aldrich v. McCulloch Properties, Inc., 627 F.2d 1036 (10th Cir. 1980); Newman v. Prior, 518 F.2d 97 (4th Cir. 1975). The district court correctly applied to the § 17 claims the same analysis as for the § 10(b) and Rule 10(b)-5 claims. See Nortek, Inc. v. Alexander Grant & Co., supra; Turner v. Lundquist, 377 F.2d 44 (9th Cir. 1967). Accordingly, the § 17 claims are also barred, unless the period was tolled.
C. The Section 11 and Section 12(2) Claims.
Sections 11 and 12(2) of the 1933 Act, 15 U.S.C.A. §§ 77k and 777(2) (a portion of Count III, Count IV and Count V), however, are governed by the limitation period contained in § 13 of the 1933 Act, 15 U.S.C.A. § 77m, which provides:
No action shall be maintained to enforce any liability created under § 77k or § 771 (2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, .... In no event shall any such action be brought to enforce a liability created under § 77k ... of this title more than three years after the security was bona fide offered to the public, or under § 777(2) of this title more than three years after the sale.
The district court held that the passage of more than three years between the alleged wrongful act and the commencing of this action is an absolute bar to the claims under §§ 11 and 12(2), 7. e., the normal rules of tolling do not apply after three years. Appellant does not seriously contest this ruling and it is consistent with a view of the majority of the courts to consider the question. See Brown v. Producers Livestock Loan Co., 469 F.Supp. 27 (D.Utah 1978); Turner v. First Wisconsin Mortgage Trust, 454 F.Supp. 899 (E.D.Wis.1978); Cowsar v. Regional Recreations, Inc., 65 F.R.D. 394 (M.D.La.1974). The Tenth Circuit has interpreted the almost identical language in the Interstate Land Sales Full Disclosure Act to constitute an absolute bar. Aldrich v. McCulloch Properties, Inc., 627 F.2d at 1042-43. But see In re Home-Stake Production Co. Securities Litigation, 76 F.R.D. 337 (N.D.Okl.1975). The court in Turner v. First Wisconsin Mortgage Trust, supra, rejected the plaintiff’s argument that the three-year period could be tolled by the defendant’s concealment of the claim. “Otherwise [§ 13] would create a limitation period for all suits of one year from the time discovery of the untrue statements or omissions should have been made, and the three-year provision would serve no purpose at all.” 454 F.Supp. at 911. We find this reasoning convincing. We hold that the normal tolling rules are not applicable to toll the three-year period. Accordingly, we hold that appellant’s claims under § 11 and § 12(2) are absolutely barred and affirm the district court’s dismissal of those claims.
II. DID APPELLANT ALLEGE SUFFICIENT FACTS WHICH WOULD TOLL THE STATUTE OF LIMITATIONS ON THE § 10(b) AND § 17 CLAIMS?
While we relied upon state law for the appropriate statute of limitations, federal law determines “when the clock starts to running” for purposes of the statute of limitations. See Azalea Meats, Inc. v. Muscat, 386 F.2d 5, 8 (5th Cir. 1967). “Under federal law, a cause of action under § 10(b) and Rule 10(b)-5 . . . accrues when the aggrieved party has either actual knowledge of the violation or notice of facts which, in the exercise of due diligence, would have led to actual knowledge thereof.” See Vigman v. Community National Bank & Trust Co., 635 F.2d at 459. Appellant claims that by the exercise of due diligence he did not discover the claims now asserted until 1977, within one year before the complaint was filed, and well within the appropriate statute of limitations whether it be two, three or four years.
We turn to the allegations of the complaint, particularly those of concealment of the facts by the defendants, which would tend to establish that plaintiff exercised due diligence in discovering the claims which he now asserts. The allegations throughout the complaint which would establish appellant’s due diligence or concealment of facts by the corporate defendants fall into three categories: (1) that the defendants conspired to fail to file required reports with the Securities and' Exchange Commission, to fail to file and mail stockholders reports and proxy statements, and to fail to call annual stockholders meetings; (2) that defendants attempted to lull appellant by telling him that reports on L&L’s financial condition would be forthcoming and that all was well with L&L; and (3) that defendants conspired to prevent the appellant from learning the true condition of the corporation by denying appellant access to corporate books and records, by falsely advising appellant that records had been lost or were unavailable, and by making false entries in the books and records. Appellant asserts, as a consequence of these actions, he did not reasonably discover the existence of the claims until 1977.
We are mindful of the standard for ruling on a Rule 12(b)(6) motion: “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief,” Conley v. Gibson, 355 U.S. 41, 45-6, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). In granting the defendants’ motion to dismiss the complaint pursuant to Rule 12(b)(6), the district court held, as a matter of law, that the plaintiff was aware of facts which would have disclosed the alleged fraud. The facts relied upon by the district court were only three: first, Summer’s knowledge that the defendant corporation did not hold annual stockholders’ meetings; second, his knowledge that the defendant corporation did not send out annual stockholders’ reports; and third, his knowledge of the sharp decline in the value of the stock.
With respect to the decline in the price of the Land and Leisure stock, we note that the bulk of Summer’s purchases occurred after the substantial price decline, and that all the purchases were made through the underwriter, Raymond. It is a reasonable inference from the pleadings that the independent accounting firm, Arthur Young, continued to provide accounting services throughout the relevant time, including in particular after the time of the substantial price decline. If the price decline did not put the accounting firm and the underwriter on notice, it is a reasonable inference that it would not have put Summer on notice. We can conceive of several factual situations in which a price decline, under the circumstances here, would not be indicative of fraud in the least, e. g., a depressed real estate market caused either by tight money or recession.
With respect to the failure to send annual stockholders’ reports and hold annual stockholders’ meetings, none of the defendants have cited any case, nor have we found one, which holds that the mere failure to send such reports or hold such meetings is sufficient to put an investor on notice of facts which in the exercise of due diligence would have led to actual knowledge of fraud.
In the present posture of this case —a Rule 12(b)(6) dismissal — the three facts relied upon by the district court are simply not sufficient to justify a conclusion that “it appears beyond doubt that the plaintiff can prove no set of facts” which would adequately explain why plaintiff did not become suspicious. In fact, Summer has made significant allegations tending to explain his lack of suspicion and tending to support his allegation of due diligence. As against all defendants, Summer has alleged generally a conspiracy to fraudulently conceal from plaintiff the material facts. As against the corporate defendants, Summer specifically alleged misrepresentations on numerous occasions that reports of financial condition would be forthcoming, that all was well with the defendant Land and Leisure, and that annual meetings would be forthcoming. In addition, Summer alleged that he was denied access to records, and that there were attempts to prevent him from learning the true financial condition by hiding records, removing records, making false entries in records, and misrepresenting that records were also lost or destroyed. Accordingly, we hold with respect to all defendants, except Arthur Young and Raymond, that the district court erred in dismissing plaintiff’s complaint pursuant to Rule 12(b)(6). In Azalea Meats, Inc. v. Muscat, 386 F.2d 5 (5th Cir. 1967), we stated:
We disagree, however, with its disposition of the issue of due diligence on motions for summary judgment.
Recognizing that “ * * * the question whether a party had sufficient opportunity, so that in the exercise of reasonable diligence he would have discovered the facts forming the basis of his cause of action, may raise issues of fact which would have to be tried to a jury; * * * ”, the learned judge, on the facts contained in the record before us, treated it as a question of law to be determined by the court and arrived at the ultimate conclusion that: “Considering the depositions, documents and affidavits filed herein, there can be no question that plaintiff was put on notice as to the facts constituting its alleged cause of action no later than early September, 1961.” We note in passing that neither of the four cases relied upon by the trial court to support this result involved adjudication upon a motion for summary judgment.
The concept of due diligence is not imprisoned within the frame of a rigid standard; it is protean in application. A fraud which is flagrant and widely publicized may require the defrauded party to make immediate inquiry. On the other hand, one artfully concealed or convincingly practiced upon its victim may justify much greater inactivity. The presence of a fiduciary relationship or evidence of fraudulent concealment bears heavily on the issue of due diligence.
386 F.2d at 9 (footnotes omitted). Of course we express no opinion as to whether the record in the instant case on remand will develop such that the due diligence issue can be resolved on summary judgment, or whether a full trial will be necessary. However, we are confident that it was error to conclude that “it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. at 45-46, 78 S.Ct. at 101-02. Accordingly, the dismissal of the complaint was error with respect to all defendants except Arthur Young and Raymond.
Because the district court concluded that Summer had knowledge of facts which should have led to his discovery of the fraud, the district court did not address the subsidiary argument of Arthur Young and Raymond that the complaint contains only conclusory allegations as against those two defendants. We agree with Arthur Young and Raymond that the complaint includes only conclusory allegations of fraudulent concealment as against Arthur Young and Raymond. Rule 9(b), Fed.R.Civ.P., requires that the elements of fraud be pleaded with particularity. Accordingly, we affirm the judgment of the district court to the extent that it dismissed the complaint with respect to Arthur Young and Raymond, but we hold that on remand Summer be granted leave to amend to assert more particularized allegations as against Arthur Young and Raymond, if he can do so. See 2A Moore’s Federal Practice, K 9.03 (indicating that dismissal for failure to comply with Rule 9(b) is almost always with leave to amend).
III. THE OTHER ISSUES ON APPEAL
Our disposition necessarily supplants the district court’s determination that the complaint was without merit and that the defendants were entitled to attorney’s fees. We therefore vacate the award of attorney’s fees, which also makes it unnecessary for us to address the issues on cross-appeal relating to the amount of attorney’s fees. Likewise, we reinstate the pendent state claims.
IV. CONCLUSION
We affirm the district court’s dismissal of the § 11 and § 12(2) claims as against all defendants. As against all defendants except Arthur Young and Raymond, we reverse the district court’s dismissal of the § 10(b) and Rule 10(b)-5 claims and the § 17 claims and remand for further proceedings not inconsistent with this opinion. As to Arthur Young and Raymond, we affirm the dismissal of the § 10(b) and Rule 10(b)-5 claims and the § 17 claims, but direct that leave to amend be granted. The district court’s award of attorney’s fees is vacated. The pendent state claims are reinstated. All costs of this appeal shall be taxed against appellees.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
. The allegations of concealment are not contained within each and every count of the complaint; however, the allegations are contained at various points in the complaint. We believe it would be contrary to the liberal reading which we must give to a complaint upon motion to dismiss to consider the allegations of concealment only as to those counts in which the allegations are set forth. Having made such allegations with respect to some counts, and there being a reasonable inference that the allegations would likewise apply to the other counts, we surely cannot conclude that it appears beyond doubt that plaintiff can prove no set of facts which would entitle him to relief.
. Defendants cite several cases in which a plaintiffs knowledge of the declining market price of securities has been a factor indicating that plaintiff had knowledge of facts which should have led to the discovering of the fraud. However, these cases apparently involved misrepresentations relating to the value of the securities — e. g., that the investment would produce a stable income with no risk — so that sharp declines in value shortly after such misrepresentation would in fact tend to indicate that the representation was false. See Buder v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 644 F.2d 690 (8th Cir. 1981); Koke v. Stifel, Nicolaus & Co., 620 F.2d 1340 (8th Cir. 1980); Jablon v. Dean Witter & Co., 614 F.2d 677 (9th Cir. 1980); and Hupp v. Gray, 500 F.2d 993 (7th Cir. 1974). In the instant case, a decline in market price is not inconsistent with the representations complained of nor otherwise suggestive of the fraud alleged.
. Arthur Young’s reliance upon Cook v. Avien, Inc., 573 F.2d 685 (1st Cir. 1978), is misplaced. Cook did not hold that the failure to hold a stockholders’ meeting constituted notice. In Cook, a stockholders’ meeting was in fact held, and plaintiff would have become aware of the misrepresentations had plaintiff attended. Id. at 696, n.22. Nevertheless, the First Circuit declined to adopt an inflexible rule imputing such knowledge to a shareholder who did not attend the meeting; rather, the court held only that the failure to attend was one factor to be weighed adversely to plaintiffs diligence. Id. at 695, n. 21.
. We note that most of the cases relied upon by the defendants were appeals from summary judgments rather than 12(b)(6) dismissals. The plaintiffs were allowed to support their claim with matters outside the pleadings.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HASTIE, Circuit Judge.
In this civil antitrust suit the appellants, John and Bernard Taxin, who are wholesale distributors of fruit and produce in the Philadelphia area, have charged numerous defendants with conspiracy to restrain and monopolize interstate commerce in fruit and produce. One group of defendants, associated with defendant Food Fair Stores, Inc., will be called Food Fair or the Food Fair defendants. The second group, the appel-lees here, associated with defendant Samuel P. Mandell Co., Inc., will be called Mandell or the Mandell defendants.
Answering the complaint, all of the defendants pleaded a general release wherein the Taxins, for a consideration of $18,000 paid in cash to their counsel, released the defendants from liability for all claims under the antitrust laws or otherwise which the Taxins might have had against them on or before March 28, 1958, the date of the release. Replying to this affirmative defense, the appellants admitted the execution of the release but pleaded that it had resulted from Food Fair’s promise to buy produce from the appellants in the future, and that this promise had been made in bad faith with a view to furthering the conspiracy to restrain trade.
The district court agreed to try the question of the validity of the release separately before considering any other issue. Accordingly, various depositions and affidavits were filed with reference to this question. The Mandell defendants then filed a motion for summary judgment asserting that, on the pleadings and the facts established and not disputed in the record, the release was valid as to them no matter what grounds of avoidance might be said to exist as against the Food Fair defendants. The court sustained this contention and granted summary judgment in favor of the Mandell defendants. From that partial disposition of the litigation this court has allowed an immediate appeal as authorized by Section 1292(b) of Title 28 U.S.C.
It is clear and not disputed that the release was intended and on its face is sufficient to bar the appellants from maintaining the present suit insofar as it pertains to injuries occurring before March 28, 1958. It is also conceded that $18,000 was paid to counsel for the appellants as consideration for the release. This sum, of which $12,000 was paid by Mandell, was used to satisfy the Taxins’ obligations to their counsel.
To avoid the release appellants assert that they were induced to execute the instrument by a promise made in bad faith that Food Fair Stores, Inc., would buy $500,000 worth of fruit and produce from them annually. Affidavits of appellant John Taxin and his attorney William A. Gray, Esquire, state that Louis Stein, Myer Marcus, and Arthur Rosenberg, described as “the principals of Food Fair Stores”, were the parties who made or were present at the making of the alleged fraudulent promise. For present purposes we assume, but do not decide, that there is a substantial controversy yet to be litigated between appellants and the Food Fair defendants whether or not those defendants made a fraudulent promise in order to obtain a release. Cf. Michael Rose Productions, Inc. v. Loew’s, Inc., D.C.S.D.N.Y.1956, 141 F.Supp. 257; 143 F.Supp. 606. But the affidavits and allegations which support the claim of fraud do not charge that the Mandell defendants participated in or even knew of the alleged misrepresentation. Indeed, appellant Bernard Taxin has deposed that Mr. Mandell “had nothing to do with” the negotiations during which the fraudulent promise is said to have been made.
The exculpation of the Mandell defendants was one important basis of the district court’s conclusion that the release was valid as to these parties. In analogous circumstances the Court of Appeals for the Second Circuit has suggested that it would be inequitable to deny one antitrust defendant the benefit of a settlement and release solely because of fraud, unknown to him, on the part of another defendant in connection with such settlement and release. Martina Theatre Corp. v. Schine Chain Theatres, Inc., 2 Cir., 1960, 278 F.2d 798, 802. This is in accord with the rule of Section 477 of the Contracts Restatement, which reads as follows:
“Fraud or material misrepresentation by a third person renders a transaction voidable by a party induced thereby to enter into it if the other party thereto
“(a) has reason to know of the fraud or misrepresentation before he has given or promised in good faith something of value in the transaction or changed his position materially by reason of the transaction, or
“(b) is affected by the fraud or misrepresentation under the law of Agency or of Trusts.”
For an application of that section of the Restatement by this court see Blum v. William Goldman Theatres, Inc., 3 Cir., 1947, 164 F.2d 192.
Despite the admission that the Man-dell defendants “had nothing to do with” the alleged fraudulent promise, appellants have sought to imply some privity from the fact that Mandell paid $12,000 of the $18,000 cash consideration for the release and the additional fact that some months thereafter Samuel P. Mandell, a dominant personality among the Mandell defendants, became a vice-president of Food Fairs Stores, Inc. No more need be said of these circumstances than that in our view they have no tendency to prove guilty participation in or even knowledge of the alleged fraud by any of the Mandell defendants. Indeed, the giving of a substantial independent cash consideration for the release supports the claim that the release is valid. Cf. Tal-madge v. United States Shipping Board Merchant Fleet Corp., 2 Cir., 1933, 66 F.2d 773, certiorari denied 1934, 291 U.S. 669, 54 S.Ct. 454, 78 L.Ed. 1058. This fact combined with the blamelessness of these defendants in the making of the alleged fraudulent promise would normally suffice to establish the validity of their release. Cf. Martina Theatre Corp. v. Schine Chain Theatres, Inc., supra.
In this case, however, we must deal with one more point which the appellants have greatly stressed. In their reply to the affirmative plea of release they have asserted that “the alleged release was obtained by defendants as part of and in furtherance of the continuing conspiracy among the defendants about which plaintiffs complain”. This in itself is said to preclude summary judgment. However, this allegation must be interpreted and considered in the light of Bernard Taxin’s deposition which concedes that the Mandell defendants had nothing to do with alleged fraudulent representation by the Food Fair defendants. In these circumstances, it seems to be appellants’ theory, and indeed it is so stated in their brief, that if the original conspiracy of Food Fair and Mandell to restrain trade can be proved, “Mandell would be responsible for the acts of his co-conspirators [in connection with the release] whether or not he participated therein”. The court below properly pointed out that this “would mean that in any case in which a group of conspirators were involved in an antitrust case none could obtain a valid, binding release if one of the conspirators obtained a release by fraud”.
In our view the fatal defect in appellants’ argument lies in its failure to respect the limits within which the law confines the responsibility of a conspirator for acts of a coconspirator. The accepted and prevailing rule has been clearly stated by District Judge Wyzanski in Momand v. Universal Film Exchange, D.C.D.Mass.1947, 72 F.Supp. 469, 475, affirmed 1 Cir., 1948, 172 F.2d 37, certiorari denied 1949, 336 U.S. 967, 69 S.Ct. 939, 93 L.Ed. 1118: “Conspirators are chargeable with the acts of their fellows only if the acts are done in the furtherance of the joint venture as all understood it; they are not to be held for what some of the conspirators, unknown to the rest, do beyond the reasonable intendment of the common understanding.” Here, though plaintiffs have undertaken to file affidavits concerning the relation of the various defendants to the alleged fraudulent release, they do not assert .or offer to prove that the original conspiracy to restrain trade included any agreement or common understanding that persons who might complain of the hurtful consequences of the conspiracy would be mollified by bad faith promises of future benefits. If the appellants were relying on their ability to prove such agreement, certainly the motion for summary judgment should have prompted them to say so. We are more inclined to require such an explanation because we are not able to imagine any meaningful way in which the obtaining of a release could be, in appellants’ own words, “part of and in furtherance of the continuing conspiracy among the defendants about which plaintiffs complain”. In simple logic a release given on March 28, 1958, could not facilitate any restraint of trade which had already been accomplished. If, on the other hand, plaintiffs mean that a release might further the conspiracy after its execution, this argument has no significance here because the release in suit clearly does not bar a suit for damages occurring after March 28, 1958, and the court’s order granting summary judgment was limited accordingly. Thus, we cannot see how the release could have any effect except to compromise existing claims for past misconduct.
In such circumstances, we hold that it was at least incumbent upon plaintiffs, in opposing the motion for summary judgment, to state any special or unusual relation which the release may have borne to the general conspiracy. Since nothing of that sort appears in the affidavits or was even suggested during the discussion of this point on oral argument, plaintiffs’ unexplained and unsupported allegation that the obtaining of the release was part of or in furtherance of the original conspiracy does not suffice to prevent the granting of summary judgment.
For these reasons the judgment of the district court will be affirmed.
. This reasoning also disposes of a suggestion, which seems 'to be implicit in appellants’ brief, that Mandell’s complicity in fact in the Food Fair misrepresentation can be inferred from the general conspiracy in restraint of trade to which Mandell is said to have been party. In our view, this would require sheer speculation rather than the drawing of a logical inference. It would, therefore, have been improper for the district court to have permitted a jury to reach such a conclusion.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
DOBIE, Circuit Judge.
Gerard Hartzog (hereinafter called Hartzog) was convicted of criminal evasion of federal income taxes, in violation of 26 U.S.C. § 145(b), by the United States District Court for the Eastern District of South Carolina. Hart-zog was indicted on three counts, one count for each of the years 1946, 1947 and 1948. He was acquitted on the 1946, count but found guilty on each of the other two counts. After the jury had returned its verdict and before judgment, Hartzog made a motion for a new trial; this motion was denied, and Hartzog was sentenced to five years’ probation.
Hartzog has appealed to us and presents two questions: (1) whether certain worksheets were properly admitted in evidence against him; and (2) whether certain loans received by Hart-zog from the Commodity Credit Corporation on cotton were properly included in the Government’s computation of his, 1948 income.
We need express no opinion as to the merit of Hartzog’s second issue, since we hold that it was prejudicial error for the lower court to admit the worksheets in evidence, and the case must be reversed and remanded for a new trial pursuant to Hartzog’s motion.
The worksheets in question were put into evidence as a substantial part of the Government’s proof of Hartzog's income for 1947 and 1948. There were two sets of worksheets introduced in evidence, and an objection was made by Hartzog's counsel to the introduction of either set as proof of the contents of Hartzog's records for the years 1947 and 1948, since, it is contended, both sets are hearsay evidence.
One set of worksheets was prepared in 1951 by a Deputy Collector of Internal Revenue named Baynard, who died before this case came to trial. The second set was prepared in 1951 by Berlin, a special agent of the Internal Revenue Service. Baynard’s worksheets list and classify checks, check stubs and other records into the various categories of income, the various categories of allowable deductions, the category of personal or other non-deductible expenses, the category of non-taxable receipts, and the categories of capital or ordinary gains and losses, and long and short term capital gains and losses.
Berlin supervised the making of Bay-nard’s worksheets but never examined any of the information and materials upon which Baynard based his figures, except upon one occasion when he saw Hartzog’s farm ledgers for about two minutes. Berlin’s worksheets are based primarily on information obtained from Baynard’s worksheets and were prepared with Baynard’s collaboration, although Berlin also used some information obtained from outside sources such as bank statements and Hartzog’s clients. Berlin’s worksheets were prepared when it became apparent that the information obtained by Baynard would not give a sufficient picture of Hartzog’s income.
Both sets of worksheets were made in preparation for this prosecution, after Hartzog had refused the agents permission to see the bulk of his records. Bay-nard was permitted to see a small portion of Hartzog’s records and information obtained from these sources is the basis of his worksheets. We shall first consider the admissibility of the Bay-nard worksheets.
In a criminal prosecution, the right of the Government to introduce these worksheets as secondary evidence of the contents of Hartzog's record is uncontradicted, provided such evidence is otherwise admissible. See Paschen v. United States, 7 Cir., 70 F.2d 491; Lisansky v. United States, 4 Cir., 31 F.2d 846, 67 A.L.R. 67. As then Circuit Judge Parker stated for this court in the Lisansky ease, supra, 31 F.2d at page 850:
“But evidence as to the contents of books and papers is not lost to the government because the defendant has them in his possession and their production cannot be ordered or the usual basis laid for the introduction of secondary evidence. In such cases, the rule is that, when they are traced to his possession, the government, without more ado, may offer secondary evidence of their contents.”
This rule does not, however, give the Government carte blanche to introduce any type of evidence merely because it may be relevant and material as secondary evidence of the contents of a defendant’s records. Such secondary evidence may not be admitted for the purpose of such proof if it is hearsay. Clearly, the worksheets prepared by Baynard before his death, and introduced without his testimony, are hearsay in so far as they tend to indicate the existence of the records and checks upon which the worksheets are based; they are also hearsay as to the amounts and classifications of these checks and other records.
The Government contends, however, that Baynard’s worksheets, even though hearsay, are admissible as proof of the truth of their contents, under the provisions of 28 U.S.C. §§ 1732, 1733. These sections reads as follows:
“1732. Record made in regular course of business. In any court of the United States and in any court established by Act of Congress, any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence, or event, shall be admissible as evidence of such act, transaction, occurrence, or event, if made in regular course of any business, and if it was the regular course of such business to make such memorandum or record at the time of such act, transaction, occurrence, or event or within a reasonable time thereafter.
“All other circumstances of the making of such writing or record, including lack of personal knowledge by the entrant or maker, may be shown to affect its weight, but such circumstances shall not affect its admissibility.
“The term ‘business,’ as used in this section, includes business, profession, occupation, and calling of every kind.”
“1733. Government record and papers; copies, (a) Books or records of account or minutes of proceedings of any department or agency of the United States shall be admissible to prove the act, transaction or occurrence as a memorandum of which the same were made or kept.
“(b) Properly authenticated copies or transcripts of any books, records, papers or documents of any department or agency of the United States shall be admitted in evidence equally with the originals thereof.”
Section 1733 obviously has no application here. Baynard’s worksheets are not books or records of account of a department or agency of the Government, nor are they minutes of any proceeding.
The wording of Section 1732 raises quite a different problem. Its language is broad and inclusive, and a literal reading of its provisions may suggest that Baynard’s worksheets are admissible evidence. This section has not been given such a literal interpretation by the Supreme Court.
Mr. Justice Douglas in the leading case of Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 87 L.Ed. 645, pointed out the evils inherent in a strict application of this section, 318 U.S. at pages 113-114, 63 S.Ct. at page 480:
“Any business by installing a regular system for recording and preserving its version of accidents for which it was potentially liable could qualify those reports under the Act. The result would be that the Act would cover any system of recording events or occurrences provided it was ‘regular’ and though it had little or nothing to do with the management or operation of the business as such. Preparation of cases for trial by virtue of being a ‘business’ or incidental thereto would obtain the benefits of this liberalized version of the early shop book rule. The probability of trustworthiness of records because they were routine reflections of the day to day operations of a business would be forgotten as the basis of the rule. * * * Regularity of preparation would become the test rather than the character of the records and their earmarks of reliability * * * acquired from their source and origin and the nature of their compilation. We cannot so completely empty the words of the Act of their historic meaning. If the Act is to be extended to apply not only to a ‘regular course’ of a business but also to any ‘regular course’ of conduct which may have some relationship to business, Congress not this Court must extend it. Such a major change which opens wide the door to avoidance of cross-examination should not be left to implication. Nor is it any answer to say that Congress has provided in the Act that the various circumstances of the making of the record should affect its weight not its admissibility. That provision comes into play only in case the other requirements of the Act are met.
“In short, it is manifest that in this case those reports are not for the systematic conduct of the enterprise as a railroad business. Unlike payrolls, accounts receivable, accounts payable, bills of lading and the like these reports are calculated for use essentially in the court, not in the business. Their primary utility is in litigating, not in railroading.”
The legislative history of Section 1732 gives ample support to this construction of the section. See Sen. Rep. No. 1965, 74th. Cong. 2d Sess. (1936). This section was enacted to provide a relaxing of the strict common-law rule requiring identification of book entries by all parties making them. It is clear that Congress did not intend to do away with the requirement that the record to be admissible, must carry with it some guarantee of trustworthiness. See Gordon v. Robinson, 3 Cir., 210 F.2d 192; Hoffman v. Palmer, 2 Cir., 129 F.2d 976, affirmed 318 U.S. 109, 63 S. Ct. 477, 87 L.Ed. 645.
On the record presented to us, it does not appear that the worksheets prepared by Baynard were prepared under such circumstances as will provide a guarantee of trustworthiness. These worksheets were made in preparation for this prosecution; they were Baynard’s personal working papers, were the product of his judgment and discretion and not a product of any efficient clerical system. There was no opportunity for anyone, especially Berlin, to tell when an error or misstatement had been made. These worksheets were no more than Baynard’s unsworn, unchecked version of what he thought Hartzog’s records contained. Applying the criterion of the Hoffman ease, that admissibility is to be determined by “the character of the records and their earmarks of reliability * * * acquired from their source and origin and the nature of their compilation”, 318 U.S. at page 114, 63 S.Ct. at page 480, we hold that these worksheets were inadmissible as evidence of the truth of their contents. See, e. g., United Mine Workers of America v. Patton, 4 Cir., 211 F.2d 742; Chapman v. United States, 5 Cir., 194 F.2d 974; Masterson v. Pennsylvania R. Co., 3 Cir., 182 F.2d 793; Gilbert v. Gulf Oil Corp., 4 Cir., 175 F.2d 705, 709-710; New York Life Ins. Co. v. Taylor, 79 U.S.App.D.C. 66, 147 F.2d 297. But see Korte v. New York, N. H. & H. R. Co., 2 Cir., 191 F.2d 86.
The Government places great reliance upon the case of United States v. Mortimer, 2 Cir., 118 F.2d 266. In this case a number of charts were admitted in evidence on the testimony of one Karcher, an accountant who had supervised their preparation. Objection was made to the charts since one of Karcher’s assistants in the preparation of the charts did not take the stand. The Second Circuit quite properly held that the testimony of a supervisory agent alone is sufficient where he has had complete supervision and direction of preparation of the evidence which he offers. We do not think that such supervision and control existed in the instant case. Baynard was not a mere tool of Berlin. He exercised his own discretion and judgment as to classification of information which he alone saw. While Berlin may have been his “supervisor,” in fact the two parties were operating on the same level in this investigation. Moreover, the Mortimer case is founded on the assumption that the evidence was compiled “according to a method at once practicable and offering reasonable guaranty of accuracy * * 118 F.2d at page 269. We do not think that Bay-nard’s worksheets were prepared by such a method.
Since we hold that Baynard’s worksheets are inadmissible as being mere hearsay, it necessarily follows that Berlin’s worksheets are also inadmissible in so far as they are based on Baynard’s worksheets. See United States v. Grayson, 2 Cir., 166 F.2d 863. Such a holding is not necessary for reversal of this case, in view of the prejudice in admitting Baynard’s worksheets. Since the case must go back for a new trial, however, we feel that an expression of our opinion on this point is necessary.
For a like reason, we must state our view that the amount of the cotton loans made by the Commodity Credit Corporation was not income to Hartzog for the year 1948.
The Government further contends that any error in admitting the Baynard worksheets was harmless. There is no merit in this contention. Proof of Hartzog’s income was based substantially on these worksheets. Practically all of the Government’s figures for deductions were determined from Baynard’s worksheets. Without this evidence, the jury might well have reached an entirely different result.
For the reasons stated above, the judgment of the District Court is reversed and the case is remanded to that court for a new trial.
Reversed and remanded.
. This case construed the provisions of 28 ti.S.O. § 695 which is the predecessor of Section 1732 and the same as Section 1732 except that Section 1732 embodies some minor amendments of § 695 that are not important here.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
NORTHCOTT, Circuit Judge.
This is a libel brought by one Benigno Velazquez, a naturalized American citizen, born in Porto Rico, against the steamship Corapeak. The libelant, who was a fireman, claimed to have been injured on the vessel while it was lying off Newport News, and the injury occurred while libelant, who was off duty, was engaged in showing a green hand .coal passer how to work an ash ejector. The injury evidently occurred because of the action of the coal passer in turning the steam into the machine at the wrong time. The injury consisted of a bruise on the arm, and seems to have been of no great importance, as neither the skin nor bones were broken. The injured man was promptly given medical attention on board the ship, and was tendered a hospital certificate admitting him to the Norfolk Marine Hospital, free of ehhrge, and was offered a taxi to take him to the hospital boat.
The injury occurred on the morning of May 4, and wages were due libelant from the 1st of May, at the rate of $67.50 per month. At the time libelant left the boat he was tendered $10.13, which was found by the judge below to be the correct amount due him for wages, and was requested to sign the portage bill, which contained no other condition than that it was for “whole wages.” Libelant refused to sign the portage bill and was not paid.
Libelant entered a private hospital and was treated for his injury. Negotiations were entered into by libelant through his proctor, looking to a settlement of his claim against the ship, but these negotiations failed, and the libelant brought this proceeding.
The court below rejected libelant’s claim for damages for injury and allowed him one month’s wages, amounting to $67.50, for maintenance and cure. The court also held that at the conclusion of the negotiations for settlement the libelant should have been paid the wages due, and allowed libelant the sum of $544.50 as double pay for the withholding of wages under section 4529, Rev. St'., as amended by Act March 4, 1915, § 3 (46 USCA §, 596), from which action of the court below this appeal was brought. Libelant filed a cross-appeal.
This court has had occasion to discuss the question of withholding seamen’s wages in numerous eases, a résumé of which will be found in the Lake Gaither, 40 F.(2d) 31. A reading of these decisions will show that it has been repeatedly held that no condition may be imposed on tender of wages due, but in this case we find a- tender made of all wages due with no other condition attached than that a receipt be given for “all wages,” a receipt which the captain of the ship certainly had a right to demand upon payment. The record discloses nothing was demanded -of the seaman other than he sign a receipt, and further discloses that at the conclusion of the negotiations for settlement no direct demand was ever made by the seaman or his proctor for the payment of this amount. Having once made a proper tender the captain of the ship was certainly under no obligations to repeat the tender in the absence of a direct demand for payment, and we are of the opinion that the judge below was in error in allowing libelant any waiting time.
In Collie v. Fergusson, 281 U. S. 52, 50 S. Ct. 189, 191, 74 L. Ed. 696, heard by the Supreme Court on certiorari for this court, in an able opinion discussing the question of waiting time, Mr. Justice Stone lays down the proper principles to- be applied, and among other things says:
“The phrase ‘without sufficient cause’ must be taken to embrace something more than valid defenses to the claim for wages. Otherwise, it would have added nothing to the statute. In determining what other causes are sufficient, the phrase is to be interpreted in the light of the evident purpose of the section to secure prompt payment of seamen’s wages (II. R. Rep. 1657, Committee on the Merchant Marine and Fisheries, 55th Cong., 2d Sess.), and thus to protect them from the harsh consequences of arbitrary and unscrupulous action of their employers, to which, as a class, they are peculiarly exposed. The words ‘refuses or neglects to make payment * * * without sufficient cause’ connote, either conduct which is in some sense arbitrary or willful, or at least a failure not attributable to impossibility of payment. We think the use of this language indicates a purpose to protect seamen from delayed payments of wages by the imposition of a liability which is not exclusively compensatory, but designed to prevent, by its coercive effect, arbitrary refusals to pay wages, and to induce prompt payment when payment is possible. * * *
“That the liability is not incurred where the refusal to pay is in some reasonable degree morally justified, or where the demand for wages cannot be satisfied either by the owner or his interest in the ship, has been the conclusion reached with practical unanimity by the lower federal courts.”
Here there was no arbitrary refusal to pay, but, on the contrary, there was a tender of all wages due with no improper condition attached.
With respect to the damages suffered by the libelant and his claim for maintenance and cure, we are of the opinion, from the evidence, that $150 would be a liberal recompense to him on those items.
The decree of the court below will he modified so as to allow libelant the said sum of $150, together with the $10.13 due as wages, and the costs of this appeal will be equally divided between the parties.
Modified.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HINCKS, Circuit Judge.
Plaintiff-appellant was employed by the appellee under a written contract of employment covering the period from February 11, 1947 to January 1, 1952. Both parties to this action are physicians and by that contract plaintiff was engaged to assist defendant in his practice of medicine in Hartford, Connecticut. Under this contract, the defendant was to pay the plaintiff a regular salary of $7,000 plus 25% of the net profits of the practice per annum and, in addition, was each of the years of the agreement to credit him with a percentage of the proceeds of the practice which otherwise would inure to defendant alone. These credits were to be applied to the purchase by plaintiff of 24%% interest in a partnership to be formed, at plaintiff’s option, at the termination of the employment agreement between plaintiff and defendant and one Doctor Bernstein, who was also a party to the employment contract under which he too was given an option to purchase a partnership interest in the practice.
Under Paragraph 8(a) of the employment contract it is provided that if plaintiff was still associated with defendant as of January 1, 1952, he would be entitled to become a partner. And Paragraph 8(d) of the contract provided that if the plaintiff is not associated with the defendant or “shall elect not to enter into a partnership after January 1, 1952 with the” defendant, then the credits should, adopting the phraseology of the contract, "revert” to the defendant. Plaintiff remained in defendant’s employ until January 1, 1952, but it was not until March 3, 1952, that the three doctors were able to find time to discuss the proposed partnership. From the evidence it does not appear that the delay was due to any reluctance on the part of defendant, but rather because each physican was faced with heavy professional obligations.
Although the options to the plaintiff and Bernstein extended only to a partnership in which the defendant should have a 51% interest, at the March 3rd meeting, Bernstein sought a partnership on terms more favorable to him. Plaintiff, however, indicated that he was quite willing to become defendant’s partner on the terms provided in the employment contract. No formal written partnership agreement was consummated at this meeting or thereafter. This was due, it may be fairly inferred, to Bernstein’s recalcitrance. However that may be, without objection by the plaintiff, or indeed by the defendant or Bernstein the execution of a partnership agreement was indefinitely deferred pending further negotiations. On April 7, 1952, the plaintiff accepted a position in Princeton, New Jersey, in preference to continued practice in Connecticut. On June 15, 1952, the plaintiff severed all relationship with the defendant.
For the month of February, 1952, the plaintiif received from the defendant one-third of the net proceeds of the office which would have been his share if the partnership between the three doctors envisaged by the earlier employment contract had come into effect.
The plaintiff reported as gross income the credits to which he was entitled under the employment contract, as stated above, in his income tax return for each of the years between 1947 and 1952.
These credits aggregated $10,715.18 and the plaintiff brings the instant action for their recovery. The court below entered judgment for defendant and this appeal resulted.
It seems clear that plaintiff’s right to the credits depended on the formation of a partnership. Under the contract the sum credited to the plaintiff was to be applied against the purchase of a share in the partnership and if after February 1, 1952, plaintiff elected not to become a partner the credits were to “revert” to the defendant. The crucial question, then, is whether a partnership between the plaintiff and defendant was ever formed. We think the trial judge was right in deciding this question adversely to the plaintiff.
The court below held that a formal written contract was necessary to the formation of a partnership in this case. Plaintiff contends that he accepted defendant’s offer at the March 3 meeting and that everything essential to a binding relationship was fully understood and agreed upon at that time. Hence, plaintiff argues, no formal writing was necessary. Under Connecticut law, which is here applicable, whether, in the absence of statutory provision, a formal writing is necessary to the formation of a contract is a question of fact. See Socony-Vacuum Oil Co. v. Elion, 126 Conn. 310, 11 A.2d 5; Garber v. Goldstein, 92 Conn. 226, 102 A. 605. Under this doctrine the trial judge must find whether it was the intent of the parties to be found without a written instrument. See 1 Corbin on Contracts, Section 30. The trial judge found against the plaintiff on this issue and we may not reverse his finding unless it is shown to be clearly erroneous. See Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A.
There is much evidence to support the trial judge’s ruling. Paragraph 8(f) of the contract refers to a “partnership agreement to be drawn” which fairly imports an intent that a partnership attested by a formal writing was contemplated by the parties. For plaintiff to purchase his share in the partnership a capital contribution of upwards of $6,000 would have been required of him in addition to the aggregate credits of $10,000. There is no evidence that on March 3rd, when the plaintiff contends an informal partnership was formed, plaintiff was able to provide the necessary capital and no evidence whatever that he actually tendered it. It is true that the defendant in his eagerness to consummate a partnership later offered to finance the plaintiff’s necessary capital contribution. But, although at the March 3rd meeting the plaintiff expressed willingness to become defendant’s partner, no specific arrangements were then or thereafter made as to the terms on which the defendant would finance the plaintiff’s capital contribution. And, perhaps more important, the terms of the partnership, including both the amount of the capital contribution by the plaintiff and his share of the partnership profits, depended upon Bernstein’s election to participate. And prior to April there had been no unequivocal manifestation of Bernstein’s position.
Plaintiff’s willingness to become a partner continued for a time, but his decision in early April to forsake Connecticut for Princeton, makes it difficult to believe that even he really considered that in March he had become a member of a partnership. And as all the evidence showed, the defendant’s desire to effectuate a partnership continued until terminated by the plaintiff’s decision to remove to Princeton. Certainly the record fails to show any breach of the defendant’s promise to form a partnership.
In view of the foregoing, we find no basis for the plaintiff’s contention on appeal that Judge Smith’s finding that the plaintiff “never entered into or presently intended to enter into a partnership” with the defendant, is inconsistent with his subordinate findings. No one questions that on March 3, 1952 the plaintiff intended to enter a partnership as soon as all the terms could be agreed upon and embodied in an integrated writing. But the evidence amply supported a finding that the plaintiff never intended to enter into an informal partnership not integrated into a written agreement. And read in context that is all Judge Smith’s finding meant.
The fact that plaintiff for the month of February received a partner’s share in lieu of the stipulated salary does not necessarily, in view of the background evidence, import more than expectation on the part of the parties that soon a partnership would be formed under terms retroactive to January 1st, in accordance with the employment contract. Even the plaintiff does not contend that a partnership had been formed, either informally or otherwise, as early as February. And any possible inference that the measure of his compensation for February betokened a partnership is negatived, or at least neutralized, by the fact that from March to June he accepted compensation on a salary basis without claim for a partner’s share.
The fact that the plaintiff and presumably the defendant on their respective tax returns each year reported the credits as income to the plaintiff, has no bearing on the issues here. The fact is referable to a supposed advantage, tax-wise, to report the credits annually rather than in an aggregate amount when the expected partnership should be formed. Here again is a fact which betokens at most an expectation of a future partnership and not its actual accomplishment.
Since, as we hold, there was no breach on the part of the defendant of his promise to form a partnership with the plaintiff, neither law nor equity entitled the plaintiff to recover the credits. For the credits were monies of the defendant deriving from his practice which were to become available to the plaintiff only on condition that he should enter into the contemplated partnership. The prior employment contract referred to the plaintiff’s rights to the credits as “conditional rights.” The judgment below involved no forfeiture of plaintiff’s rights to the credits. His own unequivocal election in April not to enter into such a partnership wholly terminated his contingent rights thereto. The monies, which at all times had been in the defendant’s possession, thereby were released from the plaintiff’s contingent rights without need for any affirmative action on the part of the defendant.
Judgment affirmed.
. Jurisdiction is based on diversity of citizenship and amount in controversy.
. “8. In addition to paying the salaries and percentages hereinbefore set forth, but solely for the purposes hereinafter defined, said Heublein further agrees to credit to said Godfrey and/or Bernstein during the term of this agreement or as long as said Godfrey and/or Bernstein remain associated with said Heu-blein, whichever period is the shorter, the following percentages to each: * *
. “(a) If either said Godfrey or said Bernstein shall be associated with said Heu-blein on January 1, 1952, each then so associated shall be entitled to a share in a partnership to be formed with said Heublein for the continuance of said office and practice, the value of each such share, if both shall then be associated, not to exceed twenty-four and one-half per cent (24%%) of the appraisal of said office and practice as determined by three disinterested persons as soon as practicable after January 1, 1952, and there shall be applied against the purchase of each share the credits hereinabove set forth.”
. “(d) In the event that neither said Godfrey nor said Bernstein shall be associated with said Heublein or in the pvent that either or both of them shall elect not to enter into partnership after January 1. 1952 with said Heublein, then all contingent right, title and interest in and to amounts so credited to said Godfrey and/or said Bernstein as herein-above provided shall pass and revert to ' said Heublein.”
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
CLARK, Circuit Judge:
This appeal by plaintiff, Chandler Leasing Division of Pepsico Service Industries Leasing Corporation (Chandler), and cross-appeal by defendant, Florida-Vanderbilt Development Corporation (Florida-Vanderbilt), involves the validity of the defense of breach of warranty of seaworthiness and the proper measure of damages for an admitted breach of a written lease agreement covering a 55 foot yacht. The facts are not in dispute, but the admiralty and Florida legal conclusions to be derived therefrom are contested.
On January 23, 1970, Chandler leased to Florida-Vanderbilt a 1970 Chris Craft Cruiser for a nine-year term. On September 1, Florida-Vanderbilt ceased remitting payments and on October 30 wrote to Chandler terminating the lease because of acute electrolysis problems. Pursuant to a judgment of replevin issued by a Florida state court, Chandler repossessed the vessel on February 11, 1971, proceeded to hold a public sale of the vessel (which is not attacked procedurally) and purchased the vessel at that sale for 100,000 dollars.
Chandler filed this suit seeking a recovery of damages in accordance with the provisions of the lease contract which essentially consisted of the discounted value of all future rent payments less the purchase price of 100,000 dollars. Florida-Vanderbilt defended by claiming a breach of the warranty of seaworthiness. The district court refused to recognize the seaworthiness defense but entered summary judgment which limited Chandler’s recovery to the accrued rental in default as of February 11.
Florida-Vanderbilt cross-appeals from the district court’s disallowance of its affirmative defense that Chandler breached its warranty of seaworthiness. Florida-Vanderbilt argues that a warranty of seaworthiness attached to the lease agreement despite the existence of a general, but universal, disclaimer clause. It contends that the disclaimer in order to be efficacious against a warranty of seaworthiness, must specifically state that the warranty is abjured. The facts in the case at bar make this defense wholly inapplicable. Chandler was not a boat owner offering to lease a vessel. The lease makes it transparently clear that Florida-Vanderbilt chose the exact yacht and equipment it wanted and even selected the boat company from which it wanted the yacht to be acquired. The very first term of the lease provided:
“EQUIPMENT; ACCEPTANCE. Lessee hereby leases from lessor, and lessor leaves to lessee, the personal property described above and in any schedule made a part hereof by the parties hereto (herein called ‘equipment’). Lessee has chosen and requested equipment of the type and quantity specified herein and has selected the supplier named above. Lessor agrees to order such equipment from said supplier, but shall not be liable in any event for specific performance of this lease or for damages of any type, if, with or without excuse, the supplier delays or fails to fill the order or delivery of the equipment is otherwise delayed or not made. Any delay in such delivery shall not affect the validity of this lease. Lessee shall accept such equipment if delivered in good repair, and hereby authorizes lessor to insert herein the serial number of each item of equipment so delivered. Unless lessee gives lessor written notice of each defect or other proper objection to any item of equipment within five (5) business days after receipt thereof, it shall be conclusively presumed, as between lessee and lessor, that the item was delivered in good repair and that lessee accepts it as an item of equipment described herein.”
No principle of the maritime doctrine of warranty of seaworthiness, which applies to demise charters and related vessel leases, proscribes Chandler from contracting with Florida-Vanderbilt that a part of the consideration for the lease of a vessel Florida-Vanderbilt selected and caused Chandler to purchase should include a waiver of any warranty from Chandler. In substance, Chandler was not a demise charterer but rather was a financing agent. Under the facts here, the general disclaimer clause effectively remitted any claim arising from the leased vessel’s physical condition to such claim as could be exerted against the manufacturer’s warranties. The district court correctly struck the affirmative defense of breach of warranty of seaworthiness.
Florida-Vanderbilt attempts to also cast its defense in a failure of consideration mold. We similarly reject this attempt to reach the same result via a substitute route. The leased vessel it picked out was accepted and used, and rentals were remitted for many months. The obligations of the lease were fully assumed and cannot be negated in derogation of the document’s plain terms.
Chandler argues that according to Subsection (A) of Section 14 of the lease agreement it is entitled to: (i) 15% of the actual cost of the vessel, + (ii) the balance of the rent for the unexpired term of the lease from the date of termination minus the 100,000 dollars received from the sale, both adjusted by the required discounts or added interest, + (iii) expenses and attorneys’ fees. Florida-Vanderbilt relies upon Cutler Gate Building Corp. v. United States Leasing Corp., 165 So.2d 207 (Fla.Dist.Ct. of Appeal, 3d Dist. 1964); Monsalvatge & Co. of Miami v. Ryder Leasing, Inc., 151 So.2d 453 (Fla.Dist.Ct. of Appeal, 3d Dist. 1963) to uphold the district court’s judgment that such recovery would be inequitable and unjust.
Except for one particular — the requirement of an arbitrary payment of 15% of actual cost — the provisions of the present lease are distinguishable from Cutler Gate and Monsalvatge. The contractual clauses involved in both of those cases provided for damage in the amount of the unaccrued rents for the remainder of the lease term and in addition, the lessor was allowed the use and benefit of the leased property. The Florida courts held that it would be unjust and inequitable to allow the lessor this much compensation because in effect the lessor was afforded a double remedy. See also Geiger Mutual Agency, Inc. v. Wright, 233 So.2d 444 (Fla.Dist.Ct. of Appeal, 4th Dist. 1970). Instead, the recovery was limited to the rentals in default at the time of the termination of the lease.
These cases cannot be interpreted to lay down the per se rule that irrespective of whatever contractual damage provision the parties may have agreed upon, only rentals in default could be recovered. Such a rule would not only conflict with the right of contracting parties to obligate themselves as they wish, but it would also be inconsonant with sound reason. Under so absolute a rule, lessees could breach lease agreements with impunity knowing that they would be liable only for the payments in default, and lessors on the other hand would never know when the property would be returned and in what condition. Such intolerable conditions would so seriously impair the commercial viability and efficacy of lease transactions that they would forestall or inhibit the negotiation of commercially valuable lease agreements.
However, the absolute requirement of Section 14 that a defaulting lessee pay 15% of the actual cost of the equipment leased can, in the context of the other damage covenants, only amount to an unenforceable attempt to contract for a penalty in excess of actual damages. It is not a liquidated damage clause. The damages were certainly capable of accurate estimation, if by no other means, then by the contractual process of selling the property let, applying sale proceeds to reduce the anticipated rental income and providing for the reimbursement of all retaking and selling expense. The percentage remained inflexible throughout the years of the lease and in no part served as a reasonable forecast of just compensation, which is the hallmark for legal damages under Florida law. Pembroke v. Caudill, 160 Fla. 948, 37 So.2d 538, 6 A.L.R.2d 1395 (1948); Hungerford Const. Co. v. Florida Citrus Exposition, 410 F.2d 1229 (5 Cir.), cert. denied 396 U.S. 928, 90 S.Ct. 263, 24 L.Ed.2d 226 (1969); 1 Restatement of Contracts § 339(1) (1932). For example, consider how unconscionable such a flat exaction would be in the latter months of the lease.
Florida follows the universal rule that parties sui juris may negotiate any contract not violative of law or public policy. See e. g., International Ass’n of Machinists v. State ex rel. Watson, 153 Fla. 672, 15 So.2d 485 (en banc 1943); Troup v. Meyer, 116 So.2d 467 (Fla.Dist.Ct. of Appeal, 3d Dist. 1959); 17 C.J.S. Contracts § 1(2) (1963). Except for the flat 15% of cost proviso, the present contractual method of damage calculation is not violative of any law or public policy. It does not provide for a double recovery as did the contracts in Cutler Gate and Monsalvatge. With the 15% penalty deleted, it is a reasonable damage provision that competent contracting parties were completely free to negotiate about and accept or reject.
We recognize that under the Florida case law there are three remedies available to lessors when their lessees breach a lease agreement. However, these remedies are not established as the sole remedies which may be provided for lease breaches, but are intended to supply remedies when none are provided in the lease or when broader contractual lease remedies violate public policy. Since we conclude that without the 15% penalty Section 14 neither provides the lessor with a double remedy nor violates any announced public policy of the State of Florida, it is controlling on the question of damages. Therefore the district court erred in refusing to apply the remedy of that subsection to the breach admitted here.
Under Section 14 the termination date is crucial to the computation of damages. We construe that date to be February 11, 1971, the date the lessor first took an affirmative act indicating its choice of remedies under the provisions of the contract.
In view of our disposition of this case, we pretermit discussion on Florida-Vanderbilt’s final point. The cause is remanded to the district court for a calculation of damages due Chandler under Section 14.
Affirmed in part, reversed in part, and remanded with directions.
. “3: WARRANTY. Lessor, without assuming responsibility for compliance by supplier, will request the supplier to authorize lessee to enforce in lessee’s own name all warranties, agreements, or representations, if any, which may be made by the supplier to lessee (or lessor). LESSOR ITSELF MAKES NO EXPRESSED OR IMPLIED WARRANTIES OR REPRESENTATIONS AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATIONS, THE CONDITION OF EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE. In no event shall any defect in or unfitness of the equipment relieve lessee of the ob-litigation hereunder, once the item has been accepted, or presumed accepted under Paragraph 1 hereof, by lessee.”
. 14. DEFAULT. If lessee, fails to pay any rent or other amount herein provided within ten (10) days after the same is due and payable. . . . lessor at 'its option may from time to time sue, at law or in equity, to enforce performance of this lease or to recover damages for breach thereof, or, may by notice in writing to the lessee terminate this lease as to any or all items of equipment; .... In the event of such notice of termination from the lessor, this lease shall terminate in accordance therewith as to the equipment specified (“terminated equipment”) but the lessee shall nevertheless remain liable for all rents therefor and additional sums thereon accrued and unpaid at the time of termination and additionally shall be liable to lessor as hereinafter provided. In such event lessee shall remain liable for the return of the terminated equipment to lessor, ns provided in paragraph 7 hereof, but lessor may take possession of any or all of said equipment, wherever it may be located without demand or notice, without any court order of process of law, and without incurring any liability to lessee for any damages occasioned by such taking of possession. Lessor shall make such efforts as are reasonable in the circumstances, at its option either to sell any or all of the terminated equipment at public or private cash or credit sale, or to re-let the same. In the event of such termination, lessee shall also be liable to lessor for a further sum, computed . . . : (A) As to any terminated equipment sold by lessor before the expiration of the initial term, the sum of (1) an amount equal to fifteen per cent of the actual cost to the lessor of such equipment, plus (2) the “balance of rent”, being the unpaid balance (if any) of the total rent reserved herein attributable to such equipment for the portion of the initial term unexpired at the time of such termination (“unexpired term”), less (3) the net proceeds of such sale. Since pursuant to the foregoing lessor may receive payment of such balance of rent at a time or times earlier or later than the same would have fallen due in the absence of termination, such balance of rent is to be adjusted by subtracting discount therefrom or adding interest thereto accordingly, at the rate of 6% per annum, and for the purposes of computing such adjustments, the aforesaid proceeds of sale or re-letting and any sums received from lessee in respect of said termination and of all costs and expenses incurred by lessor hereinbelow mentioned, and thereafter, to the payment of the balance of rent. In addition to the foregoing, lessor may recover from lessee all costs and expenses, including without limitation, reasonable attorneys’ fees and fees of collection agencies, incurred by lessor in exercising any of the rights or remedies, such costs and expenses to include, without limitation, in case of termination any and all incurred in taking or receiving possession, removal, storing, selling or re-letting the terminated equipment in reconditioning the same for selling or re-letting, and in repairing and restoring the same to the conditions stated in paragraph 7 hereof.
. The three remedies are:
“(a) he may treat the lease as terminated and resume possession of the premises, thereafter using the same exclusively as his own for his own purposes ; or
“(b) he may retake possession of the jiremises for the account of the tenant, holding the tenant in general damages for the difference between the rentals stipulated to be paid and what, in good faith, the landlord is able to recover from a reletting ; or
“(c) lie may stand by and do nothing, and sue the lessee as each installment of rent matures, or for the whole when it becomes due.” 4 Adkins, Florida Real Estate Law and Procedure § 106.-04 at p. 1970 (1960). See also Kanter v. Safran, Fla.1953, 68 So.2d 553, 557-558; Diehl v. Gibbs, Fla.App.1965, 173 So.2d 719, 720.
Jimmy Hall’s Morningside Inc. v. Blackburn & Peck Enterprises Inc., 235 So.2d 344 (Fla.Dist.Ct. of Appeal, 2d Dist. 1970). See also Hyman v. Cohen, 73 So.2d 393 (Fla. en banc 1954).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HASTINGS, Senior Circuit Judge.
Illinois State Journal-Register, Inc. (Company) petitions this court, pursuant to Section 10(f) of the National Labor Relations Act (Act), as amended, 29 U.S.C.A. § 160(f), to review and set aside an order of the National Labor Relations Board (Board), issued against the petitioning-Company on June 3, 1968. The Board found the Company had engaged in unfair labor practices within the meaning of Section 8(a) (1) and 8(a) (5) of the Act, as amended, 29 U.S.C.A. § 158(a) (1) and (a) (5), by refusing to bargain collectively with the International Mailers Union (Union), exclusive bargaining representative for the Company’s 14 city and country district circulation managers working out of Company’s Springfield, Illinois plant.
The Board, pursuant to Section 10(e) of the Act, as amended, 29 U.S.C.A. § 160(e), cross-petitions for enforcement of its order.
The record reveals that the Company is an Illinois corporation engaged in the business of publishing daily newspapers in Springfield, Illinois. It further shows that on August 30, 1967, the Union filed a petition with the Board seeking to represent for purposes of collective bargaining the Company’s city and country district managers.
Subsequent to a hearing ordered by the Thirteenth Regional Director of the Board to consider, inter alia, whether the district men whom the Union sought to represent were supervisory or managerial employees, the Regional Director issued a decision finding that such district managers were not supervisory or managerial employees and that they constituted a unit appropriate for the purposes of collective bargaining pursuant to Section 9(b) of the Act, as amended, 29 U.S.C.A. § 159(b). The Board denied the Company’s request for review of the Regional Director’s unit decision in case No. 38-RC-419.
Pursuant to the Regional Director’s direction, a representation election was conducted on January 17, 1968 in which a majority of the district managers designated the Union as their collective bargaining representative. On January 25,1968, the Union was so certified.
It is undisputed that subsequent to the certification the Union requested, and continues to request, the Company to bargain collectively and that the Company has refused, and continues to refuse, to bargain with the Union.
With the Company’s refusal to bargain, the Union filed a charge, and the Board’s General Counsel, by the officer-in-charge of Subregion 38, issued a complaint and notice of hearing on March 19, 1968 against the Company alleging violations of Section 8(a) (5) and 8(a) (1). In answer to the complaint, the Company admitted its refusal to bargain and alleged that the certification of the Union was invalid on the grounds that the district managers are not employees within the meaning of Section 2(3) of the Act, as amended, 29 U.S.C.A. § 152(3). Specifically, the Company’s answer contends that the 14 district managers are supervisors within the meaning of Section 2(11), as amended, 29 U.S.C.A. § 152(11). The Company contends, therefore, that its refusal to bargain is not violative of the Act since the certification of the Union was invalid as such district men do not constitute an appropriate bargaining unit.
Thereafter, on March 27, 1968, General Counsel filed with the Board a motion for summary judgment. The motion was premised upon the Board’s “rule against relitigation.” Under such procedure, the Board will not relitigate in a subsequent refusal-to-bargain proceeding matters which have been considered and disposed of in a prior related representation case. Pittsburgh Plate Glass Co. v. N.L.R.B., 313 U.S. 146, 61 S.Ct. 908, 85 L.Ed. 1251 (1941); N. L. R. B. v. National Survey Service, Inc., 7 Cir., 361 F.2d 199, 204 (1966).
By the motion, General Counsel asserted that since the Company admits its continuing refusal to bargain and that since the sole issue raised by the Company’s answer related to the question of the unit’s propriety, which had been previously determined in Case No. 38-RC-419, a hearing with respect to the alleged unfair labor practice was unnecessary under the rule against relitigation.
In substance, the Board granted the motion on the basis of the reasoning embraced in General Counsel’s motion for summary judgment.
In this case, the Company’s petition for review of the Board’s order in effect represents a petition for review of the Regional Director’s finding and decision that the 14 district managers are employees, rather than “supervisors and/or managerial employees”, and constitute a unit appropriate for the purposes of collective bargaining. This is true since the validity of the Board’s order hinges on the propriety of the Regional Director’s finding with respect to the issue of whether the district managers were employees within the meaning of the Act.
It is axiomatic that the Board is accorded wide discretion in establishing the correct limits of a bargaining unit and is not subject to reversal unless it is arbitrary and capricious in the exercise of its discretion. N. L. R. B. v. Waukesha Lime & Stone Co., 7 Cir., 343 F.2d 504, 507 (1965); N. L. R. B. v. Weyerhaeuser Company, 7 Cir., 276 F.2d 865, 869 (1960), and cases cited therein, cert. denied, 364 U.S. 879, 81 S.Ct. 168, 5 L.Ed.2d 102. The finding reached in the instant case with respect to the question of whether the district managers were employees and constituted an appropriate bargaining unit “must be sustained if it is supported by substantial evidence on the record considered as a whole.” Trailmobile Division, Pullman Incorporated v. N. L. R. B., 5 Cir., 379 F.2d 419, 422 (1967); N. L. R. B. v. Security Guard Service, Inc., 5 Cir., 384 F.2d 143 (1967).
After examining the record, we are satisfied that the evidence substantially supports the conclusion that the Company’s district managers are employees within the meaning of the Act and constitute an appropriate bargaining unit. Such a determination was reasonable and cannot be characterized as being arbitrary or capricious in nature. It necessarily follows that the Board’s petition for enforcement of its order should be granted.
The record shows that the Company’s circulation department has 14 district men or managers. Each manager is assigned to a geographical area known as a district; there are five country and nine city districts. Though the manager’s functions and responsibilities within his district are multifarious and the subject of some disagreement, it is undeniable that his paramount concern is with the newspaper carriers of which there are approximately sixty to seventy in each district.
With respect to the Company’s contention that the district men are managerial employees, we are in accord with the Regional Director’s analysis that “the discretion and initiative which these men [the district managers] are expected to exercise fall within relatively unimportant areas * * * ” and “ * * * make them sufficiently removed from managerial policy-making so they may not be considered employees who formulate, determine and effectuate managerial policy.”
Though the Board has established a policy of excluding “managerial employees” from bargaining units, it has not developed clear guidelines for determining whether particular individuals are “managerial employees.” In Retail Clerks International Ass’n, A.F.L.-C.I.O. v. N. L. R. B., 125 U.S.App.D.C. 63, 366 F.2d 642, 644-645 (1966), cert. denied, 386 U.S. 1017, 87 S.Ct. 1373, 18 L.Ed.2d 455, the court notes that there seem to be two fundamental tests for determining whether an employee is a managerial employee and therefore excludable under Board policy from bargaining units.
The first test is to determine whether an employee is so closely related to or aligned with management as to place the employee in a position of potential conflict of interest between his employer on the one hand and his fellow workers on the other. If an employee is found to be in such a position, he is not, under Board policy, entitled to be represented in the collective process.
The second managerial employee test is to determine whether the employee is formulating, determining and effectuating his employer’s policies or has discretion, independent of an employer’s established policy, in the performance of his duties. If an employer cloaks an individual with such authority or such discretion, that individual would be a managerial employee and would be deprived of the right of representation by a bargaining unit.
The alignment between the 14 district men in question and the upper management echelon of the Company is not of such degree or character as to place these employees in a position of potential conflict. The alignment test is essentially a narrow one in the sense that unless an employee is substantially involved in his employer’s labor policies his relationship with management is not one of a managerial employee. The rationale behind this is succinctly set forth in Westinghouse Electric Corporation v. N. L. R. B., 6 Cir., 398 F.2d 669, 670-671 (1968). In that case the court stated:
“The Board strictly adheres to its definition of a ‘confidential employee’ since a broader rule would, in the Board’s opinion, needlessly deprive many employees of their right under Section 7 of the Act to bargain collectively through representatives of their choosing. * * * The Board thus attempts to strike a balance between the right of employees to be represented in the collective bargaining process with the right of the employer to formulate, determine and effectuate its labor policies with the assistance of employees not represented by the union with which it deals.”
In the instant case, the record is devoid of substantial evidence showing that the 14 district men were concerned with or involved in the Company’s labor policies to such an extent that a potentially meaningful conflict of interest problem might arise. We find that the district men were not managerial employees under the first test.
Nor do we find upon consideration of the record as a whole that the district men were managerial employees within the meaning of the second test as set forth in Retail Clerks International Ass’n, A.F.L.-C.I.O. v. N. L. R. B., supra.
The record shows that the district men have similar duties within their respective districts. The paramount responsibilities of these men are: overseeing the distribution of the Company’s newspapers; working with the newspaper carriers, including the hiring and the training of the carriers; handling complaints which relate to delivery; adjusting and remitting sales receipts to the Company; participating in Company circulation campaigns, primarily by encouraging carriers to promote new subscriptions ; attending sales meetings; recommending discounts for delivery routes; organizing and determining delivery routes within their district; contracting news dealers on behalf of the Company; leasing space to serve as a substation within the district; and making various small purchases.
While the district man has various responsibilities, they are minor in nature and not tantamount to those of an employee who formulates, determines and effectuates his employer’s policies. The scope of his authority in the area of significant management policy is limited in nature and as the Regional Director aptly notes “the discretion and initiative which these man are expected to exercise fall within relatively unimportant areas.” The record contains evidence indicating that in the few areas where the district man appears to have some discretion in the performance of his job and to have some semblance of policy authority the Company effectively circumscribes such discretion and limits such authority.
The Company maintains that one indi-cia of the district manager’s discretion and authority rests in the fact that these men are “initiating discount policies.” The record reveals that the district man may recommend, instituting a discount on a particular delivery route, but it does not show they have the discretion or authority to make the ultimate determination, independent of Company consideration and approval, of whether a discount policy should be adopted.
A similar indication of the limited range of the district man’s discretion and influence on policy can be discerned by reviewing the extent to which he participates in circulation campaigns. While the district man may suggest and participate in setting up these campaigns, it does not appear he may independently initiate a major campaign. His primary function in such a campaign is seemingly confined to executing within his district those campaign plans formulated by his superiors. This amounts to encouraging his carriers “to promote and sell and canvass and get new subscriptions for our newspaper.”
A further manifestation of the limited discretion and authority can be discovered in the uncontroverted testimony of the Company’s assistant circulation director, Umberto A. Natale. He testified that the district man “can recommend that his district be redivided * * *” but that someone else, presumably someone at a higher level, determines whether the recommended subdivision would be provident.
In this case, the extent of the district man’s relation to and influence on major company policies is limited to making recommendations to the Company with respect to its policies and future plans. The Board has held that the power to make recommendations does not warrant precluding one from representation as a managerial employee. Puget Sound Power & Light Company, 117 NLRB 1825, 1827 (1957). The other areas in which the district man has apparent discretion and policy authority are relatively unimportant in scope or effectively circumscribed by Company policy or review.
As an additional proposition, the Company further contends the Board erred in holding that the 14 district men were not supervisors within the meaning of Section 2(11) of the Act, as amended, 29 U.S.C.A. § 152(11), which provides in relevant part:
“The term ‘supervisor’ means any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees * * *.” (Emphasis supplied.)
Also relevant is Section 2(3) of the Act, as amended, 29 U.S.C.A. § 152(3), which reads in material part:
“The term ‘employee’ shall include any employee, * * *, unless this subchapter explicitly states otherwise, * * *, but shall not include any individual * * * having the status of an independent contractor, or any individual employed as a supervisor, * * (Emphasis supplied.)
The Company urges that the Board erred in deciding whether the 14 district men were supervisors within the meaning of Section 2(11) by referring to Section 2(3) of the Act to determine whether the individuals they supervised were employees. The Company asserts that relevant legislative history and the wording of Section 2(11) do not “invite reference” to the definition of the term employee in Section 2(3). Thus, the gravamen of the Company’s ingenious argument rests on the contention that “any individual who exercised supervisory authority on behalf of an employer, regardless of whether the individuals supervised were ‘employees’ within the meaning of Section 2(3)”, is a supervisor. To bolster its contention, the Company reasons that to hold that the term “employees” in Section 2(11) is to be defined by Section 2(3) would render the word “other” in Section 2(11) superfluous. We are not persuaded by the Company’s position on what appears to be a question of first impression.
With regard to the superfluousness argument, we agree with the view expressed in International Ladies’ Garment Workers’ Union, A.F.L.-C.I.O. v. N. L. R. B., 2 Cir., 339 F.2d 116, 121-122 (1964),that:
“The natural inference to be drawn from the language of section 2(11), especially if attention is paid to the words ‘other employees’, is that the employer referred to is the employer of those being supervised. * * *”
By looking to Section 2(3) for the definition of employee to determine whether an individual is a supervisor does not render the term “other” in Section 2(11) superfluous, but rather the term functions to limit the statutory definition of a supervisor to those individuals who are given by their employer supervisory authority over other employees of that same employer. To so view the function of the term “other” does not appear to thwart the Congressional intent behind Section 2(11) and related sections and is in accord with both judicial and Board precedent. Retail Clerks International Ass’n, A.F.L.-C.I.O. v. N. L. R. B., supra at 644, n. 2, of 366 F.2d; Eureka Newspapers, Inc., 154 NLRB 1181, 1185 (1965).
Study of the legislative history behind the 1947 Taft-Hartley enactment of Sections 2(3) and 2(11) sheds scant light on the specific issue of whether the term “other employees” in Section 2(11) is to be defined by reference to Section 2(3). The legislative history does not contain a statement of intent to bar such reference.
We are persuaded by the logic of the Board’s reasoning that it is difficult to imagine that Congress, in redefining and narrowing the scope of the term “employee” by excluding supervisors and independent contractors, did not intend for the Board and courts to look to the revised definition of the term “employee”, as set forth in Section 2(3), in construing the definition of “supervisor”, as defined in Section 2(11).
In view of this reasoning and the absence of precedent and clear legislative history to the contrary, we find that unless an individual is granted by his employer supervisory authority over fellow employees, as defined in Section 2(3), of that same employer, he is not a supervisor within the meaning of Section 2(11).
In the instant case, it would be anomalous to hold that these 14 district men are truly supervisors. The parties have stipulated the carriers and dealers are independent contractors. Since independent contractors are not employees within the meaning of the Act and are excluded from the coverage of the Act by Section 2(3), we affirm the Regional Director’s conclusion that “* * * these managers cannot be their supervisors within the meaning of the Act.”
Finally, we find no merit in the Company’s contention that the district men were supervisors with respect to the Company’s agents and solicitors. We find ample support in the record to sustain the Regional Director’s conclusion that the supervisory authority of the district men over these employees is “too sporadic and too routine” to warrant classifying them as supervisors. We have held that “ [p] erformance of isolated, infrequent duties of a supervisory nature does not transform a rank and file employee into a supervisor.” Plastic Workers Union Local 18, I. U., D. & T. W., A.F.L.-C.I.O. v. N. L. R. B., 7 Cir., 369 F.2d 226, 230 (1966).
The petition to set aside the order under review is denied and the cross-petition for enforcement is granted.
Review denied.
Enforcement granted.
. The decision and order of the Board are reported at 171 NLRB No. 130, 1968-1 COH NLRB ¶22,531.
. This case is not published,
. The recent well-reasoned decision of Pepsi-Cola Buffalo Bottling Company and Squirt-Vernors of Buffalo, Inc. v. National Labor Relations Board, 2 Cir., 409 F.2d 676, March 25, 1969, seemingly opens to question the validity and vitality of the rule against relitigation. In the instant case, neither party to the dispute sought to invoke argument with respect to the soundness of the principle of no re-litigation in response to our invitation to consider such a move.
. Among other points, the Company urges that the district men exercise “independent judgment” in adjusting customer complaints, pledging Company credit, and establishing delivery routes. The record shows that: the adjustments made are minor in amount, routine and under a general Company policy which attempts to hold the carrier responsible for losses he has caused; the pledges of credit are small in amount and routine in nature; and the establishment of delivery routes is subject to policy “suggestions” by the Company.
It is also of interest to note that while a district man has discretionary authority to terminate a news carrier, the circulation manager Merle Williamson could not recall a ease of a district man exercising such authority and stated that any termination decision is subject to being overruled “by someone higher up in the Circulation Department.”
. At the hearing before the Regional Director, the parties stipulated that the “carrier boys, news dealers, and motor route dealers * * * were independent contractors working under the jurisdiction of the district managers.” See joint appendix, p. 59.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
TACHA, Circuit Judge.
Appellants appeal an order of the district court granting defendants’ motion for summary judgment. Colorado Taxpayers Union, Inc. v. Romer, 750 F.Supp. 1041 (D.Colo.1990). On appeal, appellants contend that the Governor of Colorado violated their First Amendment rights by using state resources to defeat an amendment on the ballot at a Colorado general election. Appellee Romer cross appeals asserting that appellants lack standing to pursue this action. We exercise jurisdiction under 28 U.S.C. § 1291 and dismiss the appeal for lack of standing.
BACKGROUND
In October of 1988, the citizens of Colorado placed an initiative, commonly referred to as Amendment six, on the ballot at the Colorado general election. Amendment six focused on statewide tax reform and would have allowed the citizens of Colorado to vote directly on any significant change in state tax laws.
Appellee Romer, the Governor of the State of Colorado, and defendant Citizens for Representative Government, of which defendants Phil Fox and Clark Shaw were members, publicly opposed the amendment. Appellants assert that Governor Romer used numerous public resources to publicly oppose the amendment. These resources allegedly included staff time, equipment and supplies, travel resources, and facilities at the state mansion and state capital office. Amendment six eventually was defeated in the Colorado general election.
After the defeat of the amendment, appellants filed a suit in the United States District Court for the District of Colorado seeking relief under 42 U.S.C. § 1983. Appellants claimed that Governor Romer violated their First Amendment rights by using state resources and the power and prestige of his office to oppose the amendment. Appellants also asserted that the Governor and the other defendants combined in a conspiracy to violate the appellants’ constitutional rights in violation of 42 U.S.C. § 1985(3) and common law.
Asserting that appellants lacked standing and that they failed to state a claim for relief for a violation of the United States Constitution, defendants moved for summary judgment. Appellants cross-moved for summary judgment. The district court denied appellants’ motion and then addressed defendants’ motion, denying it in part and granting it in part. The district court found that appellants had standing to sue, but that Governor Romer’s expenditures were “de minimis” so that the appellants failed to state a claim.
DISCUSSION
On appeal, Romer contends that appellants lack standing to pursue this action. Because we agree with this contention, we address only the standing argument and do not address the merits of appellants’ contentions on appeal. In this case, appellants are two associations, the Colorado Taxpayers Union and the Colorado Libertarian Party, and a number of individuals.
Before a party may invoke the jurisdiction of the federal courts, Article III requires that the party demonstrate that (1) “ ‘he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant’ (2) “the injury ‘fairly can be traced to the challenged action’ and (3) the injury “ ‘is likely to be redressed by a favorable decision.’ ” Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982) (quoting Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99, 99 S.Ct. 1601, 1607, 60 L.Ed.2d 66 (1979) and Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 38, 41, 96 S.Ct. 1917, 1924, 1925, 48 L.Ed.2d 450 (1976)). If a party satisfies these minimum constitutional requirements, then a court may still deny standing for prudential reasons if the injury alleged constitutes a “generalized grievance” that more appropriately should be addressed by the representative branches. See Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984).
The district court concluded that plaintiffs “alleged sufficient injury for standing.” Colorado Taxpayers Union, Inc. v. Romer, 750 F.Supp. 1041, 1043 (D.Colo.1990). In support of this conclusion, the district court stated that “[t]he harm consists of the additional burden imposed on the plaintiffs by the defendants’ allegedly unconstitutional acts. Like the plaintiffs in Common Cause v. Bolger, [512 F.Supp. 26, 30 (D.D.C.1980)], the plaintiffs here have alleged that their campaign for Amendment 6 would not have been so difficult (and, in fact, might have been successful) but for the defendants’ acts.” Id. We must now determine whether the individuals or either of the associations, the Colorado Libertarian Party or the Colorado Taxpayers Union, have standing to bring this suit.
A. The Colorado Libertarian Party
Appellants contend that the Libertarian Party has standing to sue because it seeks judicial relief for injuries to the organization. An organization has standing on its own behalf if it meets the standing requirements that apply to individuals. Havens Realty Corp. v. Coleman, 455 U.S. 363, 378-79, 102 S.Ct. 1114, 1124-25, 71 L.Ed.2d 214 (1982). To have standing, plaintiffs must allege “ ‘such a personal stake in the outcome of the controversy’ as to warrant ... invocation of federal-court jurisdiction.” Village of Arlington Heights v. Metropolitan Hous. Dev. Corp., 429 U.S. 252, 261, 97 S.Ct. 555, 561, 50 L.Ed.2d 450 (1977) (quoting Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962)). Appellants must demonstrate that their alleged injury is an “injury in fact, economic or otherwise.” Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 152, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970). The injury must be “ ‘distinct and palpable,’ ” Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 100, 99 S.Ct. 1601, 1608, 60 L.Ed.2d 66 (1979) (quoting Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975)), and “real and immediate,” not abstract, conjectural, speculative, or hypothetical, City of Los Angeles v. Lyons, 461 U.S. 95, 101-02, 103 S.Ct. 1660, 1664-65, 75 L.Ed.2d 675 (1983).
Appellants claim that Governor Romer used his staff and the resources of his office to defeat the tax initiative supported by the Libertarian Party and thus forced the Party to bear a greater burden in its attempt to pass the amendment. Appellants claim that under Havens, 455 U.S. at 379, 102 S.Ct. at 1124, this drain on resources is a concrete and demonstrable injury.
In Havens, the Supreme Court found that an organization was entitled to standing on its own behalf because the organization alleged that an apartment owner’s racial steering practices had perceptively impaired the organization’s ability to provide counseling and referral services for low and moderate income home seekers. The Court stated that “[s]uch [a] concrete and demonstrable injury to the organization’s activities—with the consequent drain on the organization’s resources—constitutes far more than simply a setback to the organization’s abstract social interests.” Id. at 379, 102 S.Ct. at 1124.
Appellants’ argument that they were forced to counteract the Governor’s activities through the expenditure of additional funds is purely conjectural. Such an argument simply does not demonstrate that the Libertarian Party or its members have suffered a distinct and concrete injury. At most, the Libertarian Party’s allegations suggest only that the organization has received a minor setback to its organizational purpose. The Libertarian Party’s argument would require this court to engage in a futile act of speculation in order to determine the extent of some remote, uncertain injury. This type of conjectural injury cannot establish standing under Havens. In Havens, the defendant’s allegedly unlawful conduct could be tied directly to a concrete harm inflicted upon the primary activity of the plaintiff organization—the organization’s counseling and referral efforts were rendered futile when the defendant turned away referred applicants. Here, appellants’ actions in spending additional funds simply cannot be traced to the Governor’s allegedly illegal expenditures. It is pure conjecture to assume that Governor Romer’s activities caused appellants to drain their resources. Thus, we conclude that appellants have not “allege[d] [a] personal injury fairly traceable to the defendant’s allegedly unlawful conduct and likely to be redressed by the requested relief.” Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984).
The Libertarian Party also argues that it suffered an injury when its First Amendment rights were chilled. Appellants contend that the allegedly illegal expenditures by the Governor effectively imposed a tax upon the Libertarian Party in its effort to exercise its First Amendment right to petition. Essentially, appellants claim that the dilution of Party resources chilled the exercise of First Amendment rights.
We cannot agree with the characterization of the Governor’s activities as a “tax” on the Libertarian Party or its members’ First Amendment right to petition. The Governor’s activities in no way prevented the Libertarian Party or its members from petitioning the government. The Governor’s activities only commenced once the amendment was placed on the ballot. The Governor’s allegedly unlawful activities never prevented members of the Libertarian Party from associating, speaking on behalf of the amendment, or voting on the amendment. Further, the Libertarian Party and its members failed to demonstrate that Romer’s activities impacted their ability to petition the government of Colorado in the future. Thus, neither the Libertarian Party nor its members has demonstrated that First Amendment rights were chilled.
The Libertarian Party contends that even if it has not been injured, it is entitled to standing on behalf of its members. In Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 343, 97 S.Ct. 2434, 2441, 53 L.Ed.2d 383 (1977), the Supreme Court announced a three-part test for associational standing:
[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of the individual members in the lawsuit.
Because we conclude that the Libertarian Party’s members do not have standing to sue in their own right, the Party is not entitled to associational standing.
B. The Colorado Taxpayers Union and the Individual Appellants
The individual appellants claim that they are entitled to standing as taxpayers. The Colorado Taxpayers Union asserts standing as an organization suing on behalf of its tax-paying members. Appellants argue that the Governor illegally used state tax funds in order to defeat Amendment six and that this misappropriation entitles them to standing under Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968). The district court stated that “[t]he essence of the plaintiffs’ position is that when the Governor becomes an advocate against a citizen initiative, he has exceeded the limits of his official power and interfered in the process by which the people exercise their sovereign right to change the authority of the officials who govern them.” Colorado Taxpayers Union, Inc., 750 F.Supp. at 1044. Appellee Romer argues that this claim is insufficient to give appellants taxpayer standing under Flast.
Most of the taxpayer standing cases addressed by the Supreme Court deal with federal taxpayer standing. The general prohibition against federal taxpayer standing originated in Frothingham v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078 (1923). In Frothingham, the Supreme Court held that a federal taxpayer lacks standing to sue to enjoin federal officials from enforcing a federal statute authorizing appropriations of public money. The federal taxpayer attacked the Maternity Act of 1921, which established a federal program of grants to states to reduce maternal and infant mortality. The taxpayer alleged that Congress, in enacting the Act, exceeded its powers under Article I of the Constitution. She argued that “the effect of the appropriations complained of will be to increase the burden of future taxation and thereby take her property without due process of law.” Id. at 486, 43 S.Ct. at 600.
The Court began its analysis by noting that “[t]he interest of a taxpayer of a municipality in the application of its moneys is direct and immediate and the remedy by injunction to prevent their misuse in not inappropriate. It is upheld by a large number of state cases and is the rule of this court.” Id. The Court then distinguished federal taxpayers from municipal taxpayers and stated that a federal taxpayer’s “interest in the moneys of the treasury ... is comparatively minute and indeterminable” and that “the effect upon future taxation, of any payment out of the [Treasury’s] funds, [is] remote, fluctuating and uncertain.” Id. at 487, 43 S.Ct. at 601. Thus, the Court found that the federal taxpayer lacked standing.
In Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968), the Court created an exception to the bar on federal taxpayer standing in the context of Establishment Clause challenges. The Court asked “whether the Frothingham barrier should be lowered when a taxpayer attacks a federal statute on the ground that it violates the Establishment and Free Exercise Clauses of the First Amendment.” Id. at 85, 88 S.Ct. at 1944. To resolve this issue, the Court noted that a court must “determine whether there is a logical nexus between the status asserted and the claim sought to be adjudicated.” Id. at 102, 88 S.Ct. at 1953. The Court then concluded that the nexus requirement for a federal taxpayer contains two aspects. “First, the taxpayer must establish a logical link between that status and the type of legislative enactment attacked.” Id. Under this first aspect, a taxpayer can only challenge the unconstitutionality of exercises of congressional power under the Taxing and Spending Clause of Article I, Section 8 of the Constitution. The second aspect requires that a taxpayer establish “a nexus between that status and the precise nature of the constitutional infringement alleged.” Id. To satisfy this requirement, a taxpayer must show that the challenged action “exceeds specific constitutional limitations imposed upon the exercise of the congressional taxing and spending power.” Id. at 102-03, 88 S.Ct. at 1953-54. In Flast, the taxpayers satisfied both aspects of the required nexus because they challenged a congressional exercise of power under Article I, Section 8 and because they asserted that the congressional expenditures violated the First Amendment’s Establishment Clause, which specifically limits the taxing and spending power of Article I, Section 8.
After Flast, the Court consistently has adhered to the “narrow exception [Flast] created to the general rule against taxpayer standing.” Bowen v. Kendrick, 487 U.S. 589, 618, 108 S.Ct. 2562, 2579, 101 L.Ed.2d 520 (1988). In Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982), the Court held that federal taxpayers lacked standing to challenge the Secretary of Health, Education, and Welfare’s (HEW) decision to give property to a religious institution. The Court rejected the taxpayers’ standing argument because the “source of their complaint is not a congressional action, but a decision by HEW to transfer a parcel of federal property.” Id. at 479, 102 S.Ct. at 762. The Court also reasoned that “the property transfer about which [the taxpayers] complain was not an exercise of authority conferred by the Taxing and Spending Clause.” Id. at 480, 102 S.Ct. at 762. Thus, the Court has indicated that Flast applies only to cases in which a federal taxpayer challenges a congressional appropriation made pursuant to Article I, Section 8 that allegedly violates the Establishment Clause of the First Amendment. See United States v. Richardson, 418 U.S. 166, 94 S.Ct. 2940, 41 L.Ed.2d 678 (1974); Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 228, 94 S.Ct. 2925, 2935, 41 L.Ed.2d 706 (1974); Flast, 392 U.S. at 114, 115, 88 S.Ct. at 1959, 1960 (Stewart, J., concurring and Fortas, J., concurring); see also Taub v. Kentucky, 842 F.2d 912, 916 (6th Cir.), cert. denied, 488 U.S. 870, 109 S.Ct. 179, 102 L.Ed.2d 148 (1988).
Both parties mistakenly rely on Flast to resolve whether appellants qualify for taxpayer standing in this case. Flast does not directly govern this appeal because it applies to federal taxpayer standing issues, not questions relating to standing for state taxpayers. Although neither Frothingham nor Flast analyzes questions of state taxpayer standing invoked to challenge state taxes or expenditures, the Supreme Court briefly addressed the issue in Doremus v. Board of Education, 342 U.S. 429, 72 S.Ct. 394, 96 L.Ed. 475 (1952).
In Doremus, New Jersey state taxpayers sued the State of New Jersey seeking a declaratory judgment that a state law authorizing public school teachers to read from the Bible violated the First Amendment. The Court concluded that the plaintiffs lacked standing because they did not allege any direct injury to themselves. The Court stated that
[t]here is no allegation that this activity is supported by any separate tax or paid for from any particular appropriation or that it adds any sum whatever to the cost of conducting the school. No information is given as to what kind of taxes are paid by appellants and there is no averment that the Bible reading increases any tax they do pay or that as taxpayers they are, will, or possibly can be out of pocket because of it.
Id. at 433, 72 S.Ct. at 397. The Court reiterated that a taxpayer “ ‘must be able to show, not only that the statute is invalid, but that he has sustained or is immediately in danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers in some indefinite way in common with people generally.’ ” Id. at 434, 72 S.Ct. at 397 (quoting Commonwealth of Mass. v. Mellon, 262 U.S. 447, 488, 43 S.Ct. 597, 601, 67 L.Ed. 1078 (1923)). The Court held that “[t]he taxpayer’s action can meet this test, but only when it is a good-faith pocketbook action.” Id. Thus, we must determine whether appellants’ action satisfies the “good-faith pocketbook” requirement.
After Doremus, the federal courts have addressed the issue of state taxpayer standing and the type of claim that satisfies the good-faith pocketbook requirement infrequently. In Hoohuli v. Ariyoshi, 741 F.2d 1169 (9th Cir.1984), the Ninth Circuit examined the issue of state taxpayer standing and concluded that the plaintiffs met the Doremus requirements. In Hoohuli, state taxpayers brought an action challenging a system established by the State of Hawaii that disbursed benefits to residents who had descended from aboriginal inhabitants of the islands. The taxpayers claimed that “their tax dollars were being spent on a program which disbursed benefits based on impermissible racial classifications.” Id. at 1172.
After reviewing Frothingham and Doremus, the Ninth Circuit concluded that “[s]tate taxpayers could still maintain taxpayer suits if their pleadings were sufficient. They were sufficient if they set forth the relationship between taxpayer, tax dollars, and the allegedly illegal government activity.” Id. at 1178 (citation omitted). To reach this conclusion, the Ninth Circuit reviewed Flast and its progeny and found that because the Supreme Court did not discuss Doremus in the second part of the Flast nexus test, it implicitly distinguished between standing requirements for federal and state taxpayers. Id. at 1179. Thus, the Ninth Circuit decided that state taxpayer standing remained unchanged after Flast and must be guided by Doremus in its original form. Id. at 1179-80.
Based on this analysis, the Ninth Circuit held that the plaintiffs had satisfied the “good-faith pocketbook action” of Dore-mus. Each of the plaintiffs set forth his or her status as a taxpayer. The taxpayers challenged the appropriation, transfer and spending of taxpayers’ money from the general fund of the state treasury. Further, the taxpayers alleged that they “ha[d] been burdened with the necessity to provide more taxes to support” the program. Id. at 1180. The Ninth Circuit concluded that “[t]he pleadings set forth with specificity amounts of money appropriated and spent for allegedly unlawful purposes.” Id. Thus, under the test announced by the Ninth Circuit, a taxpayer must satisfy three requirements: (1) taxpayer status; (2) the appropriation of monies from the state’s general funds; and (3) the spending of those funds for allegedly unlawful purposes. Under this standard, a taxpayer need not demonstrate that “her tax burden will be lightened by elimination of the questioned expenditure.” Cammack v. Waihee, 932 F.2d 765 (9th Cir.1991), petition for cert. filed, 60 USLW 3406 (Nov. 12, 1991).
The Eighth Circuit, in Minnesota Federation of Teachers v. Randall, 891 F.2d 1354 (8th Cir.1989), agreed with the Ninth Circuit’s approach to state taxpayer standing. In Randall, the plaintiffs, a teachers’ union and its president, brought an action challenging the constitutionality of the Minnesota Post-Secondary Enrollment Options Act. Pursuant to the Act, public high school students in their junior and senior years could take advanced courses at two- and four-year colleges, some of which were religiously affiliated. The plaintiffs alleged that the Act violated the Establishment Clause of the First Amendment. Protesting the disbursement of tax money to sectarian schools and arguing that reallocation of funds reduced money available for his salary, the president of the teachers’ union asserted standing as a taxpayer.
The district court dismissed the suit for lack of standing because it believed that to achieve state taxpayer standing, the plaintiff would have to show an increase in his tax bill under Doremus. Id. at 1357. The Eighth Circuit disagreed, concluding that Doremus did not require a showing of an increased tax burden. The court reasoned that “only a taxpayer really suffers a distinct injury from the improper use of public money in violation of the establishment clause” and “that taxpayer standing was created to specifically permit the airing of establishment claims.” Id. at 1358. The Eighth Circuit concluded, “we do not believe that state taxpayers are required to show an increase in their tax burdens to allege sufficient injury.” Id.
The Sixth Circuit addressed the issue of state taxpayer standing in Taub v. Kentucky, 842 F.2d 912 (6th Cir.), cert. denied, 488 U.S. 870, 109 S.Ct. 179, 102 L.Ed.2d 148 (1988). In Taub, a state taxpayer brought an action against Kentucky, its governor, and other executive officers to prevent them from spending state tax revenues in connection with the construction of an automotive assembly plant. The plaintiff, who paid approximately $1,200 dollars in state property taxes, claimed that “the action of the Commonwealth and various officials of the executive branch amount[ed] to the taking of private property through taxation for other than a public purpose.” Id. at 914. After reviewing the federal taxpayer standing cases, the court noted that few cases have addressed the standing of state taxpayers where the Establishment Clause is not an issue, whereas municipal taxpayer standing has been recognized in a variety of contexts. Id. at 917. The Sixth Circuit then noted that challenges to the Establishment Clause create a unique situation in state taxpayer standing cases. Relying on the Supreme Court’s notation in School District of Grand Rapids v. Ball, 473 U.S. 373, 380 n. 5, 105 S.Ct. 3216, 3220 n. 5, 87 L.Ed.2d 267 (1985), that the Court has “adjudicated [numerous] Establishment Clause challenges by state taxpayers to programs for aiding nonpublic schools,” the Sixth Circuit stated that “[t]his observation [by the Supreme Court] points up the distinctive treatment of standing when the Establishment Clause is involved, but does not indicate any rule with respect to other state taxpayer suits.” Taub, 842 F.2d at 917.
After undertaking the preceding analysis and reviewing Doremus, the court
conclude[d] that the requirements for federal taxpayer standing announced in Frothingham control the issue of state taxpayer standing, at least in those cases where violation of the Establishment Clause is not alleged.... In order to have standing, a state taxpayer must allege direct and palpable injury with sufficient specificity to meet the “good-faith pocketbook” requirement of Doremus.
Id. at 918. The Sixth Circuit disagreed with the Ninth Circuit’s conclusion in Hoo-huli that a state taxpayer must only allege that appropriated funds were spent for unlawful purposes. Id. at 918-19. In addition to this requirement, the court required that “[a] state taxpayer ... tie such allegations of illegal appropriations and expenditures to a specific claim of some direct and palpable injury threatened or suffered.” Id. at 919.
After considering the cases relating to both federal and state taxpayer standing, we conclude that, where an Establishment Clause violation is not asserted, a state taxpayer must allege that appropriated funds were spent for an allegedly unlawful purpose and that the illegal appropriations and expenditures are tied to a direct and palpable injury threatened or suffered. Only by meeting these requirements will a state taxpayer satisfy the “good-faith pocketbook” requirement of Doremus. A state taxpayer must demonstrate that she will be “out of pocket” because of the allegedly illegal appropriation. Doremus, 342 U.S. at 433, 72 S.Ct. at 396.
In reaching this conclusion, we are guided by the Supreme Court’s decision in ASARCO, Inc. v. Radish, 490 U.S. 605, 109 S.Ct. 2037, 104 L.Ed.2d 696 (1989). In ASARCO, numerous individual state taxpayers and the Arizona Education Association, representing approximately 20,000 public school teachers in the State of Arizona, brought a suit in Arizona state court seeking a declaration that a state statute governing mineral leases on state land was void. The plaintiffs challenged the state statute on grounds that it did not comply with the methods Congress required the State to follow before leasing or selling the lands granted by the United States in the New Mexico-Arizona Enabling Act of 1910, 36 Stat. 557. Because the state court interpreted federal law, the Court addressed whether the plaintiffs would have had standing had the action originally been brought in federal court.
The Court noted that the general bar on federal taxpayer suits announced in Frothingham does not necessarily apply to municipal taxpayers “if it has been shown that the ‘peculiar relation of the corporate taxpayer to the [municipal] corporation’ makes the taxpayer’s interest in the application of municipal revenues ‘direct and immediate.’ ” ASARCO, 109 S.Ct. at 2043 (quoting Frothingham, 262 U.S. at 486-87, 43 S.Ct. at 600-01) (alteration in original). The Court then noted that “we have likened state taxpayers to federal taxpayers, and thus we have refused to confer standing upon a state taxpayer absent a showing of ‘direct injury,’ pecuniary or otherwise.” Id. (quoting Doremus, 342 U.S. at 434, 72 S.Ct. at 397). The Court concluded that the state taxpayers were not entitled to standing because “[t]he possibility that taxpayers will receive any direct pecuniary relief from this lawsuit is ‘remote, fluctuating and uncertain,’ as stated in Frothingham, supra, and consequently the claimed injury is not ‘likely to be redressed by a favorable decision.’ ” Id. (quoting Valley Forge, 454 U.S. at 472, 102 S.Ct. at 758).
After reviewing the reasoning in ASARCO, we conclude that we must reject the Ninth Circuit’s formulation of state taxpayer standing because it equates state taxpayers with municipal taxpayers for standing purposes. See Cammack, 932 F.2d at 770 (“we conclude that municipal taxpayer standing ... mirrors our threshold for state taxpayer standing”). Supreme Court jurisprudence indicates that state taxpayers must be likened to federal taxpayers. Thus, in addition to demonstrating that money was appropriated and spent for an allegedly unlawful purpose, a state taxpayer must show that a distinct and palpable injury resulted from the allegedly illegal appropriation or expenditure. To show such an injury, a state taxpayer must allege that he has suffered a monetary loss due to the allegedly unlawful activity’s effect on his tax liability.
Requiring a distinct and palpable injury for state taxpayers comports with notions of federalism that are central to our system of government. In the federal taxpayer standing cases, the Supreme Court has restricted standing to prevent the judicial branch from intruding into the provinces of the executive and the legislative branches. We agree with the Sixth Circuit that
[t]his separation of powers concern has a counterpoint which should be considered when a state taxpayer seeks to have a federal court enjoin the appropriation and spending activities of a state government. Considerations of federalism should signal the same caution in these circumstances as concern for preservation of the proper separation of powers in an “all federal” action.
Taub, 842 F.2d at 919. As the dissent in Hoohuli stated,
Doremus requires a state taxpayer plaintiff to demonstrate “a good-faith pocketbook action,” which appears to parallel the core article III injury-in-fact requirement. But when state taxpayers attack state spending in federal court, another major consideration operates: the integrity of our government’s federalist structure. Unnecessary or abstract decisions by federal courts in cases where there is no case or controversy could unduly constrict experimental state welfare legislation and undermine local self-determination.
Hoohuli, 741 F.2d at 1183 (Wallace, J., dissenting) (citations omitted). In this case we have an especially compelling federalism concern that dictates careful attention to the threshold case or controversy requirement of standing. This case involves a citizen initiative effort. The right to initiate legislation is a unique state-created right. The allegations in this case suggest that the elected chief executive officer of the state cannot take an active official role in the state-created initiative process. We can discern few areas so sacrosanct as protection of state self-determination. The mere allegation of federal constitutional violations cannot be allowed to clothe a state governmental decisionmaking process with the ill-fitting garments of federal court scrutiny. The “direct injury” requirement for standing that has flourished since Frothingham and Doremus and that defines the appropriate litigants in a state taxpayer case proves yet again the wisdom of the Framers of the Constitution when they tied federal court jurisdiction to the “case or controversy” requirement and its attendant standing, ripeness, and mootness doctrines. This case proves the continuing importance of judicial vigilance over these time-tested doctrines. Absent such vigilance, we would seriously undermine the constitutional commitment to federalism.
In this case, appellants allege that funds were appropriated and spent for an unlawful purpose; however, they do not allege a distinct and palpable injury that results from an increased tax liability. Instead, appellants merely allege that the Governor’s allegedly illegal activities forced them to spend additional funds to offset his efforts. “[A] taxpayer alleges injury only by virtue of his liability for taxes.” Valley Forge, 454 U.S. at 478, 102 S.Ct. at 762. Appellants have not alleged that they have suffered any injury whatsoever as a result of paying increased taxes to fund the Governor’s activities. Because appellants have not alleged an injury related to tax liability, they have not shown that they have suffered a distinct and palpable injury as a result of the allegedly illegal appropriations or expenditures. Thus, the individual appellants do not satisfy the good-faith pocketbook requirement of Do-remus and are not entitled to standing as state taxpayers. Likewise, the Colorado Taxpayers Union lacks associational standing because its members do not have standing as taxpayers to sue in their own right. Hunt, 432 U.S. at 343, 97 S.Ct. at 2441.
Accordingly, both the individuals and the two associations lack standing to challenge the alleged illegality of the Governor’s activities. The appeal is DISMISSED.
. The Supreme Court has permitted federal taxpayer standing when plaintiffs challenge that the administration of congressional grants violates the Establishment Clause. See Roemer v. Board of Pub. Works, 426 U.S. 736, 744, 96 S.Ct. 2337, 2343, 49 L.Ed.2d 179 (1976); Hunt v. McNair, 413 U.S. 734, 735-36, 93 S.Ct. 2868, 2870-71, 37 L.Ed.2d 923 (1973); Tilton v. Richardson, 403 U.S. 672, 676, 91 S.Ct. 2091, 2094, 29 L.Ed.2d 790 (1971).
. The dissent in Hoohuli argued that the taxpayers lacked standing because they did not demonstrate how the Hawaiian plan increases the taxes they pay. Id. at 1183 (Wallace, J., dissenting). The dissent noted that if the taxpayers had shown a sufficient good-faith pocketbook injury, an "especially acute” dual federalism issue would arise. Id.
. In Cammack v. Waihee, the Ninth Circuit found that the same standing requirements that apply to state taxpayers also apply to municipal taxpayers. "[W]e conclude that municipal taxpayer standing simply requires the ‘injury’ of an allegedly improper expenditure of municipal funds, and in this way mirrors our threshold for state taxpayer standing.” Id. at 770.
. Justice Kennedy garnered only four votes for the portion of the opinion that deals with state taxpayer standing. See ASARCO, 109 S.Ct. at 2053 (Brennan, J., concurring). Because Justice Brennan believed that it was unnecessary to address the state taxpayer standing issue, he did not concur in this part of Justice Kennedy's decision. Justice O’Connor did not take part in the decision.
. In ASARCO, the Court explained why the plaintiff-taxpayers lacked standing:
[The taxpayers] have simply asserted that the Arizona statute governing mineral leases has "deprived the school trust funds of millions of dollars thereby resulting in unnecessarily higher taxes.” Complaint, ¶ III. Even if the first part of that assertion were correct, however, it is pure speculation whether the lawsuit would result in any actual tax relief for [the taxpayers],
109 S.Ct. at 2043 (emphasis added).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PHILLIPS, Chief Judge.
Michael J. Patrone, a nontenured school teacher in the Howland, Ohio, district, was employed for eight successive years under a series of one year certificates to teach industrial arts. He is not eligible for tenure under Ohio law because he has never qualified for a regular industrial arts teaching certificate. When his contract was not renewed for the 1970-71 school year, he filed this action under 42 U.S.C. § 1983, complaining that the Board of Education had refused his demands for a statement of the reasons for nonrenewal of his contract and had denied him an opportunity to be heard. Patrone does not assert in his complaint that the action of the Board of Education was caused by the exercise by him of freedom of speech or any other constitutional right. He contends that the due process clause of the Fourteenth Amendment guarantees him a statement of reasons and a hearing before the school board.
The District Court granted partial summary judgment in favor of the teacher and ordered reinstatement with back pay. We reverse.
The order of the District Court was based upon failure of the Board of Education to state a reason for nonrenewal of the contract and to grant a hearing. The District Court said that the recent decision of this court in Orr v. Trinter, 444 F.2d 128 (6th Cir. 1971), cert. denied, 408 U.S. 943, 92 S.Ct. 2847, 33 L.Ed.2d 767, rehearing denied, 409 U.S. 898, 93 S.Ct. 95, 34 L.Ed.2d 157, is not controlling “since plaintiff’s case rests on constitutional grounds.”
The decision of the District Court is based upon a misinterpretation of Orr v. Trinter. Reversal is required not only by the decision of this court in that case, but also by the decision of the Supreme Court in Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548, and by the decisions of this court in Lukac v. Acocks, 6 Cir., 466 F.2d 577 (1972), Harp v. Clemens, 6 Cir., 464 F.2d 1028 (1972), and Crabtree v. Brennan, 6 Cir., 466 F.2d 480 (1972).
On appeal Patrone argues that he had an expectancy of continuing employment, relying on Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570. That case involved a situation where “the policies and practices of the institution” rose to the level of implied tenure. Ohio has a tenure system to protect the rights of career teachers. There are two types of teaching contracts, limited and continuing service. § 3319.08 O.R.C. A teacher with temporary certificate, such as the one possessed by Patrone, may be employed only under a limited contract. § 3319.11 O.R.C.
A teacher with a limited contract is entitled to reemployment unless notified to the contrary. § 3319.11 O.R.C. It is not disputed under the record in this case that Patrone was notified in writing in accordance with the statute that the Board did not intend to renew his contract. Furthermore, the Board’s affidavits state that Patrone’s 1969 certificate was conditioned upon his completing two courses of additional training; that the files of the Division of Certification of the Ohio Department of Education do not show that Patrone has submitted evidence of his completion of the two required courses; and that a fully certified teacher became available and was employed to teach industrial arts in the position formerly held by Patrone. Pat-rone does not assert that he completed the required courses of additional training, but states by affidavit that he received a temporary certificate for 1970-71. We find nothing in the record in this case that could be construed to establish an expectancy of continued employment as contemplated by Perry v. Sindermann, supra.
Reversed and remanded with instructions to dismiss the complaint.
. No allegation, to this effect is contained in the complaint.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
OPINION OF THE COURT
ALDISERT, Circuit Judge.
The Fugitive Felon Act, 18 U.S.C. § 1073, makes it a federal crime to flee a state to avoid prosecution for a state felony and provides that violators of § 1073 may be prosecuted only in the federal district in which the original state crime was allegedly committed. Under 18 U.S.C. § 2, one who aids or abets commission of an offense against the United States is punishable as a principal. The question for decision is whether, when the alleged violation is aiding and abetting flight to avoid prosecution, and the acts of aiding and abetting took place in another district, the defendant must be tried where the principal would be tried. The district court held that under the facts of this case venue was limited to the Eastern District of New York and therefore dismissed a count in an indictment brought in the Eastern District of Pennsylvania. The government has appealed as authorized by 18 U.S.C. § 8731. We affirm.
Two New York City police officers were shot on April 16,1981, in Queens County as they attempted to stop a van occupied by suspected burglars later identified as James Dixon York and Anthony LaBorde. One officer died, the other suffered serious wounds. After York and LaBorde fled New York, appellee Harvin Thurman allegedly obtained several residences for them in Philadelphia, helped them move their personal effects from one residence to another, provided them with “food, books and newspapers,” and transported York from Philadelphia to Virginia. Thurman was charged in a federal indictment filed in the district court for the Eastern District of Pennsylvania with six various counts: conspiracy, 18 U.S.C. § 371 (count one); being an accessory after the fact of unlawful flight, 18 U.S.C. § 3 (counts two and three); misprision of felony, 18 U.S.C. § 4 (counts four and five); and aiding and abetting an unlawful flight, 18 U.S.C. §§ 2(a), 1073 (count six). On Thurman’s motion the district court dismissed count six. The government appeals.
Section 1073 specifies that “[violations of this section may be prosecuted only in the Federal judicial district in which the original crime was alleged to have been committed .... ” The government concedes that York and LaBorde could be tried on the federal charge only in New York, but it argues that Thurman may be tried in the Eastern District of Pennsylvania, where he is alleged to have aided and abetted York and LaBorde.
The problem before us is solely a question of statutory construction, and our authority is limited: if the statutory language and the legislative intent are plain, the judicial inquiry is at an end. In this case we must read the substantive statute, § 1073, together with the aider and abettor statute, 18 U.S.C. § 2(a).
Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.
The district judge viewed § 2(a) as controlling:
[TJhat in effect requires that the aider and abettor must also be tried in the district in which the principal must be tried, and the principals here clearly must be tried in New York, and it is my feeling that this count is not properly in this district.
App. at 22a. Because we believe both § 1073 and § 2(a) are unambiguous, we agree with the district court’s analysis.
The legislative history of § 1073 supports our conclusion. The 1934 Senate debate preceding its passage reveals that the purpose of the legislation was to help states fight criminal gangs whose interstate contacts and resources made state prosecution difficult. Senator Robinson spoke of the necessity of having “a witness or other person needed in a criminal prosecution” brought back to the scene of the crime. 78 Cong.Rec. 5736 (1934). Emphasizing that if the person were a member of a gang operation he should be brought back, Senator Copeland provided the following example:
[SJuppose the witness should flee from Detroit to Columbus, Ohio, and he should be dealt with in the court in Columbus, Ohio, for having committed a felony against the United States. The State officials in Detroit would not be benefited at all in the event the witness should be dealt with afterward by the court in Columbus, because he would be outside the State of Michigan, and could not be dealt with anyway by the State of Michigan.
Id. at 5737.
The Senate debate indicates that the bill’s sponsors were interested in not merely a federal prosecution, but a prosecution in a specific federal district. Although we are quick to admit that the legislative history did not specifically discuss aiders and abettors, we find in the legislative history no indication that Congress would require fleeing witness and felon members of a gang to be returned to the district wherein the state crime allegedly occurred, but nevertheless allow aiding and abetting associates to stay outside the reach of state prosecution.
The government has provided us with a string of citations, apparently to support its proposition that at common law aiders and abettors were tried in the district in which their culpable acts occurred, and therefore that venue in this case may be laid in the Eastern District of Pennsylvania. See United States v. Buttorff, 572 F.2d 619, 627 (8th Cir.), cert. denied, 437 U.S. 906, 98 S.Ct. 3095, 57 L.Ed.2d 1136 (1978); United States v. Kilpatrick, 458 F.2d 864, 868 (7th Cir. 1972); United States v. Bozza, 365 F.2d 206, 221 (2d Cir. 1966); United States v. Gillette, 189 F.2d 449, 451-52 (2d Cir.), cert. denied, 342 U.S. 827, 72 S.Ct. 49, 96 L.Ed. 625 (1951); Eley v. United States, 117 F.2d 526, 528 (6th Cir. 1941). These decisions do not aid the government in this case, however, for although they may be read to hold that venue over aiding and abetting offenses generally is proper either where the substantive offense took place or where the aiding and abetting took place, none of these cases involves § 1073 and its clear legislative intention that venue would properly lie only in one district.
We therefore reject the interpretation urged upon us by the government. Indeed, we are somewhat surprised that the Department of Justice is resisting the prosecution of this defendant in the federal court in New York, in the state where not only the murder occurred but where state authorities potentially have a more than academic interest in this defendant. Moreover, the federal interest in prosecution for offenses committed in the Eastern District of Pennsylvania is vindicated: from the same nucleus of operative facts the government may go forward in prosecuting one count of conspiracy implicating eight overt acts, two counts of accessory after the fact of unlawful flight, and two counts of misprision of felony relating to the unlawful flight.
We conclude that the interpretation urged upon us by the government conflicts with the primary purposes of the venue section of § 1073: to return the felon to the state where the original flight occurred in order to assist state officials in combatting organized crime there, and to vindicate the federal interest in punishing acts committed in the judicial district where the original flight took place. As the court observed in Lupino v. United States, 268 F.2d 799, 801 (8th Cir.), cert. denied, 361 U.S. 834, 80 S.Ct. 86, 4 L.Ed.2d 75 (1959):
Such flights by perpetrators of crimes against the states are a common means of hindering state justice as is well known and, as it is the federal government which accords the freedom of movement throughout the country that makes the flights possible, it is plainly within the province of that government to regulate this abuse of it. The abuse is against the peace and dignity of the United States and also that of the States.
The government’s view of the venue provision of § 1073 conflicts with the clear language of the statutes, the Congressional intent revealed in the legislative history, and desirable public policy favoring state and federal cooperation in the apprehension and prosecution of members of organized crime.
The judgment of the district court will be affirmed.
. Section 1073 provides:
Whoever moves or travels in interstate or foreign commerce with intent either (1) to avoid prosecution, or custody or confinement after conviction, under the laws of the place from which he flees, for a crime, or an attempt to commit a crime, punishable by death or which is a felony under the laws of the place from which the fugitive flees, or which, in the case of New Jersey, is a high misdemeanor under the laws of said State, or (2) to avoid giving testimony in any criminal proceedings in such place in which the commission of an offense punishable by death or which is a felony under the laws of such place, or which in the case of New Jersey, is a high misdemeanor under the laws of said State, is charged, or (3) to avoid service of, or contempt proceedings for alleged disobedience of, lawful process requiring attendance and the giving of testimony or the production of documentary evidence before an agency of a State empowered by the law of such State to conduct investigations of alleged criminal activities, shall be fined not more than $5,000 or imprisoned not more than five years, or both.
Violations of this section may be prosecuted only in the Federal judicial district in which the original crime was alleged to have been committed, or in which the person was held in custody or confinement, or in which an avoidance of service of process or a contempt referred to in clause (3) of the first paragraph of this section is alleged to have been committed, and only upon formal approval in writing by the Attorney General or an Assistant Attorney General of the United States, which function of approving prosecutions may not be delegated.
. We assume that Thurman, will be tried in the Eastern District of Pennsylvania on the remain-tag five counts, as they were unaffected by the district court’s order.
. Nor is Hett v. United States, 353 F.2d 761 (9th Cir. 1966), helpful to the government, for in that case both the principal’s state offense and the acts of aiding and abetting took place in the same district.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
GEE, Circuit Judge:
The appellees are railroads doing interstate and intrastate business in Louisiana. They sued the state tax collectors, alleging that the Louisiana Tax on Transportation and Communication Utilities (“T & C” tax) discriminates against them in violation of the Railroad Revitalization and Regulatory Reform Act of 1976 (“4-R Act”). The district court ruled in favor of the railroads, but enjoined the collection of the T & C tax only insofar as it exceeded a locally assessed business license tax. We affirm the district court’s holding that the T & C tax violates the 4-R Act, but we reverse its ruling that the discriminatory tax can be collected in part.
A. Facts and Prior Proceedings
The railroads sued to enjoin the collection of the Louisiana T & C tax on the ground that it is prohibited by the 4-R Act. The T & C tax is a tax of 2% on the intrastate gross receipts of “public utilities” in Louisiana. La.Rev.Stat.Ann. § 47:1001. The 4-R Act emerged from a long Congressional debate over improving the plight of the railroad industry. One result of this debate was 49 U.S.C. § 11503(b), which forbids discriminatory taxation of railroads. The statute prohibits states from assessing railroad property at a higher rate than other commercial property, § 11503(b)(1), levying or collecting at such a rate, § 11503(b)(2), levying or collecting ad valorem taxes at a discriminatory rate, § 11503(b)(3), or imposing “another tax that discriminates against rail carriers....” § 11503(b)(4).
In response, the Secretary of the Department of Revenue and Taxation argued that the district court did not have subject matter jurisdiction over the controversy because the railroads’ claims did not fall within the 4-R Act’s exception to the Tax Injunction Act. On the merits, the Secretary contended that § 11503(b) was meant to apply only to property taxes, and that § 11503(b)(4) should not be interpreted literally to give it unlimited scope; instead, it should be applied only to taxes “in lieu of” property taxes. The Secretary also contended that the tax was not discriminatory when viewed in the context of the entire state taxation scheme.
The district court first held that the 4-R Act applied to taxes other than property or “in-lieu” taxes. Kansas City Southern Railway Co. v. McNamara, 563 F.Supp. 199 (M.D.La.1983). After trial, the district court ruled the tax “discriminatory” within the meaning of § 11503(b)(4) because “The plain intent of the statute is that state taxation upon railroads shall be upon an equal footing with other commercial and industrial taxpayer[s] generally.” Kansas City Southern Railway Co. v. McNamara, 624 F.Supp. 395, 399 (M.D.La.1985). The court decided that the T & C tax was a type of business license tax; it noted that “The only other business license tax levied in Louisiana which is comparable to the transportation and communications tax is commonly referred to as the occupation license tax.” 624 F.Supp. at 400; see La.Rev.Stat. Ann. § 47:341 et seq. (authorizing local assessment of the occupational license tax). The court pointed out that the burden of the occupational license tax ($7,500 maximum per year per jurisdiction) was far less than the T & C tax. Accordingly, the court held that the T & C tax was discriminatory. The court decided, however, that it would enjoin collection of the T & C tax only to the extent that the amount collected “would exceed the highest amount that would be due under the occupational license tax.” 624 F.Supp. at 402. Both sides appeal.
B. Jurisdiction and the Anti-Injunction Act
The 4-R Act includes an exception to the Tax Injunction Act, 28 U.S.C. § 1341. The first question we face is the breadth of the exception. By its terms, the 4-R Act exception to the Tax Injunction Act seems limited to assessment discrimination:
Notwithstanding section 1341 of title 28 and without regard to amount in controversy or citizenship of the parties, a district court of the United States has jurisdiction, concurrent with other jurisdiction of courts of the United States and the States, to prevent a violation of subsection (b) of this section. Relief may be granted under this subsection only if the ratio of assessed value to true market value of rail transportation property exceeds by at least 5 percent, the ratio of assessed value to true market value of other commercial and industrial property in the same assessment jurisdiction____
49 U.S.C. § 11503(c) (emphasis added).
This subsection is oddly cast. Read literally, it grants a sweeping exception to the Tax Injunction Act for claims under § 11503(b), then immediately takes away jurisdiction on two of four substantive provisions of § 11503(b)—subsection (3) (discriminatory tax rates) and subsection (4) (other discriminations). Our colleagues on the Ninth Circuit have read the language of the jurisdictional section of the statute as a mistake. They think the statute was meant to read: “Relief from discriminatory assessment may be granted under this section only if the ratio of assessed value...” See Trailer Train Co. v. State Board of Equalization, 697 F.2d 860, 865-66 (9th Cir.) (despite literal language to contrary, statute permits claims in federal court for rate discrimination under § 11503(b)(3); to hold otherwise “leads to... absurd result[s]”), cert. denied, 464 U.S. 846, 104 S.Ct. 149, 78 L.Ed.2d 139 (1983). The Supreme Court has tacitly affirmed this reading of the statute. The Court recently held that at the behest of the railroads federal courts must determine whether a state tax authority has correctly determined fair market value; the Court did not mention that the relief requested by the railroads does not come within the literal meaning of the exception in § 11503(c). See Burlington Northern Railroad Co. v. Oklahoma Tax Commission, _ U.S. _, 107 S.Ct. 1855, 95 L.Ed.2d 404 (1987). Other courts reviewing claims under § 11503(b)(4) of non-property-tax discrimination have assumed jurisdiction, overleaping this issue without even addressing it. See, e.g., Alabama Great Southern Railroad v. Eagerton, 663 F.2d 1036 (11th Cir.1981). At oral argument, counsel for the Secretary besought us to follow the literal language of the statute, while all but conceding that such a reading is absurd. Because the result is absurd, we agree with the decisional law that the exception to § 1341 in § 11503(c) does not say exactly what it means. Federal courts have jurisdiction over a case alleging discriminatory taxation in violation of § 11503(b)(3) and (4).
C. The Scope of § 11503(b)(4)
The Secretary argues with great force that § 11503(b) applies to property taxes only, and that § 11503(b)(4) is limited to taxes “in lieu” of property taxes. Cf. Burlington Northern, _ U.S. at _, 107 S.Ct. at 1857 (one technique chosen by Congress to rehabilitate the railroad industry “was a prohibition on discriminatory state taxation of railroad property”). She points out that there is virtually no mention of anything but discriminatory property taxes and taxes “in lieu” of property taxes in the legislative history of § 11503(b). See generally Richmond, Fredericksburg & Potomac Railroad v. Dept. of Taxation, 591 F.Supp. 209, 215-19 (E.D.Va.1984), rev’d, 762 F.2d 375 (4th Cir.1985). The Secretary also invokes the interpretive canon ejusdem generis to bolster her argument that § 11503(b)(4) should not be read to swallow up the preceding subsections.
Every court but two that has considered the scope of § 11503(b)(4) has rejected the Secretary’s position. The important exception is a powerful opinion by Judge Warriner in Richmond, Fredericksburg, 591 F.Supp. at 220-21 (§ 11503(b)(4) does not reach income taxes). For all its logic, however, that decision is now the equivalent of a law review article; it was reversed on precisely this issue by the Court of Appeals. Richmond, Fredericksburg, 762 F.2d at 379. Nevertheless, Judge Warriner’s opinion is a cogent argument in the Secretary’s favor. The opinion makes a good case from the legislative history that the extremely broad language of § 11503(b)(4) was not intended to swallow the rest of the carefully crafted statute. The Association of American Railroads has filed an amicus brief in this case containing contrary arguments based on extensive research into the legislative history. The presence of this brief is itself a tacit concession by the railroads to the power of Judge Warriner’s argument to inspire apprehension, even from the grave.
Within the rococco trappings of “ejusdem generis" and “legislative history,” the Secretary’s argument and Judge Warriner’s opinion pose a simple and compelling rhetorical question:
Why would Congress debate for 15 years about discriminatory property taxes, write various bills that dealt only with property taxes, and then, without discussion and only a few weeks before enactment, tack on to a section entitled “Tax discrimination against rail transportation property ” a subsection that is unlimited in scope and reduces the rest of the section to superfluous detail? The question is a good one.
But starting with dicta in Ogilvie v. State Board of Equalization, 657 F.2d 204, 210 (8th Cir.) (the purpose of § 11503(b) “was to prevent tax discrimination against the railroads in any form whatsoever”), cert. denied, 454 U.S. 1086, 102 S.Ct. 644, 70 L.Ed.2d 621 (1981), and ripening into a holding in Alabama Great Southern Railroad v. Eagerton, 663 F.2d 1036, 1040 (11th Cir.1981) (“paragraph (d) [§ 11503(b)(4)] is indeed intended as a catchall provision to prevent discriminatory taxation of a railroad carrier by any means”), and again and again since, federal and state courts have given an equally powerful if tacit answer: Although Congress was long concerned with blatant property-tax discrimination by many states, it realized near the end that banning discriminatory property taxes was not enough to save the railroads from unfair state taxation. Congress therefore added § 11503(b)(4) to ensure that the statute would not fail of its broader purpose. See, e.g., Trailer Train Co. v. Bair, 765 F.2d 744, 745 (8th Cir.), cert. denied, _ U.S. _, 106 S.Ct. 572, 88 L.Ed.2d 556 (1985); Richmond, Fredericksburg & Potomac Railroad v. Dept. of Taxation, 762 F.2d 375, 379 (4th Cir.1985); Atchison, Topeka & Santa Fe Railway v. Bair, 338 N.W.2d 338, 345 (Iowa 1983), cert. denied, 465 U.S. 1071, 104 S.Ct. 1427, 79 L.Ed.2d 751 (1984); Atchison, Topeka & Santa Fe Railway v. Bair, 535 F.Supp. 68 (S.D.Iowa 1982).
Whatever Congress may have meant by § 11503(b)(4), we must first focus on what it said. Judicial faithfulness to legislative will consists not in crude gropings into the consistently dark closets of legislative history but in a fine faithfulness to the mediating power of the legislative word. Our legislators are servants of the public, and when they speak in statutory language— that most public form of discourse — their motives and desires are submerged into a public product intelligible in a public context. If we do not take a legislative body at its word, we run the risk of substituting our own normative (and inherently nondemocratic) views, of disrupting the strange political trade-offs that make democracy possible, of — worst of all — polluting a public language of relatively fixed meaning and reference, a language necessary for the public discourse we call self-government. We will run these risks when the statutory language leads to absurdities, see supra section B, but not when the language of the statute merely makes Congress look foolish. See supra note 8.
The meaning of this statute is clear enough. Congress was most concerned with property tax discrimination, and it voiced that concern in detail in § 11503(b)(l)-(3); but it included § 11503(b)(4) to ensure that states did not shift to new forms of tax discrimination outside the letter of the first three subsections of § 11503(b). Nor is the rule of ejusdem generis of help. That “rule” is an interpretive rule-of-thumb, not a “rule” in the sense of a principle with independent analytical force. It merely summarizes a common-sense judicial response to centuries of lawyers’ implausible interpretations of serial clauses. Besides, it is too late in the jurisprudential day for us to agree with the Secretary and Judge Warriner. The shadows have lengthened across their arguments, as one-by-one every Court of Appeals that has considered the issue has sided with the railroads’ position. Although these decisions do not bind us, we do not lightly disregard such unanimity; and we would do so only were we convinced that those decisions are wrong. Obviously, we are not at all convinced they are wrong. We hold that § 11503(b)(4) forbids all forms of tax discrimination against railroads by states.
The meaning of “discrimination” presents a somewhat stickier problem.
D. Discrimination under § 11503(b)(4)
The district court’s opinion nicely summarized the problem of defining “discrimination”:
In order to determine whether an action discriminates against a group or class, the effect of the action must be compared to the effect on others. Not surprisingly, the parties do not agree as to the proper group or class to which the railroads should be compared. Plaintiffs insist that they must be compared to all other commercial and industrial taxpayers, while defendant asserts that the railroads should be compared only to those other utilities which are subject to the [T & C] tax.... While the ad valorem tax provisions of § 306(l)(a), (b), and (c) [§ 11503(b)(1), (2) and (3) ] make it plain that for ad valorem purposes, the railroads are to be compared to all other commercial and industrial taxpayers, the provisions of § 306(l)(d) [§ 11503(b)(4)], with which we are here concerned, have no such clear mandate. As most of my colleagues here realize, we would not have to pass the legislation before the Senate today if there had not been a rather significant imbalance in Federal assist-
624 F.Supp. at 399. The district court concluded, relying on Great Southern Railway v. Eagerton, 541 F.Supp. 1084 (M.D.Ala.1982), that the class of “other commercial and industrial taxpayers which pay the same type of tax” is the appropriate standard for § 11503(b)(4).
The Secretary advances three alternative arguments to demonstrate that the T & C tax is not discriminatory. First, she argues that the T & C’s classification of railroads with other common carriers is reasonable, and non-discriminatory. Second, she argues that the T & C tax is “complementary” to the General Sales and Use Tax which the railroads have purportedly underpaid or escaped. Third, she argues that in general there is no tax discrimination against the railroads by the State of Louisiana.
(1) Is the T & C Tax Discriminatory?
The T & C tax applies to “public utilities.” La.Rev.Stat.Ann. § 47:1001. “Public utilities” is defined to include railroads, motor bus lines, motor freight lines, express companies, boat or packet lines, and pipe lines. § 47:1003(1). The Secretary argues that the impetus behind the 4-R Act was not simply the desire to give the railroads special advantages or merely to maintain them in existence — that could have been accomplished more easily by subsidies (as in the case of the American merchant marine) than by deregulation. Rather, the point was to put the railroads back on an even footing with other forms of transportation. Therefore, we are told, a tax analyzed under § 11503(b)(4) need not be compared with the general class of “all other commercial and industrial” taxpayers as in § 11503(b)(l)-(3); instead, it should be compared with taxes against competitive modes of transportation. The T & C class does not illegally discriminate against the railroads because it also applies to their main competitors. See Atchison, Topeka & Santa Fe Railway v. Bair, 338 N.W.2d 338 (Iowa 1983) (comparing state tax on railroad fuel to fuel taxes on three competitive modes of transportation), cert. denied, 465 U.S. 1071, 104 S.Ct. 1427, 79 L.Ed.2d 751 (1984).
The only simple way to prevent tax discrimination against the railroads is to tie their tax fate to the fate of a large and local group of taxpayers. A large group of local taxpayers will have the political and economic power to protect itself against an unfair distribution of the tax burden. The class of taxpayers subject to the T & C tax is simply too small and too foreign to fulfill this function — for all we know, the T & C tax may be an unfair burden on all taxpayers subject to it. And, as we discuss below, the cost of actually figuring out whether the T & C tax is unfair is simply too high. We think the best course is to require that the railroads be taxed only under taxes applicable to “other commercial and industrial” taxpayers.
We recognize that the 4-R Act puts severe limits on the broad discretion usually afforded state taxing authorities. A state may not have, for example, a broad class of commercial and industrial taxpayers; instead, it may have a number of smaller classes based on size and line of business, with taxes varying markedly from class to class. Moreover, this “unequal” classification may be perfectly fair and reasonable, given variations from class to class in externalized costs of doing business and in state services provided to members of each. Our holding may preclude the state from putting the railroads into one of these smaller tax classes even if that classification is perfectly fair. The T & C tax itself may be fair.
The 4-R Act, however, is a prophylactic rule to prevent tax discrimination. It forbids some fair arrangements because the actual fairness of those arrangements is too difficult and expensive to evaluate. See infra section D(3). We hold that the state of Louisiana can satisfy the prophylactic strictures of the 4-R only by a more mechanical equality between its taxation of the railroads and its taxation of the class of “other commercial and industrial” taxpayers generally. In a proper case, the state might be able to show that a tax class that includes railroads is necessarily small because of the nature of the tax and that the tax on members of that class is directly related to services provided them by the state and does not cross-subsidize other taxpayers. Cf. Atchison, Topeka & Santa Fe Railway v. Bair, 338 N.W.2d at 346 (although income from fuel tax is used only to support railroads, it violates § 11503(b)(4) because it is not applied evenhandedly to three competitive modes of transportation that consume fuel). But the class of taxpayers included in the T & C tax is unnecessarily small, and the T & C tax is therefore discriminatory within the meaning of § 11503(b)(4).
(2) Does T & C Tax “Complement” the General Sales and Use Tax?
Accepting for the sake of argument that the T & C tax is facially discriminatory, the Secretary invokes the “complementary tax” doctrine of dormant Commerce Clause litigation in an effort to show that the T & C tax and the Louisiana General Sales and Use Tax, La.Rev.Stat.Ann. § 47:301 et seq., are “complementary.” See, e.g., Armco Inc. v. Hardesty, 467 U.S. 638, 642, 104 S.Ct. 2620, 2622, 81 L.Ed.2d 540 (1984) (“It long has been established that the'Commerce Clause of its own force protects free trade among the States.”). The Secretary urges us to uphold the T & C tax on the theory that it is “complementary” or equivalent to the Sales and Use Tax and that the railroads do not pay their fair share of the Sales and Use Tax.
Although it may be helpful in analyzing some aspects of the problem, Commerce Clause doctrine does not answer the questions posed by the 4-R Act. In a Commerce Clause attack the courts will not “deal in abstractions. In this type of case the taxpayers must show that the [challenged tax] formula places a burden upon interstate commerce in a constitutional sense.” Northwestern Cement Co. v. Minnesota, 358 U.S. 450, 463, 79 S.Ct. 357, 365, 3 L.Ed.2d 421 (1959). Any state tax scheme is prima facie valid, and the Commerce Clause will “of its own force” invalidate state laws only when the taxpayer can show that the laws will actually operate in a discriminatory fashion. See Maryland v. Louisiana, 451 U.S. 725, 756, 101 S.Ct. 2114, 2134, 68 L.Ed.2d 576 (1981) (“A state tax must be assessed in light of its actual effect considered in conjunction with other provisions of the State’s tax scheme.”).
But the 4-R Act alters the legal landscape. Congress, acting pursuant to its extensive Commerce Clause powers, has commanded that the states not impose any tax “that discriminates against a rail carrier.” § 11503(b)(4); cf. Arizona Public Service Co. v. Snead, 441 U.S. 141, 99 S.Ct. 1629, 60 L.Ed.2d 106 (1979) (federal anti-discrimination tax statute goes beyond minimum protections of the Commerce Clause). The 4-R Act reverses and changes the burden of persuasion found in the dormant Commerce Clause cases. In a 4-R case, the railroads need only establish that the tax is facially discriminatory, after which the tax must be justified, if possible, by the state. See, e.g., Burlington Northern Railroad Co. v. Lennen, 715 F.2d 494, 497 (10th Cir.1983) (discussing discriminatory property tax rates), cert. denied, 467 U.S. 1230, 104 S.Ct. 2690, 81 L.Ed.2d 884 (1984). It may be that in an appropriate case we would allow the state to save a facially discriminatory tax by showing that it is necessary to “compensate” for some state or local tax — a tax applicable to “other commercial and industrial” taxpayers — that for some reason cannot be levied against the railroads. Assuming that a facially discriminatory tax could be rescued on such a showing, the Secretary obviously cannot meet this burden here because the Sales and Use Tax is fully applicable to the railroads and, in fact, she is presently suing them for underpayment of that tax. Appellant’s Brief at 6.
The Secretary asks us to consider two facts about the application of the General Sales and Use tax to the railroads that should allow her to supplement it with the T & C tax. First, railroad services are not included in services subject to the tax. See § 47:301(14). Second, the Louisiana legislature has recently exempted railroad rolling stock from the Sales and Use tax. See § 47:305.45. In effect, the Secretary asks us to allow her to use the T & C tax to “complement” the Sales and Use tax so she can recover Sales and Use taxes that the State of Louisiana has determined that the railroads should not pay. This argument does not merit discussion. Cf. Pennsylvania v. New Jersey, 426 U.S. 660, 664, 96 S.Ct. 2333, 2335, 49 L.Ed.2d 124 (1976) (“The injuries to the [state] plaintiffs’ fiscs were self-inflicted, resulting from decisions by their respective legislatures.... No State can be heard to complain about damage inflicted by its own hand.”).
(3) Is the Tax Structure of Louisiana Fair to the Railroads?
Finally, the Secretary asks us to consider the overall tax burden of the railroads and to compare that burden with all other commercial and industrial taxpayers. She argued at trial and argues here that, even when the T & C tax is included, the railroads paid far less than their fair share of state taxes. From the sketchy evidence adduced at trial by both sides, we are perfectly willing to concede that the Secretary might be correct. But, however relevant her argument may be to an assessment of the wisdom of the 4-R Act, it is irrelevant to a claim under it.
Determining the intrinsic economic fairness of a tax system to a particular taxpayer is a paradigm of the kind of polycentric problem for which courts are ill-suited. In effect, we would have to determine the fairness of the tax system to each and every taxpayer in order to decide whether it was fair to any one of them. See Fuller, The Forms and Limits of Adjudication, 92 Harv.L.Rev. 353, 394-404 (1978). In the words of the Surpeme Court,
[C]ourts as institutions are poorly equipped to evaluate with precision the relative burdens of various methods of taxation. The complexities of factual economic proof always present a certain potential for error, and courts have little familiarity with the process of evaluating the relative economic burden of taxes.
Minneapolis Star v. Minnesota Commissioner of Revenue, 460 U.S. 575, 589-90, 103 S.Ct. 1365, 1374, 75 L.Ed.2d 295 (1983) (footnote omitted). Aside from the theoretical difficulty of assessing the basic fairness of a state tax system, an attempt to make the assessment would be extraordinarily costly both to the parties and the judicial system. Furthermore, there is no reason in principle why the railroads could not sue for such a judicial assessment each year (or for each tax bill) because the dynamic nature of any state’s economy will alter the relative benefits and burdens of its tax system from moment to moment. Despite these profound problems, courts undertake the kind of tax analysis suggested by the Secretary in the absence of controlling statute and when the risk of error falls equally on important constitutional interests on both sides. See Minneapolis Star, 460 U.S. at 589 n. 12, 103 S.Ct. at 1374 n. 12. But this case does not require it.
The 4-R Act precludes the difficult analysis that the Secretary requests. The statute speaks in simple and categorical terms about property tax rates and assessments, § 11503(b)(lH3), then prohibits “another tax that discriminates against a rail carrier____” § 11503(b)(4). The focus is on particular taxing entities — “a State, subdivision of a State, or authority acting for a State or subdivision” — and particular assessments and particular taxes. There is nothing in the statute that even suggests that an individually discriminatory tax should be assessed for fairness against the entire tax structure of the state.
Because of the statute’s simple — we are tempted to say simplistic — structure, our colleagues on other Circuit Courts have refused invitations to undertake polycentric inquiries under various theories of the 4-R Act. For example, the Sixth Circuit has refused a state’s invitation to consider the cumulative effect of taxes by distinct taxing entities within the state as justification for a facially discriminatory tax. See General American Transportation Corp. v. Kentucky, 791 F.2d 38, 42 (6th Cir.1986); but cf. Clinchfield Railroad Co. v. Lynch, 700 F.2d 126, 130 & n. 5 (4th Cir.1983) (comparing local and central property taxes without discussion). While withholding judgment on the actual result in General American, we agree with its general view of the statute — the categorical language of the 4-R Act demands bright-line rules for simple judicial administration.
We have already acknowledged that the prophylactic nature of the 4-R Act handicaps state legislatures and tax collectors in the fulfillment of their taxing duties. It does not, however, completely disable them. If state authorities approach the problem carefully, we trust that they can create tax structures that comply with the 4-R Act while ensuring that the railroads pay their fair share of state taxes. We will not do that job for them.
E. The Propriety of the Partial Injunction
The railroads argue that the district court should not have partially enjoined the T & C tax because of the existence of an equivalent locally-assessed occupational license tax. They cite Arizona Public Service Co. v. Snead, 441 U.S. 141, 99 S.Ct. 1629, 60 L.Ed.2d 106 (1979) (discriminatory electricity taxes forbidden by 15 U.S.C. § 391), General American Transportation Corp. v. Kentucky, 791 F.2d 38, 42 (6th Cir.1986) (refusing to examine entire tax structure of state in 4-R Act case), Atchison, Topeka & Santa Fe Railway v. Bair, 338 N.W.2d 338, 346 (Iowa 1983) (same), cert. denied, 465 U.S. 1071, 104 S.Ct. 1427, 79 L.Ed.2d 751 (1984), and Alabama Great Southern Railroad Co. v. Eagerton, 541 F.Supp. 1084, 1086 (M.D.Ala.1982) (ignoring “equivalent” business license tax), for the proposition that courts refuse to look at the total effect of state and local taxes in determining whether a given state tax is discriminatory within the meaning of a federal non-discrimination statute.
The Secretary responds with more citations to the Commerce Clause cases; for the reasons given above, these cases do not help us. However, we have identified other arguments in her favor. First, in Clinchfield Railroad Co. v. Lynch, 700 F.2d 126 (4th Cir.1983), the Fourth Circuit affirmed a partial injunction by the district court based on a court-created non-discriminatory property tax rate. The district court had derived the non-discriminatory rate by setting it at the median of a variety of. business tax rates. The comparative business taxes, however, were locally assessed, while the partially-enjoined tax on railroads was centrally assessed. Moreover, the court affirmed the district court’s scheme despite the fact that the district court had not even used other centrally-assessed property taxes (mainly taxes on public utilities) in setting the median rate. Clinchfield Railroad, 700 F.2d at 130 n. 5. Second, federal courts will partially enjoin illegal tax rates and assessments schemes to eliminate only their discriminatory effects rather than enjoining the entire rate or assessment scheme and requiring state authorities to comply with federal law from scratch. See, e.g., General American Transportation Corp., 791 F.2d at 40-43 (discriminatory rates); Clinchfield Railroad Co. v. Lynch, 700 F.2d at 131 n. 6 (discriminatory assessments); Trailer Train Co. v. State Board of Equalization, 697 F.2d 860 (9th Cir.) (discriminatory rates), cert. denied, 464 U.S. 846, 104 S.Ct. 149, 78 L.Ed.2d 139 (1983). These remedial techniques under the 4-R Act tend to support the propriety of the district court’s partial injunction. Finally, it could be argued that in 4-R litigation we should distinguish between the liability phase and the remedial phase in the use of other state taxes. While it might not be permissible to consider allegedly “equivalent” or “compensating” state taxes in determining whether or not a given state tax is discriminatory, it is permissible to consider such taxes when determining the proper remedy for the discriminatory tax.
The Secretary’s position does not persuade us. The distinction between rights and remedies is pointless because in both cases the language of the statute does not appear to leave room for the difficult task of sorting out “complementary” or “equivalent” taxes. The partial injunctions of discriminatory taxes and tax assessments in cases like General American Transportation and Trailer Train are proper because they involve one kind of tax and one taxing entity. Finally, we do not need to decide whether to accept or reject the decision in Clinckfteld Railroad, or the apparently contradictory decision in General American Transportation Corp. Those cases involved property taxes, and the difficulty of assessing locally the property of railroads — which is largely made up of mobile rolling stock — might justify Clinch-field Railroad’s comparison of the rates of locally-assessed taxes with centrally-assessed taxes. There is no comparable difficulty with a tax on the privilege of doing business in a state or its subdivisions.
We are compelled to reverse the district court’s partial injunction by the logic of our arguments affirming its holding that the T & C tax is discriminatory. Although the district court’s decision seems fair on the clear facts of this case, that cannot save it. Once we start down the slippery slope of enjoining discriminatory taxes only to the extent that they exceed “equivalent” taxes by other taxing entities, we destroy the bright lines created by § 11503(b) itself. Furthermore, if we affirm the district court’s partial injunction, we will consign every 4-R case to. a trial on the merits like the one in this case — an unproductive “battle of the experts” on whether any taxes levied in the state are “equivalent,” and if so, which ones. Short of some sort of strong prima facie showing by the state of necessity, as we suggest above in sections D(l) and (2), we think a trial on whether a tax is discriminatory or not can and should be avoided. In this case, there is clearly no necessity — the local entities could tax the railroads under the business license tax and pass the money on to the state, or the state could centrally assess the business license tax against all businesses (including railroads).
We recognize that our conclusion is somewhat formalistic. But the 4-R Act is formalistic. And, again, we have faith in the abilities of the state tax collectors to reach the pockets of the railroads with taxes that are actually and formally fair.
F. Conclusion
For better or worse, the tax provisions of the 4-R Act give us few substantive and procedural standards. Therefore, in the manner of the common law, we must work out the meaning of 49 U.S.C. § 11503 gradually in relation to specific disputes. Our opinion expresses a general view of the statute, but our ruling is narrow. We hold that federal courts have jurisdiction under § 11503(c) over claims by railroads of tax discrimination under § 11503(b)(4), that the Louisiana Tax on Transportation and Communication Utilities violates the requirements of § 11503(b)(4), and that collection of the T & C tax should be unconditionally enjoined. Nothing in this opinion, however, is meant to discourage the Secretary and the Louisiana legislature from fairly taxing the railroads within the formal demands of the 4-R Act. The judgment of the district court is AFFIRMED in part, REVERSED in part, and REMANDED for modification of the judgment in accordance with this opinion.
. § 47:1001 reads:
Every person owning or operating, or owning and operating, any public utility in this state as defined in this Part, shall, in addition to all other taxes and licenses levied and assessed in this state, pay a license tax, for the privilege of engaging in such business in this state, of two per centum (2%) of the gross receipts from its intrastate business.
§ 47:1003(1) reads:
“Public utility" means railroads and railways, sleeping cars, motor bus lines, motor freight lines, express companies, telephone companies, telegraph companies, boat or packet lines, and pipe lines, as herein defined.
. The statute reads:
(b) The following acts unreasonably burden and discriminate against interstate commerce, and a State, subdivision of a State, or authority acting for a State or subdivision may not do any of them:
(1) assess rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value of other commercial and industrial property in the same assessment jurisdiction has to the true market value of the other commercial and industrial property.
(2) levy or collect a tax on an assessment that may not be made under clause (1) of this subsection.
(3) levy or collect an ad valorem tax on rail transportation property at a tax rate that exceeds the tax rate applicable to the commercial and industrial property in the same assessment jurisdiction.
(4) impose another tax that discriminates against a rail carrier providing transportation subject to
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
POLITZ, Circuit Judge:
Marta Carbonell appeals the dismissal, after a bench trial, of her complaint invoking Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and 42 U.S.C. §§ 1981 and 1983. The parties agreed to a trial before a magistrate with direct appeal to this court, 28 U.S.C. § 636. Finding no merit in any claim presented, we affirm the dismissal for the reasons we set forth.
Facts
Carbonell is a native of Cuba. She was employed by the state of Louisiana in various capacities. Her last assignment was with the Louisiana Department of Health and Human Resources (DHHR) as a Clinical Social Worker V, in the New Orleans Substance Abuse Clinic. As the second highest employee in that clinic, Carbonell was the chief social worker and supervised the Spanish-speaking program, day and evening supervisors and Spanish personnel. It is apparent that personal friction existed between Carbonell and her immediate supervisor, Adrienne Mouledoux, the district administrator.
Beginning in 1976 Carbonell filed various complaints with the Equal Employment Opportunity Commission (EEOC). The first complaint was against Mouledoux and raised claims of discrimination based on national origin. Subsequent complaints charged retaliatory acts allegedly triggered by the EEOC filings. Matters worsened until Calvin Bankston, head of the DHHR Bureau of Substance Abuse, determined to solve his department’s serious personnel problem by separating the protagonists. He reassigned Carbonell from the New Orleans Substance Abuse Clinic to a newly designated Substance Abuse Clinic in neighboring St. Bernard Parish. Carbonell was assigned to the new clinic as its administrative head and was told to report for duty on August 21, 1979. Carbonell declined, considering this transfer discriminatory, retaliatory, and tantamount to an assignment to “Outer Mongolia,” a characterization not likely shared by the thousands of residents of St. Bernard Parish.
In lieu of reporting to St. Bernard on August 21, 1979, Carbonell visited the EEOC office, filed a complaint, and then went to the New Orleans clinic. She was instructed to declare in writing whether she would accept her new assignment. By day’s end on August 21, Carbonell delivered a letter to Mouledoux stating that she was “herewith declining the assignment and taking the proper legal action.”
On August 22, 1979, Carbonell called Bankston and told him of her refusal to obey his transfer order. Bankston placed Carbonell on a three-day suspension without pay for insubordination and orally ordered her to report to the St. Bernard clinic on August 27. On August 24, Carbonell was given a written confirmation of the suspension and directed in writing to report to St. Bernard on August 27.
Carbonell responded to the suspension by amending her EEOC charge to include a claim that the transfer was in retaliation for her EEOC filing. Instead of reporting to St. Bernard on August 27, Carbonell opted to again report to the New Orleans clinic. Early that morning her husband delivered a letter to Mouledoux’s home, addressed to Bankston, in which Carbonell repeated her charge that the transfer was arbitrary, illegal, abusive, and in retaliation for filing EEOC complaints. She again declined to report to St. Bernard and stated that at 10:30 a.m. she would be at the New Orleans clinic.
When Carbonell arrived at the New Orleans clinic on August 22 she was met by Bankston who urged her to consider the seriousness of her refusal to accept the reassignment. Bankston again ordered her to report to St. Bernard. Carbonell refused. Later that day she was given a letter of removal which she promptly appealed to the Louisiana Civil Service Commission (CSC).
The CSC appointed a referee who conducted public hearings on August 11-13, 1980; April 20-24, 1981; May 26-29, 1981; and June 8-9, 1981. The CSC affirmed the DHHR removal. On appeal, the Louisiana Court of Appeal for the First Circuit affirmed the CSC decision. Carbonell v. Dept. of Health & Human Resources, 444 So.2d 151 (La.App.1983).
After her dismissal, Carbonell again amended her EEOC complaint to charge that the dismissal was retaliatory. The EEOC declined to press the matter and issued the statutory right-to-sue letter. Carbonell filed the instant suit claiming, as above noted, Title VII, § 1981, and § 1983 violations.
A bench trial before the magistrate lasted a week. At the outset of his memorandum opinion the magistrate stated:
If this Court were to make findings of fact based upon the evidence presented and testimony offered at trial, they would be identical to those facts set forth by the First Circuit Court of Appeal in its decision. This Court hereby adopts the findings of the state appeals court as its own. Carbonell v. Dept. of Health and Human Resources, No. 83-0186 [444 So.2d 151] (La.Ct.App. 1st Cir., Dec. 22, 1983).
After making these factual findings by reference and adoption, the magistrate proceeded to dismiss all claims. The Title VII claims against all individual defendants were dismissed because they were not the employer and Title VII was not applicable to them. The Title VII complaint against DHHR was dismissed on grounds of res judicata. The § 1981 claim was dismissed for failure of any evidence of intent to discriminate against Carbonell on the basis of national origin. Finally, as to the § 1983 claim, the magistrate found that Carbonell was inappropriately attempting to appeal a decision of the Louisiana court to the federal court, a matter over which the court lacked jurisdiction.
Analysis
Carbonell urges, with subcategorizations, more than a score of assignments of error. Most are totally without merit. We combine the remainder for review.
A. Section 1981 Claim
As an appellate tribunal, we are constrained by Fed.R.Civ.P. 52(a) to accept all findings of fact made by the trier of fact, in this instance the magistrate, unless shown to be clearly erroneous. There has been no such showing. Nor could any such showing be made. The facts as found by the magistrate, through his adoption of the state court findings, are fully supported by the record. This claim borders on the frivolous.
B. Section 1983 Claim
Stripped to its essentials, Carbonell’s § 1983 complaint would have the district court sit in review of the decision of the Louisiana First Circuit Court of Appeal. The district court lacks jurisdiction to conduct that exercise. As we held in Kimball v. The Florida Bar, 632 F.2d 1283, 1284 (5th Cir.1980):
Stripped to its essentials, Kimball’s petition for declaratory and injunctive relief asks the federal district court to reverse a final, definitive state court order. As we stated in Lampkin-Asam v. Supreme Court of Florida, 601 F.2d 760 (5th Cir.1979): “This Court has held on numerous occasions that federal district courts do not have jurisdiction under 42 U.S.C. § 1983 or any other theory to reverse or modify the judgments of state courts.” We echo that it “is axiomatic that a federal district court, as a court of original jurisdiction, lacks appellate jurisdiction to review, modify, or nullify a final order of a state court. 28 U.S.C. § 1257(3).” Id. The proper forum for the relief Kimball now seeks was the United States Supreme Court.
It is hornbook law that § 1983 does not create a federal cause of action but, rather, a remedy for the vindication of other federal statutory or constitutional rights. That those rights have been adjudicated in a state court under concurrent § 1983 jurisdiction or under a state cause of action is of no moment: once a determination has been made by a state court relative to the existence or non-existence of a federal right, and any possible infringement of that right, the only avenue of review is to the United States Supreme Court via 28 U.S.C. § 1257(3). As a panel of this court observed:
A federal district court, as a court of limited original jurisdiction, lacks power to review, modify or nullify a final order of a state court. Nor can a party, aggrieved by a judicial decision of a state’s highest court, invest a lower federal court with such jurisdiction by clothing his or her grievance in the garb of § 1983 and alleging that the decision of the state court deprived him or her of constitutionally protected rights or inter-ests____ A party seeking relief from such an allegedly unconstitutional action by a state court may seek review in only one federal court — the United States Supreme Court.
Dasher v. Supreme Court of Texas, 650 F.2d 711, 714-15 (5th Cir.1981), rev’d on other grounds, 658 F.2d 1045 (5th Cir.1981) (on reh’g), reh’g opinion disapproved, District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 n. 16 (1983). See also Brown v. Chastain, 416 F.2d 1012 (5th Cir.1969); Gresham Park Community Organization v. Howell, 652 F.2d 1227 (5th Cir.1981).
We recognize that Carbonell has not faulted the Louisiana court, as such, but she asserts the same claims previously asserted in the state system. She maintains that the DHHR violated her Title VII fair employment rights. The underlying federal right now advanced is identical to that adjudged by the Louisiana court. Thus, whether the dismissal of the § 1983 claim for lack of jurisdiction should be upheld hinges on whether the complaint seeks an exercise of appellate or original jurisdiction. Despite the fact that the proceedings before the Louisiana Civil Service Commission and the subsequent state-court appeal were based largely on state administrative and statutory law, the Supreme Court’s opinion in District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), teaches that the nature of the underlying claim, not the nature or basis of the desired relief, directs the answer to the appellate versus original jurisdiction inquiry. When a plaintiff presents federal claims that “are inextricably intertwined with the state court’s denial in a judicial proceeding of a particular plaintiff’s [state-law claim], then the District Court is in essence being called upon to review the state-court decision. This the District Court may not do.” Feld-man, 460 U.S. at 482 n. 16, 103 S.Ct. at 1315 n. 16, 75 L.Ed.2d at 223 n. 16. Feld-man directs the inquiry away from a mechanical classification of the relief requested or the cause of action, toward a realistic consideration of the nature of the underlying claim.
The instant case is guided by Feldman. We are presented with a § 1983 claim challenging an adverse state-court judgment on the theory that the state administrative action therein upheld violated the plaintiff’s constitutional rights. This necessarily invites appellate review of the determinations of federal rights by the Louisiana court of appeal. That review is beyond the jurisdictional pale of the federal district court. The magistrate properly concluded that the court had no subject-matter jurisdiction over this § 1983 claim as postulated.
C. Title VII Claim
It cannot be gainsaid that the dismissal of the Title VII claims against the non-employer individual defendants was appropriate. Only the claim against the DHHR need be reviewed. The magistrate concluded that review of this claim against the DHHR was precluded by operation of the doctrine of res judicata, 28 U.S.C. § 1738, a defense which was not pled.
This approach is fraught with difficulty for under Rule 8(c), Federal Rules of Civil Procedure, the defense of res judicata must be affirmatively pled. Generally this rule is strictly read and applied, but in this circuit we have recognized two limited instances in which the trial or appellate court may raise the issue sua sponte. An example of one exception is United Home Rentals, Inc. v. Texas Real Estate Commission, 716 F.2d 324, 330 (5th Cir.1983), where after observing that res judicata is an affirmative defense which must be specially pleaded we observed:
[The] failure to assert res judicata as a defense does not determine the issue, however, since in the interest of judicial economy res judicata may properly be raised by a district court sua sponte, particularly where both actions are brought in the courts of the same district. See Boone v. Kurtz, 617 F.2d 435, 436 (5th Cir.1980) (affirming district court sua sponte dismissal on res judica-ta grounds) ____ On occasion, appellate courts have raised the issue for the first time on appeal. See Robertson v. Interstate Securities Co., 435 F.2d 784, 787 n. 4 (8th Cir.1971)____ In these cases, however, the appellate court considered applying res judicata as a means to affirm the district court decision below.
The other exception involves the situation in which all relevant data and legal records are before the court and the demands of comity, continuity in the law, and essential justice mandate judicial invocation of the principles of res judicata. This exception is illustrated by our decision in American Furniture Co. v. International Accommodations Supply, 721 F.2d 478 (5th Cir.1981).
We are not persuaded that the case now before us qualifies under either exception; we therefore decline to use 28 U.S.C. § 1738 as a bar to consideration of the Title VII claim.
The evidence of record provides an ample basis for affirming the dismissal of Carbonell’s Title VII claim. Reaching and reviewing the magistrate’s adoptive findings in light of this evidence, we find no clearly erroneous factual finding. The scenario which we must accept under the directive of Fed.R.Civ.P. 52(a) demonstrates that Carbonell was discharged for rank insubordination. She repeatedly refused direct orders of reassignment. She reserved to herself the right to determine the clinic in which she would work. Working in the parish of St. Bernard somehow offended her sensibilities. She insisted on having her way notwithstanding the urgings and orders of her superiors. We find no support in the accepted findings of fact; indeed we find no support in the record for the claim that retaliatory actions were taken because of her national origin or because she filed various EEOC charges. We find and conclude that Carbonell has failed to establish the discrimination charged. Her Title VII complaint is without merit.
Finally, we consider Carbonell’s argument that the recent decision by the Supreme Court in Cleveland Board of Education v. Loudermill, 470 U.S.-, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985), declares her dismissal constitutionally infirm and that the decision by the Louisiana Civil Service Commission and Louisiana Court of Appeal must be accordingly reversed. This challenge founders on the same legal shoals as the § 1988 claim discussed supra. Lower federal courts do not review on appeal the constitutionality of state court decisions. That prerogative belongs exclusively to the Supreme Court. 28 U.S.C. § 1257(3); Kimball v. The Florida Bar. Whatever Loudermill portends for future litigation, it does not impact on the result of this proceeding.
The magistrate dismissed all claims. We AFFIRM his judgment.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
WILKINSON, Circuit Judge:
Lundy Packing Company petitions for review of a supplemental decision and order by the National Labor Relations Board that directs payment of back pay to two discharged employees and forty-four unfair labor practice strikers. Lundy Packing Co., 286 NLRB No. 11 (September 30, 1987). The Board filed a cross-application for enforcement of the supplemental decision and order. This court granted the motion of Local 525 Meat, Food and Allied Workers Union, United Food and Commercial Workers International Union, AFL-CIO & CLC (the union) for leave to intervene in these proceedings. We deny the petition for review and grant enforcement of the Board’s order.
I.
In April, 1974, the union instituted an organizational campaign at petitioner’s Clinton, North Carolina meatpacking plant. Two employees subsequently were discharged for their active support of the organizational campaign and forty-four other employees were refused reinstatement after they participated in a strike in protest of petitioner’s unfair labor practices. On March 19, 1976, the Board found that the company had violated Sections 8(a)(3) and 8(a)(1) of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(3) & 158(a)(1), by discharging the two employees and by refusing to reinstate the forty-four unfair labor practice strikers. Lundy Packing Co., 223 NLRB 139 (1976). The Board directed the company to reinstate the forty-six employees and make them whole for any loss of earnings suffered as a result of the company’s unfair labor practices. This court enforced the Board’s order in relevant part. Lundy Packing Co. v. NLRB, 549 F.2d 300 (4th Cir.1977), cert. denied, 434 U.S. 818, 98 S.Ct. 57, 54 L.Ed.2d 74 (1977).
Hearings began in April, 1979, before an Administrative Law Judge to resolve the back pay issue. The hearings extended over a six month period, included the testimony of more than one hundred witnesses, and resulted in a transcript that approached 10,000 pages. The AU issued his findings in two parts on August 25, 1981 and September 25, 1981. On September 30, 1987, the Board issued its supplemental decision and order adopting the AU’s findings and conclusions as modified by the Board. Lundy Packing Co., 286 NLRB No. 11 (September 30, 1987). Specifically, the Board affirmed the AU’s determination that each of the workers engaged in reasonably diligent job searches and therefore were entitled to back pay. The Board, however, reversed the AU’s tolling of back pay for six workers who temporarily discontinued their searches for full-time employment during periods of part-time employment and for five who left interim employment. The Board adopted the AU’s finding that strike payments to the former employees were not deductible from gross income back pay.
II.
In response to an employer’s unfair labor practices, the Board is authorized to take such remedial action, including reinstatement and back pay, as will effectuate the policies of the National Labor Relations Act. See 29 U.S.C. § 160(c). The Board enjoys discretion in framing appropriate back pay remedies, NLRB v. McAllister Bros., Inc., 819 F.2d 439, 446 (4th Cir.1987), and to the extent that the Board’s decision rests on findings of fact for which there is “substantial evidence” in the record as a whole, this court must defer to that decision. 29 U.S.C. § 160(e); Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203, 215-16, 85 S.Ct. 398, 405, 13 L.Ed.2d 233 (1964); Universal Camera Corp. v. NLRB, 340 U.S. 474, 477-91, 71 S.Ct. 456, 459-66, 95 L.Ed. 456 (1951).
Once the amount of back pay due a worker has been established, the burden shifts to the employer to produce evidence to mitigate its liability. NLRB v. Mercy Peninsula Ambulance Service, Inc., 589 F.2d 1014, 1017 (9th Cir.1979). Deductions are made from a worker’s gross back pay for the worker’s interim earnings and for losses that were wilfully incurred by an unjustified refusal to take substantially equivalent employment. Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 197-200, 61 S.Ct. 845, 853-55, 85 L.Ed. 1271 (1941). The defense of a wilful loss of earnings, however, is an affirmative defense and it is the employer’s responsibility to carry that burden. Florence Printing Co. v. NLRB, 376 F.2d 216, 223 (4th Cir.1967), cert. denied, 389 U.S. 840, 88 S.Ct. 68, 19 L.Ed.2d 104 (1967); NLRB v. Madison Courier, Inc., 472 F.2d 1307, 1321 (D.C.Cir.1972). After reviewing the record, we conclude that the challenged findings are sufficiently supported by the evidence and that the employer has not adequately rebutted the Board’s back pay findings.
The reasonableness of a worker’s effort to secure substantially equivalent employment is determined by, inter alia, the economic climate in which the worker finds himself, the worker’s skill and qualifications, and the worker's age and personal limitations. Many factors made it difficult for the forty-six former Lundy Packing employees in this case to secure substantially equivalent employment. Lundy Packing Co., 286 NLRB No. 11 (September 30, 1987). The company’s plant is located in an area of rural North Carolina that experienced increasing unemployment rates throughout the back pay period. There were few large employers in the relevant geographic area and many area employers laid off employees or closed down operations during the back pay period. The workers generally were unskilled laborers who lacked formal education. Many of them were illiterate. There was no evidence before the Board that any of the workers refused offers of interim employment. To the contrary, many mitigated the company’s back pay liability by accepting part-time and seasonal jobs at lower wages and under less desirable working conditions. Such factual determinations are the province of the Board and will not be disturbed if supported, as they are here, by substantial evidence in the record. Clearwater Finishing Co. v. NLRB, 670 F.2d 464, 467-68 (4th Cir.1982).
On the facts presented here, we also adopt the Board’s findings that no wilful loss of earnings occurred in those instances where certain workers terminated interim employment or discontinued otherwise diligent searches for full-time employment after accepting part-time or seasonal jobs. A failure to retain interim employment that is substantially less remunerative than his previous job does not provide a basis for reducing a worker’s back pay award. Chem Fab Corp., 275 NLRB 21, 24 (1985). In addition, tolling back pay for workers who accept part-time or seasonal employment and discontinue otherwise reasonable job searches has the effect of condemning those workers for accepting part-time jobs, despite the fact that the earnings from such jobs serve to mitigate the employer’s back pay liability. NLRB v. Ohio Hoist Mfg. Co., 496 F.2d 14, 15 (6th Cir.1974); Lundy Packing Co., 286 NLRB No. 11 (September 30, 1987). Whether a worker has acted reasonably in accepting or rejecting particular employment is preeminently a question of fact, Florence Printing Co. v. NLRB, 376 F.2d 216, 221 (4th Cir.1967), and the Board’s findings have ample support in the record.
III.
Finally, we reject petitioner’s contention that the Board erred when it upheld the AU’s decision to quash the company’s subpoena of the union’s records which showed the payment of strike benefits to the workers during the back pay period. Absent evidence that workers were being paid for their picketing activity, strike benefits are deemed to be “collateral” and therefore do not operate to diminish a back pay award. NLRB v. Rice Lake Creamery Co., 365 F.2d 888, 893 (D.C.Cir.1966). Accord Florence Printing, 376 F.2d at 218-20.
Although twenty-seven of the workers were vigorously cross-examined at the back pay hearing, the company failed to establish any nexus between strike benefits received and picketing activity. Many individuals received strike benefits despite the fact that they did not picket. Others stopped receiving strike benefits when they obtained interim employment yet continued to picket. The evidence sought by the company was not probative of the strike benefits issue and the AU did not commit reversible error by quashing the subpoena to compel production of the union’s bank records. Accord N.T. Enloe Memorial Hosp. v. NLRB, 682 F.2d 790, 795-96 (9th Cir.1982).
IV.
We have examined the various issues in this case and conclude that the findings of the Board are supported by substantial evidence in the record taken as a whole. Accordingly, the order of the Board is hereby
ENFORCED.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
THOMPSON, Circuit Judge.
This is an appeal from a judgment of the District Court of Delaware entered on a verdict for $32,784.79 in favor of the Massasoit Manufacturing Company, hereinafter referred to as the vendee, and against the Per-mutit Company, hereinafter referred to as the vendor. The vendee is engaged in manu-faeturing cotton yarns, commonly called cotton linters. The vendor manufactures and sells apparatus for the filtration, purification, and softening of water. The parties entered into a written contract for the purchase and installation of a water filtering plant. It appeared that, following the use of the Permutit filtration system, thousands of pounds of cotton manufactured by the vendee were off color. The vendee brought suit for damages for an alleged breach of an express warranty contained in the written contract. Shortly thereafter the vendor brought suit to recover the part of the purchase price of the filtration plant still unpaid, as well as additional sums expended by it in making changes in the filtration plant after it had been installed. These suits were consolidated on trial by agreement. The jury returned a verdict in favor of the vendee.
The main question involved in this case is: Where the guaranty in a contract expressly provides what liability the guarantor assumes thereunder, is the remedy thus provided for binding on the parties and exclusive ? A second and possibly subordinate question is: Where the evidence shows that the vendor had no knowledge of the vendee’s manufacturing processes, may the vendee recover, as special damages, losses sustained by it in the use of the machinery it purchased under a warranty not including fitness for the manufacturing in question?
The contract provided as follows:
“We guarantee that the Permutit Filtering Plant herein offered, when connected up and operated in accordance with our instructions and under the conditions set forth in this proposal, will be capable of filtering its specified amount of water at the specified rate of flow.
“We further guarantee that the water thus filtered will be clear, bright and practically free from turbidity and suspended matter.
“We agree to make good at onr expense, within a period of one year after date of delivery, any defects due to faulty design, workmanship or material, in such a manner as we may deem necessary to the satisfactory operation of the plant.
“We guarantee that the Permutit Water Clarifying plant herein offered, when operated in accordance with our instructions and under the conditions, set forth in this proposal, will deliver a water that will not have a color in excess of 2 measured in accordance with the Standards as set forth by the American Public Health Association.
“That the filtered water will contain no iron.
1 “It is the intent of this proposál that the Permutit Company will furnish to the Massasoit Manufacturing Company a complete water purification plant erected on the grounds of the Massasbit Manufacturing Company at Oakdale, Conn.
“The Permutit Company supplies all equipment foundations and building including construction of pipe line from flume, near present intake, to clarification plant and to make connections into existing service lines in present mill.
“It is the intent of this contract for the Permutit Company to furnish-to the Massasoit Manufacturing Company a completed filtration plant in operation.
“For the fulfillment of the guarantee herein, a weeks test will be made at the time set by the Permutit Company.”
The vendor objected, at the trial, to the admission of evidence of special damages sustained by the vendee, on the ground that the written contract defined and limited the vendor’s liability for any breach by it so as to exclude such special damages. Ño mention is made in the guaranty that the filtration plant was designed with any knowledge of the requirements of the manufacturing processes of the vendee, and no such information was conveyed to the vendor. To the extent that the warranty may be said to have been a warranty of fitness to deliver water of a certain color, such warranty would exclude any implied warranty of fitness; for example, that the water so purified was to be fit for the purpose of processing and purifying raw-cotton. There is nothing in the express warranty to the effect that the water to be deliv- ' ered by the plant would be fit for such a purpose. The trial court instructed the jury that the clause in the guaranty specifying the vendor’s obligations in the event of nonperformance pf the contract did not limit or define its - liability under the contract and did not provide a remedy in case of bi'each. and was not exclusive of other warranties express or implied. We think the court erred in allowing the jury to consider warranties that were not expressed in the contract. In fact, it is conceded by counsel for the vendee that no warranty could be implied. Their' contention is that their cause of action may be founded on the express warranty.
It follows from what has already been said that the trial court erred in admitting evidence of special damages, consisting of damages to the manufactured cotton and of increase in production, manufacturing, and overhead costs and expenses. The authorities overwhelmingly establish the doctrine that, where the parties have set out in the written contract the warranties agreed upon and have provided for a remedy in case of a breach of warranty, the remedy thus provided is exclusive. Sloan v. Wolf Co., 124 F. 196 (C. C. A. 8), Hickman v. Sawyer, 216 F. 281 (C. C. A. 4), and Morris & Co. v. Power Mfg. Co., 17 F.(2d) 689 (C. C. A. 6), are but a few of the many eases so holding.
We áre of the opinion that the trial judge was in error in allowing special damages to be proved and recovered by the vendee.
Judgment reversed, with directions for a new trial in the consolidated suits.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MARTIN, Circuit Judge.
On the verdict of a jury in the District Court, Benjamin Sieraski, an employee of The Thornton Sheet Metal Company, was awarded judgment for damages for personal injuries received by him while working on premises of appellant, The American Steel & Wire Company. Appellant urges that, because at the time of the accident appellee was employed by an independent contractor, the injured workman assumed the risk in the circumstances of the case and that the record reveals no breach of legal duty on the part of appellant.
By contract, appellee’s employer had undertaken the rehabilitation of appellant’s coke plant. This work embraced the repair of disintegrating tanks and plates, the fixing of furnace's, the replacement of flooring and the repair of eroded gas mains. The use of welding machines was necessary and a dozen or more of these devices, which for mobility were fastened to four-wheeled, wagon-like contrivances, had been placed by the contractor in appellant’s plant at various spots where repair work was progressing. On the morning of the accident, a foreman of the Thornton Company had hoisted one of the welding machines to a concrete platform about eight feet wide, 800 to 1,000 feet long, and elevated ten or. twelve feet above the surface of the ground. He instructed the appellee to assist two other workers in moving the welder to a point where it was needed on the platform.
To comply with this order, appellee and his fellow-workmen were compelled to walk along the platform, which ran alongside the coke ovens a distance of eight hundred to a thousand feet and had been constantly walked upon by men employed by both companies. This same platform had been used previously by others engaged in moving welding machines under instructions of their foremen.
One of his co-workers was pulling the welding machine carriage from the front; the other was pushing the four-wheeled apparatus from the inside rear; and the appellee, himself, was pushing the machine from án. outside rear position nearer the ground-side of the platform, when suddenly and unexpectedly the right rear wheel of the welder sank to its axle through the concrete platform. This caused the welder to swerve in such manner as to knock ap-pellee off the platform and hurl him to the ground below, to his serious personal injury.
Appellee testified that he had received no warning from anyone that the platform was defective or dangerous, and that he had observed no holes in it. In view of the jury verdict, his testimony must be accepted as true, though he was contradicted by witnesses introduced by the appellant. It should be noted that the independent contractor who employed and had control of appellee in his work was not engaged in repairing the defective concrete platform. Indeed, there is evidence, not only that the platform was used customarily as a walkway by employees of appellant, but also that it was used by them in moving materials, including coke and all kinds of scrap.
We quote from the testimony of the ap-pellee :
“Q. And while you were there, — so there is no misunderstanding — you did see American Steel and Wire employees going back and forth carrying materials along this very platform? A. Yes, sir. They had to.
“Q. And along the very place where you got hurt? A. Yes, sir.”
Much of appellant’s argument is seemingly based on the erroneous assumption that on this appeal we are free to determine whether a preponderance of evidence supports the jury verdict. As should be known, we are concerned merely with finding whether there is substantial evidence to support the verdict.
The record contains unequivocal, substantial evidence to the effect that employees of appellant used the platform not only as a walkway, but for the transportation pf-heavy materials; that appellee had observed such use; that prior to the accident, the use of the platform by employees of the independent contractor as a support for welding machines was known to and not forbidden by appellant; that the platform was known by appellant but unknown by appellee to be dangerous and unsafe; and that appellant failed to warn appellee of such hazardous condition. Assuming, as we must, that the jury based its verdict upon such evidentiary facts, our conclusion is that appellant has properly been held legally liable for appellee’s injury.
In Hozian v. Casting Co., 1937, 132 Ohio St. 453, 9 N.E.2d 143, 112 A.L.R. 333, the Supreme Court of Ohio, in the syllabus, states: “When the owner or occupier of premises engages an independent contractor to do work thereon, an employee of the contractor, while executing the work, is impliedly there at the request of the owner and is an invitee toward whom the owner owes the duty of exercising ordinary care.” Among other authorities, the Ohio Court cites the opinion of this court in McGinty v. Pennsylvania Railroad Company, 6 Cir., 6 F.2d 514, 515, in which, in reversing a directed verdict for the defendant railroad company where an employee of a coal company had been injured while moving loaded coal cars over the tracks of the railroad, the court said: “We cannot doubt that under the circumstances here presented the defendant owed to the plaintiff the duty of exercising reasonable care to keep the premises where he was thus working free from unusual and unnecessary obstructions and defects which would be likely to cause him injury.”
But the judgment here under review does not rest alone upon common-law doctrine as declared by the highest court of the State of Ohio, whose laws it is our duty to. apply. Decision in the instant case is directly pointed by cogent applicable Ohio Statutes. See General Code of Ohio, Sections 871-13(1), (2), (3), (5), (11); 871-15; 871-16; 871-17.
The platform upon which the accident occurred was plainly a “place of employment” and the work being done by appellee was clearly an “employment” within the two first cited subsections of Section 871-13, supra. Also, appellant was obviously an “employer” within the meaning of subsection (3), supra, which provides that the term “employer” includes every person having control or custody of a “place of employment.”
It is undeniable and is not denied by appellant that appellee was a “frequenter” of the “place of employment” within the express terms of subsection (5), supra.
It, therefore, follows that, applying the definition of “safe” and “safety” contained in subsection (11) of Section 871-13, supra, the definite duties imposed by Sections 871-15, 871-16, and 871-17, supra, rested upon appellant in relation to the. work of appellee upon the former’s plant-premises.
Under the plain provisions of these Ohio Statutes, which are quoted in the footnote, infra, appellant owed the duty to appellee, even though employed by an independent contractor, to provide appellee “while a frequenter” of appellant’s premises with a place of employment which was as safe or free from danger as the nature of the employment would reasonably permit. The trial judge correctly charged these statutory duties, and the jury found the facts to prove their violation by the appellant.
Popowich v. American Steel & Wire Co., 6 Cir., 13 F.2d 381, 382, cited by appellant, does not gainsay the conclusion we have reached. On the contrary, that earlier decision of this court recognized that, by enactment of the Ohio statutes under consideration, the legislature "saw fit to extend the' protection given the employee — as we conceive it — to the frequenter of the place where the employee was required to be, and to protect him too while thereat against injury, thus affording to him collaterally the protection accorded the employee.” It was held merely that an independent contractor’s employee, standing on a window sill to wash windows, was not when he fell within the benefits of the statute. Judge Moorman said: “To extend the duty to a place of that kind would be an expansion of the statute beyond its intended remedial effect.”
The judgment of the District Court is affirmed.
[General Code of Ohio],
See. 871-13.
“(11) The terms ‘safe,’ and ‘safety,’ as applied to any employment or a place of employment, shall mean such freedom from danger to the life, health, safety or welfare of employees or frequenters as the nature of the employment will reasonably permit, including requirements as to the hours of labor with relation to the health and welfare of employees.”
“§ 871-15. Employer required to protect the life, health and safety of employes. — Every employer shall furnish employment which shall be safe for the employes therein, and shall furnish a place of employment which shall be safe for the employees therein, and for frequenters thereof, and shall furnish and use safety devices and safeguards, and shall adopt and use methods and processes, follow and obey orders and prescribe hours of labor reasonably adequate to render such employment and places of employment safe, and shall do every other thing reasonably necessary to proteet the life, health, safety and welfare of such employees and frequenters.”
“§ 871-16. Places of employment must he safe and provided with safety devices. —No employer shall require, permit or suffer any employe to go or be in any employment or place of employment which is not safe, and no such' employer shall fail to furnish, provide and use safety devices and safeguards, or fail to obey and follow orders or to adopt and use methods and processes reasonably adequate to render such employment and place of employment safe, and no employer shall fail or neglect to do every other thing reasonably necessary to protect the life, health, safety and welfare of such employes or frequenters; and no such employer or other person shall hereafter construct or occupy or maintain any place of employment that is not safe.”
“§ 871-17. Employee shall not remove any safety device, interfere with the use thereof nor disobey rules for the protection of life, health or safety. — No employee shall remove, displace, damage, destroy or carry off any safety device or safeguard furnished or provided for use in any employment or place of employment, nor interfere in any way with the use thereof by any other person, nor shall any such employe interfere with the use of any method or process adopted for the protection of any employee in such employment or place of employment, or frequenter of such place of employment, nor fail or neglect to follow and obey orders and to do every other thing reasonably necessary to protect the life, health, safety and welfare of such employees and frequenters.”
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
BOREMAN, Circuit Judge.
Plaintiff, Nannie V. Compton, brought this action seeking a refund of $194.19 alleged to have been illegally assessed and collected as federal taxes. She joined with her claim for refund prayers for certain injunctive relief and for abatement of the balance of a $75,167.39 assessment for taxes and penalties alleged to have been unlawfully made. From the judgment of the District Court dismissing the action on the merits she appeals.
The relevant facts are not in controversy. On October 21, 1957, members of the Arlington County Police Department, armed with a search warrant, entered and searched the premises of the plaintiff in Arlington, Virginia. Indicia of gambling or wagering operations, including adding machines, tapes, numbers slips and a large amount of cash, were seized. Plaintiff and one Joseph A. Chase were arrested and charged with violating Virginia’s lottery laws. On November 7, 1957, plaintiff and Chase entered separate pleas of guilty in the County Court of Arlington County, Virginia, to charges of operating a lottery and possessing lottery slips. Plaintiff was given a suspended sentence of nine months and plaeed on probation for a period of five years. Subsequently, Chase was prosecuted on charges of failure to file federal gambling excise tax returns and failure to purchase a wagering tax stamp as required by law. He was convicted in the District Court but, on appeal on Government’s motion, the judgment of conviction was reversed and the cause remanded, the Government conceding before this court that the warrant under which plaintiff’s home was searched and the property seized was invalid, and that the evidence upon which Chase had been convicted was obtained in violation of the constitutional protection against unreasonable search and seizure. That prosecution was subsequently dismissed in the District Court on Government’s motion.
Prior to the criminal proceedings mentioned above, agents of the Internal Revenue Department, having learned from newspapers of the raid, were permitted by the police to inspect the seized property. From information gained through their inspection and from helpful and revealing discussions with the Arlington police, the agents estimated the gross receipts of the. lottery business. On the basis of these estimates the District Director, pursuant to 26 U.S.C.A. § 6862, made a joint jeopardy assessment of excise and occupational taxes owed by plaintiff and Chase which, together with penalties and interest, totaled $75,167.-39. The assessment, covering periods in 1957, is set forth below. In an effort to collect the assessment, the District Director filed liens against property of the plaintiff, including her automobile and her home, and levied upon a bank account in plaintiff’s name. The balance in the bank account, $194.19, was paid by the bank to the District Director and credited to the total joint assessments against plaintiff and Chase.
In her complaint plaintiff alleged that at no time had she engaged in the State-of Virginia in any of the activities that would require her to file a return of wagering taxes or to “apply for an occupational stamp to accept wagers.” The-denial of these allegations in the Government’s answer created a material issue of fact. Before the District Court, plaintiff' testified that she had never been engaged in the business of accepting wagers or operating a lottery and contended that, ini any event, the assessment, being based upon illegally seized evidence, was void. The District Court held that she had not sustained the burden of showing that she-was entitled to the relief requested and' dismissed her action on the merits. We-think the decision of the District Court, should be affirmed.
On this appeal plaintiff fails, ini her brief, to discuss or argue the refusal of the District Court to grant the injunctive relief requested and to abate the outstanding assessment. We are convinced, however, that in the circumstances here: the court was without jurisdiction to grant such relief.
The specific errors of which plaintiff does complain on this appeal are not altogether clear from her brief and oral argument. In her brief she states the questions involved as follows:
“1. Whether the record of the proceeding below shows the Appellant to have been engaged in a partnership or other arrangement to justify the assessment of Federal Excise Taxes to Appellant jointly with another so as to bring it in the ambit of the Due Process Clause of the Fifth Amendment to the Constitution of the United States ?
“2. Whether the District Court committed reversible error in not permitting Appellant to retain counsel of her own choice ?
“3. Whether evidence seized by either State or Federal officers, in violation of the Constitution of the United States, is inadmissible in Federal tax proceedings ?”
We shall consider these questions as they relate to the suit for refund which, in our view, was properly before the District •Court.
We turn 'first to plaintiff’s contention that illegally seized evidence is inadmissible in federal tax proceedings. Plaintiff makes this argument as an abstract proposition of law without in any manner demonstrating that unlawfully obtained evidence was introduced in the District Court. In fact, no physical or tangible evidence obtained as a result of the illegal search was introduced by the Government. The only evidence introduced by the Government which could possibly be deemed a product of the unlawful search was offered for the purpose of impeachment only and, for reasons hereinafter stated, we think the evidence was properly admitted for that purpose. Obviously the thrust of plaintiff’s argument here, as in the court below, is that the assessment itself is invalid because it was based on illegally obtained evidence. Apparently she seeks to press that issue by broadly insisting that illegally obtained evidence is inadmissible in a civil proceeding. At trial, plaintiff introduced the testimony of three agents of the Internal Revenue Department to show the manner in which the assessment was made. From their testimony, it is clear that the assessment was based almost entirely upon the fruits of the illegal search but that fact is not decisive of the issues here. The difficulty with plaintiff’s position is that she apparently misconceives the burden of proof imposed upon her and which she must sustain in order to establish her claim of entitlement to a refund.
It is a well established principle that in every case, whether in a proceeding in the Tax Court to contest a deficiency assessment or in a District Court in a suit for refund, the assessment of the Commissioner is presumed to be correct. To be sure, this presumption is not evidence in itself and may be rebutted by competent evidence. It operates merely to place upon the opposing party the burden of going forward with the evidence. However, to prevail in an action for refund, the taxpayer must not only overcome this presumption but must assume and discharge the added burden of demonstrating the correct amount of the tax due or that he owes no tax at all. See Helvering v. Taylor, 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623 (1935); Commissioner of Int. Rev. v. R. J. Reynolds Tobacco Co., 260 F.2d 9, 14 (4 Cir. 1958); Clinton Cotton Mills v. Commissioner of Internal Revenue, 78 F.2d 292 (4 Cir. 1935); 9 Mertens, Federal Income Taxation, § 50.65 (Zimmet Rev. 1958).
An action for refund of taxes paid is in the nature of an action of assumpsit for money had and received and the plaintiff’s right to recover must be measured by equitable standards. Here, taxpayer’s entire liability is at issue and if, under any state of facts, the Government is entitled to the money claimed, she cannot prevail. Consequently, it is not enough merely to show that the assessment was invalid or that the Commissioner erred; the plaintiff must go further and produce evidence from which another and proper determination can be made. The extent of the taxpayer’s burden in a refund action was aptly stated by Judge Learned Hand in Taylor v. Commissioner, 70 F.2d 619, 620 (2 Cir. 1934), aff’d sub. nom. 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623 (1935):
“ * * * if fhe burden of proof goes so far as to demand not only that the taxpayer show that the deficiency assessed against him is wrong, but what is the proper deficiency, or that there should be none at all, the decision was right, even though we know that the tax is too high. In an action to recover taxes unlawfully collected the burden does go so far. * * * But the reason for this is obvious; a plaintiff, seeking an affirmative judgment measured in dollars, must prove how much is due. His claim is for money paid and he must show that every dollar he recovers is unjustly withheld. So it is not enough merely to prove that the tax as a whole was unlawful; some of the dollars he paid may nevertheless have been due. * * *»
To put it another way, the ultimate question in a suit for refund is not whether the Government was wrong, but whether the plaintiff can establish that taxes were in fact overpaid. The plaintiff, to prevail, must establish the exact amount which she is entitled to recover.
With the foregoing principles in mind, we turn our attention to the circumstances of the ease at hand. Here, plaintiff endeavored to prove that no tax was due by testifying that she had not engaged in the numbers business during the period in question, or at any time. In response to a question by the Government on cross-examination as to whether she had pleaded guilty to charges of maintaining a lottery, she testified: “I did not plead guilty. My attorney pleaded me guilty.” The Government then sought to impeach her testimony by introducing in evidence a certified copy of the record of the County Court of Arlington County showing that plaintiff had pleaded guilty to charges of operating a lottery and possessing lottery slips. Also for the sole purpose of impeachment, the Government directed questions to the plaintiff concerning her knowledge of the property taken from her home; plaintiff denied any knowledge thereof. The District Court refused to credit plaintiff’s testimony and held that she had not sustained her burden of proof. Without directly contesting this determination, plaintiff simply argues abstractly, as we have shown before, that unconstitutionally seized evidence is inadmissible in a federal tax proceeding. The Supreme Court has never directly passed upon this question and we do not think it necessary for this court to do so here. We reiterate that no physical evidence obtained as a result of the illegal search was introduced at trial. The questions propounded by the Government with respect to plaintiff’s knowledge of the property seized, as well as the record of the guilty plea in the Arlington County Court, were directed only at impeaching plaintiff’s testimony. Without reaching the broader question, we hold that for such purpose this evidence was admissible. In Walder v. United States, 347 U.S. 62, 74 S.Ct. 354, 98 L.Ed. 503 (1954), the Supreme Court held that evidence of a previous narcotics violation which had been illegally obtained could be used to impeach the defendant’s testimony in a prosecution for subsequent illicit transactions in narcotics. There the Court stated:
“It is one thing to say that the Government cannot make an affirmative use of evidence unlawfully obtained. It is quite another to say that the defendant can turn the illegal method by which evidence in the Government’s possession was obtained to his own advantage, and provide himself with a shield against contradiction of his untruths. Such an extension of the Weeks doctrine would be a perversion of the Fourth Amendment.” Id. at 65 of 347 U.S., at 356 of 74 S.Ct.
This pronouncement by the Supreme Court in a criminal case is a fortiori applicable in the -instant case. Here the Government did not use the evidence affirmatively to establish a case. The Government was the defendant and it was merely resisting plaintiff’s claim. By alleging in her complaint that she was not engaged in accepting wagers, she recognized that this question would materially affect her right to a refund of taxes paid. Her allegations were denied. The burden was on the plaintiff to prove that she was not engaged in accepting wagers during the period in question and the above evidence, offered only to impeach her testimony, was proper. Also, in view of our conclusions with respect to plaintiff’s burden of proof, we need not decide whether the assessment was vitiated by the manner in which it was achieved. Even assuming that the assessment was thereby rendered invalid, plaintiff could not re-cover without a further showing that she did not in fact owe all or some part of the amount collected. Her attempt to do so-failed when the District Court rejected-her testimony that she had not been engaged in the numbers business during the period in question. Her proof clearly fell short of meeting her obligation to show that she, in fact, owed no tax and that the money collected by the Government was unjustly withheld.
Two cases, United States v. Harris, 216 F.2d 690 (5 Cir. 1954), and Roybark v. United States, 218 F.2d 164 (9 Cir. 1954), illustrate the proper application of the burden of proof rule. In Harris, the plaintiff was an automobile dealer against whom the Commissioner had made a deficiency assessment based upon his disallowance of claimed deductions; for purchase prices of automobiles in excess of the legal ceiling. The plaintiff paid the assessment and brought suit im the District Court for refund. In its answer the Government admitted that the-original assessment was erroneously-based on the theory, subsequently discredited, that amounts paid in excess of lawful ceiling prices could not be deducted, but denied generally that the overceil-ing prices had actually been paid. The District Court granted summary judgment for the plaintiff and the Government appealed. The Court of Appeals for the Fifth Circuit reversed, emphasizing that in an action for refund the burden is on the taxpayer to establish that the-tax he paid was not in fact due. Thus, even though the assessment was based on an erroneous conclusion of law, the plaintiff was required to prove that above legal ceiling prices had actually been paid and that plaintiff did not owe the-money which had been paid to the Government.
Roybark v. United States, supra, involved facts almost identical to those in Harris. The Court of Appeals for the Ninth Circuit similarly held that, although the tax had been assessed under ■an erroneous view of the law, the plaintiffs had the burden, which they had not met, of establishing facts from which a proper determination could be made.
The contention advanced in plaintiff’s brief, i. e., that the record does mot show that she was engaged in a partnership with Chase, requires no discus.-sion beyond the statement that 26 U.S. C.A. § 4401 makes “[e]ac7i person who is engaged in the business of accepting wagers” liable for the tax. The assessment was made against plaintiff and •Chase, jointly and severally, and plaintiff •is personally and individually liable for .such taxes as are due and owing.
Finally, plaintiff has argued that the failure of the District Court to .•grant a continuance to permit her to sub■stitute counsel constituted a denial of due •process. Soon after this action was com-menced in the District Court, plaintiff wrote to the attorneys then representing ■her that she did not desire their services 'in connection with the instant case. 'Thereafter, on September 12, 1962, one of •plaintiff’s counsel of record, Carl J. Batter, Sr., filed in the District Court a motion, termed a “Motion Regarding Status •of Counsel,” by which he sought leave to withdraw as counsel for plaintiff and permission to continue in the cause independently to protect his attorney’s lien. Mr. Batter assigned as the reason for his motion the letter from plaintiff indicating ■that his services were no longer desired. 'The motion was brought to the court’s attention on September 26, 1962, and denied on the ground that plaintiff had not been given notice of a hearing thereon, •but without prejudice to renewing the motion upon appropriate notice to plaintiff of a hearing date. Plaintiff did nothing further regarding a change of counsel until the date of trial (January 14, 1963) when she addressed the court and asked if she “could have a chance to get new counsel in this ease,” stating that she was unable to pay the fees charged by present counsel. The court treated her request as a motion for continuance and denied it as coming too late. This ruling was made the basis for a motion for a new trial which was also denied. We do not believe that in this respect error was committed.
It is well settled that the decision to grant or refuse a continuance to permit a change of counsel rests in the sound discretion of the trial court. It is shown by the record that plaintiff was represented by other counsel in the person of one Johnson several months prior to trial. Yet, no formal appearance was at any time entered by him in this proceeding. Plaintiff acknowledged before the District Court that she had known at least one week prior to trial that Johnson no longer represented her. It appears that plaintiff had ample opportunity prior to the trial date to procure other counsel if she so desired. The only prejudice assigned by plaintiff is the failure of counsel to explain the plea of guilty entered in the Arlington County Court. However, plaintiff herself sufficiently explained the plea if her testimony had been credited. From an examination of the record, there is no reason to believe that a different result would have been achieved had plaintiff been represented by other counsel. In the circumstances here we think there was no abuse of discretion and the refusal of the continuance was proper.
For the reasons stated above, the decision of the District Court is
Affirmed.
. Premises at 1800 South Cleveland Street, Arlington, Virginia, were titled in tlie name of the plaintiff but the District Court found that Joseph A. Chase had contracted for the erection of the house. Plaintiff made her home on the premises and Chase maintained a room there in which he kept clothing and other belongings. In addition, Chase had access to other parts of the house and kept a safe in the den.
. The warrant under which the premises were searched stated as the material facts constituting probable cause — “Personal observation of premises and information from sources thought by the Police Department to be reliable.” The Government, in the criminal proceeding against Chase, originally took the position that although the warrant failed to show probable cause, the evidence was nevertheless admissible because it had been seized by state officers. After the decision of Elkins v. United States, 364 U.S. 206, 80 S.Ct. 1437, 4 L.Ed.2d 1669 (1960), the Government altered its position and moved for dismissal. Subsequently, the Supreme Court of Appeals of Virginia in a forfeiture proceeding, Tri-Pharmacy, Incorporated v. United States, 203 Va. 723, 127 S.E.2d 89 (1962), held that the search warrant was valid and the search and seizure were proper. However, the District Court in the present action found-that the property was illegally seized by the Arlington County Police Department and the Government does not contest, that determination here.
. Tax Penalty Interest Total
March 1957 $14,476.64 $ 7,238.32 $154.18 $21,869.14
May 1957 14,476.64 7,238.32 81.79 21,796.75-
Sept. 1957 . 14,476.64 7,238.32 9.41 21,724.37
Dec. 1957 9,651.10 9,651.10-
Occupational tax 1957 50.00 75.00 1.03 126.03
$53,131.02 $21,789.96 $246.41 $75,167.39-
. With certain exceptions not relevant here, 26 U.S.C.A. § 7421(a) provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.” As construed in Enochs v. Williams Packing Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), this statute clearly prohibits the granting of injunctive relief in a case such as this. The prayer for abatement was in the nature of a request for an injunction or a declaratory judgment, see Etheridge v. United States, 112 U.S.App.D.C. 151, 300 F.2d 906 (1962), and likewise could not have been granted. 28 U.S.C.A. § 2201 expressly excepts cases involving federal taxes from the grant of jurisdiction for declaratory judgments.
. Although generally payment of the total assessment is a prerequisite to suing for a refund, the Supreme Court in Flora v. United States, 362 U.S. 145, 171 n. 37, 175 n. 38, 80 S.Ct. 630, 644, 646, 4 L.Ed.2d 623 (1960), indicated that the full payment rule has no application to suits for refund of excise taxes, which may be divisible into a tax on each transaction or event and with respect to which the Tax Court has no jurisdiction. Lower federal court cases decided subsequent to the Flora decision have uniformly held that payment of the complete assessment is not a prerequisite to the maintenance in a District Court of a suit for refund. Tysdale v. United States, 191 F.Supp. 442 (D.Minn.1961); O’Neil v. United States, 60-1 CCH U.S. Tax Cas. 76,568 (E.D.N.Y. April 15, 1960); see Steele v. United States, 280 F.2d 89 (8 Cir. 1960); Sherwood v. Scanlon, 207 F.Supp. 686 (E.D.N.Y.1962) (dicta); Lassoff v. Gray, 207 F.Supp. 843 (W.D.Ky.1962) (dicta). See also Jones v. Fox, 162 F.Supp. 449 (D.Md. 1957) (supplemental opinion filed 1958), decided before the Flora case.
. For example, Agent Hudner testified as follows:
“Q. The gross receipts, which you calculated, were based on the evidence held by the Arlington Police Department?
“A. Yes, sir.
“Q. Were there any other evidence used by you?
“A. No, sir.”
. See e. g., Helvering v. Taylor, 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623 (1935); Veino v. Fahs, 257 F.2d 364 (5 Cir. 1958). See generally 9 Mertens, Federal Income Taxation § 50.71 (Zimmet Rev.1958).
. E. g., Stone v. White, 301 U.S. 532, 57 S.Ct. 851, 81 L.Ed. 1265 (1937); Lewis v. Reynolds, 284 U.S. 281, 52 S.Ct. 145, 76 L.Ed. 293 (1932); United States v. Pfister, 205 F.2d 538 (8 Cir. 1953); Western Maryland Ry. Co. v. United States, 131 F.Supp. 873 (D.Md.1955), aff’d per curiam, 227 F.2d 576 (4 Cir. 1955), cert. denied, 351 U.S. 907, 76 S.Ct. 696, 100 L.Ed. 1443 (1956).
. Helvering v. Taylor, supra note 8; United States v. Pfister, supra note 9; United States v. Harris, 216 F.2d 690 (5 Cir. 1954); 10 Mertens op. cit. supra note 8, § 58A. 35. But cf. United States v. Hover, 268 F.2d 657 (9 Cir. 1959).
. The Supreme Court has not squarely decided whether illegally obtained evidence may be admitted in a civil proceeding. However, in Silverthorne Lumber Co. v. United States, 251 U.S. 385, 40 S.Ct. 182, 183, 64 L.Ed. 319 (1920), a criminal action, Justice Holmes, speaking for the Court, stated: “The essence of a provision forbidding the acquisition of evidence in a certain way is that not merely evidence so acquired shall not be used before the Court but that it shall not be used at all.” Id. at 392. Several lower federal court cases have interpreted this language as prohibiting the use of illegally obtained evidence in civil as well as criminal cases. See, e. g., United States v. Physic, 175 F.2d 338 (2 Cir. 1949); Rogers v. United States, 97 F.2d 691 (1 Cir. 1938); Lassoff v. Gray, 207 F.Supp. 843 (W.D.Ky.1962); Tovar v. Jarecki, 83 F.Supp. 47 (N.D.Ill.1948), rev’d on other grounds, 173 F.2d 449 (7 Cir. 1949). In addition, other cases have applied the prohibition against the use of illegally obtained evidence in forfeiture proceedings which, although essentially civil in nature, have some attributes of a criminal action. See, e. g., United States v. One 1963 Cadillac Hardtop, 220 F.Supp. 841 (E.D.Wis.1963); United States v. $4,171.00 In United States Currency, 200 F.Supp. 28 (N.D.Ill.1961). On the other hand, other federal courts have indicated that the exclusionary rule has no application in civil eases. See Martin v. United States, 277 F.2d 785 (5 Cir. 1960); United States v. One 1956 Ford Tudor Sedan, 253 F.2d 725 (4 Cir. 1958); United States v. One 1953 Oldsmobile Sedan, 132 F.Supp. 14 (W.D.Ark.1955). In United States v. One 1956 Ford Tudor Sedan, supra, 253 F.2d at 727, Judge Haynsworth, speaking for this court, stated:
“We deem it unnecessary to extend, beyond the suppression of evidence in the criminal jurisdiction, the overlordship of the conduct of federal law enforcement officers.”
. The plaintiff contended below that the guilty plea entered in the Arlington County Court as well as the questions propounded by Government counsel were fruits of the illegal search which should have been stricken from the record. In our view of the case, it is not necessary to decide whether such evidence was the product of the illegal search and we may assume for purposes of decision that it was.
. At page 185 of the transcript the following colloquy appears:
“THE COURT: * * * I understand Government Exhibit No. 2 which is the record of the plea of guilty in Arlington County was not introduced for the purpose of proving that in fact she was guilty or that there was anything to do with it. It was only produced in response to her answer that the plea she made was not a guilty plea and was put in to test her credibility. Is that right?
“MR. LOMBARDO: That is true your Honor.
“THE COURT: It was not put in for any other purpose.
“MR. LOMBARDO: It was put in to impeach her testimony.
“THE COURT: And that only?
“MR. LOMBARDO: Yes, your Honor.
“THE COURT: Is that what you understand it was in for only?
“MR. BATTER, JR.: Yes.”
. See, e. g., Robertson v. Malone, 190 F.2d 756 (5 Cir. 1951); Miller v. Grier S. Johnson, Inc., 191 Va. 768, 62 S.E.2d 870 (1951). See generally Annot. 48 A.L.R.2d 1155.
. See Crono v. United States, 59 F.2d 339 (9 Cir. 1932); Annot. 66 A.L.R.2d 298.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
CORNELIA G. KENNEDY, Circuit Judge.
The Commonwealth of Kentucky, Department of Education (Commonwealth), appeals from the March 19, 1982 decision of the Secretary of Education, ordering the Commonwealth to refund $338,034.00 allegedly misspent in Title 1 programs during 1974. For the reasons set forth below, we reverse.
The former United States Department of Health, Education and Welfare, through its Department of Health, Education and Welfare Audit Agency (HEWAA), conducted an audit of Title I expenditures of local educational agencies (LEAs) in the Commonwealth. The period covered by the audit was July 1, 1967, through June 30, 1974, with the last phase of the audit having been concluded in September of 1974. The audit report charged inter alia that the Title I “readiness programs” instituted with the approval of the Kentucky Department of Education in 50 local school districts supplanted State and locally funded programs in violation of 20 U.S.C. § 241e(a)(3)(B) which requires:
Federal funds made available under this subchapter will be so used (i) as to supplement and, to the extent practical, increase the level of funds that would, in the absence of such Federal funds, be made available from non-Federal sources for the education of pupils participating in programs and projects assisted under this subchapter, and (ii) in no case, as to supplant such funds from non-Federal sources, * * * (emphasis added).
The HEWAA determination required a refund from the Commonwealth for fiscal year 1974 of $704,237.00.
The Commonwealth made an application for review of this final determination in January 1977, and in the latter part of 1979 a three-member Education Appeal Board (EAB) panel was appointed to consider the matter. The Initial Decision of the EAB, issued on June 23, 1981, ruled “that the readiness programs carried out by the 50 LEAs during [Fiscal Year] 1974 were not properly designed to supplement state and local expenditures for Title I children, that a supplanting violation had occurred, and that the full $704,237.00 must be refunded by the [state educational agency] SEA to the Assistant Secretary.”
Pursuant to 20 U.S.C. § 1234a(d) the Commonwealth was notified that the initial decision would become the final decision of the United States Department of Education unless the Secretary of Education, for good cause shown, modified or set aside the EAB’s decision. On August 27, 1981, in response to comments and recommendations filed by the Commonwealth and the United States Assistant Secretary for Elementary and Secondary Education, the Secretary of Education, Terrel H. Bell, remanded the audit to the EAB for further consideration. Secretary Bell instructed the EAB to determine whether the amount of $740,237.00 should be reduced in view of several factors including the more favorable pupil :teacher ratio in the readiness classes (13:1) as compared with that in the regular classes (27:1).
The EAB panel affirmed its earlier decision, but ‘for good cause shown’ Secretary Bell on review reduced the audit figure by 52%, representing the supplemental services received by students in the Title I readiness programs as a result of the significantly smaller pupil :teacher ratio. The amount ordered to be refunded by the Commonwealth was thus reduced to $338,034.00.
I.
On appeal to this Court, the Commonwealth argues that the Secretary did not have any authority to consider and make demand for a refund of Title I funds which had purportedly been misspent in 1974. As originally enacted, the ESEA did not expressly authorize the Secretary to demand a refund of misspent Title I funds. It was not until the Education Amendments of 1978, 20 U.S.C. § 2835, that provisions were adopted authorizing audit determinations and the collection from SEAs of Title I funds found to have been misspent. Accordingly, it is argued that the Secretary exceeded his statutory authority in ordering this refund.
This argument was definitively rejected by the Supreme Court in the recent decision of Terrel H. Bell, Secretary of Education v. New Jersey and Pennsylvania, — U.S. —, 103 S.Ct. 2187, 76 L.Ed.2d 313 (1983). There the Court held that the federal government has had, from the inception of the Act, the authority to recover misspent funds from states which had received grants under Title I. Eight Justices reasoned that although the authority of the Secretary to recover misspent funds did not become explicit until the Education Amendments of 1978, the pre-1978 version of ESEA contemplated that states misusing federal funds would incur a debt to the federal government for the amount misused. Accordingly, if supplanting occurred, the Secretary has the authority to order a refund.
II.
The Commonwealth argues in the alternative that even if the Secretary has the authority to order this refund, the record does not justify the determination that a supplanting, rather than a supplementing, of State and local funds occurred during fiscal year 1974. It is unclear what standard this Court should employ in reviewing the determination of the Secretary. As noted by Justice White in his concurring opinion in Bell, the cases reviewed in that decision
... do not involve any question as to the substantive standard by which a claim that a recipient has violated its Title I commitments is to be judged. Rather, they concern the abstract question whether the Secretary has the right to recover Title I funds under any circumstances. In my view, there is a significant issue whether a State can be required to repay if it has committed no more than a technical violation of the agreement or if the claim of violation rests on a new regulation or construction of the statute issued after the state entered the program and had its plan approved. (emphasis added)
Id., at —, 103 S.Ct. at 2199. In the instant case, we must address this “significant issue” left open in Bell. The only guidance provided by the majority in Bell appears at p. —, 103 S.Ct. at p. 2198:
[T]he States have an opportunity to litigate in the courts of appeal whether the findings of the Secretary are supported by substantial evidence and reflect application of the proper legal standards. § 455, 20 U.S.C. § 1234d(c); 5 U.S.C. § 706 (emphasis added).
Title I establishes financial support for LEAs to meet the special educational needs of educationally deprived children residing in school attendance areas having high concentrations of children from low income families. Congress provided that Title I funds were to be distributed to LEAs through SEAs upon application for the funds. The Commonwealth’s programs were administered through the Kentucky Department of Education. The implementing rules and regulations in effect in fiscal year 1974 reinforced the statutory requirement that Title I funds should not supplant State or local funds and should supplement those funds. 45 C.F.R. § 116.17(h) (1971) (transferred to 34 C.F.R. pt. 200) of the regulations provides in pertinent part:
Each application for a grant under Title I of the Act for educationally deprived children residing in a project area shall contain an assurance that the use of the grant funds will not result in a decrease in the use for educationally deprived children residing in that project area of State or local funds which, in the absence of funds under Title I of the Act, would be made available for that project area and that neither the project area nor the educationally deprived children residing therein will otherwise be penalized in the application of State and local funds because of such a use of funds under Title I of the Act. No project under Title I of the Act will be deemed to have been designed to meet the special educational needs of educationally deprived children unless the Federal funds made available for that project (1) will be used to supplement, and to the extent practical increase, the level of State and local funds that would, in the absence of such Federal funds, be made available for the education of pupils participating in that project; (2) will not be used to supplant State and local funds available for the education of such pupils; and (3) will not be used to provide instructional or auxiliary services in project area schools that are ordinarily provided with State and local funds to children in nonproject area schools.
The Commonwealth argues that no supplanting took place when it designed self-contained readiness classrooms. The Commonwealth points out that Title I readiness classrooms were not approved by the Kentucky Department of Education unless the LEAs maintained the same number of State and locally funded regular classroom teachers as they had before the readiness programs were established. Thus, from the LEAs’ standpoint they were supplementing the existing programs since their expenditures for existing regular classroom programs remained at the same level. By the same token they were not supplanting any of their existing programs or expenditures with the Title I self-contained classrooms. The Secretary counters:
We interpret the ... regulations to mean that the advent of Title I funds shall not result in a decrease in the use of State and local support for the education of the educationally deprived children residing in the project area. The SEA officials viewed supplanting as the failure of an LEA to employ the number of non-Title I teachers that State and local funds were made available for, by school and grade, based on average daily attendance (ADA) statistics. The SEA’s view does not relate to the per pupil expenditure and does not give the Title I student his fair share of services purchased with State and local funds. Further, the concept of a readiness program is to primarily prepare a child for the first grade. However, the SEA’s view permits the use of the readiness class to serve as a general educational first grade.
(Report on Review of Administration of the ESEA of 1975 Title I Projects at LEAs Administered by the Kentucky Department of Education for the Period July 1, 1967 through June 30, 1974, p. 28; JA: 34). Thus, the Secretary focuses on the expenditure per pupil.
In its initial decision the EAB wrote: The SEA devoted most of its evidence and much of its argument to proving that State and local fiscal effort was maintained at the school district, school and grade levels. The Assistant Secretary does not dispute this showing but considers it irrelevant, asserting that compliance must be judged with reference to State and local funds expended for the benefit of the specific pupils enrolled in readiness classes.
(Initial Decision of the EAB, June 23, 1981, at p. 8; JA: 69).
It cannot be said that the interpretation posited by the Secretary is “unreasonable.” The statutory and regulatory prohibitions against supplanting State and local funds with Title I funds can reasonably be applied with reference to expenditures at the level of the individual educationally deprived pupil, rather than at the level of either the LEA, the school, the grade, or the classroom. Nonetheless, in the instant case we do not feel that it is our task on appeal to review the reasonableness of the Secretary’s interpretation of Title I section 241e(a)(3)(B) and regulation section 116.17(h). We are not reviewing with reference to the future effect of the Secretary’s interpretation of a statute. Rather, in this appeal we are concerned with the fairness of imposing sanctions upon the Commonwealth of Kentucky for its “failure to substantially comply” with the requirements of section 241e(a)(3)(B) and 45 C.F.R. 116.17(h), as those requirements were ultimately interpreted by the Secretary.
We disagree with the Secretary’s conclusion that the statutory and regulatory provisions at issue were sufficiently clear to apprise the Commonwealth of its responsibilities under the Act. It cannot be inferred that the Commonwealth had notice of its obligations. The legislative history to Title I is replete with evidence that Congress left to the discretion of the participating States the responsibility to establish programs with Title I funds to strengthen educational opportunities for educationally deprived children.
Under the terms of the legislation, a local public school district may use funds granted to it for the broad purpose of programs and projects which will meet the educational needs of educationally deprived children in those school attendance areas in the district having high concentrations of children from low-income families. It is the intention of the proposed legislation not to prescribe the specific types of programs or projects that will be required in school districts. Rather, such matters are left to the discretion and judgment of the local public educational agencies since educational needs and requirements for strengthening educational opportunities for educationally deprived elementary and secondary school pupils will vary from State to State and district to district. What might be an acceptable and effective program in a school district serving a rural area may be entirely inappropriate for a school district serving an urban area, and vice ver-sa. There may be circumstances where a whole school system is basically a low-income area and the best approach in meeting the needs of educationally deprived children would be to upgrade the regular program. On the other hand, in many areas the needs of educationally deprived children will not be satisfied by such an approach.
S.Rep. No. 146, reported at [1965] U.S.Cong. & AdmimNews 1446, 1454.
It should be emphasized, ... that no suggested program is in itself mandatory upon a public school authority. The selection of an appropriate program or programs, for which State educational authority approval is sought, rests with the local educational agency.
Id., at 1456-57.
This is not to say that the interpretation of the statutory and regulatory requirements posited by the Commonwealth is controlling. On the contrary, the interpretation of the Secretary governs all future dealings. We hold only that in the absence of unambiguous statutory and regulatory requirements, and in the presence of a specific grant of discretion to the Commonwealth to develop and administer programs it believes to be consistent with the intentions of Title I, it is unfair for the Secretary to assess a penalty against the Commonwealth for its purported failure to comply substantially with the requirements of law, where there is no evidence of bad faith and the Commonwealth’s program complies with a reasonable interpretation of the law.
We find support for this position in Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17, 101 S.Ct. 1531, 1539, 67 L.Ed.2d 694 (1981), where the Supreme Court analyzed Congress’ power to place conditions on the grant of federal funds to States under the Developmentally Disabled Assistance and Bill of Rights Act of 1975, 89 Stat. 486, as amended, 42 U.S.C. § 6000 et seq. (1976 ed. and Supp. III).
Turning to Congress’ power to legislate pursuant to the spending power, our cases have long recognized that Congress may fix the terms on which it shall disburse federal money to the States. See e.g., Oklahoma v. CSC, 330 U.S. 127 [67 S.Ct. 544, 91 L.Ed. 794] (1947); King v. Smith, 392 U.S. 309 [88 S.Ct. 2128, 20 L.Ed.2d 1118] (1968); Rosado v. Wyman, 397 U.S. 397 [90 S.Ct. 1207, 25 L.Ed.2d 442] (1970). Unlike legislation enacted under § 5 [of the Fourteenth Amendment], however, legislation enacted pursuant to the spending power is much in the nature of a contract: in return for federal funds, the States agree to comply with federally imposed conditions. The legitimacy of Congress’ power to legislate under the spending power thus rests on whether the State voluntarily and knowingly accepts the terms of the “contract." See Steward Machine Co. v. Davis, 301 U.S. 548, 585-598 [57 S.Ct. 883, 890-895, 81 L.Ed. 1279] (1937); Harris v. McRae, 448 U.S. 297 [100 S.Ct. 2671, 65 L.Ed.2d 784] (1980). There can, of course, be no know ing acceptance if a State is unaware of the conditions or is unable to ascertain what it expected of it. Accordingly, if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously, (footnote omitted) Cf. Employees v. Department of Public Health and Welfare, 411 U.S. 279, 285 [93 S.Ct. 1614, 1618, 36 L.Ed.2d 251] (1973); Edelman v. Jordan, 415 U.S. 651 [94 S.Ct. 1347, 39 L.Ed.2d 662] (1974). By insisting that Congress speak with a clear voice, we enable the States to exercise their choice knowingly, cognizant of the consequences of their participation, (emphasis added)
Pennhursf s requirement of legislative clarity arose in the context of imposing upon participating States an unexpected condition for compliance — interpreting the Act to impose a duty on the States to provide the “least restrictive treatment” possible to severely or profoundly mentally and physically handicapped individuals. See Bell, supra, U.S. at —, n. 17, 103 S.Ct. at 2197, n. 17. Declining to suppose that Congress intended to implicitly impose such an extensive obligation on participating States the Supreme Court wrote:
Our conclusion is also buttressed by the rule of statutory construction established above, that Congress must express clearly its intent to impose conditions on the grant of federal funds so that the States can knowingly decide whether or not to accept those funds. That canon applies with greatest force where, as here, a State’s potential obligations under the Act are largely indeterminate. It is difficult to know what is meant by providing “appropriate treatment” in the “least restrictive” setting, and it is unlikely that a State would have accepted federal funds had it known it would be bound to provide such treatment. The crucial inquiry, however, is not whether a State would knowingly undertake that obligation, but whether Congress spoke so clearly that we can fairly say that the State could make an informed choice.
Pennhurst, supra, 451 U.S. at 24-25, 101 S.Ct. at 1543-1544 (emphasis added). See also Board of Education of the Hendrick Hudson Central School District Bd. of Ed., Westchester County v. Rowley, 458 U.S. 176, 204 n. 26, 102 S.Ct. 3034, 3049 n. 26, 73 L.Ed.2d 690 (1982) (where it was held that the phrase “free appropriate public education,” in the Education for All Handicapped Children Act of 1975, 20 U.S.C. § 1401 et seq., should not be read to impose upon States the requirement to maximize the potential of handicapped children, and that even if such was Congress’ intent, its failure to clearly articulate that requirement precludes an interpretation of the Act that imposes such a burden upon States receiving federal funds); and State of Louisiana, Dept. of Health and Human Services v. Block, 694 F.2d 430, 431 n. 2 (5th Cir.1982) (where Pennhurst, supra, and New Jersey v. Hufstedler, 662 F.2d 208 (3d Cir.1981), rev’d on other grounds sub nom. Terrel H. Bell, Secretary of Education v. New Jersey and Pennsylvania, — U.S. -, 103 S.Ct. 2187, 76 L.Ed.2d 313 (1983) were cited for the proposition that legislative clarity is required when seeking to impose a heavy, affirmative burden upon states receiving federal funds).
The statute and the regulations at issue here are concerned not only with the welfare of pupils but also with the policy that Title I programs should not impact adversely on the project area. From the practical standpoint of the school district, although there is a correlation between the number of students and classrooms and the number of teachers required, a reduction in students does not always result in a savings to the school district. Only a reduction in faculty or facilities can bring about a savings. Given a fixed number of dollars awarded to the school district, the requirement that average per pupil expenditures be transferred to the Title I classrooms, in proportion to the number of students in attendance there who are expected to advance a grade, cannot help but have an adverse impact on the funds available for the regular classroom when the number of regular classrooms and teachers cannot be reduced.
Where, as here, a determination of whether Title I funds supplant or supplement State and local funds depends upon whether the focus is on the district or the pupil, the statute and regulations cannot be said to be unambiguous. We cannot say that the Commonwealth received these funds with the “knowing acceptance” required by Pennhurst. The Commonwealth was unaware of the condition that the Secretary now seeks to impose.
Accordingly, we find that the Secretary was not justified in assessing a penalty against the Commonwealth for its purported failure to comply substantially with the requirements of 20 U.S.C. § 241e(a)(3)(B).
III.
The Commonwealth finally asserts that the HEW A A assessed damages through a series of estimates and that such deficiencies in the auditors’ methodology renders the assessment of damages arbitrary and capricious. Having concluded that it is unfair for the Secretary to find that the Commonwealth failed to comply substantially with the requirements of Title I, we need not address the issue of what damages would be appropriate under a contrary holding.
Accordingly, the decision of the Secretary is reversed.
. Title I of the Elementary and Secondary Education Act of 1965 (as amended) (ESEA), 20 U.S.C. §§ 241a, et seq.
. The “supplanting” provision was added to Title I by an amendment enacted in 1970— Pub.L. 91-230, § 109(a).
. 1109 (students in readiness classes in 50 LEAs expected to be promoted to the next grade level in the subsequent school year and, thus, expected to receive first or second grade credit for the time spent in the readiness program)
x $635.02 (cost per student)
$704,237.00
. Justice White, concurring, would have preferred to have held that the 1978 amendments, which unequivocally allow for repayments, should be applied retroactively.
. It is interesting to note that it is the success of the program which causes the problem. It is only when the child is able to advance to the regular classroom in the next grade that repayment is required. No reimbursement is required for those children who return to the regular first grade classroom.
. Generally, when neither legislative history nor other decisions of the Secretary definitively interpret the language of an ambiguous statute, courts will defer to the interpretation advanced by the agency empowered to administer the statute. See United States v. Larionoff, 431 U.S. 864, 872, 97 S.Ct. 2150, 2155, 53 L.Ed.2d 48 (1977). See also Meade Tp. v. Andrus, 695 F.2d 1006, 1009 (6th Cir.1982) (where this Court wrote that the interpretation of a statute by the agency charged with its enforcement is entitled to “ ‘more than mere deference or weight. (The regulation) can only be set aside if the Secretary exceeded his statutory authority or if (it) is arbitrary, capricious, or otherwise not in accordance with law.’ Batterton v. Francis, 432 U.S. 416, 426, 97 S.Ct. 2399, 2406, 53 L.Ed.2d 448 (1977); 5 U.S.C. § 706(2)(A).”); Satty v. Nashville Gas Co., 522 F.2d 850, 854 (6th Cir.1975), aff’d in part, vacated in part, and remanded, 434 U.S. 136, 98 S.Ct. 347, 54 L.Ed.2d 356 (1977) (where this Court articulated the standard as one where “absent clear indicia in the form of legislative history that the agency interpretation is unreasonable or unnatural, we must defer to the commissioner’s construction of the statute ... ”).
. Contra, State of W. Va. v. Secretary of 3d., 667 F.2d 417, 420 (4th Cir.1981) (per curiam) (where, in resolving a dispute over ambiguity in the ESEA and regulations, the Fourth Circuit deferred to the interpretation advanced by the Secretary and affirmed the order of the Secretary requiring West Virginia to refund $125,000 misspent on the construction of an administrative office complex).
. See 20 U.S.C. § 1234b(a) and § 1234c(a) (1978) (where the Commissioner is said to act upon the belief that a recipient of funds had “failed to comply substantially” with any requirement of law applicable to such funds).
. In 1974, Congress adopted a further amendment to Title I, 20 U.S.C. § 241e(a)(l) (excess costs provision) in order to “reemphasize” that Title I funds were not to be used to supplant State and local funds. H.R.Rep. No. 805, 93rd Cong., 2d Session, 17, reprinted in [1974] U.S. Code Cong. & Admin.News 4093, 4108. We disagree with the Commonwealth’s contention that, prior to the adoption of the ‘excess costs’ provision, Section 241e(a)(3)(B) could not reasonably be interpreted to prohibit supplanting with reference to expenditures at the level of the individual educationally deprived student, and that, therefore, the Secretary is now attempting to retroactively enforce the ‘excess costs’ provision of the Act. However, the new provision makes it abundantly clear that Congress could have used language in the original enactment which would have been less ambiguous and would have more fairly apprised the State of its obligations.
. The Initial Decision of the EAB, June 23, 1981, pp. 8-9; JA: 69-70 concluded:
The Panel is persuaded that the statutory and regulatory provisions are sufficiently clear in their emphasis on the expenditure of funds for pupils — not LEA’s, schools or grade levels — to sustain the Assistant Secretary’s position. Clause (B) of . the statute 4 mandates the use of Federal funds to “supplement and ... increase” the level of funding that would otherwise “be made available from non-Federal sources for the education of pupils participating in programs and projects” assisted by Title I (emphasis added [by Board]).
The regulatory provision 5 is equally clear, even to the point of repetition. It requires assurances that use of grant funds not result in a decrease “in the use for educationally deprived children ” of the State and local funds; that “educationally deprived children” not be penalized in the application of State and local funds; that Federal funds be used to supplement non-Federal funds that would, absent Title I, “be made available for the education of pupils participating’ in Title I; and that Federal funds not supplant non-Federal funds “available for the education of such pupils.” (emphasis added [by Board] ).
4 20 U.S.C. § 241e(a)(3)(B) ...
5 45 C.F.R. 116.17(h) . ..
. Compare Alexander v. Califano, 432 F.Supp. 1182 (N.D.Cal.1977) (where Title I funds were found to “supplant” in violation of § 241e(a)(3)(B)).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM:
James B. Stephen, an attorney at law, appeals from an order of the district court which allowed him an attorney’s fee of $2,500.00, but denied the full amount of his request.
Stephen represented Charles L. Edg-ens, a social security claimant, in the district court and succeeded in obtaining an award for Edgens in the amount of $15,-584.20. Thereafter, Stephen petitioned the district court to approve an attorney’s fee equal to 25% of the accrued benefits or $3,896.05, the maximum fee allowable under 42 U.S.C.A. § 406(b) (1). The district court, after reviewing the entire record and considering all the circumstances of the case, awarded Stephen a $2,500.00 fee.
We have examined the briefs, appendix, and the record. We cannot say that the district court abused its discretion.
Accordingly, we find oral argument unnecessary and affirm the judgment below.
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
LAY, Senior Circuit Judge.
William A. Lester, trustee for the bankruptcy estate of Daniel E. Harper, filed suit in the Circuit Court of DuPage County, Illinois, against Arlington Heights Federal Savings and Loan Association (Arlington), alleging that Arlington had breached a loan commitment to Harper. A jury verdict was returned in favor of Lester and against Arlington in the amount of $18,645,000. Arlington moved for judgment notwithstanding the verdict (JNOV) or, in the alternative, for a new trial.
After judgment had been entered but while the posttrial motions were pending in state court, Arlington was declared insolvent and the Resolution Trust Corporation (RTC) was appointed receiver. Pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), the RTC removed the case to federal district court and renewed its motion for JNOV or for a new trial. The federal district court vacated the state court verdict and granted a new trial. After a second trial, this time in federal district court, the jury returned a verdict for the plaintiff Lester, but awarded zero damages. The RTC moved for JNOV, contending that the evidence was insufficient as a matter of law to show that Harper had fulfilled conditions precedent to Arlington’s obligation to fund under the commitment letter. The district court denied the RTC’s motion.
On appeal Lester contends that the district court erred in ordering a new trial on the state court verdict. In addition, although he did not make a Rule 59 motion for a new trial following the verdict in federal district court, Lester argues that errors in several eviden-tiary rulings in that trial require a new trial on damages only. The RTC has cross appealed; arguing that the district court erred in denying its motion for JNOV.
I.
In late 1970, Harper, a real estate developer, made plans to develop a shopping mall located in Lake Zurich, Illinois. The mall was to be constructed in three phases on six different lots-. Phase I was to be a strip mall and fire station on lots four and six. Phase II was to be an enclosed mini-mall and service station on lots one and seven. Phase III was to include a, bank, restaurant, office space and library on lots two and three.
In December of 1972, Harper and Arlington’s president began discussing the possibility that Arlington would finance a construction loan. On February 16, 1973, Arlington made a one-year commitment to loan Harper $5.3 million at 9.5% for 15 years. Under federal regulations, however, Arlington was prohibited from making land acquisition and infrastructure loans. Harper therefore entered into a one-year loan agreement on June 28, 1973 with another lender, McElvain-Reynolds, to fund $2.3 million to acquire the property and to construct the necessary infrastructure. Harper also obtained a $2.3 million standby commitment from Glen Ellyn Savings and Loan Association in August of 1973, funds with which Harper planned to pay off the McElvain-Reynolds loan.
In the fall of 1973, after McElvain-Reyn-olds funded $1.7 million of the $2.3 million commitment, Harper acquired the land and began working on the infrastructure. In February 1974, the $5.3 million loan commitment from Arlington expired. Work on the infrastructure was not yet complete, however, so Harper could not seek funding under the Arlington commitment. Arlington and Harper therefore agreed to extend the commitment until August 1974 (later extended until October 1974).
Meanwhile, the date on the McElvain-Reynolds loan, originally set at June 1, 1974, was extended until July 1, 1974. However, McElvain-Reynolds had never fully funded the infrastructure loan (financing only $1.7 million of the promised $2.3 million) and refused to lend Harper any more money. It is undisputed that Harper was in default on the McElvain-Reynolds loan as of July 1, 1974 and that at least some of the infrastructure work had not yet been completed. The evidence is also clear that Glen Ellyn Savings and Loan Association refused to honor its $2.3 million standby commitment.
On July 26, 1974, Arlington gave a second one-year commitment to Harper in the amount of $3,832,000. The loan was described as a construction loan on Zurich Town Mall, lot numbers 4 and 6 — in other words, Phase I of the project. The interest rate was 10.5% for a term of fifteen years. The commitment letter required an appraisal of the property and stated that the loan amount could not exceed 75% of the appraised value. The loan was made subject to several conditions, two of which’ are relevant to this appeal. First, Harper was required to maintain sufficient funds on deposit and to post a completion bond. Second, the loan was conditioned on Arlington’s obtaining additional lenders to participate in the loan. Harper accepted this second commitment on July 29, 1974.
During the summer of 1974, interest rates rose substantially. Aldington was therefore unable to find other lenders interested in participating in the loan at the 10.5% interest rate. In August, Harper and Arlington agreed to a plan to seek participants at an interest rate of 14%. By October 1974, however, Harper had run out of money, and construction on the project ceased. In a letter dated November 23, 1974, Arlington informed Harper that it had found participants at 14%. Shortly afterwards, on December 3, 1974, Harper demanded that Arlington fund under the first $5.3 million commitment letter. In response, Arlington indicated that it would fund under either the first or second commitment letter, “so long as you comply with all terms and conditions required in the respective letter of your choice.... ” Harper thereafter abandoned the project.
In 1975, McElvain-Reynolds foreclosed on the project. In May 1978, Harper filed for bankruptcy. On September 2, 1981, after receiving authorization from the bankruptcy court, Lester, acting as trustee for the bankruptcy estate of Harper, filed a two-count complaint against Arlington in the Circuit Court of DuPage County. Count I alleged that Arlington breached the second commitment letter by failing to lend Harper the $3.8 million. The second count was a tort claim, alleging that the breach was intentional. Arlington subsequently filed a third-party complaint against Harper to collect a loan commitment fee. Finally, Harper in his individual capacity was permitted to add a $20 million fraud claim against Arlington on the first day of trial.
A trial was held in the fall of 1989 in the Illinois circuit court. The jury, heard evidence pertaining to both the contract and tort claims brought by the trustee as well as evidence pertaining to Harper’s individual fraud claim against Arlington. The jury also heard testimony on Harper’s damages, including lost profits, not only from Phase I, but also from Phases II and III of the project as well.
After the parties had rested but before the case was submitted to the jury, the state court dismissed Lester’s tort claim. The jury returned a verdict for Lester and against Arlington in the amount of $18,645,-000 on the breach of contract claim. It found for Harper and against Arlington on Arlington’s third party claim for a loan commitment fee, and for Arlington and against Harper on Harper’s individual fraud claim.
Judgment was entered on November 8, 1989. On December 7, 1989, Arlington made timely motions for JNOV or, in the alternative, for a new trial. At the close of business on that same day, however, Arlington was declared insolvent and the RTC was appointed receiver. The RTC removed the ease to federal district court the next day (December 8, 1989), and subsequently renewed the motions for JNOV or alternatively for a new trial. The federal district court, the Honorable William T. Hart presiding, denied the motion for JNOV, but granted the RTC’s motion for a new trial and vacated the $18,645,000 jury verdict. Lester v. Resolution Trust Corp., 125 B.R. 528 (Bankr.N.D.Ill.1991). Judge Hart reasoned that (1) the expert testimony on damages was speculative and included Phases II and III, while the commitment letter at issue pertained only to Phase I; (2) Harper should not have been permitted to press his individual fraud claim against Arlington, because it belonged to the trustee; and (3) although Lester’s tort claim was later stricken before the jury’s deliberations, the jury was permitted to hear undifferentiated damage evidence pertaining to the impermissible tort claim.
In the second trial in federal district court, the sole claim made by Lester was based on the alleged breach of contract against Arlington. The judge excluded all damage evidence relating to Phases II and III. He also excluded evidence of lost profits as to Phase I, limiting Lester’s damages to the appraised value of Phase I less saved costs. On November 6, 1991, the jury returned a verdict in favor of Lester but awarded zero damages.
Thereafter the RTC moved for JNOV, arguing that the evidence showed as a matter of law that two conditions precedent to its obligation to fund the loan had never been fulfilled: (1) Harper did not obtain a completion bond for the construction of the infrastructure or place the required funds on deposit; and (2) despite reasonable, good faith efforts to secure loan participants, Arlington was unable to do so. The district court denied the motion.
II.
A. Jurisdiction
We must first determine whether FIRREA authorizes the RTC to invoke federal jurisdiction and to remove this case from state court, even after judgment had been entered on the state court verdict. Here, the state court had entered judgment, but post-trial motions were pending. We conclude that removal was proper.
In their jurisdictional statements to the court, the parties stated that the federal district court had jurisdiction by virtue of 12 U.S.C. § 1441a(i )(3). This provision authorizes the RTC to remove “any such action, suit, or proceeding,” but the words “action, suit, or proceeding” are not defined. Arguably, in using the word any, Congress intended an expansive reading of these terms to include more than just cases that had not yet reached a state court judgment. Indeed, the Fifth Circuit concluded that the same phrase in a different provision of FIRREA permitted the FDIC (as opposed to the RTC) to remove a state court action to federal court, even though the case was then pending before the state’s appellate court. See In re Meyerland Co., 960 F.2d 512 (5th Cir.1992) (interpreting 12 U.S.C. § 1819(b)(2)(B)), cert. denied, — U.S. -, 113 S.Ct. 967, 122 L.Ed.2d 123 (1993).
B. New trial in federal district court
Upon removal from the state court the district court ordered a new trial, citing several errors in the state trial. Lester now argues that the district court erred and requests that the state court verdict be reinstated. Ordinarily we review the trial court’s decision to grant a new trial under the deferential abuse of discretion standard. See Forrester v. White, 846 F.2d 29, 31 (7th Cir.1988). Lester argues that since the federal district judge did not preside over the first trial, deferential review of the district court’s ruling should be subject to closer scrutiny. See Finn v. American Fire & Casualty Co., 207 F.2d 113, 116 (5th Cir.1953), cert. denied, 347 U.S. 912, 74 S.Ct. 476, 98 L.Ed. 1069 (1954). In addition, Lester contends the federal district court erred as a matter of law.
Under either standard we conclude that the district court did not err when it granted the RTC’s motion for a new trial. At the first trial, Lester was permitted to introduce expert testimony on lost profits for Phases II and III of the project. Illinois law does not require lost profits to be proven with absolute certainty, but they must be established “with a reasonable degree of certainty.” See Midland Hotel Corp. v. Reuben H. Donnelley Corp., 118 Ill.2d 306, 113 Ill.Dec. 252, 257, 515 N.E.2d 61, 66 (1987); Doctors Sellke & Conlon, Ltd. v. Twin Oaks Realty, Inc., 143 Ill.App.3d 168, 96 Ill.Dec. 633, 638, 491 N.E.2d 912, 917 (1986). Here, it is undisputed that the infrastructure on Phase I of the Zurich Village Mall was never completed and that Harper did not post a completion bond nor place sufficient funds on deposit to insure completion of the infrastructure. We cannot therefore say that the district court erred in concluding that lost profits evidence from Phases II and III of the venture was speculative, particularly where Arlington’s commitment letter at issue pertained only to Phase I. See Midland Hotel, 113 Ill.Dec. at 257-58, 515 N.E.2d at 66-67. Any ensuing loss of profit from Phases II and III were not foreseeable by reason of Aldington’s refusal to fund the loan; rather, the evidence indicates that Harper’s inability to complete the infrastructure was the sole cause of the project’s failure.
In addition, at the first trial, Lester was permitted to press a tort claim for intentional breach of contract, a cause of action that does not exist under Illinois law. See Morrow v. L.A. Goldschmidt Assocs., Inc., 112 Ill.2d 87, 96 Ill.Dec. 939, 941-42, 492 N.E.2d 181, 183-84 (1986). Although the state judge dismissed this count before the case was submitted to the jury, the jury nevertheless heard evidence of agreements between Arlington and Harper pertaining to other Harper projects (Woodhills Bay Colony and Mohawk Point). Although this evidence was irrelevant to the contract claim in this case (which involved only the Zurich Town Mall project), Lester was permitted to introduce this evidence to support the tort claim, that is, to show Arlington’s alleged continuing bad faith in dealing with Harper. Moreover, the state judge improperly allowed Harper individually to press a $20 million fraud claim against Arlington, a claim which belonged only to the bankruptcy estate. See Henderson v. Binkley Coal Co., 74 F.2d 567, 569 (7th Cir.1935). Given these errors in the first trial, we agree with the district court that a new trial was properly ordered.
C. The RTC’s motion for JNOV
The RTC argues that the federal district court erred in refusing to grant its motion for JNOV after the second trial. It argues that the evidence is undisputed that Harper failed to meet conditions precedent to Arlington’s obligation to fund the loan. The commitment letter contained the following provision:
Sufficient funds must be on deposit and a completion bond must be posted to ensure compliance with the Planned Unit Development requirements, ordinances and all other agreements approved by the Village of Lake Zurich, Illinois.
The district court denied the motion for JNOV, reasoning as follows:
[T]he contract does not set a specific date by which Harper was to make the deposits or provide the bond. On the evidence presented to it, the jury could have found that a point in time was never reached at which Harper would have been obliged to post the bond or make the required deposits. It is a close question, but absent Arlington Heights finding other participants or agreeing to otherwise fund the loan, it was arguable that Harper would not have been obligated to satisfy the bond and fund deposit conditions.
This court reviews denials of JNOV motions de novo. Ross v. Black & Decker, Inc., 977 F.2d 1178, 1182 (7th Cir.1992). In reviewing a ruling on a motion for JNOV, this court must consider all the evidence together with all reasonable inferences in the light most favorable to the non-moving party. Ramsey v. American Air Filter Co., 772 F.2d 1303, 1307 (7th Cir.1985).
We conclude that the district court erred in refusing to grant the RTC’s motion for JNOV. The condition at issue required Harper to place sufficient funds on deposit and to post a completion bond. Neither of these requirements was ever met. The evidence is clear that a completion bond for the required infrastructure was never posted; moreover, Harper did not place the necessary funds on deposit nor did he have the funds to do so. The district court so found, and in his brief to this court, plaintiff does not argue that these requirements were in fact met.
The commitment letter as well as the evidence in the record demonstrate that the bond and fund deposit requirements were clearly conditions precedent. Arlington was prohibited from making infrastructure loans. Thus, in order to make certain that the funds it disbursed to Harper were not used for that proscribed purpose, Arlington required sufficient funds to be on deposit and a completion bond to be posted in order “to ensure compliance with the Planned United Development requirements, ordinances and all other agreements approved by the Village of Lake Zurich, Illinois.” If Harper were allowed to fulfill these requirements after Arlington had funded the loan, there would be no guarantee that the money was not being used to complete the infrastructure.
In denying the motion, however, the district court reasoned that the jury could have found that “a point in time was never reached at which Harper would have been obliged to post the bond or make the required deposits.” Thus, the district court determined that Harper’s failure to meet the conditions was essentially excused. We think this analysis is erroneous. If a point in time was never reached at which Harper was required to meet these conditions precedent, then the point in time was never reached at which Aldington was obligated to fund the loan. Harper’s failure to perform the bond and fund deposit conditions left the commitment letter “neither enforceable nor effective.” Jones v. Seiwert, 164 Ill.App.3d 954, 115 Ill.Dec. 869, 872, 518 N.E.2d 394, 397 (1987). As the Illinois Court of Appeals succinctly stated: “A condition precedent is one which must be performed before ... the other party is obligated to perform. If the condition remains unsatisfied, the obligations of the parties are at an end.” McKee v. First Nat’l Bank of Brighton, 220 Ill.App.3d 976, 163 Ill.Dec. 389, 394, 581 N.E.2d 340, 345 (1991) (citation omitted).
Under the facts of this case, the bond and fund deposit conditions were clearly intended to be performed prior to Arlington’s obligation to fund the loan. The fact that Harper did not perform these conditions meant that Arlington’s duty to make the loan never matured. Thus, there was no breach when the loan was not made.
In essence, we hold that the defendant did not breach any duty owed to the plaintiff. Thus, the verdict for zero damages, although in favor of the plaintiff, is under the circumstances, the equivalent of a judgment for the defendant. The defendant has not argued any collateral consequences that might flow from the form of the judgment and on that basis we believe that the judgment for zero dollars may be affirmed. Under these circumstances, the cross appeal of the defendant is mooted and therefore ordered dismissed.
The judgment is affirmed.
. The RTC's motion for JNOV was filed November 13, 1991. On December 1, 1991, Federal Rule of Civil Procedure 50(c) was amended to reflect that a judgment notwithstanding the verdict would be called a judgment as a matter of law.
. Pub.L. No. 101-73, 103 Stat. 183 (1989), codified in relevant part at 12 U.S.C. § 1811 et seq. and § 1441a et seq.
. Harper admitted that as of July 1, 1974, the main road leading into the project had not been widened, no traffic lights had been installed, and the retaining wall (bin wall) was not yet done.
. The record on this point is unclear. The jury returned its verdict on November 8, 1989. After the jury was polled, the judge stated in open court, "Judgment will be entered on all the verdicts.” He then issued an oral order staying execution of the judgment for 30 days. The next day, November 9, 1989, the court entered written orders evidencing the 30-day stay of execution (through December 8, 1989).
On November 16, plaintiff appeared before the state court ex parte and requested that Arlington be required to post a bond in connection with the stay of execution. The judge issued an order requiring Arlington to post a bond, but providing that the stay of execution was to remain in effect for another six days during which time Arlington could deposit the bond. The court executed five memoranda of judgment, which Lester then recorded in five counties, despite the stay of execution. (These were later vacated.)
On November 22, Arlington moved to vacate the November 16, 1989 order because it had been entered ex parte. The court vacated the earlier order and issued four written orders, again entering judgment on the verdicts from the trial. As with the earlier judgment, the judge again stayed execution of these judgments until December 8, 1989.
. At oral argument, we inquired about the propriety of removal under these circumstances. At the court’s direction, the parties filed supplemental briefs on jurisdiction.
. 12 U.S.C. § 1441a(Z)(3) provides in pertinent part:
The [RTC] may, without bond or security, remove any such action, suit, or proceeding from a State court to the United States District Court for the District of Columbia, or if the action, suit, or proceeding arises out of the actions of the [RTC] with respect to an institution for which a conservator or a receiver has been appointed, the United States district court for the district where the institution's principal business is located.
The RTC did not remove this case to the federal district court for the District of Columbia, but to the Northern District of Illinois, Eastern Division. Under Resolution Trust Corp. v. Lightfoot, 938 F.2d 65, 67 (7th Cir.1991), the RTC may remove a case to the district where the state court suit was pending. Thus, venue was proper if the federal district court had jurisdiction to accept the ease.
. Other provisions in FIRREA make clear that the RTC had the authority to remove this case to the federal district court after judgment had been entered. Under FIRREA, the RTC has "the same duties” with respect to Arlington that the FDIC has under specified provisions of the Federal Deposit Insurance Act. See 12 U.S.C. § 1441a(b)(4)(A). One of the specified provisions, 12 U.S.C. § 1821 (d)(13)(B), states as follows:
In the event of any appealable judgment, the [FDIC] as conservator or receiver shall—
(i) have all the rights and remedies available to the insured depository institution (before the appointment of such conservator or receiver) and the Corporation in its corporate capacity, including removal to Federal court and all appellate rights;
(emphasis added). Thus, the RTC has the right to remove an "appealable judgment," as it did in the case at bar. See In re Meyerland Co., 960 F.2d 512, 516 n. 7 (5th Cir.1992) (noting in dicta that "[12 U.S.C.] § 1821 makes it clear that the FDIC may remove a suit after judgment"); see also Federal Deposit Ins. Corp. v. Taylor, 727 F.Supp. 326, 328-31 (S.D.Tex.1989) (finding that removal after judgment was entered in state court, but while posttrial motions were pending, was proper under 12 U.S.C. § 1821; moreover, removal did not violate the Seventh Amendment).
. In its motion for JNOV, the RTC contended that a second condition precedent had also been unfulfilled. That condition provided as follows:
Loan Participation: Because of the high dollar amount of loan requested, it will be necessary to secure additional lending institutions as loan participants. The Association reserves the right to select such loan participants.
The district court concluded that the jury could reasonably have concluded that Arlington failed to make a reasonable, good faith effort to find additional participants for the loan. The RTG does not raise this argument on appeal and thus we need not discuss it.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
FAGG, Circuit Judge.
Richard J. Borchers and Jane E. Borch-ers appeal the tax court’s decision denying them an investment tax credit on computer equipment Richard leased to the Borchers-es’ wholly-owned corporation, Decision Systems, Inc., in 1982. See 26 U.S.C. § 46(e)(3)(B) (1982) (amended 1988). We affirm.
This is the second time we have had this case before us. Initially the tax court held the Borcherses were entitled to an investment tax credit, Borchers v. Commissioner, 55 T.C.M. (CCH) 1469 (1988), and the Commissioner appealed. We could not effectively review the decision because the tax court’s failure to offer an analysis “[made] it impossible for us to determine the correctness of [its] decision.” Borchers v. Commissioner, 889 F.2d 790, 791 (8th Cir.1989). Thus, we vacated the tax court’s decision and remanded the case for further proceedings. Id. On remand the tax court engaged in a reasoned analysis changing the result and disallowing the credit. Borchers v. Commissioner, 95 T.C. 82 (1990). The Borcherses now appeal.
The Borcherses argue that after we vacated and remanded the tax court’s first decision, the tax court could only explain, not change, the initial result. We disagree. Although our mandate controls all matters within its scope, a court on remand is free to revisit any issue we did not expressly or impliedly decide. Newball v. Offshore Logistics Int'l, 803 F.2d 821, 826 (5th Cir.1986); see also Bethea v. Levi Strauss & Co., 916 F.2d 453, 456 (8th Cir.1990). In our earlier decision, we did not decide whether the Borcherses were entitled to an investment tax credit or confine the tax court to explaining its first decision. Accordingly, the tax court was free to change the result on remand.
We now turn to the merits of the case. A noncorporate lessor of property seeking an investment tax credit under 26 U.S.C. § 46(e)(3)(B) must show the property is leased for less than 50% of its useful life. Here, the leases’ terms are twelve months, and the computer equipment’s useful life is six years. Thus, the leases’ written terms are less than 50% of the equipment’s useful life. In determining the duration of the leases, however, the tax court used the “realistic contemplation” test. 95 T.C. at 88. Under this test, written lease terms are not dispositive. See Connor v. Commissioner, 847 F.2d 985, 988 (1st Cir.1988). Instead, all the facts and circumstances surrounding the lease are examined, see 95 T.C. at 89, to ascertain the realistic contemplation of the leasing parties when the property is first put into service, Owen v. Commissioner, 881 F.2d 832, 834 (9th Cir.1989), cert. denied, — U.S. -, 110 S.Ct. 1113, 107 L.Ed.2d 1020 (1990); Connor, 847 F.2d at 989; see also McEachron v. Commissioner, 873 F.2d 176, 177 (8th Cir.1988) (adopting realistic contemplation test when challenged lease contains no definite term). Because the Borcherses do not challenge the use of this test, we need not consider the test used in McNamara v. Commissioner, 827 F.2d 168, 172 (7th Cir.1987) (when lease not tax motivated, written term controls unless Commissioner shows lease is a sham).
The Borcherses had the burden to prove they realistically contemplated the leases would cover less than half of the equipment’s useful life. Connor, 847 F.2d at 989. The tax court determined the Borcherses failed to satisfy this burden of persuasion. 95 T.C. at 94. We review the tax court’s determination for clear error. Connor, 847 F.2d at 989.
Reviewing the stipulated record, we find no clear error. Although the Borcherses showed the leases’ written terms were less than 50% of the equipment’s useful life, the record reflects the Borcherses controlled Decision Systems, Richard leased only to Decision Systems in 1982, and in 1983, Richard again leased to Decision Systems all the equipment purchased and leased to the corporation in 1982. See 95 T.C. at 84-87, 90. The record also shows Richard leased other computer equipment to Decision Systems in 1981, renewed all these leases in 1982, and renewed some of the leases again in 1983. See id. at 85-86, 90. We believe the tax court’s analysis of the relevant factors and circumstances, id. at 89, 94, supports its conclusion that the Borcherses failed to prove the parties realistically contemplated the terms of the leases would be less than half of the equipment’s useful life, id. at 94.
Accordingly, we affirm the tax court’s decision.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
Opinion for the Court filed by Circuit Judge D.H. GINSBURG.
D.H. GINSBURG, Circuit Judge:
After being fired by AT & T, Quince Fleming sued the company for breach of an alleged employment contract and for slander. The district court (Richey, J.), applying District of Columbia law, granted AT & T’s motion to dismiss the contract count for failure to state a claim. The court denied AT & T’s motion for summary judgment on the slander count, but after Fleming had presented his case-in-chief, directed a verdict for AT & T on that count. We affirm.
I. Facts
Fleming began his employment with AT & T as a rank and file employee at the company’s local telephone operating subsidiary in 1979. In 1984, he accepted a management position at AT & T Information Systems, where he was responsible for the accounts of the D.C. government. He entered into negotiations that culminated in a contract under which the District would purchase telephone equipment that it had been leasing. Almost immediately after entering into the contract, however, the parties were at odds over its terms. On January 9, 1987, after negotiations to resolve the parties’ disputes had apparently foundered, Fleming’s superiors held a meeting to discuss the District contract. During that meeting, they decided to fire Fleming. This they did on January 12, and shortly thereafter Fleming brought this suit.
First, he claimed that, at the January 9 meeting, one of his superiors (Kenneth Bour) had slandered him by accusing him of attempting to defraud AT & T of $3 million in connection with the D.C. purchase contract. Fleming states, and AT & T does not dispute, that he neither attempted nor committed any fraud. Second, Fleming claimed for breach of contract, contending in substance that, although he had no integrated written employment contract with AT & T, statements made by AT & T officials in company publications and orally gave rise to an employment contract terminable only for cause, and that his firing violated this contract.
AT & T moved, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the complaint for failure to state a claim. Before the court could rule on the motion, Fleming filed an amended complaint, in which he incorporated the allegations of the original complaint and added certain new allegations. With respect to the slander count, Fleming added that Bour’s statement was later republished “to at least [six] other persons who were not present at the meeting at which the slanderous statement was made;” with respect to the contract count, he added that AT & T’s Employment and Benefits Manuals “provide[d] certain meaning, terms, and intent” to the alleged employment contract.
In ruling on AT & T’s motion to dismiss the contract count, the court noted that under District of Columbia law an employment contract is presumed to be at-will, Minihan v. American Pharmaceutical Ass’n, 812 F.2d 726, 728 (1987), and found that Fleming had “failed to allege the terms and conditions of his employment relationship with sufficient particularity to support his contention that an exception to the general rule regarding at-will employment contracts applies to his situation.” The court therefore treated the motion to dismiss the contract count as a Rule 12(e) motion for a more definite statement, which it granted, ordering Fleming to amend his complaint once again. Fleming then filed a second amended complaint, in which he identified particular documents and conversations upon which he relied to rebut the presumption of at-will employment. AT & T subsequently renewed its motion to dismiss the contract count, and this time the court granted the motion.
With respect to the slander claim, AT & T filed a motion for summary judgment, which the court denied. Accordingly, the case was set for trial on that claim, but before trial, AT & T made a motion in limine to prohibit Fleming from presenting any evidence of his firing, because of the danger of jury prejudice and confusion. The court granted the motion, but indicated that if Fleming produced evidence that would permit the jury to conclude that he was fired because of the alleged slander, then he could adduce testimony regarding his firing, which would be relevant to the issue of damages.
At trial, Richard Regensburg testified that “Bour said something that opportunity existed for fraud and that [Fleming] could have or might have been involved with something like that,” and that Bour said “[t]hat Mr. Fleming possibly could have committed fraud.” In addition, Wesley Peace testified that he had overheard Re-gensburg tell Fleming on the telephone that Bour had said at the meeting that Fleming had defrauded the company. The court permitted Peace’s testimony into evidence, however, for the limited purpose of impeaching Regensburg with a prior inconsistent statement, and not as direct evidence. Fleming does not now contest the court's ruling on this point, and thus we do not consider Peace’s testimony as substantive evidence that Bour unequivocally accused Fleming of fraud.
At the close of plaintiff’s case, AT & T moved for a directed verdict, arguing that there was insufficient evidence from which the jury could conclude either that the alleged statements were capable of bearing a defamatory meaning or that they had been published. Although the court rejected the first ground, it granted the motion for want of evidence of publication. Accordingly, the court entered judgment for AT & T.
Fleming appeals the dismissal of the contract count, the grant of AT & T’s motion in limine, and the directed verdict on the slander count. AT & T cross-appeals the denial of its motion for summary judgment on the slander count.
II. Analysis
Our resolution of Fleming’s appeal moots AT & T’s cross-appeal, on which we therefore do not rule.
A. Breach of Contract
Fleming relies entirely upon the allegations in his second amended complaint to support his argument that we should reverse the district court’s dismissal of his breach of contract count. In that complaint, Fleming alleged that: (1) he had received “many” corporate documents stating that “longevity of employment with [AT & T] has been a continual goal of [the company]”; (2) AT & T’s Force Management Program was intended to “[e]nsure fair and consistent treatment of all employees” and to “[e]nsure a successful transition for managers who leave the business by providing professional career counseling and assistance”; (3) AT & T has published “continuous statements ... which corroborate a term of lifetime employment”; (4) various supervisors assured him “that his position was not in jeopardy”; (5) AT & T’s Personnel Guide defines “dismissal” as “company initiated termination of employment (performance, code of conduct violations, etc....)”; and (6) a superior, Theodore Deutsche, once assured him that “as long as I have a branch, you have a job.”
Fleming’s allegations are manifestly insufficient to rebut the at-will presumption. An employer’s literature stating generally that the company has policies of treating employees fairly and of providing post-termination counseling is irrelevant to whether a particular employee’s contract is at-will, and Fleming’s eonclusory allegation that various company publications “corroborate” the existence of the claimed contract, especially in light of the other evidence he seems to think supports him, adds nothing to his case. Similarly, statements by Fleming’s superiors that his position was not, at some undisclosed time, in jeopardy imply, if anything, that AT & T retained the power (even if it did not have at a particular moment the inclination) to fire Fleming at any time. Additionally, his reliance upon AT & T’s “definition” of dismissal is misplaced, since the “definition” on its face suggests that performance and code of conduct violations are merely illustrative of reasons for which an employee might be dismissed. Finally, Fleming claims that Deutsche’s alleged statement of assurance was made in 1986 (or thereafter), i.e., long after he began working for AT & T, and although he did allege in his first amended complaint that he relied upon “the terms, meaning and intent of the Contract of employment” in 1979 when he first decided to join AT & T, he never alleged that he relied upon Deutsche’s statement in continuing his employment. The statement, if it occurred, is therefore irrelevant to the terms of any employment contract that might have existed.
In addition to the specific allegations in his second amended complaint, Fleming also had in his original complaint general allegations of the existence of a lifetime contract of employment and of its breach. Although such allegations would have been sufficient on their own to satisfy the requirements of Rule 8(a), the purpose of which is merely to ensure that the defendant gets fair notice of the nature of the claim asserted, see, e.g., Wright & Miller, Federal Practice and Procedure: Civil § 1202, Fleming relies before this court not upon those general allegations, but upon the specific claims in his second amended complaint. Because Fleming eschews reliance on his general claims, and because he does not suggest that their particularization in the second amended complaint was anything less than exhaustive, we need not decide whether a complaint making sufficient general allegations may nonetheless be dismissed on the ground that the specific allegations in the complaint do not, by themselves, state a claim upon which relief can be granted.
B. Slander
“[I]n a libel case, it is the role of the court to determine whether the challenged statement is ‘capable of bearing a particular meaning’ and whether ‘that meaning is defamatory.’ ” Tavoulareas v. Piro, 817 F.2d 762, 779 (D.C.Cir.1987) (en banc) (quoting Restatement (Second) of Torts § 614(i) at 311 (1977)). If the court answers each question in the affirmative, then it is for the jury to determine whether, in fact, those who heard the statement understood it to have such defamatory meaning as the court determined it could have. Id.
Here, Fleming claims that (1) Bour’s alleged statement is capable of bearing the meaning that Fleming defrauded or attempted to defraud AT & T, and (2) that meaning is defamatory per se as, among other things, a statement that he committed a crime. The second step in Fleming’s argument is unobjectionable; the false imputation of criminal conduct is inherently defamatory. See, e.g., Washington Annapolis Hotel Co. v. Riddle, 171 F.2d 732, 736 (D.C.Cir.1948). The first step, however, is problematic.
Even viewing the evidence in the light most favorable to the plaintiff, Bour’s statement is simply not susceptible to interpretation as an accusation that Fleming committed fraud. Keeping in mind that the district court did not admit Peace’s account of his conversation with Regensburg as substantive evidence of the alleged slander (see page 4), we note that the strongest evidence for Fleming’s version of the facts regarding the meeting at which Bour allegedly slandered him is Regensburg’s testimony: “Bour said something that opportunity existed for fraud and that [Fleming] could have or might have been involved with something like that”; and Bour said “[t]hat Mr. Fleming possibly could have committed fraud.” On cross-examination, moreover, Regensburg answered “No” when asked specifically whether Bour or anybody else ever accused Fleming of fraud.
The D.C. Court of Appeals has established a high standard for judging a statement slanderous: “an allegedly defamatory remark must be more than unpleasant or offensive; the language must make the plaintiff appear ‘odious, infamous, or ridiculous.’ ” Howard University v. Best, 484 A.2d 958, 989 (D.C.1984) (quoting Johnson v. Johnson Publishing Co., 271 A.2d 696, 697 (D.C.1970)). The plaintiff has the burden of proving the defamatory nature of the publication. Id.
On this record, and under the law of this jurisdiction, it is clear that no reasonable jury could find that Bour accused Fleming of fraud. True, he said that there was an opportunity for someone to have committed a fraud, and even that Fleming might have taken advantage of that opportunity; but, also true, he stopped short of making any allegation against Fleming. Fleming’s whole case thus comes down to whether a statement that he might have been involved in a fraud — without any claim that the statement was uttered in such a way, or in such a context, that it could reasonably have been interpreted as a subtle accusation that Fleming had in fact done so — is capable of bearing a defamatory meaning. Under the relatively strict standard enunciated in Best, Fleming did not carry his burden of proving that Bour’s statement is capable of bearing a defamatory meaning.
III. Conclusion
For the foregoing reasons, the district court’s grant of the motion to dismiss the breach of contract count and its direction of a verdict for AT & T on the slander count are affirmed.
Because the directed verdict was proper, we need not consider AT & T’s cross-appeal from the order denying its motion for summary judgment on the slander count. For the same reason, we need not review the grant of the motion in limine; all that did was to deny Fleming the opportunity to get before the jury evidence on damages which, without a prima facie case on liability, are irrelevant.
Judgment accordingly.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
McLELLAN, District Judge.
Bacardi Corporation of America, a Pennsylvania corporation, filed a bill of complaint in the District Court of the United States for Puerto Rico, seeking to enjoin the defendant, Treasurer of Puerto Rico, and others from enforcing certain Acts of the Legislature of Puerto Rico. The alleged grounds for relief are in substance that these Acts contravene the Constitution of the United States, the Organic Act of Puerto Rico and a Treaty between the United States, Cuba and other countries. The District Court, having made certain findings of fact, concluded that the legislation attacked in the bill of complaint was not a valid exercise of the police power and was repugnant to the Commerce Clause of the Constitution of the United States. The District Court also concluded that the legislation was invalid because it violates the due process clause of the Constitution of the United States and of the Organic Act of Puerto Rico and because it deprives the plaintiff, appellee, of the equal protection of the Laws for which the Organic Act provides. The final decree from which these appeals were taken by the Treasurer of Puerto Rico, defendant, and by Destil-ería Serralles, Inc., intervenor, reads so far as need be stated as follows:
“It is ordered, adjudged and decreed: That the defendant Rafael Sancho Bonet, Treasurer of Puerto Rico, his successors, his agents and all those acting under his authority, and the Destilería Serralles, Inc., the Puerto Rico Distilling Company, their successors, officers and agents, and any and all persons holding permits from the Treasurer of Puerto Rico under the alcoholic' beverages laws of Puerto Rico, be and are hereby forever and perpetually enjoined and restrained from in any way enforcing or attempting to enforce against the plaintiff Bacardi Corporation of America the provisions of Sections 40 and 44 of Act No. 6 approved June 30, 1936, as amended by Act No. 149 approved May 15, 1937, and the provisions of Section 7 of said Act 149, insofar as said provisions prohibit complainant from marketing its products in Puerto Rico or shipping its products out of Puerto Rico with the Bacardi trade marks and labels attached thereto as now or hereafter authorized by the Federal Alcohol Administration, and from using its corporate name on its products; and also, from in any way enforcing or attempting to enforce against said plaintiff the provisions of Section 44(b) of said Act No. 6 as amended by said Act No. 149, insofar as said provisions prohibit the plaintiff from shipping its products to the United States or elsewhere in bulk; * * *”
In order that the history and declared purpose of the legislation thus stricken may appear, we set forth in the margin the pertinent portions of Act No. 115, approved May 15, 1936 and of Act No. 6, approved June 30, 1936, effective July 1, 1936, which repealed Act No. 115 and was of an experimental character and was by its terms to expire September 30, 1937. Following these Acts there appear in the margin the relevant provisions of Act No. 149 of 1937, including Section 1, Section 2, amending Section 40 of Act No. 6 of 1936, Section 3, amending Section 44 of the same Act, Section 4, adding Section 44(b) thereto, and Section 7 thereof, to which the decree of the District Court refers.
These sections of Act No. 149 prohibit the manufacture (by holders of the requisite permit) of alcoholic beverages on which there appears whether on the container or elsewhere “any trade mark, brand, trade name, commercial name, corporation name or any other designation if said trade mark, brand, trade name, commercial name, corporation name or other designation, design or drawing has been used previously * * anywhere outside the Island of Puerto Rico.” This limitation is made inapplicable to designations by a manufacturer, bottler or canner of distilled spirits manufactured in Puerto Rico on or before February 1, 1936. By Section 7, this limitation or proviso is made applicable in regard to trade marks only to such “as shall have been used exclusively in the Continental United States * * * prior to February 1st, 1936, provided such trade marks shall not have been used, in whole or in part * * * outside of the Continental United States, at any time prior to said date.” , - i 11 > : r i . ) s - > - i i r
Act No. 149, Section 4, also provides that with exceptions not here relevant distilled spirits may be shipped or exported from Puerto Rico or imported into Puerto Rico “only in containers holding not more than one gallon”. , ¡ , i
Bacardi Corporation of America aimed several blows at this legislation, and some of them took effect. We refrain, for the time being, from comment upon the . l • : apparent object and the avowed purpose of the Puerto Rican Legislature, because we want first to consider a question which needs for its determination nothing of this sort. The District Court was impressed with the suggestion that the commerce clause of the Constitution of the United States invalidates the statutory provisions as to the use of trade marks and as to the maximum size of the containers required for shipment. The commerce clause (U.S. C.A. Constitution, Article 1, Section 8, Clause 3) grants the Congress power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” By necessary implication, it prevents a state from regulating such commerce. But Puerto Rico is not a state. It is an organized Territory of the United States though not yet “incorporated” into the Union, Puerto Rico v. Shell Co., 302 U.S. 253, 58 S.Ct. 167, 82 L.Ed. 235 and the indubitable right of the Congress to regulate the commerce of Puerto Rico is founded on the Constitutional power “to dispose of and make all needful Rules and Regulations 'respecting tihe Territbry or other Property belonging to the United States.” (Constitution, Article IV, Section
3, Clause 2). The power is in no direct sense dependent upon the Commerce clause which as this court has said “does not extend to Puerto Rico”. Lugo v. Suazo, 1 Cir., 59 F.2d 386, 390. Cf. Inter-Island Steam Navigation Co. v. Hawaii, 9 Cir., 96 F.2d 412.
The decree of the District Court declaring such legislation unconstitutional can not be affirmed upon the ground that the Puerto Rican statutes violate the commerce clause of the Constitution of the United States.
The next question is whether the Puerto Rican statutes constitute a valid exercise of_ the police power of the Insular Legislature in view of the due process clause of the Constitution of the United States and of the Organic Act for Puerto Rico. And in discussing the Insular police power we shall consider whether it is relevantly narrowed either by the Federal Alcoholic Administration Act or by the Convention between the United States and Cuba.
The police power of the Puerto Rican Legislature depends upon the Organic Act for Puerto Rico passed by the Congress of the United States in 1917. This Act organizes the Territory and erects “the typical American governmental structure, consisting of three independent - departments — legislative, executive and judicial.” Puerto Rico v. Shell Co., supra [302 U.S.253, 58 S.Ct. 171, 82 L.Ed. 235]. To the Insular Legislature, the Organic Act extends legislative authority as “to all matters of a legislative character not locallyi inapplicable, including power to create, consolidate, and reorganize the municipalities so far as may be necessary, and to provide and repeal laws and ordinances therefor; also the power to alter, amend, modify, or repeal * * * all laws and ordinances of every character in force in Porto Rico or municipality or district thereof on March 2, 1917, in so far as * * * alteration, amendment, modification, or repeal may be consistent with the provisions of this chapter.” U.S.Code, Title 48, Section 821, 48 U.S.C.A. § 821.
Clearly enough, the Organic Act of Puer-to Rico authorizes legislation for the control of the manufacture and traffic in rum and other ardent spirits unless such legislation trespasses upon a field forbidden by the Constitution or by the Congress.
The appellee urges that the territorial legislation is invalid because it conflicts with the Federal Alcohol Administration Act, 27 U.S.C.A. §§ 201-211, and as examples of such asserted conflict, says:
“(a) American Bacardi has been authorized under the Federal Law to use on its product to be shipped from Puerto Rico certain labels which have been presented in evidence. Under the local statute the plaintiff is prohibited from using them (Section 44 of Law No. 6) ;
“(b) The Federal statute authorizes shipment in bulk in containers of more than one gallon, while the local statute (Section 44(b) prohibits such shipments.”
As to labels, the Federal Alcohol Administration Act, aiming at unfair competition and other unlawful practices, forbids the introduction into interstate or foreign commerce of liquor unless labelled in accordance with regulations established by the Administration in such a way as to prevent deception of the consumer and the like. Such being the purpose of the Act, its effect was not to deprive the Legislature of Puerto Rico of the right to enact the territorial statute restricting the use of labels.
Nor does it seem to us correct to say, as does the appellee, that “the Federal statute authorizes shipment in bulk in containers of more than one gallon”. What the statute does is to forbid the disposition of liquor in bulk except in pursuance of regulations of the Federal Alcohol Administration. We cannot read into this statute an intent upon the part of the Congress to bar the territorial statutes governing shipments in bulk.
Consistent with the view that the Federal Alcohol Administration Act was not intended to deprive territories of the right, in the exercise of their police powers, to limit the use of labels, or to limit the size of containers to be used under certain circumstances, is the form of permit received by the appellee, which is expressly “conditioned upon compliance with the laws of all states” in which the applicant engages in business. We are concerned here not with Congressional power but with the question whether Congress has so exercised that power as to close the door to the territorial legislation here considered. In McDermott v. Wisconsin, 228 U.S. 115, 33 S.Ct. 431, 57 L.Ed. 754, 47 L.R.A.,N.S., 984, Ann.Cas.l915A, 39, on which the appellee relies, the right of a state to impose burdens upon or discriminate against Interstate Commerce was at stake and we think that case not at all controlling upon the present aspect of the case at bar. The District Court was right in not including among the conclusions of law requested by the appellee the ruling “that Sections 40, 44 and 44(b) of Act No. 6 of June 30, 1936 as amended by Act No. 149 of May 15, 1937 are invalid as contrary to the Federal Alcoholic Administration Act.”
The appellee which had acquired by contract the right to use the trade marks of the Cuban Bacardi Corporation urges that the District Judge erred in the refusal to rule in substance that the legislation here in question “prohibiting the use of certain trade marks conflicts with the * * * trade mark convention of February 20, 1929, between the United States and Cuba and is, therefor, invalid.” 46 Stat. 2907. As to this contention the District Judge said:
“It is unnecessary to express any opinion as to the allegations in the complaint to the effect that the challenged legislation violates the Treaty between the United States and Cuba. If it were necessary I would be disposed to hold against the contention of the plaintiff. The Treaty gives no preferential advantage to a citizen of Cuba. Any right or privilege which the Treaty creates would be subject to a proper exercise of the police power.”
A summarization of the Convention would prolong this opinion unduly and is needless. Its purpose was to prevent piracy of trade marks, a matter which is not here involved. It was not intended to have and does not have the effect of invalidating local laws and regulations of the type here in question. We think the District Court’s refusal to rule that the legislation was invalid by virtue of the Convention between the United States and Cuba was right.
We come now to the question whether the provisions of the Puerto Rican legislation forbidding in substance, and subject to limitations heretofore stated and hereafter referred to, the making of rum, on the container of which or elsewhere, there appears a trade mark or corporation name previously used outside of Puerto Rico and forbidding the shipping of rum in containers holding more than a gallon, violate the due process clause appearing both in the Constitution of the United States and the Organic Act of Puerto Rico.
The due process clause of the Fifth Amendment to the Constitution, U.S.C.A. is so identical with Section 2 of the Organic Act, 48 U.S.C.A. § 737, providing against the enactment of any law depriving any person of life, liberty or property without due process of law as to preclude any detailed discussion of what parts of the Federal Constitution extend to Puerto Rico.
The District Court ruled that “the provisions of Act No. 6 of June 30, 1936, as amended by Act No. 149 approved May 15, 1937, prohibiting the use of certain trade marks and corporate names, * * * violate the due process clause of the Constitution of the United States and the Organic Act of Puerto Rico and are invalid.” A like ruling was made with reference to Section 44(b) of Act No. 6 as added by Act No. 149 of 1937 “insofar as it prohibits the exportation of rum legally manufactured in Puerto Rico in containers of more than a gallon.” In his opinion, the District Judge having called attention to the intent and policy of the statutes as expressed by the Legislature and the restrictive use of trade marks and corporate names for which the statutes provide, expressed the view that “it is difficult to see how the ‘evil’ mentioned in the preamble was corrected by the attempted ‘remedy’ Later, the court said:
“If the Legislature of Puerto Rico desires to eliminate all competition by foreign capital as a means of protecting the liquor industry, and so as to avoid the increase and growth of financial absenteeism, there is a very simple and direct way to accomplish this, purpose. I know of no reason why the Legislature of Puerto Rico may not, as Pennsylvania has done, deny to any foreign corporation or non-resident the right to manufacture or sell rum within Puerto Rico. It may limit the number of licenses which may be granted even to residents and citizens of Puerto Rico. I do not mean to say that such a policy would be wise or desirable. That is a legislative question. But, if the evil which the legislation here under consideration condemns is to be eliminated, some method other than that provided must be adopted.”
In saying that Puerto Rico could constitutionally “deny any foreign corporation or non-resident the right to manufacture or sell rum within Puerto Rico”, the District Court was right. La Tourette v. McMaster, 248 U.S. 465, 39 S.Ct. 160, 63 L.Ed. 362, supporting the constitutionality of the legislative exclusion of non-resident insurance agents, and Premier-Pabst Sales Co. v. Grosscup, 298 U.S. 226, 56 S.Ct. 754, 80 L.Ed. 1155, where the constitutionality of an act forbidding the sale of beer within Pennsylvania unless duly licensed, and forbidding the issue of a license to a corporation unless all of its officers and directors aind 51% of ,its stockholders wer.e and for two years had been residents of the state, was conceded.
But we think that having the absolute power to prohibit foreign corporations from manufacturing or selling intoxicants the Puerto Rican Legislature had the right to prescribe the conditions under which such business might be conducted. The greater power includes the less. Ziffrin v. Reeves, 60 S.Ct. 163, 84 L.Ed.-, decided November 13, 1939 by the Supreme Court of the United States; Seaboard Air Line Railway v. North Carolina, 245 U.S. 298, 304, 38 S.Ct. 96, 62 L.Ed. 299. To say the least, the legislative power to prohibit involves a wide discretion as to the conditions which may be imposed in lieu of total prohibition.
The legislative purpose to protect the renascent liquor industry of Puerto Rico from all competition by foreign capital, so as to avoid the increase and growth of financial absenteeism and to favor this domestic industry and to protect it against any unfair competition, was legitimate. And we may not strike down any legislation designed to effectuate such purpose just because it may be thought unlikely completely to accomplish the desired result. Whether the statutes prohibiting the use of certain trade marks and corporate names and whether the legislation forbidding shipments in bulk (presumably passed in part to prevent an evasion of the trade mark prohibition) will accomplish the desired result is not the question for our determination. The Legislature of Puerto Rico possessing “substantially all the local legislation powers of a state legislature, in all respects here involved” including the local police powers particularly applicable to the liquor business, has manifested its faith in the efficacy of its policy through three successive sessions, the session of 1936, the special session of 1936 and the regular session of 1937, and it is not for us to say whether its faith is well founded. .Even if we knew enough about the matter to form a judgment as to the wisdom of these statutes we should be exceeding our function were we to attempt to substitute our judgment for that of the Legislature. As said by the Supreme Court, in Nebbia v. New York, 291 U.S. 502, 537, 54 S.Ct. 505, 516, 78 L.Ed. 940, 89 A.L.R. 1469 “with the wisdom of the policy adopted, with the adequacy or practicability of the law enacted to forward it, the courts are both incompetent and unauthorized to deal. * * Times without number we have said that the Legislature is primarily the judge of the necessity of such an enactment, that every possible presumption is in favor of its validity, and that though the court may hold views inconsistent with the wisdom of the law, it may not be annulled unless palpably in excess of legislative power.”
Bearing in mind that doubt is not enough, that unconstitutionality must clearly appear in order to warrant us in holding legislation void, and being unable to say that the statutes here questioned so lack any reasonable basis as to be arbitrary or capricious, we think they should not be invalidated as repugnant to the due process clause of the Constitution of the United States or the Organic Act for Puerto Rico. St. Joseph Stock Yards Company v. United States, 298 U.S. 38, 51, 56 S.Ct. 720, 80 L. Ed. 1033; Standard Oil Co. v. Marysville, 279 U.S. 582, 49 S.Ct. 430,73 L.Ed. 856; West Coast Hotel Co. v. Parrish, 300 U.S. 379, 391, 57 S.Ct. 578, 81 L.Ed. 703, 108 A.L.R. 1330.
The District Court ruled that “the provisions of Act No. 6 of June 30, 1936 as amended by Act No. 149 approved May 15, 1937, which restrict the use of certain trade marks and corporate names, discriminate arbitrarily against the plaintiff; violate the equal protection clause of the Constitution of the United States and the Organic Act of Puerto Rico and are invalid.”
It would seem that the equal protection clause appearing in the 14th Amendment of the Constitution of the United States, U.S.C.A., limits the powers of the states and is inapplicable to Puerto Rico. But this is of no importance here because the Organic Act for Puerto Rico expressly provides that “no law shall be enacted in Porto Rico which shall * * * deny to any person therein the equal protection of the laws.” The statutory provision forbidding the shipping of rum in bulk, which applies to all shippers, need not be considered in this connection. The above ruling relates only to the provisions prohibiting the use of certain trade marks and corporate names. As to this aspect of the case, the District Court said, “whether so intended or not the Act has the appearance of being so framed as to exclude only the plaintiff. It is difficult to conceive of a more glaring discrimination.” We think the court’s ruling that the statutes are invalid as constituting a denial of the equal protection of the laws may not stand. It is true that when this case was heard by the District Judge, the appellee was the only manufacturer affected by the particular statutory provisions here considered. But they applied to all who might later engage in the business. The clause in the Act permitting continuance of the use of labels or brands already established in Puerto Rico prior to February 1, 1936, does not unduly discriminate against foreign corporations which had not entered the field before that time. We can not say without doubt upon the subject, that such a statute is unusual or capricious or unjustly discriminatory. In New York Rapid Transit Corp. v. New York, 303 U.S. 573, 578, 58 S.Ct. 721, 724, 82 L.Ed. 1024, it is said: “Although the wide discretion as to classification retained by a Legislature often results in narrow distinctions, these distinctions, if reasonably related to the object of the legislation, are sufficient to justify the classification. * * * Indeed, it has long been the law under the Fourteenth Amendment that ‘a distinction in legislation is not arbitrary, if any state of facts reasonably can be conceived that would sustain it.’ ” See also Borden’s Farm Products Co. v. Ten Eyck, 297 U.S. 251, 56 S.Ct. 453, 80 L.Ed. 669; United States v. Rock Royal Co-op. Inc., 307 U.S. 533, 59 S.Ct. 993, 83 L.Ed. 1446. Upon the principles heretofore stated and which must govern us in determining the constitutionality of an act of a legislature possessed of ample police powers, we cannot declare any of the statutory provisions here questioned repugnant to the equal protection clause of the Organic Act of Puerto Rico or if applicable the same clause appearing in the 14th Amendment to the Constitution of the United [States.
We have refrained from stating many of the facts found by the District Court as to the quality of the appellee’s product, the amounts expended on its plant and equipment, whether before or after receiving the requisite permit for manufacturing liquor, or whether before or after notice of the legislation here questioned, because none of these considerations changes the result. The validity of these statutes can not be made to depend upon the appellee’s expectation that in the exercise of its police powers a law making body may not change its policies or its laws. Mahoney v. Joseph Triner Corp., 304 U.S. 401, 58 S.Ct. 952, 82 L.Ed. 1424.
Nor have we deemed it necessary to state the facts pertinent thereto or to decide whether as urged on behalf of the appellants the plaintiff appellee is estopped to question the validity of the challenged statutes. We think the provisions of the Acts here assailed are valid.
The decree of the District Court is reversed, with costs on appeal to each appellant, and the case is remanded to that court with directions to dissolve the injunction and to dismiss the bill of complaint.
Act No. 115. “Alcoholic Beverage Law of Puerto Rico”, approved May 15, 1936; Laws of 1936, regular session, pp. 610 et seq.
“Sec. 41. — * * *
“B. After the thirty (30) days following the taking elfect of this Act, no person shall engage in the business of manufacturing, distilling, rectifying or bottling distilled spirits in Puerto Rico, unless such person is provided with a permit by the Treasurer of Puerto Rico authorizing him to engage in said business. * * *
“C. The following persons shall be entitled to permits upon application:
“(1) Every person who on February 1, 1936, possesses (possessed) a license or permit issued by the Government of Puerto Rico to engage in the business of distilling, manufacturing, rectifying, and bottling distilled spirits, and who is (was) on that date engaged in said business.
“(2) Any other person who may fully comply with the following requisites:
“(a) To file with the Treasurer of Puerto Rico an application to engage in the business of manufacturing, distilling, rectifying or bottling distilled spirits, which application shall be made in the manner prescribed by the Treasurer of Puerto Rico and shall contain, among other particulars, the following specific information:
“(I) That such person, by reason of his business experience or because of his financial position or business relations, will possibly begin operations within a reasonable period of time and that he will operate his business in accordance with both the Federal and the insular laws.
“(II) That the demand for consumption in Puerto Rico and in the rest of the United States, for the class or classes of distilled spirits to be distilled, manufactured, rectified, or bottled, exceeds the production capacity of the holders of permits under this Act, priority to be given to such persons as may have received permits under clause C, paragraph 1, of this title, as well as to the production capacity of the holders of permits granted by the Federal Alcohol Administration to distill, rectify, bottle, and/or manufacture similar distilled spirits in continental United States.
“(Ill) That the applicant has no intention to violate clause (h) hereinbelow transcribed.
“(IV) That the applicant has no intention to violate clause (i) hereinbelow transcribed.
“(V) That such business will not adversely affect those already established for the manufacture, distilling, rectifying, and bottling of distilled spirits in Puerto Rico.”
Clauses (h) and (i) referred to under (III) and (IV) above, are as follows:
“(h) If any kind, type, or brand of distilled spirits of a foreign origin becomes nationally or internationally known by reason of its bearing or showing as its brand, trade name, or trade mark, the proper name of the manufacturer thereof, such name shall not, in any manner or form whatever, appear on the labels for any distilled spirit of said kind or type manufactured, distilled, rectified, or bottled in Puerto Rico.
“(i) The production capacity of the existing distilleries, manufacturing plants, and rectifying and bottling plants may be increased so as to meet the consumption demands for the brands now produced, or to meet the demand brought about by the manufacture of new brands not in conflict with clause, (g) of this title.”
Clause (g) of the same title, referred to in (i) of the title, reads as follows:
“(g) No holder of a permit under this title shall manufacture, distill, rectify, or bottle, either for himself or for others, any distilled spirit locally or nationally known under a brand, trade name, or trade mark previously used on similar products manufactured in a foreign country, or in any other place outside Puerto Rico; Provided, (1) That such limitation, aimed at protecting the industry already existing in Puerto Rico, shall not apply to any brand trade name, or trade mark used by a manufacturer, rectifier, distiller, or bottler of distilled spirits manufactured in Puerto Rico on February 1, 1936; and (2) such restrictions shall not apply to any new brand, trade name, or trade mark which may in the future be used in Puerto Rico.”
Act No. 6, “Spirits and Alcoholic Beverages Act”, approved June 30, 1936; Law of 1936, special session, pp. 44, et seq.
“To provide revenues for the People of Puerto Rico by levying internal-revenue taxes on alcoholic spirits and alcoholic beverages, and for the manufacture and sale thereof; to regulate the production, manufacture, importation, and sale of alcohol, spirits and alcoholic beverages, and to provide license fees therefor; to impose penalties for violations hereof; to provide funds for the administration and enforcement of the Act; to repeal Aet No. 115, approved May 15, 1936, and for other purposes.
“Section 40. — Every person who in Puerto Rico manufactures or places in any container alcoholic beverages taxable under this Act, shall place on each container a label indicating the follow? ing particulars: exact contents of the container; alcoholic content by volume; the place where it was distilled or manufactured, and the name of the bottler or canner. If said alcoholic beverage is rum, said person shall be obliged to have appear on the label the following phrase in English: ‘Puerto Rican Rum’, in letters the size of which the Treasurer shall by regulation prescribe, as well as the name of the person owning the distillery where said rum was distilled. On the label of every alcoholic beverage shall also appear the word ‘Distilled’, ‘Rectified’, or ‘Blended’, as the case may be, in accordance with such regulations as the Treasurer may prescribe for the purpose, (at p. 76.)
“Section 44. — No holder of a permit granted in accordance with the provisions of this Act shall distill, rectify, manufacture, bottle or can, any distilled spirit, under a trade mark or commercial name, because such trade mark or commercial name has been used on similar products manufactured in Puerto Rico or outside of the Island; Provided, That this limitation shall not apply to any trade mark or commercial name, used for products manufactured in Puerto Rico prior to the approval of this Act; and Provided, further, That distilled spirits, with the exception of ethylic alcohol, 180° proof or more, industrial alcohol, alcohol denatured according to authorized formulas, and denatured rum for industrial purposes, may be exported from Puerto Rico only in containers holding not more than one gallon, and each container shall bear the corresponding label containing the information prescribed by law and the regulations of the Treasurer.”
Act No. 149, approved May 15, 1937; Daws of 1937, regular session pp. 392-396.
“Be it enacted by the Legislature of Puerto Rico:
“Section 1. — Section 1 is hereby amended by adding Section 1 (b) to Act No. 6, approved June 30, 1936, entitled ‘An Act to provide revenues for The People of Puerto Rico by levying internal-revenue taxes on alcoholic spirits and alcoholic beverages, and for the manufacture and sale thereof; to regulate the production, manufacture, importation, and sale of alcohol, spirits and alcoholic beverages, and to provide license fees therefor; to impose penalties for violations hereof; to provide funds for the administration and enforcement of the Act; to repeal Act No. 115, approved May 15, 1936, and for- other purposes’, which section shaE be as foEows:
“ ‘Section 1. The short title of this Act shall be Spirits and Alcoholic Beverages Act.’
“ ‘Section 1 (b). — Declaration of Policy. It has been and is the intention and the policy of this Legislature to protect the renascent liquor industry of Puerto Rico from aE competition by foreign capital so as to avoid the increase and growth of financial absenteeism and to favor said domestic industry so that it may receive adequate protection against any unfair competition in the Puerto Rican market, the continental American market, and in any other possible purchasing market.’
“Section 2. — Section 40 of said Act No. 6, approved June 30, 1936, is hereby amended to read as foEows:
“ ‘Section 40. — Every person who in Puerto Rico manufactures or places in any container alcoholic beverages taxable under this Act, shall place on each container a label indicating the foEow-ing particulars: Exact contents of the container; alcoholic content by volume; the place where it was distiEed or manufactured, and the name of the bottler or canner. If said aleohoHc beverage is rum, said person shaE be obliged to have appear prominently on the label the following phrase in English Puerto Rican Rum, in letters not less than five-sixteenths (5/16) of an inch high and of lines of one-sixteenth (1/16) of an inch or more in width, said phrase to be not less than three (3) inches long. For containers of four-fifths (4/5) of a pint and less the phrase Puerto Rican Rum must appear on the label in letters not less than one-eighth (1/8) of an inch high, said phrase to be not less than one and one-half (1%) inches long. On the label of every alcoholic beverage shaE also appear the word distüled, rectified, or blended, as the case may be, in accordance with such regulations as the Treasurer may prescribe for the purpose; Provided, further, That the trade mark or name of the rum must appear prominently on the label in letters of a size at least three times the size of the letters in which the name of the manufacturers, distiHer, rectifier, bottler, or canner appears.’
“Section 3. — Section 44 of said Act No. 6, approved June 30, 1936, is hereby amended to read as foEows:
“ ‘Section 44. — No holder of a permit granted in accordance with the provisions of this or of any other Act shaE distiE, rectify, manufacture, bottle, or can any distiEed spirits, rectified spirits, or aleohoHc beverages on which there appears, whether on the container, label, stopper, or elsewhere, any trade mark, brand, trade name, commercial name, corporation name, or any other designation, if said trade mark, brand, trade name, commercial name, corporation name, or any other designation, design, or drawing has been used previously, in whole or in part, directly or indirectly, or in any other manner, anywhere outside of the Island of Puerto Rico; Provided, That this limitation shall not apply to the designations used by a distiller, rectifier, manufacturer, bottler, or canner of distilled spirits manufactured in Puerto Rico on or before February 1, 1936.’
“Section 4 — Section 44 (b) is added to said Act No. 6, approved June 30, 1936, which section reads as follows:
“ ‘Section 44 (b). — Distilled spirits, with the exception of ethylic alcohol, 180° proof or more, industrial alcohol, alcohol denatured according to authorized formulas, and denatured rum for industrial purposes may be shipped or exported from Puerto Rico to foreign countries, to the continental United States, or to any of its territories or possessions, or imported into Puerto Rico, only in containers holding not more than one gallon, and each container shall bear the corresponding label containing the information prescribed by law and by the regulations of the Treasurer; Provided, That where any rectifier presents to the Treasurer a sworn application stating that he wishes to withdraw from business and to liquidate his stock of rum, provided said stock does not exceed 30,000 gallons at the equivalence of 100° proof, the Treasurer is empowered to authorize the sale of such stock in barrels of 40 gallons or more, either for sale in Puerto Rico or for exportation to the United States or to any foreign country. The rectifier obtaining said authorization shall show that the liquidation will be carried out in good faith for the purpose of discontinuing his business as such, by furnishing the Treasurer with such details and reports as he may request in order to be satisfied that the liquidation is made in good faith, and in such case, neither the natural nor the artificial person securing such authorization from the Treasurer, nor any officer thereof, may obtain a new permit to rectify before the expiration of five years counting from the date on which the permit requested was granted, and the present permit shall be cancelled.’
“Section 7. — In regard to trade marks, the provisions of the Proviso of Section 44 of Act No. 6, approved June 30, 1936, and which is hereby amended, shall be applicable only to such trade marks as shall have been used exclusively in the continental United States by any distiller, rectifier, manufacturer, bottler, or canner of distilled spirits, prior to February 1, 1936, provided such trade marks have not been used, in whole or in part, by a distiller, rectifier, manufacturer, bottler, or canner of distilled spirits outside of the continental United States, at any time prior to said date.”
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
POOLE, Circuit Judge:
The State of Montana appeals a district court judgment which declared American Indians (Indians) residing on the federally recognized Crow Indian Reservation (Reservation) exempt from Montana’s personal income tax, enjoined collection, and ordered refunds of taxes paid. The court denied exemption status to those Indians whose incomes were earned on the Reservation but who resided elsewhere and they cross appeal. Montana argues that the Tax Injunction Act, 28 U.S.C. § 1341, denies federal jurisdiction over the Indians’ complaint. We agree and accordingly reverse.
I.
The Indians filed this suit in 1973 under 42 U.S.C. § 1983, claiming that the state could not constitutionally tax their income earned on the Reservation. Their complaint sought an injunction prohibiting collection of the state income tax, refund of taxes paid over the last five years, and contained class allegations. Federal subject matter jurisdiction was alleged pursuant to 28 U.S.C. § 1343(3). On June 6, 1976, the district court found that it had jurisdiction.
The court certified the case as a class action with six subclasses. Three of the subclasses included Indians all of whom reside off but earn income on the Reservation. These were grouped by ethnic and tribal characteristics: (1) enrolled Crow, (2) enrolled members of other federally recognized tribes and (3) Indians not enrolled in any tribe. The remaining three subclasses included Indians who reside and earn income on the Reservation and were similarly grouped by ethnic and tribal characteristics.
On cross motions for summary judgment, the district court held that the three subclasses of Indians residing and earning income on the Reservation were exempt from the state income tax while the remaining subclasses residing off the Reservation were subject to the tax. Injunctive, declaratory and refund relief was ordered.
Montana acquiesced in the grant of a tax exemption to Indians in the first subclass-enrolled Crow residing and earning income on the Reservation and has not appealed that portion of the district court’s judgment. The grant of tax exemption to the remaining Reservation resident subclasses and the denial of exemption to the nonresident subclasses is before us by virtue of timely notices of appeal and cross appeal by Montana and the Indians.
The Tax Injunction Act, 28 U.S.C. § 1341, denies federal court jurisdiction to entertain a suit seeking relief from state taxation so long as the state provides a “plain, speedy and efficient remedy” to an aggrieved taxpayer in state courts. As Montana provides such a remedy for challengers of the state income tax, we hold that § 1341 precluded the district court from entertaining this case.
II.
Analysis begins with examination of § 1341. That statute provides:
The district court shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under the State law where a plain, speedy and efficient remedy may be had in the courts of such State.
28 U.S.C. § 1341.
The scope of the jurisdictional bar of § 1341 is broader than its terms immediately indicate. It clearly bars injunctive relief. Decisions of this circuit apply it ■ to suits seeking federal declaratory relief from state taxation. Housing Authority of City of Seattle v. State of Washington, 629 F.2d 1307 (9th Cir. 1980); Mandel v. Hutchinson, 494 F.2d 364, 366 (9th Cir. 1974). In so holding, this court has recognized that any effort to obtain tax exemption or adjustment in federal court interferes with the fiscal operations of the state. Mandel, supra, 494 F.2d at 365-66 & n.1. Section 1341 embodies a strong federal policy of noninterference with state taxation and tax administration. Id. at 366. As a suit for a tax refund inevitably requires a court to interpret state taxing statutes and analyze the ambit of state taxing power, we held in Kelly v. Springett, 527 F.2d 1090 (9th Cir. 1975), that § 1341 jurisdictionally barred a 42 U.S.C. § 1983 suit in federal court which sought a refund of state taxes. Id. at 1093-94.
In this case, also a § 1983 action, the district court enjoined collection of the Montana income tax, declared Indians exempt from payment and ordered the State to make refunds. Our prior decisions, outlined above, indicate that each of these forms of relief implicate § 1341.
The Indians do not dispute the state of the law in this circuit as to injunctive and declaratory relief. Rather, they argue that to the extent our decision in Kelly held refund suits barred by § 1341, that holding must be reconsidered in light of Moe v. Confederated Salish & Kootenai Tribes, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976). They point to a single sentence in note 14 of the Supreme Court’s opinion, which concluded with these words: “Any further proceedings with respect to refund claims by or on behalf of individual Indians . . ., would not appear to implicate § 1341.” Id. at 475, n. 14, 96 S.Ct. at 1642. Upon careful examination, we are confident that the Court did not intend by this language to overrule the view of this and other circuits that § 1341 withdraws federal jurisdiction over suits for state tax refunds when adequate state remedies exist.
The Moe comment must be viewed in context. The Supreme Court had before it consolidated appeals from a Montana three-judge district court involving that state’s power to impose cigarette sales and various personal property taxes on reservation Indians. Joined as plaintiffs in each appeal were an Indian tribe and class representatives of individual tribal members. Only in the personal property tax case did the complaint include a prayer for refund of taxes paid. The district court found jurisdiction over both tribe and individual plaintiffs. Its only mention of § 1341 with respect to the individual plaintiffs was a sentence in each district court opinion to the effect that jurisdiction was not defeated by that section. See Confederated Salish & Kootenai Tribes v. Moe, 392 F.Supp. 1297, 1305 (D.Mont.1974) (per curiam), aff’d, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976); Confederated Salish & Kootenai Tribes v. State of Montana, 392 F.Supp. 1325, 1327 (D.Mont.1975) (per curiam), aff’d, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976) (the personal property tax case).
On appeal, the Supreme Court held that the tribe was not barred by § 1341 and therefore the district court had had jurisdiction. 425 U.S. at 474-75, 96 S.Ct. at 1641-1642. The Court then concluded “all of the substantive issues raised on appeal can be reached by deciding the claims of the Tribe alone ... . ” Id. at 475 n.14, 96 S.Ct. at 1642. Accordingly, the Court did not review the district court's finding of jurisdiction over the individuals as it was unnecessary to do so to resolve the substantive merits. Id. It is particularly noteworthy that the individual refund claims had not been adjudicated in the district court when the Supreme Court acted in Moe. None of the issues which might arise from those actions was before the Court. Indeed, the opinion reminded the district court that the remaining refund actions “must be properly grounded jurisdictionally.” 425 U.S. at 469 n.7, 96 S.Ct. at 1639 n.7.
The Supreme Court was not called upon to consider, and did not consider, the interaction of § 1341 and state tax refund suits initiated in federal court. The justification for jurisdiction over the tribe did not turn on the relief sought by the tribe. Accordingly, the import of the Court’s comment in note 14 ought not be unduly magnified. It was relegated to a footnote designed to reserve a question the Court expressly found it unnecessary to reach. To read one sentence of such dictum as a sweeping reappraisal by the Court of the law of § 1341 as interpreted in the lower federal courts is an invitation which we decline to accept. As that Court has admonished, “this Court does not decide important questions of law by cursory dicta inserted in unrelated cases. Whatever the dictum’s meaning, we do not regard it as decisive .. . . ” See, e. g., Permian Basin Area Rate Cases, 390 U.S. 747, 775, 88 S.Ct. 1344, 1364, 20 L.Ed.2d 312 (1968). Nor do we. We adhere to our holding in Kelly v. Springett, supra, 527 F.2d at 1090.
By enacting § 1341 in 1937, “Congress gave explicit sanction to the pre-existing federal equity practice” to refrain from adjudicating challenges to the legality or constitutionality of a State tax in federal court when a plain, adequate and complete remedy in a state forum was available. Moe, supra, 425 U.S. at 470, 96 S.Ct. at 1640. That practice had its roots in federalism, in the federal government’s “scrupulous regard for the rightful independence of state governments” [Matthews v. Rodgers, 284 U.S. 521, 525, 52 S.Ct. 217, 219, 76 L.Ed. 447 (1932)] “and in recognition of the imperative need of a State to administer its own fiscal operations.” Tully v. Griffin Inc., 429 U.S. 68, 73, 97 S.Ct. 219, 222, 50 L.Ed.2d 227 (1975). This equitable bar to jurisdiction was invoked in refund proceedings. See First National Bank v. Board of County Commissioners, 264 U.S. 450, 44 S.Ct. 385, 68 L.Ed. 784 (1929). The rule codified in § 1341 “is meant to be a broad jurisdictional impediment to federal court interference with the administration of state tax systems.” United Gas Pipe Line Co. v. Whitman, 595 F.2d 323, 326 (5th Cir. 1979).
The “broad jurisdictional impediment” of § 1341 must be applied to tax refund suits if the concerns of Congress are to be meaningfully effectuated. Were it otherwise, the artful pleader in much state tax litigation could evade § 1341 by praying only for a tax refund. It is unpersuasive to suggest that refund litigation in federal court is any less an “interference with a state’s internal economy” [Moe, supra, 425 U.S. at 470, 96 S.Ct. at 1640] than are injunctive or declaratory proceedings. A suit for a state tax refund would invariably require a federal court to interpret and apply state tax laws. Often, as in this case, these will be laws the state has not yet construed and a federal judge would be left in the always awkward position of deciding for the state what its tax laws are designed to accomplish. Such an interpretation of state law could promote confusion and uncertainty in an area of the state’s vital concern.
The practical effect on state fiscal operations of a federal court’s refund order differs little from the effect of the declaratory or injunctive relief a federal court is clearly forbidden by § 1341 to provide. If the sum to be refunded is large, the effect is obvious. Even if modest, the role of stare decisis in our judicial system means, at least, that the continued ability of the state to tax other taxpayers similarly situated will be drawn into serious doubt.
The balance Congress struck in § 1341 reflects great solicitude for the interests of the state in orderly administration and collection of revenue. Congress concluded that these interests were of such import that so long as state courts are available to hear challenges to state taxes, federal district courts would be unavailable for that purpose. We discern no significant distinction between the intrusiveness of federal injunctive and declaratory proceedings undoubtedly forbidden by § 1341 and that of a tax refund proceeding in federal court. Accordingly, as has every circuit court with whose rulings we are familiar, we continue to hold that § 1341 bars refund actions in federal court when adequate state remedies are available. See United Gas Pipe Line Co. v. Whitman, supra, 595 F.2d at 323; Kelly v. Springett, supra, 527 F.2d at 1090; Bland v. McHann, 463 F.2d 21 (5th Cir. 1972), cert. denied, 410 U.S. 966, 93 S.Ct. 1438, 35 L.Ed.2d 700 (1973); Gray v. Morgan, 371 F.2d 172, 175 (7th Cir. 1966); Evangelical Catholic Communion, Inc. v. Thomas, 373 F.Supp. 1342, 1344 (D.Vt.1973), aff’d mem, 493 F.2d 1397 (2d Cir. 1974); cf. Ludwin v. City of Cambridge, 592 F.2d 606, 610 n.1 (1st Cir. 1979) (federal courts should refrain generally from interpreting the correctness of state tax assessments).
III.
Section 1341 bars federal relief from state tax collection where the state provides a “plain, speedy and efficient” remedy. 28 U.S.C. § 1341. The district court’s opinion in this case came before the Montana Supreme Court had ruled that an injunction would properly issue to restrain the state from attempting to collect income taxes from reservation Indians over whom the state lacked taxing power. LaRoque v. State, Mont., 583 P.2d 1059 (1978). LaRoque further indicates that an Indian need not pay a disputed tax assessment as a condition for obtaining review in state court of the legality of the tax. Id. We therefore have the benefit of a recent, definitive state court ruling which was not available to the trial court.
The Montana review of taxation, as now declared and approved in LaRoque, is “plain, speedy and efficient” within the meaning of § 1341. See Tully v. Griffin, Inc., supra, 429 U.S. at 75, 97 S.Ct. at 223 (Supreme Court approved New York tax adjustment remedy of declaratory suit during pendency of which tax assessment of the state need not be accepted by taxpayer); Ludwin v. City of Cambridge, supra, 592 F.2d at 609 (similar Massachusetts remedy deemed adequate for § 1341 purposes); Garrett v. Bamford, 582 F.2d 810 (3rd Cir. 1978) (Pennsylvania equitable remedy, created after plaintiff filed suit, adequate for purposes of § 1341 and properly applied to plaintiff). Montana in fact affords substantially identical relief to that a litigant could hope to obtain in a federal district court. It would be anomalous indeed to declare a state tax adjustment remedy inadequate and on that basis permit a plaintiff to proceed in a federal court seeking identical relief. See Mandel v. Hutchinson, supra, 494 F.2d at 367 (state remedy need not be best available or even equal to that available in federal court to be adequate for purposes of § 1341).
Appellants argue that when they filed suit the injunctive remedy sanctioned in LaRoque had not been established as a reasonably certain remedy in Montana. At that time they say, Montana courts were acknowledged to have the power to enjoin state tax collection only when the state tax was clearly illegal; and since, before their suit, no Montana court had declared taxation of reservation Indians clearly illegal, the injunctive remedy was at that time uncertain and therefore inadequate for purposes of § 1341. Therefore, they contend that district court jurisdiction was properly invoked and should still be sustained.
The remedial certainty contemplated by § 1341 is that a state forum be empowered to consider claims that a tax is unlawful and to issue adequate relief. See Tully v. Griffin, Inc., supra, 429 U.S. at 74-76 & n.7, 97 S.Ct. at 223-224 n.7. It is not, as the Indians would have it, certainty that the forum will render a favorable decision or grant the particular relief sought. See id.; Coon v. Teasdale, 567 F.2d 820, 822 (8th Cir. 1977) (per curiam). Remedial certainty does not require that state courts have previously confronted similar facts and rendered therein the relief a plaintiff now seeks.
LaRoque’s holding that Montana courts may entertain claims that state taxation is illegal without first requiring prepayment of the disputed tax and may enjoin collection of taxes if found to be unlawful was neither novel nor unexpected. Before the complaint was filed in this case, suits seeking injunctive and declaratory relief from taxes alleged to be unlawful and unconstitutional had been successfully prosecuted in Montana courts without requirement that the tax be prepaid. See, e. g., Northwest Airlines, Inc. v. Joint City-County Airport Board, 154 Mont. 352, 463 P.2d 470 (1970); Hardin Auto Co. v. Alley, 149 Mont. 1, 422 P.2d 346 (1967). Moreover, since 1891, Montana courts have been empowered by the legislature to enjoin state tax collection when the tax sought to be imposed is illegal or the property sought to be taxed exempt. Mont.Rev. Codes Ann., § 15-1-405. This power has been employed when, as here, taxpayer alleges that state taxation is completely impermissible. See Northwest Airlines, Inc. v. Joint City-County Airport Board, supra, 463 P.2d at 475.
We cannot say that the tax adjustment remedy applied to reservation Indians in LaRoque was an uncertain remedy when the Indians filed their suit in 1973. As that Montana remedy is “plain, speedy and efficient”, § 1341 clearly forbids the relief sought by the Indians’ complaint.
IV.
Even if upon analysis a state remedy is deemed adequate, § 1341 is not an absolute bar to federal jurisdiction in state taxation cases. Two exceptions have evolved, neither of which supports jurisdiction in this case.
A.
The United States and its “instrumentalities” may sue in federal court to challenge state taxation. See Department of Employment v. United States, 385 U.S. 355, 358, 87 S.Ct. 464, 466, 17 L.Ed.2d 414 (1966); Housing Authority of City of Seattle v. State of Washington, supra, 629 F.2d at 1310. This circuit had previously indicated that individual Indians who could properly join as co-plaintiffs with the United States in a federal action to enjoin state tax collection could proceed even in the absence of the United States as a party under this federal instrumentality exception to § 1341. See Moses v. Kinnear, 490 F.2d 21, 24-25 (9th Cir. 1975); Aqua Caliente Band of Mission Indians v. Helix Irrigation District, 442 F.2d 1184, 1185-86 (9th Cir. 1971), cert. denied, 405 U.S. 933, 92 S.Ct. 930, 30 L.Ed.2d 809 (1972). The Indians claim entitlement to sue under this exception.
But in Moe, supra, the Supreme Court noted that the federal instrumentality doctrine was not alone enough to permit Indians to avoid the jurisdictional bar of § 1341. 425 U.S. at 471, 96 S.Ct. at 1640. In the wake of Moe, we held the federal instrumentality analysis set forth in Moses and Agua Caliente inapplicable to suits not brought by an Indian tribe. Navajo Tribal Utility Authority v. Arizona Department of Revenue, 608 F.2d 1228, 1233-34 (9th Cir. 1979). That holding is dispositive here.
B.
Another exception to § 1341 is available to Indian tribes by virtue of 28 U.S.C. § 1362. In Moe, the Supreme Court concluded that Congress intended by enactment of § 1362 to allow Indian tribes or governing bodies to raise federal questions in federal court when the United States chose not to do so in their behalf. See Navajo Tribal Utility Authority, supra, 608 F.2d at 1232. The Court construed § 1362 as conferring upon a tribe suing in a federal court the exemption to § 1341 which would have been available to the United States. Moe, supra, 425 U.S. at 474, 96 S.Ct. at 1641. This exception is not available to individual Indians, hence it is not available here. See Navajo Tribal Utility Authority, supra, 608 F.2d at 1233.
C.
At oral argument, the Indians suggested that the opinion in Navajo Tribal Utility Authority at page 1234 left open the possibility that other exceptions to § 1341 might be available to individual Indians. That decision, however, addressed only the “instrumentality” and “co-plaintiff” exceptions we have already considered. It did not purport to recognize any others. The opinion did note that § 1341 would bar a tribal economic enterprise from seeking declaratory and injunctive state tax relief in federal court “even if we assumed the Tribe itself or its individual members, absent § 1362, could reap the benefits of the Moe co-plaintiff rule with respect to § 1341, a question we do not reach.” 608 F.2d at 1234. Such a comment hardly creates a new exception to § 1341 and the Indians have offered no authority or theory establishing a new exception. We do not choose to engage in speculation.
The complaint for injunction and refund fell within the purview of § 1341, and since Montana provides a “plain, speedy and efficient” means for contesting Montana taxes, the district court lacked jurisdiction. Accordingly, the judgment is reversed and the case is remanded with directions to dismiss the complaint.
REVERSED.
. The facts and opinion of the district court are reported at 451 F.Supp. 168 (D.Mont.1978).
. The district court’s summary order cited Bryan v. Itasca County, 426 U.S. 373, 96 S.Ct. 2102, 48 L.Ed.2d 710 (1976); Moe v. Confederated Salish & Kootenai Tribes, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976), and McClanahan v. Arizona State Tax Commission, 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973). The impact of Moe on the district court’s jurisdiction is discussed in the text. Neither Bryan nor McCIanahan are relevant to the federal jurisdictional question, however, as each arose in state court.
. The Indians do not dispute that suits brought under 42 U.S.C. § 1983 are subject to the proscription of § 1341. See Kelly v. Springett, 527 F.2d 1090 (9th Cir. 1975).
. Some have read Fulton Market Cold Storage Co. v. Cullerton, 582 F.2d 1071 (7th Cir. 1978), cert. denied, 439 U.S. 1121, 99 S.Ct. 1033, 59 L.Ed.2d 82 (1979), as authority for the proposition that refund suits in federal court are not barred by § 1341. See, e. g., North American Cold Storage Co. v. County of Cook, 468 F.Supp. 424, 426 (N.D.Ill.1979); Note, Fulton Market Cold Storage Co. v. Cullerton: Limiting Federal Jurisdiction in § 1983 Damage Actions Against Tax Officials, 74 Nw.U.L.Rev. 284, 298 & n.68 (1979). We disagree. In Fulton Market, the Seventh Circuit concluded that a damage suit for allegedly wrongful conduct by tax officials was not barred. Unlike a claim for refund, the court noted that the award of damages did “not pivot upon the construction of some state statute or tax regulation which should more properly be construed by appropriate state courts.” Fulton Market Cold Storage Co., supra, 582 F.2d at 1078. Moreover, the court cited with approval its earlier decision in Gray v. Morgan, supra, holding refund actions subject to § 1341.
. Northwest Airlines involved a challenge to a state statute authorizing local authorities to impose certain taxes on airline operations. The Montana Supreme Court found the statute unconstitutional and enjoined imposition of taxes authorized by it. The case remains indicative of Montana’s willingness to enjoin unlawful tax collection although the taxes invalidated there have subsequently been deemed constitutional. See Evansville-Vanderburgh Airport Authority District v. Delta Airlines, Inc., 405 U.S. 707, 711 n.3, 92 S.Ct. 1349, 1352 n.3, 31 L.Ed.2d 620 (1972).
. The Supreme Court has indicated that so long as a state provides one “plain, speedy and efficient” tax adjustment remedy, the adequacy of other remedies for purposes of § 1341 need not be considered. See Tully v. Griffin, Inc., supra, 429 U.S. at 76-77 & n.8, 97 S.Ct. at 224 n.8. Accordingly, we express no view on the adequacy of Montana’s other tax adjustment remedies.
. The Indians suggest that note 13 of the Supreme Court’s opinion in Moe leaves open the possibility that the federal instrumentality doctrine as developed in Moses and Agua Caliente remains available to individual Indians. Moe, supra, 425 U.S. at 474 n.13, 96 S.Ct. at 1641 n.13. There is nothing in the footnote to suggest such a conclusion and the text of the Court’s opinion is to the contrary. Id. at 473-74, 96 S.Ct. at 1641-1642.
. 28 U.S.C. § 1362 provides:
The district court shall have original jurisdiction of all civil actions, brought by any Indian tribe or band with a governing body duly recognized by the Secretary of the Interior, wherein the matter in controversy arises under the Constitution, laws or treaties of the United States.
. In light of the absence of jurisdiction, we express no opinion on the substantive issues of Indian tax exemption resolved by the district court.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
L. HAND, Circuit Judge.
The plaintiffs sued the defendant, a Massachusetts corporation, in the state court; the defendant removed for diversity of citizenship, and moved to set aside the service, because it was not doing business within the state of New York. The judge so held, and dismissed the complaint. The plaintiffs do not complain because the judgment was not limited to setting aside the service, and for this reason we treat it as though it had gone no further.
The plaintiffs alleged that the defendant promised in New York to pay for their services in the purchase by it of certain shares of stock, and that they had performed in' that state; they demand the contract price, and, by an alternative count, a quantum meruit. Process was served in New York upon the defendant’s vice president, who chanced tq be there, and the only question is whether the defendant was “present” in such sense that it could be reached in a cause of action arising upon a contract, made in the course of the same activities on. which the defendant’s supposed “presence” depends. For this rea^ son we have not before us the question discussed in Old Wayne Mut. Life Ass’n v. McDonough, 204 U. S. 8, 27 S. Ct. 236, 51 L. Ed. 345; Simon v. Southern Ry. Co., 236 U. S. 115, 130-132, 35 S. Ct. 255, 59 L. Ed. 492; that is, whether without express consent a foreign corporation may be sued upon transactions arising outside the state of the forum.
ICjie defendant’s business is that of an “engineering manager” of public utility corporations, of whose shares it owns a controlling interest, either directly, or through a holding company. These it supervises, looking after their property, and acting as engineer, so far as may be necessary to keep them in operation, and to extend their service. Only one of these is a New York corporation, and this has never been actually engaged in business; the defendant’s control of it is by the ownership of a majority of the shares of a company which in turn owns its shares. The defendant leases an office in New York at a small rental, keeps a small bank account there, on which it draws from Boston, where all its work is done, and employs a stenographer. It uses these facilities only upon occasional visits to New York, when its officers wish to bargain for the purchase of company shares. These negotia^ tions never result in closing contracts, because all such are referred to the home office, though at times the formal exchange of papers takes place in New York. Its directors and shareholders have always met in Boston, except that once on two successive days the directors met in New York, and on one of these, the shareholders. This was necessary because of the negotiations for the purchase of shares on that occasion. Its name appears in the telephone book, and of course on the office door. On the other hand the contract in suit was made in New York, and certain bonds of a subsidiary company were once offered for sale here by an underwriter or selling agent, whose prospectus was accompanied by a letter, dated at New York and signed by the defendant. In general, the business is conducted in Boston, where are all its records, and where all its officers and directors reside.
The theory of personal jurisdiction in an action in personam is, ordinarily at any rate, derived from the power over the defendant, consequent upon his presence within the state of the forum. McDonald v. Mabee, 243 U. S. 90, 37 S. Ct. 343, 61 L. Ed. 608, L. R. A. 1917F, 458. The service of a capias subjects him de facto to such commands as its courts may utter, though in its stead a notice will usually serve. Such a theory is not really apposite to a corporation, however conceived, §nd it is only by analogy that it can be used. So long as it was thought of as a fictitious personality, created by the.státe of its origin, there were logical difficulties—or at least there were thought' to be,—in treating it as existent outside the limits of that state. Bank of Augusta v. Earle, 13 Pet. 519, 10 L. Ed. 274. As to jurisdiction, the express consent of a corporation to be sued elsewhere avoided its territorial limitations (Lafayette Ins. Co. v. French, 18 How. 404, 15 L. Ed. 451; Pennsylvania F. I. Co. v. Gold Issue Mining Co., 243 U. S. 93, 37 S. Ct. 344, 61 L. Ed. 610; Louisville & N. Ry. Co. v. Chatters, 279 U. S. 320, 323, 49 S. Ct. 329, 73 L. Ed. 711), and beginning with Lafayette Ins. Co. v. French, supra, this has been extended to eases where the corporate activities within the foreign state are such as empower that state to exact such a consent. We are not here troubled by the question whether the foreign state had power to exclude the corporation from the activities relied upon. International Harvester Co. v. Kentucky, 234 U. S. 579, 34 S. Ct. 944, 58 L. Ed. 1479.
It scarcely advances the argument to say that a corporation must be “present” in the foreign state, if we define that word as demanding such dealings as will subject it to jurisdiction, for then it does no more than put the question to be answered. Indeed, it is doubtful whether it helps much in any event. It is difficult, to us it seems impossible, to impute the idea of locality to a corporation, except by virtue of those acts which realize its purposes. The shareholders, officers and agents are not individually the corporation, and do not carry it with them in all their legal transactions. It is only when engaged upon its affairs that they can be said to rep>resent it, and we can see no qualitative distinction between one part of its doings and another, so they carry out the common plan. If wo are to attribute locality to it at all, it must be equally present wherever any part of its work goes on, as much in the little as in the great.
When we say, therefore, that a corporation may be sued only where it is “present,” we understand that the word is used, not literally, but as shorthand for something else. It might indeed be argued that it must stand suit upon any controversy arising out of a legal transaction entered into where the suit was brought, but that would impose upon it too severe a burden. On the other hand, it is not plain that it ought not, upon proper notice, to defend suits arising out of foreign transactions, if it conducts a continuous business in the state of the forum. At least, the Court of Appeals of New York seems still to suppose this to be true, in spite of the language in Old Wayne Mut. Life Ass’n v. McDonough, 204 U. S. 8, 27 S. Ct. 236, 51 L. Ed. 345, and Simon v. So. Ry., 236 U. S. 115, 35 S. Ct. 255, 59 L. Ed. 492. Tauza v. Susquehanna Coal Co., 220 N. Y. 259, 115 N. E. 915. And see Missouri, K. & T. Ry. v. Reynolds, 255 U. S. 565, 41 S. Ct. 446, 65 L. Ed. 788. But a single transaction is certainly not enough, whether a substantial business subjects the corporation to jurisdiction generally, or only as to local transactions. There must be some continuous dealings in the state of the forum; enough to demand a trial away from its home.
This last appears to us to be really the controlling consideration, expressed shortly by the word “presence,” but involving an estimate of the inconveniences which would result from requiring it to defend, where it has been sued. We are to inquire whether the extent and continuity of what it has done in the state in question makes, it reasonable to bring it before one of its courts. Nor is it anomalous to make the question of jurisdiction depend upon a practical test. This for example is avowedly the case as to corporations engaged in interstate commerce. Davis v. Farmers’ Co-operative Equity Co., 262 U. S. 312, 43 S. Ct. 556, 67 L. Ed. 996. No doubt there are governmental reasons for protecting such corporations from local interference; yet, as mere matter of municipal law, the loss and inconvenience to ordinary companies from being sued wherever they may chance to have any dealings whatever, cannot properly be ignored, and may constitute a test of jurisdiction, just as they do of venue, really a kindred matter. If so, it seems to us that nothing is gained by concealing what we do by a word which suggests an inappropriate analogy, that is, the presence of an individual who may be arrested and compelled to obey. This does not indeed avoid the uncertainties, for it is as hard to judge what dealings make it just to subject a foreign corporation to local suit, as to say when it is “present,” but at least it puts the real question, and that is something. In its solution we can do no more than follow the decided cases.
Possibly the maintenance of a regular agency for the solicitation of business will serve without - more. The answer made in Green v. C., B. & Q. R. R. Co., 205 U. S. 530, 27 S. Ct. 595, 51 L. Ed. 916, and People’s Tob. Co. v. Amer. Tobacco Co., 246 U. S. 79, 38 S. Ct. 233, 62 L. Ed. 587, Ann. Cas. 1918C, 537, perhaps becomes somewhat doubtful in the light of International Harvester Co. v. Kentucky, 234 U. S. 579, 34 S. Ct. 944, 58 L. Ed. 1479, and, if it still remains true, it readily yields to slight additions. In Tauza v. Susquehanna Coal Co., supra, there was no more, but the business was continuous and substantial. Purchases, though carried on regularly, are not enough (Rosenberg Co. v. Curtis Brown Co., 260 U. S. 516, 43 S. Ct. 170, 67 L. Ed. 372), nor are the activities of subsidiary corporations (Peterson v. Chicago, R. I. & P. Ry. Co., 205 U. S. 364, 27 S. Ct. 513, 51 L. Ed. 841; Cannon Mfg. Co. v. Cudahy Packing Co., 267 U. S. 333, 45 S. Ct. 250, 69 L. Ed. 634), or of connecting carriers (Philadelphia & Read. Co. v. McKibbin, 243 U. S. 264, 37 S. Ct. 280, 61 L. Ed. 710). The maintenance of an office, though always a make-weight, and enough, when accompanied by continuous negotiation, to settle claims (St. Louis S.W. Ry. v. Alexander, 227 U. S. 218, 33 S. Ct. 245, 57 L. Ed. 486), is not of much significance (Davega, Inc., v. Lincoln Furniture Co., 29 F.(2d) 164 (C. C. A. 2)]. It is quite impossible to establish any rule from the decided cases; we must step from tuft to tuft across the morass.
In the ease at bar, the defendant has never done any continuous business in New York. It has -come here on occasion, when it found likely opportunities to buy control in a company which would fit in with its general plans. Had its business been primarily in dealing in the shares of public utility companies, and had it had a local agent, whose duty it was to bargain for these, it may be that it could not escape, merely because he had no power to dose purchases here, but must refer them to the home office. This was not the case. The acquisition of a new company whose business the defendant might supervise was of necessity sporadic; it was no part of its ordinary ’ activity. While the chief holding company controlled by the defendant in turn controls indirectly nearly a hundred smaller companies, it by no means follows that to acquire all of these the officers had to go to New York. On the contrary, it is extremely likely that in case of most of them the shares were locally held. , Only one of them was in New York and this had never done any business. So far as appears, the visits bo. New York were infrequent, and concerned only the holding units, which are few. There is no evidence that it ever borrowed money in New York, if that be material ; the sale of certain bonds of -a holding company, in the control of another co-m.pany which the defendant in turn controlled, was immaterial, and no more was shown. None of this, and not all of it, seems to us a good reason'for drawing the defendant into a suit away from its home state. In the end there is nothing more to be said than that all the defendant’s local activities, taken together, do not make it reasonable to impose such a burden upon it. It is fairer that the plain-tiffs should go to Boston than that the defendant should come here. Certainly such a standard is no less vague than any that the courts have hitherto set up; one may look from one end of the decisions to- the other and find no vade meeum.
Judgment affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
John Bolen was insured by Insurance Company of North America. His nephew, O’Neill, while riding as a passenger on a motorcycle being operated by Bolen’s son, was injured when the motorcycle collided with an uninsured automobile. Insurance Company brought an action for declaratory judgment seeking a determination of its liability to O’Neill. In a non-jury trial, the District Court found that there was no coverage because, although O’Neill was a relation, he was not a resident in the same household of Bolen. We agree and affirm.
The facts were stipulated. The only dispute concerns the correct interpretation of the Uninsured Motorists Coverage provisions. In pertinent part they provide:
The definitions under Bodily Injury and Property Damage Liability Coverage, except the definition of “Insured” apply to Uninsured Motorists Coverage, and under Uninsured Motorists Coverage:
“insured” means:
(a) the named insured and any relative;
Bodily Injury and Property Damage Liability Coverage defines relative as follows:
‘relative’ means a relative of the named insured who is a resident of the same household; (emphasis supplied).
We agree with and adopt the District Court’s conclusions:
[T]o accept the defendant’s construction of the terms of the policy would require the Court to construe the controlling provisions in a manner lending itself to strained and absurd results. Paddock v. Bay Concrete Industries, Inc., 154 So.2d 313 (Fla.App. 1963); See Also, Motor Vehicle Casualty Co. v. Atlantic National Insurance Co., 374 F.2d 601 (5 Cir. 1967).
The term ‘relative’ as used in the ‘Uninsured Motorists’ section of the policy is, under the plain language of the policy, limited to relatives of the insured who are members of the same household. Only the definition of an ‘insured’ under the policy and no other definition is redefined specially for uninsured motorist coverage. The definition of the term ‘relative’ must be taken from the ‘Bodily Injury and Property Damage Liability Coverage’ section. (District Court’s paragraph numbering deleted.)
Any other construction of the policy would indeed lead to an absurd result “[a]nd a Court ought always, we suppose, to hesitate a little bit at least before making a pronouncement that the parties intended a senseless result.” Motor Vehicle Casualty Co. v. Atlantic National Insurance Co., supra, at 605.
Affirmed.
. Pursuant to our Rule 18 this case is decided without oral argument.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
WINTER, Circuit Judge:
Plaintiff, whose local draft board classified him as a conscientious objector, performed civilian work of national importance in lieu of induction into the armed forces by becoming a training assistant of defendant, Penn Community Services, Inc., an eleemosynary corporation sponsoring adult education programs and rendering services in a rural community of South Carolina. After his selective service local board effected his release, he sued under the Fair Labor Standards Act claiming that during the time that he was performing civilian work of national importance he was paid less than the minimum wage and not paid overtime, both as prescribed by the Act. The district judge awarded him judgment for the difference between the amounts paid and the applicable minimum wage, for unpaid overtime and for attorneys’ fees — a total judgment of $7,786.14. Defendant appeals, contending that it owes plaintiff nothing, and plaintiff appeals, contending that he was entitled to double his award, less attorneys’ fees, as liquidated damages. We conclude that, under the particular circumstances of this case, plaintiff was not covered by the Fair Labor Standards Act and, hence, we reverse and direct that judgment be entered for defendant.
I
Penn Community is organized under the laws of South Carolina and carries on its activities within that state. Together with its predecessor, Penn School, which was one of the first schools for Negroes in the South, Penn Community has operated on a non-profit charitable basis since 1862. Currently, Penn Community promotes educational, health and community projects through the sponsorship of workshops and seminars; and it offers facilities for interracial conferences with accommodations for as many as 110 guests. Income to carry on its functions is derived from private gifts, institutional and foundation grants, rental of its facilities to the public at large, and rental of its facilities to the government for Peace Corps trainees.
At an undisclosed date prior to the time that plaintiff was classified as a conscientious objector, Penn Community concluded to expand, its activities and to create positions to be filled only by qualified unmarried persons performing alternative service as conscientious objectors. As described by its Executive Director who was also a member of its Board of Trustees, Penn Community created various positions for “volunteers” who were in the conscientious objector category. Penn Community distributed recruitment circulars for the various new positions which it concluded to create and, after plaintiff had been classified by his draft board as a conscientious objector, he saw the circular for the position of training assistant. Plaintiff made application to Penn Community to fill the position. After interview, plaintiff was appointed, subject to the approval of his local draft board. The approval was forthcoming and plaintiff began his duties on September 14, 1967, and remained in the position until October 19, 1969 — a period of approximately thirty days more than his obligation to perform work of national importance for twenty-four months.
The circular advertising the position plaintiff obtained specified that it was to be filled by an unmarried person performing alternative service as a conscientious objector. The job description set forth the duties of the position: taking materials to trainees in the field, purchasing and keeping a stock of supplies, maintaining equipment, elementary servicing of vehicles, meeting visitors at the airport and taking them around to visit projects in the field, and possibly performance of some general office work, all under the direction of the training director. An applicant was advised that the position would involve work on some week-ends and evenings but compensatory time off would be allowed during the week. The circular stated: “A subsistence salary of $100.00 a month is offered, room and utilities provided, together with hospitalization insurance and a three-week vacation annually. Traveling to and from Penn at the beginning and end of the period will be provided. Board is provided during conferences.”
Plaintiff was actually paid $108.34 per month beginning on September 14, 1967. This sum was increased to $150.00 per month on April 30, 1968, and again increased to $183.00 per month on July 31, 1968. Beginning September 14, 1969, when his two-year obligation to perform work of national importance had been fulfilled, plaintiff was paid $2.00 per hour for his services. At the time that plaintiff began his duties the minimum wage was $1.40 per hour, and this was increased to $1.60 per hour after February 1, 1968. At the trial plaintiff testified generally that he had worked overtime in excess of his normal working hours, which were from 8:30 A.M. to 5:00 P.M., and that he averaged working about twenty hours overtime per week. Defendant was unable to show what hours plaintiff had worked or how many hours he had been allowed for compensatory time.
II
With certain specifically designated exceptions, none of which is claimed to be applicable here, the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., fixes minimum wages and requires overtime compensation to be paid by an employer to an employee. An “employer” is defined as “any person acting directly or indirectly in the interest of an employer in relation to an employee” with certain exceptions not applicable here; “employee” is defined to include “any individual employed by an employer;” and “‘[e]mploy’ includes to suffer or to permit to work.” 29 U.S.C. A. § 203(d), (e) and (g).
The scope of the definitions of “employer,” “employee” and “employ” is so broad that one might well conclude, as did the district judge, that plaintiff was an employee of Penn Community. But the teaching of Walling v. Portland Terminal Co., 330 U.S. 148, 67 S.Ct. 639, 91 L.Ed. 809 (1947), and the administrative interpretation placed upon the Act by the Wage-Hour Administrator lead us to conclude otherwise on the facts of this case.
Portland Terminal concerned yard brakemen trainees during the period of their training. The trainees, who were required to undergo a successful period of training in order to be eligible for employment as brakemen, were first obliged to observe a railroad yard brakemen crew at work. After learning by observation, a trainee was gradually permitted to do actual work under close scrutiny. Regular employees were not displaced because they were required to supervise work performed by the trainees. The trainees did not expedite the railroad’s business but in some'cases actually impeded and retarded''it'. If a trainee successfully completed his course of instruction, he was paid $4.00 per day for his training period, and he was either hired as a regular employee or his name placed upon a list of eligibles from which future regular employees would be selected.
Notwithstanding its recognition that if literally applied the definitions of “employ” and “employee” were sufficiently broad to render the Act applicable to these trainees, as well as all students of schools or colleges that they attended, the Court said:
they [“employ” and “employee”] cannot be. interpreted so as to make a person whose work serves only his own interest an employee of another person who gives him aid and instruction. Had these trainees taken courses in railroading in a public or private vocational school, wholly disassociated from the railroad, it could not reasonably be suggested that they were employees of the school within the meaning of the Act. Nor could they, in that situation, have been considered as employees of the railroad merely because the school’s graduates would constitute a labor pool from which the railroad could later draw its employees. * * *
Accepting the unchallenged findings here that the railroads receive no “immediate advantage” from any work done by the trainees, we hold that they are not employees within the Act’s meaning. 330 U.S. at 152-153, 67 S.Ct. at 641.
It should be stressed that these statements were made in a ease in which the trainees received compensation upon successful completion of their training at approximately the same rate that plaintiff received subsistence during the time that he was a training assistant with Penn Community.
Particularly in the case of eleemosynary corporations such as hospitals, museums and schools, the role of the volunteer is ■ not unknown. The volunteer nurse’s aid, the person who mans a canteen or sales booth without compensation, the parent who donates services for an entertainment or fund-raising activity are familiar figures in everyday life. And sometimes such persons are provided a meal or reimbursement of transportation expenses or other benefit other than fixed compensation for services. In such cases the Wage-Hour Administrator has deemed such persons not employees covered by the Act, despite the fact that no single exemption contained in the Act excludes them. See, e. g., Opinion Letter No. 927, CCH W-H Admin.Rul. Nov. 1966-March 1969 j[ 30,-939 (May 29, 1968); see also, Opinion Letter No. 249, CCH W-H Admin. Rul. Aug. 1961-Nov. 1966 |f 30,843 (April 30, 1964) where, in an obvious but unspecified reference to Portland Terminal, the Wage-Hour Administrator approved voluntary work, by an alien lacking employment visa who wished to learn a manufacturing process, without application of the Act and Opinion Letter No. 626, CCH W-H Admin.Rul. Nov. 1966-Mar. 1969 f[ 30,616 (June 28, 1967) for the same general interpretation of Portland Terminal in the case of volunteer patient workers.
There is thus ample support for the general proposition that the Act does not apply to every instance in which one suffers or is permitted to work notwithstanding that facially it would appear applicable.
Ill
There are some striking analogies between the facts in Portland Terminal and the instant case. Plaintiff here and the trainees in Portland Terminal both received some compensation— denominated “subsistence” here and an “allowance” in Portland Terminal — but less than the minima required by the Act. Both were undergoing a period of training under the supervision of a regular, permanent employee, although the training period in Portland Terminal was far shorter than the training period here. Here, the period of training was undoubtedly shorter than the entire twenty-four months, but during the entire twenty-four months plaintiff was subject to supervision. In both cases successful completion of the training period led to the payment of compensation and ultimately to a better paying permanent position.
The rationale of Portland Terminal would seem to be that the railroad received no “immediate advantage” from the trainees’ services. To state it otherwise, the principal purpose of the seemingly employment relationship was to benefit the person in the employee status. We think that rationale is served here. While we cannot say that Penn Community received no benefit from plaintiff’s services, we first note that Penn Community is of far different character from the railroad in Portland Terminal. Penn Community is a nonprofit corporation and its corporate purposes are the public good in the community in which it operates. In the broad sense, therefore, any benefit to Penn Community was benefit to the public at large — a benefit of a different nature than that of a for-profit enterprise. Particularly is this true because the undisputed evidence is that Penn Community created the position occupied by plaintiff to accommodate plaintiff and others similarly classified as conscientious objectors.
More importantly, we think that the principal benefit of the relationship was to plaintiff in providing him with the opportunity to perform work of national importance to his liking. Plaintiff was recognized to be a conscientious objector. Under the Selective Service Act, 50 U.S.C.A. App. § 456(j), plaintiff was required to “be ordered by his local board, subject to such regulations as the President may prescribe, to perform for a period * * * [of twenty-four months] * * *. such civilian work contributing to the maintenance of the national health, safety, or interest as the local board pursuant to Presidential regulations may deem appropriate * * Under the Regulations adopted thereunder, 32 C.F.R. § 1660.1 et seq., plaintiff was permitted to volunteer for appropriate civilian work (§ 1660.10) which he did, or he was permitted to suggest three types of civilian work which he was qualified to do, one of which the board would order him to perform (§ 1660.20(a)), or the board could make the selection, and absent agreement by the plaintiff as to which he would accept, could order him to perform work chosen by the board (§ 1660.20(b)-(d)). It is apparent, therefore, that plaintiff elected to fill a position with Penn Community in satisfaction of his statutory obligation to render service under the Selective Service Act in lieu of volunteering for or induction into the military. While Congress, of course, provides pay and other benefits and allowances for military personnel, it has appropriated no compensation for conscientious objectors performing work of national importance. Nothing in the Regulations requires that conscientious objectors be compensated by those who “suffer or permit” them to perform work of national importance except that travel, meal and lodging allowances are provided for travel to and from the place of performing work of national importance at the beginning and end of the period of national service when a conscientious objector is ordered to perform work in a community other than the one in which he resides. 32 C.F.R. § 1660.21.
From the statutory and regulatory scheme outlined above, we see little to distinguish plaintiff from the trainees in Portland Terminal or the volunteer worker in the hospital, museum or school to whom the Act has been held or treated as not applicable. Indeed, because of the uncontradicted evidence that Penn Community created positions, including that filled by plaintiff, to accommodate conscientious objectors, there is a more cogent reason to say that plaintiff is not covered by the Act. This is so because in the case of certain hospital, museum and school volunteer workers we may assume that if voluntary services were not forthcoming, they would have to be purchased in the market place in order to continue the full program of the organization. Plaintiff, however, cannot be said to have displaced a bona fide applicant who desired to sell his services at prevailing rates, or, by reason of the special circumstances which led him to Penn Community, to be an exploited unorganized laborer, evils which the Act was designed to prevent. Missel v. Overnight Motor Transp. Co., 126 F.2d 98, 103-104 (4 Cir. 1942), aff’d, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942).
IV
We are fully aware that the Wage-Hour Administrator has issued an opinion seemingly contrary to our views. In Opinion Letter No. 687, CCH W-H Admin. Rul. Nov. 1966-Mar. 1969 30,681 (November 7, 1967) the Administrator expressed the view:
[A]ny individuals including conscientious objectors, who do, in fact, volunteer their services for six months without contemplation of pay would not be considered as employees where there is a bona fide volunteering of their services.
In situations though where the understanding is that the individual will work for wages, there would be an employment relationship, in which case the cash wage together with the reasonable cost of board, lodging, or other facilities should equal at least the minimum wage under the law for the time worked.
The opinion was rendered with respect to nursing home employees. While the nature of the nursing home was not described, i. e., non-profit or otherwise, we will assume the former since 32 C.F.R. § 1660.1 restricts service of national importance by conscientious objectors to employment by governmental units and non-profit organizations engaged in charitable activity for the benefit of the general public.
Although we recognize the deference to which the administrative interpretation is entitled, as well as its presumptive correctness, we are constrained to disagree that the opinion letter, if applied literally, correctly states the rule to be applied here. When read in its entirety, the opinion letter seems to proceed by the mechanical route that since there is no specific exemption for conscientious objectors from the Act’s broad coverage, the Act must apply to them. But Portland Terminal teaches that this is not invariably so, as do the Wage-Hour Administrator’s other rulings, including the instant opinion letter. In any event, the Fair Labor Standards Act must be applied with due regard to Congress’ enactment of the Selective Service Act which creates an obligation to serve, but which, as well as the regulations promulgated thereunder, fails to require the payment of any compensation, let alone subsistence, except for reporting to and returning from work of national importance, in the fulfillment of the duty to serve.
But the opinion letter need not be construed as in conflict with the result we reach. The Administrator’s use of “contemplation of pay” and “wages” can be construed to mean only that payment above some ascertainable subsistence level must equal the minimum wage. While the Administrator has not defined at what level “subsistence” becomes “pay” or “wages,” the Administrator has repeatedly demonstrated full appreciation of Portland Terminal, where a payment of $4.00 per day — the approximate amount received by plaintiff here —was made, and it was held that the Act did not apply. Because plaintiff’s “subsistence salary,” even including his lodging, board while conferences were held, and other benefits, would not, by today’s standards, seem to exceed the $4.00 per day in Portland Terminal, by the standards of that day, we conclude that the Administrator would permit the payment of some subsistence without insisting that an employment relationship covered by the Act has been created and that plaintiff’s subsistence exceeded permissible limits for non-coverage.
This is not to say that, as a general proposition, we would countenance conscientious objectors being treated as a labor pool available for work of national importance at substandard wages or unreasonably long, uncompensated for, working hours. But here, where a special position was created to provide plaintiff with a means of performing work of national importance, where plaintiff did not displace another member of the general labor market, and where plaintiff voluntarily entered upon his work of national importance in fulfillment of his obligation to serve with full knowledge of the limited subsistence to be provided him, we cannot conclude that he has a right to judgment under the Act.
Reversed.
In this opinion letter, the Administrator stated some of the standards generally applicable to a determination of whether the Act applies, viz: Whether the training is for the benefit of the trainee, whether he displaces regular employees and works under their close supervision and whether the employer derives any immediate advantage by his presence. Of course, those standards were stated with reference to trainees and we do not think that plaintiff was a trainee for all of his twenty-four months of service. But we do not think these standards inapplicable to the question presented by the instant case, and, as we will show, application of each leads to the conclusion that plaintiff was not under the Act.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
TRASK, Circuit Judge:
On September 9, 1971, a dual-controlled Cessna airplane owned by Aviation Unlimited, Inc. and piloted by Jerrold Rudelson, a student aviator, and Thomas DuVal, a flight instructor, collided in mid-air with a Piper aircraft flown by Marvin Aardema. The collision occurred about a mile south of the Santa Monica, California airport control tower at approximately 1,000 feet above the airfield on the downwind leg of the traffic pattern for runway 21. All three men were killed.
The survivors of Rudelson and Aardema sued the United States under the Federal Tort Claims Act, 28 U.S.C. § 2671, et seq., claiming that certain federally employed air traffic controllers had negligently caused the collision. National Indemnity Company, insurer and subrogee of the flight school, sued the United States for indemnification of sums it paid to the Rudelson heirs and others in settlement of their claims against its insureds. The suits were tried by the district court sitting without a jury, and the court’s opinions on the issues of liability, damages, and indemnification are reported as follows: Rudelson v. United States, 431 F.Supp. 1101 (C.D.Cal.1977) (liability); Rudelson v. United States, 444 F.Supp. 1352 (C.D.Cal.1977) (damages); Aardema v. United States, 444 F.Supp. 1354 (C.D.Cal.1977) (damages); National Indemnity Co. v. United States, 444 F.Supp. 1356 (C.D.Cal.1977) (indemnification). The cases were consolidated for purposes of appeal.
Pursuant to 28 U.S.C. § 2674, the district court determined liability according to the comparative negligence principles of California, the state in which the tortious acts occurred. The court held that the United States was 20 percent at fault because its controllers negligently failed to scan the entry corridor area of the downwind leg of the traffic pattern during a two minute period immediately preceding the collision. Had they done so, they would have seen that the planes were in a position of imminent peril and could have warned the pilots in time to prevent the collision. The court held that Aardema was 45 percent at fault because he entered the traffic pattern unannounced and failed to see and avoid the Cessna as required by Federal Aviation Administration (FAA) regulations. The court further held that Rudelson and DuVal were 10 percent and 25 percent at fault, respectively, for failing to maintain reasonable vigilance so as to avoid colliding with the Piper. Rudelson v. United States, supra, 431 F.Supp. 1101.
The court found that Rudelson’s heirs had suffered $1,360,586.25 in losses as a result of Rudelson’s death. From this sum the court deducted $136,058.62 to reflect the fact that Rudelson was 10 percent to blame for the collision. The damages were then reduced by an additional $200,000, the amount the Rudelson plaintiffs received in settlement of their claims against Aardema, Aviation Unlimited, the company’s owner Melvin Miller, and DuVal. This left a net award of $1,024,527.63. Rudelson v. United States, supra, 444 F.Supp. 1352. The court also found that Aardema’s heirs had suffered $542,909.14 in losses as a result of Aardema’s death. Because Aardema was 45 percent at fault, the court subtracted $244,-309.11, producing a net award of $298,-600.03. Aardema v. United States, supra, 444 F.Supp. 1354. The United States was held liable for the entire amounts of both net awards under the rule of joint and several liability.
The district court rejected National Indemnity Company’s indemnification claim against the United States. National Indemnity Co. v. United States, supra, 444 F.Supp. 1356.
We affirm each of the district court’s rulings.
I
DUTY OF REASONABLE CARE OWED TO PILOTS BY FEDERAL AIR TRAFFIC CONTROLLERS
The nature and extent of the duty of due care which air traffic controllers owe pilots is a question of law. Miller v. United States, 587 F.2d 991, 944 (9th Cir. 1978). “[T]he duty to exercise due care to avoid accidents is a concurrent one resting on both the control tower personnel and the pilot.” Mattschei v. United States, 600 F.2d 205, 208 (9th Cir. 1979). The government contends that because the FAA operations manual did not expressly order the air traffic controllers to monitor the position of a trainer aircraft while its student pilot practiced take-offs and landings, the controllers were under no legal duty to perform such monitoring. The argument is without merit. It is well settled that air traffic controllers’ duties are not limited to the tasks prescribed by FAA manuals. Under especially dangerous conditions, controllers must take steps beyond those set forth in the manuals if such steps are necessary to ensure the safety of pilots and passengers. Spaulding v. United States, 455 F.2d 222, 226 (9th Cir. 1972); Hartz v. United States, 387 F.2d 870, 873 (5th Cir. 1968); Hennessey v. United States, 12 Avi. 17,410, 17,416-17 (N.D.Cal.1971). The law of California is in accord. A person is not necessarily free from negligence just because he “ ‘may have literally complied with safety statutes or rules. The circumstances may require [him] to do more.’ ” Hogue v. Southern Pacific Company, 1 Cal.3d 253, 258, 81 Cal.Rptr. 765, 768, 460 P.2d 965, 968 (1969), quoting Dragash v. Western Pac. R. R. Co., 161 Cal.App.2d 233, 241, 326 P.2d 649, 654 (1958).
The question before us is whether, notwithstanding the FAA manual’s silence, considerations of safety necessitated closer monitoring of the trainer’s position, at least while it was in the vicinity of the entry corridor. We answer in the affirmative. The traffic controllers knew that although the student (Rudelson) and his instructor (DuVal) were under a duty to see and avoid other aircraft, their attention would probably be distracted from time to time by the teaching exercises. The controllers were also aware that planes occasionally stray into the entry corridor unannounced and that the entry corridor is the spot in the traffic pattern where mid-air collisions are most likely to occur. Rudelson v. United States, supra, 431 F.Supp. at 1106. We hold that, given the dangerous realities of this situation, the traffic controllers owed the occupants of the trainer, as well as the pilots of nearby aircraft, a duty to monitor the trainer’s position while it was in the vicinity of the entry corridor. The controllers also owed a concomitant duty to transmit warnings by radio or light beam if the planes appeared to be heading on a collision course.
II
AIR TRAFFIC CONTROLLERS’ BREACH OF DUTY
“The actual application of the legal standard to the facts of the case (i. e., the determination on the ultimate question of negligence) is reviewed under the ‘clearly erroneous’ standard.” Miller v. United States, supra, 587 F.2d at 994. We conclude that there was ample evidence in the record to support the district judge’s conclusion that the controllers were negligent. With only a quarter turn of his head, the local controller could easily have scanned the entire traffic pattern. Rudelson v. United States, supra, 431 F.Supp. at 1106. By ignoring the dangerous entry corridor area for almost two minutes at a time when the local controller and others knew or should have known that a trainer aircraft was in the vicinity, the FAA tower personnel acted unreasonably and breached their duty of due care.
III
RUDELSON’S BREACH OF DUTY
The Aardema plaintiffs concede that Aardema breached his duty of due care, but the Rudelson plaintiffs claim their decedent was not guilty of negligence because, being a student, he was under no duty to see and avoid other aircraft.. The Rudelsons’ argument is without merit. 14 C.F.R. § 91.67(a) states that “vigilance shall be maintained by each person operating an aircraft so as to see and avoid other aircraft . . . (emphasis supplied). The regulations create no exception for student pilots. Accordingly, we hold that since Rudelson and DuVal shared control of the Cessna, each was under a duty to watch out for other planes. Their respective violations of 14 C.F.R. § 91.67(a) constituted negligence per se, or at least raised a presumption of negligence. See Mark v. Pacific Gas and Electric Co., 7 Cal.3d 170, 182, 101 Cal.Rptr. 908, 916, 496 P.2d 1276, 1284 (1972); Haft v. Lone Palm Hotel, 3 Cal.3d 756, 763-65, 91 Cal.Rptr. 745, 748-50, 478 P.2d 465, 467-69 (1970). Cf. Gatenby v. Altoona Aviation Corp., 407 F.2d 443, 446-47 (3d Cir. 1969) (violation of FAA regulation held negligence per se under applicable state law).
The plaintiffs contend that Rudelson could not have been negligent because he never had the ability to see, much less avoid, Aardema’s Piper. Prior to the collision, the Cessna was climbing from beneath and to the rear of the Piper. The Cessna pilots’ upward vision may have been partially obstructed by the plane’s high wing configuration, and Rudelson, who was seated on the left side of the Cessna, may have found it especially difficult to see the Piper as it approached from the right. However, none of these circumstances excused Rudelson’s duty to see and avoid other aircraft. The district court found that “[bjlind spots can be compensated for by head movement and aircraft movement.” Rudelson v. United States, supra, 431 F.Supp. at 1105. Given that capability, Rudelson ought to have maintained a better lookout.
The record supports the district court’s conclusion that Rudelson breached his duty of reasonable care. His experience was relevant only insofar as it affected his relative culpability. Recognizing that an instructor owes a greater duty of care than does a student, the district judge assigned 25 percent of the blame for the collision to DuVal and only 10 percent to Rudelson. That apportionment of fault, like the district judge’s other comparative negligence calculations, was not clearly erroneous.
IV
CAUSATION
The district court found that if the controllers had not fixed their attention upon one part of the airport area for an unreasonable length of time, they probably would have seen the unannounced Piper, which was plainly visible in a clear sky, in time to warn the Cessna by radio and the Piper by light gun. The court also found that prompt action by the controllers probably would have prevented the collision. These findings were not clearly erroneous, and the conclusions of law based thereon were sound. “An instant’s inattention, a moment’s hesitation, stood between safety and disaster. Failure to see and realize what was visible and discernible, followed by failure to give immediate warning, constituted negligence . . . .” State of Maryland v. United States, 257 F.Supp. 768, 774 (D.D.C.1966).
The fact that the pilots’ own carelessness also caused the collision in no way absolved the government of liability. To recover, the plaintiffs did not have to prove that the controllers’ negligence “was the sole proximate cause of the injury, but only that such negligence was a proximate cause.” American Motorcycle Ass’n v. Superior Court, 20 Cal.3d 578, 586, 146 Cal.Rptr. 182, 187, 578 P.2d 899, 904 (1978) (emphasis in original). The pilots’ negligence did not break the chain of causation because their failure to see and avoid each other’s aircraft was foreseeable by the controllers. See Hoyem v. Manhattan Beach City School Dist., 22 Cal.3d 508, 520-21, 150 Cal.Rptr. 1, 8-9, 585 P.2d 851, 858-59 (1978).
Having established that government employees’ negligence proximately caused the collision, the plaintiffs were entitled to recover from the United States.
V
DAMAGES
The government contends that the damages awarded by the district judge were excessive. It relies primarily upon Felder v. United States, 543 F.2d 657 (9th Cir. 1976), which also involved an aviation disaster. In Felder this court reduced several non-pecuniary damage awards that were smaller than those in the instant case. The government argues that for the sake of uniformity, we must do the same here. However, we feel the government’s reliance on Felder is misplaced. That decision did not announce an inflexible rule mandating equal damage awards in all airplane disaster cases. The court expressly noted that “in assessing the amount of damages in a wrongful death case, each case must stand on its own facts.” Id. at 674. “ ‘While analogies to, and comparisons with, other cases may be helpful on many types of issues, their usefulness on questions of damages is extremely limited.’ ” Mattschei v. United States, supra, 600 F.2d at 209, quoting United States v. English, 521 F.2d 63, 72 (9th Cir. 1975). Unlike the Felder court, after scrutinizing the record before us, we have not been “left with the definite and firm conviction,” 543 F.2d at 674, that the awards are excessive.
We are likewise unpersuaded that the awards were inadequate. It was proper to deduct income taxes from the plaintiffs’ awards. Id. at 670. It was also proper to disregard plaintiffs’ attorneys’ fees, cf. Hooks v. Washington Sheraton Corp., 188 U.S.App.D.C. 71, 76, 578 F.2d 313, 318 (1978) (tort suit against private entity).
The government assigns as error the district judge’s application to the United States of the rule of joint and several liability. It was unjust, the government claims, for the district court to order the United States to pay almost 75 percent of the Rudelsons’ damages and 55 percent of the Aardemas’ damages when federal employees bore only 20 percent of the blame for the collision. The government concedes, as it must, that California law clearly compels such a result. In American Motorcycle Ass’n v. Superior-Court, supra, the Supreme Court of California held that joint and several liability survived the state’s transition from an orthodox negligence system to comparative fault. Under American Motorcycle, each tortfeasor whose negligence proximately caused the plaintiffs’ injuries is liable for the total damages. The government contends that the American Motorcycle joint and several liability rule should not apply to the United States because it is fundamentally incompatible with the Federal Tort Claims Act’s limited waiver of sovereign immunity. The Act waives sovereign immunity only “for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment.” 28 U.S.C. § 1346(b). According to the government, joint and several liability, when applied in a comparative negligence context, violates the Act in that it forces the United States to compensate plaintiffs for injuries inflicted by private actors. To prevent that result, the government urges us to supplant state law with a federal rule under which the United States’ damages liability would be directly proportionate to federal employees’ relative degree of fault.
We reject the government’s argument for two reasons: first, because it rests upon a false premise; and second, because the Act mandates application of state law under the circumstances of this case. The government apparently assumes that since the air traffic controllers bore 20 percent of the blame for the collision, they caused only 20 percent of the plaintiffs’ injuries. The fallacy in the government’s reasoning is obvious. This is not the sort of case where one defendant broke the plaintiff’s arm and then an hour later, in an unrelated incident, a second defendant broke the plaintiff’s leg. Here the injuries were indivisible; all of the defendants, acting concurrently, proximately caused the pilots’ deaths. Had any one of the defendants exercised due care, none of the injuries would have occurred. Consequently, each defendant is liable for all of the damages stemming from the collision. Since each defendant was responsible for the totality of the injuries suffered, it is utterly illogical to complain that joint and several liability forces the United States to pay for the wrongdoing of private parties. As the California Supreme Court pointed out in American Motorcycle,
“Liability attaches to a concurrent tortfeasor . . . not because he is responsible for the acts of other independent tortfeasors who may also have caused the injury, but because he is responsible for all damage of which his own negligence was a proximate cause. When independent negligent actions of a number of tortfeasors are each a proximate cause of a single injury, each tortfeasor is thus personally liable for the damage sustained, and the injured person may sue one or all of the tortfeasors to obtain a recovery for his injuries; the fact that one of the tortfeasors is impecunious or otherwise immune from suit does not relieve another tortfeasor of his liability for damage which he himself has proximately caused.”
20 Cal.3d at 587, 146 Cal.Rptr. at 187, 578 P.2d at 904.
For the reasons stated above, we conclude that the Federal Tort Claims Act’s limited waiver of sovereign immunity was not exceeded, nor was the Act otherwise violated, when the United States was held subject to joint and several liability under a comparative negligence system.
We also hold that the Act forecloses creation of a federal damages apportionment rule. Congress has declared that state, not federal, law is controlling on the extent to which the federal government is liable for compensatory damages in tort. See Richards v. United States, 369 U.S. 1, 82 S.Ct. 585, 7 L.Ed.2d 492 (1962); Felder v. United States, supra, 543 F.2d at 663; United States v. English, 521 F.2d 63, 70 (9th Cir. 1975). 28 U.S.C. § 1346(b) authorizes the district courts to hear suits brought by persons seeking damages for injuries caused by government employees “under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.’’ 28 U.S.C. § 2674 provides that “[t]he United States shall be liable, respecting the provisions of this title relating to tort claims, in the same manner and to the same extent as a private individual under like circumstances, but shall not be liable for interest prior to judgment or for punitive damages” (emphasis supplied). We are urged to grant the United States an exemption from California law so as to ensure that it receives more favorable treatment than private tortfeasors get under identical circumstances. The same proposition was squarely rejected in Mattschei v. United States, supra. Congress has promulgated a general rule that the United States’ tort liability is coextensive with that of private persons. To that rule Congress has created certain specific exceptions. See 28 U.S.C. § 2680. None of those statutory exceptions expressly or impliedly refers to either comparative negligence or joint and several liability. There being no applicable exception, the general rule applies to the instant case.
In summary, we conclude that where, as here, the damages awarded are purely compensatory in nature, the United States can be subjected to joint and several liability under a comparative fault system if a similarly situated private defendant would have been so liable. Since it is undisputed that a private employer of negligent air traffic controllers would have had to pay the Rudelson heirs $1,024,527.63 and the Aardema heirs $298,600.03, so must the government.
VI
INDEMNIFICATION
National Indemnity Company paid a total of $147,228.33 in settlement of claims against its three insureds, Aviation Unlimited, Inc., Melvin Miller (the company’s owner), and Thomas DuVal. National Indemnity, as subrogee of its insureds, then brought suit against the United States, seeking indemnification of the $147,228.33. Some of the company’s claims were time-barred, and the district court denied relief as to the rest on the ground that it would be inequitable to shift the entire burden of loss to the United States. Like Aviation Unlimited and Miller, the United States was merely a vicariously liable passive tortfeasor; its conduct as an employer of negligent agents was no more blameworthy than that of Aviation Unlimited and Miller. Therefore, the court held, California law barred total indemnification. Using an alternative analysis, the court also held that DuVal’s active wrongdoing, which was imputable to his employers, precluded loss shifting to a third party.
The district judge correctly applied California law. For the reasons set forth in the opinion of the district court, National Indemnity Co. v. United States, supra, 444 F.Supp. at 1360-61, we hold that National Indemnity, which stood in the shoes of its insureds, was not entitled to complete indemnification.
National Indemnity argues, however, that it should receive partial indemnification under the loss splitting doctrine announced in American Motorcycle Ass’n v. Superior Court, supra. Prior to that decision, only one type of indemnification was available: complete loss shifting from one tortfeasor to another. Contribution was the sole means whereby the burden of paying the plaintiff’s damages could be divided between tortfeasors. But contribution was available only between joint judgment debtors. Thus, unless the plaintiff chose to sue two or more concurrent tortfeasors in the same action, there was no way to split the damages. American Motorcycle added the new doctrine of partial indemnity to the existing doctrines of contribution and “all or nothing” indemnity. Under the new rule, a defendant who, because of joint and several liability, has to pay more than his pro rata share of the total damages can obtain reimbursement of the excess amount from his fellow tortfeasors, provided they have not already settled with the plaintiff.
DuVal was 25 percent at fault; consequently the flight school’s aliquot portion of the overall damages was 25 percent. Through advantageous pretrial settlements with the Rudelsons and others, Aviation Unlimited, Miller, and DuVal managed to discharge their obligations for just a fraction of that sum. Because its insureds actually paid less, not more, than their pro rata share of the damages, National Indemnity cannot use the new American Motorcycle partial indemnification rule to recover from the United States.
VII
CONCLUSION
The judgments of the district court are AFFIRMED.
. The judgments below were rendered before the California Supreme Court decided American Motorcycle. Nonetheless, American Motorcycle controls because the instant case was tried subsequent to the decision of Li v. Yellow Cab Co., 13 Cal.3d 804, 119 Cal.Rptr. 858, 532 P.2d 1226 (1975), which adopted comparative negligence. See Safeway Stores, Inc. v. Nest-Kart, 21 Cal.3d 322, 146 Cal.Rptr. 550, 579 P.2d 441, 447 (1978).
. We also agree with the California Supreme Court’s conclusion that the adoption of comparative negligence did not eliminate the reason for applying joint and several liability to concurrent tortfeasors:
“[Tjhe simple feasibility of apportioning fault on a comparative negligence basis does not render an indivisible injury ‘divisible’ for purposes of the joint and several liability rule. [A] concurrent tortfeasor is liable for the whole of an indivisible injury whenever his negligence is a proximate cause of that injury. In many instances, the negligence of each of several concurrent tortfeasors may be sufficient, in itself, to cause the entire injury; in other instances, it is simply impossible to determine whether or not a particular concurrent tortfeasor’s negligence, acting alone, would have caused the same injury. Under such circumstances, a defendant has no equitable claim vis a vis an injured plaintiff to be relieved of liability for damage which he has proximately caused simply because some other tortfeasor’s negligence may also have caused the same harm. In other words, the mere fact that it may be possible to assign some percentage figure to the relative culpability of one negligent defendant as compared to another does not in any way suggest that each defendant’s negligence is not a proximate cause of the entire indivisible injury.”
American Motorcycle Ass’n., supra, 20 Cal.3d at 588-89, 146 Cal.Rptr. at 188, 578 P.2d at 905. The court also noted that “the overwhelming majority of jurisdictions which have adopted comparative negligence have retained the joint and several liability doctrine.” Id. 146 Cal.Rptr. at 189, 578 P.2d at 906.
. In Mattschei v. United States, supra, 600 F2d at 209, the court said:
“The United States argues that where a comparative negligence rule prevails, its liability is limited to its own share of the negligence which caused an injury. It cites the FTCA, which allows suit against the Government only if injury is “caused by the negligent or wrongful act or omission of any employee of the Government . .. ” 28 U.S.C. § 1346(b). It argues that the statute prohibits the Government from bearing more than its share of the liability in a jurisdiction where comparative negligence provides the mechanism for establishing its share of the liability in the principal suit. We reject the Government’s contention.
The statute plainly makes the United States liable ‘in the same manner and to the same extent as a private individual under like circumstances’ in accordance with ‘the law of the place where the wrongful act or omission occurred.’ The United States is seeking different treatment than that given to California private tortfeasors. We find no indication in the statute or its history that Congress intended to reject the doctrine adopted by the California Supreme Court that a cotortfeasor is liable to the plaintiff for the whole of an indivisible injury caused by his negligence, even if equitable indemnity is available against the other cotortfeasors.” (footnote omitted).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
GARDNER, Circuit Judge.
Appellees Missouri State Life Insurance Company and Burk Mann, trustee, commenced this suit in equity to foreclose a real estate mortgage deed of trust which secured payment of $240,000 and interest. The deed of trust covered lands in several counties in Arkansas. Defendants in the lower court were Hughes Investment Company, a corporation, Arthur F. Douglas, record owner of the land, and various individuals comprising a committee known in the record as the committee for the protection of holders of bonds sold through G. L. Miller & Co., Inc., and others. The Hughes Investment Company filed an answer denying the allegations of the bill for foreclosure. The committee and Arthur F. Douglas filed answer and cross-bill. The issues before us are those raised by this cross-bill and the answer thereto.
In the cross-bill it is alleged that the committee were the victims of a fraud perpetrated by the Missouri State Life Insurance Company and its representatives, in a transaction involving the exchange by the committee of property known as the Medical Arts building in Memphis, Tenn., for a consideration partly in cash and partly in a first mortgage note secured by a deed of trust on Arkansas lands. The committee demanded damages for fraud and deceit in the sum of $210,000.
The case was referred to a special master, with directions to take the testimony and to report findings of fact and conclusions of law. In due time the master made and reported findings to the effect that the fraud alleged had been committed, and that the committee had suffered damages thereby in the sum of $210,000. Exceptions to the report were filed, and the lower court, upon hearing, sustained all of the exceptions and filed findings of fact and conclusions of law of its own, and entered decree thereon in favor of the appellees, dismissing the cross-bill for want of equity, and decreeing foreclosure of the trust deed for the full amount of the debt thereby secured. From this decree, the cross-complainants appealed to this court, and, because of procedural defects, we reversed the judgment. Roosevelt v. Missouri State Life Ins. Co., 70 F.(2d) 939. On remand to the lower court, this defect was remedied, and thereupon the lower court again made findings of fact and conclusions of law which are identical with those formerly made, and entered decree of foreclosure and dismissed the cross-bill. The record having been perfected, the case is now before us on the merits.
To understand the relationship of the insurance company, the committee, and other parties, and the nature of the transaction in which fraud is alleged to have been perpetrated, it is necessary to detail some otherwise unrelated facts which appear in the court’s findings, or from undisputed evidence.
A Mrs. Rees owned a lot in the business section of Memphis, Tenn. G. L. Miller & Co., of New York, investment bankers, made a specialty of taking mortgages upon urban property to secure bond issues which they sold, using the proceeds in financing the construction of buildings. This concern and Mrs. Rees became interested in the erection of a building on her lot in Memphis, to be called the Medical Arts building. To that end Mrs. Rees and a Mr. Sackett organized a corporation called the Madison Building Company, to which Mrs. Rees conveyed the lot. The Madison Building Company executed to G. L. Miller & Co. a mortgage to secure a bond issue amounting to $825,000. These bonds were sold to a great number of persons. Mrs. Rees at first took for her interest in the property a second mortgage, which she afterwards exchanged for preferred stock in the Madison Building Company. Before the building was completed, G. L. Miller & Co. failed. A receiver was appointed to take charge of the building in the suit of a mechanic’s lienholder. The trustee for the bondholders intervened, and the receivership was extended for their protection. Other holders of mechanics’ liens intervened. The Madison Building Company filed an answer, setting up that the mortgage was usurious.
A great part of the building had not been divided up by partitions, and with but little of it rented, the income was not adequate to pay the carrying charges. The total claims ahead of Mrs. Rees amounted to $1,010,500. In this condition of her affairs, she placed them in the hands of Fred Callahan, a lawyer in Memphis, Tenn., who made various unsuccessful efforts to refinance so as to save something for her, but accomplished nothing until he met Burk Mann, who suggested to him that the Missouri State Life Insurance Company would be glad to exchange some of its lands in Arkansas for the office building in Memphis. Mr. Mann was a member of a firm of Arkansas attorneys who represented the life insurance company in its Arkansas foreclosure business, being regularly retained and on a salary basis. After considerable negotiations between the insurance company and Callahan, they entered into a contract on the 21st day of July, 1927, by which it was provided that Callahan was to deliver to the insurance company $850,000 in bonds, secured by a first mortgage on the Medical Arts building; that a corporation which he would organize, and which would execute the mortgage, would finish the building °and clear it of liens, and to guarantee his so doing, he would deposit with the insurance company the sum of $31,000. In consideration of the delivery of the bonds, the insurance company was to pay Callahan $100,000 in cash, from which the $31,000 to be deposited to secure completion of the building was to be deducted, and convey to him by warranty deed, free of all liens except the taxes and assessments becoming payable after the year 1927, lands to be selected by Mann, of the value of $750,000, according to the cost to the insurance company on the day they were transferred to its real estate division after foreclosure. The insurance company also agreed that it would loan to Callahan $120,000 on $220,000 in value of the lands, valued as above set forth. The insurance company also agreed to convey to Callahan, or his nominee, lands which the insurance company carried on its books at a value of $430,000, which lands were to be used by Callahan in settling with the holders of the bonds on the Medical Arts building. The insurance company further agreed that it would give Callahan, or his assigns, an option to borrow $215,000 from the insurance company, which loan should be secured by a first mortgage on the $430,-000 list of lands. The contract further provided that unless the deal should be concluded on or before October 15, 1927, it should become null and void at the option of the insurance company. This time was, on August 22, 1927, extended to November 15, 1927.
After this contract with the insurance company had been tentatively agreed upon, but before the date of the execution of the formal contract, Callahan had several meetings with the committee representing the bondholders of G. L. Miller & Co., appointed by the United States District Court at New York City in a bankruptcy proceeding of the G. L. Miller & Co. On July 17th and 18th, Callahan submitted to the committee a proposal for contract, and this proposal was accepted by the committee, but it was contemplated by the parties that a formal contract would be executed at a later date; and on August 3, 1927, the committee and Callahan entered into a formal contract which was, however, subject to the approval of the United States District Court for the Southern District of New York. By the terms of this contract, the committee agreed to transfer to Callahan the title to the Medical Arts building, free of liens, and as consideration for such transfer, Callahan agreed to pay the committee $170,000 in cash, and to deliver to the committee a first mortgage note for $430,000 to be executed by a corporation to be organized by Callahan and to be secured by a mortgage on approximately' 8,500 acres of land theretofore acquired by the real estate division of the insurance company by foreclosure of first mortgages, the value of such lands to be ascertained by their cost to the insurance company.
On September 3, 1927, an agreement was entered into between the insurance company and the committee, in pursuance of the contract with Callahan, and by this contract the insurance company agreed directly with the committee that the insurance company would carry out its contract with Callahan. The committee hesitated to recommend to the court the confirmation of the contract, and demanded of Callahan that there either be more land included in the mortgage, or that the amount of the loan by the insurance company be increased from $215,000 to $240,000. On September 7, 1927, the insurance company agreed to increase the loan to $240,000 oh the land conveyed, as the basis of the $430,000 mortgage, and on that date the insurance company delivered to the committee the appraisals and other information which Callahan had contracted to present not later than the date of the hearing before the court.
On the evening of September 8, 1927, Callahan had a long interview with the New York attorneys of the committee, as a result of which, and at the suggestion of the committee’s attorneys that he “put in writing his statement as to the value of these lands in order that we could have something for the consideration of the committee and of the court in definite form,” he wrote to the chairman of the committee, Mr. Roosevelt, a letter which Mr. Foster, one of the committee’s attorneys, helped him to prepare from the data at hand, in which he set forth accurately the acreage, the character of each tract of land, the amount of the original loan upon it by the insurance company, and the foreclosure cost. This letter shows that the lands aggregated 10,128 acres, appraised by the insurance company before its original loans were made at $889,158, and costing on foreclosure sales $430,378.36. At this interview, Callahan stated that he had not seen any of the lands on which the $430,000 mortgage was to be executed, but he presented letters from leading real estate firms in Memphis, Tenn., giving the average value of improved and unimproved lands in the counties where these lands lay. He embodied in his letter an analysis of these estimates, showing the value of cleared lands in Crittenden county $93.75 per acre, uncleared lands $17.50 per acre, and a similar average valuation for each of the other counties. Mr. Mann was present at the conference, but took no part in it, and stated in reply to inquiry that he knew nothing about the lands. He was requested to appear in court the following day, but declined so to do, saying that he could give the court no information.
Since the letter of September 8th was written by Callahan at the request of representatives of the committee, and was apparently intended to summarize in written form his statements as to the value and general character of the lands, and since it was prepared for the purpose of use by the committee and the court, and since no objection has appeared to its fairly representing what was said by Callahan, we shall again refer to it as the best and most accurate evidence of what he did say at this conference.
It is here observed that the letter lists each tract of land separately, classifies the acreage of each tract, and places a value on each class of land. For instance, tract No. 90 is listed as 1,800 acres cultivated land at $100; 200 acres pasture at $50; 200 acres timber at $30; 100 acres lake, no value. Tract No. 92 is listed as 160 acres cultivated land at $75; 100 acres almost cleared at $60; 60 acres timber at $40. Submitted with the letter were pliotostatic copies of inspectors’ reports. These reports were those made by the insurance company’s inspectors as the basis for making the original loans. The letter closes with the following paragraph:
“While I have not personally inspected any of the lands, and the information furnished you is based upon appraisals made by the Missouri State Life Insurance Company, and from other sources mentioned above, I feel that it is fair to assume that the Insurance Company employed competent inspectors, and that the appraisals made by said inspectors, which I herewith submit, furnish the best available data as to the value as of the date of inspection, i would further state that Mr. C. W. Watson, of Marx & Bensdorf, and Mr. C. F. Williams, of Bolton Smith & Company, have no personal interest in this matter and are both connected with old and reliable firms of Memphis, Tennessee.”
On the next day, Mr. Roosevelt, chairman of the committee, and Mr. Callahan appeared before the United States District Court, Judge Mack presiding, and a hearing was had. Some of the bondholders objected to the proposed arrangement, calling attention to the fact that the farm lands were of very little value at that time, and that they did not think the Memphis property should be exchanged for farm land, but the court finally approved the arrangement on condition that the loan should be increased from $215,000 to $240,-000, and that the committee should not be required to bid for the Medical Arts building more than $500,000. At this hearing, the letter of Callahan to the committee was read in open court, and Mr. Callahan was interrogated by Judge Mack relative to the properties. The court inquired of the committee whether it had had an inspection and appraisements of the land and Mr. Roosevelt replied that they had not, but that they could have the lands appraised in ten days at a cost of $500. He asked for no postponement of the hearing in order that an appraisement might be made, and the proposed exchange was finally approved by the court.
Following this meeting in New York, Callahan returned to Memphis and organized the Hughes Investment Company, to which the 10,128 acres of land were conveyed on October 28, 1927, and on the same day the Hughes Investment Company made a mortgage of $430,000 to William P. Metcalf and the First National Bank of Memphis, as trustees for the committee. The committee was required to exercise its option to borrow $240,000 on the lands within ninety days, which option was extended by the insurance company from time to time at the request of the committee.
In May, 1928, the committee had an appraisement of the lands made, which showed in detail their condition and valued the whole at $258,550.50, and on October 27, 1928, after knowledge of the value fixed by this appraisement, the committee exercised the option to obtain the loan of $240,000. On October 30, 1928, the Hughes Investment Company, which held title to the land, executed a- $240,000 mortgage on it to Burk Mann as trustee for the insurance company. On October 31, 1928, the Hughes Investment Company conveyed the land to Arthur F. Douglas as agent for the committee. The trustees in the $430,000 mortgage, at the request of the committee, subordinated it to the $240,000. The committee actually received' the $240,000 January 9, 1928, less $20,000 to pay taxes that had accrued on the land and the expense of recording the mortgage and subordination agreement.
The committee gave no notice, either to the insurance company or to Callahan, of an intention to repudiate the transaction or to claim that they had been induced to enter into it by fraud, until the cross-complaint was filed in this cause on January 24, 1930, and the Hughes Investment Company remained in possession of the lands until their conveyance to Douglas as agent for the committee, and the committee then continued in possession of the property, receiving the rents and profits until a receiver was appointed in this cause on the 9th of November, 1929. It is to foreclose this $240,000 mortgage that this suit was brought.
The questions on this appeal may be grouped as follows: (1) Whether the findings of the master were reviewable by the District Court, and, if so, to what extent; (2) whether the Missouri State Life Insurance Company, by fraudulent misrepresentation or concealment through Callahan and Mann, or either, mislead the committee as to the condition and value of farm lands; and (3) whether the appellants by their acts have waived their right to sue for. damages for fraud and deceit, or are es-topped so to do.
The contention of appellants that the findings of the master were not reviewable by the lower court was, we think, disposed of adversely to the appellants by this court on the former appeal. Roosevelt v. Missouri State Life Insurance Co., 70 F.(2d) 939.
Equity Rule 61% (28 USCA following section 723) specifically provides that: “The report of the master shall be treated as presumptively correct, but shall be subject to review by the court, and the court may adopt the same, or may modify or reject the same in whole or in part when the court in the exercise of its judgment is fully satisfied that error has been committed.”
True, the rule provides that when a case or any issue is referred by consent, and the intention is plainly expressed in the consent order that the submission to the master is as an arbitrator, the court may review the same only in accordance with the principle covering a review of an award by an arbitrator; otherwise, the report of the master is not conclusive, but only advisory, and is subject to review by the court, and the court may either approve or disapprove, modify, or recommit the report, or it may do as it did in this' case, disaffirm the report, act upon the evidence reported, and enter its own findings. Boesch v. Graff, 133 U. S. 697, 10 S. Ct. 378, 33 L. Ed. 787; Denver v. Denver Union Water Co., 246 U. S. 178, 38 S. Ct. 278, 62 L. Ed. 649; Armstrong v. Lone Star Refining Co. (C. C. A. 8) 20 F.(2d) 625; Parker v. Interstate Trust & Banking Co. (C. C. A. 5) 56 F.(2d) 792; Roosevelt v. Missouri State Life Ins. Co. (C. C. A. 8) 70 F.(2d) 939; Holt Mfg. Co. v. C. L. Best Gas Traction Co. (D. C.) 245 F. 354; Edwards Co. v. La Dow (C. C. A. 6) 230 F. 378; Stokes v. Williams (C. C. A. 3) 226 F. 148; Byers v. Federal Land Co. (C. C. A. 8) 3 F.(2d) 9; Simkins Federal Practice § 843.
The report of the master, when submitted to the trial court, is clothed with the presumption of correctness, and if it is approved by the trial court it is clothed with the presumption of correctness in the appellate court, but where the trial court, notwithstanding this presumption, has disapproved and set aside the report, then it cannot be said that the presumption of correctness is attributable to it in the appellate court. That presumption is overcome by the adverse finding of the lower court, and we must accept the findings of the court as presumptively correct, although the presumption is doubtless weakened by the fact that its findings are in conflict with those made by the master. Where, as in the instant case, findings of the master and the court conflict, it is the duty of this court to examine the evidence and determine the facts.
While this suit was commenced as one in equity, the issues involved are those arising on the cross-complaint of the appellants, by which they pleaded an action at law to recover damages for fraud and deceit. To entitle a party to recover in such an action, there must have been actual fraud resulting in damages. As said by us in Boatmen’s Nat. Co. v. Elkins & Co., 63 F.(2d) 214, 216: “To sustain an action for damages for fraud and deceit, the representation made (1) must have been as to material facts; (2) it must have been knowingly false; (3) it must have been made with the intention that it should be acted upon by the person to whom made; (4) that person must have been ignorant of its falsity; (5) he must have relied on its truth; and (6) the false representation must have been the proximate cause of the injury or damage.”
The elements and characteristics of such an action are well stated by this court in an opinion by Judge Hook in Kimber v. Young, 137 F. 744, 747, where it is, among other things, said: “To afford sufficient basis for an action of deceit the representation must have been of material facts, and must have had such relation to the transaction in hand as to operate as an inducement to the action or omission of the complaining party (Slaughter’s Adm’r v. Gerson, 13 Wall. 379, 383, 20 L. Ed. 627; Smith v. Chadwick, 20 Ch. Div. 27); and it must have been relied on by him (Marshall v. Hubbard, 117 U. S. 415, 6 S. Ct. 806, 29 L. Ed. 919; Ming v. Woolfolk, 116 U. S. 599, 6 St. Ct. 489, 29 L. Ed. 740; Stratton’s Independence v. Dines [C. C.] 126 F. 968, 977). The basis of the action of deceit is the actual fraud of defendant — his moral delinquency; atid therefore his knowledge of the falsity of the representation, or that which in law is equivalent thereto, must be averred and proved. There is much confusion in the authorities upon this subject, due in part to the erroneous assumption that that which is merely evidence of fraud is equivalent to the ultimate fact which it tends to prove, and also to the assumption, likewise erroneous, that an untrue representation which would be sufficient to support a suit in equity for a rescission of a contract is equally as available in an action of deceit. * * * The false representation relied on as the ground of an action of deceit must have accomplished the purpose of deception. Ming v. Woolfolk, supra. The plaintiff must have used due diligence to discover for himself the truth or falsity of the representation (Upton v. Tribilcock, 91 U. S. 45, 23 L. Ed. 203), or the relations of the parties to each other or the location or character of the subject-matter of the transaction must have been such as to excuse investigation and to justify his reliance upon the assertion of the other. Again, the representation must be of existing and ascertainable facts, and not mere promissory statements based upon general knowledge, information, and judgment. Sawyer v. Prickett, 19 Wall. 146, 22 L. Ed. 105; Patent Title Co. v. Stratton (C. C.) 89 F. 174, 178. It was said in Union Pacific Ry. Co. v. Barnes [(C. C. A.) 64 F. 80], supra: ‘An action for false and fraudulent representations can never be maintained upon a promise or a prophecy.’ Nor is mere expression of opinion sufficient, though it be false, and be expressed in strong and positive language. Johansson v. Stephanson, 154 U. S. 625, 14 S. Ct. 1180, 23 L. Ed. 1009. Positive statements as to value are generally mere expressions of opinion and as such cannot support an action of deceit. Gordon v. Butler, 105 U. S. 553, 26 L. Ed. 1166; Blease v. Garlington, 92 U. S. 1, 9, 23 L. Ed. 521.”
See, also, United States v. Beebe, 180 U. S. 343, 21 S. Ct. 371, 45 L. Ed. 563; Southern Development Co. v. Silva, 125 U. S. 247, 8 S. Ct. 881, 31 L. Ed. 678; Woods-Faulkner & Co. v. Michelson (C. C. A. 8) 63 F.(2d) 569; Boatmen’s Nat. Co. v. Elkins & Co. (C. C. A. 8) 63 F.(2d) 214; Gleason v. Thaw (C. C. A. 2) 234 F. 570; Kell v. Trenchard (C. C. A. 4) 142 F. 16.
The charge of fraud is based upon certain alleged misrepresentations by Callahan as to the nature, character, condition, value, and income of these Arkansas farm lands at the conference held at the New York hotel on the evening of September 8, 1927, and in the District Court of New York on the following day. At the conference, Mr. Mann was present, and it is claimed that his silence was such as to imply an acquiescence of the Missouri State Life Insurance Company, which he represented, in the statements made by Callahan. It is important, in considering this testimony, to note the relation of the parties. The bondholders’ committee consisted of intelligent business men, who, in all they did, acted under advice of counsel. At this conference, they were represented by members of the committee and by at least three attorneys, and at the court hearing which followed, they were represented by eminent counsel. One of their attorneys had, prior to that time, been driven 150 miles through the territory where a considerable portion of the lands were located, and the committee had a local attorney at Memphis, Tenn. There were no trust relations between the parties, and they were at liberty to deal with each other at arms length. At the conference there was apparently a great deal of general discussion as to the land values. There was before the committee at this conference the report of the insurance company’s inspectors on each of these tracts of land on which the insurance company had originally made a loan. This report contained an appraisal of each tract of land. There was before the committee evidence as to the amount of the loan originally made by the insurance company, the fact that the mortgage had been foreclosed, and the amount at which the property had been bid in by the insurance company. These report's of the inspectors classified the lands embodied in each tract and separately placed a valuation on each class of land. There were before the committee letters from certain real estate firms in Memphis, Tenn., giving an estimate of certain classes of land in the counties in which these properties were located, but giving no information as to these' particular lands, and Mr. Roosevelt expressed the view that these real estate firms were reliable, and he seems to have had some acquaintance with certain of their members.
At that conference, Callahan specifically said that he had never seen nor inspected any of the lands in question. Mr. Foster, one of the committee’s attorneys who attended the conference, in his testimony relative to this conference, says: “After a long conference preliminary, we suggested that Mr. Callahan put in writing his statement as to the value of these lands in order that we could have something for the consideration of the committee and of the court, in definite form.”
In referring to the letter, this witness further says: “In preparing the figures, the analysis of the various tracts was obtained from the appraisal reports, with the exception of the foreclosure costs, which was merely a statement by the Missouri* Life Insurance Company. Mr. Callahan then reduced the computation of the foreclosure costs, divided by the number of acres, to an average of slightly under $42.50. Then 'Mr. Callahan computed with my assistance the average value of cleared! and uncleared land in the counties of Crittenden, Jefferson, Mississippi and Poinsett,, taking the average values given by Bolton-. Smith and Marx & Bensdoi;f, and then applying these average figures for cleared! and uncleared land to the amount of cleared or cultivated land on the one hand, and to the timbered and uncleared land, and obtained a value on this average valuation* basis of $577,923.75, before making any allowance for the value of the improvements. He then took the aggregate value-of the improvements as shown on the appraisal reports, $99,750.00, and added that figure to the total value of the lands without improvements, making a total valuation of $677,673.75.”
The committee, therefore, knew exactly how the letter was prepared, and had in-their hands the data from which it was-compiled, and apparently accepted it as a. summary in written, definite form of his. statements as to the value of the lands. It was not only prepared at the suggestion of' the committee for that purpose, but was. used by the committee and the court as. representing all that Callahan knew with reference to these properties. We have already adverted to the fact that Callahan at no time represented that he had any personal knowledge as to the character, condition, or value of these lands, and in his letter, after stating that he had not personally inspected any of the lands, he refers to the-appraisals as made by the inspectors of the insurance company in the following language : “I feel that it is fair to assume that the Insurance Company employed competent inspectors and that the appraisals made by said inspectors, which I herewith submit, furnish the best available data as. to the values as of the date of the inspection.”
This is in the nature of an argument,, and it refers to values, not at the time of the conference, but at the time the appraisals were made, which was in 1918 to-1920. The evidence indicates that either at the conference, or on the following day, he said that the lands throughout the delta were all alike and equally suitable for cotton farming. He said that the lands were.overflowed to a minor extent by a levee break. He also gave it as his opinion that the fair rental was $10 per acre for cotton lands. At the hearing before Judge Mack, Mr. Roosevelt, with his three attorneys, appeared, as did also Mr. Callahan. At this hearing, Judge Mack pointed out that there were no figures as to the present values of the lands, and that there were opinions only as to the general average of land in the counties. Callahan said he was making a statement from his knowledge concerning conditions in and about Memphis, his home, and that the lands involved were across the river; that he was not a land man, but a lawyer, but he was a large landowner and felt that he was qualified to say something at least concerning the prospects or future of farm lands in his section. He pointed out that during the World War, cotton planters were prosperous, and that after the war cotton sold for less than it cost to produce it; that planters lost their lands, but cotton had gone up very rapidly, and he expressed the opinion that there would be no telling where the end would be. He said: “Income from those 5600 acres of land should be between $15.00 and $10.00 per acre. I am speaking of usual conditions in the cotton belt, and the land rent usually runs from $10.00 to $15.00 per acre.”
Here the court interrupted: “How much of that land is cotton land?” Mr. Callahan replied-: “How much of it is cultivated?” This interrogation seems to have been addressed to Mr. Foster, one of the committee’s attorneys. At any rate, Mr. Foster spoke up and said, “5,500 acres.” Mr. Callahan then said his client (Mrs. Rees) reasonably should expect an income of from fifty to fifty-five thousand dollars from these lands. The court then said that the taxes and interest would amount to $36,000. Callahan said: “That would leave, your Honor, if my guess is right, that would leave some twenty or twenty-five thousand dollars, or fifteen or twenty thousand dollars of it to the present holders, with the prospect of things getting better, and how they can get worse I cannot imagine, and that would leave a margin above that.”
The court asked about the levee break, and Callahan said that his understanding, from reliable sources, was that only one plantation was affected by the overflow. The court said: “You do not know what the effect on that particular parcel is, of the break?”
Callahan answered: “No, sir, your Hon- or, I do not; but I do know this, I know that plantations thirteen miles away from the bad break at Stops Landing, that the effect was beneficial in that it made the land more fertile and much better for planting purposes, and my own plantation was improved by the deposit of new soil or silt, as they call it on the plantation. Now, that is all I can say on that subject.”
Referring to the statements from the Memphis real estate agents, the court said: “But none of these appraisals refer specifically to this land, they refer to the general average of lands in those counties.”
Callahan then said: “Well, for six hundred miles, your Honor, — of course this is just my statement — but for six hundred miles the delta looks all alike, one plantation looks just like another, and the man who gives you his guess knows about the general values of the delta, and those appraisals cover almost completely the value of the particular plantations as if he had made a specific appraisal of these particular plantations.”
In this entire recital, there cannot be said to be a statement of any present material fact. As to rental values generally, what Callahan said was less than an opinion — it was prophecy, and known to be such at the time the statements were made. In this connection he used the words “prospects or future.” As to the statement with reference to the overflow of the lands, he disclaimed any knowledge,' but stated the effect of overflow on lands some 13 miles distant from the break, and there is no suggestion of any proof that either of these statements were false. As to his general statement that for 600 miles the delta looks all alike, it is observed that he says: “Of course, this is just my statement.” Mr. Foster had viewed these lands on his 150-mile drive, but, in addition to all this, the statement bears on its face evidence that it was given as a general statement, which was not intended to apply to individual peculiar differences in the various tracts. In fact, the court and the committee were advised by the very letter which Callahan had prepared, in which he summarized the appraisal reports of the insurance company, that these lands were not all alike. These appraisals showed valuation on cultivated lands from $75 to $150 per acre, and on timber land from $20 to $60 per.acre. The letter which was read at the hearing showed that there were not only timber lands and cultivated lands, but partly cleared tracts, roughly cleared tracts, cleared land, some “slashed” land, partly marshy; 760 acres in Poinsett county was described as being “unimproved, valued a,t $60.00 per acre in timber.” Then, too, the letter from Bolton Smith & Co. showed that the average value of cultivated land in Jefferson county runs from $75 to $100 an acre, while cut-over lands in Jefferson county runs from $75 to $100 an acre; that cut-over lands and the woods lands would run from $10 to $25 an acre; that in Mississippi county the cultivated lands run from $100 to $150 an acre, and the woods lands from $15 to $40 an acre; in Poinsett county the cultivated lands run from $60 to $90, and the woods lands from $5 to $15. The Marx and Bensdorf letter contained similar data as to the various classes of lands shown by these reports in these various counties.
The appraisals furnished by the insurance company were in the hands of Mr. Foster for two days before the hearing, and he said he gave them careful examination and discussed them with certain members of the Root law firm, who were co-operating with him in the matter, and these appraisals showed variation in the lands, so that all the parties to the transaction had before them writings and documents showing that these general statements attributing a uniformity to the lands were not strictly accurate; in fact, Callahan refers to them as “just my statement.” Neither Callahan nor any one present considered these general statements as literally true, and as stated by us in Kimber v. Young, supra, “The plaintiff must have used due diligence to discover for himself the truth or falsity of the representation,” and here the evidence refuting the literal accuracy of this statement was before the parties and had been furnished by the witness himself. The parties were considering property which neither of them had seen. The committee, therefore, knew that any statements made by Callahan were not based upon personal knowledge, and it is not claimed that he did not correctly present the data upon which he based his statements, to wit, the reports of the inspectors for the insurance company and the letters from the Memphis real estate firms.
It is important in this connection,to consider the situation of these bondholders. There were many of them, their individual holdings were small, and they were widely scattered. Their bonds were secured by a mortgage on the Medical Arts building in process of construction. The building contractor had ceased operations. There were liens upon the property superior to the mortgage that were being foreclosed by foreclosure suit then pending, in which a receiver had been appointed. There had been levied upon the building an execution for $56,000. There was a mechanic’s lien of $29,000. There was $8,000 due for taxes. There were outstanding receiver’s certificates to the amount of $32,000, while the bondholders held bonds aggregating $825,-000
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
SOLOMON, District Judge:
This case involves the validity of a patent on a plastic tie strip and a method for manufacturing the product. It also involves a license agreement for the patent rights and for the know-how used to manufacture the patented tie strips. The District Court held the patent invalid and permitted rescission of the license agreement. The Court denied the licensor royalties after the filing of this action, denied the licensee recovery of royalties paid before the filing of this action, and granted the licensor some compensation for its know-how. Both parties appeal.
Some time before June 1950, Gerald Bower formed a partnership to develop and market a plastic tie strip which could be used to tie bunches of fresh vegetables. In June 1950, the business was incorporated under the name of Plas-Ties Corporation (Plas-Ties).
On June 2, 1952, Bower filed an application for a patent on a plastic tie strip and a method for making the tie strip. The Patent Office rejected all of Bower’s original claims, but he later succeeded by amendments to the application in getting some claims allowed on a narrower basis. A patent (U.S. Patent No. 2,767,113) was issued to Bower on October 16, 1956 (the Bower patent). The patented device consists of two plastic strips reinforced by a wire between them. The wire is embedded in one of the plastic strips and secured with a “cementitious substance” so that the casing cannot slide from or bunch up on the wire. The wire permits fastening the tie by merely twisting it. The plastic outer casing permits easy handling and prevents the wire from cutting the stalks of the vegetables.
In April 1963, Bower assigned his patent to Royal Industries (Royal), and Royal acquired 80 per cent of the outstanding stock of Plas-Ties. Bower owned the remaining 20 per cent of the stock, and he became president of Plas-Ties. In 1965, Royal acquired Bower’s shares and Plas-Ties became a wholly owned subsidiary.
St. Regis Paper Company (St. Regis) supplies wrapping paper to the bakery industry through one of its subsidiaries, Pollack Paper Company. The use of tie strips significantly changed the packaging of bakery products in the early 1960’s. The new method used a tie strip around one end of the package instead of having the package tightly sealed at both ends. St. Regis lacked the technical ability to manufacture tie strips. The Bower tie strips and the machines Bower developed were suitable for bakery packaging.
On May 1, 1963, Royal and its subsidiary Plas-Ties (hereinafter referred to jointly as “Royal”) entered into a license agreement with St. Regis. Under this agreement, Royal licensed St. Regis to use the Bower patent and Royal’s know-how to manufacture and sell the patented tie strips. St. Regis agreed to pay Royal 10 per cent of its net dollar sales as royalties and also agreed to pay all reasonable expenses incurred by Royal in transferring its know-how to St. Regis. The agreement provided that it would terminate upon the expiration of the Bower patent in 1973.
Royal did make its know-how available to St. Regis. From 1963 to 1967, St. Regis paid Royal $174,642.04 for royalties and expenses.
Later, a dispute unrelated to this action arose between Royal and St. Regis on whether they had entered into an oral price fixing agreement. The dispute resulted in litigation between the parties. In preparing for that litigation, St. Regis discovered evidence which it believed showed that Bower’s patent was invalid. St. Regis stopped paying royalties after July 19,1967. On April 24, 1968, St. Regis brought this action against Royal and Plas-Ties to declare the Bower patent invalid, to rescind the license agreement, and to recover royalties it paid. In a counterclaim, Royal sued St. Regis for patent infringement.
The District Court held the Bower patent invalid. It also dismissed Royal’s counterclaim. The Court held that St. Regis was entitled to rescind the license agreement, but denied St. Regis and Royal a money judgment against the other. In other words, the Court held that St. Regis could not recover the royalties it had paid, and Royal could not collect additional royalties under the license agreement. The Court awarded Royal the reasonable value of its know-how, but found that this amount had been fully satisfied by St. Regis.
Both parties have appealed. The appeals raise four issues:
(1) Is the Bower patent valid?
(2) If the Bower patent is invalid, is St. Regis entitled to recover royalties it paid to use. the patent?
(3) If the Bower patent is invalid, is Royal entitled to recover royalties for its know-how?
(4) Is St. Regis entitled to attorney fees?
I. VALIDITY OF THE PATENT
The District Court held that the Bower patent was invalid for obviousness and because of a false oath, which failed to disclose that the patented product had been on sale for more than one year prior to the filing of the patent application.
A condition of patentability under the Patent Act of 1952 is non-obviousness. Section 103 of the Act provides:
“A patent may not be obtained . if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.” 35 U.S.C. § 103.
Royal contends on appeal that the District Court failed to apply the proper standard for determining obviousness.
The issue of obviousness is ultimately a question of law, but the underlying analysis is one of fact. Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966). The Supreme Court in Graham set forth the standard for determining obviousness under Section 103. The court must determine the scope and content of the prior art, the differences between the prior art and the claims at issue, and the level of ordinary skill in the pertinent art.
Here, the District Court determined that the prior art consisted of two lines of teachings. One consisted of tie strips manufactured and sold for more than a year before Bower applied for his patent. The other consisted of seven patents which teach the use of a cementitious substance to bind wire or cord between two sheets of paper or other material.
The Court compared the teachings of the prior art with the claims of the Bower patent. It found that it was undisputed that tie strips manufactured and sold by Plas-Ties for more than a year before Bower applied for his patent were identical to the claims of the Bower patent, except for the use of a “cementitious coating” in the Bower patent to bind the wire to the plastic strips. And the Court found that the Wisbrock, Schindler, Crosby, Wick, and French patents teach the use of a cementitious substance to secure wire or cord between pieces of paper or other materials in the same manner and for the same purpose as the Bower patent.
Finally, the Court accepted the testimony of St. Regis’s expert witness (Dean Fischer) on the level of skill in the art. Fischer testified that in view of prior teachings and the prior public use of unbonded tie strips, the product claimed in the Bower patent would have been obvious to a person of ordinary skill in the art.
Royal also argues that the Court failed to give proper weight to the presumed validity of a patent. Any such presumption would disappear, or at least be weakened, when it is shown that all the prior art had not been brought to the attention of the patent examiner. 35 U.S.C. § 282; Alcor Aviation, Inc. v. Radair, Inc., 527 F.2d 113, 115 (9th Cir. 1975), cert. denied, 426 U.S. 949, 96 S.Ct. 3170, 49 L.Ed.2d 1186 (1976).
Claim 1 of the Bower patent describes a product which depends both on the position of the wire (embedded in one of the plastic strips) and the use of a “cementitious coating” to bind the wire to the plastic strips. The District Court, based on the file wrapper, found that the patent examiner was persuaded to allow claim 1, not because of the cementitious coating, but by the argument that Bower’s positioning of the wire was a novel solution to the problem of enabling the plastic to get a good grip on the wire. Nevertheless, at the trial Royal did not dispute that more than a year before the patent application, Plas-Ties manufactured and sold tie strips which conformed in every respect to the claims of the Bower patent except for the use of a cementitious coating on the wire. These findings at least raised an issue whether Bower misrepresented the state of the prior art in his patent application and weakened the presumption of validity. See Monroe Auto Equipment Co. v. Superior Industries, Inc., 332 F.2d 473, 482 (9th Cir.), cert. denied, 379 U.S. 901, 85 S.Ct. 190, 13 L.Ed.2d 175 (1964).
We hold that the Bower patent is invalid for obviousness. Because we affirm the District Court’s holding of invalidity for obviousness, we need not reach the second ground, Bower’s false oath.
II. THE LICENSE AGREEMENT
Under the license agreement, Royal licensed St. Regis to manufacture plastic tie strips using the Bower patent and Royal’s know-how. In return, St. Regis agreed to pay Royal 10 per cent of net dollar sales in royalties.
The agreement provided for the possibility that the Bower patent might be declared invalid. Section 12(b)(1) of the agreement stated:
“12. This agreement shall terminate upon the expiration of United States Patent No. 2,767,113, which is October 16, 1973, unless sooner terminated as hereinafter provided .
(b) Pollock may terminate this agreement after the expiration of three years from the effective date of this agreement by serving six months written notice on Royal to that effect, in the event that:
(1) Said Patent No. 2,767,113 is held invalid or so restricted in scope as to substantially lessen the protection of said patent by the final judgment of a court from which no appeal has been or can be taken . . . .”
St. Regis stopped all royalty payments on the basis of Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), but it did not comply with the procedure for terminating the agreement set out in section 12(b)(1).
The District Court held that section 12(b)(1) of the agreement was unenforceable under Lear, and that St. Regis did not have to pay royalties after the filing of this action.
The Court also held that St. Regis was entitled to rescind the agreement because the patent was invalid and because Bower knew the patent was invalid, which knowledge was imputed to Royal. The Court found that Royal was entitled to compensation for the know-how it conveyed to St. Regis and fixed the value of the know-how at $53,088.90. But the Court denied Royal payment on the ground that this amount had been fully satisfied by the royalty payments of more than $174,000, which St. Regis had paid Royal from 1963 to 1967. The Court disallowed St. Regis’s claim for royalties paid before this action was filed.
A. Refund of Royalties Paid
In Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), the Supreme Court rejected the doctrine of licensee estoppel which prohibited a licensee from challenging the validity of his licensor’s patent in an action for royalties under the license agreement. Under the Lear doctrine, a licensee can avoid payment of royalties withheld before the patent was declared invalid.
The question here is whether a licensee can recover royalties on a patent paid before filing an action in which the patent was found to be invalid. The Court in Lear was not faced with this issue because the licensee had paid no royalties after the patent was issued.
St. Regis contends that under California law it is entitled to restitution of all royalties paid to Royal under the license agreement less the value of Royal’s know-how. St. Regis relies on California Civil Code, Section 1692, which it contends provides for “automatic” restitution of benefits conferred when a contract is rescinded.
Section 1692 provides:
Ҥ 1692 Relief based on rescission
The aggrieved party shall be awarded complete relief, including restitution of benefits, if any, conferred by him as a result of the transaction and any consequential damages to which he is entitled; but such relief shall not include duplicate or inconsistent items of discovery.
If in an action or proceeding a party seeks relief based upon rescission, the court may require the party to whom such relief is granted to make any compensation to the other which justice may require and may otherwise in its judgment adjust the equities between the parties.”
Section 1692 was designed to eliminate the confusing and complex duality of rescission procedures which existed in California by providing a single procedure to be followed in all cases where rescission is sought. Runyan v. Pacific Air Industries, Inc., 2 Cal.3d 304, 85 Cal.Rptr. 138, 466 P.2d 682 (1970). The provision permits a court in an action for rescission to grant any relief, including restitution and consequential damages, to which a party is entitled. It does not require restitution even when rescission is ordered. Restitution is discretionary with the court.
We believe that St. Regis is not entitled to restitution in this case due to overriding federal patent law policies.
The Sixth Circuit considered the Lear doctrine in light of the goals sought to be achieved and concluded that the federal policy which permits a licensee to assert invalidity of the underlying patent does not entitle the licensee to a refund of all royalties paid for the use of the invalid patent. See Troxel Mfg. Co. v. Schwinn Bicycle Co., 465 F.2d 1253 (6th Cir. 1972) (Troxel I); Troxel Mfg. Co. v. Schwinn Bicycle Co., 489 F.2d 968 (6th Cir. 1973), cert. denied, 416 U.S. 939, 94 S.Ct. 1942, 40 L.Ed.2d 290 (1974) (Troxel II); Atlas Chemical Industries, Inc. v. Moraine Products, 509 F.2d 1 (6th Cir. 1974). See also Zenith Laboratories, Inc. v. Carter-Wallace, Inc., 530 F.2d 508 (3d Cir. 1976), cert. denied, 429 U.S. 828, 97 S.Ct. 85, 50 L.Ed.2d 91 (1976).
The Sixth Circuit noted that the Supreme Court in Lear rejected the estoppel doctrine on the ground that it effectively “muzzled” licensees who might be the only individuals with sufficient economic incentive to challenge the patentability of an invention. As stated in Lear, supra, 395 U.S. at 668, 89 S.Ct. at 1910 “federal law requires that all ideas in general circulation be dedicated to the common good unless they are protected by a valid patent.” This policy encourages full and free competition in the use of ideas which are in the public domain. Lear, therefore, is an inducement to an early adjudication of invalidity; but the Sixth Circuit cautioned that the possibility of a royalty refund might delay such a determination. The possibility of obtaining a refund of all royalties paid might induce a manufacturer to accept a license based on a patent of doubtful validity, derive the benefits of suppressed competition which the patent affords, and challenge validity only after the patent’s expiration. The licensee would have a chance to regain all the royalties paid while having enjoyed the fruits of the license agreement. Therefore, if a refund were permitted, licensees who were only recently unmuzzled by Lear would again be silenced by economic self-interest rather than by state law.
We agree with the reasoning of the Sixth Circuit, and we hold that St. Regis is not entitled to the refund of royalties paid before it challenged the validity of the patent.
In Troxel I, supra, at 1259, n. 5, the Court noted that it has been held without reliance on Lear that a licensee is entitled to recover royalties paid when the licensed patent was procured fraudulently. St. Regis, relying on that comment, asserts that it is entitled to restitution because Bower obtained the patent by fraud. Even if fraud is a proper basis for allowing recovery of royalties, here the District Court found there was no fraud. The findings of the Court on this issue are not clearly erroneous.
B. Payment for Know-How
Royal contends that the District Court erred when it held section 12(b)(1) unenforceable. It asserts that the Court failed to distinguish between the payment of royalties for the patent rights and payment for the know-how. Royal concedes that if the patent is invalid, it is not entitled to the payment of royalties for the patent rights on the basis of section 12(b)(1); but it contends that section 12(b)(1) is valid and enforceable on royalties for know-how.
RoyaFs know-how consisted of the knowledge of how the machinery used to manufacture plastic tie strips was constructed, and how this machinery operated. It included detailed information of the process for manufacturing the patented tie strips, a list of material suppliers, and work room dimensions. An employee of St. Regis spent several weeks at Royal’s plant studying the manufacturing process. The District Court found that this know-how was fully revealed to St. Regis.
The Court found that Royal’s know-how was not essential to the manufacture of the patented plastic tie strips, but was valuable to St. Regis because it permitted St. Regis to enter the plastic tie market sooner. St. Regis bargained both for the right to use the Bower patent and for the know-how needed to use the patent effectively. The know-how was closely related to the patent rights. This interdependence is reflected in the provision sought to be enforced.
Section 12(b)(1) provides that St. Regis may terminate the agreement if the patent is declared invalid. Royal’s attempt to separate the know-how from the patent rights and to enforce the agreement for know-how alone is inconsistent with section 12(b)(1) and, we believe, contrary to the intent of the parties.
When, as here, the patent rights and the know-how are so intimately intertwined, we believe that the same rule which makes royalties for patent rights uncollectible if the patent is invalid should apply with equal force to know-how. This does not mean Royal will be deprived of compensation for know-how; it merely means Royal is not entitled to royalties under the license agreement, which did not distinguish between royalties for patent rights and royalties for know-how.
Royal urges us to address the broader question whether a contract for the payment of royalties for know-how is enforceable under Lear. But here we do not have a naked know-how license. In our view, the patent rights and know-how here are so intertwined that it would be unreasonable to enforce the agreement for one and not the other.
We hold that section 12(b)(1) is unenforceable for both the patent rights and the know-how. Nevertheless, we believe that Royal is entitled to compensation for its know-how.
The District Court valued the know-how at $53,088.90. Royal asserts it is worth much more.
Although the Court ordered the contract rescinded, Royal urges us to value the know-how at one-half of the royalty rate because the parties placed this value on the know-how in discussions before the contract was executed. The contract as executed does not contain any such valuation. And the Court, after ordering rescission, was not required to place this value on the know-how even if it had been agreed to. Royal did not offer any other evidence on value. St. Regis suggested that the know-how be valued at $53,088.90, which represents a $20,000 advance on royalties paid by St. Regis before Royal permitted access to its know-how and one-half of the royalties paid through the second quarter of 1965, at which point the value of the know-how to St. Regis had become de minimus.
The District Court accepted this valuation. In our view, it is fairly generous. And in any event, it was the only evidence on the value of the know-how before the Court. The Court had a rational basis for this valuation, and we affirm this holding.
III. ATTORNEY FEES
In exceptional patent cases, the court may award reasonable attorney fees to the prevailing party. 35 U.S.C. § 285.
St. Regis contends that this is an exceptional case and that it is entitled to attorney fees. St. Regis asserts there are two factors which make this an exceptional case: Bower obtained his patent by fraud or material misrepresentation; and Royal knew or should have known that the Bower patent was invalid long before this litigation and yet it vigorously prosecuted this action.
The District Court rejected St. Regis’s contentions and found that Bower’s representations to the Patent Office were not motivated by fraudulent intent and that Royal had no knowledge of the infirmity of the Bower patent before trial.
The award of attorney fees is a matter of discretion, and a trial court may not be reversed except for abuse of discretion. Hayes Spray Gun Co. v. E. C. Brown Co., 291 F.2d 319, 327 (9th Cir. 1961); Pickering v. Holman, 459 F.2d 403, 408 (9th Cir. 1972). There was no abuse here.
The judgment of the District Court is affirmed in all respects.
. Royal Industries v. St. Regis Paper Co., 420 F.2d 449 (9th Cir. 1969). Royal brought the action against St. Regis for patent infringement and unfair competition. The District Court granted St. Regis’s motion for summary judgment, and we affirmed on appeal.
. Wisbrock patent, U.S. Patent No. 1,474,699; Schindler patents, U.S. Patent Nos. 1,910,510, 1,929,903 and 2,290,386; Crosby patent, U.S. Patent No. 2,577,843; Wick et al. patent, U.S. Patent No. 2,228,332; French patent, U.S. Patent No. 918,218.
. “1. A plant-tie comprising: two ribbons of polyvinyl chloride joined face to face in parallel to form a unified strip; a wire disposed between said ribbons lengthwise thereof; one of said ribbons being flat and the other of said ribbons having a channel at least as deep as the diameter of said wire, in which said wire is embedded; and a cementitious coating on said wire for bonding said wire to said ribbons.”
. The patent examiner at first rejected claims 1-4 of Bower’s patent application. He was later persuaded to allow claim 4, which became claim 1 of the issued patent.
. In Lear, the license agreement was entered into before a patent issued. Lear, the licensee, terminated all payment of royalties before the issuance of the patent. The Court held that Lear could avoid payment of royalties from the date of the issuance of the patent. In this case the license agreement was entered into more than six years after the patent issued. St. Regis paid royalties after the patent had issued, from 1963 to 1967, and it seeks to recover those royalties.
. St. Regis contends that this issue was not properly raised on appeal because Royal made a binding election of remedies in its counterclaim when it implicitly accepted the termination of the license agreement and sued for patent infringement rather than for enforcement of the agreement. We do not agree.
Royal did not specifically seek to enforce the agreement in its counterclaim, but the pretrial order lists as an issue whether St. Regis was entitled to rescind the agreement. Royal at the trial asserted that it had a contract with St. Regis, that St. Regis breached the contract, and that Royal was entitled to appropriate relief. This was sufficient to prevent Royal from being precluded from seeking to enforce the license agreement on appeal.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
ROSS, Circuit Judge.
This is an appeal from the dismissal of a complaint which grew out of an Indian election dispute in the District of South Dakota. The facts are set out fully in the district court opinion. Means v. Wilson, 383 F.Supp. 378 (D.S.D.1974). Appellants, who were plaintiffs below, are Russell Means, an unsuccessful candidate for president of the Oglala Sioux Tribal Council in the February, 1974 election, and a group of his political supporters. They are all enrolled members of the Oglala Sioux Tribe residing on the Pine Ridge Indian Reservation in South Dakota. The appellees are Richard “Dick” Wilson, who was elected president of the Council in the aforementioned election, a number of tribe members who supported him, the Tribal Council and certain members thereof and the Tribal Election Board. Some of the appellants are sued individually and in their capacities as officials of the Tribe. They are also enrolled Oglala Sioux, residents of Pine Ridge Reservation.
The action was brought under 28 U.S.C. § 1343, the Indian Civil Rights Act (25 U.S.C. §§ 1301-1303) and 42 U.S.C. §§ 1985(3), 1986 and 1988. The district court found that there was no jurisdiction given by either 42 U.S.C. § 1985 or 25 U.S.C. § 1302, but rested its decision on the section 1302 claim on the determination that no claim was alleged under that section. We agree with the court below except in certain respects mentioned herein, and affirm in part and reverse in part.
I. Exhaustion of Tribal Remedies.
Although the trial court did not rely on its conclusion that the Means supporters failed to exhaust tribal remedies in dismissing their complaint, it found that there was such a failure and that this also would have barred plaintiffs from maintaining an action under 25 U.S.C. § 1302 for lack of jurisdiction. We express no view of whether exhaustion of tribal remedies is a prerequisite to federal relief under the Indian Civil Rights Act or 42 U.S.C. § 1985(3) in this particular case, because we find that the plaintiffs made every reasonable attempt to exhaust their tribal remedies.
Plaintiffs originally filed suit on February 11, 1974. On February 19, 1974, plaintiffs moved for a continuance in order to allow them to pursue a formal election contest filed on February 15 in accordance with Tribal Ordinance 85G. Section 12 of the ordinance provides that election contests shall be filed with the election board within three days of certification of the election. The election was certified on February 13, 1974, and one of the plaintiffs, on behalf of Means and all other tribe members, filed a formal contest with a member of the election board at 8:00 p. m. on February 15. The election board is required to act on the contest and make recommendations thereon to the Tribal Council within five days after the contest is filed. Apparently the board denied relief oh February 20, 1974. Within five days after the election board has made its determination, Ordinance 85G requires the Tribal Council to render a decision on the contest. The ordinance provides that: “The decision of the Council on a contest shall 'be final.” However, the Council did not issue a decision on the plaintiffs’ election contest within five days and has still not .ruled on the contest. Plaintiffs waited for a final decision on the contest until March 29, 1974, before filing their amended complaint, over a month after the Tribal Council, headed by defendant Wilson, had failed to meet the five day deadline imposed by Tribal Ordinance 85G. We find that plaintiffs have done all they could to exhaust tribal remedies in this case, but their tribal right to appeal the election has been frustrated by inaction of the Tribal Council. “The plaintiffs sought relief [through tribal channels] and were denied an effective timely remedy.” Brown v. United States, 486 F.2d 658, 661 (8th Cir. 1973).
II. 42 U.S.C. § 1985(3)
In considering the Means faction’s section 1985(3) claim, the district-court first held that that section did not affect the Oglala Sioux Tribe’s historic immunity from suit. With this we agree. Twin Cities Chippewa Tribal Council v. Minnesota Chippewa Tribe, 370 F.2d 529, 531-532 (8th Cir. 1967); Native American Church v. Navajo Tribal Council, 272 F.2d 131, 134-135 (10th Cir. 1959). But the district court erred in concluding that this same reasoning applied to suits against individual Indians. Tribal immunity is based on the sovereignty of the tribe, Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 559, 8 L.Ed. 483 (1832), and does not protect a tribal subject from suit. Seneca Constitutional Rights Organization v. George, 348 F.Supp. 48, 49 (W.D.N.Y.1972). Therefore we must look further than the tribal immunity doctrine to determine whether there is jurisdiction over individual defendants under 42 U.S.C. § 1985(3) and 28 U.S.C. § 1343(4).
■ In Griffin v. Breckenridge, 403 U.S. 88, 101-102, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971), the Court held that 42 U.S.C. § 1985(3) provided a cause of action against private conspiracies, i. e. those not involving state action, to deprive citizens of equal protection of the law or of equal privileges and immunities. In each section 1985 case it must be determined whether there is a constitutional source of congressional power to reach the private conspiracy alleged in the complaint. Griffin v. Breckenridge, supra, 403 U.S. at 104, 91 S.Ct. 1790; Action v. Gannon, 450 F.2d 1227, 1233 (8th Cir. 1971). In Griffin the Supreme Court identified two such sources of congressional power; the thirteenth amendment and the right of interstate travel. Supra, 403 U.S. at 105-106, 91 S.Ct. 1790. This latter right was characterized as one of the rights of national citizenship which Congress has the power to protect by appropriate legislation. Supra, 403 U.S. at 106, 91 S.Ct. 1790. In this context several cases were cited as exemplary of other “rights of national citizenship;” among them were United States v. Classic, 313 U.S. 299, 314-315, 61 S.Ct. 1031, 85 L.Ed. 1368 (1941) and Ex Parte Yarbrough, 110 U.S. 651, 658-662, 4 S.Ct. 152, 28 L.Ed. 274 (1884). ..Classic and Yarbrough were both prosecutions under criminal statutes analogous to 42 U.S.C. § 1985(3), based on alleged interference with voting rights in national elections. It is thus apparent that the right to vote in federal elections is a right of national citizenship protected from conspiratorial interference by 42 U.S.C. § 1985(3). Griffin v. Breckenridge, supra, 403 U.S. at 106, 91 S.Ct. 1790. The Sixth Circuit has held, and we agree, that the right to cast a ballot in a state election is also protected from interference from private conspiracies by the federal Constitution. Cameron v. Brock, 473 F.2d 608, 610 (6th Cir. 1973); see also Reynolds v. Sims, 377 U.S. 533, 554, 84 S.Ct. 1362, 12 L.Ed.2d 506 (1964); Smith v. Cherry, 489 F.2d 1098, 1100-1101 (7th Cir. 1973).
The right to vote is fundamental to representative government. As a right of national citizenship, it is a source of constitutional power, and Congress has the power to guarantee that right by statute. Griffin v. Breckenridge, supra, 403 U.S. at 106, 91 S.Ct. 1790. We have previously held that Congress has guaranteed the right to vote in tribal elections against interference from Indian tribes by enactment of the Indian Civil Rights Act, 25 U.S.C. § 1301 et seq. Brown v. United States, 486 F.2d 658, 661 (8th Cir. 1973); Daly v. United States, 483 F.2d 700, 704-705 (8th Cir. 1973); White Eagle v. One Feather, 478 F.2d 1311, 1314 (8th Cir. 1973). These cases established that where Indian tribes have adopted Anglo-Saxon democratic processes for selection of tribal representatives, equal protection concepts applicable to the tribes by virtue of the Indian Civil Rights Act required adherence to the one man one vote principle as a necessary concomitant of the election process. White Eagle v. One Feather, supra, 478 F.2d at 1314. Today we hold that 42 U.S.C. § 1985(3) protects the right to vote in tribal elections against interference from private conspiracies as well.
Under the Indian Commerce Clause Congress has plenary authority over Indians. Worcester v. Georgia, supra, 31 U.S. (6 Pet.) at 559. Although the clause speaks of “Indian Tribes” the authority to legislate concerning individual Indians is necessarily included within the sweeping grant of congressional power. United States Department of the Interior, Federal Indian Law 22, n. 6 (1958) (hereinafter, Federal Indian Law). In 1924, Congress granted citizenship to all American Indians who had not previously enjoyed that status, including many Oglala Sioux. Act of June 2, 1924, ch. 233, 43 Stat. 253; Iron Crow v. Oglala Sioux Tribe, 231 F.2d 89, 97 (8th Cir. 1956). At that time certainly, if not before, Indians became endowed with the fundamental rights of national citizenship, including the right to vote. Federal Indian Law, 530.
The Pine Ridge Reservation, the tribal constitution which sets forth election procedures and the organization of the Oglala Sioux Tribe all exist pursuant to federal law, Act of Mar. 2, 1889; ch. 405, § 1, 25 Stat. 888; 25 U.S.C. §§ 476, 477; see Iron Crow v. Ogallala Sioux Tribe, 129 F.Supp. 15, 18-20 (D.S.D.1955), aff’d, 231 F.2d 89 (8th Cir. 1956). The Oglala Sioux have established their system of representative government under the authority of these statutes, which in turn were enacted by Congress under the authority contained in the Indian Commerce Clause. In this way Congress has encouraged the development of democratic processes for the self-government of the Oglala Sioux, and extended to them the benefits of national citizenship. Since the right to vote in a system of representative government is one of the essential trappings of citizenship protected by the Constitution, we hold that Congress has necessarily granted it to the plaintiffs, and in a proper case, interference with the right to vote in a tribal election may be vindicated under 42 U.S.C. § 1985(3) as a deprivation of equal protection of the laws or equal privileges and immunities under the law.
The plaintiffs in this case have thus alleged facts to bring this case and some of the defendants within the jurisdiction of the federal courts. The complaint states that defendants conspired and did overt acts in furtherance of a conspiracy to deprive the plaintiffs of their right to vote because they were supporters of plaintiff Means and members of the American Indian Movement. In Griffin the court emphasized that in order to show a deprivation of equal protection or equal privileges and immunities which may be redressed under 42 U.S.C. § 1985(3), it must be shown that the conspirators were motivated by an invidiously discriminatory animus toward a racial group or perhaps another type of class. Supra, 403 U.S. at 102, 91 S.Ct. 1790. In interpreting this class-based discrimination test the Fifth Circuit has said:
There need not necessarily be an organizational structure of adherents, but there must exist an identifiable body with which the particular plaintiff associated himself by some affirmative act. It need not be an oath of fealty; it need not be an initiation rite; but at least it must have an intellectual nexus which has somehow been communicated to, among and by the members of the group.
Westberry v. Gilman Paper Co., 507 F.2d 206, 215 (5th Cir. 1975). This opinion was later withdrawn by the Fifth Circuit sitting en banc and the cause remanded with directions to dismiss it as moot, “so that it will spawn no legal precedents.” Supra, 507 F.2d at 216. However, in our' opinion, the reasoning above quoted was and is valid in the light of Griffin. The group of plaintiffs in this case, by their affirmative acts of supporting plaintiff Means and the American Indian Movement and attempting to oust Wilson as their Council President, were a class against whom, according to the allegations of their complaint, the defendants discriminated because of their class membership This brings their complaint within the ambit of 42 U.S.C. § 1985(3). Cameron v. Brock, 473 F.2d 608, 610 (6th Cir. 1973). We must now examine the complaint more closely to determine whether it states a claim under the statute as to any of the named defendants.
Under Fed.R.Civ.P. 8, technical niceties of pleading are not required. Rather, a short and plain summary of the facts sufficient to give fair notice of the claim asserted is sufficient. Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Many of the plaintiffs’ allegations fail to meet this test. At a minimum, the complaint must state some way in which the named defendants participated in the alleged conspiracy to take away the election rights of the plaintiffs. Smallwood v. United States, 358 F.Supp. 398, 408 (E.D.Mo.), aff’d mem., 486 F.2d 1407 (8th Cir. 1973); see Ellingburg v. King, 490 F.2d 1270, 1271 (8th Cir. 1974). In addition a complaint under 42 U.S.C. § 1985(3) must allege facts to show that intentional or invidious discrimination was the object of the conspiracy. Griffin v. Breckenridge, supra, 403 U.S. at 102-103, 91 S.Ct. 1790; Snowden v. Hughes, 321 U.S. 1, 7, 10, 64 S.Ct. 397, 88 L.Ed. 497 (1944).
Most of the allegations against defendants as individuals either fail to identify any of the named defendants as a conspirator or fail to allege the required animus. The only possible adequate allegation of a conspiracy under 42 U.S.C. § 1985(3) which appears in the complaint is that defendant Wilson conspired with private individuals to insure his reelection by illegal means, and in furtherance of this conspiracy a private, unauthorized police force known as the “Goon Squad”, was maintained by Wilson which harassed and threatened those who opposed the Wilson administration. Defendant Glenn Three Stars is identified as leader of the force and another defendant, Bennie “Tote” Richards, is alleged to be a member. As to these two defendants and defendant Richard “Dick” Wilson we hold that the complaint very inartfully states a claim under 42 U.S.C. § 1985(3).
III. The Indian Civil Rights Act.
We agree with the district court’s conclusion that 25 U.S.C. § 1302 provides rights only against the tribe and governmental subdivisions thereof, and not against tribe members acting in their individual capacities. Spotted Eagle v. Blackfeet Tribe, 301 F.Supp. 85, 89-90 (D.Mont.1969). The statute provides that: “No Indian tribe in exercising powers of self-government shall .” engage in the prohibited conduct. 25 U.S.C. § 1302. “Indian tribe” and “powers of self-government” are defined in 25 U.S.C. § 1301(1) and (2). When sections 1301 and 1302 are read together it is plain that only actions of the tribe and tribal bodies are constrained.
To some extent then, the historic immunity from suit has been abrogated by the Indian Civil Rights Act. Daly v. United States, 483 F.2d 700, 705 (8th Cir. 1973); Luxon v. Rosebud Sioux Tribe, 455 F.2d 698, 700 (8th Cir. 1972). Therefore, even though tribal immunity prevents suit against the tribe or its governmental arms under 42 U.S.C. § 1985(3), the Means supporters can still sue these bodies under 25 U.S.C. § 1302.
Subsection 8 of 25 U.S.C. § 1302 is modeled closely after the equal protection clause of the federal Constitution. Federal courts have refused to decide election contests based on equal protection arguments in the absence of allegations of intentional deprivation of the right to vote. See Snowden v. Hughes, 321 U.S. 1, 11, 64 S.Ct. 397, 88 L.Ed. 497 (1944); Smith v. Cherry, 489 F.2d 1098, 1102-1103 (7th Cir. 1974); Cameron v. Brock, 473 F.2d 608, 610 (6th Cir. 1973). Thus, in Pettengill v. Putnam County R-1 School District, 472 F.2d 121, 122 (8th Cir. 1973) we refused to decide a school bond election contest based on a contention that administrative errors had diluted plaintiffs’ votes.
The district court correctly concluded that the standard for setting aside a tribal election must be at least as restrictive as that applied in non-Indian local election cases under the Constitution. We agree that there are no allegations of fact in the complaint to show that the Oglala Sioux Tribe or the Tribal Council has intentionally deprived Means supporters of equal protection of the law, nor that they have attempted to do so.
We note, however, that a claim of intentional interference with plaintiffs’ voting rights is stated against the Tribal Election Board. Numerous election errors and irregularities allegedly affected the result of the election. In addition, the complaint states: “The three-person Election Board failed to provide proper instructions to election judges and clerks in a deliberate attempt to confuse the situation to insure the success of the illegal practices.” This is alleged to be part of a conspiracy between Wilson and “other tribal officers” to insure Wilson’s election. Although it seems to us that such an allegation would be difficult to prove, it would be sufficient to state a claim for denial of equal protection if this were alleged against a local government in a non-Indian case.
Additional considerations of the desirability of preservation of unique tribal cultures and continued vitality of tribal governments underlie the Indian Civil Rights Act, however, and these considerations counsel great caution in applying traditional constitutional principles to Indian tribal governments. O’Neal v. Cheyenne River Sioux Tribe, 482 F.2d 1140, 1144 (8th Cir. 1973); Note, The Indian Bill of Rights and the Constitutional Status of Tribal Governments, 82 Harv.L.Rev. 1343, 1368 (1969). In this case, the alleged interference with plaintiffs’ voting rights is not founded in tribal custom or governmental purpose which would justify modification of traditional equal protection concepts. Rather, the complaint alleges an intentional interference by the Election Board with tribal members’ rights to participate in their government, which are granted them by the Oglala Sioux Constitution. We believe this alleged violation falls witoin the protection of 25 U.S.C. § 1302(8)/Wd the Election Board is an “Indian tribe” exercising powers of self-government as defined by 25 U.S.C. § 1301(1) and (2). Therefore it was error to dismiss the complaint against the defendant, the Oglala Sioux Tribal Election Board.
The order of the district court is reversed with respect to dismissal of the complaint against Richard “Dick” Wilson, Glenn Three Stars, Bennie “Tote” Richards, and the Oglala Sioux Election Board; dismissal of the complaint against the other defendants is affirmed. The case is remanded to the district court for further proceedings consistent with this opinion.
. The original complaint named as additional defendants the U.S. Department of the Interi- or, the Bureau of Indian Affairs, the Commissioner of Indian Affairs and the Department of Justice. These defendants were deleted from the amended complaint, although plaintiffs allege participation by federal officers and agencies in the conspiracy which is the basis of their action.
. 28 U.S.C. § 1343 provides:
The district courts shall have original jurisdiction of any civil action authorized by law to be commenced by any person:
(1) To recover damages for injury to Bis person or property, or because of the deprivation of any right or privilege of a citizen of the United States, by any act done in furtherance of any conspiracy mentioned in section 1985 of Title 42;
(4) To recover damages or to secure equitable or other relief under any Act of Congress providing for the protection of civil rights, including the right to vote.
Section 1343(4) gives the courts jurisdiction to redress violations of the substantive rights set forth in the Indian Bill of Rights, 25 U.S.C. § 1301 et seq. Luxon v. Rosebud Sioux Tribe, 455 F.2d 698, 700 (1972).
Since a violation of substantive law is a condition precedent to assumption of jurisdiction under section 1343(1) or (4), for the sake of brevity we will refer to the issue of whether there is jurisdiction under 42 U.S.C. § 1985(3) or 25 U.S.C. § 1302, even though 28 U.S.C. § 1343 is the statute which actually gives the court jurisdiction to redress violations of the substantive statutes named.
. 42 U.S.C. § 1985(3)
Depriving persons of rights or privileges (3) If two or more persons in any State or Territory conspire or go in disguise on the highway or on the premises of another, for the purpose of depriving, either directly or indirectly, any person or class of persons of the equal protection of the laws, or of equal privileges and immunities under the laws; or for the purpose of preventing or hindering the constituted authorities of any State or Territory from giving or securing to all persons within such State or Territory the equal protection of the laws; or if two or more persons conspire to prevent by force, intimidation, or threat, any citizen who is lawfully entitled to vote, from giving his support or advocacy in a legal manner, toward or in favor of the election of any lawfully qualified person as an elector for President or Vice President, or as a Member of Congress of the United States; or to injure any citizen in person or property on account of such support or advocacy; in any case of conspiracy set forth in this section, if one or more persons engaged therein do, or cause to be done, any act in furtherance of the object of such conspiracy, whereby another is injured in his person or property, or deprived of having and exercising any right or privilege of a citizen of the United States, the party so injured or deprived may have an action for the recovery of damages, occasioned by such injury or deprivation, against any one or more of the conspirators.
. “The Congress shall have Power ... To regulate Commerce . with the Indian Tribes . . .” U.S.Const. art. I, § 8.
This case differs from those in which there was not a clearly defined class, e. g., Ward v. St. Anthony Hosp., 476 F.2d 671, 676 (10th Cir. 1973); Bricker v. Crane, 468 F.2d 1228, 1233 (1st Cir. 1972), cert. denied, 410 U.S. 930, 93 S.Ct. 1368, 35 L.Ed.2d 592 (1973), or those in which there was a class, but the alleged conspiratorial discrimination was not motivated by plaintiffs’ class membership. E. g., Arnold v. Tiffany, 487 F.2d 216, 218 (9th Cir. 1973), cert. denied, 415 U.S. 984, 94 S.Ct. 1578, 39 L.Ed.2d 881 (1974); Hughes v. Ranger Fuel Corp., 467 F.2d 6, 10 (4th Cir. 1972). 42 U.S.C. § 1985(3) does not reach every injury suffered by an individual; that would be tantamount to a general federal tort law, which Congress does not have the power to enact.
The constitutional shoals that would lie in the path of interpreting § 1985(3) as a general federal tort law can be avoided . by requiring, as an element of the cause of action, the kind of invidiously discriminatory motivation stressed by the sponsors of the limiting amendment. . . The language requiring intent to deprive of equal protection, or equal privileges and immunities, means that there must be some racial, or perhaps otherwise class-based, invidiously discriminatory animus behind the conspirators’ action. The conspiracy, in other words, must aim at a deprivation of the equal enjoyment of rights secured by the law to all.
Griffin v. Breckenridge, 403 U.S. 88, 102, 91 S.Ct. 1798 (1971) (footnotes omitted). In this case, where the complaint alleges a conspiracy motivated by intent to deprive plaintiffs qua Means supporters of their right to vote, the “constitutional shoals” of interpreting the statute as a general federal tort law have been circumnavigated.
. The specific provision with which we are concerned here is 25 U.S.C. § 1302(8):
25 U.S.C. § 1302. Constitutional Rights No Indian tribe in exercising powers of self-government shall—
(8) deny to any person within its jurisdiction the equal protection of its laws or deprive any person of liberty or property without due process of law .
. 25 U.S.C. § 1301. Definitions
For purpose of this subchapter, the term— (1) “Indian tribe” means any tribe, band, or other group of Indians subject to the jurisdiction of the United States and recognized as possessing powers of self-government;
(2) “powers of self-government” means and includes all governmental powers possessed by an Indian tribe, executive, legislative, and judicial, and all offices, bodies, and tribunals by and through which they are executed, including courts of Indian offenses
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
OPINION OF THE COURT
ROTH, Circuit Judge:
These consolidated cross-appeals by plaintiffs, University Medical Center (“UMC”) and the Official Creditors’ Committee, and defendant Louis W. Sullivan, Secretary of Health and Human Services, require us to delineate the appropriate relationship between a Medicare provider and the Department of Health and Human Services (“HHS” or “the Department”) from the time of the provider’s bankruptcy petition filing until its cessation of business — a relationship shaped by the intersection of the Medicare Act and the Bankruptcy Code. Specifically, UMC raises the question of whether HHS, seeking to recover pre-petition Medicare provider reimbursement overpayments, may withhold payments for Medicare services rendered post-petition without controverting the Bankruptcy Code’s automatic stay. The Secretary appeals the order of the district court, affirming the bankruptcy court’s finding that HHS violated the automatic stay by withholding such payments. UMC has filed a cross-appeal based on the district court’s reversal of the bankruptcy court’s award of attorneys’ fees and costs to UMC. The district court'found that the Department’s violation of the automatic stay was not “willful,” as is required for such an award under Bankruptcy Code section 362(h).
We agree with the district court that the Secretary’s withholding of UMC’s Medicare reimbursement, due for services rendered post-petition, in an attempt to recover pre-petition Medicare overpayments, violated the Bankruptcy Code’s automatic stay. We further find that this violation was not willful as required for a section 362(h) award of attorneys’ fees and costs. We will, therefore, affirm.
I. STATUTORY AND REGULATORY BACKGROUND
UMC was a participant in the Medicare program, 42 U.S.C. §§ 1395-1395cec (1988 & Supp. I 1989), which provides health insurance for the elderly and disabled. As a general care hospital, UMC serviced Medicare beneficiaries pursuant to a “provider agreement” filed with HHS. This agreement, executed in 1966 between the Broad Street Hospital and the Secretary of Health, Education and Welfare, the predecessors in interest to UMC and HHS respectively, is similar to provider agreements entered into by hospitals and health care facilities across the country. Through executing the provider agreement, Broad Street Hospital became eligible to receive reimbursement payments, in accordance with the terms of the Medicare statute, for services rendered to Medicare beneficiaries. In exchange, the hospital agreed to charge these beneficiaries only as allowed by statute and to comply with certain civil rights laws in providing these services.
Medicare reimbursement of inpatient hospital services is governed by the Prospective Payment System (“PPS”). Under PPS, each discharged patient is classified into a Diagnosis Related Group (“DRG”). Providers are paid most reimbursable expenses pursuant to predetermined, national and regional rates that are fixed for each DRG. See 42 U.S.C. § 1395ww(d). HHS makes these reimbursements through fiscal intermediaries, such as the Blue Cross Association. To insure that providers are paid promptly, the Medicare statute requires that payments be made at least monthly and otherwise at the discretion of HHS. 42 U.S.C. § 1395g(a). Under the usual reimbursement procedure, periodic interim payments, which are estimates of actual expenditures, are made by the intermediary upon application of a provider at the discharge of each Medicare patient. Providers are also entitled to receive additional estimated payments based on their actual costs for capital expenses, outpatient services, and certain other costs. 42 C.F.R. § 412.113 (1991). Actual expenditures of each provider are audited by the intermediary annually to determine whether the provider has been over or underpaid for that cost-year. HHS then adjusts the provider’s subsequent Medicare reimbursement payments to account for prior over or underpayments. 42 U.S.C. § 1395g(a). Such adjustments are mandated by Medicare’s PPS.
. II. FACTS AND PROCEDURAL HISTORY
On January 1, 1988, UMC filed a voluntary petition under Chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 101-1330 (1988 & Supp. II 1990). After this filing UMC continued to serve Medicare patients as a debtor-in-possession. One week later, on January 8, 1988, Blue Cross of Greater Philadelphia (“Blue Cross”), UMC’s fiscal intermediary, informed UMC by letter that the hospital had been overpaid $276,042 for Medicare services provided in 1985. This letter stated that Blue Cross would begin 100% withholding of interim reimbursement payments unless UMC made repayment or agreed to a long-term repayment schedule. UMC did not respond. On February 8, 1988, Blue Cross sent a second letter, again stating that 100% withholding of interim payments would begin unless other arrangements for return of the overpayment were made. Blue Cross subsequently withheld a $58,000 payment on February 18.
Prompted by this action, UMC officials met with a Blue Cross representative and orally agreed to provide Blue Cross with documentation detailing UMC’s need for an extended repayment schedule. In the interim, UMC agreed to repay the 1985 overpayment at a rate of $15,000 per month over a period of 18 months. The UMC officials apparently consented to this arrangement in order to maintain the hospital’s flow of Medicare reimbursement, which it required to meet its payroll obligations. On March 4, 1988, UMC remitted $15,000 to Blue Cross, after which Blue Cross released the $58,000 it had withheld. However, UMC neither sought court approval of this arrangement nor advised any other interested party, including the Creditors’ Committee, of this repayment plan. UMC failed to supply Blue Cross with the documentation needed to formalize the repayment agreement. On March 28, 1988, Blue Cross announced that it would resume 100% withholding. Three days later, UMC closed its doors and ceased doing business.
HHS, through Blue Cross, withheld from UMC a total of over $312,000 in reimbursement for Medicare services provided by UMC after it filed its petition in bankruptcy. Meanwhile, Blue Cross determined that, in addition to the 1985 overpayment, UMC had been overpaid by $470,894 in 1986 and by $65,447 in 1987.
On June 17, 1988, UMC brought an adversary proceeding against HHS in the Bankruptcy Court for the Eastern District of Pennsylvania, alleging that the Department’s actions, in demanding payment for pre-petition Medicare overpayments and in withholding post-petition reimbursement to recover the amounts overpaid, violated the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362. UMC requested turnover of these funds, pursuant to Bankruptcy Code sections 542 and 543, and an award of attorneys’ fees and costs under Code section 362(h). HHS answered by claiming the affirmative defense of contractual recoupment.'On July 8, 1988, HHS filed a separate motion for relief from the automatic stay.
The bankruptcy court held that HHS had violated the Bankruptcy Code’s automatic stay provision. This conclusion was based upon the court’s finding that UMC had not assumed its provider agreement and that as a consequence the Department’s demand that UMC repay the pre-petition over-payments as a condition of receiving future Medicare reimbursement constituted the type of governmental discrimination against debtors prohibited by the anti-discrimination provision of the Bankruptcy code, 11 U.S.C. § 525(a). In re University Medical Center, 93 B.R. 412, 416-417 (Bankr.E.D.Pa.1988). In reaching this decision, the bankruptcy judge relied heavily on his opinion in an unrelated case, In re St. Mary Hospital, 89 B.R. 503 (Bankr.E.D.Pa.1988), which was decided while the present action was pending. Because the bankruptcy court held the withholding to be impermissible under section 525(a), it also refused to grant relief from the stay under 11 U.S.C. § 362(d). and ordered HHS both to return the $15,000 payment made by UMC in accord with the tentative repayment agreement and to pay UMC the amount due for post-petition Medicare services. University Medical Center, 93 B.R. at 417-18. In addition, the court awarded UMC prejudgment interest, attorneys' fees, and costs, on the ground that the Department’s decision to press this litigation after that court’s decision in St. Mary Hospital amounted to a willful violation of the automatic stay. Id. at 418-19.
HHS appealed this decision to the United States District Court for the Eastern District of Pennsylvania. In a published opinion, the district court affirmed the holding that HHS had violated the automatic stay but disavowed the reasoning of the bankruptcy court, adjudging the record inadequate to support a finding of discrimination in violation of Bankruptcy Code section 525(a). University Medical Center v. Sullivan, 122 B.R. 919 (E.D.Pa.1990). Instead, the district court anchored its af-firmance on its conclusions (1) that UMC had not assumed the provider agreement because, as an executory contract, assumption of that' agreement had to receive formal court approval, (2) that the Department’s withholding did not fall within the equitable doctrine of recoupment because the pre-petition overpayments arose from different transactions than did the post-petition Medicare reimbursement, and (3) that equity controls the relationship between debtor and creditor if, during the period between a bankruptcy filing and the assumption or rejection of an executory contract, performance under the contract continues. However, the district court reversed the bankruptcy court’s award of attorneys’ fees and costs to UMC, finding that the Department’s violation of the automatic stay was not willful as is required for such an award made under Bankruptcy Code section 362(h). The district court also denied the parties’ motions for reconsideration. University Medical Center v. Sullivan, 125 B.R. 121 (E.D.Pa.1991). Judgment was stayed pending appeal.
Both parties filed timely notices of appeal to this court. We review the district court’s decision under the same standards employed by the district court in reviewing the bankruptcy court’s decision. Thus our review of the district court’s conclusions of law is plenary. We review findings of fact under the clearly erroneous standard. In re Nelson Co., 959 F.2d 1260, 1263 (3d Cir.1992).
III. JURISDICTION
The Secretary now takes issue with our ability to exercise jurisdiction over this case and contends that neither the bankruptcy court nor the district court properly had jurisdiction over UMC’s claims. In particular, he contends that UMC’s claims arise under the Medicare statute and points to 42 U.S.C. § 405(h), made applicable to Medicare claims by 42 U.S.C. § 1395Ü, which precludes judicial review of any “claim arising under” the Medicare statute prior to the exhaustion of administrative remedies. Because we agree with UMC that the Bankruptcy Code supplies an independent basis for jurisdiction in this case, we reject the Secretary’s arguments and find that-the district and bankruptcy courts properly had jurisdiction under 28 U.S.C. §§ 157, 158 and 1334 and that we may properly exercise jurisdiction over this appeal under 28 U.S.C. §§ 158(d) and 1291.
The Medicare Act establishes an administrative channel of redress for health care providers dissatisfied with their reimbursement determinations. If a provider disputes an intermediary’s final determination of the reimbursement due for a fiscal year and the amount, in controversy exceeds $10,000, the provider can, within 180 days, request a hearing before the Provider Reimbursement Review Board. 42 U.S.C. § 1395oo (a). The Board’s decision is then subject to review by the Secretary. After exhausting these procedures, a provider may seek judicial review of the final agency determination. 42 U.S.C. § 1395oo (f)(1). See, e.g., Abington Memorial Hosp. v. Heckler, 750 F.2d 242, 244 (3d Cir.1984), cert. denied, 474 U.S. 863, 106 S.Ct. 180, 88 L.Ed.2d 149 (1985). Prior to the exhaustion of this administrative channel of review, no court has jurisdiction over claims arising under the Medicare Act.
Neither party contends that these administrative procedures were in fact exhausted in this case. Our ability to exercise jurisdiction over this appeal thus turns on whether UMC’s claims actually arise under the Medicare statute. The Supreme Court has construed the “claim arising under” language of section 405(h) broadly to encompass any claims in which “both the standing and the substantive basis for the presentation” of the claims is the Medicare Act. Heckler v. Ringer, 466 U.S. 602, 615, 104 S.Ct. 2013, 2022, 80 L.Ed.2d 622 (1984) (quoting Weinberger v. Salfi, 422 U.S. 749, 760-61, 95 S.Ct. 2457, 2464-65, 45 L.Ed.2d 522 (1975)). According to the Secretary, both requirements are satisfied in this case: the complaint seeks a money judgment in payment for health care services provided by UMC to Medicare beneficiaries and the reimbursement sought by UMC conforms to the rates established by the Medicare Act.
UMC responds that the administrative review channel set forth in the Medicare Act and regulations is available only for claims brought by a provider when dissatisfied with final reimbursement determinations of the fiscal intermediary. See 42 C.F.R. § 405.1841 (1991) (a request for a Board hearing “must identify the aspects of the determination with which the provider is dissatisfied, explain why the provider believes the determination is incorrect in such particulars, and be accompanied by any documenting evidence the provider considers necessary to support its position”). This case, however, does not raise that type of claim, because the parties do not dispute the amount of reimbursement due for any cost reporting period. In fact, the parties stipulated both to the amounts of the over-payments made to UMC and to the separate pursuit of any substantive dispute concerning these amounts through the normal administrative processes set forth in the Medicare statute. Due to the fact that its adversary proceeding was based on the contention that HHS violated the automatic stay provision of the Bankruptcy Code, UMC maintains that its claims arose under the Bankruptcy Code, not the Medicare Act. Thus, the mandate of section 405(h) that the Medicare Act’s administrative review procedures be exhausted before judicial review is sought simply does not apply to this case.
We agree with UMC. Its challenge to the Secretary’s attempt to recover pre-petition overpayments through post-petition withholding is not inextricably intertwined with any dispute concerning the fiscal intermediary’s reimbursement determinations. If UMC had not filed for bankruptcy, there would be no dispute concerning the monies due to HHS or the method for recovering them. Neither party questions the amount of pre-petition overpayments made to UMC nor any other determination of the fiscal intermediary that might be appealed to the Provider Reimbursement Review Board. Nor does either party take issue with the procedure by which the statute provides for making routine adjustments with a non-bankrupt provider for prior over or underpayments. See 42 U.S.C. § 1395g(a). This issue is only before us because UMC filed for bankruptcy and now claims that the withholding violated the automatic stay. We find, therefore, that UMC’s claim arises under the Bankruptcy Code and not under the Medicare statute.
In doing so, we recognize that a broad reading of section 405(h) might accord with Congress’ intent to allow “the Secretary in Medicare disputes to develop the record and base decisions upon his unique expertise in the health care field. The misfortune that a provider is in bankruptcy when he has a reimbursement dispute with the Secretary should not upset the careful balance between administrative and judicial review.” In re St. Mary Hosp., 123 B.R. 14, 17 (E.D.Pa.1991). However, a finding that jurisdiction is proper in this case does not impinge upon this authority of the Secretary protected by section 405(h). Indeed, there is no danger of rendering the administrative review channel superfluous, for there is no system of administrative review in place to address the issues raised by UMC in its adversary proceeding. Thus we agree with the Ninth Circuit that “where there is an independent basis for bankruptcy court jurisdiction, exhaustion of administrative remedies pursuant to other jurisdictional statutes is not required.” In re Town & Country Home Nursing Servs. Inc., 963 F.2d 1146, 1154 (9th Cir.1991). This conclusion advances the congressionally-endorsed objective of “the effective and expeditious resolution of all matters connected to the bankruptcy estate.” Id. at 1155. See also H.R.Rep. No. 595, 95th Cong., 1st Sess. 43-48, reprinted in 1978 U.S.C.C.A.N. 5787, 5963, 6004-08. The Secretary’s attack on the ability of the judicial system to resolve UMC’s claims thus fails.
IV. DISCUSSION
Having determined that we do have jurisdiction to hear this appeal, we must next consider whether the Department’s withholding of UMC’s post-petition payments violated the automatic stay provision of the Bankruptcy Code. To resolve this question we undertake a multiple-step analysis. First, does the automatic stay apply to government entities. Second, if it does, did UMC, after it filed for bankruptcy, assume its provider agreement. An important aspect of this second issue is whether formal court approval is a prerequisite to assumption of an executory contract pursuant to section 365 of the Bankruptcy Code. Third, even if the automatic stay is applicable and the agreement was not assumed, did HHS’s withholding fall within the scope of the recoupment doctrine. Finally, if we find that the recoupment doctrine does not apply, does equity control the post-petition relationship between UMC and HHS; and, if it does, is HHS permitted under the provisions of the Medicare Act to reimburse a provider without making adjustments for past overpayments.
A. The Automatic Stay
The automatic stay is one of the fundamental debtor protections supplied by the Bankruptcy Code. In re Atlantic Business & Community Corp., 901 F.2d 325, 327 (3d Cir.1990). Codified in section 362, the stay “prohibits, inter alia, the commencement or continuation of a judicial or administrative proceeding against the debt- or that could have been initiated before the petition was filed, or to recover on a claim that arose pre-bankruptcy.” United States v. Nicolet, Inc., 857 F.2d 202, 207 (3d Cir.1988). The stay
gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits a debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
In re Schwartz, 954 F.2d 569, 571 (9th Cir.1992) (quoting H.R.Rep. No. 595, 95th Cong., 1st Sess. 340 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5963, 6296-97). Thus, it is designed to replace the “unfair race to the courthouse” with orderly liquidation that treats all creditors equally. Nicolet, 857 F.2d at 207.
In drafting the Bankruptcy Code, Congress subjected the government, acting as creditor, to the limitations of the automatic stay provision. By its terms, section 362(a) applies to “all entities.” 11 U.S.C. § 362(a). The Bankruptcy Code defines the term “entity” as including governmental units. 11 U.S.C. § 101(14). See, e.g., In re Pearsori, 917 F.2d 1215, 1216 (9th Cir. 1990), cert, denied, — U.S.-, 112 S.Ct. 1291, 117 L.Ed.2d 514 (1992); In re Parr Meadows Racing Ass’n, 880 F.2d 1540, 1545 (2nd Cir.1989), cert, denied, 493 U.S. 1058, 110 S.Ct. 869, 107 L.Ed.2d 953 (1990); Penn Terra Ltd. v. Department of Envtl. Resources, 733 F.2d 267, 271-72 (3d Cir. 1984) (“the fact that Congress created an exception to the automatic stay for certain actions by governmental units itself implies that such units are otherwise affected by the stay”). Government agencies are only excepted from the reach of the automatic stay when proceeding “to enforce such governmental unit’s police or regulatory power.” 11 U.S.C. § 362(b). Congress intended this exception to apply
where a governmental unit is suing a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such law.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 343 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6299; S.Rep. No. 989, 95th Cong., 2d Sess. 52, reprinted in 1978 U.S.C.C.A.N. 5787, 5838. Neither the language of section 362(b) nor its legislative history indicates that this exception was intended to permit government agencies to enforce contractual rights against a debtor without first seeking relief from the automatic stay. See In re Corporacion de Servicios Medicos Hospitalarios, 805 F.2d 440, 445 (1st Cir.1986). The Department’s withholding of UMC’s Medicare payments certainly did not fall within this police power exception to the stay, and the Secretary does not contend as much. Thus, unless we can conclude either that UMC assumed its provider agreement or that HHS was entitled to recoup the pre-petition over-payments through withholding UMC’s post-petition reimbursement, HHS was constrained by the automatic stay.
B. Assumption of the Provider Agreement
Bankruptcy Code section 365 empowers a trustee or debtor in possession, “subject to the court’s approval,” to “assume or reject any executory contract or unexpired lease of the debtor.” 11 U.S.C. § 365(a). This section is designed to “allow[ ] the trustee or debtor in possession a reasonable time within which to determine whether adoption or rejection of the exec-utory contract would be beneficial to an effective reorganization.” In re Whitcomb & Keller Mortg. Co., 715 F.2d 375, 379 (7th Cir.1983). During this period, the terms of an executory contract are temporarily unenforceable against the debtor. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 532, 104 S.Ct. 1188, 1199, 79 L.Ed.2d 482 (1984).
Assumption of the executory contract requires the debtor to accept its burdens as well as permitting the debtor to profit from its benefits. Consequently, if UMC assumed its provider agreement, there is no question that HHS could withhold UMC’s post-petition reimbursement in order to recover pre-petition overpayments without violating the automatic stay. Through executing a provider agreement, a hospital accepts the “burden” of allowing HHS to recover the amount of prior over-payments from Medicare reimbursement currently due. Rejection, on the other hand, both cuts off any right of the contracting creditor to require the estate to perform the remaining executory portions of the contract and limits the creditor’s claim to breach of contract. Leasing Serv. Corp. v. First Tennessee Bank Nat’l Ass’n, 826 F.2d 434, 436 (6th Cir.1987). The district court concluded that formal court approval is required to effect an assumption of an executory contract in accord with the terms of section 365. Because UMC never sought court approval of its assumption of the provider agreement, the court found that this agreement was never assumed and, as a result, that its reimbursement overpayment provisions could not be enforced against UMC. We agree with this conclusion.
The Secretary contends, however, that, due to the detailed Medicare statutory scheme, a provider agreement is a unique type of executory contract that a debtor should be deemed to assume in accord with section 365 whenever performance under the agreement is continued beyond the filing of a bankruptcy petition, regardless of whether formal court approval is sought. Because, in the Secretary’s view, court approval was not required to effect UMC’s assumption of its provider agreement, the over-payments to UMC were properly withheld; UMC impliedly assumed the agreement, and a debtor that assumes the benefits of an executory contract cannot escape shouldering the burdens of that contract as well.
To buttress this argument, the Secretary points to the text of the Medicare statute and its implementing regulations. These state that a provider agreement remains in effect until either the provider ceases to do business or the agreement is formally terminated by the provider or the Secretary. This requirement, the Secretary explains, is designed to ensure that important Medicare interests are not compromised by uncertainty concerning a hospital’s status as a Medicare provider and to preserve the Department's statutory authority to enforce prescribed standards covering patient care, quality control, reimbursement, and coverage.
We cannot agree that the complexity of the Medicare scheme mandates a finding that court approval is unnecessary for the assumption of a provider agreement pursuant to section 365. By its terms, section 365 “includes all executory contracts except those expressly exempted.” Bildisco, 465 U.S. at 521, 104 S.Ct. at 1194. No express exemption exists for contracts formed with the government, and courts often have assumed, without discussion, that the ability of a debtor to assume or reject an executory contract pursuant to section 365 extends equally to contracts formed with the government. See, e.g., United States Dep’t of Air Force v. Carolina Parachute Corp., 907 F.2d 1469, 1472 (4th Cir.1990) (analyzing the government’s contract with the debtor under section 365); In re West Electronics, Inc., 852 F.2d 79, 82 (3d Cir.1988) (commenting, in the context of a debtor’s contract with the government, that “in general... under 11 U.S.C. § 365 West as a debtor in possession could assume an executory contract with court approval”); In re Harris Management Co., 791 F.2d 1412, 1414 (9th Cir.1986) (same).
Moreover, to circumscribe a debt- or’s power of assumption Congress has legislated special treatment for the assumption and rejection of collective bargaining agreements, 11 U.S.C. § 1113, and for the rejection of certain real property leases, 11 U.S.C. § 365(h). See, e.g., Sharon Steel Corp. v. National Fuel Gas Distrib. Corp., 872 F.2d 36, 40 (3d Cir.1989). Congress’ failure to legislate special treatment for the assumption or rejection of Medicare provider agreements indicates that assumption of these agreements, like that of other executory contracts, should be deemed subject to the requirements of section 365, unless and until Congress decides otherwise. Cf. Bildisco, 465 U.S. at 522, 104 S.Ct. at 1194 (concluding that because Congress did not draft an exclusion for collective bargaining agreements from the terms of section 365, Congress intended section 365 apply to those agreements). Thus, a provider agreement can only be assumed by a debtor hospital in accord with the terms of section 365. But see In re Advanced Professional Home Health Care, Inc., 94 B.R. 95, 97 (E.D.Mich.1988) (holding that through continuing to serve Medicare patients a debtor hospital obviates the need for strict compliance with the terms of § 365).
We have generally treated court approval as a prerequisite to a debtor’s assumption of an executory contract. See e.g., Counties Contracting & Constr. Co. v. Constitution Life Ins. Co., 855 F.2d 1054, 1060 (3rd Cir.1988) (finding court approval “mandated for effective assumption under [§ 365(a) ]”). Formal court approval of assumption of the provider agreement was neither sought nor granted in this case. As a result, UMC maintains that the agreement was never assumed but that such approval is necessary to effect the purpose of section 365(a). UMC’s position is consistent with the interpretation we have given to section 365(a) in cases such as Counties Contracting. In order to insure that a debtor has the opportunity to assess the advantages and disadvantages of assuming a contract, assumption must be approved. It cannot be presumed. As will be developed below, we acknowledge that the interests articulated by the Secretary are integral to the Medicare system and cannot merely be jettisoned in the wake of a provider’s filing in bankruptcy. At the same time, however, there are definite interests protected by Bankruptcy Code section 365 that HHS completely discounts.
In particular, the Secretary asserts that no purpose contemplated by Congress is advanced by requiring court approval of the assumption of a provider agreement when the debtor, without objection from creditors, voluntarily continues to render Medicare services. By so doing, the debtor hospital manifests its decision that continuation of the agreement is in the best interest of the estate. Thus, the Secretary contends, no further opportunity is needed for the exercise of the debtor’s business judgment in deciding whether the contract is beneficial. Moreover, the Secretary opines that creditors would suffer no discernible prejudice if continued performance by a debtor hospital were adjudged an implied assumption of the agreement. Rather than removing money from the estate and thus decreasing the funds available for distribution to a hospital’s creditors, the assumption of a provider agreement insures that additional Medicare revenues will flow into the estate. For these reasons, the Secretary claims that creditors are in no way harmed by such an assumption.
These arguments misapprehend the interests of creditors that can be implicated through the assumption of a provider agreement. Indeed, it is conceivable that creditors of a debtor hospital may well benefit from a decision to reject such an agreement. Rejection or assumption of an executory contract determines the status of the contracting creditor’s claim, namely whether “it-is merely a pre-petition obligation of the debtor, or is entitled to priority as an expense of administration of the estate.” Leasing Serv. Corp., 826 F.2d at 437. Prior to assumption, HHS is. in a position equivalent to general unsecured creditors: its recovery of pre-petition debt depends upon the amount left in the bankrupt’s estate after secured and priority creditors.are satisfied, and so is unlikely to be one hundred cents on the dollar. In contrast, if the provider agreement.is assumed, HHS, like other parties to assumed executory contracts, effectively “gains an administrative priority” against the estate. 1 COLLIER BANKRUPTCY MANUAL § 365.01, at 365-2 (Lawrence P. King ed., 3rd ed. 1992). See also, In re Taylor, 913 F.2d 102, 106-07 (3d Cir.1990).
In this case, HHS has asserted a right to recover overpayments to UMC totaling more than $800,000 for the period 1985 through 1987. However, after UMC negotiated the oral repayment arrangement with HHS on February 18, 1988, UMC survived as a going concern for only six weeks. Given UMC’s precarious financial position in February of 1988, the realistic result of an assumption of the provider agreement might have been to enhance temporarily UMC’s post-petition coffers by a few hundred thousand dollars. At the same time, this assumption would significantly improve the status of the Secretary’s pre-petition debts at the direct expense of all other unsecured creditors. Alternatively, though a rejection of the agreement would preclude the receipt of long-term future Medicare revenues, HHS still would have been required to pay for any services rendered post-petition. Moreover, HHS then would have been treated in a manner equal to other unsecured creditors in the asset - distribution for pre-petition debts. Thus, it is disingenuous to conclude that the interests of UMC’s other creditors would not be affected if a provider agreement is automatically assumed when a debtor hospital continues to treat Medicare patients after filing for bankruptcy.
Furthermore, such a holding would thrust a Medicare provider contemplating bankruptcy into a dilemma. Immediately upon filing a bankruptcy petition and without the benefit of a reasonable period for financial reflection as contemplated by section 365, a hospital would be forced to decide whether to assume or reject its provider agreement. If the provider chooses to continue service of Medicare patients for any period of time, regardless of its prospects for a successful reorganization, it would be deemed to have assumed the provider agreement, thereby assuring HHS an administrative priority over all general creditors. Alternatively, the provider could choose to terminate Medicare services and immediately reject the agreement, thereby in all likelihood abandoning any hope for a successful reorganization. Despite the Secretary’s protestations, we cannot deem such a result to be mandated by the Medicare statutory scheme; nor is it one contemplated by the Bankruptcy Code. Accord In re Memorial Hosp. of Iowa County, 82 B.R. 478, 484 (W.D.Wis.1988) (“Recognition of an exception to the requirement of court approval of assumption of exec-utory contracts nullifies • the clear and unambiguous statutory language of sections 362 and 365”).
We also find it significant that Bankruptcy Code section 365(d)(2) enables a creditor, at any time after a bankruptcy petition is filed, to move the court to compel the debtor’s assumption or rejection of an exec-utory contract. Congress intended this provision to “prevent parties in contractual or lease relationships with the debtor from being left in doubt concerning their status vis-a-vis the estate.” S.Rep. No. 989, 95th Cong., 2d Sess. 59 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5845. Here the district court specifically noted that HHS never moved the bankruptcy court to compel UMC either to assume or reject the provider agreement. See University Medical Center, 125 B.R. at 124. Particularly in this situation, where the creditor has failed to avail itself of the procedure supplied by the Bankruptcy Code for compelling a debtor’s decision on an executory contract, we find it inappropriate to announce a new rule that a debtor hospital’s continued treatment of Medicare patients results in an implied assumption of its provider agreement. Thus, we conclude that UMC did not assume its provider agreement at any time after filing its petition in bankruptcy. As a result, the Department’s withholding of UMC’s post-petition reimbursement did violate the automatic stay.
C. Recoupment
HHS contends, however, that under the equitable doctrine of recoupment, it still should be able, without violating the automatic stay, to recover pre-petition over-payments by withholding UMC’s post-petition reimbursement. The Secretary is correct that recoupment is an equitable exception to the automatic stay. Thus, if the Secretary’s acts come within the scope of this doctrine, the withholding of UMC’s post-petition Medicare reimbursement to recover prior overpayments would be proper, even though the provider agreement was not assumed. The district court found that the Department’s withholding could not be deemed to fall within the purview of recoupment, and we agree. As a consequence, this attempt to circumvent the automatic stay also fails.
To grasp the scope of the recoupment doctrine, it is helpful first to distinguish recoupment from a creditor’s ability to set off certain claims. The doctrine of setoff, as incorporated in Bankruptcy Code section 553, gives a creditor the right “to offset a mutual debt owing by such creditor to the debtor,” provided that both debts arose before commencement of the bankruptcy action and are in fact mutual. In re Davidovich, 901 F.2d 1533, 1537 (10th Cir.1990). “Setoff, in effect, elevates an unsecured claim to secured status, to the extent that the debtor has a mutual, pre-petition claim against the creditor.” Lee v. Schweiker, 739 F.2d 870, 875 (3d Cir.1984). Generally, the mutual debt and claim are the product of different transactions. 4 COLLIER ON BANKRUPTCY § 553.03, at 553-14 (Lawrence P. King ed., 15th ed. 1992). Pursuant to the limitations imposed by Code section 553, a creditor’s pre-petition claims against the debtor cannot be set off against post-petition debts owed to the debtor. Id.
The Bankruptcy Code does not contain a recoupment provision. The common law doctrine of recoupment provides an exception to setoff in bankruptcy cases. Recoupment “is the setting up of a demand arising from the same transaction as the plaintiff’s claim or cause of action, strictly for the purpose of abatement or reduction of such claim.” 4 COLLIER ON BANKRUPTCY § 553.03, at 553-15-17 (emphasis added). This doctrine is justified on the grounds that “where the creditor’s claim against the debtor arises from the same transaction as the debtor’s claim, it is essentially a defense to the debtor’s claim against the creditor rather than a mutual obligation, and application of the limitations
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HARLINGTON WOOD, Jr., Circuit Judge.
In this securities action, plaintiffs appeal from the dismissal of their amended complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Defendant cross-appeals from the denial of its motion to dismiss on limitations grounds.
I. FACTUAL and PROCEDURAL BACKGROUND
In early December 1983, plaintiffs Albert A. Robin, Sheli Z. Rosenberg, Donald S. Chisholm, and Equity Holdings bought 61,-000 shares of Doctors Officenters Corporation (“DOC”) at $9.00 per share pursuant to a December 7, 1983, prospectus. The prospectus stated in its summary that the purchase of its shares of common stock “is speculative and involves a high degree of risk.” The prospectus contained DOC’s financial statements, the most recent of which were dated July 31, 1983, as well as defendant Arthur Young & Company’s (“Arthur Young”) report on these financial statements. Arthur Young’s unqualified report was dated August 19, 1983. In its report, Arthur Young stated that it had examined DOC’s balance sheet at July 31, 1983, and December 31,1982, and the related statements of operations, equity deficiency and changes in financial position for the seven months ended July 31, 1983, the year ended December 31, 1982, and the period December 7, 1981 (inception), to December 31, 1981. Arthur Young stated further in its report that it found the financial statements to present fairly DOC's financial position and that its examinations were made in accordance with generally accepted auditing standards and other necessary auditing procedures.
DOC was liquidated on February 26, 1985, and each shareholder received $2.72 per share. On July 13,1987, plaintiffs filed suit against Arthur Young alleging violations of section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and rule 10b-5 (Count I), as well as common law fraud (Count II). On May 4, 1988, the district court granted Arthur Young’s motion to dismiss on the grounds that the applicable statute of limitations barred the action and that plaintiffs had failed to state a claim under federal securities laws.
Plaintiffs filed an amended complaint on June 16, 1988, which expanded the allegations in Count II. In their amended complaint, plaintiffs alleged that the primary violators knowingly and intentionally failed to disclose in the prospectus that Arthur Young’s decision to issue its unqualified report was based on facts that were no longer true as of December 7, 1983, the date of the prospectus. Plaintiffs further alleged that Arthur Young aided and abetted the primary violators both by consenting to the use of its report in the prospectus with knowledge that the prospectus was false and misleading and by not withholding that consent until DOC had made adequate disclosure. Arthur Young again filed a motion to dismiss for the same reasons set out in its earlier motion — namely, that the action was barred by the statute of limitations and that plaintiffs had failed to state a claim for aiding and abetting under section 10(b) and rule 10b-5.
The district court, after denying Arthur Young's motion to dismiss based on the statute of limitations, dismissed the amended complaint for failure to state a claim under federal securities laws. The court held that plaintiffs’ claims did not satisfy the Seventh Circuit requirements for aiding and abetting on the grounds that plaintiffs had not adequately alleged that Arthur Young had the requisite scienter and that Arthur Young had no duty to force DOC to make the disclosures plaintiffs claim should have been made.
Plaintiffs appeal from the dismissal of their amended complaint and Arthur Young cross-appeals from the denial of its motion to dismiss. We have jurisdiction under 28 U.S.C. § 1291 and now affirm.
II. ANALYSIS
A. Statute of Limitations
In its cross-appeal, Arthur Young renews its argument that actions under section 10(b) and rule 10b-5 should be governed by federal rather than state limitations periods. Specifically, Arthur Young argues that we should adopt the limitations period from section 13 of the Securities Act of 1933 and sections 9(e), 18(c), and 29(b) of the Securities Exchange Act of 1934 in place of the three-year limitation period provided by the Blue Sky law of Illinois, Ill.Rev.Stat. ch. 12U/2, para. 137.13 D. Under the relevant federal law, plaintiffs must file suit within one year after the discovery of facts constituting the violation, and in no event more than three years after the violation. Although plaintiffs brought this action more than three years after the sale of securities (the sale occurred on or around December 7, 1983, and this suit was filed on July 13, 1987), the state limitations period, unlike the federal limitations period with its three-year absolute bar, may be tolled by certain instances of fraud. The district court, applying the three-year Illinois statute and the federal tolling doctrine, rejected Arthur Young’s claim that the action was time-barred, holding that the complaint raised factual issues as to whether the statute should be tolled and when the limitations period began to run.
Since this case was argued, the Seventh Circuit has ruled on the issue raised by Arthur Young in its cross-appeal. In Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir.1990), we expressly overruled our prior precedents to hold that actions under section 10(b) and rule 10b-5 are governed by the limitations period found in section 13 of the Securities Act of 1933: one year after the plaintiff discovers the facts constituting the violation and in no event more than three years after the violation. We left open all questions having to do with retroactive application of our decision in Short. Id. at 1038-39. Although application of section 13 would bar plaintiffs’ suit in the present case, we do not reach the issue of whether Short applies retroactively because plaintiffs have failed to state a claim for aiding and abetting.
B. Aiding and Abetting Liability Under Section 10(b) and Rule 10b-5
This circuit recognizes a cause of action for aiding and abetting violations of section 10(b) and rule 10b-5. E.g., DiLeo v. Ernst & Young, 901 F.2d 624, 628 (7th Cir.1990); Latigo Ventures v. Laventhol & Horwath, 876 F.2d 1322 (7th Cir.1989); see also Schlifke v. Seafirst Cory., 866 F.2d 935, 946 (7th Cir.1989) (citing cases). At the same time, this circuit has also questioned the propriety of implying such a cause of action from these securities provisions, see Renovitch v. Kaufman, 905 F.2d 1040, 1045 n. 7 (7th Cir.1990) (citing cases), and we observe that the Supreme Court has twice reserved decision on this issue. Herman & MacLean v. Huddleston, 459 U.S. 375, 379 n. 5, 103 S.Ct. 683, 685 n. 5, 74 L.Ed.2d 548 (1983); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 191 n. 7, 96 S.Ct. 1375, 1380 n. 7, 47 L.Ed.2d 668 (1975). Our recognition of aider and abettor liability is rooted in 20 + years’ precedent, however, and we stand by this decision until the Supreme Court tells us otherwise. DiLeo, 901 F.2d at 628.
Aider and abettor liability requires at a minimum that the alleged aider and abettor (1) commit one of the “manipulative or deceptive” acts prohibited under section 10(b) and rule 10b-5 (2) with the same degree of scienter that primary liability requires. E.g., Renovitch, 905 F.2d at 1045; Schlifke, 866 F.2d at 947; LHLC Corp., 842 F.2d at 932; First Interstate Bank of Nev. v. Chapman & Cutler, 837 F.2d 775, 780 n. 4 (7th Cir.1988); Barker v. Henderson, Franklin, Starnes & Holt, 797 F.2d 490, 495 (7th Cir.1986). We consider each of these elements in turn.
1. Manipulative or Deceptive Act
Plaintiffs contend that the actions described in paragraphs 14 through 19 of their amended complaint constitute manipulative or deceptive acts proscribed by section 10(b) and rule 10b-5.
Paragraphs 14 through 16, under the heading “Active Conduct,” allege that Arthur Young aided and abetted the primary violators by affirmatively consenting in writing to the use of its report in the prospectus with the knowledge that the prospectus was false and misleading. These paragraphs further allege that consent to the inclusion of the report in the prospectus was required before the registration statement could become effective, that Arthur Young knew its consent was required, and that without the registration statement, the securities could not have been offered to the public and the primary violators could not have defrauded the investors.
Paragraphs 17 through 19, under the heading “Passive Conduct,” allege that Arthur Young discovered facts occurring between July 31, 1983, the date of DOC’s financial statements, and before December 7, 1983, the date of the prospectus, which facts required adjustment of DOC’s financial statements and/or financial disclosure by DOC. The amended complaint alleges further that Arthur Young had a duty, under generally accepted auditing standards, to advise DOC to make adjustments in its financial statements and/or appropriate disclosure to prevent future reliance on its report and/or to prevent DOC’s financial statements from being misleading as of the date of their reissuance in the December 7, 1983, prospectus. According to the amended complaint, in the event that DOC did not make the advised adjustments or disclosures, Arthur Young had the further duty under generally accepted auditing standards to (1) notify DOC that its report was not to be associated with the financial statements; (2) notify the appropriate regulatory agencies (including the SEC) that its report should no longer be relied on; (3) notify the investing public, as far as reasonably practicable, that its report should no longer be relied upon; and (4) to withhold or to withdraw consent to the use of its report in the prospectus. Finally, the amended complaint alleges that contrary to its duty to plaintiffs and other members of the investing public, Arthur Young failed to take any of the above-described actions.
Turning first to the “active conduct” described in paragraphs 12 through 16, we observe that plaintiffs have not alleged any problem with the audited financial statements of July 31, 1983, which are included in the prospectus and are the subject of Arthur Young’s report. Nor is there any allegation that Arthur Young’s report itself is incorrect; indeed, plaintiffs’ counsel at oral argument acknowledged that the report was accurate when written. Rather, what plaintiffs allege is that the prospectus was false and misleading because circumstances had changed between the date of the report and the date of the prospectus, that Arthur Young knew this, and that had Arthur Young’s report not been included in the prospectus, the registration statement could not have become effective.
Even assuming that Arthur Young knew that the prospectus was false and misleading, paragraphs 12 through 16 allege only that had Arthur Young not consented to the use of its report in the prospectus, the primary violators would have been unable to defraud plaintiffs. It is well settled in this circuit, however, that but-for causation is not sufficient to state a claim for aiding and abetting. E.g., Renovitch, 905 F.2d at 1047; First Interstate Bank, 837 F.2d at 779; see also Schlifke, 866 F.2d at 947. Because the connection alleged by plaintiffs between Arthur Young’s consent to the use of its report in the prospectus and plaintiffs’ loss on their investments amounts to nothing more than this but-for causation, the “active conduct” described in plaintiffs’ amended complaint does not constitute a manipulative or deceptive act for purposes of aiding and abetting liability. See Renovitch, 905 F.2d at 1047; First Interstate Bank, 837 F.2d at 779.
Turning next to Arthur Young’s “passive conduct,” the amended complaint alleges that Arthur Young, knowing that certain changes occurred between the date of the financial statements and the date of the prospectus, nonetheless failed to carry out the duties described in paragraphs 17 through 19, which duties included advising DOC to make disclosures, making certain disclosures itself in the event of DOC’s inaction, and withholding consent to the use of its report in the prospectus.
As we explained in Barker, when the manipulative or deceptive act is “the failure to ‘blow the whistle,’ the defendant must have a duty to blow the whistle.” 797 F.2d at 496 (emphasis in original); see also Schlifke, 866 F.2d at 948 (quoting Barker); LHLC Corp., 842 F.2d at 932 (“When the problem consists in keeping silence while the primary violator carries out the fraud, the plaintiff must show that the silent person had a legal duty to speak”); First Interstate Bank, 837 F.2d at 778 (quoting Barker). General duties to speak do not find their source in securities laws, Basic Inc. v. Levinson, 485 U.S. 224, 239 & n. 17, 108 S.Ct. 978, 987 n. 17, 99 L.Ed.2d 194 (1988), but instead “must come from a fiduciary relation outside securities law." Barker, 797 F.2d at 496; see also Schlifke, 866 F.2d at 948.
Plaintiffs contend that the source of Arthur Young’s duty is to be found in certain standards promulgated by the American Institute of Certified Public Accountants (“AICPA”), one of the main sources of professional standards for accountants. Specifically, plaintiffs argue that sections 711.12, 560, and 561 of the AICPA Codification of Statements on Auditing Standards (1985) (the “Auditing Standards”) impose on Arthur Young the duty to take the actions described in paragraphs 17 through 19 of their amended complaint.
In discussing the duty to disclose, we have said that there must be a legal duty to speak, LHLC Cory., 842 F.2d at 932, and that state law will generally be the source of this duty. DiLeo, 901 F.2d at 628. Assuming, without deciding, the proposition that the failure to comply with the Accounting Standards constitutes a violation of state common law, the Auditing Standards set out the actions that plaintiffs allege Arthur Young should have taken. The question then becomes whether an accounting firm’s failure to comply with these professional standards constitutes a manipulative or deceptive act for purposes of aider and abettor liability.
Plaintiffs do not cite any cases that suggest that a failure to comply with the Auditing Standards may give rise to an action for securities fraud under section 10(b) and rule 10b-5. Instead, plaintiffs primarily rely on Rudolph v. Arthur Andersen, 800 F.2d 1040 (11th Cir.1986), cert. denied, 480 U.S. 946, 107 S.Ct. 1604, 94 L.Ed.2d 790 (1987), a decision that substantially expands the scope of accountants’ liability and one that we have previously declined to follow. See Latigo Ventures, 876 F.2d at 1327. We remain unpersuaded that accountants’ liability should be expanded to this extent and thus decline again to adopt the position of the Eleventh Circuit.
Whether a lack of compliance with the Auditing Standards will expose an accounting firm to liability for aiding and abetting, while an interesting question, is one that we need not decide at this time. Even if we assume that a failure to comply with these professional standards constitutes a manipulative or deceptive act, this is not enough because plaintiffs have failed to allege that Arthur Young acted with scien-ter. And, unless the defendant acts with the requisite intent, there can be no liability for aiding and abetting, for it is the intent requirement that distinguishes an action for securities fraud from an action for negligence or malpractice. See, e.g., Ernst & Ernst, 425 U.S. at 199, 96 S.Ct. at 1383; Barker, 797 F.2d at 497. We thus conclude our discussion with an analysis of the scienter requirement.
2. Scienter
In Ernst & Ernst v. Hochfelder, the Supreme Court held that persons may be held liable for aiding and abetting under section 10(b) and rule 10b-5 only if they act with scienter. 425 U.S. 185, 193, 96 S.Ct. 1375, 1381, 47 L.Ed.2d 668 (1976). Scienter, as the Supreme Court defined it in this context, is the “intent to deceive, manipulate, or defraud.” 425 U.S. at 193, 96 S.Ct. at 1381. Negligent conduct is thus not sufficient; aiders and abettors must commit the proscribed act with the intent required for a primary violation. This circuit has held that the requirement of wrongful intent is satisfied by a showing of reckless conduct. See, e.g., Rowe v. Maremont Corp., 850 F.2d 1226, 1238 (7th Cir.1988); Barker, 797 F.2d at 495.
Turning to the amended complaint, the allegations having to do with Arthur Young’s mental state occur in paragraphs 13, 16, and 20. Paragraph 13 alleges,
At the time the prospectus was issued, Arthur Young had knowledge of each of the facts omitted from the prospectus, as hereinabove alleged, and had knowledge that the prospectus failed to disclose each of said facts. Alternatively, Arthur Young’s lack of knowledge was due to a reckless disregard of the truth.
Paragraph 16 alleges, “Arthur Young, with knowledge that the prospectus was false and misleading, as hereinabove alleged, affirmatively consented to the use of its report in the prospectus.” Finally, paragraph 20 of the amended complaint alleges,
By virtue of the foregoing active and passive conduct, Arthur Young knowingly and intentionally aided and abetted the primary violators in the perpetration of the fraud upon plaintiffs and the members of the plaintiffs’ class hereinabove alleged. Alternatively, Arthur Young’s active and passive conduct ... constituted an extreme departure from the standards of ordinary care which presented a danger of misleading buyers of DOC’s securities that was either known to Arthur Young or so obvious that Arthur Young should have been aware of it.
Plaintiffs contend that these allegations are sufficient to satisfy the scienter requirement for aiding and abetting liability.
Although states of mind may be pleaded generally under Fed.R.Civ.P. 9(b), the rule requires plaintiffs to plead “with particularity” any “circumstances constituting fraud.” See also DiLeo, 901 F.2d at 627. Assertions that Arthur Young had knowledge that the prospectus was false and misleading and that Arthur Young knowingly and intentionally aided and abetted the primary violators are nothing more than rote conclusions. As we stated in DiLeo, while the defendant’s mental state need not be pleaded with particularity, “the complaint must still afford a basis for believing that plaintiffs could prove scienter.” Id. at 629. Plaintiffs’ amended complaint fails to do this.
For example, the amended complaint alleges that Arthur Young consented to the use of its report in the prospectus while knowing that the prospectus was false and misleading. Yet it alleges no facts to show how Arthur Young knew that the basis for its decision to issue an unqualified report was no longer sound. How Arthur Young would have known, however, is important in this case. Arthur Young would not have discovered the events that negatively affected DOC’s financial health during the course of a routine audit because they occurred between August 19, 1983, the date of Arthur Young’s report and December 7, 1983, the date of the prospectus. Although the Auditing Standards suggest certain procedures a firm should use to keep itself informed of events during this time lag, plaintiffs do not allege that Arthur Young knew as a result of following those procedures.
Plaintiffs’ claims that Arthur Young should have known that the prospectus was false and misleading also fail to allege scienter. While reckless conduct may satisfy the scienter requirement, bare allegations that Arthur Young should have known or that its knowledge was due to a reckless disregard of the truth are not sufficient to turn a possible negligence or malpractice action into an action for securities fraud. See, e.g., Barker, 797 F.2d at 496. Plaintiffs must provide more than concluso-ry allegations to satisfy rule 9(b)’s requirement that the circumstances of the fraud be pleaded with particularity.
Finally, the amended complaint as a whole provides no grounds for believing that plaintiffs could prove scienter. As we stated in Barker, “[i]f the plaintiff does not have direct evidence of scienter, the court should ask whether the fraud (or cover-up) was in the interest of the defendants. Did they gain by bilking the buyers of the securities?” Barker, 797 F.2d at 497. Here, as in DiLeo, there are no allegations that Arthur Young had anything to gain from any fraud by the primary violators. Although the amended complaint does allege that Arthur Young received $90,000 for its services to DOC, this is not sufficient to support an inference of scienter. As we explained in DiLeo, an accounting firm’s “greatest asset is its reputation for honesty, followed closely by its reputation for careful work. Fees [an accounting firm receives for its services] ... could not approach the losses [the firm] ... would suffer from a perception that it would muffle a client’s fraud.” 901 F.2d at 629.
We therefore conclude that plaintiffs have not adequately alleged that Arthur Young acted with the intent required to support a claim for aiding and abetting. The district court’s dismissal of plaintiffs’ amended complaint is
Affirmed.
. Plaintiffs also filed two other related suits. The first was against DOC, FMP (a medical partnership that owned DOC stock), and various officers and directors of DOC. The second was against the law firm that was counsel to DOC in the public offering and various officers and directors of DOC.
.Section 10(b) prohibits persons from using or employing any “manipulative or deceptive device or contrivance" in connection with the purchase or sale of a security. 15 U.S.C. § 78j(b); rule 10b-5 makes it unlawful for any person, in connection with the purchase or sale of a security:
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security.
17 C.F.R. § 240.10b-5.
. Although Arthur Young argues on appeal that we should reconsider our position, it did not raise this argument before the district court and we will therefore not consider it on appeal. Patrick v. Jasper County, 901 F.2d 561, 566 (7th Cir.1990). At the same time we note that even had Arthur Young raised this argument below, reconsideration of our position would not be appropriate because plaintiffs’ amended complaint fails to state a claim for aiding and abetting.
. To state a claim for a primary violation, the plaintiff must demonstrate that the defendant (1) made an untrue statement of material fact or omitted a material fact that rendered misleading the statements made (2) in connection with the purchase or sale of a security, (3) with the intent to mislead, and (4) which caused the plaintiffs loss. Renovitch, 905 F.2d at 1045 n. 7; Schlifke, 866 F.2d at 943. Secondary liability or liability for aiding and abetting differs from primary liability in that secondary liability can attach to one who has not actually purchased or sold a security. Renovitch, 905 F.2d at 1045 n. 7; LHLC Corp. v. Cluett, Peabody & Co., 842 F.2d 928, 932 (7th Cir.), cert. denied, 488 U.S. 926, 109 S.Ct. 311, 102 L.Ed.2d 329 (1988). We assume for purposes of this appeal that primary violators committed the acts alleged in plaintiffs’ amended complaint.
. Other courts have established additional requirements for aiding and abetting liability: (1) the existence of a primary violator; (2) knowledge by the aider and abettor of the primary violation; and (3) substantial assistance on the aider and abettor’s part in perpetrating the primary violation. Barker, 797 F.2d at 496. It is unnecessary for us to analyze these additional factors, however, because plaintiffs’ amended complaint does not allege even the minimal requirements of an aiding and abetting claim. See Schlifke, 866 F.2d at 947; Barker, 797 F.2d at 496.
. The amended complaint alleges that Arthur Young determined that its report would not include a going-concern qualification based on the facts that: (1) DOC was in the process of a public offering of securities that would generate approximately $30 million; (2) DOC had $500,-000 remaining on its bank line of credit; (3) DOC had approximately $1 million of accounts receivable that could be used as collateral for any borrowings; and (4) DOC had additional cash available from private investors. According to the amended complaint, Arthur Young knew at the time the prospectus was issued that these facts were not true. The amended complaint further alleges that Arthur Young knew that although the prospectus stated that DOC had a cash overdraft of $123,000, $128,000 of collectible receivables outstanding, and $500,-000 remaining under its bank line of credit, on October 31, 1983, DOC had an overdraft of $618,000, and on December 7, 1983, DOC had no available balance remaining on its bank line of credit. Finally, the amended complaint alleges that Arthur Young knew that DOC had been unable to generate sufficient cash between August 1, 1983, and December 7, 1983, to pay its liabilities when due.
. See Shroyer, Accountants and the Dynamics of Duty, 14 Wm. Mitchell L.R. 77, 82 n. 3 (1988), for a list of treatises discussing these standards.
. Arthur Young argues that under the Auditing Standards, its only duty was to correct errors in the financial statements and that there is no duty to update information to the effective date of the prospectus. This is incorrect. Section 711 governs filings under federal securities statutes. Section 711.12, which deals with the accountant’s response to subsequent events, states that if an accountant discovers subsequent events requiring adjustment or disclosure in the financial statements and the client refuses to make appropriate adjustment or disclosure, he should consider withholding consent to the use of his report in the prospectus and should follow the procedures in section 561.08-.09. Section 561.08 describes the actions that paragraph 17 of the amended complaint alleges Arthur Young should have taken with respect to notification to DOC, to regulatory agencies, and to the investing public.
. As we mentioned previously, plaintiffs do not contend that the report or the financial statements that were the basis of the report were false at the time they were completed.
. Section 711.10 of the Auditing Standards provides, for example, that an auditor should read the prospectus and should ask and obtain written representations from the relevant officers and others about whether any events have occurred that materially affect the financial statements or need to be disclosed so that the financial statements are not misleading.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
STANLEY, District Judge.
Appellant was convicted after trial by jury in the District of New Mexico on four counts, each charging forgery of the endorsement of the payee’s name on a United States Treasury check. He now appeals, urging error upon nine grounds:
“1. Prior incarceration for extended periods of time on charges of which Appellant was later absolved, specifically, for a great length of time on the charge of murder, of which charge Appellant was not prosecuted.
“2. Admission of a letter written by Appellant to an agent of the F. B.I. while Appellant was incarcerated on investigation of the murder charge aforementioned. This letter was identified by the Appellant during the cross-examination of his testimony as having been written by himself. However, it is urged that this letter contained inflammatory and prejudicial reference to the fact that Appellant was incarcerated during it’s (sic) authorship.
“3. Failure of the United States to bring out the witness and co-defendant Linda Walker’s total past criminal record which, states Appellant, causes her testimony to be beyond belief.
“4. Incompetence of Appellant's court-appointed attorney at trial.
“5. An excessive sentence in that the convicted co-defendant Walker was sentenced only to one year whereas Appellant was sentenced to eight years on each count of conviction, said sentences to run concurrently.
“6. That the motion to dismiss filed by Appellant’s attorney should have been treated by the trial court as a motion for change of venue and that the venue should have been changed.
“7. That the conclusion opined by the government’s expert witness was hearsay and should have been excluded from consideration of the jury.
“8. That Appellant was not warned of his rights prior to writing the letter to the F.B.I. which was used as the basis of comparison by the Government’s handwriting expert witness. That such should have caused the letter to be suppressed on the grounds of self-incrimination, contrary to Amendment V of the Constitution of the United States.
“9. The trial judge was prejudiced against Appellant.”
The “prior incarceration” was on other charges, in no way connected with those which resulted in the conviction here appealed.
The letter referred to by appellant was written by him before the date of the offenses charged. It formed the basis of the opinion of the government’s handwriting expert that the forged endorsements were written by appellant, and was properly received in evidence. See Robinson v. United States, 144 F.2d 392 (6th Cir.), cert. denied, 323 U.S. 789, 65 S.Ct. 311, 89 L.Ed. 629 (1944).
Appellant does not suggest what Linda Walker’s total past criminal record may have been. On cross-examination, defense counsel brought out the fact that she had been convicted of a felony (uttering one of the cheeks forged by appellant) and was, at the time of the appellant’s trial, serving the sentence imposed following that conviction. The weight of her testimony was for the jury.
The record discloses no incompetence on the part of appellant’s trial attorney. On the contrary, it appears that appellant was well served by appointed counsel, who took her appointment seriously and who overlooked no opportunity to advance her client’s cause or to protect his rights. “Neither vigor nor skill can overcome truth. Success is not the test of effective assistance of counsel.” Hester v. United States, 303 F.2d 47, 49 (10th Cir.), cert. denied, 371 U.S. 847, 83 S.Ct. 80, 9 L.Ed.2d 82 (1962).
Appellant was sentenced to a term of eight years — two years less than the maximum — on each count, the sentences to run concurrently. It is well established that when a defendant is convicted on several counts a judgment and sentence will not be reversed if the sentence does not exceed that which might lawfully be imposed on any one count. Grant v. United States, 307 F.2d 509 (10th Cir. 1962).
The trial court held an evidentiary hearing on appellant’s motion to dismiss. The only suggestion that prejudice might exist against the defendant was the statement of trial counsel that “someone is trying to see that this man does not get a fair trial.” This statement was made in support of counsel’s theory that members of the local police department had attempted to intimidate a witness. Such a statement does not suggest the sort of local prejudice contemplated by Eule 21(a), F.E. Cr.P. The trial court found that there had been no intimidation and that there was no reason to believe that appellant would not receive a fair trial. This finding is supported by the record, in which we find nothing indicating that the motion to dismiss should have been treated as one for change of venue.
An expert in handwriting, his qualifications having been established to the satisfaction of the court, compared the admitted handwriting of appellant
with that of the forged endorsements and gave his opinion that all were written by the same person. It is well established that such evidence is admissible. Robles v. United States, 279 F.2d 401 (9th Cir. 1960), cert. denied, 365 U.S. 836, 81 S.Ct. 750, 5 L.Ed.2d 745 (1961). There was proof that the original checks bearing the endorsements had, after being subjected to detailed examination by the expert, been lost in his office in the Treasury Department. The witness identified photostatic copies as accurate representations of the originals, and they were received in evidence. A sufficient foundation was laid for the admission of the copies. McBoyle v. United States, 43 F.2d 273 (10th Cir. 1930), rev’d on other grounds, 283 U.S. 25, 51 S.Ct. 340, 75 L.Ed. 816 (1931). We find no error in the procedures followed by the trial court and none in its rulings.
The standard of appellant’s handwriting used by the handwriting expert in making his comparison was the letter mentioned in appellant’s second point. It was unsolicited, and was written before the commission of the offenses here involved and while he was in custody on an unrelated charge. The letter was addressed voluntarily by the appellant to an agent of the F.B.I. Appellant could hardly have been “warned of his rights prior to writing the letter,” when no one but he knew that it was to be written. It was not a confession, and contained no incriminatory statements. It bears no resemblance to the sort of statements dealt with in Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed. 2d 246 (1964); Escobedo V. State of Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977 (1964), and their progenitors. See Otney v. United States, 340 F.2d 696 (10th Cir. 1965).
Appellant sets out no basis for his allegation that the trial judge was prejudiced against him, and we find none in the record.
In a document entitled “Application for Relief”, filed after argument and submission of this appeal, appellant, having already accused his appointed trial counsel of incompetence, levels the same charge at counsel appointed to represent him here. This attorney, after careful investigation and research, reached the same conclusion that we have reached — that there is no merit in the claimed errors specified by appellant. Nevertheless, he presented them to this court while frankly admitting that he could find no supporting authority.
Appellant, by requesting the appointment of counsel, sought the benefits of the attorney-client relationship as customarily practiced in the American system of jurisprudence. See Williams v. Beto, 5th Cir., 354 F.2d 698, December 28, 1965. An attorney “is bound by all fair and honorable means, to present every defense that the law of the land permits, to the end that no person may be deprived of life or liberty, but by due process of law.” Canon 5, American Bar Association Canons of Professional Ethics. This does not require an attorney, whether retained or appointed, to stultify himself by advancing arguments known by him to be without merit.
A careful review of the transcript of the trial proceedings and testimony leads unescapably to the conclusion that the verdict was amply supported by the evidence and that there exists no such error, defect or irregularity as would affect appellant’s substantial rights. Rule 52, F.R.Cr.P.
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
BIGGS, Circuit Judge.
The plaintiff, David E. Jones, a seaman employed by the defendant and third-party plaintiff, Waterman Steamship Corporation, brought suit against his employer in a civil action to recover maintenance and cure and wages. Jones had left his ship, the S.S. “Beauregard”, on shore leave and was proceeding across the pier toward the street when all the lights on the pier were extinguished. As a result of the darkness he fell into an open ditch along a railway siding owned and operated by the third-party defendant, Reading Company, and sustained injuries which incapacitated him for some months. Waterman impleaded Reading Company as a third-party defendant for reasons set out hereinafter.
The suit at bar, Civil Action No. 1481 in the District Court, was instituted by Jones on the same day that he brought a civil action against Reading Company in the court below, Civil Action No. 1480, to recover damages for his injuries and expenses in connection therewith. No. 1480 was tried to a jury and a verdict was returned for the plaintiff in the amount of $2,387.50. Thereafter, the court granted a motion made by Reading for a new trial. See Jones v. Reading Company, D.C., 45 F.Supp. 566. Jones then settled his case with Reading for the sum of $750 and executed a general release in the latter’s favor. The release was in the usual form and released and discharged Reading from all claims and demands whatsoever which Jones had against Reading “by reason of any matter, cause or thing whatsoever * * * and particularly, * * * by reason of injuries and losses sustained as a result of * * * ” the fall “to recover for which I brought suit in the U. S. District Court for the Eastern District of Pennsylvania against Reading Company, in Civil Action No. 1480, * *
During the pendency of No. 1481 Waterman filed a motion to dismiss the action against it on the ground that a ship owner was not liable for maintenance and cure for an injury occurring on a pier. The motion was granted by the court below but the judgment was reversed by this court. See 3 Cir., 130 F.2d 797. Our decision was affirmed. Aguilar v. Standard Oil Co., 318 U.S. 724, 63 S.Ct. 930, 87 L.Ed. 1107. After remand Waterman filed an answer setting out the release which Jones had executed to Reading and impleaded Reading asserting that Waterman is entitled to indemnity from Reading for any sum which Jones may recover against Waterman.
The case went to trial. Jones introduced as evidence the testimony received in No. 1480. Other evidence was also received which need not be detailed here. It is enough to state that certain testimony was given by Jones respecting his inability to work following his medical discharge and that shipping articles of the “Beauregard” were introduced in evidence as was the release to Reading. In No. 1480 Jones sought to recover both compensation and consequential damages, the latter including, as the evidence shows, substantially all the items recoverable by Jones as maintenance and cure and wages.
The court below in the instant case concluded that “To permit the plaintiff to successfully prosecute [the action at bar] would be to enable him to obtain two satisfactions for the one injury by resort to two different causes of action.” 60 F.Supp. 30, 32. Judgment was entered in favor of Waterman and against Jones. Judgment also was entered in favor of Reading as third-party defendant and against Waterman as third-party plaintiff on the theory enunciated in The Federal No. 2, 2 Cir., 21 F.2d 313. Both Jones and Waterman have appealed at our Nos. 8930 and 8945, respectively.
If a seaman falls sick or is injured and must be removed or is kept from his vessel he is entitled to maintenance and cure as well as to his wages. Smith v. Lylces Brothers-Ripley S.S. Co., 5 Cir., 105 F.2d 604, 605. Wages, even if they include “keep”, must be restricted to the term of employment as specified by the shipping articles while the duty to provide maintenance and cure lasts as long as the seaman’s need continues. Calmar Steamship Corporation v. Taylor, 303 U.S. 525, 58 S. Ct. 651, 82 L.Ed. 993; Loverich v. Warner Co., 3 Cir., 118 F.2d 690, certiorari denied 313 U.S. 577, 61 S.Ct. 1104, 85 L.Ed. 1535. Jones has a cause of action against Waterman for maintenance and cure and for his wages as set out in his complaint in the suit at bar. This is an action ex contractu. Jones may maintain it by reason of the obligations and duties imposed on Waterman by the shipping articles and by virtue of his status as a member of the crew of the “Beauregard”. Jones also had a cause of action against Reading sounding in tort and arising ex delicto by reason of Reading’s alleged failure properly to maintain its right-of-way. Jones was careful to restrict his complaint in the case at bar to a claim for “wages to the end of the articles and maintenance and cure for the period of his disability * * * He does not seek to recover damages from Waterman.
The distinction between the right to maintenance and cure and wages and the right to damages is made clear by the Supreme Court in Pacific Steamship Co. v. Peterson, 278 U.S. 130, 138, 49 S.Ct. 75, 77, 73 L.Ed. 220, wherein Mr. Justice Sanford stated, “In short, the right to maintenance, cure and wages, implied in law as a contractual obligation arising out of the nature of the employment, is independent of the right to indemnity or compensatory damages for an injury caused by negligence ; and these two rights are consistent and cumulative.” See also Aguilar v. Standard Oil Co., supra, 318 U.S. at pages 730, 731, 63 S.Ct. 930, 87 L.Ed. 1107. Jones could not have recovered maintenance and cure and wages from Reading, nor may he recover damages from Waterman. It follows that Waterman and Reading were not joint tortfeasors. In fact, Waterman committed no tort. It is not alleged that it did. Under no theory of law can Jones’ release to Reading release Waterman. It is unnecessary therefore to discuss the Pennsylvania law of release of joint tortfeasors or to compare it with the federal law. Cf. Thompson v. Fox, 326 Pa. 209, 192 A. 107, 112 A.L.R. 550 and McKenna v. Austin, 77 U.S.App.D.C. 228, 134 F.2d 659, 148 A.L.R. 1253.
Jones has settled his cause of action against Reading but he is free to assert and to recover on his ex contractu cause of action against Waterman. He would be free to do this even if he had obtained a judgment against Reading and had executed it. The circumstances are somewhat analogous to those which would be presented if a person insured against personal liability were injured by an automobile driven by an alleged tortfeasor. He has sued the tortfeasor who drove the automobile which hit him and recovered a verdict. This has been set aside and he, thereafter, makes a settlement with the alleged tortfeasor. He then seeks to collect a sum of money which he alleges is due to him under his insurance policy because of his injuries. The insurance carrier says, “You have made a settlement with and have received money from the tortfeasor, the amount of your claim against us has been satisfied.by that settlement or at the least your recovery against us must be reduced pro tanto.” This contention in substance was dealt with by the court in Dempsey v. Baltimore & O. R. Co., D.C., 219 F. 619 and was refuted. See also Sprinkle v. Davis, 111 F. 2d 925, 128 A.L.R. 1101 and Clune v. Ris-tine, 10 Cir., 94 F. 745. The position taken by Waterman as to Jones is untenable.
In the suit at No. 1480 there was a certain confusion evinced by counsel for both parties as to the nature of the damages which Jones was entitled to prove and this confusion seems to have been carried over into the suit at bar. As we have indicated at an earlier point in this opinion, a seaman is entitled to wages only to the end of the period of time covered by the shipping articles, whereas he is entitled to maintenance and cure as long as he shall have need of them. Two sets of shipping articles were introduced in evidence. We are concerned with only one, those signed by Jones on January 6, 1941, and which were in effect on January 16, 1941, the day of the accident. It has been stipulated by the parties that these shipping articles were “closed out” on February 5, 1941. But the articles state, inter alia, that the seamen should make one or more voyages on the “Beauregard” as the master might direct “for a term of time not exceeding twenty-four calendar months.” We entertain no doubt in the light of such decisions as MCarron v. Dominion Atlantic Railway Company, D.C., 134 F. 762, and Enochasson v. Freeport Sulphur Co., D.C., 7 F.2d 674, that Waterman’s obligation to pay Jones’ wages endured as long as the period for which he claims maintenance and cure. Since this was the fact the District Court at No. 1480 could not have permitted Jones to recover from Reading damages based upon maintenance and cure and wages. Jones was entitled to recover in the suit at No. 1480 only compensatory damages including an amount to be awarded for pain and suffering. Since Jones was not entitled to recover damages for maintenance and cure and wages in the suit at No. 1480, all other considerations aside, these elements may not be deemed to have been included in the settlement of the suit at No. 1480.
We come now to the final phase of the case at bar. The question presented by it may be summed up as follows: May Waterman recover from Reading any sum which it may be required to pay to Jones for maintenance and cure and wages? In other words, if Waterman pays Jones, is Waterman entitled to indemnity from Reading if it be found that Reading negligently caused Jones’ injuries? The third party complaint filed by Waterman does not allege specifically that Reading was negligent or that Jones was injured by reason of Reading’s negligence. It does aver, however, that Reading was in charge of the premises through which Jones walked as an invitee and that when the lights on the pier were extinguished Jones fell into the railroad “ditch” sustaining the injuries which he recites in his complaint. The evidence in No. 1480 was introduced by a stipulation into the case at bar. The court below in the case at bar made no findings of fact or conclusions of law as to Reading s negligence, if any, since it relied on The Federal No. 2, supra. It is suggested by counsel for Jones that this court “as in an action in admiralty” may make findings of fact and conclusions of law. We may not do this. The suit at bar is not in admiralty though Jones’ rights against Waterman are governed by the general maritime law. It is a civil suit and is to be conducted in the court below according to the Rules of Civil Procedure. 28 U.S. C.A. following section 723c. Since it was tried to the court and not to a jury, findings of fact and conclusions of law must be made by the court b'elow as required by Rule 52. For the purpose of expediting the cause we will assume, arguendo, that Jones’ injuries were caused by Reading’s negligence and will endeavor to state the applicable principles of law governing the third-party action.
Whether Waterman may maintain its action against Reading in the present suit depends in part on whether the cause of action set out in the third-party complaint can be fitted into the frame of Rule 14(a). The answer to this question turns in large part on the construction, of the word “claim” as used in the rule. We think it would be difficult to employ a more inclusive term, and, as is stated in Moore’s Federal Practice, Vol. 1, at p. 742, “ * * * it is reasonably certain that Federal Rule 14 sought the same general objectives as * * * Admiralty Rule [56].” Admiralty Rule 56, 28 U.S.C.A. following section 723, is very broad and, if the suit at bar were in admiralty, would permit the defendant to maintain the third-party complaint under the assumption of proof which we have made. Moore states also at p. 740, that “The general purpose of Rule 14 is to avoid two actions which should be tried together to save the time and cost of a reduplication of evidence, to obtain consistent results from identical or similar evidence, and to do away with the serious handicap to a defendant of a time difference between a judgment against him, and a judgment in his favor against the third-party defendant.” If Waterman will have a claim which it can assert against Reading because compelled to pay Jones money which, absent Reading’s negligence in relation to Jones, it would not have to pay, Waterman may assert that claim in the suit at bar by way of its third-party complaint.
The primary question therefore is whether or not Waterman has a cause of action which it can assert against Reading if Waterman is compelled to pay Jones. We think that Waterman has such a cause of action if it can prove that Reading’s negligence was the cause of Jones’ injuries. If Waterman can recover from Reading it can do so because a cause of action arises under the law of Pennsylvania where the operative facts occurred. and No Pennsylvania case in point has been cited to us and we can find none. The right is one of an employer to recover indemnity for sums of money which he has been compelled to pay to a servant who has been injured by the tortious act of another. This is not the right of an employer to recover against a tortfeasor for an act which has deprived him of the services of a servant but resembles the latter. It is desirable to state some of the precedents of the general law to the end that our reasons for allowing recovery to Waterman under the assumptions hereinbefore stated may be made plain.
At common law an employer could maintain an action against a tortfeasor to recover damages on account of loss of services which he sustained by reason of an injury to his employee. This cause of action included damages measured by the loss of the employee’s services. See 35 American Jurisprudence, Master and Servant, § 530, and the authorities cited therein, and 18 R.C.L., 542, § 58. As to servants infra moenia, some cases held that the master could recover only his out-of-pocket expense due to being deprived of the services. This rule of law persisted to a rather late date in New York. See Tidd v. Skinner, 225 N.Y. 422, 122 N.E. 247, 3 A.L.R. 1145. These rights in substance were those of indemnification. Some of the early cases permitted indemnification against an intentional tortfeasor and denied it as to a merely negligent tortfeasor. The Supreme Judicial Court of Massachusetts did not make such a distinction in Ames v. Union Railway, 1875, 117 Mass. 541, 19 Am.Rep. 426, but permitted a master to recover for the loss of apprentice’s services, the latter having been injured due to negligent operation of the railway. See Coal Land Development Co. v. Chidister, 86 W.Va. 561, 103 S.E. 923. The American courts seem to have made no distinction between loss of services caused by intentional wrongdoing, such as assault and battery, and those in which the loss of services resulted from mere negligence. See Voss v. Howard, Fed.Cas. No. 17,013. The case of Cain v. Vollmer, 19 Idaho 163, 112 P. 686, 32 L.R.A. N.S., 38, seems typical. In this case a jockey was injured by a dog, negligently permitted to wander at large by its master. The employer of the jockey sued to recover the value of the prizes which the jockey might have won had he been able to ride. The damages, however, were held to be too speculative to permit recovery. The Supreme Court of Idaho, however, clearly found that a cause of action existed. Compare Fluker v. Georgia Railroad & Banking Co., 81 Ga. 461, 8 S.E. 529, 2 L.R.A. 843, 12 Am.St.Rep. 328.
A case which denies the master’s right to recovery is Chelsea Moving & Trucking Co. v. Ross Towboat Co., 280 Mass. 282, 182 N.E. 477. The Supreme Judicial Court of Massachusetts distinguished Ames v. Union Railway, supra, on the ground that the employee in the Ames case was an apprentice and the relationship between master and apprentice was different from that of an ordinary employer and employee, which was purely contractual. The Chelsea Moving & Trucking Co. case is the only decision among the early cases which we have found (though doubtless there are others in the deeps of the law) which holds that an employer cannot recover indemnity for the loss of his employee’s services, whether the loss was caused by intentional wrongdoing or negligence. The English law may have gone off in the direction of permitting recovery only if there had been intentional tortious interference with the employer and employee relationship. Lum-ley v. Gye, 2 El. & Bl. 216, may be said to look in that direction. But the general law in the United States upon this subject seems settled.
This is not to say, however, that the employer or master may necessarily recover the sums expended by him out of his own pocket to cure the servant or employee or to maintain him during the illness resulting from an accident. It would seem to follow, however, as a matter of logic that if the master by virtue of his contract of employment with the servant is compelled to maintain and cure his servant during the latter’s illness the master should be permitted to recover these sums from the wrongdoer as part of the remedy afforded him in his cause of action against the wrongdoer. There are a number of cases arising under the general maritime law where such recovery or indemnification was permitted. In Mystic Terminal Co. v. Thibeault, 1 Cir., 108 F.2d 813, the operator of a car float towed by a tug was held liable for injuries sustained by the mate of the tug when he stepped through the rotted roof of the car float. It was held that the mate was on the roof for a business purpose and that it was the intention of the parties to include within the contract of towage and implied warranty of a safe place to work. In New York & Porto Rico S.S. Co. of New York v. Lee’s Lighters, D.C.E.D.N.Y., 48 F.2d 372, the court held that the steamship company was entitled to indemnity for money paid by it in satisfaction of a judgment obtained against it, plus expenses, arising out of an injury to a stevedore, employed by the steamship company, the accident arising out of the unseaworthiness of a lighter operated by the lighterage company. It was held that there was an implied warranty of seaworthiness in the lighter under the lighterage contract. This case should be viewed in the light of the recent decision of the Supreme Court in Seas Shipping Co., Inc., v. Sieracki, 66 S. Ct. 872. In The No. 34, 2 Cir., 25 F.2d 602, a stevedoring company whose employee was injured by a defective ladder fastened to the side of a lighter and who had recovered a judgment against his employer in the state court, was held to be entitled to indemnification from the owner of the lighter. Again, it was ruled that there was an implied warranty of a safe place to work as an incident of the stevedoring contract. See also The Lewis Luckenbach, 2 Cir.., 207 F. 66. In this case a stevedore had been injured due to a defect in the ship’s machinery. The stevedore sued the owner and the charterer and settled with both. The charterer sued the owner for indemnity and recovered. See also Rederii v. Jarka Corporation, .D.C.S.D.Me., 26 F. Supp. 304. In this case an employee of a stevedoring company was injured in the hull of a vessel under circumstances possibly entitling him to compensation under the Longshoremen’s and Harbor Workers’ Compensation Act, 33 U.S.C.A. § 901 et seq. He sued the vessel and made a compromise settlement. The owner of the vessel brought a libel in personam against the stevedoring company for indemnity. It was held that the owner of the vessel had a cause of action. The Federal No. 2, supra, is the only decision which we have been able to find which militates against this view. We will discuss that decision at a later point in this opinion.
If the principles of the majority of the decisions cited in the foregoing paragraph are sound it would follow that indemnity or recovery over may be had against a pier owner, or one holding under him, by a ship for sums expended by it for the maintenance and cure of one of its seamen injured because the pier was not maintained in a condition fit for the business purpose for which it was intended. The duty to maintain the pier, or a railroad track running upon it, in a safe condition for the benefit of seamen leaving a ship moored to the pier is a warranty implicit in the contract between the pier owner and the ship and in the contract or arrangement between the pier owner and the railroad whose tracks run upon the pier. But putting this tortious spelling out of contractual obligations and implied warranties aside, it is clear that Reading had a duty so to maintain its tracks on the pier that a seaman leaving the “Beauregard” would not be injured if he exercised due care. Under this concept Reading’s obligation sounds in tort and not in contract but is none the less binding upon it for that reason. Chief Justice Holmes took this position in Boston Woven Hose & Rubber Co. v. Kendall, 178 Mass. 232, 59 N.E. 657, 51 L.R.A. 781, 86 Am.St.Rep. 478, declaring that although the cause of action of the injured employee against the third party sounded in tort and the obligations and duties of the employer and the employee sounded in contract, the right of the employer to indemnity against the tortfeasor who had injured the employee was not impaired.
We come finally to such Pennsylvania cases as there are. There is no doubt that under the Pennsylvania law an employer has a right to recover against a tortfeasor for an act deliberately intended to deprive him of the services of his servant. Such a right was recognized by the early Pennsylvania decisions dealing with labor relations. We believe that the law of Pennsylvania follows the general law and will permit the employer to recover from a negligent tortfeasor for the value of the services of his injured employee, though we can find no decision directly in point upon this question. It is the law of Pennsylvania that property owners may recover indemnity from persons whose primary negligence has caused them to pay damages to injured persons. See Orth v. Consumers’ Gas Co., 280 Pa. 118, 124 A. 296, and Wise Shoes, Inc., v. Blatt, 107 Pa. Super. 473, 164 A. 89. Here the duty imposed upon the corporations primarily liable sounds in tort and grows directly out of the failure to maintain premises properly. The Pennsylvania labor relations cases and the two decisions last cited throw some light on the problem of law presented. Moreover, it must be borne in mind that the obligation of Waterman in the instant case grows out of the maritime law. Waterman cannot escape the burden of Jones’ maintenance and cure and it could not escape the loss of his services. Each element of the loss rose out of Reading’s tort, assuming Reading to have been negligent. We think that under these circumstances the law of Pennsylvania will permit Waterman to recover not only for the loss of Jones’ services but for the sums which it will be compelled to expend for his maintenance and cure.
In so holding we are not unmindful of the decision of the Circuit Court of Appeals for the Second Circuit in The Federal No. 2 which held to the contrary under circumstances analogous to those at bar. The substance of that Court’s ruling appears in 21 F.2d at page 314, where, after reference to a “social condition” which permits a father to recover for the loss of the services of a child or a husband for those of his wife, states, “But this social condition does not exist in the relationship of a seaman and his employer. It is a contract obligation, which [the employer] must perform, that imposes this responsibility, even though it be a special damage he suffers from a tortious act. The cause of the responsibility is the contract; the tort is the remote occasion.” In Seas Shipping Co., Inc. v. Sieracki, Mr. Justice Rutledge makes it plain that the obligations of the ship to its seamen do not rest solely in contract ; that a seaman is in effect a ward of the admiralty and that the relationship between owner and seaman, master and seaman, and ship and seaman is in essence a “consensual relationship”. We are of the opinion that the relationship of the ship owner to the seaman is more closely analogous to that of father and child than to that of an employer to a mere employee. We prefer to impose a higher degree of dignity upon the ship-seaman relationship, awarding to it a status or a “social condition” in excess of that given under the ruling in The Federal No. 2. Compare Crab Orchard Imp. Co. v. Chesapeake & O. R. Co., 4 Cir., 115 F.2d 277, 282, 283, where an employer was not permitted to recover indemnity against the tortfeasor who had injured his employee. It should be pointed out that in the cited case the relationship was merely that of employer and employee.
The status of the ship to its seaman bears comparison to that of a soldier in the United States Army to the United States. In United States v. Standard Oil Co., D.C. S.D.Cal., 60 F.Supp. 807, the United States sued the Standard Oil Company for indemnity for the money expended by it to cure an enlisted man of the United States Army who had been struck by the defendant’s truck and for the soldier’s wages during the period of his incapacity. The court permitted the recovery of both items. While the status of an enlisted man in the armed forces of the United States may be described as statutory and the obligation of the ship to grant maintenance and cure to the injured seaman arises under the admiralty law as embodied in decisions, the principle of liability so clearly enunciated in the cited case should be applicable under the facts of the case at bar. While the courts of the Commonwealth of Pennsylvania have not applied the maxim “Ubi jus, ibi remedi-um”, they have been apt in indemnifying injured employers and we conclude that it is no very great innovation to permit Waterman to recover from Reading for maintenance and cure to be paid by it to Jones, if Reading’s negligence is found to be the cause of Jones’ injuries.
It is clear that the release executed by Jones to Reading will not avail Reading in the third-party action for the right of Waterman against Reading is not a derivative right through Jones but is a separate and distinct cause of action which will vest in Waterman when it is ascertained what sum of money is due from Waterman to Jones. Cf. United States v. Standard Oil Co., supra.
The judgment against Jones and in favor of Waterman will be reversed. The judgment in favor of Reading and against Waterman will be reversed. The cause will be remanded with the direction to proceed in accordance with this opinion.
AVkile there was no express waiver of jury trial, the original plaintiff having requested trial by jury on April 17, 1941, as provided by Rule 38(b) and the third party plaintiff haying made no such request, it is apparent from the transcript of the proceedings in the court below on June 5, 1944, the day of the trial, that all the pai'ties waived all rights to trial by jury.
See that portion of Rule 14(a) which provides that a defendant may “serve a summons and complaint upon a person not a party to the action who is or may be liable to him or to the plaintiff for all or part of the plaintiff’s claim against him.”
The dividing line between Admiralty and the common law is set out in Bee. 128 and 128a of Benedict on Admiralty, Knauth’s 6th Ed. Contrast the English and American Rules. See the authorities cited to Knauth’s text. Under the decisions of the American courts there is no doubt that Waterman’s cause of action does not lie within the purview of the maritime law.
It will be observed that the third-party complaint alleges diversity of citizenship and jurisdictional amount and that tlie rule of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487 must be applied.
The action by husband or parent for loss of services of wife or child is closely analogous. See the Restatement, Torts, Section 703. It will be noted that the husband or parent is entitled to recover reasonable expenses incurred in treating the illness or injury. See h. Damages, under Section 703 of the Restatement. The recovery of such items may be had because the husband or parent is himself legally liable for them.
It is stated as follows in 39 C.J., Master and Servant, § 1604, “A master may maintain an action for all injuries to his servants because of the negligent or wilful acts of third persons wMch result in damage to the master through loss of services; and the rule has been applied where loss of services resulted from an assault and battery upon the servant, or by reason of his false imprisonment, from the negligent shooting of the servant, or from negligently driving or transporting him, or from his being bitten by defendant’s dog.” See the authorities cited to the text, some of which have been referred to in this opinion.
The fact that a husband or father, suing for loss of services of wife or child, may recover for medical expenses supplies a helpful analogy. See note 5 supra.
See O’Neil v. Behanna, 182 Pa. 236, 37 A. 843, 38 L.R.A. 382, 61 Am.St.Rep. 702; Jefferson & Indiana Coal Co. v. Marks, 287 Pa. 171, 134 A. 430, 47 A. L.R. 745; Flaccus v. Smith, 199 Pa. 128, 48 A. 894, 54 L.R.A. 640, 85 Am. St.Rep. 779; Kraemer Hosiery Co. v. American Federation of Full Fashioned Hosiery Workers, 305 Pa. 206, 157 A. 588. Cf. Tugboat Indian Co. v. A/S Ivarans Rederi, 334 Pa. 15, 5 A.2d 153, cited by Reading.
As to the general common law on this subject see 18 R.C.L. p. 542, § 58, and the authority cited to the text.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
This is an appeal from a judgment for penalties for violation of the Agricultural Adjustment Act of 1938, 7 U.S.C.A. § 1281 et seq. Appellant is a tobacco farmer who, because of his failure to report the disposition of his crops, had an acreage allotment of zero for the years 1950, 1951, 1952 and 1953. There was evidence which justified the findings of the court below that appellant raised and sold flue cured tobacco in the years in question in the amount found by the court. The penalty based on price was established by regulations contained in the Federal Register. Appellant complains of the refusal to continue the case, but this was clearly a matter resting in the discretion of the trial judge and there is no showing that the discretion was abused. He complains, also, because the court considered marketing quota regulations, which were contained in the Federal Register but were not introduced in evidence. It is clear, however, that the court could take judicial notice of these regulations. 44 U.S.C.A. § 307; Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10. There was no error and the judgment appealed from will be affirmed.
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
LEVIN H. CAMPBELL, Circuit Judge.
The following two opinions concern separate actions taken by the district court in a bankruptcy receivership proceeding. While we fully recognize that each must rise or fall on its own distinct facts, we find it convenient to announce both opinions together since they share a common background and are, to some degree at least, interrelated.
No. 79-1511.
The question in this appeal is whether the district court abused its discretion in denying applications by the alleged bankrupt, Alan H. Abrahams, to use for his personal benefit certain funds held by the bankruptcy receiver. As we believe the district court was neither obliged to entertain, nor authorized to grant, such applications, we affirm the order of the district court.
The order under appeal was entered June 26, 1979 by the district court, sitting as a court of bankruptcy, reconfirming the court’s earlier decision to deny Abrahams’ requests for legal fees in his pending criminal prosecution and for subsistence payments to his- family. The matter arose on an unusual set of facts. In February 1978, an involuntary bankruptcy proceeding was instituted against appellant Abrahams and Lloyd, Carr & Co., a Boston-based commodities option firm that had allegedly engaged in fraudulent options sales on a massive scale. A receiver in bankruptcy was appointed pursuant to Bankruptcy Rule 201, and charged with responsibility to marshal the assets of the alleged bankrupts. Learning that Abrahams and Lloyd, Carr maintained two large bank accounts in Bermuda, the receiver brought legal proceedings there seeking to have the money — rabout $1.75 million — transferred to the receiver’s control. This effort met considerable resistance in the Bermudian legal system, sparked by Abrahams’ personal refusal to authorize the transfer or cooperate in bringing it about.
On April 5, 1978, the receiver sought to have Abrahams held in contempt for failing to cooperate in having the Bermuda funds repatriated to the United States, as required by the Bankruptcy Act and by the district court’s injunctive order of February 3, 1978. An April 28, 1978 hearing on the contempt motion was adjourned to a lobby conference at which the district court judge, the receiver; Abrahams, and the United States attorney, among others, were present. No creditors, other than the United States, were represented at this conference. Abrahams and the receiver arrived at an agreement during the conference that Abrahams would authorize transfer of $1.5 million from Bermuda to the receiver, to be held in a segregated account in Boston. In exchange, the contempt motion would be dropped; the United States attorney promised not to use the settlement as evidence against Abrahams in criminal proceedings relating to his commodities option transactions; and the district judge indicated that he would be willing to “entertain” motions from Abrahams seeking to use part of the $1.5 million fund to maintain Abrahams’ family in their residence in Marblehead, Massachusetts, and to pay the counsel fees arising from Abrahams’ numerous legal difficulties.
Abrahams did in fact take the steps necessary to effect transfer of the $1.5 million from his Bermuda banks to the receiver in Massachusetts. The creditors, however, objected strenuously when their legal representatives were first apprised of the nature of the purported compromise entered into by the receiver and the district court. After much discussion, a new and considerably narrower compromise was reached in July 1978 whereby the creditors agreed to permit $20,000 of the $1.5 million to be used as a retainer for Abrahams’ bankruptcy counsel and also to permit Abrahams to transfer an additional $40,000 from Bermuda to be used for his criminal defense and for support of his family. This compromise, unlike the earlier arrangement, was carefully spelled out in writing. It was approved by all principal creditors except the United States, which appealed to this court from the district court’s approval of the compromise over its objection. After a single judge of this court had refused to issue a stay pending appeal, the United States withdrew the appeal. This court thus never had occasion to pass on any issues concerning the compromise.
During the months that followed, Abra-hams made repeated requests for further allocations of money from the $1.5 million fund, in line with his asserted understanding of the agreement of April 28. None were granted. On May 7,1979, Abra-hams’ new counsel moved for a release of funds,, for legal fees and family support, claiming that his client was entitled, at the least, to have such a motion “entertained” by the district court. After a hearing, this motion was denied by order dated May 29. A reapplication by way of a memorandum of law was unsuccessful, and the district court reconfirmed its order on June 26.
Appellant’s first argument, simply stated, is that the district court entered into a contract with him at the April 28 lobby conference whereby the court agreed to grant appellant’s reasonable requests for funds in consideration for appellant’s cooperation in having the $1.5 million brought up from Bermuda. There is no merit to this contention. The objects for which use of the funds was sought do not fall within any category expressly sanctioned in the Bankruptcy Act. A bankruptcy court ordinarily has no power to authorize payment of funds from the bankruptcy estate for the personal use of the alleged bankrupt. See Randolph v. Scruggs, 190 U.S. 533, 539, 23 S.Ct. 710, 712, 47 L.Ed.2d 1165 (1903) (Holmes, J.); In re Orbit Liquor Store, 439 F.2d 1351, 1354 (5th Cir. 1971); compare 11 U.S.C. § 102(a)(1). Even if the facts here would support a construction of the April 28 agreement as a contract between appellant and the district court, a matter we do not decide, any such contract would be void to the extent it purported to authorize judicial acts beyond the scope of the court’s power.
If not as an enforceable contract, appellant urges us to uphold the April 28 understanding as a species of compromise of the receiver’s pending claim to the funds in Bermuda. Section 27 of the former Bankruptcy Act, 11 U.S.C. § 50, provides that:
“The receiver or trustee may, with the approval of the court, compromise any ■ controversy arising in the administration of the estate upon such terms as he may deem for the best interest of the estate.”
The April 28 understanding, however, is not enforceable as a Section 27 compromise. Among other reasons for nonenforceability is the fact that the notice requirements of the Bankruptcy Rules were not met. Rule 919(a) provides:
“On application by the trustee or receiver and after hearing on notice to the creditors as provided in Rule 203(a). the court may approve a compromise or settlement.”
Although Rule 203(a) provides that the court may, “for cause shown,” dispense with the required ten-day notice in the case of a hearing on approval of a compromise, the court here made no such order, nor was cause shown to dispense with the notice requirements, and other formalities, contemplated by Rule 919(a). See also 11 U.S.C. § 94(a)(6). Particularly where principal creditors had been given no opportunity to consider or respond to it, the April 28 agreement, whatever it may have been, was not a valid compromise pursuant to Section 27. When brought to the creditors’ attention, they not only did not ratify the undertaking but instead objected vigorously, with the result that a different and far narrower arrangement was entered into.
Finally, appellant argues that the July 14, 1978 written stipulation, pursuant to which $60,000 was made available to Abrahams’ family and attorneys, constituted an open-ended commitment by the creditors to permit Abrahams to have access to the remainder of the $1.5 million. This argument is frivolous. The July 14 stipulation was painstakingly drafted, as the record makes clear. By its terms, it was limited to authorizing payment of $60,000, two-thirds of which was to be brought in from Bermuda. The parties specifically stated that
“it is understood by all parties to this transaction that the willingness of Petitioning Creditors to allow funds of Abra-hams in this amount to be disbursed in this manner. is not precedent which will govern future applications of this type, all of which Petitioning Creditors shall be free to oppose if they see fit.”
Abrahams’ counsel signed this document on his behalf. Nowhere does it indicate that the district court is authorized or empowered to make further payments to Abra-hams, nor is there any indication that the creditors waived their rights with respect to this matter. Moreover, we find nothing in the July 21 order of the district court approving this compromise that indicates it was intended in any way to constitute a continuing commitment to provide funds to Abrahams.
Accordingly, the district court not only did not abuse its discretion in refusing to authorize payment of the funds sought, but we know of no basis upon which the district court could have been authorized to grant the requests Abrahams made in May 1979. The district court’s refusal to grant these requests was therefore indisputably correct, and we affirm the court’s order in No. 79-1511.
No. 80-1045.
This appeal was taken by the United States from an order of the district court entered January 17, 1980 which, in essence, (1) directs Abrahams to take all necessary steps to transfer all funds presently held in Butterfield Bank, Bermuda, Account No. 544-7-04620, to the receiver or his agent; (2) directs Abrahams to sign all documents necessary for the receiver to obtain a full transcript of that account, certain other described accounts at the Butterfield Bank, and any other account on which the alleged bankrupt is signatory; and (3) orders the receiver, upon receipt of the funds, to post bail in the sum of $100,000 on Abrahams’ behalf in a criminal case pending against him before Judge Conner in the Southern District of New York, and to deposit the balance in the receiver’s segregated interest-bearing account at a Boston bank.
This order was entered following a district court hearing held on January 10,1980 attended by counsel for Abrahams; for the receiver; for the Tax Division, Department of Justice; for petitioning creditors New England Telephone, et ah; and for plaintiffs in a reclamation action being brought on behalf of customers allegedly defrauded by the alleged bankrupts. See In re Lloyd, Carr & Co., 614 F.2d 17 (1st Cir. 1980). As already indicated, see note 2 supra, the United States, appellant herein, appears to be the principal creditor of the alleged bankrupts, with tax claims amounting to about $5.6 million, although the reclamation proceeding, if successful, might give rise to an even greater liability. The telephone companies have claims of just under $1 million and there are other trade creditors. While all of the latter were not represented at the January 10 hearing, it seems to be generally agreed that all major creditors and potential creditors having an interest in the bankruptcy estate were present.
Abrahams was then, as now, facing trial on a 50-count indictment for mail and wire fraud in connection with allegedly fraudulent sales of commodity options made by Lloyd, Carr & Co. employees on a national scale. Venue in this case had been transferred from Boston to Arizona, and eventually to the Southern District of New York to avoid the possible impact of prejudicial pretrial publicity. At the time of the January 10 hearing, Judge Conner in New York had apparently indicated some willingness to free Abrahams on $100,000 bail, although it was not until later that bail was' actually set in this amount.
Abrahams, through his counsel, proposed to the district "court in Boston that he be permitted to transfer what he represented to be all his remaining funds in Bermuda— about $207,000 — to this country, with half to go to the receiver outright and the other half to be posted for bail in New York. With some qualifications, the receiver endorsed the proposal, pointing out practical and legal difficulties he had encountered in securing a transfer to himself of the alleged bankrupts’ assets in Bermuda. The receiver asserted that a “compromise” of the estate’s claim against the Bermuda assets was desirable in order to avoid the expense and delay of further litigation as well as the risk that such litigation would be unsuccessful.
As recounted by the receiver, his difficulties stemmed from Abrahams’ refusal to cooperate by personally authorizing the depository bank to transfer his funds to the receiver. As a result the receiver was obliged to bring legal proceedings in the Bermuda courts, and after almost two years these were still pending. Initially an order restraining Abrahams from transferring the funds had been obtained, but the issuing court had been persuaded to discontinue the injunction. The injunction was only reinstated after appeal, and then only by a divided court. The merits of the receiver’s claim to the funds were yet to be tried. The receiver pointed out the difficulty he had experienced in finding competent members of the small Bermuda bar to represent him in opposition to the local banks. One attorney had already been discharged for inadequate performance. Both because of the further legal expense that would be required to secure the funds without Abra-hams’ cooperation, and the uncertainty of success, the receiver felt that Abrahams’ proposal was in the best interests of the estate.
The receiver’s endorsement of Abrahams’ proposal was qualified in two respects. First, he insisted that Abrahams be required to provide a full accounting of all monies in Bermuda over which he exercised any control, so that the receiver could assure himself that no assets of the estate were still remaining there. Second, the receiver insisted that all of the money brought in from Bermuda be placed in the receiver’s custody prior to any bail arrangement, so that Abrahams would have,no opportunity to abscond with the funds in the event he appeared for trial and bail was refunded. Addressing the issue of what risk existed that the estate would lose the bail money due to a default by Abrahams, the receiver stated that it was his opinion, based on considerable personal contact with Abrahams, that he would not default. According to the receiver, Abrahams was convinced he would be acquitted at his New York fraud trial; the sole reason Abrahams desired bail was to assist in organizing his defense. The receiver also maintained he felt there was a significant possibility that,' even if Abrahams defaulted, part of the $100,000 would be salvaged for eventual refund to the estate by the district court in New York.
No representative of any creditor spoke in support of the proposal at the January 10 hearing. The proposal was vigorously opposed by the United States in its status as tax creditor. The government emphasized the risk that Abrahams would default on his bail. The proposal was also opposed by the petitioning creditors, who relied on a written submission. Counsel for plaintiffs in the reclamation action focused his attention on ensuring that Abrahams, at a minimum, be required to provide records of his bank accounts in Bermuda, but also opposed the proposed arrangement generally as not in the best interest of claimants against the estate.
A written stipulation memorializing the compromise proposal outlined by the receiver was filed with the district court on January 16, 1980, and was approved by order of the court entered January 17. The United States immediately moved for a stay of this order pending appeal, and a temporary stay was subsequently granted. In the meantime, pursuant to the written stipulation, Abrahams effected a transfer of the $207,-000 to the control of the receiver, who placed the funds in a segregated account previously established for the $1.5 million brought to Boston in early 1978.
On this expedited appeal, the district court’s order approving the compromise is challenged by the United States, by the petitioning creditors, and by the Commodity Futures Trading Commission as amicus. Subsequent to oral argument, we requested that the receiver file additional material concerning the status of the litigation in Bermuda prior to the January 10 hearing, and such material was duly filed. From this material, principally judicial opinions of the Bermudian courts and papers filed in the Bermuda litigation, it appears that the principal barriers to recovery in Bermuda were created by the Bermudian courts’ uncertainty as to the status of an American bankruptcy receiver, and a misapprehension on the part of those courts that the receiver was more concerned with enforcement of criminal sanctions against Abrahams than with the recovery of the bankruptcy assets. The receiver gave as his opinion, based on consultation with counsel in Bermuda, that the chances for success had the matter been litigated to final judgment were no better than 50 percent. Both the United States, as tax creditor, and the petitioning creditors have since filed responses to the receiver’s materials, arguing on the basis of those materials (which were not presented in the district court), that the legal posture of the receiver’s Bermuda case was more hopeful than represented, and restating their opposition to the compromise. Counsel for the creditors asserts that an eventual adjudication of bankruptcy by the district court here — an event which he claims to be inevitable and feels has been unnecessarily delayed — would have greatly improved the chances for success in Bermuda.
I.
While there is some initial plausibility in the district court’s order, which secures Abrahams’ cooperation in disclosing and turning over the proceeds in the Bermuda bank accounts in exchange for the receiver’s posting of $100,000 bail in Abrahams’ federal criminal case in New York, we do not believe the order can be upheld.
First, we state the obvious: no section of the Bankruptcy Act authorizes the payment of bail for an alleged bankrupt, and, as observed in the previous case, it is well settled that payments designed to benefit the bankrupt personally may not be made out of the bankruptcy estate. Considerations as to Abrahams’ alleged constitutional and statutory rights to bail in the Southern District of New York are, of course, irrelevant in the bankruptcy proceeding. The presiding judge in the criminal case, Judge Conner, has exclusive responsibility with respect to bail, subject to appropriate appellate review in the Second Circuit. It is up to Judge Conner to determine the conditions of release, and he may, of course, adjust any bail order to defendant’s available means. A bankruptcy court has no duty to provide the bankrupt with the means for release on bail; to the contrary its duty is to marshal and conserve the assets. The only relevance to the present bankruptcy proceeding of Abrahams’ bail proceeding in New York is the extent to which the possibility of his flight might jeopardize the $100,000 security the receiver has been ordered to post. In that regard, we agree with appellants that the economic danger, while obviously impossible to calculate precisely, has to be regarded as substantial in Abrahams’ case. See United States v. Abrahams, 575 F.2d 3 (1st Cir.), cert. denied, 439 U.S. 821, 99 S.Ct. 85, 58 L.Ed.2d 112 (1978) (Abrahams’ unique history and circumstances held to justify his pretrial detention without bail).
Since there is no direct authority for using bankruptcy funds for bail, the district court’s authority here, if any, must come from the compromise provision, quoted in our opinion in No. 79-1511, namely Section 27 of the Bankruptcy Act, 11 U.S.C. § 50. Pointing to the difficulties Abrahams’ lack of cooperation has created in Bermuda, and the danger, said to be as high as 50 percent, that the receiver might ultimately not prevail in litigation designed to extract Abra-hams’ $207,000 from local banks, the receiver takes the position that the quid pro quo obtained in return for risking $100,000 of estate funds to secure Abrahams’ bail reflects a fair compromise. Not only has the estate now secured the $207,000 — it has also received, with Abrahams’ cooperation, the transcripts of his financial dealings with certain Bermuda banks. This information will assist the receiver in closing out his responsibilities to determine and collect assets in Bermuda, and it may also assist the reclamation plaintiffs in tracing funds in their pending action against the bankrupts.
There are two principal factors, however, which militate against acceptance of the arrangement as a valid Section 27 compromise. First, we have found no precedent for judicial approval of a compromise founded simply on the alleged bankrupt’s willingness — by way of supposed compromise — to do only what the Bankruptcy Act requires him to do. Second, we have found no precedent for a compromise of this nature actively opposed by the major creditors and affirmatively approved by none.
II.
We first address the enforceability of a purported compromise based on the bankrupt’s agreeing to cease obstructionist tactics that violate the Bankruptcy Act. Section 7(a) of the Bankruptcy Act, 11 U.S.C. § 25(a) states in part,
“The bankrupt shall... (2) comply with all lawful orders of the court;. (5) execute and deliver to his trustee [in this case, receiver] transfers of all his properties in foreign countries.”
The district court, on February 3, 1978, in ordering the receiver to take custody of all the property of the bankrupts, wherever situated, restrained all persons from interfering with the bankrupts’ property — an order which would control the bankrupts as well as others.
The well-settled rule in the field of contracts has long been that performance of a pre-existing legal duty that is neither. doubtful nor subject to honest and reasonable dispute is not valid consideration where the duty is owed to the promisor, or to the public at large. Restatement of Contracts § 76(a) (1932); Pittsburgh Testing Laboratory v. Farnsworth & Chambers Co., 251 F.2d 77 (10th Cir. 1958); United States v. Westmoreland Manganese Corp., 134 F.Supp. 898, 910 (E.D.Ark.1955), aff’d, 246 F.2d 351 (8th Cir. 1957); 1A Corbin on Contracts § 175 (1963); see United States v. Bridgeman, 173 U.S.App.D.C. 150, 161, 523 F.2d 1099, 1110 (D.C.Cir.1975), cert. denied, 425 U.S. 961, 96 S.Ct. 1743, 48 L.Ed.2d 206 (1976); Morrison Flying Service v. Deming National Bank, 404 F.2d 856, 860 (10th Cir. 1968), cert. denied, 393 U.S. 1020, 89 S.Ct. 628, 21 L.Ed.2d 565 (1969). The policy underlying this rule is to discourage parties under such a duty from using the threat of nonperformance to extort greater compensation for doing only that which they were already obligated to do. See Corbin, supra, § 183. Certain exceptions are recognized to the general rule in cases where the circumstances indicate that the policy of deterring extortion is not applicable, such as the case of the contractor who encounters “extraordinary and unforeseen difficulties in the performance of the subsisting contract.” Pittsburgh Testing Laboratory v. Farnsworth, 251 F.2d at 79. See also Restatement of Contracts § 76, ill. 8. In such cases, the promise to pay a larger sum for performance of the existing contract will often be enforced. Id.
Abrahams is in no position to claim the benefit of any such exception. He cannot argue that his duty under the Bankruptcy Act to remit all funds under his control is “doubtful” or that there is an “honest and reasonable dispute” regarding this duty. Neither is there any circumstance rendering performance of his duty difficult or impossible; Bermuda law erects no obstacle to Abrahams’ directing the funds to be sent to the receiver. Abrahams’ affirmative obligations are governed by United States law, not Bermuda law.
Approval of this compromise could have much the same effect as would recognition of a contract based on performance of a pre-existing legal duty. It places the bankrupt in the position of being rewarded for contravening the bankruptcy laws of the United States. All other cases we have found where bankruptcy compromises were approved have involved some colorable claim by the bankrupt, or someone else, to the property involved. See, e. g., In re Goldman, 241 F. 385 (E.D.Pa.1917); In re Kranich, 174 F. 908 (E.D.Pa.1909). While courts have often sanctioned compromises which confer pragmatic benefits, they have drawn the line at increasing the assets of the estate by means of agreements thought to encourage unfair or criminal methods. See, e. g., In re Rosenblatt, 153 F. 335 (E.D.Pa.1907), aff’d sub nom. Mulford v. Fourth Street National Bank, 157 F. 897 (3d Cir. 1907). The present compromise may encourage bankrupts situated as is Abrahams to refuse to comply with their legal duties. While we do not say that compromises of the present nature may never be approved, whatever the advantage to the estate, we think they are heavily disfavored on grounds of public policy, and should be approved only upon a showing of clear benefit to the estate and the absence of any realistic available alternatives.
A showing of this type was not made here. At the hearing in the district court, the receiver’s files concerning the Bermuda litigation were not tendered. Now that they are in our possession, we do not think they reflect such heavy burdens upon the receiver or such signal dangers to the estate as to indicate that continued litigation in Bermuda was an unrealistic alternative. Bermuda law would apparently recognize the right of a trustee in bankruptcy to take title to the bank accounts; the problem there stemmed from the fact that the receiver in bankruptcy was originally an equity receiver appointed because of the bankrupts’ alleged fraudulent practices. The Bermuda courts balked at transferring title to one thought to have been appointed to enforce the penal laws of the United States. They failed to recognize, partly through the fault of the receiver’s original Bermuda counsel, that what had started as an equity receivership had been transformed into a bankruptcy proceeding, conducted solely on bankruptcy grounds.
In so saying we do not necessarily question the receiver’s judgment that, on balance, the compromise offered more to the estate than it would cost. Most experienced lawyers would agree that a bird in the hand is worth an ongoing- — or as the receiver said, “endless” — law suit. But where as here a settlement rewards a bankrupt for his contumacious refusal to comply with the Bankruptcy Act itself, more is required than a simple showing of marginal benefit. Public policy forbids a settlement of this character without, at least, a powerful showing of such potential detriment to the estate that no other course is reasonably available. See In re Van Camp Products Co., 95 F.2d 206, 209 (7th Cir.), cert. denied, 305 U.S. 605, 59 S.Ct. 65, 83 L.Ed. 384-(1938).
III.
We are also concerned by the absence of creditors’ support — and by the strength of creditor opposition. A much quoted statement of the standards by which a proposed compromise is to be judged is found in Drexel v. Loomis, 35 F.2d 800 (8th Cir. 1929). See, e. g., 2A Collier’s on Bankruptcy ¶ 27.04 at 1092; 2 Remington on Bankruptcy § 1161. Along with factors such as probability of success, the difficulties of collection, the complexity of the litigation involved and the inconvenience and expense attending it, emphasis is placed upon
“d. the paramount interest of the creditors and a proper deference to their reasonable views in the premises.”
The views of creditors are, of course, not controlling upon the receiver. See 2A Collier’s, supra, ¶ 27.03 at 1090. No case has come to our attention, however, where a compromise has been imposed without the support of a single creditor and over the active opposition of the major creditors.
Appellees argue that the United States has divided loyalties — that while it represents itself as a civil tax claimant, it cannot divest itself of its sometime role as criminal prosecutor. According to this argument, the United States is simply trying to prevent Abrahams from being freed on bail. But this explanation does not make it clear why the petitioning creditors have opposed the compromise, nor why the reclamation plaintiffs have opposed it, nor why no creditor whatever has expressed support for the compromise. If the compromise was manifestly in the best interest of the estate, we think this would be apparent to at least some of the creditors and their counsel.
To be sure, some of the lack of support may be due to the suddenness with which the matter was brought forward. No change of heart, however, has since come to our attention. We recognize the reclamation plaintiffs were not vociferous in their denunciation of the proposal, nor did they appeal the court’s order approving it. And the petitioning creditors did not appeal, though they have filed briefs registering vigorous support for the United States’ opposing position and strong opposition to the receiver’s position. Whatever can be discerned from the foregoing, however, it is plain that were we to approve the district court’s order, we would be endorsing an arrangement, highly questionable in terms of public policy, without any affirmative indication in the record that a single creditor was persuaded that it was in the best interest of the bankruptcy estate. Under the circumstances we believe the district court’s order to be in excess of its authority.
Our action leaves the $207,000 in the hands of the receiver, where, under the bankruptcy law, it belongs (and of course must stay, at least pending adjudication of the bankruptcy petition). In remitting the funds, the bankrupt did no more than the law required; while he did so after entry of the district court’s order, he was represented by counsel and was well aware that interested parties had up to 60 days within which to appeal to this court, with the possibility that the order might be reversed. We see no moral obligation, much less legal authority, for disturbing the present custody or status of the funds in whole or in part.
The order of the district court in No. 80-1045 is hereby vacated except insofar as it is to be construed as directing the receiver to retain all funds received from any of the listed Bermuda accounts as a part of the assets being held in the bankruptcy receivership.
So ordered.
. We disagree with appellees’ contention that Abrahams’ notice of appeal was untimely filed. Under Fed.R.App.P. 4(a), a party has 30 days in which to file a civil appeal, unless the United States is a party to the proceeding, in which case the time limit is 60 days. Here, Abrahams filed his notice of appeal July 31, 1979, more than 30 days but less than 60 days after the June 26 order from which he appealed. While it is true that the United States did not file an opposition to appellant’s memorandum seeking to alter the district court’s earlier May 29 denial of funds, the United States has been involved in this particular controversy from the outset, and is a present party to this appeal. While the mere fact that the United States was a tax creditor in a civil bankruptcy proceeding would not, by itself, assure that the 60-day limit would be appropriate, see 9 Moore’s Federal Practice ¶ 204.10 at 926, the government’s participation here was sufficiently active for Abrahams to invoke the 60-day limit of Rule 4(a). Appellees also argue that the critical order was that issued May 29 rather than June 26 and that Abrahams should have taken his appeal from the former. While the issue is close, we are inclined to read the earlier order, which was entered without prejudice, and was expressly made subject to modification after receipt of memoranda from the parties, as nondispositive (or at least is not so obviously dis-positive as to have necessitated an appeal at that time in order to preserve the issue now before us).
. The receiver, Walter McLaughlin, Sr., had previously been appointed equity receiver in a proceeding to enjoin Lloyd, Carr from various alleged fraudulent practices. Commodity Futures Trading Commission v. Carr, No. 77-371-T (D.Mass.). Abrahams, using the name James Carr, was alleged to be a principal in Lloyd, Carr’s activities.
McLaughlin’s appointment as bankruptcy receiver, pursuant to Section 2a(3) of the Act, 11 U.S.C. § 11(a)(3) and Bankruptcy Rule 201, would seem to have superseded his status as equity receiver. As bankruptcy receiver, his principal duty is to preserve the estate and protect the interest of creditors pending adjudication of the petitions in bankruptcy. Id.
The petitions for involuntary bankruptcy filed against Lloyd, Carr and Abrahams on February 1, 1978 alleged various acts of bankruptcy as defined under the Act, including the earlier placing of the firm into receivership by the district court, and the transfer of a large sum of money to Bermuda for the purpose of disadvantaging creditors. We are informed that creditors’ claims against the alleged bankrupts now include some $5.6 million claimed by the United States for unpaid taxes, and at least $2.8 million sought by other creditors. In addition, a class of allegedly defrauded customers of Lloyd, Carr are seeking $25 million from the estate by way of a reclamation suit. The receiver, commendably, has so far recovered about $5 million in assets of the estate. For reasons which do not clearly appear, the adjudication proceeding has yet to take place; this delay is a major source of complaint by the petitioning creditors, principally a group of telephone companies claiming some $973,000.
. Reference has mistakenly been made in the current proceedings to the brief unpublished opinion issued by a judge of this court declining a stay as if it were a final pronouncement of the Court of Appeals. This it was not. The court’s focus when acting on a stay petition is necessarily hurried, tentative and incomplete. Often, only one judge, not three, is involved.
. Although the Bankruptcy Act of 1898 has been superseded, we apply to these transactions the law as it existed at the time they occurred, Pub.L.No. 95-598, § 403(a), 92 Stat. 2549 (1978), and all citations are to the then-existing statutes.
. We recognize that concern has been expressed throughout this controversy that failure to award funds to Abrahams, or else to rescind the transaction and return the $1.5 million to Bermuda, would be “unfair” to Abra-hams, since he acted in “reliance” upon the April 28 arrangement. Abrahams, however, at no time took, or agreed to take, any action which he was not already obliged by law to perform. At all times, he has been under an absolute duty to assist the receiver in marshall-ing the assets properly includable in the bankruptcy estate, wherever they were located. See 11 U.S.C. § 25(a)(2), (5). Because Abrahams was already in jail, and as a practical matter immune to fines, he may have felt he could afford to flout the usual contempt remedies available to the district court. Only because of certain technical aspects of Bermudian law was he able to resist the receiver’s efforts to have funds transferred from that jurisdiction by legal process. Abrahams cannot complain of having done what in fact the Bankruptcy Act required him to do. If Abrahams, indeed, had expectations of any sort flowing from the April 28 understanding, they have been more than met by the provision of $60,000 under the July 14 stipulation, in return for which Abrahams only complied with his manifest legal responsibilities. Whether even that limited compromise, had it been fully contested on appeal, would have been upheld we need not decide; clearly the informal and incomplete arrangement he now seeks to invoke, being beyond the power of the district court to make binding, could give rise to no legitimate expectations.
. We understand from counsel that Judge Conner is aware of the order being appealed from. We also understand he is willing to accept the receiver’s posting of $100,000 security even though, of course, if Abrahams defaults it will be the creditors and defrauded customers, not Abrahams himself, who stand to lose the security. There is indication in the record that Judge Conner may have felt Abrahams’ incentive to flee would be reduced if all his known remaining funds in Bermuda, consisting of something in excess of $200,000, were transferred to the receiver. The extent to which a particular bail arrangement may or may not serve as an effective deterrent to flight is, of course, entirely up to the New York court, which has control of the criminal proceedings, and not ourselves.
. Lest there be any thought that Abrahams is the garden variety defendant or bankrupt, we refer to our opinion in United States v. Abrahams, 575 F.2d 3 (1st Cir.), cert. denied, 439 U.S. 821, 99 S.Ct. 85, 58 L.Ed.2d 112 (1978), which recounts something of his background. We do not cite to this case to indicate that we necessarily disagree with other, more optimistic evaluations of Abrahams but merely to indicate that, to say the least, his reliability is debatable.
. It is not disputed in this case that the receiver, “for present purposes, has all the rights and remedies that a duly qualified trustee in bankruptcy would have.” National Oats Co. v. Long, 219 F.2d 373, 375 (5th Cir.), reh. denied, 220 F.2d 745 (5th Cir. 1955).
. In terms of benefit to the estate, the key question confronting the district court was obviously the likelihood of success in the Bermuda
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
GARDNER, Circuit Judge.
This was an action brought by appellant to recover $4-,572.32, being a portion of the income taxes assessed against and paid by it for the year ending April 30, 1942. On trial the court entered judgment denying recovery and from the judgment so entered this appeal was taken. The parties will be referred to as they were designated in the trial court. The facts were stipulated and found by the court as stipulated.
In January, 1932, one J. C. Walton, being indebted to plaintiff in excess of $25,000, gave his five promissory notes of $5,000 each, due two, three, four, five and six years after date respectively, the notes bearing interest from date at the rate of 6 per cent per annum. On October 23, 1932, Walton and his wife assigned to plaintiff as collateral security to these notes three certain life insurance policies on the life of J. C. Walton, the policies having a face value of $25,000, Walton’s wife being the named beneficiary therein. The assignment was limited to the extent of any indebtedness due the assignee at the time of the payment of the policies, it being recited in the assignment that, “The interest of the as-signee in the policies hereby assigned shall include any and all indebtedness which may now or at any time hereafter be owing to the said assignees and which may exist at the time of the settlement of the policies. The remainder of said policies, if any, shall be not affected by this assignment.” At the time of the assignment there were loans against the policies in the sum of $6,734.89, and the cash surrender value of the policies at that time-was $8,107. After the assignment the interest accruing annually on the loans was added to the principal of the loans and all premiums thereafter coming due on the policies were paid by the plaintiff. During its fiscal year ending April 30, 1933, plaintiff charged off as a bad debt the $25,000 of indebtedness of Walton evidenced by these notes, and in its tax return for that year deducted the $25,000 as a bad debt, thereby reducing its tax liability. Walton died December 17, 1941, and during its fiscal year ending December 30, 1942, plaintiff recovered on its indebtedness against Walton to the extent of $18,-188.70, representing the net proceeds from the three life insurance policies assigned to it by Walton.
The Commissioner of Internal Revenue assessed and plaintiff paid a deficiency based on the inclusion in plaintiff’s gross income for that year of the proceeds of the Walton insurance policies, less the premiums paid by plaintiff. Plaintiff filed a claim for refund of the taxes attributable to the inclusion in gross income of the proceeds of the insurance. The claim was re-j ected and this action followed.
The printed assignment of the policies recited the consideration of $1. The actual value of any additional consideration for the assignment was neither stipulated nor proved. The court concluded as a matter of law that the amounts received by the taxpayer under the assignment of the life insurance policies constituted a recovery of bad debt losses previously deducted and were taxable income in the year received, and entered judgment in favor of defendant.
Plaintiff seeks reversal on the ground that the proceeds of the policies received by»- it were not taxable income under the provisions of Section 22(b) (1) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev. Code, § 22(b) (1), because (1) it paid no valuable consideration for the assignment, or (2) if there was a valuable consideration paid it consisted of the amount originally advanced by it to Walton, and as the proceeds of the insurance policies were less than the consideration plus the premiums paid by plaintiff subsequent to the assignment, they were exempt under the provisions of Section 22(b) (2) of the Revenue Act.
Section 22 of the Internal Revenue Code defines gross income as including various specifically named sources of income and as including income derived “from any source whatever.” Section 116(a) of the Revenue Act of 1942, 26 U.S.C.A. Int.Rev.Code, § 22(b) (12), provides that income attributable to the recovery during the taxable year of a bad debt is taxable to the extent of the amount of recovery. The recovery of the debt of Walton previously deducted as worthless, clearly constitutes taxable income in the year of recovery unless, as contended by plaintiff, it was exempt as proceeds received under a life insurance contract paid by reason of the death of the insured.
Section 22(b) of the Internal Revenue Code provides for certain exclusions from gross income as follows:
“Sec. 22 * * * (b) Exclusions from gross income. The following items shall not be included in gross income and shall be exempt from taxation under this chapter :
“(1) Life insurance. Amounts received under a life insurance contract paid by reason of the death of the insured, whether in a single sum or otherwise (but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income);
“(2) Annuties, etc. * * * In the case of a transfer for a valuable consideration, by assignment or otherwise, of a life insurance, cudowment, or annuity contract. or any interest therein, only the actual value of such consideration and the amount of the premiums and other sums subsequently paid by the transferee shall be exempt from taxation under paragraph (1) or this paragraph ; * *
The policies on Walton’s life were written in favor of his wife. These policies by written assignment were pledged to plaintiff as collateral security for the Walton notes. Under the law of Missouri life insurance policies were subject to pledge as security for a debt. Missouri State Life Ins. Co. v. Cal. State Bank, 202 Mo.App. 347, 216 S.W. 785; First Nat. Bank of Beeville, Tex. v. Security Mut. Life Ins. Co. of Binghamton, N. Y., 283 Mo. 336, 222 S.W. 832. The assignment here purports in terms to transfer title. Its only purpose, however, was to pledge the policies as security for the insured’s indebtedness. This is conclusively shown by the recitals in the assignment itself and by the surrounding facts and circumstances and it should be so construed. Conrad v. Fisher, 37 Mo. App. 352, 8 L.R.A. 147; Thomson v. Thomson, 8 Cir., 156 F.2d 581; Amick v. Empire Trust Co., 317 Mo. 157, 296 S.W. 798, 53 A.L.R. 1064; Hodge v. Truax, 138 Wash. 360, 51 P.2d 357, 103 A.L.R. 420. The policies themselves were transferred to the possession of the plaintiff and held as security. Under the terms of the assignment it is clear that the right of the plaintiff was dependent upon the existence of the indebtedness. Piad it been paid the beneficiary named in the policies would have been entitled to the proceeds payable on the insured’s death. Thomson v. Thomson, supra. There was no change in the beneficiary and so far as the insurance contracts were concerned plaintiff was not entitled to the proceeds of the policies. In order that it might receive such proceeds it was necessary to make proof of the pledge of the policies and proof of an unpaid indebtedness. The pledge was subsidiary to the principal debt and collateral to that debt, and if collection were made on the policies it would go to the credit of the principal debt, or if that debt had been paid any collection made under the policies would have gone to the debtor’s beneficiary named in the policies. We think that the amount received was not received by plaintiff under a life insurance contract paid by reason of the death of the insured within the meaning of Section 22(h) (1). It was received because of the pledge contract.
So far as the right to exclude this recovery from plaintiff’s gross income is concerned, Section 22(b) (2) cannot be invoked as suslaining plaintiffs contention. The transfer, as has been observed, was not an absolute transfer, but merely a pledge, and plaintiff has not sought to have excluded from its gross income the consideration, if any, paid for the assignment. It in fact insists that the transfer was not for a valuable consideration. It contends, however, that if there was a valuable consideration it was the original debt. But manifestly, the face value of the notes did not represent the “actual value” of the consideration for the assignment. The notes were not executed as a part of the same transaction but had been executed long before the execution of the assignment. They were not due and there was no claim that there had been any agreement to extend the time of payment. They were certainly not surrendered at the time of the assignment but, as has been pointed out, the assignment was for the specific purpose of pledging the policies as collateral security for the payment of the notes. Section 22 contemplates the exclusion of the amount received under a life insurance contract paid by reason of the death of the insured. Under this section only the beneficiary named in the policy can be said to receive the proceeds of the policy under the insurance contract. If there has been a transfer of the policy, the transferee is not entitled to have the proceeds received by reason of the payment of the policy excluded from his gross income but only the actual value of the consideration paid for such transfer.
Plaintiff relies quite strongly on the case of Durr Drug Co. v. United States, 5 Cir., 99 F.2d 757, 759, 119 A.L.R. 1192, but that case is strikingly dissimilar in its facts. There the employer prevailed upon an employee who was indebted to it in a sum in excess of $15,000 to insure his life for that amount, naming the employer as beneficiary, and with the understanding that the policy would be delivered to the employer and that it would pay all premiums. The policy was so delivered and the premiums were paid by the employer without any charge against the employee, and on the death of the insured the employer collected the face amount of the policy. In holding that the insurance money collected was exempt from income tax the court among oth-**r things said: “From the inception of the insurance contract until the maturity of the rights thereunder, appellant, was the sole beneficiary and the owner thereof. At no time was Wylie in the position of owner or beneficiary, and at no time did he have any interest therein which he could transfer or assign.”
In other words, the policy covered the employer’s insurable interest in its employee and when the insured Hied the proceeds were paid to the ■ beneficiary and clearly constituted the proceeds of insurance. The court in the course of the opinion observed that, “ * * * in order for the proceeds paid by reason of the death of the insured to be taxable as income, the contract must have been transferred by assignment or otherwise, so that it would come 'within the exception.”
We think the insurance contract when it was transferred and pledged lost its character as insurance in- the hands of the pledgee within the meaning of the statute. It became simply collateral security.
It has been held that the term “recovery” as applied to bad debts includes the proceeds of the sale of the debt as well as the proceeds from, a collection of the debt. Here the recovery was on the collateral security and the incidental' fact- that the proceeds of this insurance policy would have been exempt to the beneficiary named does not mark it as exempt where it has become, a matter, of barter rather than a matter of insurance.
The plaintiff having charged, off a bad debt and received a tax. deduction in consequence, and having later received payment of the debt or a parfof it, the collection became income regardless of the fafct that it was received from insurance policies in which it was not named as a beneficiary. The judgment appealed from is therefore affirmed. ’
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
LEVENTHAL, Circuit Judge:
These petitions to review Federal Power Commission certificate orders amount, on analysis, to a challenge to the FPC’s ruling that the underlying contractual arrangements entitled United Gas Pipeline Co. to 120,000 Mcf/d from Humble Oil & Refining Co.’s natural gas production in the Garden City Field, and that this entitlement would be respected even though United later bettered its position in that field, especially in relation to Columbia Gas Transmission Corp. In our view the FPC acted within the permissible range of an administrative agency in both its construction of the contracts, and its certificate order. Taking into account this record, and the way the parties shaped their position before the agency, we cannot condemn the FPC on the ground that the broader non-contractual elements of public interest required a different result. We affirm.
In its order, issued on October 16, 1974, in its Docket C172-674, Texas Gas Exploration Corp., et al., the FPC—
a. Issued certificates authorizing Texas Gas Exploration (Texas Gas), et
al. to sell certain of their gas to United;
b. Held that the contractual and statutory obligations of Humble and Cullen to deliver 120,000 Mcf of gas per day to United from the Garden City Field were not reduced by the volumes sold to United by Texas Gas, et al. under the certificates issued in that order; and
c. Held that Texas Gas et al. could collect only the area rate for “old gas” for the volumes sold under those certificates.
The facts are available from the opinion of Administrative Law Judge Kanell, adopted by the FPC, and will not therefore be restated at any length. It suffices to say that on June 15, 1958, Humble and Cullen entered into a contract with United giving United the right to purchase all of their Garden City Field gas. In 1963, Humble and Cullen desired to sell some of their Garden City gas to Columbia Gas, and amended their contract with United on June 18, 1963. The 1963 amendment, sometimes referred to by the parties as a “carveout agreement,” provided insofar as pertinent:
1. Humble and Cullen were obligated to deliver to United a maximum of 120,000 Mcf of gas per day, (this freed any excess to be sold to Columbia.)
2. The maximum daily delivery obligation of 120,000 Mcf would be reduced by any volumes received by United under “contracts as now in effect with Buyer’s [United’s] other suppliers” in the Garden City Field.
3. Humble and Cullen could meet their daily delivery obligation to United by delivering their own gas or other gas from the Garden City Field which either Humble or Cullen “shall from time to time have the right to market or dispose of for others”.
On June 28, 1963, Humble and Columbia executed an agreement which provided that Humble would warrant delivery of 6.1 trillion cubic feet (Tcf) of gas to Columbia from a number of fields. Humble further agreed that a portion of its Garden City Field gas, over and above the volumes required to fulfill its obligations to United, would be delivered toward the 6.1 Tcf. On the same day Cullen also entered into a contract to sell Columbia a portion of its excess gas, i. e., Garden City Field gas in excess of that required to meet its obligation to United.
Between 1963 and 1971, Cullen had the right to market Garden City Field gas for Texas Gas and others, and delivered their gas to satisfy part of its obligation to United under the 1963 amendatory contract. These authorizations were revocable. Humble never had the right to market the gas of Texas Gas. On May 2, 1971, Cullen obtained small producer certificates, and notified Texas Gas et al. as of May 2, 1971, it would no longer market their gas. Texas Gas et al. thereupon entered into negotiations with United that culminated in 1972 contracts to sell to United 8,400 Mcf/d out of the Garden City Field gas formerly marketed for them by Cullen. When the amounts of those deliveries were deducted by Humble from the amount it delivered to United, United complained to the FPC and sought a declaratory ruling as to the meaning of the contract.
The proceeding before the Federal Power Commission required the Commission to determine the validity of United’s complaint that it was entitled to 120,000 Mcf/d from Cullen and Humble under the 1963 agreement. Humble took the position that the contract, properly interpreted, permitted it to deduct from the 120,000 Mcf/d obligation such additional amounts as United might obtain from other suppliers in the Garden City Field who had formerly supplied gas to Cullen as their marketing agent for sale to United instead of contracting directly with United. The Administrative Law Judge construed the contract to agree with the interpretation advanced by United, and also accepted by Cullen, that the clause providing for deduction of volumes received by United under “contracts as now in effect with Buyer’s other suppliers” referred to amounts obtained by United from British Petroleum and Gulf, the suppliers in the Garden City Field with which it had contracts in effect on June 18, 1963 (see note 3). Humble did not petition for review of the adverse ruling.
Columbia’s petition to the FPC for review took the position previously advanced by Humble. The FPC adopted the construction of the contract set forth by the Administrative Law Judge. We affirm.
The FPC’s interpretation of the contract is in accordance with its literal terms, and is supported by a plausible explanation of the intendment of the parties. We would likely have reached the same interpretation ourselves, but should in addition note that there is room, in review of administrative agencies, for some deference to their views even on matters of law like the meaning of contracts, as on the meaning of statutes, where the understanding of the documents involved is enhanced by technical knowledge of industry conditions and practices. See Gulf States Utilities Co. v. Federal Power Commission, 171 U.S.App.D.C. 57, 518 F.2d 450, 457 (1975).
Columbia advances the separate contention that the FPC’s ruling amounts to permitting United to take the 120,000 Mcf/d from Humble plus up to 8,400 Mcf/d from Texas Gas et a 1. — and thus to take more from the field than was previously the situation. This, says, Columbia, can only be done in a proceeding under § 7(b) of the Natural Gas Act, in which Texas Gas seeks abandonment as to supply to Columbia, as well as the certification under 7(c) of its supply to United. And this can only be done in a comparative proceeding which takes into account the large elements of public interest inherent in shifting entitlements to gas supply.
Where there is an abandonment or curtailment of service, the Commission has an obligation to consider not only the contract situation but larger elements of public interest, including the entire situation of the pipelines competing for purchase. Transcontinental Gas Pipe Line Corp. v. FPC, 160 U.S.App. D.C. 1, 488 F.2d 1325 (1973), cert. denied sub nom. Natural Gas Pipeline Co. v. Transcontinental Pipe Line Corp., 417 U.S. 921, 94 S.Ct. 2629, 41 L.Ed.2d 226 (1974); Michigan Consolidated Gas Co. v. FPC, 108 U.S.App.D.C. 409, 283 F.2d 204, cert. denied, 364 U.S. 913, 81 S.Ct. 276, 5 L.Ed.2d 227 (1960), cited in Transcontinental Gas, 160 U.S.App.D.C. at 5, 488 F.2d 1325. But the present case and record was not presented in these terms, as a comparative case or a broad public interest question. The proceeding was shaped as one involving a contract interpretation. In the proceeding before the FPC, Columbia tendered no evidence bearing on broad public interest questions, such as the comparative position of the United and Columbia pipelines, or even on whether its overall gas entitlement would fall in fact. The case was one involving an extremely modest amount, in comparison with supplies going to Columbia from Humble and to United. Columbia’s counsel says the party proposing the application has the burden of proof. But the FPC can give some presumptive weight to contract arrangements, as Transco recognizes (see 160 U.S.App.D.C. at 5, 488 F.2d at 1329). Columbia should have offered some reasoning as to why the contracts should be rejected.
Putting formality aside, and looking to broader issues, there is merit in principle that the overall “public interest,” and not mere contract arrangement, should govern whenever there is a considered challenge to what is in fact a transfer of supply from one pipeline to another. That public interest background can be assured in the 7(c) proceeding to certificate the new purchaser. Again, since the volume of gas involved is relatively small and the parties did not present the broader public interest question to the Commission, we do not on this record fault the Commission for taking and deciding the case as the parties laid it before them. See FPC v. Transcontinental Gas Pipe Line Corp., 423 U.S. 326, 96 S.Ct. 579, 46 L.Ed.2d 533 (1976).
Columbia accused the FPC of inconsistency, in that it recognized that Texas Gas et al. must be treated as producers already engaged in the pertinent supply arrangement, for it held Texas Gas to a flowing gas rate, and did not permit it to charge the rate set for new gas. But the ruling that Texas Gas had dedicated its gas to interstate commerce, for rate purposes, does not mean the gas had been contractually dedicated to United.
Taking the case as it was shaped by the parties, we cannot say that the FPC was faithless to its obligation to consider the public interest.
Affirmed.
. Texas Gas et al. includes Texas Gas, Gulf Oil Corporation (Gulf) and Southern Natural Gas Company (Southern).
. “Humble” is retained throughout although Humble Oil & Refining Co. was succeeded by Exxon Corp.
. As of this June 18, 1963, amendment, United was also purchasing Garden City gas from British American and Gulf under outstanding contracts.
. The contract was with Columbia’s predecessor, namely United Fuel Gas Company.
. Pursuant to FPC Order 428, 18 C.F.R. 157.40.
. United thus contended that the volumes of gas furnished to it by Texas, Gulf and Southern should be excluded from the calculation of its 120,000 Mcf daily entitlement from Cullen and Humble. Any Garden City gas obtained under its contracts with British Petroleum and Gulf, however, would be included in the 120,-000 Mcf calculation.
. We do not question the standing of Columbia to raise the question, nor did the FPC, for the more gas United has a right to get from Humble-Cullen under its 1963 contract, the less gas Columbia has a right to demand under its 1963 contractual right to take what is left after the sellers satisfy the contractual commitments to United.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM:
Herbert and Arnold Smith, together with their respective wives, commenced this suit in the District Court against the United States to recover damages for the use of their warehouse. Jurisdiction was invoked under the Tucker Act. The matter is here on the appeal of the United States from a judgment for the Smiths.
The facts are undisputed. On May 8, 1964, United States Internal Revenue Service executed a distraint warrant for unpaid taxes owing by Lichty Printing and Business Forms, Inc. Levy was made upon Lichty printing presses and other equipment in Smiths’ building, which Lichty had been renting on a monthly basis. The seizure was accomplished by simply padlocking the building and posting the customary notices.
The Smiths thereupon notified the government agents that Lichty had failed to pay rent for several months and demanded that the government either vacate the premises or pay for their use. They informed the government's agents that the rental would be at the rate of $45.00 per day, that being the sum exacted of Lichty. The agents declared this sum excessive, but did not relinquish possession.
On June 5, 1964, Lichty was adjudicated a bankrupt on a voluntary petition and a receiver was appointed pending selection and qualification of a trustee. Several days later, the government, without notice to the Smiths, delivered the keys to the receiver for Lichty, who continued in possession of the premises until October 12, when the printing equipment was sold and removed. The receiver then turned the keys over to the Smiths.
The Smiths predicated their claim alternatively on a theory of an implied contract or a taking of property without compensation, in violation of the Fifth Amendment. The trial court predicated judgment upon the inverse condemnation theory and did not discuss implied contract.
On this appeal the government contends it did not take the Smiths’ property. In substance, the government argues that the lease between the Smiths and Lichty remained in effect throughout the period that the building was padlocked; that, since the Smiths never terminated the tenancy by judicial proceedings, the Smiths had no right to possession with which the government could interfere. We must disagree.
Under Arizona law, a month-to-month tenancy may be terminated for nonpayment of rent without notice to the tenant. Ariz.Rev.Stat. § 33-341, subsec. B. After a tenant has been in arrears in his rent for five days, the landlord may “re-enter and take possession, or, without formal demand or re-entry, commence an action for recovery of possession of the premises.” Ariz.Rev.Stat. § 33-361, subsec. A. The landlord’s right to possession accrues as soon as the tenant becomes five days in arrears in rent. We do not have to decide whether a landlord might, under Arizona law, be required to resort to judicial proceedings to evict a tenant who prevents a landlord from retaking possession for, in this case, it was the government, not the tenant, who refused to let the landlords reenter their building.
From the outset, the government was fully aware that the Smiths insisted upon either possession of the premises or rental for their use. “ [I]f the United States occupies a person’s premises, it is, ordinarily, liable for the rental value thereof even though it occupies them against the will of the owner and without an intention on the part of the United States to pay rent. This liability arises under the Fifth Amendment prohibiting the taking of private property without the payment of just compensation.” Niagara Falls Bridge Comm. v. United States, 76 F.Supp. 1018, 1019, 111 Ct.Cl. 338 (1948). The government, of course, enjoyed the right to seize Lichty’s property to enforce its tax lien. However, it did not have the right to seize the property of the Smiths and to use the same as a storage facility without running afoul of the Fifth Amendment. The Smiths were entitled to compensation. Carroll v. United States, 229 F.Supp. 891 (W.D.Ark.1964); Feldwin Realty Co. v. United States, 169 F.Supp. 73, 76-77 (D.N.J.1959).
The judgment is affirmed.
. The Act, so far as is relevant, is codified in 28 U.S.C. § 1346(a) (2), which provides:
“(a) The district courts shall have original jurisdiction, concurrent with the Court of Claims, of:
$ * * * $
(2) Any other civil action or claim against the United States, not exceeding $10,000 in amount, founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department [of the United States], or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.”
. This case was previously here in 1966. Smith v. United States, 362 F.2d 366 (9th Cir. 1966). We concluded that the nature of Lichty’s tenancy was unclear and remanded the matter to the district court for a determination. Upon such remand the parties stipulated that, although the Smiths and Lichty had contemplated entering into a formal lease for a term of years, no such agreement was ever executed; that “in October 1961 Lichty went into possession of the premises on a month to month tenancy at a rental of $1350.00 per month or $45.00 per day.”
. The government argues that, in any event, it should not be liable for rent beyond June 12, 1964, the date on which it gave the keys to the building to Liehty’s receiver. However, the agreement between the Internal Revenue Service and the receiver, under which the transfer was made, stated that the property being turned over to the receiver was the “[p]roperty of Lichty Printing & Business Forms, Inc., bankrupt, which was levied upon and seized prior to the filing of the Petition in Bankruptcy . . . ” The “property” referred to in this agreement was only that to which the government was lawfully entitled to possession- — Lichty’s printing equipment. Since the transfer of the keys to the receiver was made without notice to tire Smiths and the Internal Revenue Service seizure notices and padlock were kept on the building until the receiver’s sale, we agree with the District Court that the government’s occupancy of the building continued until the premises were returned to the Smiths. The receiver’s possession of the premises was derived from the government, not the bankrupt ; and the initial taking being wrongful, the government remained liable until the premises were returned. Feldwin Realty Co. v. United States, 179 F.Supp. 70, 72 (D.N.J.1959).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HAMILTON, Circuit Judge.
On October 23, 1941, at about 1:50 o’clock a. m., while it was raining, the tug, America, was attempting to release the steamer, B. F. Jones, a bulk freighter, from the strand in the Detroit River a short distance above Belle Isle, and the America turned over and sank. The tug carried a crew of thirteen men, seven of whom drowned when she capsized.
Appellants, personal representatives of four of the deceased, instituted these actions in admiralty and at law against the Interstate Steamship Company, the owner of the steamer, B. F. Jones, and the Great Lakes Towing Company, owner of the tug, America, for the wrongful deaths of the deceased under the Michigan Death Statute. The trial court dismissed all' of appellants’ libels as to the Interstate Steamship Company from which decrees this consolidated appeal is prosecuted.
Appellants urge two points: (1) That the evidence shows that there was mutual fault of the America and the B. F. Jones, and that in such a case under admiralty rules where damages are caused by two tort feasors resulting in the death of an innocent third party, each is primarily liable for one-half; (2) that the Great Lakes Towing Company and the Interstate Steamship Company were engaged in a joint venture, co-operative effort and mutual enterprise in attempting to move the stranded vessel' and that by reason thereof, the doctrine of respondeat superior applies to the owners of both ships.
The B. F. Jones, a bulk freighter, 538 feet long, 56 feet beam and 31 feet deep, fully loaded with iron ore, went on the strand in the Detroit River, a short distance above Belle Isle and was unable to release herself, and the Great Lakes Towing Company, under an arrangement with the Interstate Steamship Company, undertook to float her. After several unsuccessful attempts to release the Jones, the port side of the vessel became firmly embedded in the bank, lying broadside of the currrtit and having a compass heading of about N. E. by N. The tug, America, attached her hawser to the stern of the Jones and tried to pull her into the channel, but without success. Thereupon, it was concluded to remove some of the cargo by lighter, and in order to prevent the ship from going further on the strand as her weight became less, her starboard anchor, with about 70 or 80 fathoms of chain out, was carried upstream by one of the tugs and dropped, the angle of the anchor chain from the ship, when it became fixed, being approximately 45 degrees. After about 800 tons of iron ore were removed from the Jones, it was found she could be swung from the bank in a pivoting motion but that the anchor prevented such a movement as it was so firmly embedded at the bottom of the stream. The winding mechanism of the Jones could not move the anchor and other means for separating the anchor chain from the anchor were not available. Manila lines were attached to the anchor chain and an effort made to move it by the tug, Oregon, but under strain the lines separated and nothing was accomplished. Steel cables were used but they also parted. There was then obtained from the Jones a steel shackle and the bridle of the America’s towing hawser was loosely shackled around the anchor chain so as to allow freé movement of the bridle up and down the chain. The America then began to pull backward and forward across the lead of the anchor chain as the Oregon had previously done, using manila lines.
The Captains of the Jones and America agreed, before the latter began to pull, that when the America had broken the anchor resulting in slack in the anchor chain, the America would give three short whistle signals, whereupon the slack thus developed would be hove in by means of the windlass of the Jones. During this maneuver, some progress was made in heaving-in slack and the length of the anchor chain was reduced to approximately 45 fathoms. The tug, America, and the tug, Oregon, were then joined and commenced to pull on the anchor chain in tandem, with the Oregon in the lead. As thus rigged the America’s steel towing hawser running over the top of the drum of her towing machine was about 200 feet long and through the water was shackled around the stock of the Jones’ anchor. A manila towing hawser about 40 feet in length led from the America’s pawl posts forward down to the Oregon’s after towing bits. The first tandem pulling was done upstream on the Jones’ starboard side and then the tugs switched downstream across the bow of the Jones pulling on the lead of her anchor chain on her starboard side.
During these changing operations from up to down stream, the Jones and the Oregon commenced to move through the water with greatly accelerated speed, and the Captain of the America blew a check whistle to her engine room and also blew a similar whistle to the Oregon. The movement of the tugs abruptly halted and the America rolled to port and all on board were thrown to the floor on the port side of the pilot house and the America immediately filled with water and went down by the stern. The Oregon remained afloat. There was no parting of the cable lines from the America to the anchor chain and there was no parting of the cable connecting the America and the Oregon.
A few minutes before the America capsized, the operator of the windlass on the Jones, in response to signals, hove in some of the anchor chain. He then placed the windlass in a pay-out position and paid out about half a link and again reversed the windlass to a pay-in position.
There is no direct evidence in the record of the origin of the tow slack which caused the two tugs to surge forward suddenly and abruptly halt. Neither tug slowed down in response to the check whistles because the accident occurred almost simultaneously with the signals.
Two qualified seamen who were on the America testified that from their experience and actual observation at the time of the accident, the chain slack which permitted the two tugs to lurch forward suddenly was caused by a pay-out of the anchor chain on the B. F. Jones’ windlass and that the abrupt halt of the vessels was caused by a sudden tightening of the mechanism of her windlass. Neither of these witnesses was on the Jones at the time of the accident, nor did either see any movement of the anchor chain to or from the windlass.
The seamen operating the windlass on the Jones testified there was no pay-out of her anchor chain except a few inches or part of a link at the time of, or immediately before, the accident. The claimed negligence is the movement of the anchor chain on the Jones and this issue is determined by what weight, if any, is to be given to the testimony of the two witnesses for the libellants who expressed their opinion on the subj ect.
It is contended that the Master and officers of the Jones paid out the anchor chain without notice to or direction from the Masters or officers of the towing tugs and that the compressor or locking device or reversing mechanism on the windlass of the Jones was 'suddenly applied, which caused the immediate stopping of the America and its consequent sinking.
It is true that the owner of a vessel is liable in personam and the vessel is liable in rem for injuries done to persons by the negligence of the Master or crew, but the negligence must be such as would make the owner of the vessel under the same circumstances, liable in a suit at common law. If a tort is committed on navigable waters, the case becomes cognizable in admiralty. But the fact that the occurrence took place on navigable waters still leaves open the question whether the circumstances were such as to amount to a tort. The burden of proving negligence on the part of a ship, its Master or crew, which rests upon the libellant, never shifts to the respondent. The libellant must establish directly or by just inference some want of care on the part of the Master or the crew of the ship to which his injury may fairly and reasonably be traced. It is not enough for the libellant to prove that the negligence might perhaps have caused the injury. If the injury complained of might well have resulted from one of many causes, it is incumbent upon the libellant to produce evidence which will exclude the operation of those causes for which the Master or the crew is under no legal obligation. If the cause of the injury may be as reasonably attributed to an act for which the Master and crew is not liable as to one for which they are, the libellant has not sustained, the burden of fastening tortious conduct upon the Master or crew. The evidence showing negligence must come from witnesses who speak as knowers, not as guessers.
In the case at bar, the tugs were switching upstream and downstream and were creating water swells by their movements. The bridle on the anchor chain was free to slide up and down. The slack in the tow line from the America to the anchor chain could have been created by the switching movement of the ship or by slides on the anchor chain and the abrupt halt of the ship could have been caused by a sudden grab of the bridle on the anchor chain. Of course, it could have been caused by the pay-out of the anchor chain on the windlass of the Jones, or by its reversing mechanism or by a sudden application of the compressor.
A fair appraisal of the evidence leaves the cause of the accident open to pure speculation. The question of what was the cause of the rapid movement of the tugs forward and their sudden halt is a matter of opinion; nobody can swear just what it was. It was competent for the seamen on the scene conversant with the facts to give their opinion deduced therefrom in the light of their experience. But when the testimony of these witnesses is weighed along with the testimony of those controlling the movements of the windlass on the Jones, the libellants failed to sustain the burden of fastening tortious conduct upon the Master or crew of the Jones.
While appeals under admiralty rules are heard de novo, nevertheless a finding on a question of fact by an admiralty court, which saw and heard the witnesses, will be accepted by the appellate court unless the evidence greatly preponderates against it. Globe S. S. Co. v. Moss, 6 Cir., 245 F. 54. There is no preponderance in the evidence here in favor of the appellants.
While the general rule is that the master is liable for the acts of his employees done within the scope of their employment, it is equally well settled that the rule applies only when the relation of master and servant is shown to exist between the wrongdoer and the person sought to be charged for the wrong at the time of the injury and with reference to the very transaction out of which the injury arose; otherwise, the doctrine of respondeat superior does not apply.
There is nothing in the evidence in the case at bar from which an inference could be drawn that the Captain and crew of the tug, America, may be said to have been the agents or servants of the owners of the B. F. Jones or seamen of that ship. They were, in no sense, under the control of, or subject to the orders of the Master of that ship, but on the other hand, they were the servants and agents of the Master or owners of the tug America and were amenable to them in the discharge of their duties.
The owners or agents of the B. F. Jones had no part in the employment of the members of the crew of the America, nor did the owners or agents of the Jones have any authority to remove or discharge the persons employed on the America, nor did the Master of the Jones have any authority to order what should be done on the America. The mode and manner of performance of the work of the America was solely under the control of its Master.
It is true the Master of the Jones furnished a steel shackle which was attached to the anchor chain and that the- Master of the Jones consulted and advised with the Masters of the tugs, America and Oregon, as to how the work of releasing the Jones was to be done, but no one connected with the Jones exercised or had any control over the details of the movements of the tugs. The tugs furnished their own crews, pursued their own course, regulated the length of the lines, the movement of the vessels and the order in which the two tugs were to be lined. All of this was done irrespective of the wishes of the Master of the Jones. The respondent, The Great Lakes Towing Company, was engaged in the business of freeing stranded vessels on the Great Lakes and made a special rate for this type of work. It was employed by the Interstate Steamship Company for the specific purpose of releasing the Jones.
There can be no doubt the America was engaged in the service of the B. F. Jones, but there is no evidence whatever that the latter vessel led the former into the difficulty which resulted in the disaster in which libellants’ deceased lost their lives. Under the circumstances of this case, the court is of the opinion that respondent is not responsible for damages arising from the negligence or unskillfullness of the Master, officers or crew of the tug, America. The relationship which the towing company bore to the interstate company was that of independent contractor. Sturgis v. Boyer et al., 24 How. 110, 65 U.S. 110, 16 L.Ed. 591.
Decrees affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
OPINION OF THE COURT
PER CURIAM.
This is an appeal by a bankrupt corporation from an order of the district court confirming an order in which the referee had confirmed the sale of the bankrupt’s corporate trade name and the bankrupt’s revoked certificate to operate as a supplemental air carrier to a purchaser for $5,000.
It is not contended that the sale price was inadequate. All of the tangible assets of the bankrupt had been sold before the presently challenged sale.
In dismissing the bankrupt’s petition for review, the district court reasoned that:
“[u]nder Section 39c of the Bankruptcy Act, only a ‘person aggrieved’ can petition for review of a Referee’s order. A ‘Person Aggrieved’ is one who is directly and adversely affected pecuniarily by the order. Hartman Corp. of America v. United States, 304 F.2d 429 (8 Cir. 1962); In re Henry Wood Sons Co., 279 Fed. 608 (D.C. Mass.1922). In any event, real value was realized by the trustee for the benefit of the creditors, and the bankrupt may not petition for review where fair value is exchanged for the asset, if it be one, of only a skeletal charter and a dormant right of purchase. Of course, a grossly inadequate bid is quite another matter. The argument of the petitioner is that the trustee had no assets to sell in this regard. If that is so, then only the purchaser has been harmed by his speculation. If the bankrupt corporation had inherent rights in these intangible property rights, then the trustee’s duty under the Act was to sell, and this is precisely what he did.”
We agree with the district court that the bankrupt was not “aggrieved,” within the meaning of the Bankruptcy Act, by the sale it is attempting to challenge.
The judgment will be affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
BINGHAM, Circuit Judge.
No. 2516 is an appeal from an order or decision of the Board of Tax Appeals reversing a decision of the commissioner determining the liability of the Angier Corporation, transferee of the Angier Mills, for an additional income and profits tax for the year 1918, assessed against the Angier Mills.
The question presented is whether the deficiency or additional tax assessed by the commissioner for the year 1918 against the Angier Mills was barred by the statute of limitations and therefore uncollectible from the Angier Corporation, to which all the property of the Angier Mills had been transferred.
The statutes involved are the Revenue Aet of 1918, ch. 18, § 250 (d), 40 Stat. 1083; the Revenue Act of 1921, ch. 136, § 250 (d), 42 Stat. 265; Revenue Act of 1924, ch. 234, § 277 (a) (2), (b), 26 USCA § 1059 note and section 278 (c) (d) (e), 26 USCA §§ 1060 note, 1061 note and 1062; and the Revenue Aet of 1926, ch. 27, § 280, (a) (1), (b) (1) and (2), and (e) and (d), 26 USCA § 1069 (a) (1), (b) (1, 2), (c) and (d).
The Angier Corporation is a Massachusetts corporation organized in 1920, with its principal place of business at Framingham, Mass. Edward H. Angier is its president and treasurer and has been from its inception.
The Angier Mills is also a Massachusetts corporation, organized in 1904. From 1907 to 1921 it had its place of business at Ash-land, Mass. Edward H. Angier was its treasurer in 1917; and was its'president, treasurer, and a director in 1918, 1919, and 1920. His last election as director, president, and treasurer was February 14,1920. Since then no election of officers or directors of this corporation has been had.
Edward H. Angier owned all the stock of the Angier Mills, but on .December 31, 1920, the Angier Corporation acquired all of this stock in exchange for its own capital stock. December 30, 1921, Angier Mills transferred to the Angier Corporation all of its property and after that date ceased to hold meetings or do business, and on March 31, 1923, on the application of the Angier Corporation, its sole stockholder, it was dissolved under a statute of Massachusetts authorizing such dissolution but continuing the corporation in existence for three years for the purpose of winding up its business and suing and being sued. Gen. L. Mass. c. 155, §§ 50, 51. The transfer on December 30, 1921, of the property and assets of the An-gier Mills was in liquidation of its capital stock and the property transferred was of a net value in excess of the tax here involved.
The Angier Mills filed its tax return for the year 1918 on April 11, 1919. The tax shown by this return was paid on or before December 15, 1919. Thereafter the commissioner examined the return and on October 31, 1924, pursuant to section 274 (a) of the Revenue Aet of 1924 (26 USCA § 1048 note), mailed a deficiency notice addressed to Angier Mills, Framingham, Mass., notifying it of an additional tax of $25,797.34. On this notice no action was taken by the taxpayer, and in March, 1925, the commissioner assessed an additional tax in the amount of $25,797.34, which he thereafter reduced to $18,876.19. January 20, 1923, a written waiver, consenting to a determination, assessment, and collection of the amount of the tax due under any return made by Angier Mills for the years 1917 to 1921, inclusive, under the Revenue Act of 1921, or prior acts, without limitation as to time, was signed, “Angier Mills, Taxpayer, E. H. Angier, President, D. H. Blair, Commissioner.” January 31, 1924, a like waiver for the year 1918, to “remain in effect for a period of one year after expiration of the statutory period of limitation, or the statutory period of limitation as extended by waivers already on file,” was signed “Angier Mills, E. H. Angier, Treasurer, Taxpayer, D. H. Blair, Commissioner.” And on January 25, 1924, a like waiver was executed for the year 1917, to “remain in effect for a period of one year after expiration of the statutory period of limitation or the statutory period of limitation as extended by any waiver already on file.” The originals and photostatie copies of these waivers bear the corporate seal of the Angier Mills.
February 9,1927, the commissioner, pursuant to section 280 of the Revenue Act of 1926 (26 USCA § 1069), mailed a notice to the Angier Corporation, transferee of the assets of the Angier Mills, notifying it of his determination of its liability for the 1918 tax of the Angier Mills.
From the foregoing it appears that, as to the 1918 tax, the period of limitation, provided for in section 250 (d) of the Act of 1918 (40 Stat. 1083), section 250 (d) of the Act of 1921, 42 Stat. 265, and section 277 (a) (2) of the Act of 1924 (26 USCA § 1057 note), for assessing the tax against the An-gier Mills had expired before the act of 1926 was passed. This being so, the period of limitation for assessing the Angier Corporation, transferee, on its liability for said tax, is governed by section 280 (b) (2) of the Revenue Act of 1926, 26 USCA § 1069 (b) (2), which provides:
“(b) The period of limitation for assessment of any such liability of a transferee * * * shall be as follows:
* * *
“(2) If the period of limitation for assessment against the taxpayer expired before the enactment of this Act but assessment against the taxpayer was made within such period [the 5 year period, or such period extended by waiver], — then within six years after the making of such assessment against the taxpayer, but in no case later than one year after the enactment of this Act.”
It also appears from the facts above set forth that the period of limitation for assessing the liability of the Angier Corporation as transferee, for the 1918 tax, under the above-quoted statute, had expired before February 9, 1927, when the commissioner mailed the notice to the Angier Corporation, unless the tax against the Angier Mills was seasonably assessed by virtue of the extension of time granted by the waivers of January 20, 1923, and January 31, 1924. And the latter question depends upon whether either of the signatures of the Angier Mills, appearing upon the waivers, as made by Edward H. Angier in the capacity of president, or treasurer, was valid.
As above pointed out, Mr. Angier was the treasurer of the Angier Mills in 1917. He was de jure and de facto president, treasurer, and director of that corporation in 1918, 1919, and 1920. March 27, 1918, he filed with the commissioner the tax return of the Angier Mills for the calendar year of 1917. April 11, 1919, he filed its tax return for the calendar year 1918; and on March 14, 1921 (more than a year after his last election), he filed a like return for the year 1920, and, although he may have ceased to be a de jure officer on or about February 14,. 1921, he nevertheless continued to act as a de facto officer thereafter, for the record also shows that, on December 30, 1921, he effected, in behalf of the Angier Mills, the transfer of all its property and assets to the Angier Corporation, and thereafter continued to act in its behalf, for on January 20, 1923, he signed a waiver in its behalf as president, and on January 25, 1924, and on January 31, 1924, he signed two other waivers in its behalf as treasurer, and affixed the seal of the corporation to all three. He undoubtedly acted as de facto officer of the Angier Mills during a period of about two years preceding its dissolution in 1923, and thereafter during the winding up of its affairs; and, as such, exercised and had authority to sign the waivers, for these acts were'but steps in the liquidation of the corporation. See United States v. Kemp (C. C. A.) 12 F.(2d) 7; Hudson v. Parker Mach. Co., 173 Mass. 242, 53 N. E. 867; Stratton Mass. Gold Mines Co. v. Davis, 222 Mass. 549, 111 N. E. 375; Brinkerhoff v. Jersey City, 64 N. J. Law, 225, 46 A. 170.
It is argued that the notices of determination sent to the Angier Mills at Framing-ham, Mass., should have been sent to the Angier Mills at Ashland. Little reliance can be placed on this contention. When the letters were sent the Angier Mills had ceased doing business at Ashland. Its property and assets had all been transferred to the Angier Corporation. Its stock was then all owned by that corporation. Its president and treasurer was then the president and treasurer of the Angier Corporation located at Framingham, and it would have b^en an empty thing to have sent the notices to Ash-land.
No. 2517 is an appeal from an order or decision of the Board of Tax Appeals modifying a decision of the commissioner determining the liability of the Angier Corporation, as transferee of the Angier Mills, for an additional income or profits tax of the latter company for the year 1920, claimed to have been assessed against the Angier Corporation.
It appears that on March 14, 1921, the Angier Mills filed a consolidated tax return for itself, the Angier Mechanical Laboratories, the Mansfield Company, and the Van de Carr Paper Company for the year 1920, and the tax thereon was duly paid. Thereafter the commissioner examined the return, and January 2,1926, pursuant to section 274 (a) of the Revenue Act of 1924 (26 USCA § 1048 note), mailed a 60-day deficiency notice addressed to the Angier Mills, Framingham, Mass., notifying it of an additional consolidated tax liability of $13,800.86 for the fiscal year 1920. No appeal was taken by the taxpayer and no further action was taken by it in respect to the additional tax. February 23, 1926, the commissioner mailed a 60-day notice to the Angier Mills, Framing-ham, Mass., of an additional assessment against it of $13,800.80 and stating that “this letter supersedes Bureau letter dated January 2, 1926.”
On March 8, 1926, the five-year period having nearly elapsed, a jeopardy assessment of the additional tax of $13,800.86 was made by the commissioner. See section 279', chap. 27 of the Revenue Act of 1926 (26 USCA §§ 1051, 1063). This assessment was later reduced to $11,336.25.
On April 12, 1926, pursuant to section 279 (b) of the Revenue Act of 1926, 26 US CA § 1051 (b), the commissioner mailed a 60-day letter of deficiency notice to the An-gier Mills, Framingham, Mass., notifying it of an assessment against it in the amount of $13,800.86 and of its right of appeal to the Board of Tax Appeals, and stating that, “This letter supersedes Biireau letter dated February 23, 1926.”
The consolidated tax for the year 1920 was assessed against the Angier Mills alone, instead of being assessed against the affiliated companies on the basis of the net income properly assignable to each. There was no agreement that this should be done and there was no notice to the commissioner to so assess the tax.
On February 9, 1927, the commissioner, pursuant to section 280 of the Revenue Act of 1926, mailed a 60-day notice to the Angier Corporation, the transferee of the assets of the Angier Mills, for the tax year 1920, as well as the years 1917 and 1918.
The Board of Tax Appeals held that the commissioner properly asserted the deficiency for 1920 against the Angier Corporation, as transferee, but only for $7,526.33, or so far as the tax was assessable to the Angier Mills based on the net income properly attributable to it. In redetermining the amount of the tax of the Angier Mills as $7,526.33, the board acted in pursuance of section 240 (b) of the Act of 1926 (26 USCA § 993 (b).
In this petition to review the holding of the Board of Tax Appeals, affirming the decision of the commissioner as to the liability of the Angier Corporation, as transferee, for the additional tax of the Angier Mills, the petitioner, the Angier Corporation, is not questioning the power of the board to cut down the tax of the Angier Mills to $7,526.-33, but complains that the board erred in affirming the commissioner’s determination of the liability of the Angier Corporation for such deficiency tax.
It is difficult to determine the precise nature and scope of the errors assigned by the petitioner, but they apparently are: (1) That the Board erred in not holding that the deficiency notice to the Angier Corporation of February 9, 1927, was invalid, for the reason that the notice included a deficiency tax against the Mansfield Company for 1918 and the first three months of 1920; (2) in holding that the liability of the Angier Corporation for the deficiency tax of the Angier Mills for the year 1920 existed and may be enforced, (a) for the reason that the deficiency notice of April 12,1926, to the Angier Mills was invalid, in that it was not sent within the five year period, and (b) for the further reason that no valid tax for 1920’ was assessed against the Angier Mills within five years of its tax return; and (3) that it erred in not holding that section 280 of the Revenue Act of 1926 (26 USCA § 1069) is unconstitutional.
The petitioner takes nothing by the first assignment above specified. The deficiency notice to the Angier Corporation of February 9, 1927, contained a complete statement showing what tax had been determined against the Angier Mills for 1920, and fixing the amount of the tax at $11,336.25. The Angier Corporation, therefore, received definite notice of the tax for 1920 for which it, was to be held liable as transferee, and we are unable to see wherein it could have been more definitely notified of the nature and the amount of the tax, for which it was to be held liable, had the notice contained no reference to its liability for other years.
The second assignment of error, subdivision (a), is apparently based on the assumption that the notice of April 12, 1926, to the Angier Mills is the notice upon which the jeopardy assessment of March 8,1926, or any other assessment against the Angier Mills for the year 1920, was predicated, and, not having been mailed within five years from the filing of its tax return, it was invalid as a deficiency notice and as a basis for the assessment of a tax against'the Angier Mills for that year. It seems to us that the difficulty with this contention is that the notice of April 12, 1926, is not the notice upon which the commissioner relies as a determination of the deficiency tax against the Angier Mills. There seems to have been an abundance of notices in this case, for the commissioner notified the Angier Mills of the deficiency tax on January 2,1926, and again on February 23, 1926, both of which notices were given within five years from the filing of its tax return. The fact is that the letter of April 12, 1926, was sent after the jeopardy assessment of the additional tax was made on March 8, 1926, and section 279 (b) of the Revenue Act of 1926, 26 USCA § 1051 (b) provides:
“(b) If the jeopardy assessment is made before any notice in respect of the tax to which the jeopardy assessment relates has been mailed under subdivision (a) of section 274, then the Commissioner shall mail a notice under such subdivision within 60 days after the making of the assessment.”.
It thus appears that the notice of April. 12, sent after the jeopardy assessment, was given out of abundant caution, for, previous to the jeopardy assessment, two deficiency notices, such as are called for under subdivision (a) of section 274 (26 USCA § 1048 note), had been seasonably sent to the Angier Mills determining its tax. It is of no consequence that the notice of April 12, 1926, was not given within five years of the date of the tax return. It was given within 60 days after the assessment (section 279 (b)). The only assessment made was under section 279 (a), 26 USCA § 1051 (a) which provides:
If the commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay, he shall immediately assess such deficiency. * * * ”
This means that he may, in such ease, make an assessment although previous notice of a deficiency has not been given. The deficiency notice was seasonably given.
The position taken in the second assign-mezzt, subdivision (b), that the assessment against the Angier Mills of March 8, 1926, is invalid as not having beezi made within five years after its tax return was filed, is without merit, for it was made within five years.
The only objection that could be urged against that assessment would seem to be that the amozznt was too large, due to the fact that it was based in part upon income which should have been apportioned to the other affiliated companies. If the Angier Mills was not satisfied with the amount of the tax assessed against it, it could have appealed, but it didn’t; and whether it was open to the Angier Corporation to question the amount of the tax before the Board of Tax Appeals, it is not open here, for the Board of Tax Appeals, in determining the liability against it as transferee, has determined its liability to be for a tax based only on the proportion of income properly attributable to the Angier Mills for 1920.
The petitioner has failed to point out wherein section 280 of the Act of 1926 is unconstitutional. The reasonable construction and application of that section does not call for the exei-eise of unwarranted power and, as here construed and applied, no such power has been exercised. It apparently thinks that when the letter of February 9,1927, was sent notifying it of its liability for the tax, no liability for the tax existed against the Angier Mills, but, as we have above pointed out, such liability then existed. In its brief the petitioner states that “the better reasoning seems to be in favor of the validity of the section,” and we are of that opinion.
The Angier Corporation has filed a motion to dismiss the petition for review in No. 2516, claiming that its liability has been extinguished, and, therefore, the question raised is moot. It bases this contention on the ground that the recital in a certificate of discharge of a lien, recorded in the registry of deeds, in Massachusetts, to the effect that the tax in question had been paid was conclusive of that fact. In support of this contention it relies upon subdivision (d) of section 613 of the Revenue Act of 1928, 26 US CA § 115 (d), amending section 3186 o£ the Revised Statutes, which reads:
“(d) A certificate of release or of partial discharge issued under this section shall he held conclusive that the lien upon the property covered by the certificate is extinguished.”
While this section makes the certificate conclusive that the lien is extinguished, it does not make the recital that the tax .has been paid conclusive, and there is no contention here that the tax in question has been paid. The question of the liability of the Angier Corporation for the tax is not moot.
Furthermore, the certificate in the registry was filed before any further tax had come into existence, and the release of the lien was filed in the registry under a complete misapprehension of the situation. But whether a lien for the tax did or did not exist at the time the certificate was filed, and .whether the release was or was not given and filed under a misapprehension, is of no consequence in the matter here under consideration.
The motion to dismiss the petition for review is denied.
In 2516, the order or decision of the Board of Tax Appeals is vacated, and the ease is remanded to that board for further proceedings not inconsistent with this opinion.
In No. 2517, the order or decision of the Board of Tax Appeals is affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
Opinion for the court filed by Circuit Judge BUCKLEY.
BUCKLEY, Circuit Judge:
Southern Air Transport alleges that an American Broadcasting Companies television report created the false and defamatory impression that Southern Air had acted in partnership with the government of South Africa in an illegal operation to supply arms to insurrectionary forces in Nicaragua. The district court found that because all the statements regarding Southern Air in the challenged news story were true, it was not possible to infer a defamatory meaning from them.
While the applicable law holds that a defamatory inference may be derived from a factually accurate news report, we find that a viewer could not reasonably infer from the report that Southern Air was in partnership with South Africa. We also conclude that even though ABC had characterized the arms supply operation as illegal, that characterization is opinion protected by the First Amendment. We therefore affirm the district court’s grant of summary judgment in favor of ABC and its reporter, Karen Burnes.
I. Background
On February 25 and 26, 1987, appellee American Broadcasting Companies, Inc. (“ABC”) aired two essentially identical versions of a special news report alleging U.S. and South African cooperation in support of a clandestine operation in Central America. According to the ABC story, U.S. government officials had enlisted the assistance of the South African government in supplying weapons to insurrectionary forces in Nicaragua known as the “Contras.” The February 25 report was the lead story on ABC’s “World News Tonight” and was introduced by anchorman Peter Jennings' statement that it would show
what lengths the Reagan Administration has gone to in order to help the ... Contras when Congress was against it. This is a story of how the South African government was enlisted to help the Contras with aircraft and flight crews.
A film clip of drilling soldiers beneath the phrase “South Africa Connection” accompanied Jennings’ introduction.
The three minute, forty-five second story followed, beginning with more film of marching soldiers in camouflage. Appellee Karen Burnes, an ABC reporter, stated that ABC’s investigation had revealed that during a period of intense congressional debate over economic sanctions against South Africa, Central Intelligence Director William Casey had run a “vest pocket operation” outside of all normal channels to enlist South African help for the Contras. A picture of Casey and a film clip of the debate accompanied this portion of the report. The story claimed that the CIA's Latin American Division Chief, Duane Clar-ridge, had secretly traveled to South Africa in 1983 in an attempt to solicit aid for the Contras. It continued:
Several months [after Clarridge’s trip] Safair Freighter [ (“SAFAIR”) ], a South African cargo company, opened an office in the United States. U.S. officials said SAFAIR is involved in covert operations for the South African government. On the same day it incorporated SAFAIR signed a lease with Southern Air Transport [(“Southern Air”)], known for its past relationship with the [CIA]. SA-FAIR provided planes to Southern Air, planes which were used to fly weapons to the Contras.
Footage of SAFAIR planes dissolving into a film of Southern Air planes accompanied this segment. Later in the story, Burnes reported that certain officials met with Southern Air pilots in a safe house in San Salvador, where they were told that third country nationals, some of whom were allegedly South African, would fly weapons into Nicaragua. A nearly identical story aired on ABC’s “Good Morning America” the next day.
On March 9, 1987, Southern Air initiated this libel action in the U.S. District Court for the District of Columbia, basing jurisdiction on the parties’ diversity of citizenship. 28 U.S.C. § 1332(a)(1). Its complaint alleged that
the report ... create[d] the false and defamatory impression ... that Southern Air leased airplanes from SAFAIR as an active and knowing participant in an illegal scheme established by the governments of the United States and South Africa for South Africa to assist in the delivery of weapons to the Contras.
Complaint, paras. 8 & 12. Southern Air also claimed that the “false and defamatory statement that Southern Air used SAFAIR planes to fly weapons to the [C]ontras was known by ... ABC to be false prior to ... the broadcast.” Complaint, paras. 9 & 13. Southern Air sought more than $10,000 in actual damages and $30 million in punitive damages.
ABC moved to dismiss or, in the alternative, for summary judgment. In support of its motions, ABC set forth undisputed facts establishing that Southern Air played a role in airlifting arms to the Contras, but was unable at that time to show that Southern Air had used a SAFAIR plane for that purpose. The district court denied ABC’s motions, stating that it could not say “beyond doubt” that viewers could not construe the challenged broadcast as containing a defamatory message. Southern Air Transp., Inc. v. ABC, 670 F.Supp. 38, 42 (D.D.C.1987) (“Southern Air 7”). The court was not satisfied that “the juxtaposition of graphics and commentary could not convey the meaning ascribed to the broadcast” by Southern Air. Id.
The court further noted that it could not award summary judgment because of a dispute over several material facts, including whether Southern Air had used a SA-FAIR plane in the Contra supply operation. The court observed that if a SAFAIR plane had been used to deliver weapons to the Contras, a reasonable inference might be drawn that Southern Air was in partnership with the South African government. Id. at 44.
During discovery, Southern Air’s counsel informed ABC’s counsel that he had ascertained that on one occasion a Southern Air charter flight had used a plane leased from SAFAIR to transport munitions from a Contra base at Ilopango, El Salvador to one at Aguacate, Honduras. Southern Air’s president was on the flight and was aware that it had delivered the munitions.
Southern Air moved to amend its complaint, principally by deleting paragraphs 9 and 13, which alleged that the statement that SAFAIR planes were used to deliver weapons to the Contras was false and defamatory. ABC filed a renewed motion for summary judgment on the basis that the disclosure concerning the SAFAIR plane showed that the story was substantially true as it related to Southern Air. ABC also moved for the imposition of sanctions on Southern Air and its counsel pursuant to Fed.R.Civ.P. 11, claiming that at the time the complaint was filed, they knew or could have learned through reasonable inquiry that the allegations in paragraphs 9 and 13 were false.
In Southern Air Transp., Inc. v. ABC, 678 F.Supp. 8 (D.D.C.1988) (“Southern Air II”), the district court granted ABC’s renewed motion for summary judgment. It noted that the dispute over the use of a SAFAIR plane was critical to its earlier determination to deny summary judgment. In the face of Southern Air’s disclosure, the court concluded that “there is a reasonable inference that Southern Air played a role in deploying a South African airplane to supply weapons to the Contras,” id. at 11, and that, because of the truth of the statements made, “it is impossible to infer defamatory meaning from them.” Id. at 12. The court denied ABC’s motion for Rule 11 sanctions. Id.
Southern Air appealed the grant of summary judgment, and ABC cross-appealed the denial of its motion for sanctions.
II. Discussion
A. Was the Report Defamatory?
1. Applicable Legal Standards
“In a libel case, it is the role of the court to determine whether the challenged statement is 'capable of bearing a particular meaning’ and whether ‘that meaning is defamatory.’” Tavoulareas v. Piro, 817 F.2d 762, 779 (D.C.Cir.) (en banc) (quoting Restatement (Second) of Torts § 614(i)), cert. denied, — U.S. -, 108 S.Ct. 200, 98 L.Ed.2d 151 (1987). If the court determines that the statement is capable of conveying a defamatory meaning, a jury must determine whether such a meaning was in fact attributed to it. Id. at 780. Our power to hold as a matter of law that a statement is not defamatory is limited:
It is only when the court can say that the publication is not reasonably capable of any defamatory meaning and cannot be reasonably understood in any defamatory sense that it can rule as a matter of law, that it was not libelous.
McBride v. Merrell Dow and Pharmaceuticals, Inc., 717 F.2d 1460, 1465 (D.C.Cir.1983) (quoting Levy v. American Mutual Liability Ins. Co., 196 A.2d 475, 476 (D.C.1964)).
Furthermore, District of Columbia law, which governs this diversity case, clearly contemplates the possibility that a defamatory inference may be derived from a factually accurate news report:
As to the falsity of the broadcast, appellant conceded in his deposition that both the WTOP-TV news broadcast and the film strip were accurate and true.... However, in determining whether the broadcast was defamatory in light of extrinsic facts, as appellant claims, the trial court must decide if the words (and herein, the accompanying film strip) are reasonably susceptible of or reasonably could be understood to have the meaning suggested by the innuendo.
Harrison v. Washington Post Co., 391 A.2d 781, 783 (D.C.1978). Thus, even if all of ABC’s factual statements regarding Southern Air are true, we must determine whether the challenged report nonetheless is capable of conveying the meaning alleged by Southern Air, and whether such a meaning is defamatory.
2. The Libels Alleged
The libels alleged by Southern Air initially consisted of two distinct claims: the first asserts that ABC’s story created “the false and defamatory impression” that Southern Air was “an active and knowing participant in an illegal scheme established by the governments of South Africa and the United States for South Africa to assist in the delivery of weapons to the Contras,” Complaint, paras. 8 & 12; the second, that ABC falsely stated that Southern Air had made use of SAFAIR aircraft in making the deliveries. Complaint, paras. 9 & 13. In Southern Air I, the district court interpreted the first claim to allege both that viewers could infer that Southern Air was in effect “in bed” with the South African government and that Southern Air was involved in an illegal operation:
While it is true that Southern Air Transport dealt commercially with a South African corporation, the Court finds that there is a substantial difference between economic dealings and innuendo that the plaintiff was in partnership with the government of South Africa. The Court is unwilling to hold, as a matter of law, that such an inference is unreasonable or could not lead to a finding of defamatory meaning. ... [Pjlaintiff [also] contends that the broadcast, in context, implies that Southern Air was involved in an illegal operation. The Court cannot say, as a matter of law, that a jury would not so find.
670 F.Supp. at 44.
In Southern Air II, however, the court stated that “[tjhe possibility of a false innuendo that the plaintiff was in partnership with the government of South Africa arises only if the statement as to the use of SAFAIR planes is false.” 678 F.Supp. at 10 (emphasis added). The court concluded that “[b]ecause of the truth of the statements made about Southern Air Transport in the ABC News broadcast, it is impossible to infer defamatory meaning from them.” Id. at 12. The court did not discuss the alleged illegality of the operation.
The fact that Southern Air actually used a SAFAIR aircraft to transport arms to a Contra base is clearly relevant to Southern Air’s claim that ABC falsely stated this fact, but we fail to see how it relates to the reasonableness of an inference either that Southern Air was “in partnership with the government of South Africa,” or that Southern Air was involved in an illegal operation. Because District of Columbia defamation law holds that a factually accurate broadcast may still be defamatory, see Harrison, 391 A.2d at 783, Southern Air’s admission is not dispositive. Accordingly, we turn to the district court’s original analysis, in Southern Air I, and its conclusion that it could not hold that a reasonable viewer could not infer either Southern Air’s partnership with South Africa or its involvement in an illegal operation.
3. Partnership with South Africa
An inference that Southern Air was engaged in dealings with the government of South Africa clearly would have a defamatory meaning because of the intense antipathy felt by a great number of Americans towards South Africa. Given the numerous boycotts, protests, and sanctions that have taken place or been invoked against the government of South Africa and those associated or doing business with it, such an inference could cause Southern Air’s reputation great damage and lead to other adverse consequences. See, e.g., 131 Cong.Rec. S9,321-404 (daily ed. July 11, 1985) (Senate debate over the imposition of economic sanctions against South Africa). Therefore, we must determine whether this inference is reasonable.
In addressing this question, we are to consider the report “as a whole” and in the sense in which it would be understood by the average viewer. Afro-American Publishing Co. v. Jaffe, 366 F.2d 649, 655 (D.C.Cir.1966) (en banc). We must also take into account the impact of the visual effects as well as the text because “the television medium offers the publisher the opportunity, through visual presentation, to emphasize certain segments in ways that cannot be ascertained from a mere reading of the transcript.” Lasky v. ABC, 631 F.Supp. 962, 970 (S.D.N.Y.1986); see also Tavoulareas, 817 F.2d at 779 (“entire context” of story must be considered). Only by considering the text in conjunction with the accompanying visual images can one understand the possible emotive impact of the story, as it is the juxtaposition of the audio and visual elements that conveys the meaning intended. Lasky, 631 F.Supp. at 970.
We conclude as a matter of law that a reasonable viewer could not infer from the report that Southern Air was in partnership with the government of South Africa. The text of the report focused on clandestine dealings between the CIA and the government of South Africa to secure the latter’s assistance for the Contras in the context of congressional action urging tighter sanctions against South Africa and the cutoff of military assistance to the Contras. The report portrays CIA Director Casey, CIA Latin American Division Chief Duane Clarridge, and unnamed South African officials as the principals in these dealings. There is nothing in it to suggest that the “partnership” extended beyond the CIA and the South African government.
Southern Air is mentioned only briefly, and it is nowhere suggested it had any involvement in the discussions with South Africa. All the report states is that Southern Air was known to have had a past relationship with the CIA and that SAFAIR planes leased by it had been used to supply arms to the Contras. As the district court noted in Southern Air I, “there is a substantial difference between economic dealings [with SAFAIR] and innuendo that the plaintiff was in partnership with the government of South Africa.” 670 F.Supp. at 44.
Nor does the visual portion of the report support the inference of such a partnership. Rather, it focuses on clandestine meetings that had allegedly occurred between United States and South African officials in support of the Contras and reminds the viewer that this operation took place in the face of congressional resistance. Thus, we see the phrase “South Africa Connection” emblazoned on top of a film clip of drilling soldiers in camouflage, a graphic illustrating Casey’s alleged trip to South Africa with an inset picture of him, films of congressional debate on South African economic sanctions, and military planes and helicopters on an unidentified airstrip. A Southern Air plane is shown only briefly and in the context of the supply operation alone. Considering the report “as a whole,” and having viewed videotapes of the two broadcasts, we conclude that a reasonable viewer could not infer from the report that Southern Air was in partnership with the government of South Africa.
4. Illegal Operation
Southern Air also alleged that the report portrayed it as a participant in an “illegal scheme ... to assist in the delivery of weapons to the [C]ontras.” Complaint, paras. 8 & 12. As previously noted, the district court held in Southern Air I that it could not hold as a matter of law that a jury could not infer from the report that the operation to aid the Contras was illegal. 670 F.Supp. at 44. As Southern Air has previously noted, this issue relates to whether the scheme to aid the Contras was illegal, and not to Southern Air’s alleged ties with South Africa. See, e.g., Plaintiff’s Reply Memorandum in Support of Plaintiff’s Motions (July 7, 1987) at 9. If the report is capable of bearing this inference, we must determine whether the implication of illegality is opinion protected by the First Amendment.
In determining whether an allegedly defamatory statement is an expression of opinion rather than fact, a court will consider the totality of the circumstances, taking into account four factors. Ollman v. Evans, 750 F.2d 970, 979 (D.C.Cir.1984) (en banc), cert. denied, 471 U.S. 1127, 105 S.Ct. 2662, 86 L.Ed.2d 278 (1985). First, does the language of the challenged statement have a precise core meaning or is it ambiguous? Viewers are more likely to treat ambiguous statements as opinion. Second, is the statement verifiable? If it cannot be readily verified, it is more likely an expression of opinion. Third, is the full context |j,of the article or report such that it would cause the average viewer to infer that a challenged statement is based on fact? Finally, is the broader context or setting such as to signal to the public that the statement is one of fact or opinion? A statement appearing in a political advertisement is less likely to be viewed as a statement of fact than one appearing in a report of the National Academy of Sciences.
Here, the introduction to the “Good Morning America” segment declared that the operation took place “even as U.S. military aid to the Nicaraguan rebels was prohibited by law.” Under the first Oilman factor, this constitutes a precise statement that, standing alone, could suggest that ABC was stating as a fact that the operation was illegal. In view of the other Oilman factors, however, we conclude that this was an expression of opinion.
First, the immediate context is that of a political controversy not only over the issue of military aid to the Contras, but also over the reach of the various amendments placing restrictions on such aid that had been introduced by Congressman Edward P. Bo-land. The Reagan Administration had vigorously asserted that it had not violated the law. See, e.g., Report of the Congressional Committees Investigating the Iran-Contra Affair, S.Rep. No. 216, H.R.Rep. No. 100-343,100th Cong., 1st Sess. 395-410 (majority report), 489-99 (minority report). This context becomes apparent when we consider Peter Jennings’ reference, in his introduction to the “World News Tonight” segment, to the impending release of a report by a special commission that had investigated the Iran-Contra affair and the fact that the ABC story was broadcast in the midst of highly publicized congressional hearings concerning the matter.
Second, given the controversy over the reach of the Boland amendments, the legality of the operation was not subject to ready verification short of recourse to a court of law. In light of this larger context, we do not believe that a statement that the operation was illegal can reasonably be taken as other than an expression of ABC’s opinion. As such, it is protected by the First Amendment. See Gertz v. Robert Welch, Inc., 418 U.S. 323, 339-40, 94 S.Ct. 2997, 3006-07, 41 L.Ed.2d 789 (1974) (opinion protected under First Amendment).
B. Rule 11 Sanctions
The district court denied ABC’s motion for Rule 11 sanctions without explanation in the last sentence of its opinion in Southern Air II. 678 F.Supp. at 12.
A court must impose Rule 11 sanctions on a party and his attorney if a “pleading, motion, or paper [signed by either] is (1) not well grounded in fact, (2) not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, or (3) interposed for any improper purpose such as harassment or delay.” Westmoreland v. CBS, Inc., 770 F.2d 1168, 1174 (D.C.Cir.1985). Furthermore, Rule 11 imposes a duty on the signer of a pleading or paper to conduct a reasonable pre-filing inquiry into the relevant facts and law, and a court must impose sanctions if it determines no such inquiry took place. See International Bhd. of Teamsters v. Association of Flight Attendants, 864 F.2d 173, 176 (D.C.Cir.1988).
We accord the district court “wide discretion” in determining whether factual or bad faith reasons exist for the imposition of sanctions. Westmoreland, 770 F.2d at 1174. Thus, we will reverse such a determination only if we find an abuse of that discretion. Determinations of legal sufficiency, however, are questions of law, and as such are reviewable by this court de novo. Id. at 1175.
ABC filed its motion for sanctions subsequent to Southern Air’s disclosure that a SAFAIR plane had indeed been used to ferry munitions from one Contra base to another, contrary to Southern Air’s earlier assertions in its complaint and pleadings. ABC contended that Southern Air and its counsel knew, or with any reasonable inquiry would have learned, that these earlier assertions were untrue. Southern Air countered with a detailed description of its examination of flight logs and interviews with Southern Air executives, and it submitted an affidavit of its president, William G. Langton, explaining why he had failed to make earlier mention of the use of the SAFAIR plane. Affidavit of William G. Langton, November 6, 1987. The district court’s weighing of this evidence involves factual questions that only warrant reversal if the district court abused its discretion. Although the court’s denial of ABC’s motion was “lamentably terse,” Adams v. Pan American World Airways, Inc., 828 F.2d 24, 32 (D.C.Cir.1987), cert. denied sub nom. Union de Transports Aeriens v. Beckman, — U.S. -, 108 S.Ct. 1109, 99 L.Ed.2d 270 (1988), we find no such abuse on the record before us and therefore decline to overturn the district court’s ruling.
III. Conclusion
We find that no reasonable viewer would infer from the televised report that Southern Air was in partnership with the government of South Africa in a scheme to provide aid to the Contras. We also conclude that any implication that Southern Air was involved in an illegal operation was an expression of opinion protected by the First Amendment. Accordingly, we affirm the district court’s grant of summary judgment in favor of ABC. We also affirm the district court’s denial of Rule 11 sanctions against Southern Air and its counsel.
So ordered.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
LEVIN H. CAMPBELL, Circuit Judge.
This suit for infringement of a 1957 patent was brought in 1968 by Scully Signal Co. (Scully), the assignee of the patent and its licensor. Electronics Corporation of America (ECA), the defendant, alleged both noninfringement and invalidity. The patent expired before trial, leaving only damages at issue. The case was tried in December, 1975 and January, 1976, and at the end of the presentation of evidence ECA moved to amend its pleadings to allege fraud against the Patent Office by Scully because of a failure to reveal allegedly anticipatory patents, which in turn would entitle ECA to damages. The district court held that ECA had infringed the disputed patent, and went on to hold that the patent had not been anticipated within the meaning of 35 U.S.C. § 102 but was invalid for obviousness under 35 U.S.C. § 103. Denying ECA’s motion to amend the pleadings, the court awarded attorneys fees to the plaintiff because of “exceptional” conduct on the part of ECA.
On appeal, Scully vigorously challenges the district court’s determination of obviousness, accusing the court of substituting hindsight for a proper assessment of the level of ordinary skill in the pertinent art at the time of the supposed invention. ECA in a cross appeal seeks to overturn the district court’s denial of its motion to amend the pleadings, although it does not appeal the award of attorneys fees to Scully-
Obviousness under 35 U.S.C. § 103
The patent in question, No. 2,798,-214, W. G. Rowell, Checking Technique and System (“Rowell ’214”), describes a technique designed to incorporate “fail-safe” features into machines or systems whose unsafe failure would present dangerous consequences. The technique combines a monitoring system, a failure simulator, and a self-checking circuit that will activate an alarm and take corrective measures whenever either the unsafe condition appears or the checking system itself breaks down. As the word “fail-safe” implies, the system is designed to shut off the machine it regulates whenever anything goes wrong, even if the machine itself is operating as intended.
Rowell assigned the patent to his employer, Scully, which in turn sought licensees to manufacture devices applying the patented system. In particular Scully offered nonexclusive licenses to ECA and Minneapolis-Honeywell Regulator Co. (Honeywell), the principal manufacturers of burner control devices. While the patent does not show a burner monitor application, the district court found that a use “would be obvious to anyone minimally skilled in the art,” and this is not disputed. After satisfying itself as to the validity of the patent, Honeywell took a license in 1960. The license was limited to
“[t]he field of flame detection in which a flame sensing means is arranged to detect the presence or absence of flame, provided the flame sensing means is connected to the input of an electrical amplifier having a feedback in the form of a relay controlling a chopper switch means or other chopper member disposed at or before the input of the amplifier for controlling the feedback so that the relay normally is caused to repetitively cycle upon the flame sensing means detecting a flame or detecting the absence of flame, as the case may be, there being a further switch means controlled by the relay to alternately and repetitively connect a capacitor to a source of energy to charge the capacitor and then to connect the charged capacitor to an electrical device (load) normally to maintain the electrical device (load) continuously energized only so long as the relay continues to cycle.”
A diagram used by the district court, which we attach as Appendix A, illustrates this description more clearly. When the detector (5) picks up the light, an amplifier (6) transmits the signal to relay coil (7). When so charged, the relay coil holds the relay arm (8) in place with contact (9), which completes a circuit between the battery terminals (B +) (B-), a storage capacitor (11), and a resistor (12) that regulates the current. When the interrupter (3) blocks the light, relay (7) receives no charge, the first circuit is broken as arm (8) drops to contact (10), and a new circuit is formed between the capacitor (11), the resistor (12), and the load relay (14). A small capacitor (13) draws off some of the current from this circuit. As long as current flows through it, the load relay (14) holds the arm (15) to contact (16), which may be a ground or some other circuit, signalling all is well. If current were to stop passing through the load relay (14), however, the arm (15) would drop to contact (17), setting off the alarm (18) and cutting off oil to the burner.
Current passes through the load relay (14), holding off the alarm, as long as a proper cycle between the two circuits is maintained. The continual charging occurs because the capacitors (11) and (13) each have the property of storing and dispensing current, depending on whether a stronger power source is attached to the circuit. When the light is on, capacitor (11) is storing energy from the battery (B +) (B-), and capacitor (13) is giving off current to the load relay (14). When the light is off, capacitor (11) is giving off current to charge the load relay (14) and associated capacitor (13). Because each capacitor has only a limited storage capacity, however, each must be recharged continually by alternate completion of the two circuits. The choice of the components determines the proper rate for the cycle. Although the diagram does not show it, the solenoid (1) that operates the shutter (3), which in turn controls the alternating periods of light and darkness that trigger the respective circuits, can itself be hooked into one of the circuits so that it may respond to the cycle it controls. This “feedback” feature was mentioned in the patent, although the invention was meant to be used with or without this modification, and incorporated into the Honeywell license.
ECA refused Scully’s offer of a license, citing the added cost of installing the self-checking system in burner monitors already on the market. In 1967, however, ECA brought on to the market its own self-checking burner monitor, the Fireye UVP-4S. The ECA device differed in material respects from that sold by Honeywell only in that it relied on an independent timer for the flame-interrupting shutter rather than on feedback.
Scully’s licensing arrangement with Honeywell continued until its expiration in 1975, Honeywell’s payments totalling over $400,000 during the fifteen year period. It is notable that in 1954 Honeywell itself drew Scully’s attention to the two patents which ECA alleges Scully fraudulently concealed from the Patent Office, and thereafter accepted a license notwithstanding its awareness of them.
At trial the district court considered several patents which were alleged to anticipate Rowell ’214. These included No. 2,659,880, A.E. Dodd, Apparatus for Detecting Recurrent Circuit Operation (Dodd); No. 2,605,334, C.H. Hines, Circuit Integrity Indicating System (Hines); German Patent No. 898,564, Ludwig, Photoelectric Security Installation (Ludwig); German Patent No. 696,166, Werner, Circuit for Signal Devices (Werner); No. 1,631,021, J.J. Dowling, Thermionic Indicating Means Responsive to Light Variations (Dowling II); No. 1,561,-837, J.J. Dowling, Thermionic Indicating Means Responsive to Light Variations (Dowling I). The last four were not cited to the Patent Office during the prosecution of Rowell ’214, although Honeywell had informed Scully of the two Dowling patents in 1954.
Dodd and Hines, both of which were cited to the Patent Office, referred to a code-following circuit as prior art. A code-following circuit described by a witness to have existed in the late 1940’s is diagrammed in Appendix B. Relay CTR, analogous to relay (7) in the Honeywell device, alternately receives and does not receive signals from some external device. When charged, CTR switches the attached arm so as to complete a circuit between B 4- and B-, a battery or other power source, a capacitor C, and a resistor R. When not charged, CTR causes a circuit to be formed between capacitor C, resistor R, and relay TR, with resistor Ri wired parallel to relay TR. The effect of wiring resistor Ri across relay TR is to delay the release of the relay during the period capacitor C is being charged and is not charging relay TR. The substitution of the resistor Ri for the capacitor (13), the only distinguishing feature between the two circuits, was held to be irrelevant, as expert testimony indicated the desired effect of a delayed release load relay could be achieved in a variety of ways, any of which would have been obvious to one of ordinary skill in 1954. As a result, the district court held that Rowell ’214’s self-checking circuit was not by itself inventive. It formulated the sole remaining question as “whether it was obvious to use such a circuit in a flame-out monitoring device in a manner that achieved precise simulation of the predetermined event that the monitor is to detect.”
The other patents considered by the district court, while employing self-checking circuits of varying degrees of efficacy, were relevant mainly because of the monitoring and interruption means that generated the on-off cycle transmitted to the checking circuit. Werner and Ludwig both involved space intrusion detectors, such as burglary alarms, designed to set off an alarm if some object interfered with a beam of light being sent into a photoelectric cell. Werner reflected the beam with a mirror from the light source to the detector; the portion of the beam between the mirror and the detector was projected across the protected space. The mirror was regularly jerked out of position, creating a steady pulse of light that went into the detector. Ludwig achieved the same effect through a circuit that switched off the light source upon receipt of the beam at the detector. Both systems embodied a feedback principle. The two Dowling patents were designed to detect variations in the intensity of light, such as occlusion caused by fog. A pierced disk which rotated in front of the beam of light was used in Dowling I. Dowling II substituted a vibrating prong, something like a tuning fork, which oscillated in the path of the light beam. The stimuli to the prong were controlled by the signals generated by the pulses of light, thereby embodying yet another form of feedback.
At trial Scully emphasized that the Ro-well device, in exercising the monitoring system, simulated precisely the event to be detected by the monitor, namely disappearance of the flame. All other self-checking systems, it was maintained, created some other kind of interference with the operation of the detecting circuit that, because of a lack of exact correspondence with the looked for event, failed to achieve the same degree of reliability. In particular, Ludwig and Werner rather than blocking the beam of light, as would the intruder sought to be detected, turned off the light signal completely. Further, the Dowling systems, which were meant to detect variations in light intensity, employed instead rhythmic but total blockage of the beam. The district court held, however, that the distinction was without a difference, as Scully had failed to indicate how Rowell’s “precise” simulation of the flame-out in any way enhanced reliability in comparison to the other systems. The court further held that the combination of a light interruption device, already considered prior art, with a self-checking circuit, also considered prior art, did not amount to a patentable invention.
Although Scully knew about the Dowling patents during prosecution of the Rowell patent, this prior art was not disclosed to the patent office. ECA contended that the Dowling II patent, by employing feedback in its monitoring circuit, completely anticipated Rowell '214 and would have resulted in the latter patent’s invalidation if seasonably presented to the Patent Office. Ro-well’s feedback feature was not, however, essential to the invention and in other respects the Dodd and Hines patents, which were cited, seem more closely to have anticipated the Rowell system. Both Dowling patents were in the public domain for more than a decade before Rowell applied for his patent. Rowell in 1954 wrote two analyses for Scully of the Dowling patents, each of which contended that his invention contained substantial safety features not found in the earlier devices. The second of these memoranda, of which ECA made use during trial, accepted for the sake of argument that the self-checking circuit in Dowling II was as safe as that in Rowell ’214 but went on to indicate other features of the earlier system that made it less safe than his own invention. Honeywell was sufficiently convinced by the memoranda to accept the Scully license.
It does not appear that anyone thought much of the Dowling patents until Rowell became embroiled in an unsavory dispute with Scully in 1970. Impugning his own invention and prior statements, Rowell surprisingly asserted that one of the Dowling patents was entirely anticipatory of his own invention; and undertook on this basis to sabotage Scully’s suit against ECA. The district court nonetheless found, support-ably we think, that, “given that plaintiff did in fact cite to the Patent Office numerous patents far more relevant than Dowl-ing, to either a broad or narrow reading [of the Rowell patent], I cannot imagine that citing Dowling would have affected the Patent Office proceedings.”
While “the ultimate question of patent validity is one of law”, Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 694, 15 L.Ed.2d 545 (1965), this court has emphasized the highly factual context of a determination of § 103 obviousness, and the strong deference due a district court’s reasoned judgment on the issue:
“More often . . . obviousness as an ultimate question cannot meaningfully be separated from those factual determinations which are peculiarly within the trial court’s province, such as the credibility of the experts. The district court’s supported findings on obviousness will therefore normally stand unless manifesting a misconception of the correct legal standard.”
Forbro Design Corp. v. Raytheon Co., 532 F.2d 758, 763 (1st Cir. 1976). Scully contends, however, that the district court, although reciting the proper legal standard for determining obviousness, in fact applied the wrong criteria, namely obviousness to the court itself. Scully goes so far, indeed, as to deny that the record itself contains any evidence that would support the finding of obviousness, arguing that the court simply ignored the “years of expertise in the nuances of these circuits” of the Patent Office, which also had Hines and Dodd before it. Further, the court is said to have overlooked the demonstration “that the best the skilled engineers in this art had been able to evolve, over the past twenty years, despite their attempts to provide against unsafe failures, still ran the risk of . . failures, that simply cannot fail unsafe with the Rowell technique.” The entire technical community is said to have recognized the novelty and importance of the Rowell system. The district court is said to have ruled by “fiat”, piecing together a multitude of prior inventions and patents by hindsight, in violation both of the admonitions of jurists and the Constitution itself.
If the district court were guilty of such misdirected thinking we would agree that error had indeed occurred. Scully, however, ignores the substantial evidence supporting the district court’s finding that the relevant techniques were all known to the art in 1957 when the patent was obtained, and the lack of persuasive evidence that Rowell’s assemblage of these bits and pieces reflected, in the instant application at least, a novel insight. According to Pascoe, a Westinghouse engineer, the same ingenious self-checking circuit forming the backbone of the patented system had been employed in railroad signalling devices in the 1940’s; it is referred to in the Dodd patent and in the Hines patent. Scully does not seriously contest this, but argues that since no one “had thought of the application of this kind of technique, suitably modified, for burner control safety monitoring”, there was invention.
In response, the district court inquired whether using the precise event to be detected, in this case the light from the burner flame, with a light interrupter and detector in combination with the non-inventive self-checking circuit, was inventive. It concluded not. It would not be inventive to adopt a self-checking circuit to monitor the presence or absence of light, nor “to effect the pulsing needed to utilize the self-checking circuit by use of a shield or similar light occlusion device to cause light periodically to strike the detector.” The latter technology was sufficiently revealed in both Dowl-ing patents and in Werner and Ludwig. Pascoe, moreover, testified to a contemporary use of a light source, interrupter, and a detector with a self-checking circuit to signal the presence of a train.
The court then turned to Scully’s emphasis upon the patent’s teaching “that the precise predetermined event which the device is to monitor should be repetitively simulated to produce the checking pulse.” Scully presented this as, in effect, the synergism which could transform a combination of familiar elements into an invention. The court was unimpressed — warrantably, we think. It could find little evidence that the concept of precise simulation was itself the key to some advance over the prior art in averting unsafe failures. To the extent blockage of light from the flame to the detector was a species of “precise simulation”, it found it to be just another obvious way of employing light interrupters — merely “the recognition of an attribute of an existing device”. Hence “at least as adapted to a nonfeedback burner flame monitor, the patent is invalid.”
Given the level of technology which the court was entitled to find existed, we believe it was warranted in concluding that utilization of the burner flame itself, the interrupter, the detector, and the self-checking circuit was in 1957 within the competence of engineers ordinarily skilled in the art. To be sure, this presupposes knowledge of self-checking circuits in the railway field and of systems in other industries with common problems such as burglar alarms, fog detectors, and so forth. Ro-well’s patent, however, encompasses such a range of applications: indeed it describes a railway application but does not specifically describe a burner flame use at all. We think the “art to which said subject matter pertains”, as defined in § 103 would embrace such devices.
On appeal, Scully does little to meet the district court on these grounds. Rather it belittles the district judge as one who has, never in his life, upheld a patent, and urges courts to stay out of matters that they don’t understand. Its most credible argument, but one we also find deficient, is that the district court paid no attention to the ready commercial acceptance of Honeywell’s licensed device, and its evidence of enthusiastic trade comment.
We would agree that secondary factors— especially were they to show “long felt but unsolved needs, failure of others”, Graham v. John Deere Co., supra, 383 U.S. at 17, 86 S.Ct. at 694 — could be important evidence in a case such as this, but we do not agree that Scully’s evidence measures up to the claims of its counsel. In Hand’s famous compendium of “signposts” in Reiner v. I. Leon Co., 285 F.2d 501, 504 (2d Cir. 1960), cert. denied, 366 U.S. 929, 81 S.Ct. 1649, 6 L.Ed.2d 388 (1961), the questions, “how long did the need exist” and “how many tried to find the way”, appear side by side with the question of success. That Scully and Honeywell were the first to adapt and market a self-checking system in the burner industry, and that the product was safer than previous devices, says little about the inventiveness of the system in a technological sense. Beyond indication that earlier burner monitors were less reliable, it was not brought out what sort of an effort had been mounted in the burner industry to develop a comparable system. The industry’s failure earlier to develop a self-checking system could as well have been due to lack of interest or appreciation of such a system’s potential or marketability, as to want of technical know-how. Indeed, there was evidence that ECA, a major producer, refused a license initially because of a belief (whether or not misguided is beside the point) that what it had sufficed.
Scully introduced a variety of news clippings, lab reports, and related items dating from the period of invention, all of which remarked on the advance in flame monitoring safety achieved by the Rowell invention. The majority of these items, however, were either promotional literature put out by Scully or press reports cribbed directly therefrom. The lab reports established only a fact which is not in dispute: that the Rowell patent was the first to apply the self-checking circuit to burner flame monitoring. None of these reports were decisive or even especially germane to the inventiveness of this application. As the Supreme Court said recently, in discussing a patent held simply to arrange “old elements with each performing the same function it had been known to perform, although perhaps producing a more striking result than in previous combinations,”
“Though doubtless a matter of great convenience, producing a desired result in a cheaper and faster way, and enjoying commercial success, Dairy Establishment ‘did not produce a “new or different function” . . . within the test of validity of combination patents.’. Anderson's-Black Rock v. Pavement Co., supra, at 60 [396 U.S. 57, 90 S.Ct. 305, 24 L.Ed.2d 258]. These desirable benefits ‘without invention will not make patentability’. Great A. & P. Tea Co. v. Supermarket Corp., 340 U.S., at 153. [71 S.Ct. 127, 95 L.Ed. 162.] See Dann v. Johnston, ante, at 230 n.4.”
Sakraida v. AG PRO, Inc., 425 U.S. 273, 282-83, 96 S.Ct. 1532, 1537, 47 L.Ed.2d 784 (1976).
The foregoing authority, and the cases it cites, also dispose of Scully’s argument that the district court was duty bound to treat the fact of issuance of the patent as itself conclusive of non-obviousness. While weight must be given to the presumption of validity, and this circuit is quite prepared to sustain patents which meet the statutory criteria, the time has long since gone, if it ever existed, when district courts and courts of appeal could refuse to make an independent assessment of § 103 obviousness in light of all the evidence presented. To criticize a court for making an independent assessment is to criticize it for doing what the law presently requires. The process involves the ever-present risk of an overuse of hindsight, as well as the possibility of blunders by lay judges; but this court has no license, even if it wanted one, to adopt another approach. Finding nothing even marginally erroneous in the analysis employed by the district court, we sustain the finding of invalidity.
Fraud
Turning to the cross-appeal by ECA, it must be determined whether the district court violated the mandate of Federal Rule of Civil Procedure 15(b) to amend the pleadings to conform to issues tried with the express or implied consent of the parties. Having determined that the Dowling patents did not anticipate Rowell ’214 and would not have affected the prosecution of the patent in light of closer prior art that was cited, the court refused to consider whether Scully nonetheless violated its duty of candor and good faith by not disclosing the two patents. The court noted that further evidence would be necessary to resolve the issue, and that the failure of the record to contain sufficient evidence to try the issue was due entirely to ECA’s own misconduct. The court found that ECA had known of the two Dowling patents at least since 1972, although its counsel were not told of their existence until midway through the trial. In addition, ECA in its post-trial briefing on the issue had attempted to mislead the court as to the extent of an inventor’s duty of disclosure at the time the Rowell patent was prosecuted. These factors all persuaded the court to deny the motion to amend.
Although Rule 15(b) by its terms requires amendment of the pleadings whenever an issue has been tried by express or implied consent, courts have refused to grant such motions if amendment would prejudice one of the parties, such as by requiring the presentation of additional evidence. See American Hot Rod Association, Inc. v. Carrier, 500 F.2d 1269, 1277-78 (4th Cir. 1974); United States v. An Article of Drug, 320 F.2d 564 (3rd Cir.), cert. denied, 375 U.S. 953, 84 S.Ct. 444, 11 L.Ed.2d 313 (1963); 3 Moore’s Federal Practice ¶ 15.13[2], at 997 & n. 34 (2d ed. 1974). Professor Moore explains this practice as an implied finding that the issue involved was not tried by the consent of the parties. Id. Whether the district court’s ruling be interpreted either as finding the issue had not in fact been tried, or that Scully had not consented to trying the issue, the denial of ECA’s motion to amend did not exceed the court’s discretion. The Dowling patents were put in evidence primarily to attack the validity of the Rowell patent, not to prove bad faith on the part of Scully. As the district court noted, establishing fraud on the part of Scully would require evidence of state of mind, see Norton Co. v. Carborundum Co., 530 F.2d 435, 441-42 (1st Cir. 1976), which neither side produced to sufficient degree. Requiring Scully to introduce new evidence of its intent and actions during the prosecution of Rowell ’214, when the failure of the case to embrace this issue can be attributed entirely to ECA’s neglect, would be sufficiently prejudicial to warrant the action taken by the district court.
Counsel’s argument
We must comment on the entirely unacceptable tenor of argument by Scully’s counsel. The right of appeal includes the right vigorously to challenge the decision of a lower court and to describe in every proper way its alleged errors. But appellate counsel may not give vent to their frustrations by undignified or discourteous remarks directed against the person of the deciding judge. Never suppressing any fact or proper argument, counsel have a professional responsibility to refer to the tribunals from which an appeal is taken, as well as those before which they appear, with reasonable respect and courtesy. Perhaps an attorney would have greater leeway if provoked by some act of judicial misconduct, but clearly there was no misconduct here — only a decision which counsel believes to be wrong. The court’s decision manifested care and diligence. While it might be natural for a layman, embittered by a decision, to lash out at a judge, such conduct cannot and will not be tolerated from a member of the bar of this court. We only refrain from taking some action because of the curious history of this case which, beginning with defendant’s egregious misconduct, seems to have spawned an unusual atmosphere that seems unlikely of repetition. We make it quite clear, however, that counsel’s personal asides in Scully’s brief raise serious questions in our mind. See Mass.Sup.Jud.Ct. Rule 3:22; DR 7—106(c)(4); DR 7-106(c)(6). Should we receive anything approaching this from counsel in the future, we shall not hesitate to act.
Affirmed.
APPENDIX “A”
APPENDIX “B”
. The court said, in a comprehensive opinion,
“[The] section 102 defense . . . must be made out by a single invention. See Columbia Broadcasting Sys. v. Sylvania Elec. Prod., Inc., 1st Cir., 1969, 415 F.2d 719, cert. denied, 396 U.S. 1061, 90 S.Ct. 755, 24 L.Ed.2d 755. As will become apparent in my discussion of the prior art, I find no such single anticipatory invention.”
. Such circuits were used over the years to operate signals to indicate the presence of a train in a section of track, the word “code” denoting the sending of pulses of electricity rather than a steady current through the rails. The patent in issue details, as one of its possible uses, an application to railroad signalling.
. The court said, “the simple fact is that the circuit used in plaintiffs patent is identical to circuits disclosed in the prior art.” This conclusion seems plainly to be warranted on the record.
. Appellant’s counsel writes in his brief that in “thirty years of practice, and in some courts mighty hostile to patents . . . [he] has never seen such a travesty of technology, let alone justice.” He goes on to speak sarcastically of the district court’s “great insight” and, after other comments in the same vein, to urge reversal in order to uphold “the intellectual integrity of the judicial system.” While later in this opinion we shall deal with this mode of argumentation, which we regard as intolerable, we mention it here merely to make it clear that we did not miss the point.
. The district court correctly approached the claimed invention as a combination of known elements. After citing Anderson’s-Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57, 61, 90 S.Ct. 305, 308, 24 L.Ed.2d 258 (1969) to the effect that a combination patent must achieve “an effect greater than the sum of the several effects taken separately”, it cautioned against reading this language too literally, saying, “by hindsight, a combination patent will always achieve, strictly, no more than the sum of the parts”. The court’s formulation was that, “invention may lie in perceiving the possibility and making the selection so as to achieve something not a priori, mechanically, obvious”. The district court was clearly well aware that combinations may be inventive, and that hindsight can be dangerous.
. To the extent a claimed invention is directly anticipated in the prior art, it is of course not inventive. See Shanklin Corp. v. Springfield Photo Mount Co., 521 F.2d 609, 617 (1st Cir. 1975), cert. denied, 424 U.S. 914, 96 S.Ct. 1112, 47 L.Ed.2d 318 (1976).
. Decisions in which the judge in question has either determined an invention to be non-obvious or, writing for the circuit court, has upheld such a determination include Spound v. Mohasco Indus., Inc., 534 F.2d 404 (1st Cir.), cert. denied, 429 U.S. 886, 97 S.Ct. 238, 50 L.Ed.2d 167 (1976); Borg-Warner Corp. v. Paragon Gear Works, Inc., 355 F.2d 400 (1st Cir. 1965), cert. denied, 384 U.S. 935, 86 S.Ct. 1461, 16 L.Ed.2d 536 (1966); United Shoe Machinery Corp. v. Industrial Shoe Machinery Corp., 335 F.2d 577 (1st Cir. 1964), cert. denied, 379 U.S. 990, 85 S.Ct. 702, 13 L.Ed. 2d 610 (1965), rev’g 223 F.Supp. 826 (D.Mass.1963); Wilson Research Corp. v. Piolite Plastics Corp., 327 F.2d 139 (1st Cir. 1963); Progressive Engineering, Inc. v. Machinecraft, Inc., 273 F.2d 593 (1st Cir. 1959); St. Regis Paper Co. v. Winchester Carton Corp., 410 F.Supp. 1304 (D.Mass.1976); Norton Co. v. Carborundum Co., 397 F.Supp. 639 (D.Mass.1975), aff’d, 530 F.2d 435 (1st Cir. 1976).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM:
Rite-Nail Packaging Corporation and Donald B. Halstead sued Berryfast, Inc., for infringement of U.S. Patent No. 3,432,895, the Halstead patent, issued in 1969 for a machine for packaging nails in plastic strips for use in a power-operated nailing gun, and for breach of a license agreement under that patent. Berryfast counterclaimed, seeking declaratory judgment that the Hal-stead patent was invalid, -recission of the license agreement, and restitution of royalties paid. The district court held the Hal-stead patent invalid and approved recission of the license agreement, but denied restitution. Both parties appeal. We affirm in part and reverse in part.
I.
The district court held the Halstead device was anticipated by U.S. Patent No. 2,503,518 — granted to C.E. Slaughter in 1950, 15 years before the Halstead patent was issued — and was obvious in light of the Slaughter patent. 35 U.S.C. §§ 102, 103.
Both patents disclose a machine for encapsulating elongated objects in plastic strips by extruding hot plastic directly on the articles. However, they differ .in some respects. For example, Halstead employs a “carrier means” or “carrier wheel” for feeding the articles into the portion of the device where they are encapsulated in hot plastic, while Slaughter states only that the objects “may be fed” into the molding mechanism “either manually or by automatic machinery.” This difference is sufficient to undercut the district court’s conclusion that the Halstead device was “anticipated” by Slaughter. “Unless all of the same elements are found in exactly the same situation and united in the same way to perform the identical function in a single prior art reference there is no anticipation.” Jones v. Vefo Inc., 609 F.2d 409, 410 (9th Cir. 1979).
We agree with the district court, however, that the Halstead device was “obvious” in light of Slaughter. Slaughter was not considered by the patent office in issuing Halstead, and the Halstead patent therefore is not presumed to be valid. Penn International Industries v. New World Manufacturing, 691 F.2d 1297, 1300 (9th Cir.1982).
Rite-Nail distinguishes Slaughter from Halstead in several respects which appellee characterizes, we think accurately, as essentially “semantic differences.” These include the use by Slaughter of two “compression members,” described as “cylinders” having a series of “peripheral chambers or grooves,” to receive and hold the objects during encapsulation with plastic, while Halstead employs two “plastic molding wheels with circumferentially spaced teeth” to perform this function. Similarly, we see no substantive difference between Hal-stead’s “extrusion” of two streams of hot plastic “onto the objects” from opposite sides, and Slaughter’s “dropping” of the objects “into the convergence of two [extruded] preformed sheets” of hot plastic.
Rite-Nail’s principal reliance, however, is upon Halstead’s provision of a “carrier means” to feed articles into the portion of the device in which encapsulation occurs, and the absence of such a provision in Slaughter, except in a most general form. The district court rejected this contention on the ground that “the carrier wheel in the patent in suit is an old means for transporting articles in succession along a prescribed path, as the Plaintiffs themselves concede,” and the combination of this old element with the old extrusion process for encapsulating articles in hot plastic did not produce “a new and surprising or unusual result,” as required to justify a patent on a combination of old elements.
The district court applied the correct legal principle, see Sarkisian v. Winn-Proof Corp., 688 F.2d 647, 650 (9th Cir.1982) (en banc), and nothing in the record would support a conclusion that the addition of a carrier wheel to Slaughter’s mechanism for encapsulating elongated objects in hot plastic produced a new and surprising result rather than simply the result to be expected. This analysis does not disregard the “subject matter as a whole,” 35 U.S. § 103, as Rite-Nail suggests. Viewing Halstead’s combination of old elements as a whole, it does not reflect a new and surprising result.
Rite-Nail argues that failure of efforts by others to develop a machine to produce clips of nails for nailing guns, and the commercial success of the Halstead device, establishes the non-obviousness of the Halstead device to persons “of ordinary skill in the art.” If that were so, such “secondary” factors as commercial success, long-felt but unsolved needs, and failures of others would be sufficient without more to establish patentable inventions — but clearly they are not. Bristol Locknut Co. v. SPS Technologies, 677 F.2d 1277, 1281 (9th Cir. 1982). One reason is that obviousness is to be determined on the hypothesis that the person of ordinary skill in the art, who is the judge of obviousness under section 103, is aware of all pertinent prior art. Cool-Fin Electronics Corp. v. International Electronic Research Corp., 491 F.2d 660, 662 n. 7 (9th Cir.1974); Walker v. General Motors Corp., 362 F.2d 56, 60 n. 3 (9th Cir.1966). Even the patent office examiner was unaware of Slaughter, the most pertinent prior art, and nothing in the record suggests that persons of ordinary skill working in the field were better informed.
Because we agree with the district court that the Halstead patent is obvious in light of the prior art, we do not discuss the additional bases offered by Berryfast to invalidate the patent.
II.
Berryfast paid royalties under the license agreement from 1965 through the first quarter of 1970, then ceased payment without explanation. On September 18, 1970, Berryfast notified Rite-Nail that it believed the patent was invalid, and that it would make no further payments. On February 7, 1973, Rite-Nail gave written notice of termination of the license agreement. On September 24, 1973, Rite-Nail filed suit to recover royalties due from April 1970 to the date of termination. The district court denied recovery.
Rite-Nail argues that because the licensing agreement provided that royalties would be paid until a final and unappeala-ble declaration of invalidity, and because of the provisions of a California statute governing recission of contracts, Cal.Civ.Code § 1689 (West 1973), the district court erred in refusing to award unpaid royalties accrued prior to a final determination of patent invalidity.
Federal patent policies favoring early adjudication of patent validity prevail over the provisions of state law and private contract in determining whether to award unpaid royalties accrued under an invalid patent. Lear, Inc. v. Adkins, 395 U.S. 653, 670-75, 89 S.Ct. 1902, 1911-13, 23 L.Ed.2d 610 (1969); Bristol Locknut Co. v. SPS Technologies, 677 F.2d at 1282; St. Regis Paper Co. v. Royal Industries, 552 F.2d 309, 312-14 (9th Cir.1977). Provisions of ‘state law or private contract to the contrary notwithstanding, a licensee under an invalid patent may not be required to pay royalties which accrue under the license agreement after the licensee “takes an affirmative step that would prompt the early adjudication of the validity of the patent, such as filing an action contesting the patent’s validity or notifying the licensor that the payments were being stopped because the patent was believed to be invalid.” Bristol Locknut Co. v. SPS Technologies, 677 F.2d at 1283.
Although a licensee need not institute suit challenging the validity of the patent, mere nonpayment of royalties is not enough. See American Sterilizer Co. v. Sybron Corp., 614 F.2d 890, 896-97 (3d Cir. 1980); PPG Industries v. Westwood Chemi cal, 530 F.2d 700, 706 (6th Cir.1976). The licensee must clearly notify the licensor that the licensee is challenging the patent’s validity. Bristol Locknut Co. v. SPS Technologies, 677 F.2d at 1283. Since Berryfast did not give such notice until September 18, 1970, it remained liable to Rite-Nail for royalties that accrued from April 1, 1970, through September 18, 1970, but no more.
Berryfast contends it should be allowed to recover all of the royalties it paid under the agreement because Rite-Nail fraudulently induced Berryfast to enter into the agreement. See St. Regis Paper Co. v. Royal Industries, 552 F.2d at 314. We do not reach the question. The district court found that Berryfast had not proved fraud, and this finding is not clearly erroneous.
III.
The trial court’s rejection of Berryfast’s request for an award of attorneys’ fees under 35 U.S.C. § 285 may be reversed only for abuse of discretion. See SSP Agricultural Equipment v. Orchard-Rite Ltd., 592 F.2d 1096, 1101-02 (9th Cir. 1979); Pickering v. Holman, 459 F.2d 403, 408 (9th Cir.1972). None has been shown.
The judgment is affirmed except for the denial of Berryfast’s claim for royalties for the period April 1, 1970, to September 18, 1970. That portion of the judgment is reversed and remanded to the district court for determination of the amount due.
Each party shall bear its own costs.
. Rite-Nail argues the district court improperly rescinded the licensing agreement since a second patent, U.S. Patent No. 3,303,632, was covered under the agreement, preventing a complete failure of consideration. The district court found the device patented under No. ’632 to be inoperable. In the trial court Rite-Nail did not rely upon the inclusion of this apparently worthless patent in the license agreement as a. ground for sustaining the agreement. We therefore decline to consider the contention on appeal. Confederated Tribes & Bands of the Yakima Indian Nation v. Washington, 608 F.2d 750, 752 (9th Cir. 1979); Evans v. Valley West Shopping Center, 567 F.2d 358, 361 (9th Cir. 1978).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
WEICK, Circuit Judge.
This appeal arises out of a private anti-trust action brought by the Lamb companies (Lamb) in the District Court against The Toledo Blade Company (Blade), Cox Broadcasting Corporation (Cox), Buckeye Cablevision, Inc. (Buckeye), and Ohio Bell Telephone Company (Bell), to recover $54,319,900 damages, the complaint alleging that Lamb was excluded from the community antenna television (CATV) business in Toledo, Ohio, as a proximate result of a conspiracy entered into by said defendants to violate Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. The complaint contained a separate count against Bell alone, in which Lamb sought to recover damages for breach of an alleged contract to provide Lamb priority in service and equipment of a CATV station in Toledo, and contained also a count for damages against Cox, Blade and Buckeye for allegedly inducing Bell to breach its contract with Lamb.
The case was tried before a jury for five weeks, during which time Lamb abandoned its claims against Bell for breach of contract and against Cox, Blade and Buckeye for inducing such breach. At the close of the evidence and arguments of counsel the Court submitted to the jury, as authorized by Rule 49(a) Fed.R.Civ.P., a special verdict requiring the jury to make a special written finding upon each issue of fact.
The jury made findings as follows:
Special Issue No. 1:
Do you find from a preponderance of the evidence that during the period between January 26, 1965 and March 23, 1966, the defendants Blade, Buckeye, Cox, and Bell, or any combination with each other, entered into a combination, contract or conspiracy, the purpose of which was to foreclose, prevent, or preclude plaintiffs Lamb from entering the community antenna television business in the Greater Toledo area?
The answer is, “No.”
Special Issue No. 4:
Do you find from a preponderance of the evidence that from approximately January 26, 1965, to approximately the latter part of September, 1965, the defendants, or any of them individually, were engaged in a “relevant line of commerce”, product or service market, as these terms have been defined to you, in the Greater Toledo area?
The answer is, “Yes.”
Special Issue No. 5:
Do you find from a preponderance of the evidence that during the period from January 26, 1965, to approximately the latter part of September, 1965, the defendants, or any of them, individually or in any combination with each other, possessed monopoly power so as to control and dominate interstate trade and commerce in the mass communications media, or in dissemination of news and advertising, to such an extent as to exclude actual and potential competitors from that field of interstate trade or commerce?
The answer is, “No.”
Special Issue No. 8:
Do you find from a preponderance of the evidence that any such monopoly or attempt to monopolize, as above found by you, was a substantial and proximate cause of damage to the business or property of plaintiffs Lamb?
The answer is, “No.”
Special Issue No. 10:
Do you find from a preponderance of the evidence that from approximately January 26, 1965, to approximately the latter part of September, 1965, Blade and Cox were engaged in a “relevant line of commerce”, produce or service market, as those terms have been explained to you? If so, identify such “relevant line of commerce.”
The answer is, “Yes; dissemination of news.”
Special Issue No. 11:
Do you find from a preponderance of the evidence that the effect of organizing Buckeye and the acquisition of its stock and assets by Blade and Cox in February, 1965, was either to substantially lessen competition or tend to create a monopoly in the “relevant line of commerce” you found in answer to Special Issue No. 10 in a “relevant geographic market” as that term has been explained to you in the Court’s charge?
The answer is, “No.”
The Court then entered judgment, dismissing the complaint. Lamb appealed, confining its claims of error to'alleged violations of Section,1 of the Sherman Act and the Court’s instructions to the jury. It is the claim of Lamb that there was a per se violation of Section 1 and that the judgment should be reversed “and the case remanded to the District Court for a new trial as to the amount of injury and damage suffered by plaintiffs as a result of defendants’ violations of Section 1 of the Sherman Act,” and in the alternative, for a new trial. We affirm.
I
A CATV system is a facility which receives television signals over high antennas erected on a tower, the base of which houses equipment which amplifies or modifies the signals transmitting programs broadcast by one or more television stations, and distributes such signals by coaxial cable to homes of subscribers who are willing to pay for such service.
A cable television company, desirous of entering into the business, may erect its own distribution system by renting from utility companies space on their utility poles for its equipment. • Such an arrangement is known as “pole contact.” Or the CATV company may contract with a telephone company whereby the telephone company agrees to construct the distribution system and lease it back to the CATV company under tariffs filed with the state Public Utilities Commission. Such an arrangement is known as “lease-back.”
The corporate plaintiffs are entirely owned and controlled by Edward Lamb, of Toledo, and his family. Lamb was the majority stockholder and in complete charge of all operations. Lamb has been engaged in the operation of radio and television stations for a number of years, but more recently of CATV systems.
Blade, an Ohio corporation, owns and publishes two daily newspapers in the greater Toledo area, namely, The Blade, and The Toledo Times.
Cox and its subsidiaries have interests in CATV systems in fourteen states.
Buckeye is an Ohio corporation organized by Blade and Cox to furnish CATV service in the greater Toledo area. Its shares of stock were' owned initially 55% by Blade and 45% by Cox, and are owned now 80% by Blade and 20% by Cox.
Bell is a public utility which became interested in providing CATV service in 1964. The service was provided under tariffs filed with the Public Utilities Commission of Ohio.
II
The controversy in this case arises out of efforts of two corporations, Buckeye and Lamb, competing to be first to obtain a natural monopoly in the CATV business in Toledo. To be first to obtain the completed facility was all-important because in the CATV business, like that of electric, gas and telephone utilities, it is not feasible to compete house-to-house for customers in the same area. Buckeye was able to and did arrange construction of its CATV facilities first, and Lamb claims that this violated the anti-trust laws. We disagree.
Cox was first to approach Bell about CATV service in the Toledo area. The meeting took place in Atlanta, Georgia, on January 22, 1965. A few days later Cox met with officials of Blade and they agreed to organi2;e Buckeye as an Ohio corporation in order to enter into the cable television business in Toledo. Bell was informed of the agreement, and it was made known to the public by a news item in the Toledo Blade on February 3, 1965, which was the date of incorporation of Buckeye.
Bell wrote Cox under date of February 2, 1965, offering to furnish cable television for the cities of Cleveland, Toledo, Columbus and Dayton, and setting forth rates for a five-mile and for an eleven-mile distribution system. Following this, there was additional correspondence and meetings between Buckeye and Bell resulting in an agreement whereby Bell agreed to and did furnish “lease-back” service to Buckeye for an eleven-mile distribution system in the Toledo area, at a cost in excess of $1,-000,000.
Lamb’s initial contact with Bell was on January 26, 1965. They discussed policies on pole contact and lease-back arrangements. Lamb indicated an interest in CATV installations, not in Toledo but in several cities in the Findlay, Ohio District. On January 29, 1965, Lamb wrote Bell stating that he would like to examine CATV possibilities in Sandusky, Fremont, Upper Sandusky and Norwalk. Bell then sent to Lamb a proposal containing the charges for a five-mile and for an eleven-mile distribution system for Sandusky, Fremont and Upper Sandusky; Norwalk was not included because Bell does not serve that city.
Bell’s proposal was made subject to applicable tariffs approved by the Public Utilities Commission of Ohio. On February 9, Lamb requested proposal letters for Canton and Massillon, and on February 10 Lamb sent Bell a letter of intent for all five cities. On February 12 Lamb advised Bell that it decided to compete with Toledo Blade for cable television in Toledo. Bell immediately sent a proposal letter to Lamb in which it furnished rates for a five-mile and for an eleven-mile distribution system for Toledo. Three days later Lamb notified Bell that it had decided not to wire Toledo for CATV at this time.
On March 3, 1965, Buckeye requested Toledo City Council to enact an ordinance granting it a permit to do business in Toledo, notice of which request was published in the Toledo newspapers. Several days later Lamb changed his mind and filed with Toledo City Council a request for a franchise and notified Bell that he was interested in a proposal for cable television for Toledo.
Bell then sent Lamb another proposal similar to the one submitted on February 15, quoting the same rates for a five-mile and for an eleven-mile distribution system. On April 12 Lamb signed a letter of intent to Bell for an eleven-mile distribution system without stating what area in the city was to be embraced. Lamb met with Bell on June 17, 1965, and designated a small section near the center of Toledo on the west side of the Maumee River. Lamb indicated that this was all that he was interested in at the present time.
The parties met again on June 29, and Lamb again changed his designated section from the west side to the east side of the Maumee River, and also selected a small five-mile system to serve a thirty-mile wide area, rather than an eleven-mile system. Bell advised Lamb that the five-mile system would not reach the west side of the Maumee River, but Lamb stated that if he desired to serve that side he would build another system. It was not disputed that the operation of such a small area was not economically feasible.
However, Bell computed the estimated charges for the five-mile system, and Lamb accepted by letter dated July 17, 1965, enclosing a check for $44,975.00 for the cost. As to any additional segments, the letter stated:
“At such time, the undersigned or his nominee may at its option: (1) make similar individual advance payments for such segments; (2) request you to delay in proceeding with further work on its behalf with respect to such segments until a subsequent time of its designation; (3) cancel the order with respect to any such individual segment; (4) cancel the order with respect to subsequent segments, or (5) assign any such segment to another nominee.” (340A)
These reservations were not apt to convince anyone that Lamb in good faith intended to build other segments.
Bell performed the engineering for Lamb for the five-mile segment and arranged to meet Lamb on November 10, 1965 for approval of the engineering plans prepared by Bell, which approval was necessary before construction could proceed. Lamb did not show up for the meeting. He testified that he had decided on September 15, 1965 not to proceed, but he never notified Bell, and Bell proceeded to complete the engineering work. The reasons which Lamb gave for not going ahead was that Bell had breached its agreement to build first for Lamb and also to keep it secret. As before stated, Lamb did not prove that there was any such agreement.
Ill
Legislative events affected the actions of the parties, events consisting of ordinances passed by City Councils of not only Toledo, but other cities in Ohio as well, where Bell was constructing CATV systems for Lamb (Fremont, Sandusky and Akron), which ordinances.required permits' and franchises in order, to enter into the CATV business.
Tariffs filed by Bell with, and approved by, the Public Utilities Commission of Ohio, provided:
“The customer shall comply with applicable laws and ordinances and shall obtain any franchises and permits required by law or ordinances.”
On March 3, 1965, Buckeye requested the City of Toledo to pass an ordinance granting it a permit to engage in the CATV business in that city. There was some question whether this was necessary under a “lease-back” arrangement. On March 15 Lamb filed with the city a proposed cable television permit ordinance similar to the one filed by Buckeye but containing provision for a slightly higher percentage of gross revenue to the city. A number of meetings were held by the City Council to consider the proposed ordinances, during which Lamb requested a delay in granting any franchise.
On May 17, 1965, the City Council passed a general regulatory ordinance for cable television and another ordinance granting Buckeye a permit to enter the cable television business. The permit was non-exclusive. Lamb also applied for such a permit; his application was not acted upon and no permit was ever issued to him.
On November 29, 1965 the City Council passed Ordinance 942 which prohibited cable television companies from going into business without first securing from the City a permit. Lamb never applied for such a permit under this ordinance.
The ordinance was declared unconstitutional by this Court more than five years later. Lamb Enterprises, Inc. v. Toledo, 437 F.2d 59 (6th Cir. 1971).
While Lamb and the defendants other than Bell engaged in so-called lobbying activities before the Toledo City Council, Bell took no part therein and adopted a wholly neutral attitude. Although Bell was requested by Lamb to join with him to fight the Toledo ordinances, Bell declined to do so.
All of the parties were bound by the provisions of the tariff approved by the Public Utilities Commission. Bell had the right to assume that the Toledo ordinances were constitutional until they were declared unconstitutional.
Nor could the subsequent adjudication of unconstitutionality of the ordinance impose a liability upon Bell, since it complied with the tariff, as it was obligated to do. Cf. Washington Gas Light Co. v. Virginia Elec. & Power Co., 438 F.2d 248 (4th Cir. 1971); E. W. Wiggins Airways, Inc. v. Massachusetts Port Auth., 362 F.2d 52 (1st Cir.), cert. denied, 385 U.S. 947, 87 S.Ct. 320, 17 L.Ed.2d 226 (1966).
A public utility may not be held for an anti-trust violation when it has complied with its tariff. Georgia v. Pennsylvania R. R. Co., 324 U.S. 439, 453, 65 S.Ct. 716, 89 L.Ed. 1051 (1945). And this is true even though the tariff subsequently was determined invalid. McClellan v. Montana-Dakota Utilities Co., 104 F.Supp. 46 (D.Minn.1952), aff’d 204 F.2d 166 (8th Cir.), cert. denied, 346 U.S. 825, 74 S.Ct. 43, 98 L.Ed. 350 (1953).
Construction of the segment selected by Lamb could never have been completed before passage of the November 29th ordinance, since Lamb had not even approved the engineering plans for the construction. He had also secretly abandoned the project in September.
IV
Lamb complains about Bell’s policy decision relative to priorities. Bell had advised Buckeye by letter on July 16, 1965, that it had received from another customer (Lamb) an order for a thirty-mile stretch; that it proposed to build for both customers, simultaneously; and that it expected to finish both segments at about the same time. Bell stated, however, that if shortages of labor or material should develop, it would give construction priority to the customer in the thirty-mile system (Lamb), and to Buckeye in the balance of the areas which it had previously specifically designated.
Buckeye, on July 7, 1965, had divided the map into ten segments, and on July 8 it had accepted Bell’s proposal and paid $110,188, which was ten per cent of the estimated cost.
Thus, in the event of shortages Lamb was to be given priority in the construction of everything he had ordered. He can hardly complain about that. However, although Bell anticipated that shortages in labor and material might develop at the time orders were placed by Buckeye and Lamb, such shortages never did occur.
V
Lamb contends that the undisputed evidence establishes that the defendants, Blade, Cox and Buckeye, intended to secure an exclusive position in Toledo CATV, and that such a joint intent by itself violates section 1 of the Sherman Act. Lamb intended to do the same thing. Further, he argues that Bell’s agreement to construct for Buckeye the segments selected by it made Bell a party to a combination and a conspiracy to restrain trade. We disagree.
Here it is clear that Lamb and the defendants were competing in a natural monopoly situation in which two or more CATV operators could not survive in direct house-to-house competition. The jury’s special findings established that there was no violation of the antitrust laws. We find substantial evidence in support of the jury’s finding that there was not a conspiracy the purpose of which was to prevent Lamb from entering the CATV business in Toledo. Moreover, to hold, as Lamb urges, that there was a per se violation of the Sherman Act here would place major obstacles in the way of entrepreneurs in situations where only one competitor could survive. Here, for example, both parties were competing to become the first in business in the greater Toledo area. If success in such a venture could become a per se violation of the anti-trust laws, the ultimate effect would be to stifle, rather than to encourage, competition and formation of new business enterprises. In this instance, however, there seems to have been healthy competition between Lamb and Buckeye to establish the first CATV system in the greater Toledo area.
While the evidence showed that defendants, Cox, Blade, and Buckeye, were prompt, direct and decisive in their dealings with Bell, Lamb was indecisive and he vacillated. First, Lamb was interested in wiring smaller towns in the Findlay, Ohio area, and then in San-dusky, Fremont, Upper Sandusky and Norwalk. As to these cities he proceeded promptly with Bell.
When Lamb learned of Buckeye’s interest in Toledo, he also became interested, and he secured proposals from Bell; then he changed his mind and advised Bell that he had decided not to wire Toledo. He changed his mind again when he learned of Buckeye’s application to Toledo’s City Council for a permit, and he applied again to Bell for proposals, which were again promptly given to him.
On April 12, Lamb signed a letter of intent to Bell for an eleven-mile system, without stating what area in the city it was intended to cover. It was not until June 17 that he met with Bell and selected an area near the center of Toledo, on the west side of the Maumee River. He indicated that that was all he was interested in at the present time. Lamb and Bell met on June 29 and Lamb again changed his mind. He selected a new section on the east side of the Mau-mee River, instead of the one on the west side which he had previously selected. He also selected a smaller five-mile system to serve a thirty-mile area, rather than the larger eleven-mile system which he had selected on the west side of the river. He did this although he knew that operations in such a small area were not economically feasible, and he conditioned his acceptance so that he was under no obligation whatsover to proceed further. Had he selected an eleven-mile system, he would have been required to make a deposit of more than twice the sum which he paid. Buckeye had made a deposit of $110,188, and designated ten segments on the map which it desired to wire.
It is clear to us that Lamb, by his own conduct and dealings with Bell, excluded himself from the business in Toledo, instead of being prevented, as he alleged, by anti-trust violations, from entering the business there.
Insofar as Bell is concerned, the anti-trust laws do not require it to show preference to one who is indecisive.
Bell was always ready to, and did, proceed with the engineering of the small segment selected by Lamb. It did not proceed with construction because Lamb abandoned the project without even approving the engineering drawings. There was not a scintilla of evidence connecting Bell with any conspiracy. So far as Bell was concerned, it was willing and able to construct duplicate facilities for Buckeye and Lamb, simultaneously.
It is a per se violation of the anti-trust laws to enter into a price-fixing arrangement, International Salt Co. v. United States, 332 U.S. 392, 396, 68 S.Ct. 12, 92 L.Ed. 20 (1947), or to engage in a group boycott, Klor’s, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959), or to eliminate, by joint collaborative action, discounters from access to the market, United States v. General Motors Corp., 384 U.S. 127, 145, 86 S.Ct. 1321, 16 L.Ed.2d 415 (1966). However, the Supreme Court has never held that one who succeeds in a natural monopoly situation, in the face of competition, has committed a per se violation of the anti-trust laws.
This kind of situation was discussed by the First Circuit in Union Leader Corp. v. Newspapers of New England, Inc., 284 F.2d 582 (1st Cir. 1960). Although the discussion in Union Leader is addressed specifically to section 2 of the Sherman Act, nevertheless we feel it is apposite in the present case, in a similar natural monopoly situation.
“It was a foregone conclusion that if successful the Journal would eventually drive the Gazette out of business, and, naturally, Union Leader proposed to succeed. But intending the natural consequences of acts which are in all respects lawful, does not constitute the ‘exclusionary intent’ that is a prerequisite for finding a violation of section 2. In other words, a natural monopoly market does not of itself impose restrictions on one who actively, but fairly, competes for it, any more than it does on one who passively acquires it. In either event, there must be some affirmative showing of conduct from which a wrongful intent can be inferred.” (Id. at 584)
In a footnote to the above quote, the Court noted:
“An interesting speculation might be whether the anti-trust laws were intended to protect one natural monopolist against another, in view of the fact that there was no competition before the battle began and there would be none afterwards.” (Id. at 584 fn 4)
We need only decide, and we do, that the circumstances of this case do not give rise to a per se violation of the antitrust laws. Here the jury found specially that the defendants did not enter into any conspiracy the purpose of which was to preclude Lamb from entering the CATV business in the greater Toledo area.
In a natural monopoly situation any successful competitor gets the market. Thus, it cannot be “unreasonable, per se, to foreclose competitors from any substantial market,” United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 945, 92 L.Ed. 1236 (1948), where such foreclosure is the natural result of success in a natural monopoly situation.
The agreement between Blade and Cox to form Buckeye, and the subsequent arrangement with Bell, were made to further the business interests of each. The dominant motive of each was undoubtedly to succeed in the CATV business in Toledo, and not to prevent Lamb from entering the business. The resulting effect on Lamb was not a per se violation of section 1.
In Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969), the Court said:
“Not every agreement is per se ‘in restraint of trade’ within the meaning of section 1. See White Motor Co. v. United States, 1963, 372 U.S. 253, 261, 83 S.Ct. 696, 9 L.Ed.2d 738. Thus, it is well settled that it is not a per se violation of the antitrust laws for a manufacturer or supplier to agree with a distributor to give him an exclusive franchise, even if this means cutting off another distributor. [Citing authority].” (Id. at 76).
The Court further said:
“The proper line to be drawn, we think, is that stated by Barber in ‘Refusals to Deal Under the Federal Antitrust Laws,’ 103 U. of Pa.L.Rev. 847 (1955), at 876-77:
******
“... The issue in these cases is not the existence or nonexistence of concerted refusal to deal, but rather whether the purpose and effect of the operation of the contract, association, exchange or joint sales agency was such as unreasonably to exclude outsiders from participation in the trade in question. The principle' of the group boycott cases — -that it is prima facie unreasonable for a dominant group to combine to coerce- — is not here applicable.’” (Id. at 77-78).
VI
Lamb contends that the Court below erred in refusing to admit into evidence plaintiff’s exhibit 43, which is a copy of a letter sent by Cox’s attorney to attorneys for Buckeye and to the vice-president of Cox, and which reads as follows:
Here are reprints from yesterday’s issue, of Broadcasting Magazine relating to an FCC staff letter to State Attorney Generals alleging FCC concern about telephone companies bypassing local franchising authorities. This supplements our report last week regarding actions by the California Attorney General and the Jackson, Michigan City Council.
This is background information in the event circumstances ultimately required or justified an effort to forestall a competitor through action of the Toledo City Council — or possibly in connection with any continuing debate with Ohio Bell regarding priorities.
Lamb argues that this exhibit does not come within the rule that immunizes lobbying activities from the anti-trust laws, Eastern Railroad Presidents v. Noerr, Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961). Moreover, Lamb asserts, the sole purpose of offering the exhibit was to demonstrate the purpose and character of defendants’ acts, a permissible use even if the letter was within the Noerr exception. UMWA v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965).
We agree with the defendants that this letter does fall within the Noerr exception, for the right to petition the Government would be seriously jeopardized if persons could not consult and decide how best to petition governmental units.for redress, or legislation. Nevertheless, this does not end the matter, for, as the Court said in UMWA v. Pennington, 381 U.S. 657, 670, 85 S.Ct. 1585, 1593, 14 L.Ed.2d 626 (1965):
“It would of course still be within the province of the trial judge to admit this evidence, if he deemed it probative and not unduly prejudicial, under the ‘established judicial rule of evidence that testimony of prior or subsequent transactions, which for some reason are barred from forming the basis for a suit, may nevertheless be introduced if it tends reasonably to show the purpose and character of the particular transactions under scrutiny. [Citing authorities].”’ (Id. at 670-671 fn 3, 85 S.Ct. at 1593).
Thus, the trial judge must be given discretion in determining the effect that certain evidence would have on the trial, in deciding whether it should be admitted to show the “purpose and character” of the defendants’ acts.
And, as stated by the Court in United States v. Johns-Manville Corp., 259 F.Supp. 440, 453 (E.D.Pa.1966):
“In any event, by the terms of that footnote, it is within the province of the trial judge to exclude such evidence if he finds that it is not probative or is unduly prejudicial.”
In the present case the trial judge made the exact finding:
“Well, my ruling is at this point in time that I am going to sustain the objection, because I think at this point in time it would be highly prejudicial.” (68A)
Such a ruling by the Court cannot be said to constitute an abuse of discretion, for the Judge was in the best position to determine the effect that admission of the document would have on the course of the trial at the time it was offered.
VII
Plaintiffs contend that the trial court erred in instructing the jury that it must determine whether “an unreasonable restraint” existed, and that “a conspiracy... can exist only if there was... concert of action between them [the defendants] in unreasonable restraint of trade.... ” This was error, the plaintiff says, because the exclusion of Lamb from the market was unreasonable as a matter of law.
This instruction was not error. In Section I of this opinion we rejected the argument that there was any per se violation of the anti-trust laws here. Otherwise, section 1 of the Sherman Act applies only to unreasonable restraints of trade. Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1910); Packard Motor Car Co. v. Webster Motor Car Co., 100 U.S.App.D.C. 161, 243 F.2d 418 (1957). Thus, the trial court’s instructions were proper.
VIII
In another allegation of error closely related to its per se argument, Lamb claims that the trial court erred in instructing the jury:
“In determining the existence of an unreasonable restraint, you need not find a specific public injury, but you must find that the defendant’s conduct was reasonably calculated to prejudice the public interest.”
Lamb states:
“The law is clear that there is no requirement of injury to the ‘public interest’ in order to establish a cause of action under section 1,” citing Klor’s, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 210-11 [79 S.Ct. 705, 3 L.Ed.2d 741] (1959); Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656 [81 S.Ct. 365, 5 L.Ed.2d 358] (1961); Continental Ore Co. v. Union Carbide Corp., 370 U.S. 690, 708 [82 S.Ct. 1404, 8 L.Ed.2d 777] (1962).
Each of these cases involved a per se violation of section 1 of the Sherman Act. Klor’s and Radiant Burners each involved group boycotts, while Continental Ore involved a refusal to deal, price fixing, and customer allocations.
In the present case, however, there has not been a per se violation of the Sherman Act. Thus the trial court’s instructions were proper, because even the eases cited by Lamb establish that where there is no per se violation it must be determined whether or not the activity in question unreasonably restrains trade. If the activity is not unreasonable, the Act is not violated. Cherokee Labs., Inc. v. Rotary Drilling Serv., Inc., 383 F.2d 97 (5th Cir. 1967).
If there had been a per se violation here, then the charge would have been error. In Continental Ore Co. v. Union Carbide Corp., supra (370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962)) the Court said:
“An error committed by the trial court, perhaps understandable because the trial preceded this Court’s decision in Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, [79 S.Ct. 705, 3 L.Ed.2d 741], was the ‘public injury’ charge. Although petitioners pleaded a concerted refusal to deal with them by respondents, a price-fixing conspiracy, and an allocation of customers, all per se violations under § 1 of the Sherman Act, the court charged the jury that a conspiracy must be proved ‘which was reasonably calculated to prejudice the public interest by unduly’ restraining trade, and which was intended ‘to injure the general public by’ restraining trade. Under the rule stated in Klor’s, this charge was error.” (Id. at 708, 82 S.Ct. at 1415).
But where there is no per se violation of the anti-trust laws the jury must determine whether the conduct in question unreasonably restrains trade. Thus the Fifth Circuit has said in Rogers v. Douglas Tobacco Board of Trade, Inc., 266 F.2d 636 (5th Cir. 1959):
“In the Sherman Act Congress has determined that certain prohibited activities are injurious to the public. Radovich v. National Football League, 1957, 352 U.S. 445, 453, 77 S.Ct. 390, 1 L.Ed.2d 456. As to classes of restraints which from their ‘nature or character’ are unduly restrictive, Congress has determined its own criteria of public harm. Klor’s, Inc. v. Broadway-Hale Stores, Inc., [359 U.S. 207] 79 S.Ct. 705, 709 [3 L.Ed.2d 741]. In restraints, like the present one to which ‘the rule of reason’ applies, while the jury should not, and cannot properly, reject the policy of the Sherman Act which has been determined by Congress, it must still decide whether the particular conduct is reasonably calculated to prejudice the public interest which that Act is designed to protect.
That does not mean that specific public injury must be proved before a private person can recover; but before it can be said that the conduct is forbidden as unreasonably restraining trade or commerce within the meaning of the Sherman AntiTrust Act it must appear that it tends or is reasonably calculated to prejudice the public intei'est.” (Id. at 644).
See also Cherokee Labs, Inc. v. Rotary Drilling Serv., Inc., supra.
For the foregoing reasons, the trial court’s instruction requiring a finding that the defendants’ conduct was “reasonably calculated to prejudice the public interest” was proper.
IX
The trial court instructed the jury in conventional conspiracy terms:
“A conspiracy is a combination of two or more persons, by concerted action to accomplish some unlawful purpose, or to accomplish some lawful purpose by unlawful means, in this case to violate the United States Antitrust laws as charged.” (157A)
Plaintiffs claim that this instruction was misleading and prejudicial, basing their contention on language in American Tobacco Co. v. United States, 328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946), which states:
“It is not of importance whether the means used to accomplish the unlawful objective are in themselves lawful or unlawful. Acts done to give effect to the conspiracy may be in themselves wholly innocent acts. Yet, if they are part of the sum of the acts which are relied upon to effectuate the conspiracy which the statute forbids, they come within its prohibition.” (Id. at 809, 66 S.Ct. at 1139).
Plaintiff asserts that its requested instruction Number 4, which was based on this language, should have been given. But the trial court’s definition of conspiracy was correct. Duplex Printing Press Co. v. Deering, 254 U.S. 443, 465, 41 S.Ct. 172, 65 L.Ed. 349 (1921); Apex Hosiery Co. v. Leader, 310 U.S. 469, 516, 60 S.Ct. 982, 84 L.Ed. 1311, Hughes, C. J., dissenting, (1940).
The American Tobacco dicta indicates that, assuming the existence of a conspiracy to restrain trade, the unlawful objective could be accomplished by wholly innocent acts. Here, however, the District Court could not assume the existence of a conspiracy with an unlawful objective, for this was a question for the jury. In any event, the trial court’s instructions are consistent with American Tobacco, for they certainly allowed the jury to find whether there was a combination to accomplish an unlawful purpose, by either lawful or unlawful means. The only difference is that the language in American Tobacco perhaps makes this more clear.
But Lamb’s requested instruction Number 4 implies that an unlawful objective is present, and is in that way more prejudicial to him than the instruction given by the trial court. Thus, there was no error in the instructions given by the trial court on this point.
X
Lamb contends that to prove restraint of trade it is unnecessary to prove that the defendants intended to restrain trade; rather it argues, all that must be proven is that a restraint resulted from the defendants’ conduct. United States v. Griffith, 334 U.S. 100, 105, 68 S.Ct. 941, 92 L.Ed. 1236 (1948). Thus, he argues that the District Court erred in submitting to the jury a special verdict which required a finding of wrongful intent before it could conclude that there had been an unlawful restraint of trade, and that instead, the trial court should have given plaintiff’s requested charge Number 1, which reads in part as follows:
“Under the antitrust laws of the United States, an illegal combination or conspiracy to restrain trade occurs if two or more of the defendants engage in joint activity which has the result of limiting or excluding competition in a given market.
“If
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
ORDER
PER CURIAM.
These causes came on to be heard on petitions for review and cross-application for enforcement of an order of the National Labor Relations Board and were argued by counsel. While the issues presented occasion no need for an opinion, they have been accorded full consideration by the court. See Local Rule 13(c).
The order of the National Labor Relations Board is supported by substantial evidence in the record- taken as a whole. See Universal Camera Corp. v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951). Moreover, this court finds that the Board’s order is otherwise free from reversible legal error.
On consideration of the foregoing, generally for the reasons stated in the Board’s order, it is ORDERED and ADJUDGED by this court that the petitions for review are hereby denied and the cross-application for enforcement is hereby granted.
MARKEY, Chief Judge, dissents from the foregoing order for the reasons stated in the following dissenting opinion.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
EVANS, Circuit Judge.
The dispute which this appeal is to settle involves the feasibility of the plan of reorganization which the debtor submitted for her creditor’s and the court’s approval. This plan, which met the approval of the District Court, is seriously challenged by appellant who is debtor’s sole creditor.
Debtor’s plan calls for an extension of time within which to pay her debts, which amount to $13,750 and interest, besides money, advanced by mortgagee to pay taxes. She, the debtor, is the owner of a parcel of real estate located at 3643-45 Sheffield Avenue, Chicago. Upon this real estate is a three story brick six flat building and a two car garage. Each apartment contains six rooms. One apartment is occupied by debtor and her family who manage the property.
The property is encumbered by a first mortgage which secures promissory notes of the principal sum of $13,750, with accrued interest of approximately $600. Appellant, in addition to holding the notes and mortgage, has paid certain taxes on the premises, aggregating $1,491.21.
In 1932, the debtor made an assignment of rents. Not all the rents were collected, however, and a new collector was designated who applied the installments of rent on taxes and interest. After these proceedings were instituted the debtor deposited the net monthly rentals with the clerk of the court. Out of the same, the 1934 taxes of $612.11 were paid. Unpaid expenses of these proceedings are less than the undistributed rentals collected during the pendency of these proceedings.
The plan, briefly stated, calls for extension of the debt for five years from date of order approving confirmation, to-wit, April, 1936. Interest at the rate of 3% per annum is to be paid semi-annually on the indebtedness of $14,369.03. The remaining 3% per annum is to be added to the principal indebtedness and paid at the end of the extension period. Debtor is to pay appellant $1,491.21 (being moneys advanced for the payment of taxes) and interest thereon at 6% from May 11, 1935. $745.65 of this sum is to be paid by the end of the first year and the balance at the end of the second year. Debtor is to pay all current taxes and current costs' of operation. After the payment of costs of administration, .. attorneys’ fees, moneys advanced on account of taxes, current and accrued interest, and current taxes, any net income shall be used to retire the principal.
Debtor is to manage said premises, do the janitor and decorating work free of charge, and is to receive for her services, the free use of the apartment now occupied by her. She is to file with the clerk of the court on the 10th day of each month an itemized statement of receipts and disbursements for the preceding month and •shall deposit the net rentals monthly with the clerk. The plan. contained the following:
“9. In the event that at the end of extension period the indebtedness due and •owing under aforesaid trust deed is not liquidated, or upon the failure of the debt- or to make the payments required under this extension proposal, the court may order a liquidation of this estate, as provided by law for the benefit of creditors, or may grant the mortgagee the right to foreclose, or to take any other appropriate proceedings. Debtor shall be allowed a period of sixty days grace for all payments required to be made under this extension proposal, with the exception of deposits which are to be made monthly with the Clerk of the United States District Court.”
The cost of the administration was to be fixed by the court and assessed against the estate and shall constitute a prior lien on the income of the property involved herein. $346 was allowed for further attorneys’ fees, $750 having been previously paid.
The clerk’s office shows receipts to be as follows:
Balance in Clerk’s hand to April, 1936 (From May, 1935) $ 759.91
May, 1936 52.75
June, 1936 239.80
July, 1936 183.25
August, 1936 00.00
Sept., 1936 142.91
$1,378.62
Average monthly income for five months 123.74
The property for 30 months prior to these proceedings netted 3,567.65
Average monthly income , 118.92
The schedules placed a value of $20,000 on the property.
Was the proposed plan, upon the facts stated, feasible?
Appellee’s assurances of fulfilment of promises depend upon an expected increase in rentals. Doubtless, the court may take notice of the fact that there has been some increase in the rental of Chicago real estate, and it may also assume that this will continue. There are, however, many other factors bearing on this issue of feasibility.
The feasibility of any plan of reorganization presents problems which are highly practical. They involve the study of estimated receipts and expenditures, of the possibility of change in either, as well as questions of value. To illustrate: Such questions as these call for answer. Will values rise in the next five years? If they do generally, how much will they affect the value of this debtor’s property? How much should one discount cost price? In view of the sorry record of Chicago 1927-29 building operations and the irresponsible flotation of securities worth less than par during the ’20s with padded cost items a common practice, should cost price not be entirely ignored in determining present day values? May an investor in Chicago real estate bonds reasonably expect his bonds to rise to par when the total bonded indebtedness equaled or exceeded the original padded cost of the building? To what extent should the court look to the year or the time when the building was erected as a factor of value? Likewise, location in a city like Chicago has a most important bearing upon future earnings and value. In some instances courts are asked to assume a value for 1928 or 1929 which has never been duplicated in any other period of the city’s history. Commenting upon the proposal of frantic investors vainly seeking to recover their lost investment, Chief Justice Hughes, in the recent decision in the case of Tennessee Publishing Company v. American National Bank et al., 57 S.Ct. 85, 87, 81 L.Ed. —, decided November 8, 1936, said:
“However honest in its efforts the debt- or may be, and however sincere its motives, the District Court is not bound to clog its docket with visionary or impracticable schemes for resuscitation.”
As to the recent market value of this real estate we are left in the dark so far as opinion evidence is concerned. It may well be so, for opinions of value at all times, and particularly today, vary greatly and are hard to reconcile.
Any plan of reorganization must be fair to both parties. The mortgagee is entitled to equal consideration with the mortgagor. While the collection efforts of the mortgagee may well be stayed for a reasonable time provided there exists a reasonable likelihood of her mortgage being paid at that time, it is manifestly unfair to postpone interest payment, repayment of moneys advanced to pay taxes for a period of five years, and leave the mortgagee’s recovery of principal and interest to chance or speculative uncertainties based wholly on “hopes” born of wistful wishing, strong desires or urgent necessities. In the absence of facts to support hopes, there exists no sufficient support for a plan which postpones mortgagee’s rights and remedies arising out of a past due secured indebtedness.
We are not prepared, however, upon the facts disclosed by the record in this case to reject the debtor’s plan in view of its approval by the District Court. By that plan the court can and no doubt will protect the mortgagee if reimbursement for interest and back tax payments is not made. The net yearly rental of $1500 will cover taxes and the interest payments provided for in the plan and leave approximately $470. The debtor may supplement this income from outside sources, and the amount required to meet the back taxes each year will be less than $300. At the end of two years the back tax reimbursements will be at an end and the current taxes and all interest charges at 6% would be more than earned. All of this contemplates vigilance on the part of the court. The plan must not be viewed as a paper plan — a theoretical solution of a present pressing problem. If the obligations of debtor are not met or the default satisfactorily explained, action to protect mortgagee must follow immediately. This we think the plan contemplates.
As an appellate court we are not called upon to pass upon the feasibility of this plan as an original proposition. We may have grave doubts as to its feasibility. The determination of that matter was the District Court’s function. He was in a better position than we (certainly in as good a position), and he found the plan was feasible. The evidence does not justify our setting aside this finding.
The decree is
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
WILLIAM E. DOYLE, Circuit Judge.
Introductory
John C. Frank, the plaintiff-appellee and cross-appellant, originally brought an action against Victoria Murdock Bloom, the defendant-appellant, to recover his attorney’s fees for services rendered to Mrs. Bloom during a period starting June 4,1971 and continuing to April 10, 1973. Frank’s claim was for $107,000. The cause was tried before a jury which rendered a verdict in the amount of $85,000. Mrs. Bloom has appealed the final judgment based upon this award. Frank has filed a cross appeal from the trial court’s order disallowing prejudgment interest on the award.
Frank was originally hired by Mrs. Bloom to represent her interest in the Murdock litigation which is also pending in this court. Mrs. Bloom was a member of the Murdock family which owned a newspaper in Wichita, Kansas. The paper had been in the Murdock family since the newspaper was originally founded by Mrs. Bloom’s grandfather, Colonel Marshall Murdock, in 1872. When he died in 1914 the newspaper was inherited by his three children, Marcellus, Victor and Pearl. Each received one-third. Victor’s one-third passed to his daughter, Katherine Henderson, and his grandson, Victor Delano. Pearl’s one-third share passed to her grandson, Harry B. Brown. Victoria’s father, Marcellus Murdock, following his death on March 10,1970, left his share in a trust which he had created during his lifetime. He placed one-half of his interest in the paper, or one-sixth of the stock, in that trust. The trust created five shares, one for his widow and one for each of his four children. In 1966 Marcellus Murdock created a testamentary trust. In this he provided five shares, one for his widow and one for each of his children. The remaining one-sixth share of stock of the newspaper was willed to the testamentary trust.
There were six surviving heirs of Marcellus - his widow Paula, his three children, Marshall Murdock, Janet Jennings and Victoria Bloom, and two grandchildren of Jane, his deceased daughter, Vici McComb and David Colwell.
The Will Litigation
Frank was employed by Victoria Bloom on June 4,1971 in connection with litigation concerning the interest which the widow of Marcellus, Paula, was entitled to receive from the estate. This dispute was litigated in state court in Wichita. It centered on the interpretation and validity of an Anti-Nuptial Agreement executed in 1940, a Will executed in 1966 and a Codicil to the Will executed in 1967. The widow, Paula, took the position that she was entitled to one-half of the estate. The son, Marshall, here contended that Paula was entitled to one-fifth of the estate in accordance with the Anti-Nuptial Agreement. Victoria Bloom disputed the claim of Paula that she was entitled to one-half and contended that she should receive nothing at all.
A provision in the Will of Marcellus stated that Paula should receive nothing if she and Marcellus were not living as husband and wife at the time of his death. The facts were that Marcellus, after having lived with Paula for 24 years, moved out of the family residence. She, however, continued to live there until Marcellus’ death. The trial court determined that Paula was entitled to a one-fifth share in accordance with the Anti-Nuptial Agreement.
This decision was affirmed by the Supreme Court of Kansas which held that the clause in question encouraged separation and was on that account contrary to public policy and unenforceable.
The trial judge in the will or widow’s case awarded plaintiff-appellee Frank the sum of $48,000 for his services in the estate proceedings. Later the state supreme court ruled this sum to be not payable out of the estate. It did not comment on the reasonableness of the award.
Voting the Stock
There was also litigation concerning the voting rights of the trustee. The beneficiaries of the trust sought to have the bank vote the stock in accordance with their wishes. The bank refused, however, to do so. Mrs. Bloom’s position was the same as that of the bank: that the trustees should vote according to their own discretion, and not necessarily in accordance with the wishes of the beneficiaries.
Sale of the Newspaper
A third trial arose in connection with the sale of the newspaper to Ridder Publications, Inc. This action was brought by Victor Delano seeking an injunction against the sale of the newspaper and requesting damages from all other shareholders. The court did not enjoin the sale of the newspaper. It was during this injunction trial that Frank withdrew as the attorney for Mrs. Bloom. He testified that Mrs. Bloom insisted that he call her as a witness and ask her questions which she had previously prepared but had refused to allow Frank to review. He advised her that she was not needed as a witness since the hearing was limited. After denial of the injunction the newspaper was sold to Ridder Publications for $42,000,000.
At the outset of the Bloom-Frank relationship the understanding was that Frank was to be paid fees based upon the hourly rate of $50.00 per hour. Frank’s contention is that this contract was modified early in the relationship. Mrs. Bloom testified that she was approached by Frank with the suggestion that he seek his fees from the estate with the understanding that if the estate was not held liable he would seek to be paid by Bloom. Bloom maintained that Frank informed her that all of the attorneys were seeking to be paid by the estate and asked her if she wished for him to do the same. Frank’s version was similar, with the exception that he claimed that it was Bloom who approached him with the idea of his seeking his fees from the estate. Frank said that he did not give Bloom an answer until he had thought about and researched the issue. He said that at some later date he advised her that°he would seek payment from the estate and have the court allow the fee; that he would no longer bill her on a regular basis. Frank - also testified that he and Bloom agreed that if the court refused to grant- the fees from the estate he would continue to look to Bloom for payment and that his fees would be what he considered to be reasonable and could be more or less than the $50.00 per hour.
The testimony on behalf of Mrs. Bloom as to the fee arrangement generally was that her contract with Frank was for $50.00 per hour, and that this contract never changed. She maintained that nothing was said about changing the $50.00 hourly rate to be charged nor was there anything said about the court setting the fee. She understood that Frank would try to get his fee from the estate at the $50.00 per hour rate. She understood that if the estate did not pay that she would have to pay as originally agreed, i. e. $50.00 per hour.
In his counterclaim Frank alleged that the reason for the change in the fee arrangement was Mrs. Bloom’s excessive demands on his time. In his answer he claimed that in an itemized statement he told Mrs. Bloom that the excessive demands on his employment by her were placing a severe burden on his law practice and that he would prefer to withdraw. The answer further stated that Mrs. Bloom encouraged him to continue to represent her and indicated her willingness to forego the hourly fee contract and replace it with a reasonable compensation arrangement. Frank also testified at the trial that he told Mrs. Bloom that he did not know whether the fee based on reasonable rates would be higher or lower than under the original contract, but in his deposition he testified that his feeling was that the fee would probably be lower.
Frank testified at the estate hearing on fees that his office had spent 450 hours on the case and that his fee should be from $38,000 to $48,000. According to Bloom’s brief, this would have amounted to $85.00 to $106.00 per hour based on 450 hours. The worksheet showed that approximately 280 hours had been spent on the case.
The additional amount demanded by Frank derived from representing Mrs. Bloom in the two state court cases, one having to do with the widow’s case and the other the voting case. Both of these pertained to control of the newspaper.
Somewhat later, on March 2, 1973, Mrs. Bloom said that she learned the newspaper had been sold and that this sale had been arranged by Mr. Kitch and Mr. Brown. Mrs. Bloom finally did sell her stock, notwithstanding that Kitch was going to receive a finder’s fee from the buyer of the paper based upon the number of shares that he was able to sell. Mr. Delano filed a lawsuit seeking to enjoin the sale of the newspaper and Frank represented Mrs. Bloom in that case and filed a cross claim against Kitch to recover Mrs. Bloom’s portion of the finder’s fee.
After the Supreme Court of Kansas ruled that the estate was not responsible for the fee here in question, Frank billed Mrs. Bloom for the sum of $107,500 for the representation in the several cases. However that was not itemized or broken down according to the various cases in which he had participated. This present suit was filed September 26, 1974. Originally Frank employed the Kitch firm to bring the fee action against Mrs. Bloom. Mrs. Bloom took exception to Frank hiring the Kitch law firm to bring the action against her because she had been adversary to Kitch in the other litigation. She sought to have the Kitch firm disqualified from trying the present case, i. e. for the attorney’s fees. Later the Kitch firm voluntarily withdrew.
The Contentions of Mrs. Bloom
There are a great many assignments of error and we list all of them. She asserts that the trial court
1. Erroneously failed to instruct the jury that a contract for additional compensation entered into under threat of withdrawal following partial performance of the fee contract was invalid.
2. Failed to instruct the jury as to the legal effect of the $48,000 award to Frank given by the Kansas judge in connection with the litigation in the estate of Marcellus Murdock. (Under the Supreme Court of Kansas ruling the estate was not liable for this fee.)
3. Failed to instruct that a fee contract which was changed after the attorney-client relationship went into effect was void per se or voidable at the election of the client.
4. Erred in not granting a new trial or in not granting a remittitur as an alternative to a new trial.
5. Erred in admitting the desk calendars of Frank into evidence together with the estimated number of hours shown on those calendars.
6. Erroneously received evidence showing the amount of money saved Mrs. Bloom by virtue of the reduction of the widow’s share of the estate, in that this analysis was based on the value of the stock sold in 1973 instead of the estate inventory value in 1970.
7. Erred in failing to instruct the jury regarding a determination of a reasonable fee in the event that the jury found that the original hourly rate contract had been charged.
8. Erred in instructing the jury that in order to find a modified contract invalid it must determine that the client was under the domination of the attorney.
9. Committed grievous error in withdrawing from the jury the issue of disentitlement to attorneys’ fees as a result of conduct of the attorney which is against the best interests of the client.
I. Did The Trial Court Err in Failing to Instruct the Jury That a Contract Between An Attorney and Client Which is Modified Under Threat of Withdrawal by the Attorney is Invalid?
During the pleading stage in the case, an answer was filed on behalf of Frank, responding to Mrs. Bloom’s counterclaim. In the answer Frank alleged that Mr. Frank and Mrs. Bloom had modified their initial contract; that Frank had notified Mrs. Bloom that he wished to withdraw from her case due to the excessive demands of being employed by her. Frank also alleged that Mrs. Bloom objected to Frank’s withdrawal and offered to replace the $50 per hour fee with a reasonable compensation standard if he would continue to represent her. That identical statement appeared in a letter written by one of Mr. Frank’s attorneys to the trial judge in this case, United States District Judge Wesley Brown, explaining the reason for the change in the fee arrangement. Mrs. Bloom’s lawyer brought all of this out in an effort to impeach the testimony of Frank during the trial.
The factual matter contained in the pleadings is admissible as an admission by a party made by his agent acting within the scope of his employment. Such evidence is admissible for substantive purposes, and need not be received solely for impeachment purposes. See Weinstein on Evidence, 1978, 801(d) [01], page 801-10, and 801(d)(2)(D)[01], page 801-137. At the trial Frank repudiated the statements made by his lawyer, saying that they were incorrect. However, he is nevertheless bound by his lawyer’s admissions on his behalf.
It is significant that Mrs. Bloom did not claim at the trial to have been influenced to agree to a change in basis for computing fees by any threat made by Mr. Frank. These admissions were used solely to try to impeach Frank. One thing is clear, and that is that the evidence on this question of a change in the fee standard was in sharp dispute at the trial. It is also plain that although Mrs. Bloom now contends that the contract was modified under threat of Frank’s withdrawal, it does not appear that she raised that at trial. In fact, she denied that the parties ever discussed modifying the contract.
Nevertheless, the trial Judge gave an instruction that “any admissions contained in the pleadings.... must be accepted by you as true and are not required to be supported by additional evidence.” The jury could have concluded that based upon the admissions in Frank’s pleadings, he had, indeed, threatened to withdraw and the instructions permitted the jury to question whether Mrs. Bloom relied on such withdrawal.
The jury was also instructed that a presumption of undue influence exists when contracts are made between parties to a confidential relationship. Further, the Court told the jury that Mr. Frank, as a domineering party, had the burden of showing that the contract was made in good faith without unfairness or overreaching and for a valuable consideration.
A further instruction given by the trial judge charged the jury that a modifying contract would be invalid if a confidential relationship existed between the parties, if, in addition, Mrs. Bloom was, in fact, under the domination of Frank, and the modification lacked consideration, was unfair, unreasonable, the result of overreaching, coercion or inequitable conduct, and was not freely and voluntarily entered into and with full understanding of its terms and consequences.
There is case law holding modified agreements for attorney fees invalid in circumstances in which the court found that the clients had had no freedom of choice and had agreed to the change in reliance on the threat of the lawyer to withdraw. Egan v. Burnight, 34 S.D. 473, 149 N.W. 176 (1914), and Griffin v. Rainer, 212 Va. 627, 186 S.E.2d 10 (1972). In the cited cases the courts found that the client had relied on the attorney’s threat of withdrawal. In Griffin, for example, the court said that the client lacked freedom of choice to resist the pressure which had been applied by the attorney. If the jury had determined that Mrs. Bloom was similarly pressured, notwithstanding that she had not claimed that she had been so influenced, the instructions to the jury which were here given and which are described above would have adequately covered the subject whereby the jury could have found the contract to have been invalid.
The instructions which were given to the jury regarding attorney pressure in relation to the voiding of a contract were thus adequate. The failure of the jury to rule that Mrs. Bloom was pressured was due to lack of evidence rather than to lack of a specific instruction pinpointing the appellant’s theory of the case. We are unable, therefore, to find that the court committed error in its treatment of the foregoing.
II. Did the Trial Court Err in Not Instructing the Jury as to the Legal Effect of the Witness Judge Stephan’s Testimony On This Dispute?
Judge Stephan was the judge in Wichita who presided in the widow’s case. As noted previously, concern had to do with whether Marcellus Murdock’s widow was entitled to one-fifth or one-half of her husband’s estate. Judge Stephan awarded Frank $48,000 for his services in that case. The Kansas Supreme Court reversed the part of the decision which charged this fee to the estate, and so the parties continue to dispute whether the Frank-Bloom agreement for the payment of $50 per hour is in effect, or whether it is a question of the reasonable value of Frank’s services. Judge Stephan, the man who made the determination that the services were worth $48,000, testified at trial that the $48,000 was reasonable for the services rendered by Frank. Mrs. Bloom maintains here that the jury should have been informed that the court’s award had no binding relationship to any contract between the parties; that it was not binding between her and Frank; that Mrs. Bloom was not obligated nor entitled to call the court’s (meaning Judge Stephan) attention to the $50 per hour contract that she believed to be in effect.
The instruction of the trial court here stated:
If you find (Mrs. Bloom) made an enforceable agreement to pay (Mr. Frank) the reasonable value of his services in the widow’s case, then you may consider from the evidence the amount (Mr. Frank) is reasonably entitled to recover. On the other hand, if you find (Mrs. Bloom) made no enforceable agreement to assume and pay such fees, if not payable out of the estate, then the basis for (Mr. Frank’s) recovery in the widow’s case would be the terms of the original contract of employment as you find them.
The jury was further instructed that even though Judge Stephan was called as an expert witness to value Frank’s services the jury was not bound to accept Judge Stephan’s testimony; that his testimony was to be considered by the jury in the same manner as any other evidence; and that the testimony should be given the weight and credit the jury deemed appropriate. The jury was also told that it was up to it to determine whether Mrs. Bloom had contracted to pay Frank the reasonable value of his services or whether the terms of the original contract governed. Moreover, the jury was told that Judge Stephan’s award did not bind the jury.
In view of the extent of the instructions given by the court, we are unable to see a need for an additional one saying that Judge Stephan’s award was not binding on the jury. The jury was told in plain terms that the $48,000 was not binding on it and further instruction could only cause confusion. Appellant’s claim of error must be denied.
III. Is Mrs. Bloom’s Argument That the Trial Court Erred in Refusing to Instruct the Jury That a Fee Contract Change After The Creation of the Attorney-Client Relationship is Void Per Se or Voidable at The Election of the Client a Valid One?
We hold that the trial court did not err in not so instructing. Mrs. Bloom’s argument springs from her claim that such an instruction is in harmony with the law of Kansas which upholds strict rules of conduct for fiduciaries. No showing has been made, however, that the Kansas Court has embraced this specific principle. The general rule is that a contract made during the existence of an attorney-client relationship is valid and enforceable if it is fair and equitable. 13 ALR 3d 710 (1967). Mrs. Bloom’s argument is not reasonable. It seems highly unlikely that the Kansas Supreme Court would hold that a client has the power to void any fee contract which comes into existence after the attorney-client relationship has arisen. This argument is not shown to have support in Kansas law, and, therefore, Appellant’s claim of error on this is denied.
IV. Was it Error to Instruct the Jury that in Order to Find a Modified Contract Invalid It Must Determine that the Client was under the Domination of the Attorney?
The claim of error is based on appellant’s belief that domination is presumed as a consequence of the attorney-client relationship, and thus a modified contract between an attorney and his client is void per se or void at the client’s election. However, as stated above, there is no indication that Kansas follows this minority per se doctrine. The Kansas pattern jury instruction states that when deciding whether the party is to be relieved of his responsibilities because of undue influence the jury may be instructed to consider whether the moving party to a confidential relationship is under the domination of the other party. See Kansas Pattern Instructions, Section 18.-02G. The instruction given by the trial court was in accord with the present Kansas law. Thus, this contention lacks merit.
V. Did the Trial Court Abuse Its Discretion in Denying the Motion for New Trial or a Remittitur as an Alternative to a New Trial Based on the Fact that the Amount of the Verdict, $85,000, is Excessive and Contrary to the Weight of the Evidence?
A. Was There Insufficient Evidence for the Jury to Find That the Parties had Modified the Original Contract?
Mrs. Bloom maintains that the jury necessarily found that the parties had modified the original contract. As we have previously noted (many times) there were two opposing versions: Mrs. Bloom maintained that the contract continued to be based upon the $50 per hour rate (or nothing). Frank contended that soon after his employment the contract was modified to require that Mrs. Bloom pay him a reasonable fee. Frank said that the other members of his law firm were aware of the alleged modification. This, however, was never corroborated. The jury was left to determine who was telling the truth as between Frank and Mrs. Bloom. The parties agreed that there had been some modification in the arrangement in that Mrs. Bloom ceased to pay Frank on a regular basis, and also the fees attributable to the widow’s claim were agreed to be obtained from the estate if possible. It is difficult to say that the jury reached a result which was clearly erroneous inasmuch as they were called upon to evaluate and determine the credibility of the parties as witnesses. The evidence was sufficient to show that reasonable minds could differ and, therefore, the trial court was within its authority in denying a new trial. See Fireman’s Fund Ins. Co. v. Aalco Wrecking Co., 466 F.2d 179 (8th Cir. 1972); cert. denied 410 U.S. 930, 93 S.Ct. 1371, 35 L.Ed.2d 592 (1973).
B. Did the Evidence Justify, Under the Standard of a Reasonable Fee, the Allowance of $85,000?
The instruction required the jury, if it determined that the contract had been modified so as to pay Mr. Frank the reasonable value of his services, to take into account the following factors in determining that value:
1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.
2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude her employment by the attorney.
3) The fee customarily charged in the locality for similar legal services.
4) The amount of money... involved in the controversy and the result secured for the client.
5) The nature and length of the professional relationship with the client.
6) The experience, reputation and ability of the attorney performing the service. [Tr.Vol. V, p. 102]
Mrs. Bloom argues that there was insufficient evidence as to the value of the services rendered whereby the jury could determine reasonable value and that there was insufficient evidence as to the total hours spent by Frank on her behalf. However, several witnesses did testify giving opinions as to the value of such services and the jury was at liberty to give to that testimony the weight that the jury deemed appropriate. As to the testimony concerning the number of hours: Frank’s desk calendars were introduced; these had been kept by Frank’s secretary; a ledger and time sheet prepared by secretaries were introduced. These were prepared for the litigation in question. Much of this evidence was somewhat inconsistent and contradictory, and therefore, had limited probative value. All of these discrepancies and contradictions were called to the attention of the jury, however, and undoubtedly were considered by it. The Judge instructed the jury that the issue was to be
determined by you on the basis of the evidence presented. In making this determination, you may consider the failure to keep proper records and the passage of time between the rendition of services and arriving at an estimate as effecting the reliability of such evidence.
The law is very clear that reviewing courts are not at liberty to set aside jury verdicts merely because the reviewing judges feel that opposite results seem more reasonable. See Tennant v. Peoria and P. U. Ry. Co., 321 U.S. 29, 35, 64 S.Ct. 409, 412, 88 L.Ed. 520 (1944). The Tennant case pertained to a motion for a judgment notwithstanding the verdict. However, the rule has been applied to motions for new trial. See Firestone, supra; Lind v. Schenley Industries, Inc., 278 F.2d 79 (3rd Cir. 1960), cert. denied 364 U.S. 835, 81 S.Ct. 58, 5 L.Ed.2d 60; Duncan v. Duncan, 377 F.2d 49 (6th Cir. 1967); cert. denied 389 U.S. 913, 88 S.Ct. 239, 19 L.Ed.2d 260. It is to be noted also that Frank had obtained an award from the Judge who tried the widow’s case in the amount of $48,000 for the effort in that case. Even though the trial court instructed the jury that this was not binding, it may have had influence because this was a limited part of the total work performed.
The trial judge was not at liberty to set aside the verdict, unless it was clearly against the weight of the evidence. See Moore’s Federal Practice, 59(5) 1979. Even if the judge would have reached a decision different from the jury he would not be justified in interfering with the jury’s conclusion because the credibility of,, the witnesses is for the trier of the facts; in this case, the jury. In order for the court to set aside the jury verdict it must clearly appear that the jury reached a seriously erroneous result. Moore, Section 59.08(5), pages 59-159. There are no unusual or special circumstances here to warrant a finding that the trial court’s action, in failing to set aside the verdict, constituted an abuse of discretion.
Considering the broad discretion that the trial court has in ruling on motions for new trial, we must conclude that no grounds existed in this case to warrant the overturn of the jury’s verdict and the granting of a new trial. Accordingly, the appellant’s contention that error was committed in this respect is denied.
VI. Was it Error for the Trial Court to Receive Into Evidence Frank’s Desk Calendars?
At the very outset the trial court, in its instructions to the jury, mentioned the lack of proper records and the time lapse between the rendition of the services by Frank and the attempt to estimate the number of hours spent by Frank. In addition, the testimony at trial pointed out the lapse of time and also the insufficiency of the records. Thereby the jury was in a position to determine the weight to be given to the information in the calendars and to reach a conclusion concerning the number of hours devoted to the task. Federal Rule of Evidence 401 provides that evidence is relevant if it has any tendency to make the existence of any fact that is of consequence to the determination of the action more proper or less proper than it would be without the evidence. Rule 401 defines relevance in broad terms. In the light of these guides it cannot be said that the desk calendars lacked “any tendency” toward probativeness as to the number of hours spent by Frank on behalf of Mrs. Bloom.
Relevant evidence is to be excluded only if its probative value is outweighed by danger of unfair prejudice, confusion of the issues, misleading the jury or by questions of undue delay, waste of time or needless presentation of cumulative evidence. Federal Rule of Evidence 403. It was brought to the jury’s attention that there was a lack of proper records and a lapse of time before such records were compiled. It is not apparent that the probative value of the evidence was circumstantially outweighed by other dangers. It was open to the jury to attribute to the evidence any amount of weight that it deemed proper and this could have been resolved in favor of Frank or against him.
In addition, it is argued by Mrs. Bloom that Frank took the position during the pretrial procedure that the calendars would not be used in and of themselves as evidence showing hours, but would be limited to refreshing his memory on the work that he was doing. Therefore, Mrs. Bloom contends that Frank cannot rely on this evidence at trial. However, Frank never asserted that the calendars were not reliable; he merely asserted that he was not planning to rely on them. Frank was ordered to produce the calendars during the discovery stage and he did so over his own objections on the grounds of confidentiality. He blocked out the confidential parts and gave copies to Mrs. Bloom. Inasmuch as these were discovered by Mrs. Bloom and were produced, there does not appear to be any reason for not allowing them to be used for whatever value they may have had. Accordingly, the assignment of error in connection with the desk calendars should be and is hereby denied.
VII. Did the Trial Court Err in Ruling That the Amount of Money Which Was Saved Mrs. Bloom in the Widow’s Case Based on the Sale Price of the Newspaper Three Years After the Trial of the Case Was Relevant and Could Be Received in Evidence?
The position of Mrs. Bloom in the widow’s case was that the widow should receive nothing. The widow, Paula Murdock, claimed one-half of the estate. She was restricted to one-fifth. Mr. Frank’s argument is that due to his efforts, Mrs. Bloom’s share of the estate was enhanced as a result of the reduction of the widow’s share from one-half to one-fifth.
To demonstrate that Mrs. Bloom profited from the result in the widow’s case, Frank presented evidence as to the value of the estate before the case and thereafter. The figures were used to show the value of the newspaper three years afterward when it was sold. Mrs. Bloom’s position was that only the value of the paper at the time of trial ought to have been shown.
In the circumstances presented it was not prejudicial to reveal the sale price. At the time of the widow’s trial it was easy to predict that the paper would be sold. It is true that it was sold at its inflated value, but this was a product of the times. Certainly the jury could cope with this factor. The numbers were not important. The relevant item was the fact that Frank had saved Mrs. Bloom a substantial sum of money regardless of the sale price. Mrs. Bloom was seeking to show that Frank was of no help or of little help in the widow’s case. Frank was entitled to show that his effort did enhance ultimate recovery. Obviously Frank did not bring about the inflated sale price, but he might have anticipated it. True, the. amount of money that Mrs. Bloom ultimately received is of problematical relevance, but it ought not to require overturning of the verdict. See Moore’s Federal Practice Sec. 10311.11, P. 1-21-22.
VIII. Was it Error for the Trial Court to Withdraw from the Jury the Issue of Alleged Forfeiture of Attorney’s Fees to Frank Based on His Failure to Act in Accordance with Mrs. Bloom’s Request or Because of His Alleged Disloyalty?
This problem derives from the action of the trial court (Judge Templar) in withdrawing from jury consideration the defense of Mrs. Bloom to the payment of the attorney’s fees based upon a number of instances in which he allegedly acted contrary to Mrs. Bloom’s interest. The trial court summarized the issue as follows:
The defendant Bloom as a defense to plaintiff Frank’s claims contends that plaintiff Frank has lost his right to fees in the widow’s case and the voting trust case under the $50 per hour contract because he failed to take the deposition of Paul Kitch; because he failed to file the cross-claim against Kitch in the DelanoKitch case; that he looked to Paul Kitch for advice as to whether she should sell her stock in the Eagle-Beacon newspaper when he knew that a decision not to sell would reduce Kitch’s finder’s fee and also knew there was a strong possibility that she could stop the sale altogether, resulting in no finder’s fee; and that he employed the firm of Fleeson, Gooing, Coulson and Kitch to file his suit against her and represent him, which led to the turning over to that firm of attorneys his entire file in the Delano-Kitch ease while it was on appeal.
Now, you’re instructed that the Court is withdrawing these issues from your consideration and you will not consider these matters in your deliberations.
Mrs. Bloom’s argument that Frank forfeits all compensation because of the six instances in which he is alleged to have acted in a manner detrimental to the interest of Mrs. Bloom is in truth a claim of malpractice against Mr. Frank.
It is important to point out that the only evidence in the record that Frank acted in a way that could be described in the court’s instruction is in the descriptions of what occurred. There is no evidence evaluating his course of conduct so as to establish that he conducted himself contrary to law or in an unethical way. The appellant treats this alleged misconduct as if it was per se illegal. It might have been helpful if there had been an expert witness who condemned Frank’s activities as being contrary to her interest. This would possibly have created an issue for the jury to determine. As the record stands, the jury would have been required to engage in speculation as to whether Frank’s misconduct was in her interest or contrary to her interest.
But there is a more serious deficiency in Mrs. Bloom’s position. A requisite in a malpractice claim is that the client must have been damaged and hence aggrieved as a result of action of the attorney. The fact, if it be a fact, that the attorney in the heat of the trial disregards the direction of the client as to trial strategy or activity does not give the client a right of action against the attorney. After all, it is the duty of the attorney who is a professional to determine trial strategy. If the client had the last word on this, the client could be his or her own lawyer. Therefore, an attorney does not ordinarily violate his duty to the client by rejecting a client’s suggested tactic.
Furthermore, in order for a client to have a cause of action against the attorney that client must have suffered money damages from the act of the attorney. This damage is not presumed; it must be proven.
The Sixth Circuit considered a claim of malpractice against an attorney in the case of Woodruff v. Tomlin, 593 F.2d 33 (6th Cir. 1979), aff’d. in part, rev. in part after rehearing en banc, 616 F.2d 924 (1980). In the first opinion that court stated:
An attorney, like any other professional, is liable for acts of negligence in the conduct of his professional work. He has a duty to possess and to use that degree of skill, competence, and learning ordinarily possessed and used by others in the same profession, under like and similar circumstances. An attorney who fails to perform his duties for his client is negligent. He is liable for damages proximately caused to the client thereby. Restatement (Second) of Torts Sec. 299 A (1965); Prosser, Law of Torts, Sec. 32 (4th Ed. 1971).
Id. at 43 (emphasis added).
On rehearing, the court remanded the cause to the trial court to allow the plaintiff the opportunity for a jury to determine whether the attorney should be liable for malpractice. The court agreed that an attorney may not be held liable for “the choice of trial tactics and the conduct of a case based on professional judgment...,” but held that an attorney is “still bound to exercise a reasonable degree of skill and care in all his professional undertakings.” 616 F.2d at 930. •
While the majority of the court, after rehearing Woodruff, held that the plaintiff might be able to show malpractice under the facts of that case, the court still referred to the need of the plaintiff to show injury or damages. The court quoted cases which would hold the attorney liable of malpractice for “loss to (his) client,” (616 F.2d at 929, emphasis added), and cited Bruce v. Baxter, 75 Tenn. (7 Lea) 477, as follows: “... and if any injury result to the client from want of such reasonable care and skill, the attorney must respond to the extent of the injury sustained.” 616 F.2d at 930, emphasis added.
The above is in harmony with an earlier decision given by the Supreme Court of the United States. That case was National Savings Bank of D. C. v. Ward, 100 U.S. 195 at 198, 25 L.Ed. 621 (1880). There the Supreme Court said:
When a person adopts the legal profession, and assumes to exercise its duties in behalf of another for hire, he must be understood as promising to employ a reasonable degree of care and skill in the performance of such duties; and if injury results to the client from a want of such degree of reasonable care and skill, the attorney may be held to respond in damages to the extent of the injury sustained... but it must not be understood that an attorney is liable for every mistake that may occur in practice, or that he may be held responsible to his client for every error of judgment in the conduct of his client’s cause. Instead of that,-the rule is that if he acts with a proper degree of skill, and with reasonable care and to the best of his knowledge, he will not be held responsible.
Id. at 198 (emphasis added).
The appellant would have us declare that any misconduct of an attorney automatically brings about forfeiture of attorney’s fees, whether the misconduct was intended or not, whether it involved a refusal to follow the dictates of the client, right or wrong, and whether damages resulted to the client or not. This is contrary to the law. Even the cases cited by appellant in Mrs.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
For the reasons stated in the thoughtful opinion of the district court, 297 F.Supp. 1356 (D.P.R. 1969), we affirm the court’s determination that the present use of the Culebra Island Naval Defensive Sea Area is within the Congressional authorization and the discretion of the President, and that such use does not constitute a taking of plaintiff’s property or freedom of movement without due process of law, the only issues raised by this appeal. We would add only a brief comment regarding the two arguments stressed on appeal.
First, appellant places great emphasis on a letter by the Secretary .of the Navy to the Senate Committee on Naval Affairs expressing the need for presidential power to create defensive sea areas “in time of actual or threatened war”. S.Rep. No. 940, 64th Cong., 2d Sess. (1917). Appellant concludes from this single instance of pertinent legislative history that the President’s power must be exercised in compliance with the standard expressed in the letter. However, it seems clear that Congress chose to confer a broader power on the President, who was empowered to create defensive sea areas when they were “necessary in his discretion for purposes of national defense.” 18 U.S.C. § 96, re-codified as 18 U.S.C. § 2152. Such statutory standard was satisfied here.
Secondly, concerning the alleged taking or improper restriction of plaintiff’s right of travel, we note that such right may be inhibited, depending on “the extent of the governmental restriction imposed” and the “extent of the necessity for the restriction”. Zemel v. Rusk, 381 U.S. 1, 14, 85 S.Ct. 1271, 1279, 14 L.Ed.2d 179 (1965). Here there exist reasonable and frequent means of access to other islands, and the restrictions which do exist are reasonably necessary and — at least as presently administered — limited to such necessity.
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MERRITT, Circuit Judge.
This is an environmental case concerning “wetlands” and the jurisdiction of the United States Army Corps of Engineers over them. The government claims that defendants, Riverside Bayview Homes, Inc., and Allied Aggregate Transportation Company, violated section 301(a) of the Federal Water Pollution Control Act, 33 U.S.C. § 1311(a) (1976), and regulations concerning “wetlands” purportedly issued under that Act. The claimed violation occurred when the defendants deposited fill material on Riverside’s land, which the government asserts is a “wetland,” without obtaining a permit from the Corps of Engineers as required by the Act. Judge Cornelia Kennedy, sitting as a District Judge, issued a permanent injunction prohibiting further filling on a large portion of Riverside’s property and a declaratory judgment holding one of the Corps regulations unconstitutional. Both parties then appealed.
On the first appeal, 615 F.2d 1363 (6th Cir.1980), this Court remanded the case for further proceedings in the District Court in light of a new regulation promulgated by the Corps. That regulation, found at 33 C.F.R. § 323.2(c) (1983), specifically altered the definition of “wetlands” relied upon by Judge Kennedy in the original District Court proceeding. We conclude that the District Court on remand erred in interpreting the new definition of wetlands to include defendant’s property and in continuing the permanent injunction under the new regulation. We also vacate as moot the declaratory judgment issued by the District Court in the first proceeding.
I. THE LAND IN QUESTION
Riverside owns approximately eighty acres of undeveloped land north of Detroit in Harrison Township, Michigan, which it had planned to develop for housing. It is located in a suburban area approximately a mile west of Lake St. Clair and south of .South River Road, roughly paralleling the Clinton River. Its southern boundary is separated from the man-made Savan Drain by two ten-acre parcels. Its western boundary is formed by Jefferson Avenue, a heavily travelled road.
Riverside’s property comprises one sixty-acre parcel and a partially adjoining twenty-acre parcel. The sixty acres running along Jefferson Avenue were actively farmed in the past. In 1916, the sixty-acre tract was platted as a subdivision, and storm drains and fire hydrants were installed. The remaining twenty-acre parcel was neither platted nor improved. In the early and mid-1950’s, some efforts were made by the owner to develop the platted subdivision. In 1960, the newly-formed Riverside Corporation bought the property. According to Riverside, its efforts to develop the property along with the surrounding area during the 1960’s were stymied by an adjacent property owner who blocked an effort to reroute a street dissecting the property, and by a local zoning, ordinance which forced it to fill the property to a specific elevation.
In 1973, unprecedented high water levels on the Great Lakes, including Lake St. Clair, located a mile east of the Riverside land, prompted emergency action by Harrison Township and the Corps of Engineers to protect area homes and businesses from water damage. Emergency measures included building a semicircular dike which dissected the twenty-acre parcel and extended southeast across the sixty-acre tract, and filling a ditch along Jefferson Avenue with dirt, thereby destroying the drainage on the western border of the property.
In furtherance of its development plans, Riverside contracted with Allied Aggregate Transportation Company in the fall of 1976 to have dirt fill hauled to the property. It was unclear whether or not the land would be subject to the Corps’ regulatory jurisdiction. Accordingly, a Riverside stockholder met with Corps personnel to discuss whether a permit must be obtained in order to proceed with filling the land. Riverside submitted an incomplete application for a permit in November, 1976.
Before the permit application had been acted on by the Corps, Riverside began placing fill on the property north of the dike. On December 22, 1976, Riverside was ordered by the Corps to cease and desist from further filling. When Riverside continued to fill, the Corps asked the United States Attorney to bring this enforcement proceeding.
On January 7, 1977, the District Court entered a temporary restraining order prohibiting Riverside and Allied from engaging in further filling, pending a full evidentiary hearing. After that hearing, which encompassed seven days of testimony, Judge Kennedy issued an opinion granting the government’s motion for a preliminary injunction. Judge Kennedy also held unconstitutional a Corps regulation requiring the processing of an application for a permit to be postponed once the United States Attorney has begun enforcement proceedings. On June 20, 1979, the District Judge issued the court’s final judgment holding a large portion of Riverside’s land to be a wetland subject to Corps regulation under the Federal Water Pollution Control Act. Judge Kennedy permanently enjoined further filling on that portion of the property until the Corps issues a permit to Riverside. At the same time, she issued an order holding defendants in contempt of court because they had continued to fill the property. The defendants were ordered to remove the fill, which they have apparently done. Since that time, Riverside’s application for a Corps permit has been processed and denied.
II. THE WETLANDS DETERMINATION
A. Statutory and Regulatory Background
The Federal Water Pollution Control Act was enacted to “restore and maintain the chemical, physical and biological integrity of the Nation’s waters.” 33 U.S.C. § 1251(a) (1976). The Act declares that “it is the national goal that the discharge of pollutants into the navigable waters be eliminated by 1985.” Id. § 1251(a)(1). Section 301 of the Act states that, except as permitted under certain exceptions, “the discharge of any pollutant by any person shall be unlawful.” Id. § 1311(a). One of the express exceptions to this rule is contained in section 404, 33 U.S.C. § 1344, which authorizes the Corps to issue permits for the disposal of dredged or fill materials into “navigable waters.”
The Act contemplates that applications for section 404 permits are to be evaluated by the Corps under regulations developed jointly by the Environmental Protection Agency and the Corps. See id. § 1344(b); 40 C.F.R. § 230 (1983). These regulations are supposed to identify the factors to be used in determining whether filling will have an adverse impact on water quality.' A person who fills or otherwise discharges pollutants into “navigable waters” without a permit subjects himself to civil or criminal penalties. See 33 U.S.C. § 1344(h)(1)(G) (violations of permit program entail “civil and criminal penalties and other ways and means of enforcement”).
The “navigable waters” which the Federal Water Pollution Control Act was meant to protect are defined in the Act as “the waters of the United States, including the Territorial seas.” Id. § 1362(7). The Act does not mention or define “wetlands.” The Corps and the EPA, however, developed regulations pursuant to the Act covering areas denominated as “wetlands” as well as the congressionally specified “navigable waters.” These regulations, including the permit procedures noted above, seek to prohibit tampering with wetlands without the express permission of the agencies.
B. The Wetlands Definition
At the time that this action was initially brought, the Corps regulation defined wetlands and provided that a permit must be obtained for filling of
Freshwater wetlands including marshes, shallows, swamps and similar areas that are contiguous or adjacent to other [sic] navigable waters and that support freshwater vegetation. “Freshwater wetlands” means those areas that are [1] periodically inundated and that [2] are normally characterized by the prevalence of vegetation that requires saturated soil conditions for growth and reproduction.
33 C.F.R. § 209.120(d)(2)(i)(h) (1976) (emphasis added).
The question before the District Court in the initial proceeding was whether the Riverside land possessed the characteristics set forth in the above definition and thus should be classified as a wetland subject to the Corps’ regulatory jurisdiction. Judge Kennedy found that the land was contiguous to a navigable water, Black Creek, which is a tributary of Lake St. Clair. Furthermore, she found that because of the type of soil found on the land, the unfilled Riverside property was “characterized by the prevalence of vegetation that requires saturated soil conditions for growth and reproduction.” These two aspects of the wetlands definition having been satisfied, the District Court focused on the question of whether the land was “periodically inundated.”
Judge Kennedy’s resolution of this issue was based on what she admitted was an unavoidably “arbitrary” interpretation of the term “periodic” as it is used in the Corps regulation. She accepted the standard dictionary definition, “flooded,” as the meaning of “inundated,” but was compelled to rely on a rough statistical plotting of the potential for flooding of the Riverside land in order to determine whether it was “periodically inundated,” or flooded on a “periodic” basis.
Judge Kennedy found that the Riverside land was rarely if ever inundated. From testimony concerning Lake St. Clair which established that a water level of 575.0 feet would be reached or surpassed only about two percent of the time, she concluded that it was difficult to ascertain whether the Riverside land south and east of the contour line of 575.5 feet was ever flooded. She explained:
The mean of the elevations on the south and east of defendants’ property is 574.6, ranging from 575.70 to 574.45. Using the monthly mean level of Lake St. Clair ... and adding six inches, the normal variation, it is immediately apparent that there have been long periods of time when none of the property was inundated by water from contiguous or adjacent navigable waters. Indeed, this has been true most of the time.
Opinion and Order Granting Motion for Preliminary Injunction in Part at 6 (emphasis added). Judge Kennedy noted that the high-water levels in the period from 1973-75 were unprecedented. From this and other statistical information, she extrapolated that “there have been periods in only 14 of the 80 years of recorded lake levels in which the monthly mean inundated the property, — or, 17% of the time,” and that “[s]ome of the higher elevations have been inundated only during the last recent unprecedented high water or have never been inundated.” Id. (emphasis added).
Despite these misgivings, Judge Kennedy found that there was sufficient evidence from which to conclude that the land had been “inundated.” Accordingly, she then turned to the question of whether that inundation was “periodic,” observing that “[t]he Court is left in the unenviable position of having to define ‘periodic’ without knowing the reason for the adoption of this standard.” Id. at 7. She found that the Riverside land at the contour line of 575.5 feet above sea level had been inundated on four to six occasions in the past eighty years. Acknowledging that there was no precedent for her analysis, Judge Kennedy reasoned:
If treating the years 1972-1975 and 1952-1953, as one occurrence, then the lake levels have exceeded 575 feet only four times (1928, 1952-1953, 1969 and 1972-1975). If the level of 574.9 feet were to be considered, the number of occurrences would increase to six ... [I]t is clear that determining the level at which the inundation would be considered “periodic” is difficult and perhaps somewhat arbitrary. The Court must choose the point at which an occurrence became periodic.. It has selected more than five. It therefore determines that the appropriate level is 575 feet, plus the half-foot of normal monthly fluctuation [of the mean high water level , of Lake St. Clair] above the mean.
Id. On this basis, the District Court enjoined Riverside from placing fill below the 575.5 foot contour line without first obtaining a Corps permit. Under this ruling, some eighty percent of the land was denominated as a “wetland,” and therefore was not usable as contemplated by the landowner without the government’s permission.
In 1977, after Judge Kennedy’s initial permanent injunction was issued, the Corps wetlands definition on which the ruling was based was repealed and replaced. Wetlands are now defined as
those areas that are inundated or saturated by surface or ground water at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. Wetlands generally include swamps, marshes, bogs and similar areas.
33 C.F.R. § 323.2(c) (1983).
In the preamble to the new regulations, the Corps explained that the wetlands definition had been changed “to eliminate several problems and achieve certain results.” The reference to “periodic inundation” was deleted because
[m]any interpreted that term as requiring inundation over a record period of years. Section 404 is intended to regulate discharges of dredged or fill material into the acquatic.system as it exists, and not as it may have existed over a record period of time.
42 Fed.Reg. 37128 (July 19, 1977) (emphasis added). The preamble goes on to indicate that the new definition “pertains to an existing wetland and requires that the area be inundated or saturated by water at a frequency and duration sufficient to support aquatic vegetation.” Id.
For similar reasons, the Corps also eliminated the term “normally” in the wetlands definition, replacing it with the phrase, “and that under normal circumstances do support.” The preamble notes that the term “normally” was used in the original version of the definition “to respond to those situations in which an individual would attempt to eliminate the permit review requirement of Section 404 by destroying the aquatic vegetation, and to those areas that are not aquatic but experience an abnormal presence of aquatic vegetation.” Id. (emphasis added). Significantly, the preamble notes that it is still the case under the new regulation that “[t]he abnormal presence of aquatic vegetation in a non-acquatic area would not be sufficient to include that area within the Section 404 program.” Id.
III. APPLICATION OF WETLANDS REGULATIONS TO FACTS
The changes in the Corps wetlands definition meant that the task before Judge Gilmore was essentially that of applying this new definition to the facts as found by Judge Kennedy in the earlier proceeding to determine whether the Riverside property below the elevation of 575.5 feet above sea level is or is not a wetland. Our order remanding this case to the District Court for further examination in light of the new regulation did not make the nature of the inquiry clear, however. We did not point out to Judge Gilmore precisely what we expected him to do.
We should have directed the District Court to consider the voluminous evidence from the seven days of testimony given earlier and to make a finding as to whether the Riverside property to the south and east of the contour line of an elevation of 575.5 feet, as it exists now, should be classified as a wetland. Instead, in the absence of clear directions, the District Judge on remand simply found from a commonsense reading of the new language that the amended regulation was “broader than its predecessor.” Presumably, his reasoning from there was that, since Judge Kennedy had found that the property was “periodically inundated,” and since it does support some aquatic vegetation, it must therefore be inundated “at a frequency and duration sufficient to support, and that under normal circumstances [does] support” wetlands vegetation.
It does not necessarily follow, however, that because an area has been flooded five times in more than eighty years that, “as it exists” now, it is “inundated at a frequency and duration sufficient to support and that under normal circumstances [does] support” wetlands vegetation. The new regulation makes clear that it is the present occurrence of inundation or flooding sufficient to support wetlands vegetation, not the mere presence of such vegetation from some other cause, that determines whether a particular area is a wetland. Thus, as we understand it, the presence of inundation on the land “as it exists” now, sufficient to cause the growth of aquatic vegetation, is necessary to satisfy the wetlands definition. Neither inundation nor aquatic vegetation would be sufficient, standing alone, to bring a piece of land within the definition. Both must be present, and the latter must be caused by the former.
Were this not so, then areas which inexplicably support some species of aquatic vegetation, but which are not normally inundated, would fall within the wetlands definition. Such a perverse result could not have been what the Corps contemplated in promulgating the regulation. Indeed, as noted earlier, the Corps expressly adverted to the situation of “areas that are not aquatic but experience an abnormal presence of aquatic vegetation” and emphasized that such lands were not intended to be covered by the regulations.
Turning now to the facts as found by Judge Kennedy, and applying our interpretation of the new wetlands definition to those facts, we conclude that the Riverside land is not a wetland. We note at the outset that Judge Kennedy did not find that the land, “as it exists” now, is inundated. Nor is there evidence in the record to support such a finding. After examining the evidence, Judge Kennedy found that the land had only been flooded on four to six occasions in the eighty years of recorded history of the area. Although flooding of such infrequency might properly be called “periodic,” it cannot fairly be said that it describes the land “as it exists.”
Judge Kennedy did find that, quoting from the old regulation, the Riverside land was characterized “by the prevalence of vegetation that requires saturated soil conditions for growth and reproduction.” Significantly, however, she found that the source of this vegetation was the type of soil found on the property and not the few instances of flooding. The evidence supports her determination that the infrequent inundation caused by the adjacent navigable water, Black Creek, was not the cause of the wetland vegetation. Thus she did not find, and on the evidence presented could not have found, that the land, as it exists now, is “inundated at a frequency and duration sufficient to support, and that under normal circumstances [does] support” the wetlands vegetation. Nor did she consider or make any findings concerning the question whether the Riverside land fits the Corps definition of an area which is technically not a wetland, because it is not inundated, but which experiences an abnormal presence of aquatic vegetation.
In the absence of evidence that the property as it exists now is frequently flooded and that the flooding causes aquatic vegetation to grow there, the government’s case is insufficient to justify a classification of this property as a wetland subject to the jurisdiction of the Corps of Engineers. The injunction is therefore vacated.
IV. NARROW INTERPRETATION OF “WETLANDS” REGULATION NECESSARY
In deciding that the District Court erred on remand in failing properly to assess the impact of the new wetlands definition upon Judge Kennedy’s earlier wetlands determination, we construe the regulation containing the definition somewhat narrowly in order to avoid serious questions concerning the validity of the definition itself under the Act. In delegating authority to the Corps under the Federal Water Pollution Control Act, Congress defined the subject matter intended to- be protected by the statute as the “navigable waters.” Section 502(7) defines “navigable waters” as “waters of the United States including the Territorial seas.” The language of the statute makes no reference to “lands” or “wetlands” or flooded areas at all.
Congress may, indeed, have meant to extend the protections of the Act beyond the straightforward definition it provided of “navigable waters.” The question, however, is how far away from “navigable waters” Congress contemplated that the regulations under the Act could drift. It is certainly not clear from the statute that the Corps’ jurisdiction goes beyond navigable waters and perhaps the bays, swamps and marshes into which those navigable waters flow. Neither is it clear that Congress intended to subject to the permit requirement inland property which is rarely if ever flooded. Nor is it clear that the statute was intended to cover a piece of property a mile inland from Lake St. Clair which has been farmed in the past and is now platted and laid out for subdivision development with the fire hydrants and storm sewers already installed.
To prohibit any development or change of such property by the landowner raises a serious taking problem under the fifth amendment. It is well established that government regulation can effect a fifth amendment taking. The rationale, as stated by Justice Brennan, is that “[pjolice power regulations such as zoning ordinances and other land-use restrictions can destroy the use and enjoyment of property in order to promote the public good just as effectively as formal condemnation or physical invasion of property.” San Diego Gas & Electric Co. v. San Diego, 450 U.S. 621, 652, 101 S.Ct. 1287, 1304, 67 L.Ed.2d 551 (1981) (Brennan, J., dissenting). Recently, in Kaiser Aetna v. United States, 444 U.S. 164, 100 S.Ct. 383, 62 L.Ed.2d 332 (1979), the Supreme Court addressed a problem markedly similar to this one and declared:
Although the Government is clearly correct in maintaining that the now dredged Kuapa Pond falls within the definition of “navigable waters” as this Court has used that term in delimiting the boundaries of Congress’ regulatory authority under the Commerce Clause, ... this Court has never held that the navigational servitude creates a blanket exception to the Takings Clause whenever Congress exercises its Commerce Clause authority to promote navigation.
Id. at 172, 100 S.Ct. at 388 (citations omitted). In Kaiser Aetna, the Supreme Court found that the government’s attempt to create a public right of access to a pond which was improved so as to be capable of supporting navigation but had always been considered private property “goes so far beyond ordinary regulation or improvement for navigation as to amount to a taking ____” Id. at 178, 100 S.Ct. at 392 (citing Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 43 S.Ct. 158, 67 L.Ed. 322 (1922)). The Court found the Kaiser Aetna petitioners’ interest in their dredged marina-style subdivision community which included Kuapa Pond “strikingly similar” to that of owners of fast land adjacent to navigable water, like Riverside, noting that there was no doubt that “when the Government wishe[s] to acquire fast lands, it [is] required by the Eminent Domain clause of the Fifth Amendment to condemn and pay fair value for that interest.” Id. at 177, 100 S.Ct. at 391. The Court concluded:
[I]f the Government wishes to make what was formerly Kuapa Pond into a public aquatic park after petitioners have proceeded as far as they have [in developing it as a private subdivision] it may not, without invoking its eminent domain power and paying just compensation, require them to allow free access to the dredged pond while petitioners’ agreement with their customers calls for an annual $72 regular fee.
Id. at 180, 100 S.Ct. at 393,
The parallels between Kaiser Aetna and this case are obvious and hardly require elaboration. We note only that we see a very real taking problem with the exercise of such apparently unbounded jurisdiction by the Corps, a problem we avoid by construing the regulation containing the amended wetlands definition as limited to lands such as swamps, marshes, and bogs that are so frequently flooded by waters from adjacent streams and seas subject to the jurisdiction of the Corps that it is not unreasonable to classify them as lands which frequently underlie the “waters of the United States.” See 2A Sutherland On Statutory Construction § 45.11, at 33-34 (C. Sands ed. 1973) (discussing presumption of constitutionality of statutes).
Accordingly, we interpret the words “inundated at a frequency and duration sufficient to support, and that under normal circumstances [does] support [wetlands vegetation]” as set forth in the amended regulation to require frequent flooding by waters flowing from “navigable waters” as defined in the Act. The definition thus covers marshes, swamps, and bogs directly created by such waters, but not inland low-lying areas such as the one in question here that sometimes become saturated with water.
V. THE DECLARATORY JUDGMENT
During the two and one-half years of litigation of the issue of the Corps’ jurisdiction over Riverside’s property, the Corps declined to process an application for a permit to fill the area in question. The agency was precluded by regulation from acting on Riverside’s application because the United States Attorney had initiated enforcement proceedings after it was discovered that Riverside was engaged in unauthorized filling. The Corps regulation provides:
If the District Engineer refers a case to the local U.S. Attorney or if criminal and/or civil action is instituted against the responsible person for any unauthorized activity, the District Engineer shall not accept for processing any application for a Department of the Army permit until final disposition of the referral action and/or all judicial proceedings, including the payment of all prescribed penalties and fines and/or completion of all work ordered by the court. Thereafter, the District Engineer may accept an application for a permit; provided, that with respect to any judicial order requiring partial or total restoration of an area, the District Engineer, if so ordered by the court, shall supervise this restoration effort and may allow the responsible persons to apply for a permit for only that portion of the unauthorized activity for which restoration has not been so ordered.
33 C.F.R. § 326.4(e) (1982) (current version as amended at 33 C.F.R. § 326.3(c)(3) & n. 2 (1983)).
Riverside asked the District Court in the initial enforcement proceeding to issue a declaratory judgment declaring this regulation to be unconstitutional as a de facto taking of Riverside’s property. In a memorandum opinion, Judge Kennedy held that the postponement of processing of Riverside’s application for a permit under the regulation “effect[s] a quasi-taking of property unless and until a person relinquishes any right the person may have to engage in litigation with the Corps of Engineers.” Opinion of the Court at 9. Moreover, Judge Kennedy held that the deferral was a sanction unauthorized by the section of the Federal Water Pollution Control Act which gives the Corps the authority to promulgate regulations to carry out its functions. Id.
Judge Kennedy interpreted the regulation as denying defendant “the right to litigate the constitutionality of a statute or regulation on peril of losing its rights to pursue its administrative adjudication remedies.” See id. Apparently, she understood the regulation to compel the defendant to choose between litigating his claim that the regulation effects an unconstitutional taking of his property, and proceeding with his application for an after-the-fact permit which, if granted, would enable him to continue with his development project.
Riverside’s opposition to the regulation postponing the permit process cannot alter the fact that nothing in the regulation now adversely affects its interests. We construed the Corps wetlands definition narrowly and concluded that Riverside’s property is not a wetland and that, therefore, the Corps has no jurisdiction over it. Riverside is now free to develop its land as it wishes. Moreover, the challenged regulation has since been amended to suggest a strong presumption in favor of processing applications for after-the-fact permits. See 33 C.F.R. § 326.3 & n. 2 (district engineer shall accept application for after-the-fact permit for unauthorized filling unless state or local enforcement action is pending, and “[tjhis exception to the general rule of accepting after-the-fact applications should be used on a limited basis, only for those cases which merit special treatment”). Therefore, the question is moot.
The problem before us clearly is not “capable of repetition, yet evading review.” See Moore v. Ogilvie, 394 U.S. 814, 816, 89 S.Ct. 1493, 1494, 23 L.Ed.2d 1 (1969) (case concerning burden placed on nomination process for statewide office was not moot but was “capable of repetition, yet evading review,” because same restriction on plaintiff’s candidacy that had adversely affected him in 1968 could do so in 1972 election); International Longshoremen’s and Warehousemen’s Union v. Boyd, 347 U.S. 222, 74 S.Ct. 447, 98 L.Ed. 650 (1954) (declaratory judgment vacated because questions of scope and constitutionality of legislation must not be decided “in advance of its immediate adverse effect in the context of a concrete case.”). We should not pass unnecessarily on the constitutionality of the Corps regulation. The declaratory judgment of the District Court is therefore vacated and the claim dismissed.
APPENDIX
. For a pictorial depiction of the property, see the Appendix to this opinion.
. The term "Territorial seas” is defined as "the belt of the seas measured from the line of ordinary low water along that portion of the coast which is in direct contact with the open sea and the line marking the seaward limit of inland waters, and extending seaward a distance of three miles.” Id. § 1362(8).
. There was evidence adduced during the evidentiary hearing which strongly indicated that the Riverside land may fit within this category of land which is "not aquatic but experience[s] an abnormal presence of aquatic vegetation.” Not only was the land farmed for many years, it has been established that there are many species of vegetation growing there now that could not be classified as purely wetlands vegetation. For example, it is significant that on cross-examination by Riverside’s attorney, the government’s main witness admitted that the "only positive knowledge” he had about the vegetation on the land was that there were cattails. See Government’s App. at 75. Furthermore, this witness testified that in addition to cattails, phragmites, marsh grasses and other wetland-type vegetation, he discovered ash, red maple, cottonwood, and sedge on the property. He admitted that these were not necessarily wetland-type vegetation. We do not find that Judge Kennedy’s finding that there was a "prevalence” of wetland-type vegetation on the property was clearly erroneous; rather, we simply note that her finding to that effect was based on the old regulation and did not go to the issue of whether the presence of wetland-type vegetation on the land was "abnormal" in the sense that it was supported not by inundation but by unusual soil conditions.
. We note that the Fifth Circuit has recently held that the Corps’ wetlands definition is consistent with the intent of the Federal Water Pollution Control Act. See Avoyelles Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897 (5th Cir.1983).
. Exhibit A, Defendant’s Memorandum of Law, United States v. Riverside Bayview Homes, Inc., No. 770041 (E.D.Mich.1977).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MOORMAN, Circuit Judge.
Petitions to review decisions of the Board of Tax Appeals by the taxpayer, the Liberty Bank & Trust Company, in No. 5867, and by the Commissioner in No. 5780.
The petitioner in No. 5867 contends that debts owing to it by the Kentucky Wagon Manufacturing Company and the Wolko Lead Batteries Company were recoverable only in part on December 31, 1921, and that deductions should have been allowed therefor from gross income for the year 1921 in the sum of $175,000. The Commissioner disallowed the deductions, and the Board of Tax Appeals sustained his ruling upon the ground that no art of the indebtedness was charged off by the taxpayer during the taxable year. The ruling of the Board was based on section 234(a) (5) of the Revenue Act of 1921 (42 Stat. 254), which provides that the taxpayer shall be allowed as deductions “debts ascertained to be worthless and charged off within the taxable year (or in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts); and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in pari.”
This statute deals with two classes of debts: Those that have become wholly worthless, and those recoverable only in part. It makes provision for the deduction of each from gross income, providing as to the first that, when “ascertained to be worthless and charged off,” a deduction therefor “shall be allowed”; and as to the second, that, when “satisfied that a debt is recoverable only in part the -Commissioner may allow such debt to .be charged off in part.” The allowance as to each class depends on the performance of a precedent act or acts. Those in the first are the ascertainment of worthlessness and the charging off, which must be done by the taxpayer, subject, of course,.to tbe review of the Commissioner as to tbe reasonableness of the ascertainment. Sherman & Bryan v. Blair, Comm. (C. C. A.) 35 F.(2d) 713; Deeds v. Commissioner, 47 F.(2d) 695 (6 C. C. A.). In the other class the precedent, act must be performed by the Commissioner. He must be “satisfied that a debt is recoverable only in part,” and, until he is, there can be no charge off, and then only with his permission. The taxpayer being under no -duty to make the charge off in this class until the Commissioner permits ( it to be done, it is sufficient to give him a right to have the Commissioner’s ruling reviewed that his claim to a charge off was made and rejected. In this case claims were presented and disallowed. Whether the disallowances by the Commissioner were because of tbe failure of the taxpayer to charge off the debts in part or were made in the exercise of the discretion which the Commissioner has does not appear. See Stranahan v. Commissioner, 42 F.(2d) 729 (6 C. C. A.) as to the extent of discretion. The Board of Tax Appeals, as we have said, based its decision upon the failure of the taxpayer- to charge off the debts in part. We think it should have considered and determined whether the Commissioner abused his discretion in not allowing the charge offs to be made.
The initial question in case Ho. 5780 is whether this court has jurisdiction and power to hear and determine the questions presented by the petition of the Commissioner. It is said that'there is no such power because there is no “ease or controversy” within the ineaning of section 2 of article 3 of the Constitution. The theory of that view is that the Board of Tax Appeals is an executive or administrative tribunal of the government superior in authority to the Commissioner of Internal Revenue, and that when the Board acted favorably to the taxpayer .on its appeal from the deficiency assessment there was an accord between the taxpayer and the highest administrative body, and no controversy remained. It is to be noted in connection with this contention that there are thirty-five reported eases, among them ■ Commissioner v. Bingham, 35 F.(2d) 503 (6 C. C. A.), And Commissioner v. Leasing & Building Co., 46 F.(2d) 2 (6 C. C. A.), in which petitions in behalf of the Commissioner to review decisions of the Board of Tax Appeals have been accepted without question. Among these eases are decisions from each of the Circuit Courts of Appeals, some of which were reviewed by tbe Supreme Court, and in none of them was the power of the Circuit Court of Appeals to review a decision of the Board of Tax Appeals upon petition of the Commissioner ever questioned or thought to he in doubt.
Whatever may have been assumed heretofore, it is, however, true that, unless a decision against the government by tbe Board of Tax Appeals presents a “case or controversy” within tbe judiciary article, there is no power of review in a constitutional court. We inquire therefore, into the statutory functions of the Board, which, as pointed out in Old Colony Trust Co. v. Commissioner, 279 U. S. 716, 49 S. Ct. 499, 502, 73 L. Ed. 918, was established by the Revenue Act of 1924 (43 Stat. 253). Under that Act it became" tbe duty of the Board to hear and decide whether deficiencies reported by the Commissioner were rightly determined. It was provided in the act that, if the Board determined there was a deficiency, the amount so determined should be assessed and paid upon notice and demand from tbe collector, and no part of the deficiency assessed by the Commissioner hut disallowed as such by tho Board could be assessed. The Commissioner, however, was given the power notwithstanding the decision of the Board, to bring a suit in a proper court against the taxpayer to collect as a deficiency the difference between his assessment and that allowed by the Board. See United States v. Cleveland Co., 42 F.(2d) 413 (6 C. C. A.). The Revenue Act of 1926 (44 Stat. 9) enlarged the original jurisdiction of the Board to consider deficiencies beyond those shown in the Commissioner’s notice if the Commissioner made claim therefor at or before tbe hearing. It further provided for a direct judicial review of the Board’s decision by the filing by either the Commissioner or tho taxpayer of a petition for review. Thus there is full statutory authority for the review here under consideration, and the sole question is whether it was within the power of Congress to confer such authority upon the courts.
The question would seem to depend first upon who is the United States’ “authorized official” or “its representative” Cor the purpose of asserting its right to tho payment of the tax. If the Board is such representative, there is, of course, no controversy between the government and taxpayer after the Board has made a detei mination in favor of the taxpayer. But the sole function of the Board “consists in reviewing, on appeal, determinations of the Commissioner under the revenue laws.” It is not concerned with the collection of taxes and “is not a part of the Bureau of Internal Revenue,” but is “an independent agency * * k ‘in the executive branch of the government.’ ” Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 564, 48 S. Ct. 587, 591, 72 L. Ed. 985. While it is not a court but is an executive or administrative board, it nevertheless exercises “appellate powers which are judicial in character.” Goldsmith v. United States Board of Tax Appeals, 270 U. S. 117, 46 S. Ct. 215, 70 L. Ed. 494; Blair v. Oesterlein Mach. Co., 275 U. S. 220, 227, 48 S. Ct. 87, 89, 72 L. Ed. 249. The Commissioner, on the other hand, has “general superintendence of the assessment and collection of all duties and taxes imposed by any law providing internal revenue.” 26 USCA, § 2. He is designated by Congress to represent the government before the Board and is a party to the proceeding before it. Thus, when a taxpayer seeks a review before the Board of a deficiency assessment, the controversy is between tho taxpayer and the government as represented by the Commissioner, and the Commissioner by statutory designation thereafter continues as the government’s representative to prosecute its claims from adveráis decisions of the Board. 26 USCA § 1224(a).
It makes no difference that the Board is an executive or administrative tribunal. There are certain matters involving public rights which “admit of legislative or exec-' utive determination, and yet from their nature are susceptible of determination by courts.” Den ex dem. Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 284, 15 L. Ed. 372; Fong Yue Ting v. United States, 149 U. S. 698, 714, 13 S. Ct. 1036, 37 L. Ed. 905; Ex Parte Bakelite Corporation, 279 U. S. 438, 451, 49 S. Ct. 411, 73 L. Ed. 789. Tho mode of determining matters of this class is completely within congressional control. Congress may reserve the power to itself, may delegate it to executive officials, or may commit it to judicial tribunals. Ex Parte Bakelite Corporation, supra. Tho latter course can only be adopted as to constitutional courts in matters which take such form that tho judicial power is capable of acting upon them. That power is capable of acting when there are parties whose adverse contentions are submitted to the court in the form proscribed by law, and where the determination involves neither advisory nor executive action. In re Pacific Ry. Commission (C. C.) 32 F. 241, 255; Osborn v. Bank of United States, 9 Wheat. 738, 6 L. Ed. 204. In pa-ssing upon matters such as are involved in this case; the Board exercises functions similar to those exercised by a trial court in a. law case without a jury. Phillips v. Commissioner, 283 U. S. 589, 599, 51 S. Ct. 608, 75 L. Ed. 1289. In our opinion, they aro matters susceptible of judicial determination. Tho order for reargumont in the Old Colony Trust Co. Case, supra, recited, among other things, that the court especially desired the assistance of counsel in respect to the question: “Was there power in Congress to confer jurisdiction upon the Circuit Court of Appeals to review action by the Board of Tax Appeals?” The question was not limited to reviews at the instance of the taxpayer, and in holding' that such power existed in the case then under consideration the court said: “In tho case we have here, there are adverse parties. The United States or its authorized official asserts its right to tho payment by a taxpayer of a tax due from him to the gov-eminent, and the taxpayer is resisting that payment or is seeking to recover what he has already paid as taxes when by law they were not properly due. That makes a case or controversy, and the proper disposition of it is the exercise of judicial power.” It is true that in that ease the Board of Tax Appeals had not decided for the taxpayer, but, as already pointed out, that Board is an “independent agency” whose sole function “consists in reviewing, on appeal, determinations of the Commissioner under the revenue laws.” It is not charged with the duty of assessing or collecting taxes but with deciding controversies between the taxpayer and the authorized representative of the government, the Commissioner of Internal Revenue. The position of the Board is analogous to that of. the Board of Appraisers under the Act of June 10, 1890 (26 Stat. 131), That act gave the collector of customs and the Secretary of the Treasury the right to have the decision of the Board of Appraisers as to certain matters reviewed in the Circuit Court. It was never suggested in any of the eases arising under that act that, when the Board of Appraisers decided such matters in favor of the importer, there remained no cognizable controversy for the courts. United States v. Klingenberg, 153 U. S. 93, 14 S. Ct. 790, 38 L. Ed. 647; United States v. Passavant, 169 U. S. 16, 18 S. Ct. 219, 42 L. Ed. 644; United States v. Lies, 170 U. S. 628, 636, 18 S. Ct. 780; 42 L. Ed. 1170.
The questions involved in Federal Radio Commission v. General Electric Co., 281 U. • S. 464, 50 S. Ct. 389, 390, 74 L. Ed. 969, were “purely administrative,” and, while the court held that it could not review such questions, it nevertheless pointed out that the proceedings there under consideration were wholly unlike proceedings under the Revenue Act of 1926 “on a petition for the review of a decision of the Board of Tax Appeals,” saying: “For, as this court heretofore has pointed out, such a petition (a) brings before the reviewing court the United States or its representative on the one hand and the interested taxpayer on the other, (b) presents for consideration either the right of the United States to the payment of a tax claimed to be due from the taxpayer or his right to have refunded to him money whieh he has paid to satisfy a tax claimed to have been erroneously charged against him, and (c) calls for a judicial and binding determination of the matter so presented — all of whieh makes the proceeding a case or controversy within the scope of the judicial power as defined in the judiciary article” — citing the Old Colony Trust Company Case, supra. Nowhere in that case nor in the Old Colony Company Case does it appear that the controversy is any the less a controversy within the judiciary article though the petition to review the decision of the Board of Tax Appeals be filed by the United States through its official representative rather than by the taxpayer. There being a controversy in this case between the taxpayer and the government as to the right of the government through its authorized representative to assess and collect, the tax, and the Board of Tax Appeals being an independent agency set up to review the action of the Commissioner in making the assessment, we can see no reason why a decision by the Board adverse to the Commissioner’s contention does not present a ease or controversy between the taxpayer and the government within the scope of the judiciary article. We accordingly hold that the right exists in this court to review the decision of the Board upon the petition of the Commissioner.
In its returns for 1916 to 1919, inclusive, the taxpayer charged off and reported certain debts as worthless. Due allowances were made for these debts by the Commissioner in the assessment of taxes for those years. Upon the payment of the debts in whole or in part in 1920 and 1921, the Commissioner treated the amounts received as a part of gross income. The Board of Tax Appeals reversed this ruling, holding to which there were dissents, that these payments were not a part of gross income for the years received because they were not in fact ascertained to be worthless for the years for which they were so reported and charged off. The opinion proceeded on the theory that the mistakes made in claiming and allowing the deductions for prior years could not be corrected by crediting the amounts collected to income in the year of collection. The Commissioner contends that the taxpayer, having asserted in its returns for the former years that the debts were ascertained to be worthless and charged off, and having received the benefit of such assertion, is now estopped to deny its truth to the prejudice of the government. The taxpayer contends, first, that the faets of the ease do not call for the application of equitable estoppel; and, second, that even if they did, the debts when collected were not income, but were return of capital.
It is said that it was the duty of the Commissioner, before allowing the deductions in the former years, to exercise reasonable diligence to discover whether the debts were worthless, and if he had done so, he could have ascertained that they were not. While it may be conceded that the Commissioner may not blindly accept every statement which a taxpayer makes as to a fact, and by acting- thereon preclude the taxpayer from showing at some other time that the statement was mistakenly made, we cannot assent to the view that a taxpayer which has been allowed a deduction for a debt, on its statement under oath that the debt has been ascertained to be worthless, is not estopped thereafter from denying the truth of the statement to the prejudice of the government. The Commissioner of necessity does and must rely largely upon the representations of the taxpayer, and, in order to estop the taxpayer from assuming a contrary position, he is not compelled io look with suspicion upon all such representations and himself examine, or cause to be examined, the financial condition of all the taxpayer’s debtors. It is the duty of the taxpayer to deal fairly and truthfully with the government. The taxpayer in this case was in a better position to ascertain the facts as to the value of debts owing to it than was the government, and it cannot now say that the government, by the exercise of reasonable care, ought to have done what it failed to do. The officers of the government charged with the duty of assessing and collecting taxes have the right to assume that a taxpayer will do his duty, and we think it is to be presumed from the fact that these deductions were allowed for the years in which they were claimed that the Commissioner relied upon the taxpayer’s sworn statements that the debts were worthless. It is also to he presumed, in the absence of evidence to the contrary that the government was prejudiced by such reliance, for it is obvious that a deduction from gross income reduces the net income subject to taxation. The purpose which the statute has in view in authorizing deductions for bad debts is to permit the taxpayer to reduce his taxable income. It is fair to infer from the fact that deductions wore claimed and allowed for these debts in former years, nothing else appearing, that there was a consequent reduction in taxable income.
Even if the taxpayer is not estopped from asserting that there was -no ascertainment of worthlessness for the former years, we are of opinion that the amounts received in payment of the debts were chargeable to gross income for the years in which they were received. On this point the ease is controlled, it seems to us, by the principles announced in Burnet v. Sanford & Brooks Co., 282 U. S. 359, 51 S. Ct. 150, 75 L. Ed. 383, where a taxpayer sustained losses on a contract which wore deducted from, income for the year in which they were sustained. These losses were subsequently recovered, and the court held that the recovery was a part of gross income when received, notwithstanding it “equalled, and in a loose sense was a return of, expenditures made in performing the contract.” This accords with the Department’s interpretation of the statutes. The regulations promulgated under section 213 (a) and section 233(a) of the Revenue Act of 1921 (42 Stat. 238, 254) provide tha,t bad debts, charged off because determined to be worthless, which are subsequently recovered, constitute income for the year in which recovered. Like regulations were promulgated under corresponding provisions of the Revenue Acts of 1916 and 1918 (39 Stat. 756; 40 Stat. 1057), and with these earlier regulations in effect Congress enacted sections 213(a) and 233(a) of the Revenue Act of 1921 in substantially the same language as the earlier acts. The same language was incorporated into the succeeding Revenue Acts of 1924, 1926, and 1928. It must be taken as settled that Congress was cognizant of the interpretation which the Treasury Department had put on the Revenue Acts of 1916 and 1918, and yet, with that interpretation extant, the provisions to which it applied were re-ena.cted in 1921. If such interpretation had not been consonant with the intent of Congress, it is reasonable to suppose that it would have modified this construction in the act of 1921, or in the later acts. Copper Queen Consol. Mining Co. v. Territorial Board of Equalization of Arizona, 206 U. S. 474, 27 S. Ct. 695, 51 L. Ed. 1143; Heiner v. Colonial Trust Co., 275 U. S. 232, 48 S. Ct. 65, 72 L. Ed. 256. In view of Burnet v. Sanford & Brooks Co., supra, we hold that it is permissible under the Sixteenth Amendment to credit to gross income the recoveries on debts for which deductions were allowed in former years.
The orders in both cases are reversed and the causes remanded for further proceedings consistent with this opinion.
The provision as to deductions for “debts ascertained to be worthless and charged off” is the same provision found in the Revenue Act of 1918, § 284 (a) (5), 40 Stat. 1078, since which such deductions have been allowed. That act, however, did not provide for addition to reserve for bad debts nor for a charge off of the unrecoverable part of a debt. Theso were first provided for in the Revenue Act of 1921.
First Circuit: Commissioner v. Angier Corporation, 50 F.(2d) 887; Commissioner v. Old Colony R. Co., 50 F.(2d) 896.
Second Circuit: Blair v. Dustin’s Estate, 30 F. (2d) 774; Commissioner v. Adolph Hirsch & Co., 30 F.(2d) 645; Commissioner v. City Button Works, 49 F.(2d) 705; Commissioner v. Field, 42 F.(2d) 820; Commissioner v. Godfrey, 50 F.(2d) 79; Commissioner v. Gong Bell Mfg. Co., 48 F.(2d) 205; Commissioner v. New York Trust Co., 54 F.(2d) 463; Remington Rand, Inc., v. Commissioner, 33 F.(2d) 77.
Fourth Circuit: Burnet v. Hanlon, 51 F.(2d) 453.
Fifth Circuit: Blair v. Stewart, 49 F.(2d) 257; Lucas v. Baucum, 50 F.(2d) 806; Lucas v. Hunt, 45 F.(2d) 781; Lucas v. Colmer-Green Lumber Co., 49 F. (2d) 234.
Seventh Circuit: Commissioner v. Langwell Real Estate Corp., 47 F.(2d) 841; Commissioner v. McCormick, 43 F.(2d) 277, reversed on the merits by the Supreme Court, 283 U. S. 784, 51 S. Ct. 343, 75 L. Ed. 1413; Commissioner v. Wright, 47 F.(2d) 871.
Eighth Circuit: Blair v. Byers, 35 F.(2d) 326; Burnet v. Jones, 50 F.(2d) 14; Burnet v. McDonough, 46 F.(2d) 944; Commissioner, Burnet v. Morsman, 44 F.(2d) 902 (reversed on the merits, 283 U. S. 783, 51 S. Ct. 343, 75 L. Ed. 1412); Lucas v. St. Louis National Baseball Club, 42 F.(2d) 984.
Ninth Circuit: Blair v. Roth, 22 F.(2d) 932; Burnet v. Bank of Italy, 46 F.(2d) 629; Burnet v. First Nat. Bank of Fresno, 46 F.(2d) 631; Burnet v. North American Oil Consolidated, 50 F.(2d) 752; Burnet v. Pacific S. W. Trust & Savings Bank, 45 F.(2d) 773; Burnet v. San Joaquin Fruit & Investment Co., 52 F.(2d) 123; Commissioner v. Garber, 50 F.(2d) 588; Commissioner v. Hind, 52 F.(2d) 1075.
Tenth Circuit: Commissioner v. Moore, 48 F.(2d) 526.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
After a full evidentiary hearing the District Court for the Northern District of Oklahoma denied the petition of Zeugin, a state prisoner, for a writ of habeas corpus. The decree of the court, however, contained further provisions and orders that the state district court should appoint an attorney for Zeugin, allow him to appeal his judgment of conviction in forma pauperis, furnish a transcript in aid thereof, and also ordered the Oklahoma Court of Criminal Appeals to entertain such appeal out of time. This appeal is taken by state authorities.
The court below exhausted its jurisdiction upon denial of Zeugin’s petition for a writ of habeas corpus. It had no further power. Fay v. Noia, 372 U.S. 391, 83 S.Ct. 822, 9 L.Ed.2d 837.
The ease is remanded with directions to vacate the affirmative provisions of its order.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
DUFFY, Circuit Judge.
This is a petition to review a decision and order issued by the National Labor Relations Board (Labor Board) under § 10(f) of the Labor Management Relations Act, 1947, 61 Stat. 136, 29 U.S.C.A. §§ 141-166, and a cross-petition by the Labor Board for enforcement of that order.
The instant case was designated before the Labor Board as No. 4-CA-1576. The Board issued an order requiring United Insurance Company of America (United) to bargain collectively with Insurance Agents’ International Union, AFL-CIO (Union) as the collective bargaining agent for the “Licensed Debit Agents” who serve United in Pennsylvania.
On July 22, 1953, Local No. 5, Insurance Workers of America, CIO, filed a petition with the Labor Board seeking certification as collective bargaining agent for United’s debit agents operating in Philadelphia. This proceeding was designated Case No. 4-RC-2052. On August 26, 1953, Insurance Agents’ International Union, AFL, filed a petition seeking certification as collective bargaining agent for United’s debit agents in Harrisburg, Pittsburgh and Hanover, Pennsylvania. The designation of this proceeding was Case No. 4-RC-2110. These two petitions were consolidated for a hearing which was held on October 12 and 13, 1953.
In a decision dated May 11, 1954 (108 NLRB 843) the Board held that the debit agents were employees of United rather than independent contractors. The Board further held that the appropriate bargaining unit consisted of all debit agents serving United throughout the state of Pennsylvania. Since the CIO Union did not wish to appear on a ballot for a state-wide unit, its petition for certification was dismissed by the Board. On May 28, 1954, the AFL Union withdrew its petition for certification. No election was held. No further proceedings were had in these cases.
Two and a half years after the original certification petitions were voluntarily dismissed and withdrawn respectively, the present Union filed a petition seeking certification as collective bargaining agent for all the debit agents serving United in Pennsylvania. An agreement was entered into between United and the Union for a consent election.
An election and a re-run election were held. The Union won the re-run election and on May 7, 1957, the Acting Regional Director of the Labor Board certified the Union as collective bargaining agent for all debit agents serving United’s industrial insurance policies in Pennsylvania. United refused to bargain, claiming it was under no obligation to bargain with the Union because the “licensed debit agents who work in Pennsylvania * * were and are independent contractors and not employees within the meaning of the Act.”
United is an Illinois corporation engaged in the insurance business. It issues commercial and industrial life, health and accident, and hospitalization insurance policies. By Pennsylvania law, industrial life insurance is sold in policies of less than $1000 on a weekly premium basis. Debit agents are engaged primarily in selling and collecting premiums on industrial life insurance policies issued by United. However, they, at times, collect premiums on other types of insurance policies issued by United.
In order to sell insurance, an agent must be licensed by the state. The license authorizes him to sell specific types of insurance for a specific company. However, some agents are licensed to sell insurance for more than one company.
The principal issue litigated at the hearing before the Labor Board was whether the debit agents were employees of United or independent contractors. In many respects, a debit agent has the attributes of an independent contractor. After being introduced to his initial policy holders by his superintendent, he is largely on his own. He sets his own hours of work and work days. He pays his own expenses such as transportation, advertising, postage and gifts to policy holders or prospects.
On the other hand, there are a number of aspects of the duties of debit agents which might indicate their status is that of employees of United. The Labor Board so found in both the 1954 Proceedings and in the instant case. However, we do not reach that question. We are met with a threshold question of whether United has been denied procedural due process.
It is true that in the 1954 Proceedings (4-RC-2052 and 4-RC-2110) the Labor Board determined the debit agents were employees of United, but United had no opportunity to have that adverse decision reviewed. The petition of one Union was dismissed because that Union did not wish to appear on a ballot for a statewide election, and the other Union, with the Labor Board's consent, withdrew its petition before an election was held. Yet, two and a half years later, a Board consisting almost completely of different members than those who considered the 1954 Proceedings, gave binding effect to the earlier Board decision.
The Labor Board is a continuing body. Changes in membership are usually of no moment as to decisions made by the Board. But the trial examiner set the tempo of the instant proceedings when he took the position that he was bound by the Findings of Fact made by the Labor Board in the 1954 Proceedings. He did not make any findings or rulings of his own, nor express an opinion on the basic question of whether debit agents were employees of United within the meaning of the Act. In its final order, the Labor Board approved the examiner’s rulings.
We hold the decision of the Labor Board in the 1954 Proceedings could not serve as a substitute for evidence in the instant proceeding. We approve the rationale of the decision of the District Court for the District of Columbia (Connecticut Light & Power Co. v. Leedom, D.C.1959, 174 F.Supp. 171). The Court there said, at page 174: “ * * * And, as indicated by the defendant, the Board itself has held that a prior Board determination of employee status is not binding in future representation proceedings, especially where, as here, there is no bargaining history (Citing cases). A fortiori, a prior Board determination of employee status in a representation proceeding would not be binding in a future unfair labor practice proceedings.”
The order of the Labor Board must be and is set aside and remanded for a full hearing and decision based upon a consideration of all relevant evidence. The cross-petition of the Labor Board for enforcement of its order is denied.
. These cases will be referred to as “The 1954 Proceedings.”
. Paragraph 13 of that Agreement provided: “By consenting to this Agreement (United) does not waive its position that licensed debit agents of United Insurance Company of America are independent contractors and not employees but waives the right to raise such issue in these proceedings.”
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
BARNES, Circuit Judge.
Appellants Walker and Goldheimer, together with defendants Wilson, Medina and Mendez, were indicted on two counts of violating Title 21 United States Code Annotated, §§ 174, 176. The first count charged that beginning on or about July 13, 1960, and continuing to August 30, 1960, appellants together with other named defendants conspired together to knowingly and unlawfully receive, conceal, transport and facilitate the concealment and transportation, and sell and facilitate the sale, of heroin which, the defendants knew had been imported into, the United States contrary to § 173, Title 21, United States Code Annotated; to knowingly smuggle and clandestinely introduce into the United States from Mexico, heroin with intent to defraud the United States (which merchandise should have been invoiced prior to importation into the United States) in violation of § 174, Title 21, United States. Code. The second count charged that during the same period appellants, and' other defendants, violated the same law with respect to marihuana (21 U.S.C.A. § 176)
Appellants pleaded not guilty to both counts and were tried by jury.
The jurisdiction of the district court was found upon 18 U.S.C. § 3231. This court has jurisdiction to hear the appeal and review the judgments under the provisions of 28 U.S.C. §§ 1291 and 1294.
Facts
Because of alleged insufficiency of the evidence to support each conviction, it becomes necessary to consider it in some detail.
James R. Webster, a special employee of the Federal Bureau of Narcotics, testified that he met Goldheimer in a jail in Long Beach, California, in the latter part of May 1960, that Goldheimer told him that he had been to Mexico, that he had narcotics sources there and that he had previously imported marihuana from Mexico to New York and that he had just returned from Mexico not long prior to his arrest, and that he had an associate or friend who had a boat and that they were intending to import a large quantity of marihuana “up to this area”; that they had the “contacts on the Mexican side ‘all lined up.’ ” Webster further testified that he met Donald Wilets, an agent of the Federal Bureau of Narcotics, on June 3, 1960, and on June 23, 1960, and outlined to Wilets the conversations he had with Goldheimer.
On June 29, 1960, Webster met Goldheimer and Walker and was asked, by Goldheimer, if he wanted to see the boat. While on the yacht Goldheimer (Walker not being present) showed Webster certain nautical charts and told him that he and Walker had one chart on which they had worked out a course to some point below Ensenada with a landing area where “a transshipment could be made of the narcotics on board the vessel.” During a conversation that night, Walker stated that the best plan, and what he intended to do, was to have the narcotics wrapped in waterproofed packages, compressed, and put into sail bags (which are canvas bags that are put on or below decks when the ship is at sea, and which are usually empty when the sails are being used). Walker also stated that he was not absolutely sure of the customs formalities in returning from a foreign run on a yacht and that he was going to check into it. In discussing finances Goldheimer stated that he had some money on deposit with one Bryce Wilson in Guadalajara; that if their venture was successful Goldheimer, Walker, Wilson and Webster were each to receive twenty-five per cent of the total profits above expenditures and that Webster was to put some money into the enterprise depending on the final amount of narcotics that was to be handled.
On June 27, 1960, Webster had suggested to Goldheimer that he meet his financial backer. Goldheimer had previously expressed a desire to meet him. On July 13, 1960, Webster and Wilets met Goldheimer at a restaurant on the Sunset Strip and Goldheimer told Wilets that there were narcotics available through his sources and that a source of transportation, a yacht, was readily available.
On July 14, 1960, Goldheimer, Walker, Webster and Wilets, met together at a restaurant and then went for a ride during which Goldheimer asked Webster and Wilets how the plan “looked” and Walker asked if Wilets were going to “front any money.”
On July 28, 1960, Webster met Goldheimer who said he would be ready to go to Mexico the following day and requested Webster to make all the arrangements. Arrangements were made and on the next day Wilets drove Webster out to pick up Goldheimer and then, drove Webster and Goldheimer to the airport. The conversation in the car concerned bringing the matter “to a head” and obtaining a clear commitment down below on what they were supposed to get. Webster and Goldheimer deplaned at Guadalajara but they could not find Wilson there, and Goldheimer then left Guadalajara and flew to Puerto Vallarta, and returned the following day with Wilson. Goldheimer told Webster that Wilson had spent his money and that they would go to the Jalisco State Jail in Guadalajara the following day to meet with one of the sources of supply. They went to the prison where they met an inmate named Talaveras with whom they discussed the availability of heroin; it was learned that marihuana was available in a week or two but that Talayeras did not know about the heroin but that he would send someone out to see about it. One Ramundo was contacted and he stated that there was a kilogram of heroin available in a week or two and that the price would be $10,000. Webster said the price was too high but Goldheimer and Wilson said that it was a fair price and Goldheimer also stated, “Well that’s the price its always been.” Webster and Goldheimer returned to their hotel with Wilson and when Goldheimer went with Wilson to the hotel at which Wilson was stopping, Webster called Wilets and outlined what had happened in the jail. Webster, Goldheimer and Wilson returned to the jail a few days later and Webster stated that $10,000 would be acceptable but that he would want a firm delivery date and Ramundo stated that there would be a kilo available on August 14, which could be held until August 21. Goldheimer suggested that the heroin and marihuana should be bought at one time for one delivery on the yacht and Talaveras said that the marihuana would be available at the same time as the heroin. Ramundo then gave Wilson, Webster and Goldheimer the name and address of a man outside of the prison whom he said was the heroin and opium connection. Ramundo s “connection” was a man named Medina and his name and address were written by Ramundo on a slip of paper which he gave to Wilson.
After leaving the jail the plans for delivery were discussed in Guadalajara by Wilson, Goldheimer and Webster and Wilson said he would go back to his home and that he would return to Guadalajara on August 14, at which time he would meet Medina to get a sample of the heroin and that he would then forward a sampie to Webster in the United States. Goldheimer said that nothing should be done about the marihuana until the heroin was obtained so that it could be put together in one package and one delivery could be made. It was agreed that Goldheimer and Webster would return to Guadalajara on August 21, after having received the heroin sample in the United States, and that in the meantime Wilson would remain in Guadalajara and see about getting the marihuana together and starting to package it. Goldheimer said he would contact Walker to arrange for a final delivery of the heroin and the marihuana by them to Walker in Ensenada. Webster stated that as to the payment for their trip to Mexico, Goldheimer had given him a $100 bill but said that he was a little short and Webster paid the remaining $37.50 for the tickets and that in addition he had purchased lunch for Goldheimer several times in Mexico but that he had given him no other funds. Webster and Goldheimer returned to the United States together on August 4, and they were met at the airport by Wilets. Goldheimer told Wilets that arrangements had been made to pick up both heroin and marihuana in Guadalajara on August 21, and that it had been decided to make it a package deal so that the heroin would not be imported without the marihuana and the price was $10,000.
Another meeting was held between Webster, Walker, Goldheimer and Wilets on August 10, and after a cup of coffee in a restaurant they drove around and discussed the arrangements that had been made. Due to the fact that Goldheimer had to make a court appearance and would not be able to return to Guadala jara on August 21, alternate arrangements had to be made and it was decided that Webster and Wilets would go to Mexico to receive delivery. Webster
could then return to the United States on August 22 and Goldheimer could follow them down in order to transport the narcotics from Guadalajara to Ensenada. During the conversation Wilets wanted to know how the marihuana was to be packed and Walker said it was to be packed as tightly as possible and wrapped in waterproofed containers so that just in case it was necessary to kick them overboard it could be done, although he (Walker) .envisioned no problem. Walker also stated that he would be ready on twenty-four-hour notice to meet Webster or Wilets or any of the coconspirators at a pick-up point in Lower California. He asked for an advance of $250 to defray the costs of renting a boat but he did not receive this sum. On August 18, Webster returned to Mexico; driving to Tijuana with Wilets, then flying on to Guadalajara alone. But when he reached Guadalajara he did not find Wilson, so he left by plane the next day for Puerto Vallaría where he located Wilson. Wilson would not return to Guadalajara with Webster as he stated that he had to go to Jalapa and Webster then accompanied Wilson and his wife to that town. Webster inquired why nothing had been done and why no sample had been received, and Wilson stated that he did not have the funds to stay in Guadalajara but that he had gone there anyway and found that the heroin which he thought was available was not available; that he had met with Medina concerning this; and that he was returning to Jalapa to wait for a letter from Medina stating when the heroin was available. Wilson returned to Guadalajara with Webster where they met Agent Chappell of the United States Bureau of Narcotics. Wilson told Chappell and Webster that he was sorry the deal had not gone off as originally scheduled and that he did not think that it was quite final enough to convince the people from whom they were buying. Wilson said that now that Chappell and Webster were both on the scene he (Wilson) would get everything rolling at once. Wilson suggested that he and Webster go back to the penitentiary to see Talaveras who was the contact man for Medina so they could once again talk to Medina. Talaveras sent them to Medina and Wilson, Chappell and Webster had a discussion with Medina at a bar in Guadalajara in which Medina stated that he was sorry he had not made the delivery but that he did not quite believe the whole thing was real and that he thought that somebody was trying to get a kilo of heroin reserved in case he could raise the money; but that since the parties were on the scene Medina would be able to supply the heroin on one week’s notice. Wilson inquired whether it would be possible to get the heroin before one week, but Medina said they would have to get the opium from the fields and process it through their laboratory to make the heroin and that it would take about a week; Medina said there was no problem with the marihuana. A meeting was arranged for two days later so that Chappell, Wilson, Webster and Medina could talk to the man who was the grower and who supplied the opium. His name was Mendez and the meeting was held at a hotel in Guadalajara; Wilson was not present at this meeting. At the meeting Mendez told Chappell that he had the opium but that it would take about a week to make it into heroin. Chappell got into a disagreement with Medina and Mendez. The latter wanted Chappell, Wilson and Webster to go to Uruapan (an Indian village about one hundred miles from Guadalajara, up in the mountains) because they were not too sure that the others were not federal agents and they were worried about federal agents in Guadalajara and also did not want to take the chance of being highjacked by other entrepreneurs. Chappell took the position that he did not want to take the chance of being in a remote Mexican village with large sums of money. It was finally decided that Wilson would go with Medina and Mendez to Uruapan and would accompany them to the farm to inspect the narcotics. At the meeting the delivery date was set for August 28 and Chappell and Webster were to wait in Guadalajara for a telephone call from Wilson which came late on the night of the 28th.
On that night Chappell and Webster accompanied by Mexican narcotics agents drove to Uruapan. On the morning of the 30th they met Wilson in Uruapan and Wilson told Chappell that there was 500 kilos of marihuana and 15 kilos of opium at Mendez’s farm and that Mendez had brought five kilos of opium to Uruapan to show that the narcotics were available.
Webster, Wilson, Chappell and a Mexican narcotics agent then proceeded to a hotel room where Mendez and Medina were present; Chappell requested to see the narcotics and Mendez left the room and returned with a shopping bag which he put on the bed and from which he extracted a shoe box. Chappell looked at the contents and confirmed that it was opium and then went in to brush his teeth, extracted a revolver from a handbag and placed Wilson, Medina and Mendez under arrest. The opium seized at that time weighed approximately two kilos.
Under cross-examination Webster testified that Goldheimer had given him his telephone number while they were in jail together in Long Beach; also he reaffirmed his testimony that when Goldheimer had shown him certain charts or maps on the yacht he had displayed one to him and said: “We have one all set up.” As to his discussion with Wilets, he stated that Wilets specifically instructed him to appear to go along with Goldheimer “but not to lead him.” He was told to contact Goldheimer but was instructed to “let them make the first move.” Webster stated that he was told by Wilets after he had described the conversation which he had had with Goldheimer and Walker, that “if there is a conspiracy I am to go along with it; but that I wasn’t to attempt to build a case.”
Corroborative testimony was given by Agent Chappell, agent in charge of the Los Angeles office of the Federal Bureau of Narcotics, and Agent Wilets. Appellants Goldheimer and Walker testified in their own behalf.
At the conclusion of all testimony, both sides rested; the court instructed the jury; and, after deliberation, the jury returned verdicts of guilty as charged in each count against each appellant. A judgment of twenty years was entered on both counts, to run concurrently, against each appellant. From the verdict and judgment, appellants appeal to this court.
Specification of Errors
Appellant Goldheimer contends the following errors were committed by the trial court:
“1. The Court erred in denying defendant and appellant’s motions to grant a judgment of acquittal and in denying the motions for new trial. Entrapment was conclusively proven.
“2. The defendant and appellant was denied a fair trial by reason of incidents occurring during the course of the trial, and particularly, the instruction of the trial court on the question of entrapment.
“3. As a matter of law, the guilt of the defendant was not established. The evidence was not sufficient, even if the evidence by all of the Government’s witnesses is to be fully believed, as must be the situation here.”
Appellant Walker contends the following errors were committed by the trial court:
“1. The Court erred in denying defendant and appellant’s motion to grant a judgment of acquittal and in denying the motion for a new trial.
“2. The evidence was insufficient to support the verdict against Appellant Walker.
“3. The defendant and appellant was denied a fair trial by reason of rulings made during the course of the trial and particularly the instruction of the trial court on the question of entrapment which was an improper statement of the law.
“4. That the Court erred in refusing to consider the affidavits filed in support of the motion for new trial, particularly since the misunderstanding set forth therein was occasioned by the improper instructions of the Court on the law of entrapment.
“5. The Court erred in admitting testimony of Agent Chappell whose testimony related incidents which were beyond any schemes or plans known to Appellant Walker.”
I
The Defense of Entrapment
Appellants rely on two leading Supreme Court cases to support their argument that the law of entrapment is applicable to their cases.
The first is Sorrells v. United States, 1935, 287 U.S. 435, 53 S.Ct. 210, 77 L.Ed. 413. The facts of that case clearly distinguish it from the instant case. In Sorrells the Court reversed a conviction, holding that the district court was in error when it refused to submit the defense of entrapment to the jury, and held that there was no entrapment as a matter of law. in the instant case, the district court did submit the issue to the jury under the principles enunciated in Sorrells, and even made reference, as an example, to the facts of the Sorrells case. The record supports appellee’s contention that this issue was submitted to, and determined by, the jury. Thus, Sorrells v. United States, supra, is not in point.
The second case cited by appellants is Sherman v. United States, 1958, 356 U.S. 369, 78 S.Ct. 819, 2 L.Ed.2d 848. In Sherman the facts clearly indicate that entrapment was shown as a matter of law. There the defendant was not “in the trade” and attempted to avoid narcotics; i. e., he repeatedly refused to discuss narcotics with the government’s informer. The two met while supposedly taking medical treatment for addiction. The informer, a supposed addict, appealed to the sympathy of the defendant, a former addict who was trying to cure himself of the habit. The informer gradually wore the defendant’s resistance down. The defendant finally consented to the scheme offered by the informer. In Sherman, the Court stated, in holding that entrapment was established as a matter of law, that it was not choosing between conflicting witnesses, nor judging credibility; but was reaching its conclusion from the undisputed testimony of the prosecutor’s witnesses. The Court, in the Sherman case, supra, stated:
“It is patently clear that petitioner was induced by [the informer].— The informer himself testified that, . believing petitioner to be undergoing a cure for narcotics addiction, he nonetheless sought to persuade petitioner to obtain for him a source of narcotics. In [the informer’s]— own words we are told of the accidental, yet recurring, meetings, the ensuing conversations concerning mutual experiences in regard to narcotics addiction, and then of [the informer’s] — resort to sympathy. One request was not enough, * * * additional ones were necessary to overcome, first, petitioner’s refusal, then his evasiveness, and then his hesitancy in order to achieve capitulation. — [The informer] not only procured a source of narcotics but apparently also induced petitioner to return to the habit. Finally, assured of a catch, [the informer]— informed the authorities so that they could close the net. The Government cannot disown — [the informer] and insist it is not responsible for his actions. * * * In his testimony the federal agent in charge of the case admitted that he never bothered to question — [the informer] about the way he had made contact with petitioner. The Government cannot make - such use of an informer and then claim disassociation through ignorance.” (356 U.S. 373-375, 78 S.Ct. 821.)
The record of the instant case clearly shows that the conduct of the government agents did not approach that found in the Sherman case. Here, Agent Wilets questioned Webster. When Webster initially contacted Wilets, he was specifically instructed to go along with Goldheimer “but not to lead him”; Webster was told to contact Goldheimer but was instructed to “let him [Goldheimer] make the first move.” Webster further testified that he had been cautioned by Wilets after Webster had reported the conversations he had had with Goldheimer and Walker; Wilets told Webster: “If there is a conspiracy * * * go along with it; but * * * [do not] attempt to build a case.” When Webster called Wilets to report the happenings on the first trip to Mexico, Wilets again cautioned Webster “to let Goldheimer lead, not to try to take over himself.” Whether the jury accepted such testimony at its face value, we do not know, but it did have the right to so accept it.
The record does not indicate that appellants made the slightest attempt to avoid contact with narcotics. They freely discussed narcotics, and their introduction into this country. They were not addicts; Webster made no appeals to their habits; supplied them with no narcotics; and there was no gradual wearing down of their resistance. We cannot believe the Sherman case, supra, is in point.
The instant case more closely parallels the case of Masciale v. United States, 1958, 356 U.S. 386, 78 S.Ct. 827, 2 L.Ed.2d 859, which case was decided by the Supreme Court on the same day as Sherman v. United States, supra, was decided. The contrast between the two cases is revealing.
In Masciale, as in the case of Goldheimer, the appellant was acquainted with the government’s special employee without knowing that the latter was an undercover agent. There, as here, the government agent was introduced as a man with money interested in talking about and buying large quantities of high grade narcotics. Here, as in Masciale, appellant could have withdrawn from the conversations, or refused to conduct further meetings, but instead appellants had additional meetings and conversations and Goldheimer discussed his “contacts” in Mexico and his plan to smuggle narcotics into the United States; Walker with full knowledge of this plan agreed to join the conspiracy as the water transportation specialist. He explained how the narcotics should best be packaged, and requested funds with which to charter a boat.
Where did the criminal design originate? It was Goldheimer who had the “contacts” in Mexico, and knew where to find them. The government had no prior knowledge of Walker’s sailing ability, it was Goldheimer who induced Walker to join the conspiracy. It was Walker who had previously observed the laxness of customs officials in inspecting private pleasure vessels; it was he who devised the plan of wrapping the narcotics in the sailing bags, and it was he who volunteered to study further the customs procedures at ports of entry to the United States in order to assure success.
This court has repeatedly held, follow-ing the rationale of Masciale, supra, that when the issue of entrapment is present, and there is conflicting testimony and credibility factors are involved, the trial court cannot fulfill its functions unless it submits the issue to the jury. It is then that the jury may, on the evidence submitted, determine whether the criminal design originated with the defendants and thereby find, as it did here, for the prosecution on the issue of the defendants’ guilt, or that the criminal design originated with the government’s agents, and constituted entrapment.
Entrapment was not proved as a matter of law, and the trial court properly submitted the issue to the jury.
II
Court’s Instructions on Entrapment
Appellants contend that they were denied a fair trial because the trial court commented on the law of entrapment in such a way as to “emasculate” the instructions given on entrapment to the jury. The instructions given the jury, and the court’s comments on entrapment, are set forth on pages 426-430 of the transcript. The appellants contend that these instructions and comments resulted in a denial of a fair trial. We cannot so read them. But if we could, we note that the court asked each side whether they were satisfied with the instructions, as they were given with comments. The court asked:
“Now, are there any matters that either side wish to take up before the jury finally retires to deliberate on the verdicts?”
Each counsel replied that they were satisfied to have the case then submitted to the jury. No exceptions were taken to any instructions given the jury before it retired for its deliberation.
Rule 30 provides in pertinent part: “* * # No party may assign as error any portion of the charge or omission therefrom unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection. * * * ”
Having failed to comply with Rule 30, and not contending that plain error had been committed, and because the instructions taken as a whole and read together do not appear prejudicial, the appellants are barred from presenting this issue on appeal.
Ill
Agent Chappell’s Testimony
Appellants contend that the testimony of Agent Chappell should not have been admitted and that its admission was highly prejudicial to their case.
We do not believe the admission into evidence of this testimony was erroneous under the pleading of conspiracy. The jury was admonished by the court and the court gave instructions relating to the law of conspiracy.
It should be noted that this testimony covered events which terminated on August 29, 1960; that the indictment alleged a conspiracy which continued to August 30, 1960; and that the evidence does not indicate that either appellant had withdrawn, or that the conspiracy had terminated, prior to August 29, I960.
Chappell’s testimony mainly concerns admissions and declarations made by Wilson, or other unindicted coconspirators, to him with regard to the operations and scheme from which the conspiracy was formed. It is well settled that every act or declaration of each member of the conspiracy in furtherance thereof, while the conspiracy is in operation, is considered the act or declaration of each member of that conspiracy. Barnett v. United States, 9 Cir. 1949, 171 F.2d 721.
IV
Sufficiency of Evidence as to Walker
While Walker did not participate as actively in the conspiracy as did Goldheimer, a review of the record indicates that appellant Walker was actively interested in participating in the plan to smuggle narcotics into the United States; that it was agreed he was to perform one of the vital functions in the conspiracy (that of providing the transportation, and transporting the narcotics into the United States), and that he at no time withdrew from his participation in the conspiracy.
It is apparent therefore that there was sufficient evidence to go to the jury concerning Walker’s participation and role in the conspiracy. It is well settled that, on review, the evidence must be viewed in the light most favorable to the government. Glasser v. United States, 1941, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680. Under such an examination, there exists ample evidence to include Walker as a conspirator. That he received the same sentence as did a more active participant is a matter of the trial court’s discretion — concerning which we legally have nothing we can say.
V
The Juror’s Affidavit
Appellant Walker offered an affidavit of a juror in support of his motion for a new trial; the affidavit concerns, not extrinsic matters or pressures on the jury, but an alleged misconception by the jurors of the court’s instructions on entrapment. This same question was presented in Rotondo v. Isthmian Steamship Lines, 2 Cir., 1957, 243 F.2d 581, 583, where the court said:
“The motion wholly misconceives the law relating to this subject. There have indeed been cases where the court has set aside a verdict because evidence was brought before the jury outside of court. Mattox v. United States, 146 U.S. 140, 13 S.Ct. 50, 36 L.Ed. 917, is the leading decision upon that point. However it is completely well settled that, when objection rests upon the juror’s testimony as to what were the reasons that in fact induced them to find their verdict, the court will not hear them.”
The Supreme Court discussed this same question — and some of the considerations therein involved — in Stein v. People of State of New York, 1953, 346 U.S. 156, 73 S.Ct. 1077, 97 L.Ed. 1522, where it said:
“ ‘If evidence thus secured could be thus used, the result would be to make what was intended to be a private deliberation [of the jury within the jury room], the constant subject of public investigation — to the destruction of all frankness and freedom of discussion and conference.’ [Citation.]” (346 U.S. at 178, 73 S.Ct. at 1089.)
We believe the trial court properly refused to consider the affidavit offered by appellant Walker. Therefore the trial court’s denial of a new trial was proper.
The judgment of conviction as to both appellants is affirmed.
. 21 U.S.C.A. § 174 provides in part as follows:
“Whoever fraudulently or knowingly imports or brings any narcotic drug into the United States or any territory under its control or jurisdiction, contrary to law, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of any such narcotic drug after being imported or brought into the United States contrary to law, or conspires to commit any of such acts in violation of the laws of the United States, shall be imprisoned not less than five or more than twenty years and, in addition, may be fined not more than $20,000. * * *
“Whenever on trial for a violation of this section the defendant is shown to have or to have had possession of the narcotic drug, such possession shall be deemed sufficient evidence to authorize conviction unless the defendant explains the possession to the satisfaction of the jury.”
. 21 U.S.C. § 176a provides in part as follows:
Ҥ 176a. Smuggling of marihuana; penalties, evidence; definition of marihuana.
“Notwithstanding any other provision of law, whoever, knowingly, with intent to defraud the United States, imports or brings into the United States marihuana contrary to law, or smuggles or clandestinely introduces into the United States marihuana which should have been invoiced, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such marihuana after being imported or brought in, knowing the same to have been imported or brought into the United States contrary to law, or whoever conspires to do any of the foregoing acts, shall be imprisoned not less than five or more than twenty years and, in addition, may be fined not more than $20,000. V *1* W
“Whenever on trial for a violation of this subsection, the defendant is shown to have or to have had the marihuana in his possession, such possession shall be deemed sufficient evidence to authorize conviction unless the defendant explains his possession to the satisfaction of the jury.
“As used in this section, the term ‘marihuana’ has the meaning given to such term by section 4761 of the Internal Revenue Code of 1954.”
. An electronic recording device had been installed in the car and the entire conversation during the car ride had been recorded on tape. These tapes were identified as Exhibits 1A, IB and 10 and were introduced into evidence.
. When these discussions were conducted in Wilets’ car they were being recorded on a tape recorder which Wilets had placed in the car. The recordings were identified and introduced into evidence as Exhibits 2A, 2B and 20.
. At this point counsel for Goldheimer objected to the introduction of evidence of the conversation at this meeting as not binding upon anyone who was absent and the court stated that it could only be binding upon anyone who was absent if it was connected np to show a conspiracy and that the indictment did allege that Medina and Mendez were members of the conspiracy.
. There was an objection by defense counsel that the proceedings testified to were hearsay as to the appellants and the court again gave cautionary instructions on the question of conspiracy.
. The statement of facts is condensed from the testimony of Webster; Chappell and Wilets corroborated this evidence. Appellee sets forth a detailed and exhaustive statement of facts in its brief, pp. 5-22.
. Though appellants submit separate briefs, several questions are common to both; Walker’s brief raises two additional questions which are not presented in Goldheimer’s brief. The common questions will be treated first; Walker’s two additional questions being treated in conclusion.
. Matthews v. United States, 9 Cir., 1961, 290 F.2d 198; Young v. United States, 9 Cir., 1960, 286 F.2d 13; Hattem v. United States, 9 Cir., 1960, 283 F.2d 339; Cellino v. United States, 9 Cir., 1960, 276 F.2d 941; Bruno v. United States, 9 Cir., 1948, 259 F.2d 8.
. Fed.R.Crim.P. 30 (18 U.S.C.A.).
. Fed.R.Crim.P. 52(b) (18 U.S.C.A.).
. On September 5, 1960, Goldheimer met Wilets to discuss the status of the operation and four days later, on September 9, 1960, Goldheimer and Walker met with Wilets to discuss and plan the final phase of the operation — still unaware of the fact that Wilets was a federal officer.
. Appellant Walter in his brief at p. 27 admits that be entered into a “purported conspiracy to import narcotics into the United States”; “His wliole defense was based upon the fact that he was unlawfully entrapped * * (Br. 23.)
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
Opinion for the court filed by Circuit Judge J. SKELLY WRIGHT.
Senior District Judge VAN PELT concurs except as to Proposal III, as to which he would reverse.
J. SKELLY WRIGHT, Circuit Judge:
The Civil Service Reform Act of 1978 requires management officials of the federal agencies to bargain with employee representatives over conditions of employment. But the duty to engage in collective bargaining is not absolute. Section 7106 of the Reform Act enumerates certain reserved rights of management that cannot be lawful subjects of negotiation. It is permissible to bargain over the “procedures” by which those rights are exercised, but not over the substance of the rights themselves.
These consolidated cases raise important questions about the scope of management’s duty to bargain under Section 7106. The issue arose when agency management refused to bargain over various union proposals for the terms of collective bargaining agreements. The negotiability of each of the proposals was considered in the first instance by the Federal Labor Relations Authority (FLRA or Authority). The Authority held three of the contested proposals to be mandatory subjects of collective bargaining; it found five to be excluded from the statutory obligation to bargain under the terms of Section 7106. We affirm the Authority in each of its holdings.
I
Labor relations within the federal civil service are governed by Title VII of the Civil Service Reform Act of 1978. Because these cases are among the first under that statute, see Nat’l Federation of Federal Employees v. FLRA, 652 F.2d 191 (D.C.Cir.1981); American Federation of Gov’t Employees v. FLRA, 653 F.2d 669 (D.C.Cir.1981), it might be useful to sketch the background against which we consider the issues presented.
A.
The questions before us arise on appeal from two decisions by the Federal Labor Relations Authority. An independent agency within the Executive Branch, the FLRA was established under Reorganization Plan No. 2 of 1978. It was continued under and administers the labor relations section of the Civil Service Reform Act, Title VII. Its role is analogous to that of the National Labor Relations Board under the National Labor Relations Act. The Civil Service Reform Act invests the Authority with both rulemaking and adjudicatory powers. Among its specific mandates, the FLRA possesses authority to determine appropriate units for labor organization and bargaining, to conduct representation elections, to adjudicate unfair labor practice complaints, and to resolve exceptions to arbitrators’ awards. With only, minor exceptions, final orders of the Authority are subject to review in the Courts of Appeals. The Authority may petition any appropriate Court of Appeals for enforcement of its orders.
The FLRA has assumed its role as a successor agency to the Federal Labor Relations Council. Functioning pursuant to Executive Order 11491, issued by President Nixon in 1969, the Council was composed of three federal management officials: the Chairman of the Civil Service Commission, the Secretary of Labor, and the Director of the Office of Management and Budget. Its decisions were not subject to judicial review. The general framework for collective bargaining administered by the Council dated from 1962, the year in which Executive Order 10988, issued by President Kennedy, initially established a program of labor-management negotiations for federal employees.
B.
The legislative history indicates that Title VII of the Civil Service Reform Act was intended to serve a variety of purposes. Congress sought at least in part to strengthen the authority of federal management to hire and to discipline employees. Representative Udall, who drafted the amendment that essentially became the labor relations chapter of the Reform Act, said explicitly that “one of the fundamental purposes of this bill is to make it easier and not harder to discharge incompetent employees * * *.” But the Reform Act also aimed to strengthen the position of employee unions in the federal service. The statutory statement of congressional purpose asserts that “protection of the right of employees to organize [and] bargain collectively” “safeguards the public interest,” “contributes to the effective conduct of public business,” and “facilitates and encourages the amicable settlements of disputes * * *.” Consistent with this view, the Reform Act replaced the Federal Labor Relations Council, which had been criticized as “defective” because its members “come exclusively from the ranks of management,” with an independent and bipartisan FLRA. There was no suggestion that employee unions might not seek procedural protections against arbitrary or mistaken employee discharges. On the contrary, Representative Udall stressed that he intended his amendment “to meet some of the legitimate concerns of the Federal employee unions as an integral part of what is basically a bill to give management the power to manage and the flexibility that it needs.” Other members articulated nearly identical sentiments during the floor debates. Endorsing the Udall amendment, Representative Ford agreed that “while considering the increased powers for management, we always had in mind that we would put together a totality here * * * that we hoped would represent a fair package of balanced authority for management, balanced with a fair protection for at least the existing rights the employees have.”
The balance of statutory purposes is evidenced, not only in the legislative history, but in the text of the Reform Act. On the one side, Section 7106(a) purports to define certain reserved rights of management:
§ 7106. Management rights
(a) Subject to subsection (b) of this section, nothing in this chapter shall affect the authority of any management official of any agency—
(1) to determine the mission, budget, organization, number of employees, and internal security practices of the agency; and
(2) in accordance with applicable laws—
(A) to hire, assign, direct, layoff, and retain employees in the agency, or to suspend, remove, reduce in grade or pay, or take other disciplinary action against such employees;
(B) to assign work, to make determinations with respect to contracting out, and to determine the personnel by which agency operations shall be conducted;
(C) with respect to filling positions, to make selections for appointments from—
(i) among properly ranked and certified candidates for promotion; or
(ii) any other appropriate source; and
(D) to take whatever actions may be necessary to carry out the agency mission during emergencies.[]
It is agreed that a union proposal intruding on protected management rights is not a proper subject of collective bargaining under the Act.
On the other side, the interest of employees in protecting their interests through collective bargaining is broadly recognized and protected. Federal management representatives are required to bargain in good faith over “conditions of employment” — a term that is expansively defined, subject only to express statutory exceptions, to in-elude “personnel policies, and matters, whether established by rule, regulation, or otherwise, affecting working conditions * * * » Even with regard to reserved management rights, the Act authorizes collective bargaining over the “procedures which management officials of the agency will observe in exercising [their] authority * * * » ]qor is the duty to bargain one that is lacking in practical effect. Although federal employees have no legal right to strike, management must make good faith efforts to reach agreement with employee representatives. Where bargaining fails to produce an accord, the Act provides for binding arbitration by the Federal Service Impasses Panel, or, if both parties agree and the procedure is approved by the Panel, by an outside arbitrator.
The possibility of binding arbitration and imposed settlement lends importance to the question whether a union contract proposal is a mandatory subject of collective bargaining under the Reform Act. Procedures for resolving this question are provided by Section 7117 and by regulations issued by the FLRA.
Negotiability disputes characteristically arise when the union submits a proposal for inclusion in a collective bargaining agreement. If the agency believes that the proposal is contrary to law or applicable regulation, or is otherwise nonnegotiable under the statute, it may inform the union of its refusal to negotiate. Section 7117 thereupon provides a right to appeal the agency’s determination of nonnegotiability to the FLRA. The FLRA is required to decide the negotiability issue at the earliest possible date, issuing a written decision containing specific reasons for sustaining or setting aside the agency’s allegation of nonnegotiability. The FLRA’s decision addresses only the negotiability of the union proposal under the Reform Act. It neither considers the merits of the proposal nor orders the agency to agree to it. If the proposal is found negotiable, the Authority holds only that the agency must bargain in good faith upon the union’s request.
II
The issues before us in these cases stem from FLRA decisions concerning the negotiability of eight union proposals. They come to us in three separate appeals, involving two decisions issued by the Authority, which this court has consolidated for review.
No. 80-1119, Dix-McGuire A.
No. 80-1119 comes before us on a petition filed by the Department of Defense. In the course of its contract negotiations with the Army-Air Force Exchange Service, Dix-McGuire Exchange, Fort Dix, New Jersey (the agency), the American Federation of Government Employees, AFL-CIO, Local 1999 (the union) advanced the following proposal as a basis for collective bargaining:
In the event of a disciplinary suspension or removal, the grievant will exhaust the review provisions contained in this Agreement before the suspension or removal is effectuated, and the employee will remain in a pay status until a final determination is rendered.[]
The agency responded that the proposal was nonnegotiable. If adopted, it said, the proposed contract term would “so unreasonably delay and impede the exercise of the reserved right to suspend and separate employees as to negate that right and, hence, violates... 5 U.S.C. 7106(a)(2)(A).” The union appealed this determination to the Authority.
Rejecting the management claim, the FLRA held the procedure to be negotiable. The FLRA based its decision on Section 7106(b)(2), which provides that the enumeration of reserved management rights contained in Section 7106(a) “does not preclude the negotiation of procedures which management will observe in exercising those rights.” The Authority construed this section to license collective bargaining over proposed “procedures” for the exercise of management rights “except to the extent that * * * negotiations would prevent agency management from acting at all.” Although the arbitration process provided in the union proposal did not contain an express time limit, the FLRA found that the agency had failed to establish that its adoption would make it impossible for the agency to implement disciplinary actions. The proposal was therefore negotiable under the “acting at all” standard adopted by the Authority.
B. No. 80 — 1351, Wright-Patterson
There are two proposals at issue in No. 80-1351, brought before us by the Department of Defense. Like those presented for review in No. 80-1358, these proposals were submitted by the American Federation of Government Employees, AFL-CIO (the union) during contract negotiations between the union and the Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio (the agency). The agency contended that a substantial number of the proposals would infringe protected management rights and therefore lay beyond the scope of the duty to bargain. Pursuant to 5 U.S.C. § 7117(c), the union appealed this allegation of nonnegotiability to the FLRA. Of the 16 proposals contested before the Authority, the FLRA held that eight were negotiable, that seven were not, and that one was partly negotiable and partly nonnegotiable. The two proposals at issue in No. 80-1351 are union Proposals III and XIV, both of which were held negotiable by the FLRA.
Proposal III provides:
Section 2. Details to Higher or Same Graded Positions
B. Unless the employer decides to use competitive procedures as outlined in Article — (Promotions), temporary assignment to higher or same grade/different duty positions shall be offered to qualified and available employees with requisite skills on the basis of seniority within the lowest organizational segment. If senior employees decline and it is necessary to detail an employee, the least senior employee shall be assigned.[]
In contesting the negotiability of the proposal the Defense Department argued that its adoption would infringe reserved management rights. According to the agency’s construction, Section 7106(a)(2)(A) reserves a management right to make personnel assignments that may not be limited; management, it says, must retain full discretion to assign employees on any basis that it chooses. The FLRA rejected this argument. The Authority recognized that the right to make assignments encompasses more than the narrow right to decide whether or not to assign that particular employee identified by some agreed set of procedures: “Under section 7106(a)(2)(A) of the Statute, the agency retains discretion as to the personnel requirements of the work of the position, /. e., the qualifications and skills needed to do the work, as well as such job-related individual characteristics as judgment and reliability. Therefore, the right to assign an employee to a position includes the discretion to determine which employee will be assigned.” Nevertheless, the Authority found the union proposal to be negotiable. The reason lay in the proposal’s authorization of competitive selection procedures. As defined in the Federal Personnel Manual, competitive procedures preserve “management’s right to select or not select from among a group of best qualified candidates.” According to the FLRA, this reservation of management discretion brought the union proposal within the statutory duty to bargain: “Only if the agency chooses not to use competitive procedures must it select [an] individual on the basis of seniority. Because Union Proposal III preserves in this manner the agency’s discretion to select, the proposal does not directly interfere with the agency’s basic right to assign employees under section 7106(a)(2XA) of the Statute.”
Union Proposal XIV dealt with temporary promotion to “encumbered” positions:
When an employee is temporarily assigned to an encumbered, but temporarily vacant[,] bargaining unit position of a higher grade for 30 days, the employee will receive the rate of pay for the higher position to which assigned, commencing on the 31st day.[]
The agency challenged this proposal as incompatible with its right under Section 7106(b)(1) to determine “the numbers, types, and grades of employees or positions * * * » The incompatibility arises, it argued, because an employee cannot be paid for a position unless he has actually been promoted to it. Because two persons cannot hold the same position, the agency could not temporarily pay an employee at a higher rate without either assigning him to an already vacant position or creating a new one; and requiring management to do this, the agency asserted, would violate its reserved right to determine the number and grades of positions. The FLRA agreed with the agency that the law requires promotion as a prerequisite to increased pay. But the Authority found no barrier to temporary promotions of employees to encumbered but temporarily vacant positions. It therefore concluded that the proposal could be implemented without the Air Force being required to create new positions. Having rejected the agency’s main objections, the Authority held Proposal XIV to be negotiable.
C. No. 80-1358, Wright-Patterson
The five proposals underlying No. 80-1358 were presented by the American Federation of Government Employees, AFL-CIO (the union) during the same contract negotiations with the Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio (the agency) as those involved in No. 80-1351. These, however, were held by the FLRA to be nonnegotiable, and it is the union that brings this appeal.
Union Proposals IV, V, VI, and VII would all require management to make certain employee assignments on the basis of seniority. Proposal IV would compel the agency to rotate “details” to lower grade positions among qualified and available employees in inverse order of seniority. Proposal V, dealing with “loans” of employees to meet temporary or emergency needs outside their usual areas of employment, would similarly dictate selection of the least senior employees with requisite skills. Proposal VI mandates seniority as a selection criterion for temporary assignments outside the bargaining unit “[w]here conditions are less at the receiving location than is provided for by this contract * * And Proposal VII would force the agency, in the absence of a volunteer for permanent reassignment from one duty station to another, to select the person to be assigned on an inverse seniority basis.
The FLRA upheld the agency’s claim of nonnegotiability with regard to each of these proposals. All, it concluded, infringed management rights to make personnel assignments protected under Section 7106(a). The crucial failure of Proposals IV, V, VI, and VII, in the Authority’s view, lay in their elimination of agency “discretion” in making assignments. “Discretion,” it found, was “an essential part” of the package of rights reserved to management under Section 7106(a). “In thus compelling the selection of a particular individual for * * * assignment,” the FLRA held, Union Proposals IV, V, VI, and VII “each directly interfere[d] with” a reserved right of management.
Union Proposal XIII specified procedures for determining certain personnel assignments following a reduction in force. It would normally have required the agency to act on the basis of employee preferences. In rejecting the proposal as nonnegotiable the FLRA reiterated its view that “the right of the agency to assign employees includes discretion as to the selection of the particular employee to be assigned.” Because Proposal XIII eliminated such discretion, the Authority held it incompatible with the management rights reserved under Section 7106(a)(2)(A) and therefore outside the scope of the duty to bargain.
Ill
The disputes at the core of these cases issue primarily from the contested relationship between Sections 7106(a) and 7106(b) of Title VII of the Civil Service Reform Act of 1978. In the case of each of the disputed union proposals, the management parties purport to identify some infringement of a management right protected under Section 7106(a). Again in each case, the union responds that Section 7106(a) states explicitly that its own terms are “subject to subsection (b) * * And subsection (b), Section 7106(b), clearly states: “Nothing in this section shall preclude any agency and any labor organization from negotiating * * * procedures which management officials of the agency will observe in exercising any authority under this section * * Because its proposals are cast in procedural terms, the union finds them compulsory subjects of bargaining under the statute.
Analysis of the competing arguments must begin with the language of the statute itself. See, e. g., Ernst & Ernst v. Hochfelder, 425 U.S. 185, 197, 96 S.Ct. 1375, 1382, 47 L.Ed.2d 668 (1976); Zerilli v. Evening News Ass’n, 628 F.2d 217 (D.C.Cir.1980). Although that language possesses troubling ambiguities, it does, we think, make clear the intent of Congress, expressed in a distinction between negotiable procedures and management’s nonnegotiable substantive authority. There are substantive rights reserved to management under Section 7106(a), subject to — but only to — procedures to be negotiated under Section 7106(b).
The difficulty arises, of course, because the distinction between procedure and substance is not always crisp. Union proposals establishing “procedures” for employee selection illustrate the uncertain boundary between the categories. Selection on the basis of seniority, for example, defines a procedure for the exercise of management’s right to hire or promote. But it is equally true that a proposal requiring selection based on seniority both establishes the substantive criterion pursuant to which selection will occur and identifies the particular employee to be chosen. Unless procedure is to be permitted to swallow substance entirely, it therefore becomes necessary to inquire into the range of proposals to be deemed “procedural” within the contemplation of the statute.
The need for an interpretive standard of this kind accounts for the various formulae enunciated by the FLRA and for those urged by the parties on this court. In Dix-McGuire, No. 80-1119, the Authority held that proposals structured in procedural language would be negotiable unless the effect of their adoption would be to stop management from “acting at all.” In so doing it rejected the argument of the agency, which proposed to draw a different line between procedure and substance. The agency suggested that a proposal ceased to be procedural within the intent of the law if it was of such a character as to “unreasonably delay” management action. In the Wright-Patterson cases the FLRA again undertook to draw a line between proposals that are properly procedural within the meaning of the statute and those that impinge on substantive agency authority. The Authority held in these cases that various proposals advanced by the union were not negotiable, despite their being expressed in procedural terms, because their adoption would “directly interfere” with reserved management rights to make decisions of substance. The union now contests this standard, insisting on the propriety of the “acting at all” test propounded by the Authority in Dix-McGuire. It also argues that the Authority erred in applying different standards in the two cases.
Despite the inherent ambiguities of the distinction between procedure and substance, and the attendant difficulties in its application, the intent of Congress cannot be ignored. It is the task of the FLRA, authorized by statute to “provide leadership” in implementing the labor-management chapter of the Civil Service Reform Act, to develop workable standards consistent with the Act’s underlying-; policies and intent.
In this regard, we think it appropriate to note what we perceive as a difference in kind among the cases calling for application of the statutory distinction between negotiable procedures and reserved substantive rights. There are, on the one hand, eases in which proposals cast in procedural language impinge on substantive management decisions by specifying the criteria pursuant to which decisions must be made. There are, on the other, more nearly “pure” procedures, which have less direct substantive repercussions — for example, procedures for use in determining which employees possess characteristics identified by management as appropriate criteria for choice. In view of this difference, we proceed to our discussion and decision of these consolidated eases without assuming beforehand that a standard found appropriate for one of these classes must also be applied to the other.
IV
A. No. 80-1119, Dix-McGuire
The sole negotiability issue in Dix-McGuire involves a proposed union contract term under which no employee could be removed or suspended from his job until completion of the review procedures provided under a collective bargaining agreement. Management objected that the proposal invited procedural delays incompatible with its reserved authority under Section 7106(a). Overruling this objection, the FLRA upheld the negotiability of the proposal.
As the FLRA recognized, the plain language of the statute strongly supports the union’s position. Although Section 7106(a) asserts that nothing in the Reform Act “shall affect the authority of any management official” to hire, and take disciplinary action, it also provides that the terms of subsection (a) are U[s]ubject to subsection (b) * * And subsection (b) clearly states that “[njothing in this section”— which includes subsection (a), on which management’s argument is based — “shall preclude any agency and any labor organization from negotiating * * * procedures which management officials of the agency will observe in exercising any authority under this section * * The language of Section 7106 thus seems to establish a hierarchy, in which the terms of subsection (b) hold priority over those of subsection (a). And the union proposal in this case, involving procedures to be followed prior to the exercise of management’s right to discharge and discipline employees, appears to fall plainly within the language of Section 7106(b).
Before affirming this conclusion, however, we — like the FLRA — must take account of the management claim that the proposal in this case was not properly “procedural” within the meaning of the statute, because the effect of its adoption would be to “eviscerate” management rights enumerated in Section 7106(a). The FLRA weighed this argument, but concluded that this threatened effect would not occur. “[T]he procedural requirement established by the proposal,” the Authority held, “relates only to when the suspension or removal may be effectuated, not to whether the agency ultimately will be able to implement those actions.” The mere possibility of delay would not take a proposal outside the statutory obligation to negotiate. The test of negotiability, the FLRA held, was whether a union proposal would, if adopted, prevent agency management from “acting at all.”
In its brief in this court the agency rests its claim for reversal of the FLRA’s decision largely on an attack on this asserted rule of decision: the holding that procedural proposals are negotiable under the statute unless their adoption would stop the agency from “acting at all.” In the context of this ease — one involving a procedural proposal that does not directly mandate substantive criteria pursuant to which management must act — we find the attack to be unconvincing.
We note at the outset that the “acting at all” standard is a reasonable and natural construction of the statutory language, rendered by the agency given responsibility for administering the statute : The management power to act that is protected by Section 7106(a) may be limited by procedures under Section 7106(b), but only so far as the procedures do not have the effect of eliminating management authority by preventing its “acting at all.”
Moreover, the “acting at all” standard finds support in — even if it is not necessarily mandated by — the legislative history. In this regard it stands in marked contrast with the alternative standard advanced by the management parties, who contend that a proposal should be held nonnegotiable if its adoption might occasion “unreasonable delay” in the exercise of management rights.
In its opinion below the FLRA justified its adoption of the “acting at all” standard largely by citation to a single passage in the report of the House-Senate conference committee that reported Title VII of the Civil Service Reform Act in the form in which it became law. In their briefs in this court the parties again treat this passage as central. It bears quotation in full:
3. [Proposed] Senate section 7218(b) provides that negotiations on procedures governing the exercise of authority reserved to management shall not unreasonably delay the exercise by management of its authority to act on such matters. Any negotiations on procedures governing matters otherwise reserved to agency discretion by subsection (a) may not have the effect of actually negating the authority as reserved to the agency by subsection (a). There are no comparable House provisions.
The conference report deletes these provisions. However, the conferees wish to emphasize that negotiations on such procedures should not be conducted in a way that prevents the agency from acting at all, or in a way that prevents the exclusive representative from negotiating fully on procedures. * * * []
In our view, analysis restricted to this text alone reveals an inescapable ambiguity. The agency contends that the conference intended the “acting at all” standard to be applied to bar negotiations so protracted as to prevent management action; the substantive negotiability of union proposals, it says, should be judged against a standard of whether their adoption might cause the exercise of management rights to be unreasonably delayed. The FLRA, on the other hand, argues that the conference intended the “acting at all” test to apply to proposed contract provisions as well, as the ultimate measure of their negotiability under the statute.
Although the quoted passage is ambiguous at best, we believe that the legislative history, taken as a whole, gives stronger support to the view of the FLRA than to that of the agency. We reach this conclusion after review of the legislative approaches to the body of case law that had grown up under the FLRA’s predecessor agency, the Federal Labor Relations Council. Prior to the passage of the Civil Service Reform Act, collective bargaining between employees and the federal agencies was governed by Executive Order. Like Section 7106(a) of the Reform Act, Section 12(b) of Executive Order 11491 established certain management rights not subject to bargaining. Regarding Section 12(b), the Council’s interpretive principle was clear. In a series of cases beginning with Local 63, American Federation of Government Employees, AFL-CIO, and Blaine Air Force Station, Blaine, Washington (Blaine), 3 FLRC 75 (1975), the Council held union bargaining proposals to be nonnegotiable if they contained procedures that would “unreasonably delay” the exercise of reserved management rights.
As Congress began its deliberations over proposals to enact civil service reform legislation, the status of the existing case law became a focus of concern. The Carter Administration drafted proposed statutory language that would have placed the “provisions, policies and approaches of Executive Order 11491” into law, and the Senate Committee on Governmental Affairs and then the Senate as a whole retained the Administration language in Section 7218 of the Senate bill. This language — the very language that the conference committee decided to delete — was explained as follows by the Committee on Governmental Affairs:
[I]t is specified in subsection [7218(b)] that nothing in that subsection shall preclude parties from negotiating procedures which management will observe in exercising its authority to decide or act or from negotiating arrangements for employees adversely affected provided that such negotiations do not result in certain consequences and are consonant with law and regulations * * *. These principles with respect to the obligation to negotiate “procedures” and “impact,” while not expressly stated in Executive Order 11491, are established in case law thereunder[]
As illustrated by the reference to the “case law,” the Senate bill clearly intended to adopt the Blaine principle that negotiation would not be permitted — that a proposal would be deemed nonnegotiable — if it might produce “certain [unacceptable] consequences,” such as adoption of procedures resulting in unreasonable delay.
The House of Representatives dealt very differently with the Administration proposal to import the “unreasonable delay” standard into the new law. In the House “management rights” provisions that reflected the Administration position were called to votes on at least two occasions, once in the Committee on Post Office and Civil Service and once on the House floor. They were rejected in both instances. The relevant language that ultimately was adopted by the House — the exact language now contained in Section 7106 of the Civil Service Reform Act — was offered in a floor amendment by Representative Udall. In an accompanying Sectional Analysis he explained the Section 7106 relationship between reserved rights and negotiable procedures in these terms:
This substitute strengthens the “Management rights” section reported by the Committee, but it is still to be treated narrowly as an exception to the general obligation to bargain over conditions of employment.
* * * [Management has reserved the right to make the final decision to “remove” an employee, but that decision must be made in accordance with applicable laws and procedures, and the provisions of any applicable collective bargaining agreement. The reserved management right to “remove” would in no way affect the employee’s right to appeal the decision through statutory procedures or, if applicable, through the procedures set forth in a collective bargaining agreement.[]
Two facts about this statement deserve comment. First, Representative Udall obviously contemplated negotiation over disciplinary procedures, such as those at issue in No. 80-1119. Second, the Udall amendment made no reference to “unreasonable delay.” Indeed, Representative Udall actively opposed unsuccessful amendments that would have retained this legal standard.
The House-Senate conference committee adopted the House version of Section 7106 —the version introduced by Representative Udall — without revisions. It is on the report of that committee, quoted above, that the parties principally rely for evidence of congressional intent.
As noted, the management parties argue that the FLRA has misread the conference report. They contend that the deleted Senate provision and the explanatory language of the committee addressed “the issue of the time consumed in negotiations, not the time necessary to complete the negotiated procedures once the procedures are agreed upon.” In the context of the full legislative history, however, this view of the committee report is hard to accept. The antecedent legislative debate had clearly focused, not on the threat of protracted negotiations, but on the kinds of proposals that ought and ought not to be negotiable. Despite being invited to do so, the House had explicitly declined to accept language adopting an “unreasonable delay” standard for determining the negotiability of union proposals. And the Senate, which had earlier opted for that standard, agreed to deletion of the pertinent language by the House-Senate conference. It was that Senate agreement that the disputed language of the conference report sought to explain. Under the circumstances, we cannot say that the FLRA misconstrued the conference report in deriving its “acting at all” test of negotiable procedures under Section 7106.
The agency advances other arguments why this court should reject the “acting at all” standard enunciated by the FLRA. For example, the agency argues that it is implausible to think that Congress would pass a law countenancing, not merely delay, but “unreasonable delay,” in implementation of management decisions. In the context, however, its argument is unconvincing. As the FLRA has emphasized, a negotiability standard is used only to determine whether a proposal is a proper subject of bargaining, not whether it ought to be implemented on the merits. In collective bargaining, government managers are presumably competent to look out for government interests. Congress has clearly acted on this premise in the enactment of other legislation, such as the labor-management chapter of the Foreign Service Act of 1980. Indeed, in reporting Section 1005 of the Foreign Service Act, a management rights provision that was modeled after Section 7106 of the Civil Service Reform Act, the House-Senate conference not only urged adoption of an “acting at all” standard; it cited Section 7106 of the Civil Service Reform Act as precedent for its decision to do so:
[Wjith respect to negotiated procedures the [House and Senate] bills are consistent and reflect the conference report to accompany the Civil Service Reform Act of 1978 (S.Rept. 95-1271, p. 158), which stated that the standard for determining whether a proposal is nonnegotiable is whether it “prevent [s] the agency from acting at all. * * * []
The conference report was “agreed to” by both the full Senate and the full House.
The agency also offers arguments that the FLRA’s “acting at all” standard must be rejected as inconsistent with other provisions of the Reform Act. These claims do not require prolonged discussion.
The agency contends that toleration of lengthy delays prior to management removal of employees would be inconsistent with the statutory authority of management to “take whatever actions may be necessary to carry out the agency mission during emergencies.” This argument is misdirected. The proposal under review deals only with disciplinary suspensions and removals. It does not necessarily apply to emergency assignments, even for disciplinary reasons.
The agency similarly argues that toleration of delays is inconsistent with the statutory command that any “negotiated grievance procedure * * * shall provide for expeditious processing * * *.” This provision may, indeed, place some limit on the kind of grievance procedures to which the parties could agree. But management has not shown that arbitration is so slow as to run afoul of this standard, and the FLRA was not required to conclude otherwise. The characteristic speed of arbitral dispute resolution also refutes the argument that the union’s proposal in this case tolerates indefinite delay and thus should be declared nonnegotiable as impairing management’s reserved authority even under the FLRA’s “acting at all” standard.
Finally, the agency lodges an objection that the FLRA failed to consider relevant factors before reaching its challenged decision. This claim rests principally upon 5 U.S.C. § 7135(b), which states in pertinent part that “decisions issued under Executive Order[ ] 11491 * * * shall remain in full force and effect * * * unless superseded by specific provisions of this chapter or by regulations or decisions issued pursuant to this chapter.” As construed by the agency, Section 7135(b) establishes that the decisions of the Federal Labor Relations Council — including those holding union proposals nonnegotiable under an “unreasonable delay” standard — were due substantial deference from the FLRA. At a minimum, the agency says, the FLRA was required to explain its departure from Council precedents.
Our review of the legislative history should make obvious the weakness of this argument. The language of Section 7106 differs in important and relevant aspects from that of the parallel Section 12(b) of Executive Order 11491. Moreover, in opting for the new language the House and then the Senate-House conference explicitly rejected alternative proposals that would have retained the interpretive standards of the existing case law. Under the circumstances, it is apparent that the Council decisions to which the agency appeals were “superseded by specific provisions of this chapter” within the meaning of Section 7135(b).
B. Nos. 80-1351 and 80-1358, Wright-Patterson
Five of the seven union proposals at issue in Nos. 80-1351 and 80-1358 involve procedures that would have conditioned certain job assignments at least partly on an employee’s seniority. These proposals obviously implicate substantive concerns. They identify a substantive criterion — namely, length of employment — on the basis of which personnel assignments would be made.
In weighing the negotiability of these proposals under Section 7106 the FLRA applied what the parties have characterized in this court as a “direct interference” test. Under this standard, as explicated by the Authority, a proposal for employee selection procedures would be held nonnegotiable if its implementation would “directly interfere with the agency’s basic right to assign employees [as reserved] under section 7106(a)(2)(A) * * This is of course a different test of negotiability from the “acting at all” standard articulated by the Authority in Dix-McGuire, and the union has suggested here that this alleged inconsistency must be corrected.
We find no necessary incompatibility between the two approaches. Proposals to establish seniority as a basis for personnel assignments stand close to the uncertain border between procedure and substance. Such proposals are therefore different in kind from that involved in Dix-McGuire — a proposal that did not specify the criteria on which disciplinary action should be based, but only designated procedures for determining whether management criteria had in fact been satisfied in a particular instance. In view of the difference between the kinds of proposals under review, we cannot agree that an identical standard must be applied to both. Rejecting the challenge based on this point, we find no need to address the FLRA’s contention in this court that application of the “acting at all” standard would have yielded the same results as those obtained under the “direct interference” formula.
In developing and applying the “direct interference” test, the FLRA appears to have reasoned from the premise that “[t]he right to assign employees in the agency under section
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
SIMONS, Circuit Judge.
The controversy presented by the appeal and cross-appeal is with respect to the liability of a closed national bank under an agreement with intervenors in liquidation proceedings to handle their loans and mortgages and ’in respect to the measure of damages if the contract was breached by the bank.
The intervening petitioners, 'non-residents of Tennessee, had inherited from their father certain mortgages on real es-ate in Chattanooga originally acquired from the bank. It being necessary that a local representative look after their interests in the property, each of them made a separate but identical contract with the bank, the material portions of which are as follows:
“The First National Bank of Chattanooga, Tennessee, as agent for handling your loans and mortgages, makes the following guarantee to you:
“1st.' The First National Bank of Chattanooga, Tennessee, guarantees that it will not let any lien run out or become ineffective which secures notes or mortgages on real estate securing said loans -which are owned by you and which are handled by us as your agent.
“2nd. We will see to it that all delinquent taxes are paid promptly after said taxes become delinquent on any mortgaged properties securing your loans or mortgages.”
The intervening petitions were filed in a general creditors’ proceeding after its removal from the state court to the court below upon the appointment of a receiver for the bank by the Comptroller of the Currency. The receiver became a party to the proceeding. Upon the overruling of a motion made by him to dismiss the petitions on the ground that the obligations undertaken in the contracts were beyond the power of a national banking association, the petitions were referred to a standing master in pursuance of a general order to hear proofs and report on claims.
The master found that the mortgages and notes of the petitioners had been left in the possession of the bank, which had a regular department for the purpose of collecting rents on mortgaged properties and seeing that taxes were paid by borrowers; that while no direct consideration was paid to the bank for that service, the bank realized its compensation from borrowers, who were charged a fee for the making of loans and extensions and renewals thereof, and by carrying the investor’s account, and that this was a very profitable business for the bank up to the time of its insolvency. He also found that the taxes accruing on the property covered by the petitioners’ mortgages were not paid but were permitted to become delinquent and that penalties and interest accrued thereon; that eventually the mortgages were returned to the petitioners and were by them foreclosed, the property in each case being bid in for less than the mortgage debt and subject to liens for unpaid taxes, penalties and interest; that the bank had given no explanation for its failure to see that the taxes were paid when • due, had failed to notify the petitioners of their default, and was unable to show that the mortgage debtors were financially unable to pay the taxes if they had been requested to do so. He found the bank liable for all the defaulted taxes involved, together with penalties and interest thereon. The court, reduced the award to the penalties and interest accumulated on the defaulted taxes, and a stipulation having been entered into as to their amounts, a decree, was entered directing their payment, with interest from the date of the filing of the petitions.
The appellants challenge the decree on the ground that the contract was ultra vires, that it had not been breached, and that the petitioners had not suffered injury. The cross-appellants complain that the award should have included the taxes as well as the interest and penalties.
A preliminary question must be disposed of. It is the contention of the cross-appellants that the report of the master having been on file more than twenty days and no exceptions having been taken to it, it should have been in all respects confirmed under Equity Rule 66, 28 U.S.C.A. following section 723. But the questions here involved are all, as we understand them, questions of law, and the rule is that if the master by his report states the facts correctly but errs as to his legal conclusions, the party against whom he errs is riot required to except to the report but may bring the legal questions to the attention of the court. Celluloid Mfg. Co. v. Cellonite Mfg. Co., 40 F. 476, C.C.N.Y.; Smith v. Seibel, 258 F. 454, 456, D.C.Iowa; Holman v. Cross, 6 Cir., 75 F.2d 909, 913. The court had power to rule upon the legal questions involved.
The bank was a permittee of the Federal Reserve Board under the power conferred upon it by § 248(k), T. 12, U.S.C., 12 U.S.C.A. § 248 (k). This section empowers the Federal Reserve Board by special permit to grant to national banks applying therefor, the right to act as trustee, executor, administrator, etc., or “in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State * * * . ”
It will serve no useful purpose, as will presently appear, to cite or discuss the statutes of Tennessee with respect to whether they empower a bank or trust company to guarantee the payment of bonds or mortgages or empower them to answer for the debt or default of another, and the power of the bank to act as agent is not questioned. It is fair interpretation of the present contract that it does not require the bank to pay defaulted taxes out of its own funds. It undertook to act as agent for the petitioners in the handling of loans and mortgages and its duty under the second paragraph of the contract was but to “see to it” that all delinquent taxes were promptly paid after they became delinquent. It is true that the bank undertook to guarantee that it would not let any lien run out or become ineffective which secured notes or mortgages owned by the petitioners and handled by it as their agent. So it is urged that when the bank failed to pay the taxes and the tax liens became prior charges upon the mortgaged real estate, the bank let the mortgage liens become ineffective to the amount of the taxes. But under familiar rules the specific obligation of the bank under the second paragraph of the contract with respect to delinquent taxes must limit its general obligation, and it is not in terms a guaranty. While a similar promise, standing alone, might in other circumstances be interpreted as a guaranty, yet the deliberate phrasing of the obligation in its present context clearly indicates that the second paragraph was not intended as a guaranty.
The bank’s obligation being that of an agent, and it having failed to require the mortgagors to pay the taxes or to notify the mortgagees of the default so that they cou'ld pay them and avoid interest and penalties, breached the contract and is liable for the damages thereby occasioned. The court we think properly measured the loss sustaine4 when it granted a decree for the interest, costs and penalties incurred by reason of the bank’s failure of duty.
The contention that the contract was usurious because the bank was thereby empowered to collect a sum in excess of legal interest from mortgagors in consideration of renewals or extensions of their loans must be rejected. There was no return to the lender of more than the legal interest, and the bank in negotiating renewals acted as agent of both borrower and lender. A brokerage commission in excess of legal interest is not usury under Tennessee law. Mallory v. Columbia Mortgage Co., 150 Tenn. 219, 263 S.W. 68.
The decree allowed interest from the date the petitions were filed, but interest upon the obligations of a closed bank should be allowed only to the date of the receivership. Anderson v. Missouri State Life Ins. Co., 6 Cir., 69 F.2d 794. Nor does the fact that resort to suit was necessary for the petitioners to establish their claims entitle them to interest from the date of dividends paid by the receiver. White v. Knox, 111 U.S. 784, 4 S.Ct. 686, 28 L.Ed. 603.
The cross-appeal is dismissed. The decree will be amended to provide that interest be computed only to the date of the bank’s closing, and as so amended it is affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
FLOYD R. GIBSON, Chief Judge.
Plaintiffs Charles Smith, John Pasley and Ralph Serini brought suit in the United States District Court for the Eastern District of Missouri against Hussmann Refrigerator Company (hereinafter referred to as Hussmann or the company) and Local 13889, United Steelworkers of America (hereinafter referred to as the union) for breach of the collective bargaining agreement and breach of the duty of fair representation. In Counts II and III, plaintiff Pasley, a black male, charged violations of 42 U.S.C. §§ 1981 and 1985 (1976), alleging that defendants discriminated against him on the basis of his race by denying him the right to make and enforce contracts and by conspiring to deprive him of the equal protection of the law.
The claims of breach of the collective bargaining agreement and breach of the duty of fair representation were tried to a jury which rendered a verdict against both defendants in favor of plaintiff Smith in the amount of $6500 and plaintiff Pasley in the amount of $2500. Also, in response to special interrogatories, the jury found that plaintiffs Smith and Serini should be awarded the classification of maintenance pipefitter, and that plaintiff Pasley’s seniority in the pipefitter classification should be upgraded. The District Court entered judgment in accordance with the jury verdict, but subsequently denied plaintiffs’ motion for a supplementary judgment to effect the advisory opinion of the jury represented by the answers to special interrogatories, and granted defendants’ motions for judgments notwithstanding the verdict. Plaintiffs Pasley, Smith and Serini appeal from the grant of defendants’ motions and the denial of their motion. They request reinstatement of the jury verdict and an order implementing the jury’s advisory opinion.
The claims of race discrimination set forth in Counts II and III were removed from jury consideration, and the court, finding no evidence of racial discrimination, determined that neither defendant had violated 42 U.S.C. §§ 1981 and 1985. Plaintiff Pasley claims error in the removal of this claim from the jury and also appeals from the decision on its merits.
On cross-appeal, defendants argue that if the judgment notwithstanding the verdict is reversed, they are entitled to a new trial for the reasons that plaintiffs had no right to a jury trial; certain jury instructions were improper; the District Court erred in excluding evidence of the National Labor Relations Board’s „ (NLRB) dismissal of plaintiffs’ charges of unfair representation; and the award indicates that the jury was impassioned or confused.
This appeal was initially submitted to a panel of this court which issued an opinion on January 3, 1979. Thereafter a petition for rehearing en banc was filed and granted. The panel opinion is hereby vacated and the judgment is modified in accordance with this opinion. We affirm the District Court’s judgment on Counts II and III of the complaint but reverse the District Court’s granting of the motions notwithstanding the verdict and reinstate the jury verdict against Hussmann and the union. We further remand to the District Court for reconsideration of whether the jury’s advisory opinions regarding classification and seniority status should be implemented.
I.
At all times relevant to this proceeding, plaintiffs were employees at Hussmann’s Bridgeton, Missouri, plant and were members of the union, and a collective bargaining agreement between defendants was in effect pursuant to which the union represented approximately 1500 production and maintenance employees at Hussmann’s Bridgeton plant. This agreement specifically provided that in the matter of promotions seniority should govern when the factors of ability and skill are substantially equal between those being considered.
On April 22, 1975, Hussmann, in accordance with the collective bargaining agreement, posted two openings for temporary positions as maintenance pipefitters. Sixty-four employees bid for these openings. Hussmann’s maintenance foreman, Schwartz, interviewed groups of the most senior employees and selected Pasley and Smith oh the basis of superior skill and ability. On May 6, 1975, Hussmann posted an opening for a permanent maintenance pipefitter. Although forty-six employees bid for this position, it was awarded to Pasley since he was already working in the classification. Three more positions in this classification, one permanent and two temporary, opened on May 13, 1975. An employee who had previously held the classification received the permanent job. Plaintiff Serini and another employee, Watson, received the temporary positions. Subsequently, plaintiff Smith bid into a permanent position as maintenance pipefitter as a result of an opening posted May 20, 1975.
Twenty-six unsuccessful bidders filed grievances claiming that Hussmann had violated the collective bargaining agreement in making the promotions. Of these grievances, the union selected four to process. These four had been filed by employees with greater seniority than the successful bidders. The union processed these grievances through the five-step grievance and arbitration procedure, as described in the collective bargaining agreement.
At the arbitration hearing, the union called each of the four grievants to testify about his skill and ability. The successful bidders were not invited to attend the hearing and their only representation was presented by Hussmann’s foreman, Schwartz, who related the substance of his interviews with the successful bidders as well as the substance of his interviews with the grievants.
On October 3, 1975, the arbitrator issued his award. He clearly denied two of the grievances on the grounds that the griev-ants lacked substantial equality of skill and ability. The arbitrator granted two grievances, those of Dattilo and Krassinger, and ordered Hussmann to give them the jobs with retroactive seniority and back pay. Further, the award named as those entitled to hold the maintenance pipefitter classification: Dattilo, Pasley, Smith, Watson, Krassinger and Serini.
Hussmann originally interpreted the arbitrator’s decision as awarding the classification to all six employees named, with their seniority in the classification in the order listed. While the plaintiffs did not rejoice at this outcome, they were satisfied with this resolution of the dispute because they retained the classification. The union, however, objected to the award arguing that the arbitrator did not have authority to create six maintenance pipefitter classifications from four posted jobs. In addition the award had two technical errors: it misstated the seniority of plaintiff Smith, giving him ten years more seniority than he actually had, and awarded Watson a position for which he had not bid.
Officials of the union and the company met to discuss these problems with the award. At this time they agreed that only four employees should be granted the classification and that those employees would be Dattilo, Krassinger, Watson and Pasley. Then, ostensibly to seek “clarification” of the award, they returned to the arbitrator. A meeting for this purpose was held October 31, 1975. No additional testimony was taken and no employees were present except the representatives of Hussmann and the union. The parties informed the arbitrator of their prior agreement and presented him with the correct seniority dates and bid sheets.
The arbitrator’s supplemental and corrective decision, issued November 4, 1975, awarded the pipefitter classification to the four most senior employees in the order of their seniority. Thus, Dattilo, Krassinger, Watson, and Pasley received the classification. Smith and Serini were entitled to be paid for the time they actually performed the job, but on any future vacancies their bid would be considered on the same basis as any other employee without seniority in the classification. This decision, however, retained the error in plaintiff Smith’s seniority, which the arbitrator later corrected after it was brought to his attention.
At the time of the second meeting with the arbitrator, the parties also agreed that a grievance filed against Serini by another employee, Pogue, would be processed against Pasley instead of Serini. At the time Pogue filed the grievance, Serini appeared to hold the fourth senior position in the classification, but by the time the union arbitrated the grievance Pasley held that position. Pasley requested permission to be present at this arbitration hearing, but his request was denied. Pogue attended the hearing at the union’s invitation. Subsequently, Pogue’s grievance was denied.
Plaintiffs, who had learned from a union official the result of the second meeting with the arbitrator before he issued his decision, attempted to file grievances to challenge the November 4 arbitration decision. Smith and Serini alleged that they were entitled to the classification, and Pas-ley challenged the realignment of his seniority. The union refused to process the grievances, relying on the language of the collective bargaining agreement that requires an arbitrator’s decision to be considered the final resolution of a dispute. In the process of trying to file his grievance, plaintiff Smith asked the president of the local union if he could be permitted to speak at a regular monthly union meeting in order to bring the matter before the membership. He was told that he would not be given the floor. Plaintiff Serini mailed a written request to the union to have the matter placed on the agenda of the next monthly scheduled meeting of the local union, but he never received a response to this request. Union officials, however, did report the results of the arbitration hearings to the membership at a regular meeting.
II.
On appeal, plaintiffs contend that the District Court erred in granting the defendants’ motions for judgment notwithstanding the verdict because the jury was properly instructed on the relevant law and was presented with sufficient evidence to find that the union had breached its duty of fair representation and that defendants breached the terms of the collective bargaining agreement.
The standard for granting judgment notwithstanding the verdict is the same as for a directed verdict. Schneider v. Chrysler Motors Corp., 401 F.2d 549, 554 (8th Cir. 1968). As stated by this court in Lord v. Wilkerson, 542 F.2d 1034, 1035 (8th Cir. 1976):
A motion for a directed verdict should be granted “only when all the evidence points one way and is susceptible of no reasonable inferences sustaining the position of the nonmoving party.” Barclay v. Burlington Northern, Inc., supra, 536 F.2d 263 at 267 (8th Cir.); Decker-Ruhl Ford Sales, Inc. v. Ford Motor Credit Co., 523 F.2d 833, 836 (8th Cir. 1975). As this Court has noted,
[A] motion for a directed verdict is properly denied where the evidence presented allows reasonable men in a fair exercise of their judgment to draw different conclusions. * * * In making this determination, the evidence, together with all reasonable inferences to be drawn therefrom, must be viewed in the light most favorable to the nonmoving party. (Citations omitted.) Vickers v. Gifford-Hill and Co., 534 F.2d 1311, 1315 (8th Cir. 1976), quoting Giordano v. Lee, 434 F.2d 1227, 1231 (8th Cir. 1970), cert. denied, 403 U.S. 931, 91 S.Ct. 2250, 29 L.Ed.2d 709 (1971).
See also Voegeli v. Lewis, 568 F.2d 89, 92 (8th Cir. 1977); Banks v. Koehring Co., 538 F.2d 176, 178 (8th Cir. 1976); Griggs v. Firestone Tire and Rubber Co., 513 F.2d 851, 857 (8th Cir.), cert. denied, 423 U.S. 865, 96 S.Ct. 124, 46 L.Ed.2d 93 (1975).
After a careful review of the jury instructions and the evidence, we conclude that the jury’s verdict should have been upheld and reverse the judgment of the District Court on this matter.
III.
The duty of fair representation developed as a corollary to the collective bargaining system promoted by Congress and administered by the NLRB. This system grants to a union the power to act as exclusive bargaining representative and necessarily subordinates the interests of an individual employee to the collective interests of all employees in the bargaining unit. Vaca v. Sipes, 386 U.S. 171, 182, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967). Because of the reduction in the individual rights of employees thus represented by a union, the controlling statutes have long been interpreted as imposing upon the union, as exclusive bargaining agent in the negotiation and administration of the collective bargaining contract, a responsibility and duty fairly to represent as individuals as well as collectively the employees within the bargaining unit. Humphrey v. Moore, 375 U.S. 335, 342, 84 S.Ct. 363, 11 L.Ed.2d 370 (1964); Ford Motor Co. v. Huffman, 345 U.S. 330, 337-38, 73 S.Ct. 681, 97 L.Ed. 1048; Steele v. Louisville & Nashville Railroad Co., 323 U.S. 192, 202, 65 S.Ct. 226, 89 L.Ed. 173 (1944).
The rationale for this statutory interpretation was clearly expressed by the United States Supreme Court:
It is a principle of general application that the exercise of a granted power to act in behalf of others involves the assumption toward them of a duty to exercise the power in their interest and behalf, and that such a grant of power will not be deemed to dispense with all duty toward those for whom it is exercised unless so expressed.
Steele v. Louisville & Nashville Railroad Co., 323 U.S. 192, 202, 65 S.Ct. 226, 232, 89 L.Ed. 173 (1944).
While the scope of the duty of fair representation has never been precisely defined, it “is a legal term of art, incapable of precise definition,” and calls for an ad hoc review of each factual situation, Griffin v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW, 469 F.2d 181, 182 (4th Cir. 1972), its evolution through the fires of court decisions leaves no doubt about its purpose. St. Clair v. Local Union No. 515 of the International Brotherhood of Teamsters, 422 F.2d 128, 130 (6th Cir. 1969). The duty of fair representation balances the collective and the individual interests of employees in the bargaining unit as these interests are represented by a labor organization in order to promote the goals of congressional labor legislation, to minimize industrial strife and encourage full production. In particular, “the duty of fair representation has stood as a bulwark to prevent arbitrary union conduct against individuals stripped of traditional forms of redress by the provisions of federal labor law.” Vaca v. Sipes, supra, 386 U.S. at 182, 87 S.Ct. at 913.
In order to meet its purpose, the scope of the duty of fair representation is in some ways very broad. The responsibility fairly to represent employees is equal in scope to the union’s broad authority in the negotiation and administration of the collective bargaining agreement. Humphrey v. Moore, 375 U.S. 335, 342, 84 S.Ct. 363, 11 L.Ed.2d 370 (1964). Thus the duty attaches to all stages of the negotiation and administration process and is owed to all employees within the unit represented. However, because of the need to balance the individual interests of employees with their collective interests, the duty of fair representation must not be construed to subvert the basic purposes of organized labor by inhibiting union representation of collective interests. The Supreme Court has stated that in the negotiation process, “[a] wide range of reasonableness must be allowed a statutory bargaining representative in serving the unit it represents, subject always to complete good faith and honesty of purpose in the exercise of its discretion.” Ford Motor Co. v. Huffman, supra, 345 U.S. at 338, 73 S.Ct. at 686. The standard by which to measure union conduct was further defined in Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967). In the administration of the collective bargaining agreement, the union has “a statutory obligation to serve the interests of all members [of a designated unit] without hostility or discrimination toward any, to exercise its discretion with complete good faith and honesty, and to avoid arbitrary conduct.” Id. at 177, 87 S.Ct. at 910. See also King v. Space Carriers, Inc., 608 F.2d 283 at 286-287 (8th Cir. 1979).
The Fourth Circuit Court of Appeals clearly articulated the import of Vaca in Griffin v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW, 469 F.2d 181, 183 (4th Cir. 1972):
A union must conform its behavior to each of these three separate standards. First, it must treat fractions and segments of its membership without hostility or discrimination. Next, the broad discretion of the union in asserting the rights of its individual members must be exercised in complete good faith and honesty. Finally, the union must avoid arbitrary conduct. Each of these requirements represents a distinct and separate obligation, the breach of which may constitute the basis for civil action.
******
* * * Without any hostile motive of discrimination and in complete good faith, a union may nevertheless pursue a course of action or inaction that is so unreasonable and arbitrary as to constitute a violation of the duty of fair representation.
IV.
Applying this standard to the union’s conduct in processing the grievances challenging plaintiffs’ promotions, we find that sufficient evidence existed for the jury to conclude that the union exceeded the permissible range of reasonableness with regard to its representation of plaintiffs. There can be no question that the scope of the duty of fair representation encompasses plaintiffs’ interests in this situation. Plaintiffs were employees within the bargaining unit and processing grievances is within the broad authority of the union as the employees’ exclusive agent in the administration of the collective bargaining agreement. See Vaca v. Sipes, supra, 386 U.S. at 177, 87 S.Ct. 903. The processing of the grievances against plaintiffs was intended to and did decide plaintiffs’ rights to the promotions, which plaintiffs had received from management on the basis of their superior skill and ability. See Tedford v. Peabody Coal Company, 533 F.2d 952, 959 (5th Cir. 1976) (“the union in making its decision not to put [grievant] back in his old position had a duty to consider not only the interests of [the grievant] but also those of the twelve employees who would suffer from the resulting rollback * * *.”); Bond v. Local Union 823, International Brotherhood of Teamsters, 521 F.2d 5, 9 (8th Cir. 1975) (union processed “test” case grievance rather than plaintiff’s grievance). This is analogous to when a union processes the grievances of some employees regarding their seniority status. Upholding the grievances necessarily derogates the seniority of other employees. Butler v. Local Union 823, International Brotherhood of Teamsters, 514 F.2d 442, 445 (8th Cir.), cert. denied, 423 U.S. 924, 96 S.Ct. 265, 46 L.Ed.2d 249 (1975). In that situation the union must fairly represent both groups of employees and may take a position in favor of one group only on the basis of an informed, reasoned judgment regarding the merits of the claims in terms of the language of the collective bargaining agreement. See Humphrey v. Moore, 375 U.S. 385, 84 S.Ct. 868, 11 L.Ed.2d 370 (1964); Deboles v. Trans World Airlines, Inc., 552 F.2d 1005, 1015 (3d Cir.), cert. denied, 484 U.S. 837, 98 S.Ct. 126, 54 L.Ed.2d 98 (1977); Price v. International Brotherhood of Teamsters, 457 F.2d 605, 611 (8d Cir. 1972).
This duty fairly to represent all employees is not diminished because plaintiffs’ rights were created by Hussmann. The particular provision of the collective bargaining agreement at issue provided that employees with superior skill and ability were entitled to promotion over those with greater seniority only if the company elected to assert its right to promote on the basis of skill and ability. This provision, typically referred to as a “modified seniority clause,” controlled the promotion machinery. The company asserted its right to choose on the basis of skill and ability because of the belief that the position of maintenance pipefitter required greater expertise than most positions within the company. It is significant that no openings in this classification had occurred for over thirteen years; thus the company did not have any established past practices for promotions into this classification with which the union could challenge compliance. Hussmann had a right to choose on the basis of skill and ability, and by its exercise of this right it vested plaintiffs with rights under the collective bargaining agreement to hold the positions to which they were promoted. The collective bargaining agreement clearly provided that employees promoted by the company on the basis of superior skill and ability are entitled to hold their promotions even against challenges by employees with greater seniority. Thus, plaintiffs possessed rights under the collective bargaining agreement which the union had a fiduciary duty to protect. The fact that their rights were contingent upon selection by the company became irrelevant once that contingency was resolved. The condition of selection is no different from the condition that plaintiffs possess superior skill and ability, which was the condition necessarily challenged by the grievants.
The nature of the union’s duty in a dispute among employees is not changed by the company’s taking a position in the grievance procedure. Even though a company may take a position favorable to a particular group of employees, the union may not abandon that particular group to the representation as afforded by the company favoring them. See Deboles v. Trans World Airlines, Inc., 552 F.2d 1005 (3d Cir.), cert. denied, 434 U.S. 837, 98 S.Ct. 126, 54 L.Ed.2d 98 (1977); Price v. International Brotherhood of Teamsters, 457 F.2d 605 (3d Cir. 1972). The union is the agent of all employees in the unit and owes a fiduciary duty to represent their interests and rights under the collective bargaining agreement. Here the union not only abandoned the plaintiffs but took an adversary attitude toward them regarding the positions they had received by reason of the company’s opinion of their skill and ability. The union took the position that any representation of plaintiffs would be made by the company, while the company declared that it had no duty to represent plaintiffs and properly protected only its self-interest which may or may not have corresponded to the interests of plaintiffs.
The first aspect of the union’s conduct in processing the grievances challenging plaintiffs’ promotions that indicates possible substandard representation of plaintiffs’ interests is the union’s strict adherence to the principle of seniority. The, union argues that in processing the grievances it merely followed a policy of favoring employees with the greatest seniority, and that this cannot be a ground for finding a breach of the duty of fair representation because it was merely in good faith applying a neutral principle. Since we agree with the District Court’s finding that there is no evidence that personal hostility toward plaintiffs motivated the use of this policy, we are squarely presented with the issue of whether this course of action combined with the other elements of the union’s conduct toward plaintiffs could be found “so unreasonable and arbitrary as to constitute a violation of the duty of fair representation.” Griffin v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW, 469 F.2d 181 (4th Cir. 1972).
The union’s choice to process all grievances based on seniority discriminated against employees receiving promotions on the basis of merit. This conduct may be viewed as a perfunctory dismissal of the interests and rights of plaintiffs. The union simply failed to represent them in any way. The modified seniority clause specifically required balancing the interests of merit and seniority whenever Hussmann deemed that the position warranted selection on the basis of merit. Under the collective bargaining agreement, after the company chose to select on the basis of merit, three separate considerations were relevant in determining the right of any employee to be promoted. These were (1) his selection by the company, (2) on the basis of skill and ability, (3) superior to the skill and ability of any senior employee who had bid for the position. Disregard for the qualification of superior skill and ability could manifest an arbitrary and perfunctory approach to promotion interests, as could ignoring the qualification of seniority or selection by the company. See Griffin v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW, 469 F.2d 181, 183 (4th Cir. 1972); De Arroyo v. Sindicato de Trabajadores Packing House, AFL-CIO, 425 F.2d 281, 284 (1st Cir.), cert. denied sub nom. Puerto Rico Telephone Co. v. De Arroyo, 400 U.S. 877, 91 S.Ct. 117, 27 L.Ed.2d 114 (1970).
As one commentator, after reviewing the applicable cases, concluded:
When the Union’s effort to represent a member of the collective bargaining unit falls below the level at which the court can conclude that the union has made a conscious, earnest effort to represent him, liability should flow. Upon a claim of substandard treatment, the union should be required to come forward with evidence to show why it followed the course of representation that it did. If the union’s behavior is based on a conscious assessment of fairly competing values, it should be given broad discretion in its choice of representation tactics. But the union should not be allowed to plead, in effect, that it chose the easier path because of convenience or rigid adherence to “union policy.”
Bryson, A Matter of Wooden Logic: Labor Law Preemption and Individual Rights, 51 Tex.L.Rev. 1037, 1102 (1973).
In this case the union has taken the position that “a union’s freedom to follow seniority in job disputes cannot coexist with a duty to evaluate the comparative skills of competing employees.” It initially selected which grievances it would process solely on the basis of seniority. It never inquired of plaintiffs about their experience or other qualifications. The only evidence presented to indicate any concern on the part of the union about the relative skill and ability of plaintiffs was the testimony of the union’s international representative who stated that he had reviewed the reports of foreman Schwartz regarding his selection of plaintiffs. In contrast to this superficial review of plaintiffs, the union representative personally discussed the backgrounds, experience, and other qualifications of the senior grievants with them and invited them to testify at the first arbitration hearing.
While we do not suggest that a union must hold internal hearings to investigate the merits of every grievance brought to it, in certain situations it may be inappropriate for a union to tie its own hands by blind adherence to a policy of favoring employees with seniority in order to avoid disputes between employees. “Conflict between employees represented by the same union is a recurring fact. To remove or gag the union in these cases would surely weaken the collective bargaining and grievance processes.” Humphrey v. Moore, supra, 375 U.S. at 349-50, 84 S.Ct. at 372. The need for a union fairly to evaluate the merits of grievances has been recognized repeatedly. “In administering the grievance and arbitration machinery as statutory agent of the employees, a union must, in good faith and in a nonarbitrary manner, make decisions as to the merits of particular grievances.” Vaca v. Sipes, supra, 386 U.S. at 194, 87 S.Ct. at 919. See Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 558, 96 S.Ct. 1048, 47 L.Ed.2d 231 (1976); Foust v. International Brotherhood of Electrical Workers, 572 F.2d 710, 715-16 (10th Cir. 1978), rev’d in part on other grounds 442 U.S. 42, 99 S.Ct. 2121, 60 L.Ed.2d 698 (1979); Minnis v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW, 531 F.2d 850, 853-54 (8th Cir. 1975); Ruzicka v. General Motors Corp., 528 F.2d 912 (6th Cir. 1975). In particular, this court has recognized that certain circumstances compel a union to evaluate the individual capabilities of employees. Petersen v. Rath Packing Co., 461 F.2d 312, 316 (8th Cir. 1972). In the context of this case the jury may have concluded that the union failed to take adequate measures to insure a fair resolution of the dispute created by the union’s processing of the grievances of the senior employees.
By negotiating the modified seniority clause to control promotion decisions, the union has limited management in an area regarded by management as one of its most important prerogatives. This limitation on management has shifted some of the burden for making promotions onto the union. Responsible union participation can ensure that the use of the seniority criterion in these decisions is compatible with efficiency and employee morale. Union involvement that is not characterized by care and thoughtful preplanning can lead to subversion of the collective bargaining agreement by processing baseless grievances. S. H. Slichter, J. J. Healy & E. R. Livernash, The Impact of Collective Bargaining on Management 178-210 (1960). See also Humphrey v. Moore, supra, 375 U.S. at 349-50, 84 S.Ct. 363. A policy of processing all grievances based on seniority regardless of their merit may even significantly alter the negotiated contract by chilling the exercise of the prerogative to promote on the basis of merit. Since a business runs on a cost-benefit basis, the cost of arbitrating the grievances of all senior employees may at times be greater than the benefit of advancing the most skilled worker. Adherence to the union’s policy in this situation would effectively set aside a provision of the collective bargaining agreement. “Such a cavalier treatment of the contract is scarcely consistent with the contemplation of the parties and seems contrary to the union members’ understanding and expectations when they ratified the contract.” Summers, The Individual Employee’s Rights Under the Collective Agreement: What Constitutes Fair Representation? 126 U.Pa.L.Rev. 251, 264 (1977). See also Vaca v. Sipes, supra, 386 U.S. at 191-92, 87 S.Ct. 903; Humphrey v. Moore, supra, 375 U.S. at 349-50, 84 S.Ct. 363.
The jury could also have found evidence of a breach of the duty of fair representation on the basis that the union failed to notify plaintiffs of the arbitration hearing or invite them to attend. Regardless of the initial evaluation of the grievances, it is obvious that once a union has chosen to arbitrate a dispute adequate presentation of all employee claims is necessary to ensure fairness in the arbitration. See Clark, The Duty of Fair Representation: A Theoretical Structure, 51 Tex.L.Rev. 1119, 1169 (1979). Since a union’s failure to inform an employee whose interests are before an arbitrator of the arbitration hearing is not necessarily sufficient to support a claim of unfair representation, courts have carefully searched the records for prejudice to the employee. When the position of the employee has been adequately presented, no breach has been found. Cf. King v. Space Carriers, Inc., 608 F.2d 283, at 288-289 (8th Cir. 1979). For example, in Humphrey v. Moore, 375 U.S. 334, 84 S.Ct. 363, 11 L.Ed.2d 370 (1964), a joint committee decided to dovetail the seniority lists of two merging companies. The Supreme Court, holding that the union was entitled to take a position in the dispute between employees, carefully noted that the disfavored employees had been given notice of the hearing and that three stewards representing them were present at the hearing and given every opportunity to state their position. Humphrey v. Moore, supra, 375 U.S. at 350-51, 84 S.Ct. 363. See also Ramsey v. NLRB, 327 F.2d 784, 788 (7th Cir.), cert. denied, 377 U.S. 1003, 84 S.Ct. 1938, 12 L.Ed.2d 1052 (1964); Bernard v. McLean Trucking Co., 429 F.Supp. 284, 286-87 (D.Kan.1977); Siskey v. General Teamsters, Chauffeurs, Warehousemen & Helpers, Local No. 261, 419 F.Supp. 48, 53 (W.D.Pa.1976); DeBelsey v. Chemical Leaman Tank Lines, 368 F.Supp. 1159, 1163 (E.D.Pa.1973); Davidson v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, Local No. 1189, 332 F.Supp. 375, 378-79 (D.N.J.1971). However, when the employee is prejudiced by not having notice of the hearing because the union inadequately prepared or presented his or her interests, a breach of the duty of fair representation has been demonstrated. Bond v. Local Union 823, International Brotherhood of Teamsters, 521 F.2d 5, 9 (8th Cir. 1975); Thompson v. International Association of Machinists, 258 F.Supp. 235, 239 (E.D.Va.1966).
The union claims that plaintiffs could not have been deprived of a fair hearing because Hussmann fully and adequately defended their position. The company, however, has consistently taken the position that it had no duty to represent plaintiffs. At trial, Hussmann presented evidence that even plaintiffs did not expect it to represent their interests. Furthermore, regardless of whether plaintiffs were inadequately represented at the first arbitration hearing, the evidence is clear that no one asserted their interests at the time of resubmission to the arbitrator.
The union also appears to contend that specific representation of plaintiffs was unnecessary since the only evidence of plaintiffs’ skills and abilities cognizable at the hearing was as they were known by the company foreman, Schwartz, who had selected plaintiffs. The union asserts that this obviated any need for plaintiffs to testify before the arbitrator. The facts belie this argument. Although at the first arbitration hearing Schwartz testified as to his evaluation and knowledge of the skill and abilities of both plaintiffs and the griev-ants, the union requested the grievants to attend and testify as to their abilities and work experience. This ex parte presentation by the union may well have hindered plaintiffs’ effort to secure an objective consideration of their promotions on the basis of superior skill and ability because the arbitrator’s decision appears to rely heavily upon the testimony of the grievants relating their background experience in terms of work they performed outside the plant. The arbitrator clearly viewed this experience as determinative in his decision regarding relative skill and ability. Although the company had some knowledge of plaintiffs’ outside work, more work experience, while in a sense cumulative, could indicate greater skill and ability. Since the griev-ants appeared to have experience not related to the arbitrator by the company representative who interviewed them, it can be inferred that plaintiffs would also be able to relate their outside work experience better than the company representative. Thus, the failure to invite plaintiffs to attend the arbitration hearing may have left them inadequately represented regarding a crucial factor in dispute.
The fairness of the ultimate arbitration award also necessarily involved consideration of the union’s and company’s resubmission to the arbitrator of the initial decision. The jury could have found that the resubmission constituted a breach of the duty of fair representation and breach of the collective bargaining agreement’s provision providing that arbitration is a final and binding resolution of a dispute. It was undisputed that at the second hearing no additional testimony was taken. Only representatives of Hussmann and the union met with the arbitrator, presented him with the correct seniority dates and bid sheets, and requested him to clarify which four employees should be awarded the four positions that had opened. Some testimony, however, indicated that the parties meeting with the arbitrator also told him, pursuant to a previous agreement, specifically which four employees should receive the positions. In this context, the jury was presented with the issue of whether the second hearing resulted in a substantial change from the original decision or merely a “clarification” of it. If an agreement between the union and the company substantially altered the award by taking away plaintiffs' rights granted by arbitration, defendants could have been found to have violated the “final and binding” provision of the collective bargaining agreement.
By the first decision of the arbitrator, six employees were granted the maintenance pipefitter classification. Seniority was designated in the following order: Dattilo, Pasley, Smith, Krassinger, Watson, Serini. According to the supplemental decision, only Dattilo, Watson, Krassinger, and Pas-ley were granted the classification, with their seniority realigned in the order listed. It was understood at the time of both decisions that only four actual openings in the classification would be filled.
While defendants argue that this changed result must be viewed as a clarification because the first award, could not be implemented, the record reveals substantial support for the position of plaintiffs that there would be no problem with permitting an employee to hold a classification status even though he did not currently work within it. Plaintiffs position appears to have been the company’s initial response and consistent with some past practice. Additionally, it should be noted that in his original decision the arbitrator specifically found that Pas
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MANTON, Circuit Judge.
The industry affected by this order has for its purpose the enabling of a woman to purchase a pattern for a dress or other piece of wearing apparel, and to use it as a pattern upon a sufficient amount of material to make the article in her own home, thus avoiding the outside tailoring or purchasing of ready-made garments. This, it is said, reduces the cost of women’s garments- very materially. She contributes her own labor and skill, using the pattern as a guide. The manufacturer creates a design, and from it a master pattern is made. Other patterns are cut out of tissue paper, and these are then placed in envelopes and sold as herein described. The petitioners, who are manufacturers, in connection with their method of advertising to the trade, published a magazine called the Delineator for circularization among women readers. There are published in that magazine pictorial representations of pattern designs. The woman sees the patterns thus pietorially represented, makes her selection, and later her purchase. Her identification is by the number marked on the pattern. The business practice of publishing patterns is not confined to a single magazine. They may be found in various magazines, such as the Ladies Home Journal, the McCall Magazine, and other publications. Patterns are on sale at stores in various cities and towns in the United States, principally department stores. The petitioners’ business has grown to very considerable proportions, the la,st reported distribution of the petitioners being 27,000,000 annually, and the magazine has a circulation of over 900,000.
It is established that the petitioners have contracts with about twenty thousand retail dry goods dealers and other stores throughout the United States. Each contract binds the dealer to maintain the resale price fixed on the labels, and binds such dealers not to sell, or permit to be sold on their premises, the patterns of competitors. They are permitted to enforce these provisions by refusing to sell to dealers who refuse to make such agreements, or to he hound by them, as well as by threats of suit and the actual institution of suits for damages. The complaint, as filed, alleges that this business method constituted unfair competition, and charged violation of section 3 of the Clayton Act of October 15, 1914 (Comp. Stat. § 8835c), and section 5 of the Federal Trade Commission Act (Comp. Stat. § 8836c). Hearings were held and testimony taken, after which the Commission entered an order commanding the petitioners to cease and desist “from selling the patterns manufactured by them, or any of them, for resale to the public upon any contract, agreement, or understanding that the distributor shall maintain the resale price fixed by the maker, and/or that such distributor shall not deal in patterns produced by any other maker than the respondents, or any of them.”
The petitioners contend that, while the pattern manufacturers practiced this method of fixing resale prices, they were not engaged in unfair competition. They say that they are using “the same methods as their competitors,” and that “those methods are inherent in this business, and have in no manner hindered competition between the pattern manufacturers,” and that in point of fact “competition has been more keen and successful in each succeeding year.” It is argued that, because of the unique character of the business, this industry presents distinctiveness from that of others where price fixing has been condemned. Miles v. John D. Park, 220 U. S. 373, 31 S. Ct. 376, 55 L. Ed. 502; Bauer v. O’Donnell, 229 U. S. 1, 33 S. Ct. 616, 57 L. Ed. 1041, 50 L. R. A. (N. S.) 1185, Ann. Cas. 1915A, 150; United States v. Schrader's Sons, Inc., 252 U. S. 85, 40 S. Ct. 251, 64 L. Ed. 471; Federal Trade Commission v. Beech-Nut Packing Co., 257 U. S. 453, 42 S. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882. It is said that protection to the public is achieved by the label price, and that, in the cases referred to of price fixing’, there was a show of monopolistic control or suppression of competition, planned through the fixing of resale prices in conjunction with the nature of business and the moans employed in maintaining the price.
The respondent has filed an answer to the petition to review the order, and in it contends that (1) the court should affirm the order; and (2) that the court should enjoin the petitioners from continuing the violations of law found by the Commission to have been committed.
This presents the question of whether the form of contract which is now used by the petitioners, as superseding the contract above referred to, still violates section 5 of the Federal Trade Commission Act. The new contract fixes the resale price, and restrains the dealer from selling the goods of the competitor. It is claimed for it that it is a contract of agency, and not a contract of sale, and that therefore it is not within the terms of the aet. We think both the contracts are the same in substance, and by their terms are in violation of section 3 of the Clayton 'Act, which forbids contracts of sale made upon the agreement or understanding of price fixing, or that the purchaser shall not deal in goods of competitors, both of which may substantially lessen competition or tend to ereate a monopoly. This form of contract was considered in Standard Fashion Co. v. Magrane-Houston Co., 258 U. S. 346, 42 S. Ct. 360, 66 L. Ed. 653, where it was held that a contract between the manufacturer and retailer creating an agency for the retailing of goods made by the manufacturer to be purchased by the retailer, with provisions for periodical exchange of old goods for new of less value, and for repurchase by the manufacturer of stock on hand, was a contract of sale within section 3 of the Clayton Aet, and it was further held that such a contract, granting an- agency to the store for selling the goods, and forbidding the retailer from assigning or transferring the agency, or removing it from its original location, without the manufacturer’s consent, and forbidding the retailer to sell on the premises goods of the manufacturer’s competitors under the terms of the contract, and to sell the same at label prices fixed' thereon, was a general restriction, not confined to the particular shop, and such clauses were in violation of section 3 of the Clayton Act.
While the latter contract is a modification of the former, and is sought to he regarded as one of agency, it is apparent to us that it is a contract of sale. Straus v. Victor Talking Machine Co., 243 U. S. 490, 37 S. Ct. 412, 61 L. Ed. 866, L. R. A, 1917E, 1196, Ann. Cas. 1918A, 955; Standard Fashion Co. v. Magrane-Houston Co., supra. Section 3 of the Clayton Act condemns sales or agreements of sales made under terms as to substantially lessen competition or tend to create a monopoly in any line of commerce. It must of necessity deal with the consequences flowing from contraéis, as here considered, which have restrictive covenants limiting the rights of' the purchaser to deal with the goods of the seller only. The president of one of the petitioners said in his testimony that 85 per cent, of the business transacted by it was under the form of contract thus condemned in Standard Fashion Co. v. Magrane-Houston Co., supra.
We think the form of contracts used in that case, are the same in substance as the present ones. By their terms they are for the resale of patterns, and they fixed a price at which they must be resold. They contain a restrictive clause against the sale of competitors’ goods, and provide that the patterns on hand at the expiration of the contract “will be returnable for repurchase,” and the consideration for the patterns is referred to as “purchase price of patterns,” and “patterns-returned in exchange or for redemption must have been purchased hereunder.” Indeed, all of the. contracts of the petitioners are in their terms substantially the same, and the business method pursued was in keeping with the terms of these contracts and in compliance therewith. The officers of the petitioner who testified substantiated this. These contracts provide means for a real or substantial lessening of competition. The petitioners are one of seven of the largest concerns engaged in this industry. There are about 50,000 pattern agencies in the United States, and the petitioners, by their contracts, control about 20,-. 000. They restrict these dealers by their contract. The application of this contract is not only a potential evil, but, indeed, is an' actual and powerful restraint upon trade by the petitioners.
We do not distinguish between the old form and present form referred to in respondent’s answer. We think they have the same injurious effect. Indeed, the record practically shows the effect of such restraint of competition. There are instances where the dealer has been cut off by the petitioners for handling the goods of the Competitor-Contracts fixing prices for resale are not only contrary to the general law, and void,, but there is no power to make them, because-of their monopolistic tendencies even in a. patented article. Boston Store of Chicago v. American Graphophone Co., 246 U. S. 8, 38 S. Ct. 257, 62 L. Ed. 551, Ann. Cas. 1918C, 447.
It is urged that the petitioners have-ceased the use, of their former contract by substituting therefor the new form referred to (Exhibits 25, 26, 27, of this record). However, it is established that many of the-old forms of contract are still in use and of binding force. Because the petitioners are-making the new form of so-called “agency-contracts,” it cannot be argued that they have discontinued the methods found by the-commission to be offensive to the act. Sears,. Roebuck & Co. v. Federal Trade Commission, 258 F. 207.
The argument that other competitors are doing substantially what the petitioners do has no effect. It is not important. Standard Fashion Co. v. Magrane-Houston Co., supra. The contracts adopted by the petitioners, in the form of Exhibits 25, 26, and 27, differ only from the terms of the former in calling the petitioners “principal”' and the retail dealer “agent,” and the principal agrees to supply f. o. b. its patterns- and- advertising matter at the price and on the conditions named on the reverse side, and, instead of the dealer agreeing to purchase, the agent agrees to accept from the-principal and keep on hand for sale at all times its patterns. The exact terms of payment, as in the former contract, provide that one-half of the agreed price for the patterns-is to be paid by a certain date, and the balance is debited to the retail dealer, called “a standing credit,” on which interest is-charged to the retail dealer, and the retail dealer is immediately on signing the contract, obliged to pay this balance, which is-due and payable at the termination of the-contract. As in the formefi contracts, all other patterns or goods charged under the contract are to be paid for on or before the 10th of the following month succeeding the date of shipment, whether the goods are sold on that date or not.
This we regard as an effort to avoid the passing of title, and thus attempt to create an agency. But there is nothing to indicate a qualified salo, and there was no transfer of a limited right to use these goods. The dealer had the title and the right to use the article purchased. He could sell and dispose of it. His sole obligation was to pay for it. In the meantime, ho had full possession and authority over the patterns, when the title passed to him. Bauer v. O’Donnell, 229 U. S. 1, 33 S. Ct. 618, 57 L. Ed. 1041, 50 L. R. A. (N. S.) 1185, Ann. Cas. 1915A, 150; Straus v. Victor Talking Machine Co., supra. We regard this new form of contract as an effort to modify the form, and not the substance, of the petitioners’ business methods. We do not- think the contracts successfully make out an agreement of agency, as distinguished from a contract of sale. This studied effort to avoid the use of the word “sale” cannot aid the petitioners in carrying out this practice, which the Commission has justly condemned as obnoxious to the public interest. This record is replete with evidence justifying tho conclusion of the Commission. It is in large part admitted by the officers of the petitioners to be their business method.
The distribution or sale of patterns of the petitioners to the retail dealers, tho sale by the petitioners of the catalogues, fashion sheets, and other advertising matter referred to in the contracts of the petitioners, and purchased by the retail dealers, is inseparably connected with the sale or agreements regarding the delivery of the patterns by the petitioners to the retail distributors, and is a part of the same transaction in commerce. The contract, in so far as it is a sale of the catalogues, fashion sheets, and other advertising matter by the petitioners to the retail distributors in other states, is a transaction in interstate commerce. The sale of these publications and advertising matters are so connected in use with tho disposal of the patterns themselves, as to indicate that the whole business is one affair of commerce. Davis v. Commonwealth of Virginia, 236 U. S. 697, 35 S. Ct. 479, 59 L. Ed. 795; Dozier v. State of Alabama, 218 U. S. 324, 30 S. Ct. 649, 54 L. Ed. 965, 28 L. R. A. (N. S.) 264; Caldwell v. North Carolina, 187 U. S. 622, 23 S. Ct. 229, 47 L. Ed. 336.
We are urged by the respondent to grant relief upon this answer, which is a cross-petition seeking the enforcement of the order' of the Commission, so as to include therein a command to the petitioner to cease and desist from its birsiness practices in the sale of these products by them, or any of them, and from enforcing its business methods requiring the distributor to maintain the retíale price fixed by the petitioners, and requiring such distributor to deal only in patterns purchased from the petitioners or any of them. The jurisdiction of tho court in this proceeding is original rather than appellate, and, since it is the former, we may, in our own decree, protect the rights of the parties and in such form as it would be enforceable by us. Silver Co. v. Federal Trade Commission (C. C. A.) 292 F. 752. The decree should be along the linos adopted by the courts of equity in hearing suits of injunction. It is the general practice in such eases that, if the defendant is continuing or threatening’ acts, there will be an injunction, but, if whatever was unlawful ceased long before, the bill was filed, and there is no reason to apprehend its renewal, the bill will be dismissed without prejudice. But here the petitioners are not only doing business under the original contract, but the now forms of contract are both deemed a violation of section 3 of the Clayton Act. The command of the order to cease and desist is broad enough to include both forms of contract. Both are offensive to the act, and fall within the enforcement of the order to cease and desist.
Concluding, as we do, that the Commission’s order was properly made, it is affirmed, and the respondent may have an order entered on its cross-petition.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
WALLACE, Chief Judge:
Young appeals from his sentence following his guilty plea to unarmed bank robbery, in violation of 18 U.S.C. § 2113(a). He contends that the district court erred by sentencing him as a career criminal offender pursuant to section 4B1.1 of the United States Sentencing Guidelines (Guidelines). This appeal presents the sole issue of whether, for purposes of section 4B1.1, the unlawful possession of a deadly weapon while in jail, in violation of California Penal Code § 4574(a), is a “crime of violence.” The district court had jurisdiction pursuant to 18 U.S.C. § 3231. We have jurisdiction over this timely appeal pursuant to 18 U.S.C. § 3742(a) and 28 U.S.C. § 1291. We affirm.
I
Section 4B1.1 of the Guidelines provides for an increased sentence to be imposed upon career criminal offenders. A defendant can qualify as a career offender if he or she is convicted of a felony that is a crime of violence and has two prior felony convictions for crimes of violence. U.S.S.G. § 4B1.1; United States v. Huffhines, 967 F.2d 314, 320 (9th Cir.1992) (Huffhines).
The district court sentenced Young as a career offender based on his instant conviction for unarmed bank robbery and on two prior state felony convictions. One of the prior convictions was for voluntary manslaughter; the other was for possession of a deadly weapon in prison. Young concedes that his instant conviction and his conviction for voluntary manslaughter may be counted for purposes of section 4B1.1. He challenges only the reliance on his prior conviction for possession of a deadly weapon while in prison, which he contends is not a crime of violence. The district court disagreed and sentenced Young as a career criminal offender.
II
We review the district court’s interpretation of the Guidelines de novo. Huffhines, 967 F.2d at 320. A “crime of violence” is defined in part in Guidelines section 4B1.2 as a state or federal offense punishable by more than one year in prison that either “has as an element the use, attempted use, or threatened use of physical force against the person of another, or ... otherwise involves conduct that presents a serious potential risk of physical injury to another.” U.S.S.G. § 4B1.2(1). To determine whether a prior conviction is a “crime of violence,” we look to “the elements of the crime charged or whether the actual charged ‘conduct’ of the defendant presented a serious risk of physical injury to another.” United States v. Sahakian, 965 F.2d 740, 742 (9th Cir.1992) (Sahakian).
The elements of the offense of possession of a deadly weapon in prison are established by California Penal Code § 4574(a), the statute under which Young was convicted. Those elements are: “(1) possession (2) of a firearm, deadly weapon, or explosive, (3) without authorization, (4) by one lawfully committed to a county jail.” People v. Talkington, 140 Cal.App.3d 557, 561, 189 Cal.Rptr. 735 (1983). An intent to use the object in a violent manner is not a required element of the offense. Id. Clearly, then, the statutory definition of the crime does not contain as an element “the use, attempted use, or threatened use of physical force against the person of another.” U.S.S.G. § 4B1.2(l)(i).
We turn, then, to the question whether the offense “involves conduct that presents a serious potential risk of physical injury to another.” U.S.S.G. § 4B1.2(l)(ii). Young argues that our prior cases establish that only the statutory elements of the offense may be examined to determine whether a particular offense is a crime of violence. Thus, he asserts, we must follow our case law even though it conflicts with the Guidelines, which do permit consideration of a defendant’s conduct while our cases do not.
As is clear from Sahakian,- in determining whether a particular conviction involved a “crime of violence,” we make two different inquiries. 965 F.2d at 742. First, we look to the elements of the crime charged. If one of the elements of the crime is the use, attempted use, or threatened use of physical force, we consider that crime to be one of violence. Id. If the crime does not contain such an element, we examine “whether the actual charged ‘conduct’ of the defendant presented a serious risk of physical injury to another.” Id. (emphasis added). The second inquiry plainly directs our attention to the conduct for which the defendant was charged and convicted. This inquiry is consistent with the directive contained in the Guidelines, which instructs courts to consider “the conduct set forth (i.e., expressly charged) in the count of which the defendant was convicted,” to determine whether that conduct “by its nature[ ] presented a serious potential risk of physical injury to another.” U.S.S.G. § 4B1.2, comment, (n. 2).
In Huffhines, decided after Sahakian, we stated that a “categorical approach, by which only the statutory definition of the crime is examined, is appropriate to determine whether a prior conviction is a crime of violence under section 4B1.1.” 967 F.2d at 320 (emphasis added). Young urges us to .read this passage as precluding any examination of a defendant’s actual conduct. We need not do so. While a consideration of only the statutory definition of a crime may be sufficient in some cases to show the crime is one of violence, in others the actual conduct with which the defendant was charged may need to be examined. In Huffhines itself, for example, we held that the unlawful possession of a silencer was a crime of violence because it involved conduct that presented a “risk of improper physical force.” 967 F.2d at 321.
To dispel any lingering confusion, we hold explicitly what is implicit in our cases: In determining whether an offense “involves conduct that presents a serious potential risk of .physical injury to another,” U.S.S.G. § 4B1.2(l)(ii), courts may consider the statutory definition of the crime and may also consider the conduct “expressly charged[ ] in the count of which the defendant was convicted.” U.S.S.G. § 4B1.2, comment, (n. 2). If a prior conviction is determined to be a crime of violence under either prong of this inquiry, then it is to be counted under U.S.S.G. § 4B1.1, regardless of the outcome of the other prong. The latter inquiry, however, must be limited to the conduct charged in the indictment or information; a sentencing court is not free to make a “wideranging inquiry into the specific circumstances surrounding a conviction.” United States v. Johnson, 953 F.2d 110, 113 (4th Cir.1992). The “sentencing court must confine its factual inquiry to those facts charged” in the count of the indictment or information for which the defendant was convicted. Id.
Young was charged with possession of a deadly weapon in prison. The information charged him with possessing a “shank,” in his case a melted-down shaving razor. Young argues that the crime of possessing a deadly weapon in prison is similar to the crime of unlawful possession of a firearm by a felon. The latter is not considered “a crime of violence” for purposes of determining whether a defendant is a career criminal offender. U.S.S.G. § 4B1.2, comment, (n. 2); see also Sahakian, 965 F.2d at 742 (concluding that “conviction of being a felon in possession [of a firearm] is not a conviction of a crime of violence”). Thus, Young argues, the possession of a deadly weapon in prison likewise should not be considered a crime of violence.
These two offenses are not sufficiently similar to warrant similar consideration for the purposes of determining a defendant’s status as a career criminal offender. Whether we confine our inquiry to the statutory definition of the crime, the possession of a deadly weapon in jail, or consider the specific conduct charged, the possession of a “shank” in jail, our conclusion is the same. In a prison setting, the possession by an inmate of a deadly weapon indeed presents a serious potential risk of physical injury to another.
The felon who unlawfully possesses a firearm, although disobeying the law, may have a legitimate use intended for the firearm, such as target shooting or collecting. By contrast, we fail to discover a similarly “innocent” purpose behind the possession of a deadly weapon by a prison inmate. Cf. Huffhines, 967 F.2d at 321 (observing that “a silencer is practically of no use except for a criminal purpose”). The confines of prison preclude any recreational uses for a deadly weapon and render its possession a serious threat to the safety of others. By its nature, therefore, the possession of a deadly weapon by a prison inmate presents “a serious potential risk of physical injury to another.” U.S.S.G. § 4B1.2(l)(ii).
The district court did not err in relying on Young’s conviction for possession of a deadly weapon in prison when determining his status as a career criminal offender.
AFFIRMED.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
BEAM, Circuit Judge.
Six defendants appeal from verdicts and sentences resulting from their joint trial. The defendants were found guilty on various counts of conspiracy to manufacture and distribute “crack” cocaine, of possession with intent to distribute and manufacture cocaine, and of aiding and abetting the possession with intent to distribute cocaine. The government cross-appeals, claiming that the appellants should have been sentenced under the Federal Sentencing Guidelines. We affirm both the convictions and the sentences.
I. BACKGROUND
On August 18, 1988, Roland Adkins telephoned the Minneapolis Police Department Narcotics Squad. Adkins told officers that he had been involved with a group of people selling cocaine. Adkins indicated that he had been given some crack to sell, but that he had consumed the crack. Adkins requested assistance in retrieving his family from his home.
The police arranged a meeting, and later that day, Adkins met with several officers. Adkins rode in the police car and directed the officers to a house at 3019 Emerson Avenue, North in Minneapolis. Adkins said that several days earlier, he had driven “Shorty” (defendant Jones) to the 3019 Emerson Avenue address to store some cocaine in the house. Adkins gave the officers the names of people who had been involved in the manufacture and distribution of crack cocaine. Adkins also told officers about drug activity at 2709 Twelfth Avenue, South in Minneapolis. This information corroborated the testimony that police had received from two other reliable informants.
Search of 2709 Twelfth Avenue, South
Pursuant to Adkins’ information, the police applied for a search warrant for 2709 Twelfth Avenue and the warrant was issued. The police planned to execute the warrant at 2709 Twelfth Avenue and, based on the results of that search, the police planned to apply for a search warrant for the 3019 Emerson Avenue duplex. Thus, the police prepared the search warrant application for 3019 Emerson Avenue and waited for the execution of the 2709 Twelfth Avenue warrant. At 6:35 p.m. on August 18, 1988, the police executed the warrant for 2709 Twelfth Avenue. The police seized a bag of cocaine powder and a bag of crack cocaine, firearms and ammunition, glass test tubes with cocaine residue, plastic bags, a triple beam scale, keys for a firesafe, and bus and airline tickets from Los Angeles to Minneapolis. The officers arrested defendants Reed, Colvin, Coaston and Hubbard-Thomas. At the time of the arrest, the police found $835 on Reed and $536 on Coaston.
Surveillance of 3019 Emerson Avenue, North
At the time that the search of 2709 Twelfth Avenue was being conducted, the Police Department Narcotics Squad set up video surveillance of the duplex at 3019 Emerson Avenue. Sergeant James Murphy personally began visual surveillance at approximately 5:00 p.m. on August 18, 1988. Between 5:00 and 6:00 p.m., Sergeant Murphy walked by 3019 Emerson Avenue and observed a black male wearing a distinctive, lumberjack-type, red-and-black checkered shirt. The man was inside the lower level of the 3019 Emerson Avenue duplex. The individual was later identified as defendant Houston.
At 6:00 p.m., Sergeant Murphy turned on a video camera. Sergeant Murphy observed Houston leave 3019 Emerson Avenue on foot. Houston returned driving a 1977 brown Plymouth with Texas license plates. Houston parked the car in front of the 3019 Emerson Avenue duplex and went inside. Sergeant Murphy observed defendant Houston exit the duplex, followed by a man who was later identified as defendant Jones. Jones was carrying a “Pampers” diaper box. The two men got into the Plymouth and drove away.
At this time, the police knew of the arrests made, and of the cocaine and the shotguns found at 2709 Twelfth Avenue. Sergeant Murphy had received orders from the head of the Minneapolis Narcotics Squad to stop any person leaving the 3019 Emerson Avenue duplex. Sergeant Murphy radioed police officers to stop Jones and Houston in the Plymouth.
Responding to the radio message, police officers stopped the Plymouth a few blocks from the duplex. Following the Minneapolis Police procedure for felony stops, the officers ordered Jones and Houston out of the vehicle at gunpoint and instructed the defendants to lie on the ground face down. While standing outside of the Plymouth, Minneapolis Narcotics Officer Peter Jackson observed cocaine in a plastic bag in the Pampers box. Subsequent laboratory analysis revealed that the bag contained 254 grams of cocaine and 24 grams of crack cocaine. Officer Jackson returned the cocaine to the Pampers box inside the Plymouth, and ordered that the Plymouth be towed, impounded, and secured. Defendants Houston and Jones were arrested and taken into custody.
Search of 3019 Emerson Avenue, North
Following the arrest, the police executed the warrant which had by then been obtained for a search of 3019 Emerson Avenue. The police seized two firesafes found in a bedroom closet. The firesafes contained 979 grams of cocaine, 67 grams of crack cocaine, and bundles of United States currency. The bundles had the words “Tweedy,” “L Dog,” “Kevin,” and “$1,800” written on them. The keys to the firesafes were seized when the police inventoried the Plymouth at the impound lot. The police also seized an airline ticket from Los Ange-les to Minnesota, a black gym bag, and bullets.
On October 3, 5, and 11, 1988, a magistrate conducted motion hearings on defendants’ motions for suppression of evidence and severance. The magistrate issued a report and recommendation, recommending that the defendants’ motions be denied. On November 25, 1988, the district court affirmed the magistrate’s report and recommendation.
The defendants were tried by jury from November 28 through December 7, 1988. The jury convicted the defendants on all counts as charged. On January 9, 1989, all defendants were sentenced.
Prior to sentencing, the defendants filed a Motion to Preclude Application of the Sentencing Guidelines, arguing that the Guidelines were unconstitutional. The trial court granted those motions and sentenced the defendants as though the crimes had been committed prior to November 1, 1987. The government cross-appealed the defendants’ sentences.
II. DISCUSSION
A. VALIDITY OF SEARCH WARRANT
Defendant Hubbard-Thomas challenges the district court’s adoption of the magistrate’s recommendation that the search warrant for 2709 Twelfth Avenue was valid. As indicated, on August 18, 1988, Adkins told the Minneapolis Police Department Narcotics Squad about drug activity at 2709 Twelfth Avenue. Hubbard-Thomas contends that the officer applying for the search warrant knew, or should have known, that the information provided to him by Adkins was false or unreliable.
“[T]he task of a reviewing court is not to conduct a de novo determination of probable cause, but only to determine whether there is substantial evidence in the record supporting the magistrate’s decision to issue the warrant.” Massachusetts v. Upton, 466 U.S. 727, 728, 104 S.Ct. 2085, 2085, 80 L.Ed.2d 721 (1984) (per curiam). Accordingly, the initial judicial determination to issue a search warrant should be given substantial deference.
Adkins’ information corroborated the information of two additional informants. Each of the informants were at 2709 Twelfth Avenue within seventy-two hours of the issuance of the warrant. One of the informants saw numerous individuals with weapons, and a kilogram of cocaine. A second informant saw cocaine and told police that the Los Angeles street gang, “Bloods,” distributed cocaine to street dealers from 2709 Twelfth Avenue. Both informants had previously provided reliable information.
Adkins, by comparison, saw a male known as “Tweedy” (defendant Coaston) weighing cocaine. Adkins said that Tweedy cooked cocaine into crack and distributed it to street dealers. Adkins also saw a kilogram of cocaine on the premises, and told officers that Tweedy was a gang leader of the Bloods. Thus, Adkins’ observations corroborated the observations of the other two informants. The executing officer relied on the informants and recited the firsthand observations of the three separate confidential informants when applying for the search warrant. Given the information provided by these three informants, the record contains substantial evidence to support the magistrate’s decision to issue the warrant. See Illinois v. Gates, 462 U.S. 213, 238, 103 S.Ct. 2317, 2332, 76 L.Ed.2d 527 (1983) (Court established test based upon “totality-of-the-circumstances” set forth in affidavit to determine whether probable cause exists for warrant to be valid). Based upon the totality of the circumstances, probable cause existed and the warrant was valid. Accordingly, we find no error in the district court’s determination that the search warrant for 2709 Twelfth Avenue was legal.
B. PROBABLE CAUSE FOR ARREST
Defendant Reed contends that there was no basis for his arrest. Reed was in the house at 2709 Twelfth Avenue when the search warrant was executed. The police arrested Reed, Colvin, Coaston, and Hubbard-Thomas, and videotaped them. Two informants subsequently identified Reed from the videotape. Reed argues that the mere fact that he was in a house where illegal activity had taken place does not give rise to probable cause to search and seize him. Furthermore, Reed asserts that the videotape taken of him and the other defendants should have been suppressed as the fruit of an illegal arrest.
The trial court found probable cause for Reed’s warrantless arrest. An appellate court reviews the trial court’s finding of probable cause to make a warrantless arrest under the clearly erroneous standard. See United States v. Wajda, 810 F.2d 754, 758 (8th Cir.), cert. denied, 481 U.S. 1040, 107 S.Ct. 1981, 95 L.Ed.2d 821 (1987).
This circuit has defined probable cause as follows:
Probable cause exists to make a warrant-less arrest when, at the moment of the arrest, the collective knowledge of the officers involved, United States v. Briley, 726 F.2d 1301, 1305 (8th Cir.1984), was “sufficient to warrant a prudent man in believing that the [defendant] had committed or was committing an offense.” Beck v. Ohio, 379 U.S. 89, 91, 85 S.Ct. 223, 225, 13 L.Ed.2d 142 (1964).
Wajda, 810 F.2d at 758.
Minneapolis police officers forcibly entered the residence at 2709 Twelfth Avenue pursuant to the search warrant. The officers recovered a plastic baggie containing 10 grams of crack cocaine from the front porch; ammunition, firesafe keys, and a plastic baggie containing 10.8 grams of cocaine powder from the dining room; pump and bolt action shotguns, and a sawed-off shotgun from underneath the couch in the living room; glass bottles with suspected cocaine residue and a triple beam scale from the basement; test tubes with suspected cocaine residue and .32 caliber ammunition from the kitchen; and ammunition from the sunroom. The police also seized $835 which was in Reed’s clothing.
At the time of Reed’s arrest, the seizure of the cocaine and the weapons was sufficient for the police officers to believe that Reed had committed or was committing an offense. Also, large amounts of cash frequently are associated with illegal drug sales. See id. at 762. Informant Adkins testified that he had seen cocaine cooked into crack at 2709 Twelfth Avenue by defendants Reed, Hubbard-Thomas, and Coaston. Accordingly, we find no error in the district court’s determination that there was probable cause for Reed’s warrantless arrest.
Reed also asserts that the videotape, and the identification of Reed from the tape by the informants, were fruits of his illegal arrest and should have been suppressed. A videotape is similar to a mug shot taken of an arrested person and can be used in a similar fashion. Reed disputes this proposition and argues that the videotape constitutes evidence improperly obtained in an examination of his person. Even if we were to accept Reed’s argument, which we, in fact, reject, the evidence was rightly gathered and employed. Where sufficient probable cause to sustain the arrest has been established, and where the “evidence seized in a contemporaneous search of the suspect’s person was in no way necessary to establish probable cause, the search is incidental to the arrest ... [and] valid.” United States v. Skinner, 412 F.2d 98, 103 (8th Cir.), cert. denied, 396 U.S. 967, 90 S.Ct. 448, 24 L.Ed.2d 433 (1969). Thus, the district court did not err in failing to suppress the videotape and the informants’ identification of Reed.
C. VALIDITY OF VEHICLE STOP
Defendants Houston and Jones argue that their seizure while driving the automobile was illegal and that the discovery of cocaine in the vehicle should have been suppressed. The defendants assert that the issuance of a search warrant for the 3019 Emerson Avenue duplex did not provide justification for their seizure. The defendants also argue that their seizure in the Plymouth was an arrest which required probable cause.
In United States v. Lewis, 738 F.2d 916, 920 (8th Cir.1984); cert. denied, 470 U.S. 1006, 105 S.Ct. 1362, 84 L.Ed.2d 383 (1985), this court stated that if the facts and the law support the district court’s finding, it must be affirmed unless clearly erroneous. In this case, the district court and the magistrate found that the police had a specific, articulable basis to suspect that the Plymouth’s occupants were engaged in criminal conduct. See Terry v. Ohio, 392 U.S. 1, 21, 88 S.Ct. 1868, 1879, 20 L.Ed.2d 889 (1968). The police “may stop a moving vehicle, ‘to investigate a reasonable suspicion, based on specific and articulable facts, that its occupants are or have been involved in criminal activity.’ ” United States v. Eisenberg, 807 F.2d 1446, 1450 (8th Cir.1986) (quoting United States v. Doffin, 791 F.2d 118, 120 (8th Cir.1986) (per curiam)). Furthermore, when the police approach an automobile with weapons drawn, the stop is not transformed per se into an arrest. See id. at 1451.
We do not find it necessary to determine whether a Terry stop was justifiable in this case. Rather, we find that there was probable cause for the arrest of Houston and Jones. At the moment of arrest, the collective knowledge of the officers involved was sufficient for them to believe that the defendants had committed or were committing an offense. See Wajda, 810 F.2d at 758.
On August 18, 1988, Sergeant Murphy observed a black male wearing a distinctive, red-and-black checkered shirt inside the downstairs unit at 3019 Emerson Avenue. As noted, the man was later identified as defendant Houston. Houston walked away from the duplex and returned in a Plymouth. Houston later drove away with defendant Jones and a Pampers box that was large enough to hold drugs and weapons. At the time the Plymouth was stopped, the search warrant for 3019 Emerson Avenue had been issued. The police knew of the shotguns, the ammunition, and the cocaine seized at the 2709 Twelfth Avenue location. Informant Adkins had told the police about drug activity at both locations. The officers reasonably could have believed that the defendants were carrying weapons. The police, therefore, could forcibly stop the defendants. See Adams v. Williams, 407 U.S. 143, 147, 92 S.Ct. 1921, 1923, 32 L.Ed.2d 612 (1972). Accordingly, the seizure of the defendants was justified because there was probable cause for their arrest. The district court did not err in failing to suppress the cocaine found in the vehicle.
D. SEVERANCE
Defendants Coaston and Hubbard-Thomas assert that the district court erred in denying their motions for separate trials. The defendants argue that their trial should have been severed because the jury would not be able to distinguish the alleged acts of each defendant from the acts of their co-defendants. Coaston and Hubbard-Thomas also allege that they were prejudiced by evidence introduced at trial with regard to a gun belonging to co-defendant Jones and to the gang associations of co-defendant Colvin.
“To establish abuse of discretion in the denial of a motion to sever, defendants must demonstrate they were prejudiced by the jury’s inability to follow the trial court’s instructions and to ‘compartmentalize the evidence’ as it related to the separate defendants.” United States v. Lee, 886 F.2d 998, 1002 (8th Cir.1989) (quoting United States v. Adkins, 842 F.2d 210, 212 (8th Cir.1988)). In this case, the initial joinder of the defendants was proper pursuant to Federal Rule of Criminal Procedure 8(b) because the indictment charged all of the defendants with participation in a single conspiracy and charged several of the defendants with various substantive counts arising from the same conspiracy. See United States v. Weinrich, 586 F.2d 481, 495 (5th Cir.1978), cert. denied, 441 U.S. 927, 99 S.Ct. 2041, 60 L.Ed.2d 402 (1979). The defendants have not carried their burden of showing real prejudice. Coaston and Hubbard-Thomas have not demonstrated that the jury was unable to compartmentalize the evidence against each of them.
The defendants were arrested at 2709 Twelfth Avenue, Hubbard-Thomas’s home and the location at which Coaston was staying. The police seized shotguns, powdered cocaine, test tubes, and vials at 2709 Twelfth Avenue. Adkins testified that he saw Hubbard-Thomas and Coaston cook cocaine into crack at this location. Thus, the evidence of the weapons and the cocaine that was seized related directly to Hubbard-Thomas and Coaston.
Pursuant to the allegation of prejudice resulting from a co-defendant’s gang associations, the trial judge made a concerted effort to keep any reference to the Bloods gang out of the trial. The defendants were not prevented from raising any defenses as a result of the joinder. The jury convicted the defendants on the different counts on which they were charged. Accordingly, we find no error in the district court’s denial of the severance motions.
' E. SEATING CHART
At the beginning of the trial, the trial judge gave the jury a seating chart identifying the fourteen people sitting at the three counsel tables. Subsequent to the confusing testimony of the first trial witness who referred to the defendants by their nicknames, the court gave the jury a second chart. This chart listed the nicknames of each defendant.
Defendant Coaston argued that the chart was prejudicial because it might appear to the jury to be a factual finding. Coaston argued that he was not known as “Tweedy.” Thus, the chart listing him as “Tweedy” significantly prejudiced Coa-ston’s right to a fair trial.
In United States v. Lueth, 807 F.2d 719, 731 (8th Cir.1986), this court commended the district court for aiding the jury in sorting through the numerous defendants and charges. The district court had ordered a large chart to be placed on the wall in front of the jury. The chart identified the defendants and the counts of the indictment. As defendants pleaded guilty or as counts were dismissed, the chart was modified to reflect these changes. The district court cautioned the jury to consider the chart only with respect to the government’s charges against the defendants.
In this case, the district court instructed the jury that the nicknames on the chart were not necessarily the nicknames of the defendants. See Trial Transcript, vol. II, at 141-42. The chart aided the jury in sorting through the numerous defendants and their nicknames. Accordingly, the district court properly employed the chart and Coaston was not so prejudiced by its use as to warrant a reversal of his conviction.
F. ADMISSION OF HANDGUN EVIDENCE
Sharitana Haynie lived in the downstairs unit at 3019 Emerson Avenue. Haynie testified that she was dating defendant Jones. Jones asked to put something in Haynie’s closet and she allowed him to do so. However, Haynie testified that she did not know what Jones put in the closet. Haynie said that Jones brought a gun into her home, and that she first discovered the gun on the floor next to her son.
Jones argues that the admission of Haynie’s testimony that Jones had a gun at her house and that her young son discovered it, was irrelevant and prejudicial. Jones asserts that the government failed to show a connection between the handgun and the need to protect drugs. Furthermore, Jones argues that he cannot be liable for possessing the gun because the gun was never found.
In United States v. Milham, 590 F.2d 717, 721 & n. 7 (8th Cir.1979), this court held that firearms evidence is admissible in drug eases as proof of a need to protect drugs and money and, inferentially, as proof of an intent to distribute drugs. Also, evidence of a defendant’s gun is probative of his involvement with the drug trade. See United States v. Matra, 841 F.2d 837, 841 (8th Cir.1988) (intent to distribute cocaine may be inferred from presence of firearms). The trial court properly admitted the handgun evidence as relevant to the drug charges.
We also find that the trial court did not abuse its discretion. Haynie’s testimony and the circumstantial evidence was enough to sustain Jones’ conviction. See United States v. Holm, 836 F.2d 1119, 1122 (8th Cir.1988). Accordingly, the absence of the gun is not enough to find that the court abused its discretion in admitting the evidence surrounding the gun.
G. ADMISSION OF COCAINE EVIDENCE
Defendant Jones objected to the admission of cocaine seized from the Plymouth and from the firesafes. Jones argues that the government failed to authenticate the exhibits under Federal Rule of Evidence 901(a) as the same substances seized from the Plymouth and the firesafes. Jones asserts that the problem with the chain of custody was that the cocaine was transferred from the original containers to different containers at the drug laboratory. No one, he argues, established a connection between the drugs offered at trial in their new containers and the drugs in the containers that the police had seized.
A trial court’s determination of the admissibility of evidence should not be overturned unless it was a clear abuse of discretion. See United States v. Jones, 687 F.2d 1265, 1267 (8th Cir.1982). In this case, a police officer delivered the exhibits and watched as they were transferred to their new containers. The officer’s handwriting appeared on the packaging of the exhibits. Furthermore, one witness was called to testify that he accepted the exhibits in the laboratory, he removed and transferred the cocaine from the original to the trial containers, and he weighed and marked the exhibits.
“So long as the court is persuaded that as a matter of normal likelihood the evidence has been adequately safeguarded, the jury should be permitted to consider and assess it in light of the surrounding circumstances.” Id. at 1267 (quoting United States v. Lane, 591 F.2d 961, 962 (D.C.Cir.1979)). Accordingly, we find that the district court did not abuse its discretion in admitting into evidence the cocaine found in the Plymouth and in the firesafes.
H. SUFFICIENCY OF THE EVIDENCE
Defendant Reed asserts that the only connection between him and the conspiracy was his purported borrowing of a car that was later used to transport drugs. Defendant Colvin argues that the government’s confidential informants, Adkins and William Mathews, who testified against Colvin, were not credible. Defendant Hubbard-Thomas also argues that the only evidence which was produced against her came from Adkins, who was unreliable. Defendant Coaston asserts that the ten grams of cocaine found during the execution of the search warrant was insufficient to inter that Coaston had the specific intent to distribute the cocaine as required for a conviction.
In evaluating the sufficiency of the evidence to support a conviction, this court must view the evidence in the light most favorable to the government. Also, the court must give the government the benefit of all reasonable inferences, and reverse only if a reasonable jury could not have found guilt beyond a reasonable doubt. See United States v. Wagner, 884 F.2d 1090, 1096 (8th Cir.1989); United States v. Felix, 867 F.2d 1068, 1071 (8th Cir.1989). We hold that the evidence adduced at trial, viewed in the light most favorable to the government, was sufficient to sustain the convictions of the defendants. The credibility of the witnesses is a determination for the finder of fact, and thus, the jury’s verdict must be upheld.
I. TRIAL IRREGULARITIES
Defendant Reed also argues that he was denied a presumption of innocence and a fair trial because of three instances of trial irregularity. First, one juror observed the six defendants being led into the courthouse by the United States Marshals. Second, several jurors overheard a stranger’s comments on the elevator that he hoped the jurors would “get them,” apparently referring to the defendants. Third, the government witness, Haynie, was sitting outside the courtroom talking to a friend during a noon recess. Reed’s attorney asserts that several jurors were present and could have overheard several sentences of Haynie’s conversation.
The trial judge conducted in camera hearings for the first two instances. The judge decided to leave the juror on the panel following the first incident. The trial judge inquired whether the juror had noticed any restraint of the defendants being led into the courthouse. The juror replied that he had not. The juror also stated that he had not observed anything that would affect his ability to be fair and impartial. Reed’s attorney did not object to the trial judge’s decision to leave the juror on the panel.
The trial judge replaced three jurors following the elevator incident. Reed asserts that there were four jurors in the elevator who had overheard the comment that the jury should “get them.” The three excused jurors admitted that they were in the elevator. All of the other jurors denied overhearing any comment regarding the case.
Pursuant to a hearing held in chambers for the third incident, the judge decided not to declare a mistrial or poll the jury. There is no evidence that Haynie communicated or commented to any of the jurors. Thus, we find that the trial judge did not abuse his discretion.
J. SENTENCING GUIDELINES
Each of the defendants brought a Motion to Preclude Application of the Sentencing Guidelines and to have the Sentencing Guidelines declared unconstitutional. The trial court granted the motion, and on January 9, 1989, sentenced the defendants as though the crimes had been committed pri- or to November 1, 1987. Shortly after the sentencing, the Supreme Court decided Mistretta v. United States, — U.S. -, 109 S.Ct. 647, 102 L.Ed.2d 714 (1989), upholding the constitutionality of the Sentencing Guidelines. Pursuant to the Mistretta decision, the government appealed the sentences.
In this case, the issue on appeal is whether the government properly responded to the Motion to Preclude Application of the Sentencing Guidelines and sufficiently objected to the defendants’ subsequent sentences outside of the Guidelines. We find that the government did not register an objection to the motion to have the Sentencing Guidelines declared unconstitutional. Nor did the government make an objection at the sentencing proceedings. The government alleges that it did oppose the motion to have the Guidelines declared unconstitutional but that for some unknown reason such opposition is not clearly stated in the record. We are not persuaded by this claim.
The government did present the district court with calculations of what the defendants’ sentences would have been under the Guidelines. The government asked the court to sentence accordingly. This reference to the Guidelines does not rise to the level of a proper objection. The government was present for the full discussion and the granting of the defendants’ motion. Then, the government requested that sentencing should proceed for each defendant. The government could have articulated a clear objection at any point during these proceedings and preserved this argument for appeal. The government did not do so, and thus, arguments raised for the first time on appeal shall not be considered. See United States v. Russell, 585 F.2d 368, 371 (8th Cir.1978); United States v. Librach, 536 F.2d 1228, 1231 (8th Cir.), cert. denied, 429 U.S. 939, 97 S.Ct. 354, 50 L.Ed.2d 308 (1976).
III. CONCLUSION
For the reasons given, we affirm the district court in all respects.
. The defendants were sentenced for the following offenses:
Robert Lee Houston was sentenced to 10 years for conspiracy to manufacture and distribute more than 50 grams of crack cocaine in violation of 21 U.S.C. § 846 (1982); five years without parole for possession with intent to distribute five grams of cocaine in violation of 21 U.S.C. §§ 841(a)(1) (1982), 841(b)(l)(B)(iii) (Supp. V 1987), and 18 U.S.C. § 2 (1982); five years for possession with intent to distribute 254 grams of cocaine in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(1)(C) (Supp. V 1987), and 18 U.S.C. § 2; five years without parole for possession of 979 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(l)(B)(ii)(II) (Supp. V 1987), and 18 U.S.C. § 2; and 10 years without parole for aiding and abetting the possession with intent to distribute 63 grams of cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(l)(A)(iii) (Supp. V 1987), and 18 U.S.C. § 2. The sentences are to run concurrently.
Leonard H. Coaston was sentenced to 20 years for conspiracy to manufacture and distribute more than 50 grams of crack cocaine in violation of 21 U.S.C. § 846; five years without parole for knowingly and intentionally possessing with intent to distribute 10 grams of cocaine base (crack) in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(l)(B)(iii); five years for aiding and abetting the possession of 10 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(1)(C), and 18 U.S.C. § 2; five years without parole for possession of 979 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b) (l)(B)(ii)(II), and 18 U.S.C. § 2; and 20 years without parole for aiding and abetting the possession with intent to distribute 63 grams of cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841 (b)( 1)(A)(iii), and 18 U.S.C. § 2. The sentences are to run concurrently.
Maurice L. Reed was sentenced to 15 years for conspiracy to manufacture and distribute more than 50 grams of crack cocaine in violation of 21 U.S.C. § 846; and 15 years for aiding and abetting the possession of 10 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(1)(C), and 18 U.S.C. § 2. The sentences are to run concurrently.
Donna L. Hubbard-Thomas was sentenced to 12 years for conspiracy to manufacture and distribute more than 50 grams of crack cocaine in violation of 21 U.S.C. § 846; and 12 years for aiding and abetting the possession of 10 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(1)(C), and 18 U.S.C. § 2. The sentences are to run concurrently.
Kevin Lee Colvin was sentenced to 15 years for conspiracy to manufacture and distribute more than 50 grams of crack cocaine in violation of 21 U.S.C. § 846; five years for aiding and abetting the possession of 10 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(1)(C), and 18 U.S.C. § 2; five years without parole for possession of 979 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b) (l)(B)(ii)(II), and 18 U.S.C. § 2; and 15 years without parole for aiding and abetting the possession with intent to distribute 63 grams of cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(l)(A)(iii), and 18 U.S.C. § 2. The sentences are to run concurrently.
John Michael Jones was sentenced to 15 years for conspiracy to manufacture and distribute more than 50 grams of crack cocaine in violation of 21 U.S.C. § 846; five years without parole for possession with intent to distribute five grams of cocaine in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(l)(B)(iii), and 18 U.S.C. § 2; five years for possession with intent to distribute 254 grams of cocaine in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(1)(C), and 18 U.S.C. § 2; five years without parole for possession of 979 grams of cocaine with intent to manufacture cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841(b)(l)(B)(ii)(II), and 18 U.S.C. § 2; and 15 years without parole for aiding and abetting the possession with intent to distribute 63 grams of cocaine base in violation of 21 U.S.C. §§ 841(a)(1), 841 (b)( l)(A)(iii), and 18 U.S.C. § 2. The sentences are to run concurrently.
. The Honorable Janice M. Symchych, United States Magistrate for the District of Minnesota.
. The Honorable Harry H. MacLaughlin, United States District Judge for the District of Minnesota.
. Fed.R.Crim.P. 14 provides in pertinent part:
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.
. Fed.R.Crim.P. 8(b) provides:
(b) Joinder of Defendants. Two or more defendants may be charged in the same indictment or information if they are alleged to have participated in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses. Such defendants may be charged in one or more counts together or separately and all of the defendants need not be charged in each count.
. The court gave the following instruction:
Members of the jury, I am going to restrict [sic] to you a revised copy of the people on the chart. Would you pass in what you’ve got?
You will note the sketch of the courtroom now has the names of the attorneys where they are seated, and also adds these nicknames that have been used by this witness and that appear in the indictment.
The fact that you have been handed a paper that includes those nicknames does not mean that those nicknames are necessarily the nicknames of any one of these Defendants. That's for you to decide if and when it becomes an appropriate time to do it.
I am giving you this only for ease and identification, because we have a witness who has been testifying all morning referring to various Defendants by various nicknames, and he has tied those nicknames to various persons amongst the Defendants.
Whether you believe the witness or not is up to you. I am not trying to put the imprimatur of the Court upon it. I am trying to make it easier for you to follow, so that you can look at this and see who it is in his mind that he’s talking about. Okay?
. Fed.R.Evid. 901(a) provides:
(a) General provision. The requirement of authentication or identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
DENMAN, Circuit Judge.
The National Labor Relations Board by its orders of April 2, 1936, required the respondent to “Cease and desist:
“(a) From discouraging membership in Weighers, Warehousemen and Cereal Workers, Local 38-44, International Longshoremen’s Association, or in any other labor organization of its employees, by discharging or threatening to discharge any of its employees for joining Weighers, Warehousemen and Cereal Workers, Local 38-44, International Longshoremen’s Association, or any other labor organization of its employees; and
“(b) From in any other manner discriminating against any of its employees in regard to hire or tenure of employment or any term or condition of employment for joining Weighers, Warehousemen and Cereal Workers, Local 38-44, International Longshoremen’s Association, or any other labor organization of its employees; and
“(c) From in any other manner interfering with, restraining, or coercing its employees in the exercise of their rights of self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection, as guaranteed in Section 7 of the National Labor Relations Act [29 U.S.C.A. § 157],”
and to take affirmative action, which the Board finds “will effectuate the policies of the Act,” (a) to offer to several discharged employees “immediate and full reinstatement, respectively, to their former positions, without prejudice to any rights and privileges previously enjoyed”; and (b) to make whole said discharged employees “for any loss of pay they have suffered by reason of their discharge by payment to each of them, respectively, of a sum of money equal to that which each would normally have earned as wages during the period from the date of his discharge to the date of such offer of reinstatement, computed at the wage rate each was paid at the time of his discharge, less the amount earned subsequent to his discharge”; and to “post immediately notices to its employees in conspicuous places in its various offices, stating (1) that respondent will cease and desist in the manner aforesaid, and (2) that such notices will remain posted for a period of at least thirty (30) consecutive days from-the date of posting.”
The Board has filed its petition in this court for the enforcement of the orders. Respondent Packing Company appears and contests the enforcement.
The respondent admits it is engaged in the canning and packing of fruits and vegetables, 39 per cent, of which are processed to be sold to persons in other states and foreign countries and shipped to them there. Its total pack in 1935 was in excess of 1,600,-000 cases. It consisted of tomatoes and tomato products, peaches, apricots, spinach, pears, asparagus, and pork and beans, in volume, in the order named.
The respondent, relying solely on the unconstitutionality of the Labor Relations Act (29 U.S.C.A. §§ 151-166) and the proceedings of the Board, does not question that the employees were dismissed by it be-* cause some of them had engaged in the formation of the local of the union in question and all had joined it. Upon the lockout, the local caused the Oakland plant to be picketed. Violence ensued, causing hospitalization of some of the participants. The product of the plant was declared “hot” and other locals of unions — teamsters, dock clerks, scalers, seamen, and longshoremen — ■ failed or refused to handle it. Blacklisting of respondent’s products was attempted.
The Board found that the “bulk of” the agricultural products processed by the respondent came from the State of California, and the respondent contends, and we accept the contention, that substantially all of the products were produced by growers in the state. Respondent further contends, and we agree with the Contention for the purposes of this decision, that the processing of the respondent, including the loading of its product in cars, is an intrastate activity as that is held to be in the Coe v. Errol Case, 116 U.S. 517, 518, 525, 6 S.Ct. 475, 29 L.Ed. 715.
The contention also was raised that under the agreements for the sale of the products, title was transferred to the purchaser prior to the actual entry of the goods into carriage by an interstate carrier, which contention we also accept for the purposes of this decision.
It appears that the respondent had two plants; one at Oakland, California, known as the “Santa Cruz plant,” and one at Sea-bright, near Santa Cruz, Cal. The case as presented here concerns only the employees engaged at the Oakland plant and there is no showing that any of the products of the Seabright plant ever left the State of California.
We hold that so far as concerns the manufacture and shipping activities of the respondent and its employees at the Oakland plant, the labor dispute leading to the discharge of the employees, the declaration of the products as “hot,” and the sympathetic refusal of other unions to handle them, “throttled” the flow of interstate commerce and “put in jeopardy” its future flow, to the extent of the 39 per cent, of respondent’s products manufactured to be shipped into that commerce.
The respondent relies on the decisions of Carter v. Carter Coal Co., 298 U.S. 238, 56 S.Ct. 855, 80 L.Ed. 1160; United Mine Workers v. Coronado Coal Co., 259 U.S. 344, 42 S.Ct. 570, 66 L.Ed. 975, 27 A.L.R. 762; Oliver Iron Mining Co. v. Lord, 262 U.S. 172, 43 S.Ct. 526, 67 L.Ed. 929; and others holding that manufacture, lumbering, and mining processes, including the loading on to the cars of the product, and all activities up to actual movement out of the state, as in the Coe Case, constitute intrastate production. Hence, the respondent contends, the Labor Relations Act is an attempt by the Congress to control the labor relations in such an intrastate activity and violates the provisions of the Tenth Amendment to the Constitution.
The questions for our solution are:
(1) Is the Carter v. Carter Coal Co. decision overruled by the decision of the Supreme Court in National Labor Relations Board v. Jones & Laughlin Steel Corporation, 57 S.Ct. 615, 81 L.Ed. —, 108 A.L.R. 1352, so far as the former holds that the Constitution gives no power to the Congress to regulate intrastate production and manufacture of goods with respect to its labor disputes, which diminish or throttle the flow of goods intended to be and which would be shipped into interstate commerce ?
(2) Granting the Congress has such power, can it be exercised where 39 per cent, of the goods produced by the labor employed are shipped in interstate commerce and 61 per cent, remain within the state of manufacture ?
(1) Carter v. Carter Coal Co. and similar cases are overruled by National Labor Relations Board v. Jones & Laughlin Steel Corporation.
Respondent’s contention that the Carter Case is not overruled by the Jones & Laugh-lift decision is squarely' presented to this court and it would be an evasion of our judicial obligation to deny it a full consideration or attempt to evade it by asserting that it is here “not controlling.”
Three circuits, the Second, Fifth, and Sixth, relied upon the principle established in the Carter Case in holding that the National Labor Relations Act was unconstitutional. National Labor Relations Board v. Friedman-Harry Marks Clothing Co. (C.C.A.2) 85 F.(2d) 1, 2; National Labor Relations Board v. Jones & Laughlin Steel Corp. (C.C.A.5) 83 F.(2d) 998, 999; Fruehauf Trailer Co. v. National Labor Relations Board (C.C.A.6) 85 F.(2d) 391, 392.
In all three of these cases there was an antecedent import of raw materials entering into the production, over which the Labor Relations Board 'asserted the right to regulate the employer and employee. Here, the respondent asserts, is a case identical with the Carter Coal Case, in what, it insists, is the controlling fact that, as in mining coal, both the fruit and vegetables and the canned and packed product are produced in the state.
It is patent that the Carter case is identical in fact and relevant principle with that of respondent.
Unless overruled it clearly is controlling in so far as it denies the constitutional .right of the Congress to regulate labor disputes affecting substantially the volume of a manufacturer’s output which is “to be” transported in interstate commerce and which may be throttled from that transport and ultimate sale in another state unless so regulated.
Great stress is laid on the fact that the Congress has not before exercised such a power over labor relations in production of goods to be transported into interstate commerce. It is argued that if it may regulate labor disputes because it will affect the volume of goods to be transported in interstate commerce, it may regulate the volume itself of, say, shoes or clothing or furniture or food products, or the material used in the construction of housing, produced for use in other states. It is urged that all such production generally has been conceived as a matter of state control, and there are pointed out dangers of political control of such matters by bureaus in Washington. It is suggested that the Constitution was framed to meet a pioneer agricultural economy in which nearly everything consumed was grown or made on the farms or in the neighboring towns. Hence it is further urged that the framers of the Constitution never would have lodged in the Congress its powers over interstate commerce if it had envisioned an economy in which practically all the clothing wc judges wear, every object contained in the chambers in which we sit, and the major part of the material entering the construction of the building in which the court is housed, come from some state other than California.
The answer to these contentions we have made in our decision in Edwards v. U. S., 91 F.(2d) 767, decided by this court on July 22, 1937. It is that the Carter Case is overruled by the Jones & Laughlin decision; that the Constitution did give the Congress the power so to regulate interstate commerce; and that that power is plenary as to all productive activities which substantially affect or tend to throttle the volume of goods to be transported in commerce outside the state of production.
Conventional historic attitudes towards states’ rights are highly important in the political world when faced with the practicability of novel proposals of the exercise of congressional power. It may or may not be politically wise at any particular time for the Congress to proceed with caution, but this in no way concerns the judicial question of the extent of the power. To refrain from or to hesitate in decision when the question is fairly presented well may cause the paralysis and frustration of efficient legislative and executive action.
The reasoning and holding of the Edwards Case, supra, answers in the negative the first of respondent’s contentions.
(2) The specific constitutional grant of power to the Congress by article 1, section 8, to regulate commerce among the states and with foreign nations is paramount to the exercise by the states of the power of regulation of the intermingled intrastate commerce, included in the general reservation of state powers by the Tenth Amendment.
Hence, if any substantial percentage of a product produced in a state is produced to enter interstate or foreign commerce, the Congress may regulate its production, in so far as it affects the volume to enter such commerce, though such regulation also regulates a larger percentage of product which does not leave the state.
Section 8 of article 1 of the Constitution makes a specific grant of power over interstate commerce. The Tenth Amendment is a general reservation of all powers not granted. There is no limit placed on the grant, no proviso that because the states also have exercised certain powers over manufacture and other production, the Congress is to be in any way hampered in the full exercise of its regulation. The Supreme Court has repeatedly held the contrary.
Construing the general reservation of state powers by the Tenth Amendment, as affected by the specific grant of power to regulate interstate commerce of article first, § 8, of the Constitution, the Supreme Court held: “This reservation to the states manifestly is only of that authority which is consistent with, and not opposed to, the grant to Congress. There is no room in our scheme of government for the assertion of state power in hostility to the authorized exercise of Federal power. The authority of Congress extends to every part of interstate commerce, and to every instrumentality or agency by which it is carried on; and the full control by Congress of the subjects committed to its' regulation is not to be denied or thwarted by the commingling of interstate and intrastate operations. This is not to say that the nation may deal with the internal concerns of the state, as áuch, but that the execution by Congress of its constitutional power to regulate interstate commerce is not limited by the fact that intrastate transactions may have become so interwoven therewith that the effective government of the former incidentally controls the latter. This conclusion necessarily results from the supremacy of the national power within its appointed sphere.” The Minnesota Rate Case (Simpson v. Shepard), 230 U.S. 352, 399, 33 S.Ct. 729, 739, 57 L.Ed. 1511, 48 L.R.A.(N.S.) 1151, Ann.Cas.1916A, 18.
The Jones & Laughlin Case holds that the disorganization and disturbance of labor affecting interstate commerce does not have to be of railway employees to bring it within the control of Congress. The interference as well may come from labor conditions in the intrastate business entirely different from transportation.
“The opinion in that case [Virginian Ry. Co. v. System Federation, 57 S.Ct. 592, 81 L.Ed. 789] also points to the large measure of success of the labor policy embodied in the Railway Labor Act. But, with respect to the appropriateness of the recognition 0of self-organization and representation in the promotion of peace, the question is not essentially different in the case of employees in industries of such a character that interstate commerce is put in jeopardy from the case of employees of transportation companies. And of what avail is it to protect the facility of transportation, if interstate commerce is throttled with respect to the commodities to be transported.” (Emphasis supplied.) National Labor Relations Board v. Jones & Laughlin Steel Corp., 57 S.Ct. 615, 627, 81 L.Ed. —, 108 A.L.R. 1352.
The Shreveport Case (Houston, E. & W. T. R. Co.) 234 U.S. 342, 34 S.Ct. 833, 58 L.Ed. 1341, relied upon by the Supreme Court for its decision in the Jones & Laughlin Case, holds that a company, by the rate charge of its intrastate business, may affect the rates of its interstate business in such a way that the intrastate business rate comes within congressional regulation. The fact that both of the businesses happen to be transportation is not relevant.
The analogy between the Shreveport Case and the Santa Cruz Fruit Packing Company is complete. In each the conduct of the intrastate business, the one as to its rates and the other as to its labor, affects the interstate business arising from the activities of the respective companies. In one this is-accomplished by producing an unfair rate upon the commodities "to be” transported, and in the other by throttling the interstate business in the commodities "to be” transported. In both the intrastate business puts “in jeopardy” the proper and fair conduct of the commerce among the states. The acceptance by the Supreme Court of the doctrine of the Shreveport Case again demonstrates the overruling of the Carter Case.
The Shreveport Case does not determine the right of Congress to control the intrastate activity in rate making upon any ratio between the volume of business under the intrastate rates and under the interstate rates. In the Jones & Laughlin Case no significance is attached to the fact that 75 per cent, of the steel and other manufactured products entered interstate commerce, or that but 25 per cent, of intrastate manufacture was regulated.
Respondent is the fifth or sixth largest of the California companies processing and packing fruits and vegetables. The 39 per cent, of its business which enters into interstate commerce is a sufficiently substantial amount to warrant the Congress to make effective its regulation, even though thereby the 61 per cent, which is intrastate business is regulated with reference to labor disputes. The intermingling of the two activities does not take from the Congress the right to regulate that substantial portion over which the Constitution has specifically granted the control to the federal government.
The suggestion that we should make an academically arbitrary 50 per cent, as the boundary line between the two jurisdictions ignores the practical necessities of industry. Shall it be 50 per cent, in volume or price ? What happens when for the first 6 months of the year 60 per cent, is exported and 40 per cent, is domestic, and for the rest of the year the percentages are reversed? Does the federal control end on June 30th? On which is the burden of proof, the state interest or the federal ? How unfair may be the competition between the industry producing the 60 per cent, for export under federal regulation and its competitor with 40 per cent, under state regulation or no regulation at all!
Industry and business cannot thrive, in some cases it could not exist, in the uncertainty oí such an abstract mathematical solution of the problem. It cannot be inferred that the Congress intended to create a situation so confusing alike to employer and employee.
What are the sufficient minima of producers’ contributions to the flow of commerce to warrant congressional regulation must be decided as the questions arise. We have no doubt that the Santa Cruz Company’s contribution, both as to volume added, to interstate and foreign commerce and percentage of its output, is “affecting commerce” within the meaning of the act.
We therefore hold that the Constitution granted to the Congress the power to regulate respondent’s labor relations with reference to all of its employees at its Oakland plant engaged in the production of canned and packed fruits and vegetables, the processing of 39 per cent, of which was intended for interstate commerce and had been throttled for a considerable period from entering that commerce, although the remaining 61 per cent, remain within the state of production.
The Board’s orders to cease and desist applied to all of the employees of the respondent, but the evidence shows no shipments by respondent into interstate commerce from its Seabright plant. The orders should be modified to apply only to the employees of the Oakland plant; otherwise they should be enforced.
The orders of the National Labor Relations Board, so modified with respect to confining their effect to the employees of the Oakland plant of the respondent, are ordered enforced.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
We are of the opinion that the decree of the District Court is correct except in so far as it allows'interest; that in allowing interest from July 30, 1935 (the date of the bringing of the bill of complaint), the court erred.
The decree of the District Court is modified by striking therefrom the words “with interest from July 30, 1935,” and so modified is affirmed, with costs to the appellees in this court.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
JOHNSEN, Chief Judge.
These appeals are from orders made by the District Court, 181 F.Supp. 504 and 183 F.Supp. 389 in a transition by Dollar-way School District No. 2, Jefferson County, Arkansas, from a segregated to a desegregated school system. Involved are the things which have occurred in the situation since our remand in Parham v. Dove, 8 Cir., 271 F.2d 132.
One of the directions in our mandate, 271 F.2d at page 135, was that an injunction should be entered against the District and its officers to prevent them from continuing to maintain, as against the student plaintiffs and the class represented by them, the system of unconstitutional segregation to which the District had been subjecting them in their educational process.
This direction was made because the school board had up to that time taken no steps, even of a transitional nature, to bring about the disestablishment of the existing unlawful status- — -which a recognition of the responsibility made clear by the Brown cases, Brown v. Board of Education etc., 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873, and 349 U.S. 294, 75 S.Ct. 753, 99 L.Ed. 1083, ought by then to have prompted.
We held, however, that, in view of the enactment of a state pupil placement or assignment statute, Act No. 461 of 1959, Ark.Stats. § 80-1525 et seq., the District would not be summarily required to make admission of the three individual plaintiffs involved to the school they sought to attend, but should be afforded the opportunity to make use of the provisions of the statute as a means or an aid in effecting an orderly location of pupils generally, in relation to the various factors which could be involved as to distribution in its school system, except those of purely racial consideration. 271 F.2d at page 137.
The recognition of facial validity which we thus gave to the statute was on the basis of it constituting a “legislative non-racial scheme”, intended to serve in effecting student location through “overall pattern”, instead of by promiscuous result. Id., at page 138. But we cautioned that “the statute cannot * * * be made to serve through artificial application, as an instrument for maintaining * * * a system of racial segregation”. Id., at page 136.
Judicial persuasion would not normally tend to be produced that a placement or assignment statute was being used as an auxiliary in effecting an orderly solution of a school district’s integration problems, where the district had refrained from adopting any program to disestablish its previous racial discrimination, where the only application of the statute engaged in by it was to Negro students seeking to escape their segregated status, and where the only result brought about thereby was to leave the racial situation in the school system remaining exactly as before.
Standards of placement cannot be devised or given application to preserve an existing system of imposed segregation. Nor can educational principles and theories serve to justify such a result. These elements, like everything else, are subordinate to and may not prevent the vindication of constitutional rights. An individual cannot be deprived of the enjoyment of a constitutional right, because some governmental organ may believe that it is better for him and for others that he not have this particular enjoyment. The judgment as to that and the effects upon himself therefrom are matters for his own responsibility.
In summary, it is our view that the obligation of a school district to disestablish a system of imposed segregation, as the correcting of a constitutional violation, cannot be said to have been met by a process of applying placement standards, educational theories, or other criteria, which produce the result of leaving the previous racial situation existing, just as before. Such an absolute result affords no basis to contend that the imposed segregation has been or is being eliminated. If placement standards, educational theories, or other criteria used have the effect in application of preserving a created status of constitutional violation, then they fail to constitute a sufficient remedy for dealing with the constitutional wrong.
Whatever may be the right of these things to dominate student location in a school system where the general status of constitutional violation does not exist, they do not have a supremacy to leave standing a situation of such violation, no matter what educational justification they may provide, or with what subjective good faith they may have been employed. As suggested above, in the remedying of the constitutional' wrong, all this has a right to serve only in subordinancy or adjunctiveness to the task of getting rid of the imposed segregation situation.
That was the basis on which we held in our previous opinion, 271 F.2d at page 137, that the District was entitled to a use of the placement or assignment statute in relation to its desegregation task, when we stated that the statute was being accorded recognition “only as an implement or adjunctive element * * * for effecting an orderly solution to its (the District’s) desegregation difficulties, in proper relationship to its other school-system problems, but with a subservience to the supreme-law declaration of the Brown cases as to all imposed segregation and the obligation owed to get rid thereof within the tolerance entitled to be allowed play under these decisions for accomplishing that result”.
What has been said up to this point is foundational to our dealing with the questions presented by these appeals. Three appeals are before us. The first one, No. 16,437, involves a determination of whether the trial court was entitled to dismiss the complaint of the plaintiffs and deny them relief from the school board’s refusal to admit them to the school they sought to attend. The second case, No. 16,448, is a cross-appeal by the District and the school board from the holding of the court that it had jurisdiction to deal with the complaint of the plaintiffs on its merits and was not required to make dismissal thereof on the basis that the plaintiffs had not exhausted their administrative remedies under the placement or assignment statute in respect to the board’s action of denial against them. The third appeal, No. 16,487, is by the plaintiffs from the approval granted by the court to the transitional plan and program filed by the District after the other decisions here involved, in response to a requirement of the court that it submit “an affirmative statement of its plans and policies designed to bring about an end to compulsory racial segregation in (its) public schools”.
I.
It is, we think, quite generally recognized that a solution to the problem of effecting desegregation will in most instances have to come through a series of progressive, transitional steps. And the Brown decisions appear to permit of the handling of a situation in this manner, provided the school' district engages in making a “reasonable start toward full compliance” and continues to move forward with “all deliberate speed”.
The question here as to the propriety of the court’s approval of the school board’s plan and program for bringing about an end to the compulsory segregation existing in the District’s school system thus is in its overall significance the most important one before us, and it will accordingly be first considered.
The approval order was made on the basis of the court’s expressed view “that the plan provides a start toward the elimination of racial discrimination, and that it is sufficient to initiate a transition period”. 183 F.Supp. at page 393. Our difficulty with this is that what the school board has said it intends to do does not seem to us to contain any demonstrable objectivity, of either effort or aim, so as realistically to be appraisable as a “reasonable start” — not in subjectivity, but in affirmative effort.
In substance, the plan states generally that the school board intends to use the provisions of the Arkansas pupil placement or assignment statute in respect to any application made for admission to a school, other than the one which the student is now attending. Application of the provisions of the statute will be made, the plan states, in relation to such policies as that “it is undesirable and unsound educationally to transfer a child from the school which he is presently in attendance (at) to a different school”; that “the Board should give favorable consideration to applications for the lateral transfer of students (that is, the transfer of a student from one school in the District to another school in the District) only in exceptional cases”; and that “When an exceptional case is found by the Board to exist, a lateral transfer may be granted if, in the opinion of the Board, the pupil can make the necessary adjustment and perform and achieve satisfactorily in the school to which transfer is requested.”
The steeping of the provisions of the placement statute in such dissuading abstractions, where the board has never given any indication of an existing desegregation opening (such as an announced intention or undertaken action to admit some contemplated number of Negro students, by a designated time, at a particular level), does not afford much basis for it to say, or for a Negro realistically to believe, that the opportunity exists for such students, either in whole or part, to escape from their imposed segregation status. And the more is this .persuasion impelled as to the present situation, in that the only result which the District has demonstrated is subject to being produced by a use of the statute on the foregoing basis is to leave the segregation situation remaining, just as it is.
Relatedly, it may be noted that in its announced climate of principles for using the placement statute, the District has further made its processes of application of the statute consist in having applicants for transfer subjected to such devices as the California Mental Maturity Test, the Iowa Silent Reading Test, the Otis Quick Scoring Test of Mental Ability, the California Language Tests, the Bell Adjustment Inventory, and other such things— which, at least in the elementary area of public education, are new adornments upon the entrance doors to school houses and class rooms.
Again, in what the District has done and proposes to continue doing, application of these devices is not going to be made to the students generally of the system but only to such individuals as undertake to engage in application for a transfer — which in the realities of the District here simply means, to Negro students seeking to enter a white school.
The District admittedly has no intention to engage in any such general application of these devices as to enable it to effect a reconstruction or reorganization of its school system or its class rooms on the basis of the levels that might be arrived at from such individual scorings. Nor can it be said to intend to make the statute serve as a means for making a choice or selection among Negro students in relation to each other, for purposes of some initial, limited, transitional step in effecting the disestablishment of its segregation system — because the plan does not contain any definitive expression of indicated opening at any point for the admission, as suggested above, of some contemplated number of Negro students, by a particular time, at a designated grade-level.
The plan does engage in a use of some general softening language in respect to first-grade students, but it does not set forth any definitive program or step on the board’s part for so effecting desegregation, or hold forth any promise of such a result, as a “reasonable start” at this level.
The board’s statement says generally that “the educational considerations which make lateral transfers undesirable and unsound do not exist, for the most part, in the case of first graders”; that “they have not established relationships with teachers, formed extensive friendships, become adjusted to a particular environment, established a curriculum pace, adopted a particular course of study, etc.”; that “first graders do not have prejudices and fixed ideas concerning traditions to the extent that older students have”; and that “Therefore, the Board is not concerned ‘with exceptional cases’ in the sense involved in lateral transfers”.
But to this there is added that “there must necessarily be a more extensive review of all facts relevant to the assignment criteria in making the initial assignment of first graders”, and that the board “will make this more extensive review”. And while it further is said in general terms that the opportunity will be given for pupils and their parents to make indication of school preference as to initial first-grade assignment, this is followed by the declaration that such assignments will be made “consistent with available school facilities, current teacher load, curriculum, emotional stability, readiness ability, adjustment potential and related matters.”
Thus, the board has presented no objective plan for the admission of any Negro students to the first grade of its two white schools, as a step in the process of effecting desegregation in its educational system. It has not held out any indication of reasonable opportunity as a basis for such requests of initial assignment to be chosenly made. Nor has it stated that it is ready to make any such desegregating assignments. Instead, it in effect says that, before it can answer that question, it must, even as to first graders, delve into such things as “emotional stability, readiness ability, adjustment potential, and related matters”.
The trial court, on careful consideration, was of the opinion that “The provisions for the initial assignment of first graders are fair on their face and are sufficient, if applied in good faith, to give at least some Negro children entering school for the first time in September of the current year (1960-1961) a reasonable chance of being assigned to the heretofore all-white Dollarway School.” 183 F.Supp. at page 392. But, after a lapse of six years, we think a board should be required to come forth with something more objectively indicative as a program of aim and action than a speculative possibility wx-apped in dissuasive qualifications.
What has been said above should be sufficient to indicate to the board its obligations to do more than to engage in generalities. Placement standards and educational doctrines are entitled to their proper play, but that play, as we have emphasized, is subordinate to the duty to move forward, by whatever means necessary, to correct the existing constitutional violation with “all deliberate speed”.
We had intended to hold up the filing of this opinion until after the board had takeix such action and produced such result as it intended to operate its school system under during the immediately pending school year. The press now contains a dispatch, indicating that the board has announced that it has assigned one 6-yeax--old Negro girl to the first grade in one of its two white schools for the pending year, and quoting the board as stating that it hoped that its action would help preserve the Ax-kansas pupil assignment law. We do no more than to note the item. The trial court may possibly desire to have indication made, in the more definitive expression of program which the board is being required to make, of what scope of opportunity generally was afforded for admission, in relation to such action.
Two further comments should pex’haps here be made. Both we and the trial court have regarded the board as having been acting with subjective good faith. The question here, howevex*, is not state of mind but required action. Required action is measurable only by objectivity.
The second relates to the statement of the trial court, 183 F.Supp. at page 393, as follows: “The Board has stated with candor that in making assignments consideration will be given to race. As indicated, where a transition period has been initiated, limited consideration in assigning students may be given to race”.
Where a board has adopted a definitive plan of effecting desegregation by reasonable transitional steps, the racial question necessarily is geared to the scope of those steps. But only in that sense and within that need, we think, is there basis to say that consideration in assigning students may be given to race. The board may in such a situation find it necessary to make selection between Negro students, and it will be entitled to do so on proper judgment as to what will best serve to accomplish its program. However, as we have said above, it has ■no right to resolve or take action at any time on the basis that it is better for some individual not to have the enjoyment of his constitutional right.
II.
As to appeal No. 16,437, relating to the court’s refusal to order the three Negro plaintiffs admitted to the 12th and 9th grades respectively of the school they sought to attend, we think that the court was entitled to require in relation to the problem of general achievement, that the enjoyment of their right to desegregation be geared to a reasonable, definitive, transitional program of “all deliberate speed”.
That problem, in its sound solution, is in most instances one for general, orderly, reasonable progression. Where the court concludes that a board is warranted in so proceeding, it does not have to leave the door subject to general crash efforts, on a “first come, first served” basis and consequence. This is not to say, of course, that such action may not be resorted to, where it appears to be necessary in order to break down the segregation barrier.
III.
There remains for consideration No. 16,448, the appeal of the District and the school board from the court’s refusal to dismiss the complaint for lack of jurisdiction to consider its merits.
, The contention made is that the plaintiffs could not resort to the federal court ágainst the action of the board in denying their applications for transfer, at leaát until after they had exhausted the remedies of appeal provided from such action to the State Circuit Court and State Supreme Court. The District and the board regard the appeals which are so provided for in the statute as part of the administrative process existing under the placement or assignment statute in respect to an application for transfer. Section 80-1531 of the Arkansas Statutes, as here pertinent, provides for a right of exception to the action of a school board in its assignment of a student, “as constituting a denial of any right of such minor guaranteed under the Constitution of the United States”. If the board does not reconsider its action, “an appeal may be taken from the final action * * *, on such [constitutional] ground alone, to the Circuit Court * * * by filing * * * a petition stating the facts * * * bearing on the alleged denial of his rights under the United States Constitution * * * »
While the section further provides that “the Circuit Court will try the said cause de novo”, it seems apparent, from the provision as to the scope of the exception to be made before the board and the requirement as to the contents of the petition (“the facts bearing on the alleged denial of his [constitutional] rights”), that the question which the court is intended to try is that of constitutional violation. Thus, the state remedy afforded is judicial and not administrative in its character and function. Judicial remedies of state courts for vindication of federal constitutional rights do not have to be exhausted, before there can be resort to a federal court, unless some federal statute so requires as to a particular legal situation. Lane v. Wilson, 307 U.S. 268, 274, 59 S.Ct. 872, 875, 83 L.Ed. 1281. See also City Bank Farmers’ Trust Co. v. Schnader, 291 U.S. 24, 30, 54 S.Ct. 259, 78 L.Ed. 628; Carson v. Warlick, 4 Cir., 238 F.2d 724, 729.
IV.
Cases Nos. 16,437 and 16,448 are affirmed. The order appealed from in case No. 16,487 is vacated, and the cause remanded for further proceedings.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
Opinion for the Court filed by Circuit Judge SILBERMAN.
SILBERMAN, Circuit Judge:
Alvin Gandal, a warrantholder of an acquired corporation, appeals the district court’s rejection of his tort claims against three of the defendants below as well as his unsuccessful contract claim against the surviving corporation, Telemundo Group, Inc. The warrantholder also challenges the damage remedy for his successful contract claim against Telemundo. Telemundo cross-appeals the ruling against it. The tort defendants also cross-appeal, challenging the district court’s assertion of personal jurisdiction over them. Telemundo was placed in bankruptcy after oral argument, which automatically stayed the action against it. At this time, therefore, we deal only with Gandal’s tort claims. We reverse the district court’s ruling that it had personal jurisdiction over the tort defendants.
I.
Prior to these transactions, John Blair & Company (Blair) was a publicly traded, diversified communications and broadcasting firm incorporated in Delaware. Blair had several wholly owned subsidiaries, including ADVO System, Inc. (ADVO), a direct mail advertising firm. In April 1986, McFadden Acquisition Corporation (McFadden) made an unsolicited, conditional tender offer for all of Blair’s common stock. Blair’s board of directors consulted with the firm’s investment advisers and determined that the offer would not provide Blair’s shareholders with adequate compensation. The board, therefore, resolved to find a more appropriate suitor (a “white knight”) supposedly to maximize the shareholders’ value.
After investigating various alternatives, Blair’s investment bankers proposed a transaction involving a subsidiary of Reliance Capital Corporation (Reliance). First, Reliance would make a two-tiered offer for Blair stock. Reliance would agree to purchase up to 60% of Blair’s stock through a cash tender offer (the “front-end” of the transaction), and assuming that the tender offer was successful (ie., if more than 50% of all shares were tendered), Reliance would convert the remaining shares into long-term, high-yield debentures (junk bonds) through a closeout merger (the “back-end” of the transaction). Blair would then spin-off its ADVO subsidiary by issuing a stock dividend of 2.57 shares of ADVO to each Blair shareholder besides Reliance, effectively increasing the back-end compensation. A venture capital firm would then take a substantial equity position in ADVO.
After Blair made Reliance’s proposal public, something of an auction for Blair followed — both McFadden and Reliance increased their offers. On June 19,1986, Reliance made what was styled as its final offer. It proposed to pay $31.00 cash for 60% of the shares. The remaining shares would be exchanged for a 12%, 15-year bond with a face value of $20.75. The bond was to accrue interest without payment in the first five years, and then pay out the interest from all 15 years in the final 10 years. This proposal continued to assume that ADVO would be spun-off after the tender offer was successfully completed. Reliance’s offer to pay cash for 60% of all shares was in practical effect an offer to buy 60% of each stockholder’s shares because section 14(d)(6) of the Williams Act, 15 U.S.C. § 78n(d)(6), required Reliance to purchase tendered shares on a pro rata basis. Reliance’s offer to each stockholder, then, was worth a blended value of 60% of the cash payment plus 40% of the value of the back-end compensation (the ADVO shares and the junk bond). Following the announcement of Reliance’s “final offer,” McFadden increased its bid for Blair by a dollar a share. In response, on July 3, the day that Reliance’s tender offer was scheduled to close, Blair announced that if the offer were successful, Blair would declare a $1.50 cash dividend on the remaining shares. The effect of the announced dividend, therefore, was to increase the blended value of the tender offer by 60 cents (40% of $1.50).
In the event, Reliance’s tender offer was successful, and Blair’s board of directors formally declared the cash dividend on August 19, 1986. At the same board meeting, a stock dividend consisting of 2.57 shares of ADVO was declared as contemplated by the merger agreement. The board set September 5, 1986, as the record date for both dividends. On September 15, 1986, all owners of Blair stock as of the record date (except Reliance, which now owned 60% of the Blair shares) received their dividends. The merger was not formally consummated, however, until a special shareholder meeting on December 24, 1986. At that point, the remaining Blair shares were converted into junk bonds and Blair was effectively merged out of existence.
Some Blair employees held “restricted” shares of common stock which they had received pursuant to a stock option plan. These shares did not vest unless, inter alia, there was a change in Blair’s control. The shares would not vest under Reliance’s offer, then, until after the tender offer had been successful, which meant that the restricted shares effectively would be excluded from the front-end of the offer. The restricted shareholders would receive only the junk bond and dividends, yet would suffer particularly onerous federal tax consequences (we are told that vesting would force the employees to recognize the full value of shares as income, and as ordinary income rather than capital gains at that).
The board, allegedly to avoid this result, resolved to have Blair purchase the restricted shares (including those held by board members) in exchange for $20.75 in cash, 2.57 shares of ADVO, and the $1.50 cash dividend. On a before tax basis, therefore, the restricted shareholders were to receive $22.25 plus 2.57 shares of ADVO. Blair’s offer to purchase the restricted shares was well-received — Blair bought over 100,000 restricted shares on September 4, 1986.
Blair had issued warrants (stock options issued by the corporation for purchase by the general public) in September of 1984 in connection with a public bond offering. The warrants gave the holder an option to purchase a share of Blair common stock for $36.75 up until the expiration date, September 15,1989. The warrant agreement, defining the warrantholders’ rights, contained an anti-dilution clause which, in the event of a merger, gave warrantholders (upon payment of the exercise price) a right to the same “kind and amount” of merger consideration that the shareholders had received. In case of a stock dividend, a similar clause entitled the warrantholder to the same number of shares that the common shareholders had received at the time of the dividend. But the agreement provided that a warrantholder had no right to any cash dividends with a record date before the date on which the warrantholder exercised his option. Prior to the announcement of the merger, Alvin Gan-dal bought 13,000 of Blair’s common stock purchase warrants. Gandal also purchased over 100,000 additional Blair warrants after Reliance’s successful tender offer had been publicly announced on July 7, 1986.
Blair and Reliance announced in a June 2, 1986 merger agreement that warrantholders would be entitled to receive the ADVO shares and the junk bond upon exercise of their warrants. As noted, Blair later offered shareholders a $1.50 cash dividend but has insisted that, by the terms of the warrant agreement’s “no cash dividends clause,” war-rantholders were not entitled to participate in the cash dividend. One warrantholder contested this interpretation and brought a class action suit for additional compensation. Blair agreed to pay $8.75 per warrant to settle this suit. Gandal, however, opted out of the settlement with the exception of certain warrants that were included due to broker error. At the time of the settlement, ADVO shares were trading as high as 12.75 per share, but in October 1987, ADVO’s share price (and the Blair warrant’s price) collapsed along with the rest of the market. Gandal ended up holding his warrants until they expired. One month before their expiration, he offered to exercise the warrants if Blair would give him the full compensation to which he thought he was entitled, which included the ADVO shares, the cash dividend, and the insider’s cash compensation. Blair’s agent rejected this offer. On the date the warrants expired, Gandal filed suit in district court.
Gandal brought contract and tort claims against various defendants. He contended that under the warrant agreement, he should have been entitled upon exercise of each warrant to both the $1.50 cash dividend and the $20.75 in cash that Blair paid for the restricted shares. Gandal also alleged that Jack Fritz (Blair’s chairman of the board) and Hugh Beath (Blair’s executive vice president and a board member) violated their fiduciary duty to the warrantholders by paying $20.75 for the restricted shares of Blair “insiders.” Finally, Gandal claimed that Reliance tortiously interfered with his contractual relations with Blair. Early in the litigation, the district court rejected Reliance, Fritz, and Beath’s motion to dismiss Gandal’s complaint against them for lack of personal jurisdiction. After discovery, Gandal brought a motion for partial summary judgment on Telemundo’s (Blair’s corporate successor) liability under the warrant agreement. The defendants below, Reliance, Fritz, Beath, and Telemundo responded with a motion for summary judgment against all of Gandal’s claims.
The district court dismissed all of the claims, except for Gandal’s contractual claim concerning the $1.50 cash dividend. See Gandal v. Telemundo Group, Inc., 781 F.Supp. 39 (D.D.C.1992). The court granted Gandal’s motion for summary judgment on that claim and held Telemundo liable for $1.50 per warrant in damages, even though Gandal had sought summary judgment as to liability only. The court concluded that the undisputed facts made clear that the $1.50 cash dividend was part of the merger consideration paid to Blair stockholders, and so the warrantholders were entitled to the dividend under the warrant agreement. The court then observed that a warrantholder who let his warrant expire would be entitled to a maximum of $1.50 in damages. The district judge reasoned that if the value of the other assets Gandal would have received upon exercise (the junk bond and the 2.57 shares of ADVO) plus the $1.50 was, throughout the life of the warrant, less than the option price of $36.75, then Gandal suffered no damage from the corporation’s failure to pay warrant-holders the cash dividend. On the other hand, if the value of the junk bond and the 2.57 ADVO shares alone was ever greater than $36.75, then Gandal should have exercised the option even though the corporation denied owing him the extra $1.50. The district judge described this as Gandal’s duty to mitigate damages. The judge concluded that although the exact amount of damages was uncertain Gandal should receive the maximum of $1.50 per warrant. See id. at 49.
Gandal appeals the district judge’s rejection of his tort theories and his contractual claim to receive the same compensation as the restricted shareholders. He also contends that the district judge should have awarded him specific performance as the remedy for his successful claim. Reliance, Fritz, and Beath, in turn, appeal the rejection of their motion to dismiss for lack of personal jurisdiction. And Telemundo appeals the district judge’s liability and damages rulings on Gandal’s claim for the cash dividend. We consolidated these appeals and designated Telemundo, Reliance, Fritz, and Beath as the appellants, and Gandal as the appellee. On June 8, 1993, an involuntary bankruptcy petition was filed against Telem-undo in the United States Bankruptcy Court for the Southern District of New York. This petition automatically stayed our proceedings as to Telemundo, see 11 U.S.C. § 362(a); Association of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446 (3d Cir.1982), but the automatic stay does not apply to the other defendants, Reliance, Fritz, and Beath. See Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324 (10th Cir.1984). This opinion, therefore, addresses only Gandal’s tort claims against these three defendants, and does not touch any of the issues involving Telemundo.
II.
Gandal asserts that he was injured both by Reliance’s tortious interference with his contract with Blair and by Fritz and Beath’s violation of their fiduciary duty to him. Resolution of these claims on the merits would oblige us to decide several difficult issues. The fiduciary duty claim alone would require us to determine whether Delaware or New York law applied, whether board members owe any fiduciary duty to warrantholders, and if such a duty exists, whether Fritz and Beath have breached it. We do not reach the merits of Gandal’s tort claims, however, because we conclude that the district court lacked personal jurisdiction over all three tort defendants.
Gandal contends that the district court had personal jurisdiction over the tort defendants under the District of Columbia’s long-arm statute, see D.C.Code § 13 — 423(a), upon which the federal district court’s personal jurisdiction in a diversity suit can be based. See, e.g., Gatewood v. Fiat, S.A., 617 F.2d 820, 824 (D.C.Cir.1980). He believes that his pursuit of the tort defendants is authorized by section 13^123(a)(4) which states that:
(a) A District of Columbia court may exercise, personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person’s—
(4) causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed, or services rendered, in the District of Columbia.
This section, as is apparent, gives the court personal jurisdiction over a claim arising from an act that occurs outside the District but causes an injury inside the District, provided the alleged tortfeasor can show another “plus factor” that demonstrates activity in the District. The parties dispute whether the tort defendants have sufficient contacts with the District to satisfy this statutory standard. But, as the tort defendants correctly insist, the statute calls for an injury inside the District before plus factors even become relevant. Cf. Gatewood, 617 F.2d at 825, 827; Crane v. Carr, 814 F.2d 758, 761-63 (D.C.Cir.1987).
Gandal claims that his injury occurred in the District only by virtue of his residence here. And Gandal’s deposition and pleadings establish that the earliest date on which he resided in the District was December 1,1986. Not surprisingly, then, he argues that his injury dates from the formal consummation of the merger on December 24, 1986. Whatever significance that date has for Gandal’s other claims, his contract rights were not tortiously interfered with by the shareholder vote, which was a mere formality; approval of Reliance’s takeover required a simple majority of Blair’s common stock, and Reliance held at that date (and had held since July 3, 1986) 60% of the shares. Nor, for the same reasons, did the shareholder vote constitute a breach of fiduciary duty by board members Fritz and Beath.
Gandal suffered his alleged tortious injuries well before December 1, 1986. Any possible tortious interference with Gandal’s contract rights took place when Reliance and Blair established the terms of the merger (e.g., the availability of the cash dividend and the decision to purchase restricted shares) in the summer of 1986. Gandal bears the burden of proving that the district court has a basis for asserting personal jurisdiction over the defendants. See Naartex Consulting Corp. v. Watt, 722 F.2d 779, 782 (D.C.Cir.1983), cert. denied, 467 U.S. 1210, 104 S.Ct. 2399, 81 L.Ed.2d 355 (1984). And Gandal has not pointed to any event occurring after December 1, 1986 that would demonstrate injury in the District from Reliance’s alleged tortious interference with his contract rights.
Gandal alleges that Fritz and Beath violated their fiduciary duty to the warrantholders by approving the favorable treatment of the restricted shares. But the board considered the treatment of those shares during the summer of 1986, before the tender offer was completed. The alleged violation could not have continued beyond the point at which Blair purchased the restricted shares, on September 4, 1986. Even if Gandal’s claims are valid, therefore, he suffered his injuries before December 1,1986 and accordingly was not injured in the District. A plaintiff cannot establish an injury in the District simply by moving here after an injury. See Leaks v. Ex-Lax, Inc., 424 F.Supp. 413, 415-16 (D.D.C.1976). The district court, therefore, lacked personal jurisdiction over the three tort defendants, and erred in failing to dismiss the claims against them for that threshold reason.
Gandal suggests that the tort defendants invited the district court's error by failing to object to a co-defendant's motion to transfer the case to New York. The tort defendants actually did not object to either their co-defendant's motion to transfer or the withdrawal of that motion. In light of the tort defendants' earlier motion to dismiss for lack of personal jurisdiction, their silence at the withdrawal of the co-defendant's motion .to transfer is of no significance.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
The defendant East Kentucky Power Cooperative appeals and the plaintiff Edward Gillen Company cross-appeals from judgment entered by the district court following a jury trial in this action by the general contractor on a construction project against the owner and the project engineer. The plaintiff contends that the defendants failed to warn it of soil conditions known to them which caused excessive subsidence requiring the plaintiff to suffer substantial loss of production and to perform extra work in connection with pilings. The plaintiff also sought payment for extra work performed in storing and moving materials from one site to another at the request of the defendant East Kentucky Power Cooperative.
The plaintiff sought recovery for the expenses involved with the soil subsidence on both contract and fraud theories. The district court granted summary judgment for the defendants on the contract claims and submitted the fraud issue to the jury. In doing so the district court relied on two recent decisions of the Kentucky Court of Appeals (now the Kentucky Supreme Court): Codell Construction Co. v. Commonwealth, 566 S.W.2d 161 (Ky.App.1977), and Dravo Corp. v. Commonwealth, 564 S.W.2d 16 (Ky.App.1977). On appeal the plaintiff argues that these two decisions are not controlling and that it was entitled to have its claim for breach of contract submitted to the jury. Upon consideration the court concludes that the district court properly applied controlling Kentucky law in refusing to submit the breach of contract claim to the jury.
On cross-appeal East Kentucky Power Cooperative contends that it was error for the district court to permit recovery for delay and expense in storing and relocating material because recovery was precluded by the “no-damage for delay” clause in the contract and for the failure of the plaintiff to submit a change authorization request for any additional work. Both of these issues were submitted to the jury which determined by its verdict that neither clause pertained to the factual situation developed at the trial. We agree with the district court that East Kentucky Power Cooperative was not entitled to a directed verdict on this issue and that the issue was properly submitted to the jury under corrected instructions.
The court also concludes that the district court did not abuse its discretion in allowing prejudgment interest.
The judgment of the district court is affirmed on appeal and cross-appeal.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM:
John B. Kotmair filed a pro se complaint against D. Gray and Gale Youn-kins, officers of the Internal Revenue Service, and certain employees of the Carroll County Bank and Trust Co. charging them with violating a number of his constitutional rights while acting under color of state law (42 U.S.C. §§ 1983 and 1985) and seeking $20,000 general and $60,000 punitive damages against each defendant. This action arose when Free State Home Builders, Inc., a corporation wholly owned by Kot-mair, incurred a penalty of $26.88 for late payment of $806.46 Federal Employment Taxes. Kotmair received a notice of the deficiency on February 19, 1973, and two letters entitled “Final Notice Before Seizure” on May 3 and August 8, 1973. These notices explained that if the amount due was not paid within 10 days, Free State’s assets could be levied upon without further notice. Appellant explained to the IRS agents and the bank in which Free State had an account that if they levied upon or permitted levy upon Free State’s account, he would bring legal action against them. The account was levied upon; the amount levied was transferred from the bank to the government; and this suit was brought. The district court, on a motion by the defendants, granted summary judgment, and we affirm.
In his complaint, appellant attacks the constitutionality of 26 U.S.C. § 6331, which authorized collection of overdue taxes by levy and seizure. However, a determination of that statute’s constitutionality is not necessary to a decision of the instant appeal. We need note only that the defendants, in seizing and paying the penalty, acted within their official scope of duty and in good faith reliance upon the law, see Eslinger v. Thomas, 476 F.2d 225 (4th Cir. 1973), and therefore are not subject to suit for their actions. Barr v. Mateo, 360 U.S. 564, 79 S.Ct. 1335, 3 L.Ed.2d 1434 (1959). In any event, there was no action under color of state law. Rather, the IRS agents acted under federal law, and the bank employees acted as private citizens obeying the federal law. Thus, none of the defendants would be subject to suit under 42 U.S.C. § 1983 even had their actions not been protected.
Although appellant contends that there are important issues of fact to be decided, summary judgment is appropriate where, as is the ease in the instant action, one party is entitled to judgment as a matter of law, Fed.R.Civ. P., Rule 56; for it is clear that even were appellant to prove all of the facts which he has alleged, he would not be entitled to judgment in this case.
Accordingly, we dispense with oral argument and the judgment of the District Court is affirmed.
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
WOODROUGH, Circuit Judge.
This petition for review involves a deficiency of $2,439.11 in federal estate taxes imposed under the Revenue Acts of 1926 and 1932, 44 Stat. 9, 47 Stat. 169, and is taken from the decision of the Board of Tax Appeals, reported 35 B.T.A. 220. The facts were found by the Board as follows:
Findings of Fact.
The petitioners are the duly qualified executors of the estate of Leveret T. Sheets, who died testate June 9, 1932, a resident of Minneapolis, Minn.
In October, 1928, Pauline L. Sheets, wife of the decedent, filed a suit for divorce from her husband, alleging cruel and inhuman treatment, and inadequate support. As relief, she asked for an absolute divorce, custody of their two small children, alimony equal to one-third of his property, a reasonable monthly or quarterly allowance for the support of herself and her children, costs of the suit, that the alimony allowed her be paid in cash or by a division of property, that the defendant be enjoined from disposing of his property until final judgment of the court, and that a receiver be appointed of all the property of the defendant with authority to carry out the decree of the court.
The defendant was ordered to show cause on November 8, 1928, or as soon thereafter as counsel could be heard, why certain relief should not be granted the plaintiff.
After protracted negotiations, the parties agreed upon a settlement of the property rights, including alimony, involved in the suit, and the dower interest of the plaintiff in the defendant’s property. The settlement agreement, entered into on November 2, 1928, contains an agreement of the parties that the estate of the defendant, consisting almost entirely of notes secured by mortgages on real property, and bonds, as disclosed by a list attached to the document, had a value of approximately $152,270.47, exclusive of the homestead, and provides for a payment of $250 per month to the plaintiff for household expenses and clothing for herself and her children. The agreement sets.forth that the defendant had paid the plaintiff the sum of $1,000 in cash and contains his agreement to pay all outstanding bills of the family and a note of the plaintiff in the sum of $225. Other provisions of the agreement follow :
The defendant has conveyed and assigned to a third party bonds and mortgages in the sum of $50,756.82, which in turn have been assigned to the plaintiff and defendant as joint tenants and not tenants in common, to the end that upon the de^th of either of the parties the ownership of said bonds and mortgages shall be and become the property of the survivor without probate or other proceedings.
It is mutually agreed that during the lifetime of the defendant he shall have the income- from the said bonds and mortgages as his own, except as hereinafter stipulated.
It is further understood and agreed that as to said bonds and mortgages the defendant shall have no right to assign, satisfy, extend, or otherwise dispose of said bonds or mortgages without the consent of the plaintiff in writing joining thereto. * * *
In the event that defendant fails to pay to plaintiff said $250 per month, the entire income from the one-third of said estate held jointly and the increase thereon shall become the property of the plaintiff and plaintiff shall be released from paying the usual household expenses but not her own personal expenses. * * *
It is further understood and agreed that this stipulation disposes of the entire estate of the defendant and the plaintiff releases and forever discharges the defendant, his heirs, administrators, executors, and assigns from any and all claims or demands, either as dower or otherwise to any of the estate of the defendant contained in the list hereto attached or that may be hereafter acquired, now or after his death, except the title to one-third thereof hereinbefore provided and conveyed to her, and except one-third of the property, if any, now owned by defendant and not included in said list. * * *
It is further stipulated that the plaintiff shall return to the home of the plaintiff and defendant immediately and that the parties hereto shall again take up the relations of husband and wife as heretofore and each shall diligently try to avoid any complications that would tend to again cause unhappy differences between them, and the plaintiff agrees that the time to answer in the above proceedings shall be and hereby is extended to December 1, 1928, and it is. specifically provided that the terms of this stipulation and agreement shall be and are binding upon each of the parties hereto,, whether or not the said proceedings are dismissed or proceed to trial and judgment therein.
The securities held by the decedent and Pauline L. Sheets, as joint tenants, were itemized in the estate tax return, but the value thereof was not included in the gross estate on the ground that the property was acquired by the surviving cotenant for an adequate and full consideration. The respondent determined a value for the property, and included the amount thereof, plus accrued interest in the amount of $787.34, in the gross estate.
The petitioners are not contesting the value determined by the respondent for some of the securities. The remaining securities had the following values at the time of decedent’s death (values itemized):
Opinion.
Upon the facts so found the Board decided that the full value of the property in question constituted a part of the gross estate and that there was deficiency in the estate tax on account thereof. The executors of the estate contend in support of their petition for review:
(1) That the property in question was not held in joint tenancy; (2) that this court should determine that Pauline L. Sheets acquired the property for an adequate and full consideration in money’s worth, notwithstanding the amendatory provisions of section 804 of the Revenue Act of 1932, 26 U.S.C.A. § 412; and (3) that it would be violative of the Fifth Amendment to apply that section to the transaction here involved.
(1) We agree with the unanimous decision of the Board of Tax Appeals that the property was held in joint tenancy within the meaning of section 302 (e) of the Revenue Act of 1926, 26 U.S.C.A. § 411(e).
(2) As the property here in question was held in joint tenancy at the time of the death of Leveret T. Sheets, it was taxable as part of his gross estate unless the wife in acquiring it from him had given adequate and full consideration for her interest in money or money’s worth. Revenue Act 1926, c. 27, § 302(b), 44 Stat. 9, 70, 26 U.S. C. § 411(b), 26 U.S.C.A. § 411(b). The consideration which she gave for it was her agreement to relinquish her marital rights in her husband’s estate, and at the time of the transaction (November 2, 1928) Congress had not yet declared by direct legislative definition whether or not such a relinquishment would constitute the consideration referred to in the statute. Several courts had considered somewhat similar language raising the question whether a surrender of dower rights” constituted “a fair consideration in money or money’s worth” for a transfer in contemplation of death, and it had been decided in the affirmative, Ferguson v. Dickson, 3 Cir., 300 F. 961; McCaughn v. Carver, 3 Cir., 19 F.2d 126; Stubblefield v. U. S., Ct.Cl., 6 F.Supp. 440, and also in the negative, Mercantile Trust Co. v. Hellmich, T.D. 3545 III-l Cumulative Bulletin 473, without determination by the Supreme Court. But the exact verbiage of this section, “adequate and full consideration in money or money’s worth,” had not been construed in connection with relinquishment of marital rights in any of the cases called to our attention. The statute, however, provided, at the time of this transaction, that any interest of the surviving spouse in the estate of the decedent existing as dower, curtesy, or by virtue of a statute creating an estate in lieu of dower or curtesy should be taxable. Revenue Act of 1926, c. 27, § 302(b), 44 Stat. 9, 70, 26 U.S.C. § 411(b), 26 U.S.C.A. § 411 (b).
The situation was therefore presented that the estate of a decedent was entitled to no deduction from tax on account of statutory rights thereto existing in the surviving spouse, but if a contract had been made by which the surviving spouse was to receive something from decedent’s estate in consideration of a waiver of the statutory rights of such spouse, then there was a question (which the courts had not decided) whether deduction should be made. Accordingly, and to meet this situation, Congress passed the amendment restricting the definition of “consideration in ‘money or money’s worth.’ ” The amendment reads:
“For the purposes of this [subchapter] title [Internal Revenue] a relinquishment or promised relinquishment of dqwer, curtesy, or of a statutory estate created in lieu of dower or curtesy, or of other marital rights in the decedent’s property or estate, shall not be considered to any extent a consideration ‘in money or money’s worth.’ ” Revenue Act of 1932, c. 209, 47 Stat. 280, 26 U.S.C. § 412, 26 U.S.C.A. § 412.
It cannot be seriously contended that the language of this provision failed to cover such a transaction as is here involved. Although the provision was enacted as an amendment to section 303(d) of the Revenue Act of 1926, its express terms make it applicable to the whole title of which section 302(e) is part and therefore necessarily amend section 302(e) of the act.
Read in the light of the amendment, section 302(e), 26 U.S.C.A. § 411(e), now requires that-the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property to the extent of the interest therein held as joint tenants by the deceased and any other person; and the proviso of the section is qualified so that where it is shown that the property held in joint tenancy has been at any time acquired from the decedent, no part of the value can be excepted from the gross estate where the consideration was merely the relinquishment of marital rights.
.It is contended that the amendment should not be held to apply in the computation of the gross estate of the decedent herein notwithstanding he came to his death on June 9, 1932, subsequent to the enactment of the amendment of June 6, 1932. The argument is that Congress intended it to apply only to property held in joint tenancy which was acquired from the decedent after the date of the amendment. But we think that the amendment should be regarded as a declaratory definition of terms and that section 302(e) must be read as it is written with the meaning of its terms Settled by the amendment. By its express terms the section covers property held in joint tenancy “which is shown to have been acquired from the decedent at any time”. _ Whether Mr. Sheets would have any interest in any property as a joint tenant with another at the time of his death could not be known until he died. Thereupon the taxable estate was to be computed, as required by the law, as it was at the time of death, and as the law then read, it was applicable to property held in joint tenancy acquired from the decedent at any time.
It was held in Knox v. McElligott, 258 U.S. 546, 42 S.Ct. 396, 66 L.Ed. 760, that Congress had not intended to require the inclusion in the gross estate of property held under a joint tenancy created prior to the passage of the statute of 1916 which was involved in that case. The court found nothing in the act to indicate Congressional intent to include prior existing joint tenancies. Shwab v. Doyle, 258 U.S. 529, 42 S.Ct. 391, 66 L.Ed. 747, 26 A.L.R. 1454, was of similar import. But probably for the purpose of meeting the reasoning of the Supreme Court in those cases, Congress passed section 302(h), 26 U.S.C.A. § 411(h), providing that section 302(e), 26 U.S.C.A. § 411(e), should apply to interests in joint tenancy referred to therein “whether made, created, arising, existing, exercised, or relinquished before or after [February 26, 1926] the enactment of this act,” and since then the Supreme Court has recognized the controlling effect of subdivision (h) in Gwinn v. Commissioner, 287 U.S. 224, 226, 53 S.Ct. 157, 77 L.Ed. 270; Third National Bank & Trust Co. v. White, 287 U.S. 577, 53 S.Ct. 290, 77 L.Ed. 505; Griswold v. Helvering, 290 U.S. 56, 54 S.Ct. 5, 78 L.Ed. 166; Nichols v. Coolidge, 274 U.S. 531-539, 47 S.Ct. 710, 711, 712, 71 L.Ed. 1184, 52 A.L.R. 1081. We think that Congress has made its intention clear that section 302(e), as amended by the Act of 1932, shall apply to interests in joint tenancy held by decedents dying after June 6, 1932, regardless of when the joint tenancy was created.
(3) To so tax the property held in joint tenancy at the time of death was not violative of the due process clause of the Fifth Amendment. All of the property held in the joint tenancy belonged to and came from the husband, and his death was the “generating source of important definite accessions to the property rights” of the surviving spouse. All that the wife had given for the interest held in joint tenancy was her agreement to waive certain of her marital rights in her husband’s property. Such interests of the wife were included in the husband’s gross estate under section 302 (b) and were taxable. As dower and marital rights were taxable, it fitted in with the general scheme of taxation to keep it taxable, notwithstanding its transformation into interests in joint tenancy in the husband and wife. The amendment which defined by limiting the meaning of the term “consideration ‘in -money or money’s worth,’ ” although it excluded inchoate dower rights from the definition, was not arbitrary, capricious, or a confiscation or deprivation of property without due process.
The cases of Nichols v. Coolidge, 274 U.S. 531, 47 S.Ct. 710, 71 L.Ed. 1184, 52 A.L.R. 1081; Coolidge v. Long, 282 U.S. 582, 51 S.Ct. 306, 75 L.Ed. 562, and Untermyer v. Anderson, 276 U.S. 440, 48 S.Ct. 353, 72 L.Ed. 645, cited and relied upon by the petitioners, are plainly distinguishable. The first case involved the question whether property transferred by an irrevocable trust years before 'there was any federal estate tax law- in effect could be treated as a transfer intended to take effect in possession or enjoyment at or after death within the meaning of the federal estate tax law. Coolidge v. Long, supra, presented the same question under a state succession tax law. The court held that the statutes could not be made to apply retroactively to transfers antedating the statute, where death brought about nothing more than the coming into possession of an estate which already had been irrevocably vested in the remainder-man. Similarly, in Untermyer v. Anderson, supra, it was decided that a federal gift tax could not be imposed on a gift fully consummated before there was any gift in effect.
The Supreme Court has recognized that the principles decided in Nichols v. Coolidge, supra, and related cases, are not controlling upon the question of subjecting jointly owned property to the estate tax. In Tyler v. United States, 281 U.S. 497, 50 S.Ct. 356, 74 L.Ed. 991, 69 A.L.R. 758, the court stated that it was the shifting of economic benefits of property at the time o.f the decedent’s death which justified the imposition of an estate tax with respect to property held by the decedent and another as tenants by the entirety; and Third Ntional Bank & Trust Co. v. White, 287 U.S. 577, 53 S.Ct. 290, 77 L.Ed. 505, affirming, per curiam, 1 Cir., ,58 F.2d 1085, affirming, D.C., 45 F.2d 911, must be deemed to hold that the full value of property held by the decedent and his wife under a tenancy by the entirety created prior to the enactment of any federal estate tax law could be reached by the tax. To the same effect are Robinson v. Commissioner, 6 Cir., 63 F.2d 652, certiorari denied, 289 U.S. 758, 53 S.Ct. 790, 77 L.Ed. 1501; Bushman v. United States, Ct.Cl., 8 F.Supp. 694, certiorari denied, 295 U.S. 756, 55 S.Ct. 913, 79 L.Ed. 1699; Putnam v. Burnet, 61 App.D.C. 393, 63 F.2d 456. See, also, Phillips v. Dime Trust & Safe Deposit Co., 284 U.S. 160, 52 S.Ct. 46, 76 L.Ed. 220, where the tenancy was created before the passage of the applicable statute but after the first estate tax law was enacted. Similarly, in Gwinn v. Commissioner, 287 U.S. 224, 53 S.Ct. 157, 77 L.Ed. 270, the court held that the tax could be imposed with respect to joint tenancies created before the enactment of the statute. The court said (287 U.S. 224, at pages 228, 229, 53 S.Ct. 157, 158, 77 L.Ed. 270):
“Although the property here involved was held under a joint tenancy with the right of survivorship created by the 1915 transfer, the rights of the possible survivor were not then irrevocably fixed, since under the state laws the joint estate might have been terminated through voluntary conveyance by either party, through proceedings for partition, by an involuntary alienation under an execution. Cal.Code Civ. Procedure, § 752; Green v. Skinner, 185 Cal. 435, 197 P. 60; Hilborn v. Soale, 44 Cal.App. 115, 185 P. 982. The right to effect these changes in the estate was not terminated until the cotenant’s death. Cessation of this power after enactment of the Revenue Act of 1924 presented proper occasion for imposition of the tax. The death became the generating source of definite accessions to the survivor’s property rights. Tyler v. United States, supra. See Saltonstall v. Saltonstall, 276 U.S. 260, 48 S.Ct. 225, 72 L.Ed. 565; Chase National Bank v. United States, 278 U.S. 327, 49 S.Ct. 126, 73 L.Ed. 405, 63 A.L.R. 388; Reinecke v. Northern Trust Co., 278 U.S. 339, 49 S.Ct. 123, 73 L.Ed. 410, 66 A.L.R. 397.
“Nichols v. Coolidge. 274 U.S. 531, 47 S.Ct. 710, 71 L.Ed. 1184, 52 A.L.R. 1081; Untermyer v. Anderson, 276 U.S. 440, 48 S.Ct. 353, 72 L.Ed. 645; and Coolidge v. Long, 282 U.S. 582, 51 S.Ct. 306, 75 L.Ed. 562, are inapplicable. In them the rights of the survivors became finally and definitely fixed before the passage of the act — nothing was added as the result of death.”
The same conclusion was reached in Griswold v. Helvering, 290 U.S. 56, 54 S.Ct. 5, 78 L.Ed. 166.
The effect of the recent affirmance by the Supreme Court, 58 S.Ct. 525, 82 L.Ed. —, per curiam, in Foster v. Commissioner, 9 Cir., 90 F.2d 486, is to settle the law that it was not violative of constitutional rights to include the total value of property held by the decedent and his surviving wife as joint tenants in decedent’s gross estate.
The language used by the Supreme Court in Tyler v. U. S., 281 U.S. 497, 50 S.Ct. 356, 359, 74 L.Ed. 991, 69 A.L.R. 758, is, we think, directly apposite to the situation presented by the amendment here in question. “The evident and legitimate aim of Congress was to prevent an avoidance, in whole or in part, of the estate tax by this method of disposition during the lifetime of the spouse who owned the .property, or whose separate funds had been used to procure it; and the provision under review is an adjunct of the general scheme of taxation of which it is a part, entirely appropriate as a means to that end.” Gwinn v. Commissioner, 287 U.S. 224, 228, 53 S.Ct. 157, 158, 77 L.Ed. 270.
The majority opinion of the Board of Tax Appeals is to the effect that the petitioners failed to prove that the wife received or acquired her interest in the property in question for an adequate and full consideration in money or money’s worth (or for an amount less than such consideration) regardless of the amendment of 1932, and we find no error in that conclusion. We also agree that no consideration in money’s worth was shown by the delay in the divorce case which the wife agreed to without consenting to a dismissal or termination of the case. We think the conclusion of the Board of Tax Appeals was right.
Affirmed.
No opinion for publication.
Report of Senate Finance Committee accompanying Revenue Act of 1932.
gee, contra, Bowers v. Commissioner, 7 Cir., 90 F.2d 790; Helvering v. Bowers, 58 S.Ct. 525, 82 L.Ed. —.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
SOPER, Circuit Judge.
The plaintiff in the District Court, who is appellant here, brought suit against the Insurance Company as the beneficiary under two policies of insurance of $5,000 each on the life of her deceased husband. She seeks to recover the additional sum of $5,000 under a clause in each policy providing for payment of double indemnity “upon receipt of due proof that the insured died as a direct result of bodily injury affected solely through external, violent and accidental means, * * * provided that the double indemnity shall not be payable if death resulted from self destruction, whether sane or insane”. The insured died as the result of a gun shot wound, and the company paid the face of the policies but denied liability for double indemnity. The sole question in the case was whether the death was accidental or suicidal, the plaintiff alleging that the defendant had been furnished with due proof of accidental death, and the defendant taking issue on this point and alleging that death resulted from self destruction.
On the day of his,death, September 30, 1937, the deceased had busied himself about his home in the town of Swansea, South Carolina, during the morning. After lunch, at about 1.15 P. M., he left his home in apparently good spirits, saying he was going to his farm which was located two and a half miles from town. He took a shot gun with him saying that he would ■try to get a' rabbit. He went to the farm and had some conversation with his tenant, and then about 1.30 P. M. went into the woods for a few minutes for a rabbit, firing one shot unsuccessfully. Returning he. arranged for the farmer to get a few stalks of sugar cane for his children and left.
Shortly after 1:30 P. M. he was found about a half mile away, lying on the ground by the side of his automobile which was parked in the yard of an abandoned house on the farm. The spot was in plain view from the public road, and he was discovered by the occupants of a passing automobile who saw his car and heard him call for help. One of them heard a gun shot when their car, as it approached the spot, was about 300 yards away. He was in great pain from a gunshot wound in the upper abdomen and died later in the. day. He was lying on the ground at a slight angle to the car with his feet at the center and his head toward the rear of the car,. The barrel of the shotgun was protruding about 18 inches from the back door, while the stock of the gun rested on the floor of the car between the front and the back seats. Pie asked the passers-by to help him, telling them that he had shot himself accidentally while attempting to pull the gun out of the car by the barrel. This statement, however, was not allowed to go to the jury as the court held that it was not part of the res gestae. We shall discuss this ruling later. Suffice it to say now that the evidence shows very clearly that the statement was made by the deceased a few minutes at the most after he was shot.
The Insurance Company contended in the District Court and contends here that the evidence in the case was not only insufficient to prove an accidental death, but actually demonstrated suicide. This position was based in part upon evidence relating to the mechanical structure of the gun and in part upon circumstances which suggested a motive for self destruction. An expert in fire arms testified for the defendant that as the gun was equipped with a safety device, it could not be discharged accidentally. In addition there was weighty evidence to show that the deceased was in bad financial condition, without income or earning capacity; that he had forged his wife’s name to the assignment of a mortgage which was in default when he died, and there was danger that his crime would shortly be discovered. Other insurance policies on his life for substantial sums were outstanding which would have lapsed on the day following his death unless the premiums were paid. The insured had no money in bank and had issued four checks which were dishonored for insufficient funds. The inventory of his estate filed by the beneficiary as executrix disclosed that the insured had left no cash on hand or in bank. On the other hand, a fire arm expert produced by the plaintiff gave evidence which had some tendency to show that the gun could have been accidentally discharged; and the insured’s wife, who was the beneficiary named in the policy, testified that at the time of his death the insured had approximately $480 in his home. The defendant, at the conclusion of all the evidence, made a motion for a directed verdict in its behalf on the ground that the only reasonable inference that could be drawn from the evidence was that the death of the insured was not accidental. This motion was overruled and the case was submitted to the jury which found a verdict for the defendant.
It is manifest from this recital that the District Judge was correct in submitting the case to the jury. While the evidence furnished ample support for the ver-diet of suicide, it cannot be said that no inference other than suicide could be drawn from the facts laid before the jury. The plaintiff contends on this appeal that the judgment of the District Court should be reversed, because of erroneous rulings on questions of law which arose during the trial. The judge refused the plaintiff’s request to charge the jury that since a violent death had been shown, and the issue was whether the death was accidental or suicidal, the presumption was that it was accidental and the burden of proof rested upon the defendant to show the contrary by a preponderance of the evidence. The judge also refused to charge that the presumption against suicide is evidence to be considered and weighed by the jury along with all the other evidence in the case. It appears that the judge felt bound by the rules of law laid down in Jefferson Standard Life Ins. Co. v. Clemmer, 4 Cir., 79 F.2d 724, 103 A.L.R. 171. It was there held that in a suit on an accident insurance or on the double indemnity clause of a life insurance policy, the burden of proof is on the person claiming under the policy to show accidental death, and that the presumption against suicide is not itself evidence but a rule of law which, in the case of an unexplained death by violence, requires the conclusion that death was accidental until credible evidence of suicide is offered; and when such testimony is offered, the jury passes upon the issues in the usual way, taking into consideration the abnormality of suicide and giving it such probative force in connection with the other facts of the case as their judgment dictates.
It is contended that these are not the governing rules in South Carolina, as announced by its highest court, which we are bound to follow under the doctrine of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. We shall assume, without deciding, that the question here at issue falls within the doctrine of that case; but we are unable to say, after a careful examination of the South Carolina decisions, that they require the trial judge in a case like this to give to the jury the instructions requested by the plaintiff. It is true that there are a number of South Carolina cases which speak of the presumption against suicide and of the burden of proof resting upon an insurance company to show suicide as a defense to recovery upon a policy of insurance, and it has been said that when the plaintiff makes out a prima facie case of violent death, the burden shifts to the defendant. See Latimer v. Woodmen of the World, 62 S.C. 145, 151, 40 S.E. 155; McKendree v. Insurance Co., 112 S.C. 335, 99 S.E. 806; Dill v. Sovereign Camp, 126 S.C. 303, 120 S.E. 61, 37 A.L.R. 167; Sanders v. Commonwealth Life Ins. Co., 134 S.C. 435, 447, 132 S.E. 828; Swofford v. Life Ins. Co., 159 S.C. 337, 157 S.E. 7; Linnen v. Commercial Casualty Co., 152 S.C. 450, 453, 150 S.E. 127. But with the exception of the last-named case, these were life insurance cases in which the insurer, as defendant, was setting up an affirmative defense under a provision of the policy whereby the insurer was freed from liability in case of suicide, and therefore had the burden, under the settled rule, of showing that the case fell within the excepting clause. Reference to this situation is made in some of the cases. Thus, in Latimer v. Woodmen of the World, supra [62 S.C. 145, 40 S.E. 156], it was said that “the defense of intentional self-destruction to a policy providing a forfeiture for that cause is an affirmative defense, and the insurer seeking to avail thereof must specifically plead it and establish it by the preponderance of evidence”; and in Marsh v. Pioneer Pyramid Life Ins. Co., 174 S.C. 59, page 63, 176 S.E. 878, 879, where the suit was brought on a double indemnity policy and the plaintiff sought to recover only the face of the policy, the court said “it was not necessary for the plaintiff to show that the insured did not commit suicide, but it was necessary for the defendant to .show that the insured did commit suicide”; and in Mandis v. New York Life Ins. Co., 177 S.C. 390, 181 S.E. 472, the court said that it must be kept in mind that the burden of proving death by suicide as a defense in a suit on an insurance policy is on the defendant. See, also, Jennings v. Clover Leaf Life-Ins. Co., 146 S.C. 41, 44, 53, 143 S.E. 668.
In Manais v. New York Life Ins. Co., supra, suit was brought to recover double the face of the policy under a double indemnity clause, and the Insurance Company set up the defense of suicide within two years of the issuance of the policy and therefore denied all liability. The court’s attention was confined to the single question whether ■ there should have been ^.directed verdict for the defendant. The burden of proof to show suicide is of course upon the defendant under such circumstances. The point does not seem to have been made that in such a situation the burden is on the plaintiff to prove accidental death in order to recover the double indemnity, with the result that if the jury cannot say on which side lies the preponderance of the evidence, they should find a verdict against the insured for the face of the policy, but should deny double recovery to the beneficiary.
In the pending case, on the other hand, the Insurance Company has paid the face of the policies and the beneficiary is suing on the double indemnity clause which is applicable only in case of accident. Manifestly, the burden rests upon the plaintiff to bring herself within the 'scope of this clause by showing that the death was accidental. A similar situation existed in Goethe v. New York Life Ins. Co., 183 S.C. 199, 190 S.E. 451, where the Insurance Company had paid the face of the policy but denied double liability on the ground that death had resulted from heart trouble and not from accident by sunstroke as claimed by the policyholder. The court said: (183 S.C. page 204, 190 S.E. page 453). “The burden was doubtless upon the plaintiff to present evidence from which the jury could properly find that the death of the deceased resulted from injuries of the nature or kind against which the policy insured him”. The same, principle applies when, as here, the plaintiff is seeking to establish an affirmative right under the accident clause of the policy and the defense' is suicide. The setting up of this defense does not relieve the' plaintiff of the usual burden to prove the case, although she is materially aided in doing so by the presumption against suicide based upon the common experience of mankind. In our opinion, the refusal of the court to charge the jury that the burden is on the defendant in this case to show suicide was not erroneous under the South Carolina law.
Nor was it error in our opinion to refuse to charge the jury that the presumption against suicide has the weight of evidence. It is true that the Supreme Court of South Carolina has spoken of the presumption against suicide as sufficient to carry a case to the jury, e. g., Marsh v. Pioneer Pyramid Life Ins. Co., supra. But this is only another way of saying that when an unexplained death by violence is established, the legal inference is that the death was caused by accident rather than by suicide. It would not be in accord with the spirit of the South Carolina decisions to single out this inference as possessing some mysterious and extraordinary value, for the court has often said that when the only reasonable inference that can be drawn from the evidence is that the death was suicidal, a verdict for the defendant must be directed. Linnen v. Commercial Casualty Co., supra; Dill v. Sovereign Camp,, supra; Swofford v. Life Ins. Co., supra; Burbage v. Curry, 127 S.C. 349, 121 S.E. 267; McLane v. Reliance Life Ins. Co., 192 S.C. 245, 6 S.E.2d 13. We find the point clearly set forth as we search the South Carolina -decisions for guidance, in the words of Justice Bonham of the Supreme Court of South Carolina in Craig v. Clearwater Mfg. Co., 189 S.C. 176, 183, 200 S.E. 765, 768. Speaking with approval of a recent decision of the Supreme Court of the United States he said: “In the case of New York Life Insurance Company v. Gamer, 303 U.S. 161, 58 S.Ct. 500, 82 L.Ed. 726, 114 A.L.R. 1218, in an opinion filed February 14, 1938, Mr. Justice Butler delivered the opinion of the Court; Mr. Justice Black dissenting. The action was to recover double indemnity on an insurance policy. The cardinal issue involved was whether the policy insured ‘from bodily injury effected solely through external, violent, and accidental means.’ (Page 501.)”
The defense was that the deceased committed suicide.
The court said: “ ‘Upon the fact of violent death without more, the presumption, i. e., the applicable rule of law, required the inference of death by accident rather than by suicide. As the case stood on the pleadings, the law required judgment for plaintiff. * * * It was not submitted on pleadings but on pleadings and proof. * * * The evidence being sufficient to sustain a finding that the death was not due to accident, there was no foundation of fact for the application of the presumption; and the case stood for decision by the jury upon the evidence unaffected by the rule that from the fact of violent death, there being nothing to show the contrary, accidental death will be presumed. The presumption is not evidence and may not be given weight as evidence.’ (Italics added.) Citing authorities, both from Federal and State Courts.
“It is true that this case is not binding on us, hut its reasoning and logic are appealing.”
The Chief Justice also quoted from Baker v. Western Union Telegraph Co., 87 S.C. 174, 69 S.E. 151, where the South Carolina cases on the force and effect of presumptions in negligence cases are summarized, and it is pointed out that when any fact raises the presumption of negligence, such fact stands as evidence of negligence throughout the trial, to be weighed with the rebutting evidence in deciding on which side the preponderance of evidence lies; but if the evidence offered by the defendant clearly explains the fact on which the presumption rests and shows due care plainly and indisputably, the presumption is completely destroyed.
Our conclusion is that it would be in accord with the South Carolina de-cisiotis to charge the jury under the facts of this case that the burden of proof rests upon the plaintiff, and that in order to recover, she must prove by a preponderance of evidence that the death of the assured was accidental; and that if the minds of the jury are in a state of equipoise on this point, so that they are unable to determine the issue, they should find a verdict for the defendant. The jury should also be told that since the fact of violent death is proved, a presumption or rule of law comes into play which requires an inference of death by accident rather than by suicide, and that while this fact with its attending inference is not alone decisive of the case, it should be considered with all the other evidence in deciding whether or not the plaintiff has borne the burden of proof imposed upon her.
The evidence relating to the statement of the wounded man, when found, that he had shot himself accidentally, should have been admitted as part of the res gestae. There is the possibility that the deceased made away with himself in such a fashion as to present the appearance of accident, and that his statement was a part of a well laid plan to this end. The trial judge might well have admitted the statement with a warning to the jury, but it would have been an invasion of the jury’s province to make this possibility the basis for rejecting the evidence. Tts admissibility depends upon whether the declaration should be regarded as a narrative of a past transaction, or a part of the res gestae in that it was made under the influence of an occurrence to which it related, and so soon thereafter in point of time as to negative the probability of fabrication. See the decision of this court in Chesapeake & O. Ry. Co. v. Mears, 4 Cir., 64 F.2d 291, where the declaration of an injured railroad conductor, when found a few minutes after an accident, as to the negligent handling of the cars was held to be admissible. The reason given was that the accident produced a shock sufficient to render the statement relating to it spontaneous and unreflecting, • and that the statement was made while the nervous excitement might still be supposed to dominate the declarant and his reflective powers were yet in abeyance. See, also, Provident Life & Accident Ins. Co. v. Eaton, 4 Cir., 84 F.2d 528. A similar view is held by the Supreme Court of South Carolina; Funderburk v. Powell, 181 S.C. 412, 187 S.E. 742; State v. McDaniel, 68 S.C. 304, 47 S.E. 384, 102 Am. St.Rep. 661. These cases, both state and federal, wisely hold that in the admission of testimony of this kind much must be left to the exercise of a sound discretion by the presiding judge. While there is some uncertainty in the pending case as to the precise interval which elapsed between the firing of the fatal shot and the discovery of the deceased by the occupants of the passing car, it is not disputed that the interval was very short, so that it may fairly be said that the conditions of admissibility were met
Reversed.
For a consideration of this question see Cities Service Oil Co. v. Dunlap, 308 U.S. 208, 60 S.Ct. 201, 84 L.Ed. 190, Channell v. Sampson, 1 Cir., 108 F.2d 315; Equitable Life Ins. Co. v. MacDonald, 9 Cir., 96 F.2d 437; Ohlinger, Federal Practice, pp. 349-352; Clark, Procedural Aspect of the New State Independence, 8 U.S.L.AV. 602.
In Linnen v. Commercial Casualty Co., 152 S.C. 450, 150 S.E. 127, the situation was analogous as the insurance company set up an affirmative defense in a suit on an accident policy.-
Including Jefferson Life Ins. Co. v. Clemmer, 4 Cir., 79 F.2d 724, 730, 303 A.L.R. 171.
The opinion in the instant case was prepared prior to May 22, 3940, when the Supreme Court of South Carolina, speaking through Chief Justice Bonham, announced its decision in McMillan v. General American Life Ins. Co., 9 S.E.2d 502, an action upon a life insurance policy defended on the ground that the death was suicidal. The plaintiff offered no testimony in chief except the policy of insurance, and depended upon the presumption against suicide to carry the case to the jury. The court found from an examination of the testimony offered by the defendant and the rebuttal testimony offered by plaintiff that death by suicide was the only reasonable conclusion that could he drawn, and therefore ruled that the refusal of the trial court to direct a verdict for the defendant was erroneous. Reviewing the plaintiff’s contention that under certain South Carolina decisions she might stand on the presumption against suicide alone, the court said that the cases did not support the proposition, but that if there was such a holding in any decision of the court it should be considered as overruled. The court quoted from Craig v. Clear-water Mfg. Co., 189 S.C. 176, 200 S.E. 765, New York Life Ins. Co. v. Gamer, 303 U.S. 161, 58 S.Ct. 500, 82 L.Ed. 726, 33.4 A.L.R. 323.8, and Jefferson Standard Life Ins. Co. v. Clemmer, 4 Cir., 79 F.2d 724, 103 A.L.R. 171, and definitely held that the presumption against suicide is one of law and not of fact, which does not have the force and effect of evidence, and of itself is insufficient, to take a case to the jury. A dictum that the presumption becomes conclusive when the defendant offers no evidence was repudiated, and it was held that there must be momo evidence offered by the plaintiff on which to base the presumption; and when the defendant offers evidence, the testimony offered by the plaintiff must be considered as is any other testimony in the case.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
THOMPSON, Circuit Judge.
This is an appeal from a judgment of the District Court for the Western District of Pennsylvania. The appellee brought suit to recover on a war risk insurance policy which insured him against total and permanent disability. The premiums were paid up to April 22, 1919, and thereafter were allowed to lapse. At the trial the appellant moved for a directed verdict on the ground that the appellee had failed to sustain the burden of proving that he had become totally and permanently disabled while the policy was in force. This was refused, and the case was submitted to the jury, which returned a verdict for the appellee.
In our opinion, the evidence produced by the appellee is insufficient to prove that he was totally and permanently disabled either before or after the lapse of the policy. The testimony is uncontradicted that the appellee pursued various gainful occupations up to the time of the suit. Although medical experts called by the appellee testified that he could not possibly pursue a gainful occupation because he had suffered total and permanent disability, the evidence clearly showed that the appellee did, in fact, pursue various gainful occupations. Applying the tests set forth in Lumbra v. United States, 290 U. S. 551, 54 S. Ct. 272, 78 L. Ed. 492, and United States v. Spaulding, 293 U. S. 498, 55 S. Ct. 273, 79 L. Ed. 617, we think the evidence was insufficient to sustain the verdict and judgment for the appellee and that the motion for a directed verdict should have been allowed.
The judgment of the court below is reversed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
CHAMBERS, Circuit Judge:
In this narcotics conviction here on appeal, we have one substantial issue: Was there reversible error in the trial court’s denial of a motion for a bill of particulars? Smith wanted a bill telling him the name of the government’s informer.
In the context of this case, he was entitled to know, although it is not every case where the information must be given. Aguilar v. United States, 9 Cir., 363 F.2d 379. However, two days before trial, the government advised defense counsel of the name of the informer. The informer was called by the defense and testified. Much of the informer’s testimony was favorable to the defendant. How in the sequence there was any prejudice, one cannot find. We find no offense to Roviaro v. United States, 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639. See Sorren-tino v. United States, 9 Cir., 163 F.2d 627, and Sartain v. United States, 9 Cir., 303 F.2d 859.
Error is asserted in failure to grant a continuance. We can’t find that it was ever requested. Requests for recesses were granted.
We find no abuse of discretion or reversible error in the instructions.
The contention of lack of competent counsel at trial is without merit. We cannot say that the representation was a mockery. In fact, we agree with the trial judge that the defendant was well represented. The frequency of this charge on appeals does point out the occupational hazard of defending such cases as this.
The judgment is affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
McENTEE, Circuit Judge.
This is another episode in the protracted litigation concerning the reorganization of the Boston & Providence Railroad. Commenced in 1938, the reorganization appears to be drawing to a close with our recent affirmance of the district court’s confirmation of a plan. In re Boston & Providence R.R., 413 F.2d 137 (1st Cir. 1969), cert. denied, Boston & Providence R.R. Development Group v. Bartlett, 397 U.S. 979, 90 S.Ct. 1103, 25 L.Ed.2d 390 (1970). Now before us are cross-appeals from certain aspects of the district court’s judgment allowing expenses and counsel fees under § 77 (c) (12) of the Bankruptcy Act, 11 U.S. C. § 205(c) (12) (1964). In No. 7575 the trustee of the New York, New Haven & Hartford Railroad, who under the terms of the plan of reorganization will succeed to assets of the B & P remaining after the payment of expenses and fees, appeals from allowances to the Boston & Providence Stockholders Development Group an(j its attorneys, claiming none were warranted as a matter of law. In No. 7597 Joseph B. Hyman, one of the Development Group attorneys, appeals from the same judgment, contending that the allowance to. him was inadequate.
In 1966 the Development Group and its attorneys submitted petitions for reimbursement and allowances to the district court for the period between January 1954 and June 1966. Acting under § 77(c) (12), the court referred the petitions to the Interstate Commerce Commission for determination of maximum limits in accordance with the statute. Extensive hearings were held and a report and order were issued by Jhci" Commission’s examiner in December 1967. The Commission modified the examiner’s decision, generally raising the limiíts' áet, in July 1968. Boston & P.R.R. Corp. Reorganization, 331 I.C.C. 614. In December 1969, the district court ;hei<J “a, hearing on the petitions and subsequently issued an order granting allowances .and reimbursements equal to the maximum, limits set by the Commission. The only evidence before the court was the.Coipmission’s decision, the examiner’s report* and an affidavit by counsel for the trustee. We add, however, that it,was’not as if this were a new matter for thé court. It had lived with the case in its many manifestations for over three decades.
Both the New Haven trustee and Attorney Hyman contend that various findings by the Commission are unsupported by substantial evidence. We think, however, that they cannot be permitted to challenge the decision on that ground.
The Supreme Court said long ago that a district court, operating under § 77(c) (12), is to act on the basis of the Commission’s report without “a hearing de novo on the issue of the reasonable worth of the services rendered or the propriety of the expenses incurred, or a reappraisal by the court of the facts.” Reconstruction Finance Corp. v. Bankers Trust Co., 318 U.S. 163, 169, 63 S.Ct. 515, 519, 87 L.Ed. 680 (1943). We take this to mean that the Commission’s report is presumptively correct and that a party opposing its findings and conclusions is bound to go forward and demonstrate any error, whether of law or fact. This burden necessarily includes introduction of the transcript and evidence before the Commission, as they are not automatically made a part of the record in the district court. Neither appellant saw fit to do so, despite clear awareness that the transcript might not be before the court. In such circumstances, they cannot now question the sufficiency of the evidence before the Commission. Accordingly, we accept the Commission’s findings in their entirety and shall consider only two kinds of inquiries: whether the findings support the Commission’s conclusions and whether the Commission made errors of law.
This conclusion is supported by the practice in rate-making cases before the Commission. In Mississippi Valley Barge Co. v. United States a carrier sought to enjoin a Commission rate order, but did not introduce in the district court the evidence presented to the Commission. The Court said:
“The settled rule is that the findings of the Commission may not be assailed upon appeal in the absence of the evidence upon which they were made. * * * The appellant did not free itself of this restriction by submitting additional evidence in the form of affidavits by its officers. For all that we can know, the evidence received by the Commission overbore these affidavits or stripped them of significance. The findings in the report being thus accepted as true, there is ' left only the inquiry whether they give support to the conclusion.” 292 U.S. at 286, 54 S.Ct. at 693.
The same considerations apply with equal force to the case at bar.
The balance of the trustee’s case boils down to the contention that the Commission was not justified in finding that the efforts of the Development Group were of benefit to the estate. The only aspect remaining open is whether the Commission’s findings support its conclusion.
We shall not rehearse the history of the reorganization in detail. Suffice it to say that the Commission adopted the examiner’s finding that the efforts of the Group blocked the 1954 plan. That plan would have given the B & P stockholders New Haven debentures valued at $103 for each share of B & P stock. The plan ultimately adopted called for payment of $110 in cash plus a certificate of contingent beneficial interest (CCBI) representing one forty-thousandth of the net proceeds of any windfall resulting from the disposition of B & P assets through 1978. The position of the Development Group throughout its participation in this proceeding has been that the assets of the B & P were undervalued. The Commission adopted the finding that, but for the Group’s insistence, the principle of the CCBI would not have been adopted in the 1966 plan. If the assets are in fact undervalued, a matter which the Commission can judge better than this court, the inclusion of the CCBIs might well produce significant gains for B & P stockholders. Consequently, we think that the Commission, particularly in light of its expertise in these matters, was justified in concluding that efforts of the Development Group were of benefit to the estate. Moreover, it might also well be that the Commission and the court could have concluded that, irritating as the presence of the Development Group might have been, it had served a constructive gadfly purpose in insuring that all possible courses of action which would benefit the estate were explored and that all feasible steps had been taken.
The points left open in No. 7597 are Attorney Hyman’s contentions that legislative efforts and attempts to develop the value of B & P assets are compensable, contrary to the Commission's rulings. He also maintains that the reduction of allowances to the Development Group petitioners because they were pot a protective committee under § 77 (p) is error and that the Commission’s decision does not comply with 5 U.S.C. § 557(c) (3) (A) (Supp. V, 1970).
We need make no determination with regard to the compensability of the Group’s promotional activities. Attorney Hyman made no claim for compensation for such efforts. He now raises the point’ on the theory that the Cominission must have disallowed part of his'.petitio'n on those grounds, as his petition included only a small claim for legislative lei; forts. The difficulty with his position is that the examiner found, contrary jto- appellant’s petition, that his “primary funcll tion, apparently, was in connection with legislation.” It therefore disallowed‘the bulk of his petition not by finding, that* appellant engaged in non-compensable promotional work, but by concluding' i!hat his legislative efforts occupied ¿'greater*' proportion of his time than claimed in the petition. There is no indication1, thaih the action on appellant’s petition' was premised on a finding that he engaged .in, promotional efforts. Therefore,, any ror the’ Commission may have made in holding promotional efforts to be^non^ compensable did not affect appellant’s allowance and we need not consider the point.
The contentions concerning ’ the compensability of legislative efforts and, the reduction of compensation tó''t'he Group petitioners due to the limited interests they represented must be placed., in context. Congress brought the^Comh.. mission into the allowance-setting process in an attempt to correct widespread-, abuses in ,connection with the allowance--' of legal expenses in railroad reorganizations. 5 Collier on Bankruptcy jf77.28g' at 591 (1969). It has major responsibility in the administration of a rather broad statute and, in the light of its considerable expertise in this area, its conclusions as to proper subjects of compensation are to be given great weight by the courts. See Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969); Gillentine v. McKeand, 426 F.2d 717 (1st Cir. 1970).
With the foregoing in mind, we think the contention that services in connection with legislation are compensable is entirely without merit. It has long been the position of the Commission that such activities do not have sufficient “connection with the proceedings' and plan” to warrant recompense out of the debtor’s estate. Wisconsin Central Ry. Reorganization, 295 I.C.C. 169, 172-73 (1956); Missouri Pacific R.R. Reorganization, 244 I.C.C. 69, 80-81 (1941); Chicago & Eastern Illinois Ry. Reorganization, 233 I.C.C. 267, 279 (1939); Chicago Great Western R.R. Reorganization, 233 I.C.C. 737, 744-45 (1939). This policy has been accepted by the courts and we see no reason to depart from it.
The reduction of allowances of the Development Group petitioners because they were not a protective committee authorized under § 77(p) arose out of the issue of duplication of efforts by the Group and the authorized stockholders’ "committee. The examiner held that each made a contribution to the plan and that, the extent that their efforts were duplicative, the allowances of each should be reduced. The Commission increased )the allowance to the members of the stockholders’ committee and counsel for trustee. 331 I.C.C. at 622-23.
It is Attorney Hyman’s position that the Development Group petitioners should not receive less compensation because of the limited interests they represent. The necessary concomitant of that position, however, is that the debt- or’s estate should be charged with the full cost of all services by any group representing stockholder interests, whether under § 77(p) or not, and irrespective of any duplication of efforts.
We cannot accept the notion that the estate should be charged for all duplicative services in these circumstances. The Act provides that “reasonable expenses * * * incurred in connection with the proceedings” are allowable. “Reasonable expenses” has, in large measure, come to mean expenses for services beneficial to the estate. See, e. g., Warren v. Palmer, supra n. 5, 132 F.2d at 668. And the Commission’s position has been that duplication of effort is not beneficial, and therefore non-compensable. See Long Island R.R. Reorganization, 295 I.C.C. 208, 214-15 (1955); Boston Terminal Co. Reorganization, 290 I.C.C. 149 (1953). Whatever may justify another course in other circumstances, we agree with the Commission that a group representing limited interests which duplicates the work of an authorized committee working on behalf of all stockholders cannot expect compensation for such efforts. See In re Paramount Publix, Inc., 85 F.2d 588 (2d Cir. 1936), cert. denied, Palmer v. Paramount Pictures, Inc., 300 U.S. 655, 57 S.Ct. 432, 81 L.Ed. 865 (1937).
The contention that the Commission’s decision does not meet the standard set by § 8(b) of the Administrative Procedure Act, as amended, 5 U.S.C. § 557(c) ’(3) (A) (Supp. V, 1970), rests solely on its alleged failure to state explicitly whether it arrived at the maximum allowance by disallowing a substantial number of the hours claimed by the petition or by reducing the rate of compensation beneath that requested. We think it is without merit.
The purpose of § 8(b) is to provide courts with a basis for judicial review — with “an intelligible statement of the factors considered, issues decided and reasons supporting the * * * conclusions.” City of Lawrence, Mass. v. CAB, 343 F.2d 583, 588 (1st Cir. 1965); see also Northeast Airlines v. CAB, 331 F.2d 579, 586 (1st Cir. 1964); cf. Baltimore & Ohio R.R. v. Aberdeen & Rockfish R.R., 393 U.S. 87, 92, 89 S.Ct. 280, 21 L.Ed.2d 219 (1968). Here the examiner found that Attorney Hyman’s primary role was in connection with legislation, a non-compensable activity. We think it clear, therefore, that the reduction in the petition is attributable to the denial of compensation for a large block of the time claimed. While it is regrettable that the Commission did not make the basis of its computation more explicit, petitioner is in no way prejudiced. The finding is sufficiently clear to enable us to determine the factors which entered into the decision. And, as petitioner may not challenge the sufficiency of the evidence, there is no need for a more detailed finding.
Affirmed.
MEMORANDUM AND ORDER
Attorney Hyman states to us that the Commission did not find that the majority of his time was spent on legislative matters, and that had it done so, it would have found him guilty of misrepresentation, or that, alternatively, we have done so. As we have said, such record as is before us is not at all clear. We do not intend to suggest any misrepresentation on the part of Mr. Hyman, or that either the Commission or we have so found. We merely say that whatever the basis of the Commission’s findings, we see no sufficient reason to disturb them. The petition for rehearing is denied.
. For the history of this reorganization see In re Boston & Providence R. R., 413 F.2d 137 (1st Cir. 1969); In re Boston & Providence R. R., 260 F.Sup. 415 (D.Mass.1966); Freeman v. Mulahy, 250 F.2d 463 (1st Cir. 1957).
. The Development Group is a group of B & P shareholders controlling a small amount of the company’s stock. It is not an authorized protective committee under § 77(p) of the Act, 11 U.S.C. § 205(p) (1964).
. 292 U.S. 282, 54 S.Ct. 692, 78 L.Ed. 1260 (1934).
. Tins disposes of most of the claims made by the trustee and Attorney Ilyman. The trustee’s argument that the district court could make no allowances without an affirmative showing that the Commission’s report was supported by substantial evidence is without merit. Moreover, its contentions that the allowances were excessive because much of the service rendered by the Development Group petitioners was legislative or duplicative of efforts by the stockholders’ committee must fail. Tbe Commission accepted the 'validity of the trustee’s position as a matter of law. Therefore, the only remaining question is whether the evidence supports the amounts of the allowances fixed, which is plainly foreclosed. Attorney Ilyman argues, assuming the validity of the Commission’s rulings on the compensability of legislative and development efforts, that his allowance was fixed at an inadequate level, as he did not devote enough time to such activities to warrant the reduction in his petition. This position is also foreclosed.
. In re New York. N. H. & H. R. R., 46 F.Supp. 214, 224 (D.Conn.), mod. on other grounds, Warren v. Palmer, 132 F.2d 665 (2d Cir.), aff’d on other grounds, Connecticut Ry. & Lighting Co. v. Palmer, 132 F.2d 670 (2d Cir. 1942).
. The Commission found fault with the examiner’s conclusion that the cost of duplicative services should be charged against both the Group and the § 77(p) stockholders’ committee and increased the allowances of the latter. It did not reduce further the Group petitioners’ allowances. Accordingly, the net effect of actions is that the committee’s compensation was unaffected by duplication, while the Group petitioners’ was reduced by part of the cost of duplication.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
JOHNSEN, Circuit Judge.
The action is one for trade-mark infringement and unfair competition. The trial court granted an injunction, on both grounds apparently, but denied any recovery of profits or damages. Both parties have appealed. The opinion of the trial court appears in D.C., 65 F.Supp. 952.
The plaintiff, Triangle Publications, Inc., is the publisher of “Seventeen,” a magazine of fashions and other interests for girls of high school age. It began publication of the magazine in August 1944 and had the name “Seventeen” registered in the Patent Office as a trade-mark for “a monthly magazine devoted to the interests of girls.”
The defendants, Hanson and Schwartz, as partners, are manufacturers of dresses for “teen-age” girls, named and labeled “Seventeen for the Junior Teens.” They began to show styles and samples to the trade in November 1944 but did not make deliveries until May 1945. The complaint in the present action was filed in March 1945.
Infringement and unfair competition are claimed from defendants’ use of the word “Seventeen” in their trade name and label of “Seventeen for the Junior Teens.” The word “Seventeen” is given prominence by defendants over the words “for the Junior Teens” in their insignia. Plaintiff charges that defendants are appropriating its registration and also the acquired secondary meaning of its trade-mark; that the magazine’s relation to the field of teen-age apparel is such that by defendants’ use of the word “Seventeen” the public will be led to believe that defendants’ dresses have been advertised in or otherwise endorsed or sponsored by the magazine; and that defendants are simply trying to get a free ride for their products on the trade-mark and good will of the magazine.
From the findings and the evidence, the magazine “Seventeen” had had a phenomenal and instant success and had become from the 'time of its first publication a recognized and outstanding fashion magazine for teen-age girls. Substantial promotional efforts to establish this position had been engaged in both before and in the months immediately following its appearance. Its initial number consisted of 380,000 copies and its circulation rapidly increased. By December 1945, 750,000 copies of the magazine were being published. Its advertising rates also correspondingly rose. Its original rate had been $750 per page, but by May 1945 this was increased to $1200 and by January 1946 to $1800.
As part of its business scheme, the magazine began immediately to sell reprints, counter cards and “blow-ups” of its advertisements and style comments for use in store displays. It sold hang-tags for garments on sales racks, featuring the words “You saw it in Seventeen.” Up to the time of the trial, over a million such hang-tags had been sold. From the start, it also offered a suggestion service to retail stores for their department set-ups and window displays of teen-age apparel, and it assisted them in putting on local fashion shows featuring garments that were advertised in its columns. Its appeal and prestige were such that more than a hundred manufacturers and merchandisers had sought permission to use the name “Seventeen” for their products or to associate their products with the magazine. The magazine has consistently refused to consent to the use of its name for any product.
The trial court made findings that defendants had deliberately chosen the word “Seventeen” as part of the trade name for their dresses, with knowledge of the reputation which the magazine had at that time acquired by virtue of the instant favor which it had won among girls of high school age, and with the obj ect of appealing to the group reached by the magazine; that defendants were seeking to trade on and take unfair advantage of tire magazine’s fame, reputation and good will; that, while tíie evidence did not show that defendants or the dealers in their products had been guilty of any direct misrepresenting and confusing, and while defendants had been careful not to state specifically that their dresses had any connection with the magazine, they nevertheless had sought in various ways to foster such an impression, as, for example, by furnishing dealers with hang-tags, such as the magazine did, in which the word “Seventeen” was emphasized; that persons in the fashion and apparel business had been confused by defendants’ trade name into believing that there was some relation between their dresses and the magazine; and that defendants’ further use of the word “Seventeen” as part of their trade name and label was likely to confuse the public by causing it to believe that defendants’ dresses were advertised in or were sponsored, approved or endorsed by the magazine. There is evidence supportive of these findings.
The injunction entered prohibited defendants from using in any manner whatsoever the word “Seventeen,” or the numeral “17,” or any name including the word “Seventeen,” in the manufacture, sale, distribution or advertising of dresses or other wearing apparel for girls.
One of defendants’ contentions here is that plaintiff’s trade-mark is invalid. But as a name for a magazine catering to girls from 13 to 18 years of age, we agree with the trial court that “Seventeen” is a fanciful or suggestive term rather than a commercially descriptive one. Its value in its registered use would seem to lie in its symbolic appeal and not in any indication of particular product. Cf. San Francisco Ass’n for the Blind v. Industrial Aid for the Blind, 8 Cir., 152 F.2d 532, 533, 534. It can hardly be said, within the language of the Trade-Mark Act of 1905, as amended, to be “merely * * * descriptive of the goods with which they are used, or of the character or quality of such goods.” 15 U.S.C.A. § 85. It is not in our opinion such a summary or characterization of contents as was held to be made by the title “Aviation” in McGraw-Hill Pub. Co. v. American Aviation Associates, 73 App.D.C. 131, 117 F.2d 293; “Ranch Romances” in Warner Publication v. Popular Publications, 2 Cir., 87 F.2d 913; “College Humor” in Collegiate World Pub. Co. v. Du Pont Pub. Co., D.C., N.D.Ill., 14 F.2d 158; and other similar cases upon which defendants rely.
Defendants further contend that their use of “Seventeen” as a name for dresses is not an infringement under the Trade-Mark Act of plaintiff’s registration of the term for a magazine title. Infringement under the statute involves the use of a trade-mark upon “merchandise of substantially the same descriptive properties as those set forth in the registration.” 15 U.S.C.A. § 96. It must be conceded that magazines and dresses would not normally be regarded as merchandise of substantially the same descriptive properties. There is, however, the factor to be considered that plaintiff has made its magazine serve also as a commercial blesser and oblique brander of merchandise for identifying the products of its advertisers in the market.
But this promotive use of the name of the magazine in a service for commercially blessing and obliquely branding the merchandise of others, as a medium for identifying and stimulating the sale thereof and with its special business incidents to plaintiff of selling hang-tags, reprints, counter cards, “blow-ups”, etc., would seem not to be directly within the scope of plaintiff’s registration and to constitute rather an extension of the trade-mark into a field of outside or secondary meaning. Such a secondary meaning, however, also is entitled to protection from unfair competition, and this ground of itself would require affirmance of the injunction here, even though there has been no technical infringement of the statutory registration.
On the question of unfair competition, the trial court in substance found, and the evidence supports the finding, that plaintiff’s use of the trade-mark “Seventeen” had acquired a secondary meaning indicative in the public mind of a relationship between the magazine and any girls’ apparel on which or as to which the name was used, and that this secondary meaning had been acquired prior to the time that defendants began to use the name for their dresses. It also found, as heretofore indicated, that defendants had deliberately chosen the word “Seventeen” as part of their trade name with knowledge of the reputation which the magazine had acquired and with the object of appealing to the group reached by the magazine, and that defendants were seeking to trade on and take unfair advantage of the magazine’s fame, reputation and good will. The evidence further shows that plaintiff had protested against defendants’ use of the name from the start, and, as previously stated, plaintiff instituted this suit for an injunction before defendants had begun to make deliveries of their dresses to the trade.
But defendants argue that what they have done cannot legally be termed unfair competition because their business is not com-, petitive with that of plaintiff. Plaintiff admittedly is not engaged in the manufacturing of dresses. As has been emphasized, however, it is using the name of its magazine in a service for commercially blessing and obliquely branding such merchandise in the market as an identification. In this service aspect, which it has made an incident of its publication business, defendants’ use of the word “Seventeen” as a vehicle for identifying and selling dresses would necessarily be competitive with plaintiff’s use thereof for the same purpose through the lending of its name to the goods of its advertisers.
Going beyond this, however, there can be unfair competition although the businesses involved are not directly competitive. Under present general law, the use of another’s mark or name, even in a noncompetitive field, where the object of the user is to trade on the other’s reputation and good will, or where that necessarily will be the result, may constitute unfair competition. See e. g. Yale Electric Corporation v. Robertson, 2 Cir., 26 F.2d 972, 974; Del Monte Special Food Co. v. California Packing Corporation, 9 Cir., 34 F.2d 774; Atlas Diesel Engine Corp. v. Atlas Diesel School, D.C., E.D.Mo., 60 F.Supp. 429. This inherently would seem to imply—though the cases are not unanimous in their theory — such a reputation and good will in the circumstances as to make it likely that the public will be confused or deceived by the particular use. Under the rule stated, the finding here as to the reputation and good will of plaintiff’s magazine, as to defendants’ deliberate attempt to get a free ride on this standing, and as to the likelihood of public confusion from defendants’ continued use of the name, clearly entitled the trial court to hold that defendants were guilty of unfair competition. Cf. Vogue Co. v. Thompson-Hudson Co., 6 Cir., 300 F. 509, 512; Esquire, Inc. v. Esquire Bar, D.C., S.D.Fla., 37 F.Supp. 875. There is the additional element in the situation, as found by the trial court, that persons in the-fashion and apparel business had in fact been confused into believing that there was some relation between defendants’ dresses and plaintiff’s magazine.
Defendants contend that this general law, which the trial court applied, is not the law of Missouri, and that the case is governed by the law of that State. The argument is that in an unfair competition case in Missouri a federal court should apply the conflict of laws rule of that State; that the conflict of laws rule of Missouri requires that the law of the State where the wrong was done be applied; and that the wrong in the present case was done in Missouri, since this was the place where defendants’ dresses were manufactured and placed in commerce. Plaintiff urges that the general law of the previously cited and other federal cases is controlling, since the unfair competition charge is pendent to a claim of trade-mark infringement, and that if this general law does not apply then the unfair competition law of New York governs, in that this is where the magazine is published and where most of plaintiff’s advertisers have their places of business and hence should be regarded as the place where the wrong was done.
For purposes of this appeal, it is not important whether the trial court should have applied general law, New York law or Missouri law, for the result here we think would be the same. The general rule which the trial court applied also is the rule in New York. See e. g. Tiffany & Co. v. Tiffany Productions, 147 Misc. 679, 264 N.Y.S. 459, affirmed 237 App.Div. 801, 260 N.Y.S. 821, affirmed 262 N.Y. 482, 188 N.E. 30; Philadelphia Storage Battery Co. v. Mind-lin, 163 Misc. 52, 296 N.Y.S. 176. And while we have found no Missouri case that is determinative, it is our view that the same rule would be applied by the courts of that State. Thus, as an indication, in National Telephone Directory Co. v. Dawson Mfg. Co., 214 Mo.App. 683, 263 S.W. 483, 484, the court referred to the narrow and technical sense in which the term “unfair competition” had been used in the earlier English and American cases and made the following comment: “The doctrine as thus announced has since, by process of growth, been greatly expanded in its scope to encompass the schemes and inventions of the modern genius bent upon reaping where he has not sown.”
Two contentions of defendants remain. One is that the terms of the injunction are “so broad, vague and indefinite as to be wholly incapable of judicial enforcement.” This we think is so devoid of merit on its face as not to require discussion. Defendants can hardly have any real fear that they may be held in contempt for putting “17” in their dresses as an indication of size. The other contention is that the court was without jurisdiction to grant relief, because plaintiff’s claim of trademark infringement was so plainly unsubstantial that the charge of unfair competition was cognizable only as a matter of jurisdiction for diversity of citizenship, and plaintiff failed to show that the necessary amount was involved to support such jurisdiction.
Under Armstrong Paint & Varnish Works v. Nu-Enamel Corporation, 305 U.S. 315, 324, 325, 59 S.Ct. 191, 83 L. Ed. 195, and Hurn v. Oursler, 289 U.S. 238, 240-244, 53 S.Ct. 586, 77 L.Ed. 1148, as well as other cases, an allegation of infringement of a registered trade-mark, unless plainly unsubstantial, carries with it jurisdiction to determine an issue of unfair competition which is part of the general situation and not inherently a separate cause of action, even where the claim of infringement fails on the trial. See also L. E. Waterman Co. v. Gordon, 2 Cir., 72 F.2d 272,274. The allegation of infringement here cannot be said to be plainly unsubstantial, as we think our previous discussion of the issue shows.
But if it had been necessary to rest jurisdiction on diversity of citizenship, it would have to be held that the evidence is sufficient to support the finding of the trial court that more than $3,000 was involved in the controversy. What plaintiff primarily was seeking to protect was its good will or the value of its right to use the name “Seventeen,” and this aspect was one of the factors to be taken into account in a determination of the amount that was involved. See e. g. Beneficial Industrial Loan Corp. v. Kline, 8 Cir., 132 F.2d 520, 525; Indian Territory Oil & Gas Co. v. Indian Territory Illuminating Oil Co., 10 Cir., 95 F.2d 711, 713. Under the evidence, plaintiff had expended $150,000 in initially promoting its magazine. The magazine had attained an immediate and continued preeminence in its field. Its circulation had grown rapidly from an original 380,000 copies to 750,000 copies per month. Its advertising rates similarly had increased from $750 per page to $1200 and later to $1800. From the time the magazine began to be published, manufacturers and merchandisers had sought to obtain permission to use or connect its name with their products and over a hundred such requests had been received. From these and other facts in the record, the trial court could properly find that the amount involved was in excess of $3,000. Cf. also Del Monte Special Food Co. v. California Packing Corporation, 9 Cir., 34 F.2d 774, 776, 777.
On plaintiff’s cross-appeal from the trial court’s denial of any recovery of profits or damages, we repeat our previously indicated view that there was no technical infringement of plaintiff’s statutory registration. Beyond this, there was a finding by the trial court that there was no evidence that plaintiff had sustained any loss either directly or indirectly, and this finding is controlling as to the unfair competition which is involved. Plaintiff appears to have been able to get all the advertising for its magazine that it could handle under the existing paper shortage. The evidence tends also to show that under the merchandise shortages of the war and postwar period the sale of defendants’ dresses up to the time of the trial had not been dependent upon the use of plaintiff’s name. As the trial court pointed out, the success of both plaintiff and defendants in their respective fields was primarily due to economic conditions. 65 F.Supp. at page 960. There was no contention that there had been any damage to the magazine’s reputation and good will from the quality or style of defendants’ merchandise. Any possibility of damage to plaintiff’s reputation and good will was potential.
In this situation, the court was warranted in limiting its decree to injunctive relief. The cases dealing with the right to profits for trade-mark infringement upon which plaintiff relies are not applicable. And since plaintiff could not show as to the unfair competition that it had sustained any probable loss in profits of any kind from defendants’ use of its name, which it might otherwise have had, or any other possible direct or indirect pecuniary injury to its business rights and property, such as a cheapening of its reputation, the trial court did not err in-denying damages. Cf. Vogue Co. v. Thompson-Hudson Co., 6 Cir., 300 F. 509, 512, 513; I.T.S. Co. v. Tee Pee Rubber Co., 6 Cir., 288 F. 794, 798.
The judgment is affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HILL, Circuit Judge:
This case arises out of the entry of conflicting child custody decrees by the Florida and Washington state courts. In 1980 Congress enacted the Parental Kidnapping Prevention Act (hereinafter “the PKPA”), P.L. 96-611, 94 Stat. 3566, codified at 28 U.S.C. § 178A (1982), in an attempt to provide at least a limited federal response to the serious social and legal problems engendered by the availability and entry of conflicting child custody orders by the courts of different states. See 28 U.S.C. § 1738A note (1982). By setting forth uniform jurisdictional standards applicable to all states in child custody matters, the PKPA seeks both to reduce the likelihood that a jurisdictional conflict between states will lead to the entry of inconsistent decrees and to resolve those conflicts that do arise. Under the PKPA, only one state at a time may assert jurisdiction to issue or modify a child custody decree, and a custody order issued in accordance with the jurisdictional requirements of the PKPA is enforceable anywhere in the United States. In the PKPA however, Congress did not expressly provide a federal forum for the resolution of the interstate jurisdictional disputes to which it was addressed. In this case we must determine whether, despite the absence of express authorization in the PKPA, a private party may prosecute an action in federal district court to resolve an interstate conflict implicating the jurisdictional requirements set forth in that legislation. The district court in this case held that a parent could successfully maintain an action in federal district court to obtain a declaratory judgment that would determine which of two conflicting state court custody orders was issued in accordance with the jurisdictional prerequisites of the PKPA. We agree.
FACTS
On June 1, 1979, the Circuit Court of Calhoun County, Florida entered a divorce decree dissolving the marriage of appellant Vivian Jenson (then Vivian McDougald) (hereinafter referred to as “the mother”) and appellee Gary McDougald (hereinafter referred to as “the father”). The divorce decree provided that the couple’s son, Jeri-my, who was then three years old, would live with each parent for alternating six month periods for the next three and one-half years. Once Jerimy reached school age, his mother was to have custody of him during the school year, with the father receiving summer visitation rights. In accordance with the custody provisions of the decree, Jerimy lived with his father from June 23, 1979 through December 23, 1979, and then from June 23, 1980 through late December of that year. Jerimy and his father lived in Blountstown, Calhoun County, Florida through all of the first six month period and most of the second one. Some time in November of 1980, the father and Jerimy then moved to Dothan, Alabama, a town located approximately 70 miles from Blountstown and about 20 miles from the Florida state line. Jerimy returned to his mother in Washington at the end of his second six month stay with his father.
On or about February 26, 1981, the father filed a petition for modification of the original custody decree in the Calhoun County Circuit Court. The Florida court set a hearing for May 15, 1981, and the modification petition and a notice of hearing were served on the mother in Washington. Soon after she was served with the Florida petition and notice, the mother filed a petition for modification in the Superior Court of Pierce County, Washington. The Washington court immediately entered a temporary restraining order and initiated communications with the Florida court, resulting in a stay of the Washington proceedings and a continuance of the Florida hearing. A hearing was eventually held in Blountstown, Florida on August 14, 1981, before the same judge who had entered the 1979 divorce and custody decree.
Both parents appeared personally before the court in Florida and testified. At the conclusion of the hearing, the Florida judge ruled from the bench that primary custody should be awarded to the mother, with the father enjoying summer and holiday visitation rights. Before the court’s order was reduced to writing and entered, however, the father filed a motion for rehearing, and the matter was set for further hearing on October 9, 1981. At that hearing, the mother’s Florida attorney was permitted to withdraw, and the mother was directed to secure new counsel before the next hearing. The next hearing was held on December 11,1981, but the mother did not attend, nor was she represented by counsel. On January 5, 1982, the Florida court issued a written Order of Modification, in which it reversed its earlier ruling from the bench and awarded primary custody of Jerimy to the father, with the mother receiving summer and holiday visitation rights.
After the Florida court’s October hearing the mother renewed her efforts to secure a modification of the original Florida custody decree in Washington. On November 21, 1981, the mother filed a memorandum regarding jurisdiction in the Washington court. After the December hearing in Florida, but before the Florida court had issued its written order, the Washington court contacted the Florida court, contending that Washington had the better claim to jurisdiction over the case and noting that a hearing was set for January 20, 1982 on that and other issues. The Florida court responded with a copy of its written order of January 5 and a letter setting forth its view of the case. The father filed an objection to the Washington court’s assertion of jurisdiction and was represented by Washington counsel in the Washington proceedings.
The Washington court held a hearing and, on May 20, 1982, ruled that it had jurisdiction over the matter. The court set a custody hearing and ordered that Jerimy remain in the custody of his mother during the pendency of the Washington proceedings. The Washington court subsequently awarded primary custody of Jerimy to his mother, with four week summer visitation rights to the father. Pursuant to that arrangement, the Washington court permitted the father to take Jerimy to Florida in July of 1982.
Apparently relying on the Florida custody order, the father did not return Jerimy to his mother at the end of the summer. Relying on the contrary Washington court orders, the mother and her father (appellant Clarence Ehli) retrieved Jerimy from Florida on April 14,1983 and took him back to Washington. Arrest warrants were issued for the mother and grandfather, who were charged with abducting Jerimy with the intent to remove him from the jurisdiction of the Florida courts.
In July of 1983 the Washington court granted the father an' order to show cause why the Washington court should not restore the custody and visitation provisions of the original 1979 Florida divorce decree. On October 28, 1983 the Washington court entered an order essentially restoring the parties to the position they were in before the father sought the modification he was eventually granted in Florida. The mother was awarded primary custody of Jerimy, with the father enjoying summer visitation rights. On January 6, 1984, the father moved to vacate the Washington orders on the basis of the supremacy and full faith and credit clauses of the United States Constitution, as well as on jurisdictional grounds. That motion was denied on February 10, 1984.
On February 23, 1984, the father filed this action in federal district court. The father’s amended complaint stated four separate claims. Named as defendants were the mother, the grandfather, and a Washington state court judge who was involved in the proceedings in that state. In Count I, the father named as defendants the mother and the Washington judge and sought damages and other relief pursuant to 42 U.S.C. § 1983 (1982). Naming the mother as defendant, Count II sought enforcement of the Florida state court order of modification on the basis of constitutional principles of full faith and credit, alleging diversity as the basis for jurisdiction. Count III sought damages in tort from the mother and the grandfather for the alleged kidnapping of the child. Naming the Washington judge and the mother as defendants, Count IV sought damages as well as declaratory and injunctive relief pursuant to the provisions of the PKPA that are codified at 28 U.S.C. § 1738A (1982), alleging both federal question and diversity jurisdiction.
On the father’s motion for summary judgment, the district court granted the Washington state court judge's motion to dismiss the father’s claims against him in their entirety for lack of personal jurisdiction. McDougald v. Jenson, 596 F.Supp. at 684. The court dismissed Count I of the amended complaint, the father’s section 1983 claim against the mother, for failure to state a claim on which relief could be granted. Id. The court dismissed Count II, seeking enforcement of the Florida decree, for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim on which relief could be granted. Id. at 685. Dismissing Count III, the court found that the father’s allegations of “child-snatching” did not constitute an actionable tort under Florida law, and that the court lacked diversity jurisdiction over such a claim if one existed under state law. Id. On Count IV, however, the court granted declaratory relief, finding that the Florida order of modification was entered consistently with the provisions of section 1738A and was therefore entitled to enforcement according to its terms. Id. at 685-89. The father had also moved for a preliminary injunction, which was denied. Id. at 689. The court’s declaratory judgment was ordered on September 26, 1984 and filed the next day. On October 29, 1984 the district court issued a supplemental order clarifying its previous order and denying the mother’s motion to stay the execution of any proceedings to enforce the court's judgment.
The mother failed to deliver Jerimy immediately to the father. On Thursday, November 15, the father filed an emergency motion for an injunction in the district court, seeking immediate custody of Jeri-my. Late that afternoon the court entered a temporary restraining order (hereinafter “the TRO”) requiring the mother to deliver Jerimy to the father by noon the next day. The mother was enjoined from taking any further action in the Washington courts that was inconsistent with, or contrary to, the district court’s earlier order. The mother was also ordered to appear personally before the court the following Monday to show cause why she should not be held in contempt of court.
The mother delivered Jerimy to the father as ordered and filed a timely notice of appeal from the declaratory judgment and the TRO. After the notice of appeal had been filed, the mother and the father entered into a stipulation requesting the district court to dissolve its show cause order and enter a permanent injunction awarding custody to the father. The stipulation expressly reserved all appellate rights either party might enjoy with respect to any such orders. The district court approved the stipulation, dissolved the TRO, and entered a permanent injunction directing the mother to comply with the Florida court’s 1982 modification order, as modified by that court or any other court with jurisdiction to modify such a decree pursuant to 28 U.S.C. § 1738A (1982). The mother filed no notice of appeal from the order entering the permanent injunction.
The father filed a timely notice of cross-appeal, challenging the district court’s dismissal of Counts I, II, and III. By agreement of the parties, the appeal against the Washington state court judge has been dismissed. The father has filed a motion to dismiss the mother’s appeal. That motion has been carried with the case and decided on this appeal.
DISCUSSION
We consider the father’s motion to dismiss the mother’s appeal in Part I below.
In Part II, we address the remaining issues presented by the mother’s appeal. In Part III, we resolve the claims raised on the father's cross-appeal.
I. THE FATHER’S MOTION TO DISMISS THE MOTHER’S APPEAL
In support of his motion to dismiss the mother’s appeal in its entirety, the father makes the following three arguments. First, the father argues, a TRO is not appealable, and even if the instant TRO is characterized as an injunction, the appeal therefrom is moot, since the order expired by its terms on November 21, 1984. Further, the father argues, any such preliminary order must be considered to have merged with the final permanent injunction order, so that appeal is proper only from the order of permanent injunction. Second, the father argues, this court lacks jurisdiction over the mother’s claims as they relate to the permanent injunction because she agreed to the terms of the injunction in a signed stipulation, and because she never filed or intended to file a notice of appeal from the permanent injunction. Third, the father argues, the mother’s appeal from the declaratory judgment is moot because even if this court were to reverse that judgment, the permanent injunction, from which no appeal has been or can be taken, would remain in effect granting custody of Jerimy to the father. As a result, the father concludes, any ruling this court made on the declaratory judgment action would be purely advisory.
In response to the father’s first argument above, the mother claims the order labeled a TRO was instead an injunction commanding her to perform an affirmative act and, as such, is appealable. If the order is characterized as a TRO, the mother urges us to exercise our inherent power to review an otherwise unreviewable order under the All Writs Act, 28 U.S.C. § 1651(a) (1982). She also argues that an appeal from the TRO should be allowed regardless of the expiration of the order by its terms because the order resulted in irreparable harm that is capable of repetition.
Regarding the permanent injunction, the mother argues that the stipulation she entered into agreeing to the terms of the injunction should not be held to constitute consent to the entry of such an order. Rather, the mother claims she never consented to the entry of the injunction and that she only agreed to the terms of the order to provide a stable environment for Jerimy for the duration of this legal battle. In support of this construction of the stipulation, the mother notes that the stipulation by its terms provided as follows:
The parties hereto agree that this document is entered into without prejudice to the appellate rights of either side and does not constitute a waiver of objection to the propriety of the Court’s Orders herein in any fashion.
The mother argues on this appeal that the permanent injunction must be reversed because it was “fundamental error” for the district court to enter the injunction eight days after the mother’s notice of appeal from the preliminary injunction and declaratory judgment had been filed, which the mother argues had the effect of divesting the district court of further jurisdiction to enter such an order in the case. The mother also argues that where, as here, a prenotice of appeal preliminary injunction has been appealed, the appeal should ■ be deemed taken also from any post-notice permanent injunction that should not have been entered.
In response to the father’s third argument above, the mother argues that her appeal from.the declaratory judgment is not moot even if the permanent injunction is not properly before this court because if we reverse the declaratory judgment, she can subsequently move to set aside the permanent injunction pursuant to Rule 60(b)(5) of the Federal Rules of Civil Procedure. That rule provides, inter alia, that “the court may relieve a party... from a final judgment, order or proceeding... [because] a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application.”
We conclude that the mother’s appeal from the TRO entered in this case, whether denominated a TRO or a preliminary injunction, is not properly before the court. It is well settled in this circuit that a TRO is not ordinarily appealable. Fernandez-Roque v. Smith, 671 F.2d 426, 429 (11th Cir.1982); Nelson v. Rosenthal, 539 F.2d 1034 (5th Cir.1976); Chandler v. Garrison, 394 F.2d 828 (5th Cir.1967). The mother argues that, because the TRO was in reality a short-lived mandatory injunction commanding her to perform an affirmative act, it is appealable pursuant to 28 U.S.C. § 1292(a)(1). We agree that the label placed on an order such as the one entered in this case is not dispositive of its nature and appealability under section 1292(a)(1). “A district court, if it were able to shield its orders from appellate review merely by designating them as temporary restraining orders, rather than as preliminary injunctions, would have virtually unlimited authority over the parties in an injunctive proceeding.” Sampson v. Murray, 415 U.S. 61, 86-87, 94 S.Ct. 937, 951, 39 L.Ed.2d 166 (1974). When determining whether to consider an order a TRO or a preliminary injunction, however, courts typically look to such factors as the duration of the order, whether it was issued after notice and a hearing, and the showing made to obtain the order. See C. Wright, Law of Federal Courts 708 (4th ed. 1983). The lengthier the duration of the order, and the more stringent the procedural safeguards employed in the district court, the more likely a TRO will be considered a preliminary injunction. See e.g., Dilworth v. Riner, 343 F.2d 226, 229 (5th Cir.1965). An examination of those considerations in this case strongly suggests that the order entered and labeled a TRO should not be considered a permanent injunction for purposes of this appeal.
Militating in favor of the appealability of the TRO entered in this case, however, is “a slowly emerging doctrine that temporary restraining order rulings may be appealable as interlocutory injunction orders if the appellant can disprove the general presumption that there is no irreparable harm.” 16 C. Wright, A. Miller, E. Cooper and E. Gressman, Federal Practice and Procedure § 3922, at 37 (1977). Thus it has been suggested that “if the TRO goes beyond simply preserving the opportunity to grant affirmative relief and actually grants affirmative relief, an appeal may be taken.” Id. See Adams v. Vance, 570 F.2d 950, 953 (D.C.Cir.1978); Belknap v. Leary, 427 F.2d 496, 498 (2d Cir.1970); Stricklin v. Regents of University of Wisconsin, 420 F.2d 1257, 1259 (7th Cir.1970).
In the context of this case, the consequences of the district court’s order were such that an immediate appeal of the TRO may well have been appropriate. The mother had not yet filed a notice of appeal from the court’s declaratory judgment when the TRO was issued, but an appeal was still available and was taken with her appeal from the TRO. Thus the possibility remained that the district court would be found by this court to lack the legal authority to issue an injunction ordering delivery of Jerimy from his mother in Washington to his father in Florida. Alternatively, the court may have been found to lack subject matter jurisdiction over the case at all. In either event, the district court may have been unable to remedy the obviously severe harm to the mother’s interest occasioned by the physical transfer of Jerimy from Washington, where she retained custody of the child pursuant to a state court judgment apparently enforceable in state court there, to Florida, where the father could enforce a state court decree granting custody to him. In light of the uncertain state of the law concerning the district court’s ability to remedy the effects of its order if it turned out to be in error, an immediate appeal prior to the carrying out of its terms may have been necessary to protect the rights of the mother and therefore appropriate under the circumstances.
Any such appeal from the TRO, however, has since been rendered moot. The mother delivered Jerimy to the father, the TRO expired by its terms, and a permanent injunction was subsequently entered ordering compliance with the Florida decree, as modified consistently with the provisions of section 1738A. Thus any finding that the district court issued the TRO without the legal authority to do so, without subject matter jurisdiction over the case, or otherwise erroneously could have no practical or legal effect. We have held that once a permanent injunction is entered, any similar prior preliminary injunction merges into the permanent order, and appeal is proper only from the order of permanent injunction. Securities Exchange Commission v. First Financial Group of Texas, 645 F.2d 429 (5th Cir.1981). See also Payne v. Fite, 184 F.2d 977, 978 (5th Cir. 1950). To the extent that a TRO might have been appealable but has been replaced by a permanent injunction, that principle is applicable to determine the appealability of the TRO as well. Here no appeal was taken from the order of permanent injunction and, as we indicate below, that order is therefore not properly before us at this time. Further, in light of our resolution of the issues raised by the mother’s appeal from the declaratory judgment entered by the district court, we do not find compelling the mother’s argument that the TRO should be reviewed in spite of its mootness because some future irreparable harm might otherwise result. We thus dismiss the mother’s appeal from the TRO as moot.
We also cannot exercise our appellate jurisdiction over the permanent injunction entered by the district court in this case. We are aware of the general rule that litigants may not appeal injunctions to which they have agreed. See Haitian Refugee Center v. Civiletti, 614 F.2d 92, 93 (5th Cir.1980). Under the circumstances of this case, however, we choose not to rest our refusal to hear the mother’s claims concerning the propriety of the permanent injunction on this principle. Rather, we find her failure to file a timely notice of appeal from the permanent injunction to leave us without jurisdiction over that order on this appeal. The permanent injunction had not been entered when the mother filed her only notice of appeal in this case; the notice of appeal thus made no reference to the permanent injunction at all. Rule 3(c) of the Federal Rules of Appellate Procedure requires that a notice of appeal “designate the judgment, order or part thereof appealed from.” Ordinarily, failure to abide this requirement will preclude the appellate court from reviewing any judgment or order not so specified. Pitney Bowes v. Mestre, 701 F.2d 1365, 1375 (11th Cir.), cert. denied, 464 U.S. 893, 104 S.Ct. 239, 78 L.Ed.2d 230 (1983).
We have previously noted that “it is well settled that an appeal is not lost if a mistake is made in designating the judgment appealed from where it is clear that the overriding intent was effectively to appeal.” Kicklighter v. Nails by Jannee, Inc., 616 F.2d 734, 739 n. 1 (5th Cir.1980). This has resulted in the liberal allowance of appeals from orders not expressly designated in the notice of appeal, at least where the order that was not designated was entered prior to or contemporaneously with the order(s) properly designated in the notice of appeal. See e.g., Comfort Trane Air Conditioning v. Trane Co., 592 F.2d 1373, 1390 n. 15 (5th Cir.1979). In this case, however, we cannot find the mother to have intended her notice of appeal to constitute an appeal from the order of permanent injunction, as that order had not yet been entered when her notice of appeal was filed. Because the intent to appeal is not apparent, review of the permanent injunction on the merits at this time would likely result in prejudice to the father, who has not briefed any non-jurisdictional issues relating solely to the permanent injunction on this appeal. We therefore decline to review the propriety of the permanent injunction entered by the district court on this appeal. See C.A. May Marine Supply Co. v. Brunswick Corp., 649 F.2d 1049, 1056 (5th Cir.), cert. denied, 454 U.S. 1125, 102 S.Ct. 974, 71 L.Ed.2d 112 (1981).
Finally, we conclude that the mother’s timely appeal from the declaratory judgment entered by the district court is properly before us and that it is not rendered moot by her failure to appeal from the order entering a permanent injunction to replace the TRO. The appeal cannot be considered moot simply because further action will be required on remand before our decision can have any practical effect. It is clear that no impediment to obtaining further relief consistent with our decision will exist on remand, regardless of our decision. See Fed.R.Civ.P. 60(b)(5). Thus our decision is no more advisory than the decision of any other declaratory judgment action, and we reject the father’s argument to the contrary.
II. THE MOTHER’S APPEAL
The mother raises a number of claims, several of which are unrelated to the PKPA, in her challenge to the district court’s order on summary judgment granting declaratory judgment in favor of the father on Count IV of his amended complaint. We will consider the issues the mother raises that involve the PKPA, as codified in section 1738A, in parts II.A arid II.B below. In part II.C we will address the claims she raises that do not concern the federal statute.
A. The Availability of Federal Relief
Raising an issue of first impression in this circuit, the mother argues strenuously on this appeal that the district court lacked subject matter jurisdiction over the father’s claims under section 1738A. Alternatively, the mother contends, the father’s claims concerning section 1738A fail to state a claim upon which relief can be granted. The Third Circuit and the Fifth Circuit have held that the federal district courts possess subject matter jurisdiction over complaints seeking to enforce compliance with the dictates of section 1738A. See Heartfield v. Heartfield, 749 F.2d 1138 (5th Cir.1985); Flood v. Braaten, 727 F.2d 303 (3d Cir. 1984). According to those courts, section 1738A vests in a parent a federal right, enforceable in federal district court, to have a custody determination made in one state in accordance with the terms of section 1738A enforced in other states as the statute provides. Although our analysis differs somewhat, we also hold that an action seeking an authoritative federal construction of section 1738A to resolve a conflict concerning the validity of conflicting state court custody orders may be maintained in federal district court.
The operative provisions of the PKPA, as codified, impose upon the appropriate state authorities the following obligations:
(a) The appropriate authorities of every State shall enforce according to its terms... any child custody determination made consistently with the provisions of this section by a court of another State.
(g) A court of a State shall not exercise jurisdiction in any proceeding for a custody determination commenced during the pendency of a proceeding in a court of another State where such court of that other State is exercising jurisdiction consistently with the provisions of this section to make a custody determination.
28 U.S.C. § 1738A (1982). The statute also provides detailed federal standards, carefully tailored to the national problem to which the statute responds, for use in determining state court jurisdiction to enter or modify a custody decree, and thus for determining which of two conflicting state court custody orders is the valid one under federal law. See 28 U.S.C. § 1738A(b)-(f) (1982).
There can be little doubt that Congress contemplated that one parent would be permitted to enforce compliance with the dictates of the PKPA, as codified in section 1738A, in a private action against the other parent. Parties have traditionally determined the validity and enforceability of child custody orders in just such a manner, and we cannot conclude that Congress intended or expected that the validity and enforceability of a custody order under section 1738A would be determined any other way. Rather, the questions raised by the mother on this appeal are (1) the availability of a federal forum — that is, federal jurisdiction — and (2) the availability of the federal remedy obtained in this case — that is, a judgment declaring the rights of the parties under federal law.
1. Subject matter jurisdiction over the complaint.
The father sued for and was granted a declaratory judgment in this case. Under the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq. (1982), a party may obtain from a federal district court a judicial declaration of his or her rights under federal law. It has long been recognized, however, that “the operation of the Declaratory Judgment Act is procedural only.” Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 463, 81 L.Ed. 617 (1937). The Supreme Court explained the jurisdictional implications of that observation in its opinion in the leading case of Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 70 S.Ct. 876, 94 L.Ed. 1194 (1950), as follows:
[By enacting the Declaratory Judgment Act,] Congress enlarged the range of remedies available in the federal courts but did not extend their jurisdiction. When concerned as we are with the power of the inferior federal courts to entertain litigation within the restricted area to which the Constitution and Acts of Congress confine them, “jurisdiction” means the kinds of issues which give right of entrance to federal courts. Jurisdiction in this sense was not altered by the Declaratory Judgment Act____ The Declaratory Judgment Act allow[s] relief to be given.by way of recognizing the plaintiff’s right even though no immediate enforcement of it [is] asked. But the requirements of jurisdiction — the limited subject matters which alone Congress has authorized the District Courts to adjudicate — were not impliedly repealed or modified.”
Id. at 671-72, 70 S.Ct. at 878-79. Thus, “if the federal issue [presented in a declaratory judgment action] would inhere in the claim on the face of the complaint that would have been presented in a traditional damage or coercive action, then federal jurisdiction exists over the declaratory judgment action.” 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2767, at 745 (2d ed. 1983); see Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 94 S.Ct. 772, 39 L.Ed.2d 73 (1974). If, however, the federal issue would necessarily arise only as an ingredient of the defense of such an action, federal jurisdiction will be denied. See Shelly Oil, 339 U.S. at 672, 70 S.Ct. at 879. See also Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 2851-53, 77 L.Ed.2d 420 (1983). As a result, the district court cannot be held to possess subject matter jurisdiction over the father’s claim for a declaratory judgment determining his rights under section 1738A unless the court would also have jurisdiction to entertain his claim for injunctive relief.
In Flood v. Braaten, 727 F.2d 303, the Third Circuit held that a federal district court could exercise its federal subject matter jurisdiction to entertain such suits. In Flood, a New Jersey state court had awarded custody to the mother, while a North Dakota court had awarded custody to the father. Each court refused to enforce the custody order entered by the other. The mother brought an action in federal district court in New Jersey to enforce the New Jersey custody decree. The circuit court found the district court to have erred when it summarily dismissed the mother’s complaint for failure to state a basis for federal jurisdiction.
The Flood, court first discussed the “domestic relations exception” to diversity jurisdiction, see Barber v. Barber, 62 U.S. (21 How.) 582, 584, 16 L.Ed. 226 (1859), finding it inapplicable to a case in which a well-pleaded complaint has otherwise made out a substantial ease for federal question jurisdiction. Flood, 727 F.2d at 307. See generally 13B C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3609 (2d ed. 1984). Further, the court found the principles underlying the reluctance of federal courts to enforce custody decrees under the full faith and credit statute to be inapposite, since adjudicating a dispute under section 1738A would not require the court to become enmeshed in the underlying custody suit in the manner in which a straightforward enforcement action would. The court would not have to inquire into whether, as a matter of state law, some modification of the decree was appropriate, but would instead only have to inquire into the jurisdictional facts that would determine which of two states rendering conflicting custody decrees had asserted jurisdiction over the controversy in conformity with federal law. Id. at 309-310. Finally, the circuit court examined the legislative history of section 1738A in an effort to determine whether Congress intended federal courts to possess jurisdiction to enforce compliance with its provisions. See id. at 310-12. After extended analysis the court concluded that Congress must have intended the jurisdiction of the federal district courts to extend to such actions, as any other result would “render § 1738A virtually nugatory by so restricting the availability of a federal forum that state compliance with the legislation would become optional.” Id. at 312.
In Heartfield v. Heartfield, 749 F.2d 1138, the Fifth Circuit also found that “where courts of two different states assert jurisdiction over a custody determination, federal district court intervention is proper and in fact necessary to enforce compliance with § 1738A.” Id. at 1141. In that case the father filed suit in federal district court in Texas seeking an injunction to restrain the mother from obtaining a modification of the custody and visitation provisions of a Texas divorce decree in Louisiana. The father brought his action under section 1738A, alleging federal question jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332 (1982). The father was successful in obtaining the injunction, and the mother appealed. Agreeing with the Third Circuit’s reasoning in Flood, the Fifth Circuit panel found federal question jurisdiction to exist over an action under section 1738A. Id. at 1140-41. The Heartfield court further agreed with the district court that, under section 1738A, Texas could exercise continuing exclusive jurisdiction to issue visitation and child support orders in the underlying custody and visitation dispute. Id. at 1141-43. The court held, however, that the injunction issued by the district court should not have been entered, as no confrontation between the Texas and Louisiana courts had yet occurred. Injunctive relief under section 1738A was therefore considered by the court to have been premature. Id. at 1143.
In this case, the father has alleged the federal question jurisdiction conferred in 28 U.S.C. § 1331 as a jurisdictional basis for the federal court’s exercise of its authority. Because we are not being asked to imply a grant of federal jurisdiction in section 1738A, we need not conduct an exhaustive inquiry into the intent of Congress in passing the PKPA. Where federal question jurisdiction does not already exist pursuant to 28 U.S.C. § 1331, and federal jurisdiction has not been expressly conferred over the cause of action by some other statute, a careful analysis of the intent of Congress when it enacted the substantive federal legislation at issue may be necessary to determine whether, by enacting that legislation, Congress can be said to have intended to confer federal jurisdiction not previously conferred by statute. But if the plaintiff’s cause of action meets the requirements that, if met, allow one to invoke the federal question jurisdiction of 28 U.S.C. § 1331, such an inquiry into legislative intent is unnecessary.
Article III, Section 2, of the Constitution extends the judicial power of the federal government to all cases “arising under... the Laws of the United States.” Such cases are commonly referred to as “federal question” cases. In 1875 Congress conferred upon the federal courts original jurisdiction over federal question cases in language virtually identical to that found in the Constitutional provisions. See 28 U.S.C. § 1331 (1982). Nonetheless, the Supreme Court has recently reaffirmed the long-recognized fact that in the federal question statute Congress did not confer all of the federal judicial power conferred by the Constitution, and that “Article III ‘arising under’ jurisdiction is broader than federal question jurisdiction under section 1331.” Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 103 S.Ct. 1962, 1972, 76 L.Ed.2d 81 (1983).
Thus the broad theory of earlier cases construing the constitutional provisions— that a federal question exists if federal law forms an ingredient of the cause of action, whether as part of the plaintiff’s ease or as part of the defense, see Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L.Ed. 204 (1824) — has been rejected in construing the federal question statute. As commentators have noted, however, it is difficult to describe with precision what has been substituted in its stead. See 13B C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3562, at 24 (2d ed. 1984). Many courts have adopted Justice Holmes’ formulation — that “a suit arises under the law that creates the action.” American Well Works Co. v. Layne & Bowler Co.,
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HUG, Circuit Judge:
I.
The United States Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, Local 32, AFL-CIO (“the Union”), petitions for review of a National Labor Relations Board (“the Board”) decision that the Union violated the National Labor Relations Act’s (“the Act”) secondary boycott provisions. 29 U.S.C. § 158(b)(4)(ii)(B), Section 8 of NLRA (1988). The Board cross-appeals for enforcement of its order. We grant the Union’s petition for review, deny enforcement of the Board’s order, and remand for further proceedings.
II.
In 1987, Ramada, Inc., the charging party in this petition, was building a hotel in the State of Washington. After soliciting bids, Ramada chose Baugh Construction Company as the general contractor for the job. Baugh Construction, in turn, subcontracted part of the job to Chapman Mechanical, Inc. Chapman Mechanical was a nonunion plumbing and mechanical firm.
In response to the selection of Chapman Mechanical as a subcontractor, Floyd Sexton, local business manager for the Union, sent a letter to the president and chief operating officer of Ramada, with copies to the officials of Baugh Construction. That letter is the subject of this action. It read as follows:
It is my understanding that Baugh Construction Company, your general contractor for the Sea-Tac Airport Ramada Inn scheduled to begin soon in Seattle, Washington, will be subcontracting the plumbing work to Chapman Plumbing Company from Tacoma, Washington.
This is to advise you that Chapman Plumbing is a nonunion contractor. The wages paid by Chapman to his nonunion workers constitute a serious threat to the standard of living enjoyed by our members.
I will establish an aggressive and continuing picketing program for the job site and will do everything necessary to organize the Seattle building trades’ support for our picketing program. We will also ask all of our affiliate groups to join with us in not patronizing the Ramada Inns.
We will establish a handbilling program to notify prospective customers of problems with the Ramada Inn.
Chapman Plumbing has just started doing business in King County. This will be their first major job that we know about.
We would prefer to work with you and with Baugh Construction but so far all of our requests to meet with Baugh have been turned down. We will not sit by and let Chapman Plumbing steal work in King County with substandard rates and poor workmanship. It looks like the beginning of a full scale war with the Ramada Inn as the battlefield.
Upon receipt of this letter, Baugh Construction filed a charge with the Board alleging violation of the Act’s secondary boycott provisions. Based upon this letter alone, the Administrative Law Judge (“AU”) found that the Union violated the Act’s secondary boycott provisions by threatening to: (1) picket the jobsite; (2) ask affiliate groups not to patronize Ramada Inns; and (3) establish a handbilling program, to inform prospective customers of problems with Ramada.
The Board affirmed the AU and found “that the [Union’s] letter constituted an unlawful threat because it contained an unqualified threat to engage in secondary picketing.” However, the Board declined to pass on the AU’s findings concerning the Union’s threats to ask affiliate groups not to patronize Ramada and to establish a handbilling program, informing prospective customers of problems with Ramada.
As discussed in Section V, we do not reach the issues on which the Board declined to pass.
III.
We will uphold a Board decision if its findings are supported by substantial evidence and if the Board has properly applied the law. NLRB v. Howard Elec. Co., 873 F.2d 1287, 1290 (9th Cir.1989).
IV.
A union may lawfully picket a jobsite occupied by both primary and secondary employers. See Local 761, Int’l Union of Elec. Workers v. NLRB, 366 U.S. 667, 672-79, 81 S.Ct. 1285, 1288-93, 6 L.Ed.2d 592 (1961); Sailors’ Union of the Pacific, 92 NLRB 547 (1950) (Moore Dry Dock).
The AU viewed the letter as “an unqualified threat of prospective unlawful picketing.” The Board accepted and adopted the ALJ’s decision in this regard, with one qualification. The Board attempted to distinguish the present case from our decision in NLRB v. Ironworkers Local 433, 850 F.2d 551 (9th Cir.1988), decided one month after the AU’s decision.
In Ironworkers, the Board found a secondary boycott violation based upon a union’s unqualified threat to the secondary employer to picket the “job.” The Board concluded that the union violated the Act’s secondary boycott provisions because it threatened to picket a common situs without giving assurances that its picketing would be conducted lawfully. Id. at 556. We denied enforcement of the Board’s order and held that the Board could not presume that a union’s threat to picket the job was a threat to picket contrary to the law, when picketing at the job could be done in a lawful manner. We noted that such a presumption is without foundation in the Act, relevant case law or any general legal principles, and concluded that the Board’s holding was “irrational and beyond the Board’s authority.” Id. at 557.
The Board’s attempt to distinguish Ironworkers from the present case is unavailing. The Board maintains that in evaluating whether a union’s statements constitute an unlawful threat of secondary picketing under Ironworkers, “[t]he primary question is not whether particular words were used, or a disclaimer issued, but how, given the context of the [communication], the union’s statements should reasonably be understood.” Id. Under this contextual approach, the Board contends that the Union’s threat to picket the “jobsite” is reasonably understood as a threat to picket the entire Ramada jobsite unlawfully. Specifically, the Board references the absence of any testimony from the secondary employer (Ramada) that it understood that the threat to picket was directed to the primary employer (Chapman Mechanical). Such testimony was before the Board in Ironwork-ers. Id. We are not persuaded.
The Board in this case did not receive any evidence of what Ramada understood. The only evidence presented in support of a violation was the letter Sexton wrote to Ramada. The letter contained a threat to picket the “jobsite.” The Union could have lawfully picketed Chapman Mechanical, the primary employer, at the Ramada jobsite, as long as the picketing was primary in nature. See id. at 554. There is nothing in the letter that justifies a presumption that the Union would not honor a reserve gate system, which is normally established at a common situs. See, e.g., Huber and Antilla Constr. v. Carpenters Local 470, 659 F.2d 1013, 1017-18 (9th Cir.1981), cert. denied, 456 U.S. 977, 102 S.Ct. 2244, 72 L.Ed.2d 852 (1982). Although the picketing could turn out to be conducted in an unlawful manner, a presumption that this would take place is not justified from a threat to picket the jobsite.
In determining whether the Union demonstrated an impermissible secondary intent, the Board is required to view the totality of the circumstances. Constar, Inc. v. Plumbers Local 447, 748 F.2d 520, 522 (9th Cir.1984). Under Ironworkers, the Board cannot infer that the Union’s unqualified threat to picket the common situs would be unlawful. The Union’s reference to Ramada as the “battlefield” does not imply that the Union’s picketing of the Ramada jobsite would be unlawful. As the common situs in the Union’s dispute with Chapman Mechanical, the Ramada jobsite would, indeed, have been the prime location upon which the Union based its fight with Chapman Mechanical, the primary employer. In short, there is nothing in the letter which would permit a conclusion that the Union’s picketing would be unlawful.
Under Ironworkers, an unqualified threat to picket a jobsite alone does not constitute a violation of the Act’s secondary boycott provisions. Ironworkers, 850 F.2d at 557. Therefore, we decline to enforce the Board’s order.
v.
In addition to finding that the Union violated the Act’s secondary boycott provisions because the letter constituted an unqualified threat to picket unlawfully, the ALJ gave two additional reasons for finding the Union’s letter a violation of the Act’s secondary boycott provisions. First, the ALJ found that the Union’s threat to organize a union boycott of Ramada constituted a violation of the Act. Second, the AU found that the Union’s threat to establish a handbilling program also constituted a violation of the Act.
In its decision, the Board expressly declined to “pass on the judge’s findings concerning the threats to handbill and organize a boycott.” The Union nevertheless asks this court to review these additional reasons. We decline to do so.
It is the Board’s application of the law that we review, not the ALJ’s. Lippincott Indus., Inc. v. NLRB, 661 F.2d 112, 115 (9th Cir.1981); 29 U.S.C. § 160(e) and (f) (1988). While the ALJ’s decision is part of the record, our function is to determine whether the Board’s decision, not the ALJ’s, is supported by substantial evidence or based on an erroneous legal foundation. NLRB v. Babcock & Wilcox Co., 351 U.S. 105, 112, 76 S.Ct. 679, 684, 100 L.Ed. 975 (1956); Universal Camera Corp. v. NLRB, 340 U.S. 474, 492-96, 71 S.Ct. 456, 466-69, 95 L.Ed. 456 (1951). Accordingly, because the Board did not decide whether the Union’s threats to boycott and handbill violated the Act, we may not review these issues here. See South Prairie Constr. Co. v. Local No. 627, Int’l Union of Operating Eng’rs, 425 U.S. 800, 806, 96 S.Ct. 1842, 1845, 48 L.Ed.2d 382 (1976) (appellate court erred in deciding “unit” question not passed on by the Board).
We remand this case for a Board decision on the remainder of the ALJ’s findings.
VI.
The Union asks for attorneys’ fees under the Equal Access to Justice Act, 5 U.S.C. § 504, 28 U.S.C. § 2412(d)(1)(A) (1988). This statute allows an award of attorneys’ fees to a prevailing party in an action against a Government agency, when the Government’s position was not substantially justified. Immigration and Naturalization Serv. v. Jean, — U.S. -, 110 S.Ct. 2316, 2317, 110 L.Ed.2d 134 (1990). The request is premature since the prevailing party in this controversy has yet to be established.
REVERSED and REMANDED.
. Section 8(b)(4)(ii)(B) of the NLRA, which pertains to the Act’s secondary boycott restrictions, provides in relevant 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 engaged in commerce or in an industry affecting commerce, where in either case an object thereof is—
(B) forcing or requiring any person to cease ... doing business with any other person ... Provided, [tjhat nothing contained in this clause (B) shall be construed to make unlawful, where not otherwise lawful, any primary strike or primary picketing;
. Accordingly, we refrain from deciding the Union's First Amendment argument. See Figueroa v. Sunn, 884 F.2d 1290, 1292 (9th Cir.1989) (court refrains from deciding constitutional issue when there is a nonconstitutional basis for decision).
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PHILLIPS, Chief Judge.
In May 1972, William Van Meter Alford underwent surgery for the removal of a small tumor in the lacrimal gland near his left eye. The operation was performed skillfully by a competent surgeon, and there is no allegation of medical negligence. Two days later the bandages were removed, and it was discovered that Mr. Alford had lost sight in his left eye. The surgeon was surprised at this unfortunate and unusual development, and none of the physicians involved in the case was able to explain definitely the cause of Mr. Alford’s partial blindness. The medical testimony indicated that the loss of vision probably resulted from a temporary occlusion or spasm of the central retinal artery, but the cause of the occlusion is unknown. The physicians saw no causal relationship between the presence of the tumor and the occlusion, but they guessed that Mr. Alford would not have lost vision in his left eye if the operation had not been performed.
At the time of the surgery, Mr. Alford was insured under an accidental death and dismemberment insurance policy issued by Continental Casualty Company. The policy provided that the insured would receive $37,500 for the loss of sight in one eye resulting from “bodily injury caused by an accident.” Mr. Alford filed a timely claim under the policy, stating that his loss was the result of an accidental injury during surgery. After processing and investigating the claim, Continental concluded that Mr. Alford’s loss of vision was not the result of an accident within the meaning of the policy. Accordingly, Continental refused payment of the claim.
Subsequent negotiations were fruitless, and Mr. Alford eventually filed suit against Continental in Fayette Circuit Court, Fayette County, Kentucky, seeking recovery of the $37,500 allegedly due under the insurance contract. In addition, the complaint sought compensatory and punitive damages on the ground that Continental’s refusal to pay Mr. Alford’s claim was oppressive and in bad faith and therefore tortious. Continental removed the action to the District Court on the basis of diversity jurisdiction, and the case came on for trial before the late District Judge Mac Swinford. At the close of the evidence, both parties moved for a directed verdict. Judge Swinford dismissed the tort claim and submitted the contract claim to the jury, which found in favor of the plaintiff. Accordingly, the court entered judgment against Continental in the amount of' $37,500, plus interest and posts. Both parties have appealed to this court.
In Continental’s appeal, it argues that as a matter of Kentucky law plaintiff’s evidence was insufficient to create a jury question on the issue of whether Mr. Alford’s loss of sight was accidental within the meaning of the insurance policy. The court’s denial of Continental’s motion for a directed verdict and its instructions to the jury on the meaning of the word “accident” were based largely on Donohue v. Washington National Insurance Co., 259 Ky. 611, 82 S.W.2d 780 (1935). In this case, the insured was stricken with a sharp pain in his hip while lifting a large can of oil. The pain caused him to fall on the afflicted hip, and the injury resulted in a substantial period of disability. The attending physician apparently was unable to identify with certainty the cause of the initial pain. The court held that the trial judge should have submitted to the jury the question of whether the insured’s injury was accidental. In the course of its opinion, the court discussed generally the law applicable to accident insurance policies:
An accident in its commonly accepted meaning and as used in insurance contracts is “an event that takes place without one’s foresight or expectation. An undesigned, sudden and unexpected event, * * * happening by chance or unexpectedly, taking place not according to the usual course of things.” “An event which proceeds from an unknown cause, or is an unusual effect of a known cause, and therefore not expected; chance, casualty or contingency.” Pack v. Prudential Casualty Co., 170 Ky. 47, 185 S.W. 496, 498, L.R.A.1916E, 952; Huffman v. Commonwealth, 193 Ky. 79, 234 S.W. 962, 964.
The words “accident,” “accidental” and “accidental means,” as used in insurance policies, have never acquired a technical meaning in law, and must be interpreted according to the usage of the average man and as they would be read and understood by him in the light of the prevailing rule that uncertainties and ambiguities must be resolved in favor of the insured. Id. at 613, 619, 82 S.W.2d at 781, 784.
If this is an accurate statement of Kentucky law, Judge Swinford was surely correct in overruling Continental’s motion for a directed verdict and in submitting the contract claim to the jury. There was ample evidence to the effect that Mr. Alford’s loss of vision was an entirely unforeseen and unexpected result arising from an unknown ultimate cause. Under the Donohue definition, the evidence plainly warranted a finding by the jury that Mr. Alford’s loss was accidental.
Continental, however, argues that Donohue is factually distinguishable and that this case should be controlled by Salinger v. Fidelity & Casualty Co., 178 Ky. 369, 198 S.W. 1163 (1917), which stated that “an injury is not produced by accidental means within the terms of an accident insurance policy where it is the direct though unexpected result of an ordinary act in which the insured intentionally engages.” Id. at 371, 198 S.W. at 1164. Continental believes that under Salinger plaintiff suffered no accident, since his blindness resulted from the surgery, which he underwent intentionally.
Although the issue is not free from doubt, we hold that the District Court properly applied the Donohue definition in the case at bar. It appears that the effect of the language from Salinger quoted above was called into question by the court’s later opinion in Donohue, in which the court concluded that:
[Salinger is not] rested on the theory that the insured was voluntarily and intentionally doing the thing claimed to have caused the injury, although that principle was referred to in [the opinion]. The opinion in [Salinger] was based on the theory that the injury resulted from disease 259 Ky. at 615, 82 S.W.2d at 782.
In the case at bar, of course, the evidence indicated that Mr. Alford’s loss of vision did not result from the disease in his lacrimal gland.
Furthermore, a number of subsequent cases have relied upon Donohue in defining the word “accident.” The Travelers v. Humming Bird Coal Co., 371 S.W.2d 35, 38 (Ky.1963); Travelers Ins. Co. v. Witt, 260 S.W.2d 641, 642-43 (Ky.1953); Pacific Mutual Life Ins. Co. v. Fagan, 292 Ky. 533, 536-37, 166 S.W.2d 1007, 1009 (1942). In these cases, the court essentially looked to the factors identified by Donohue in determining whether the injury involved was accidental. We eonclude that Donohue states general principles of Kentucky insurance law properly applicable to this case. Accordingly, the District Court did not err in denying Continental’s motion for a directed verdict on the contract claim.
In his appeal, Mr. Alford contends that the District Court should have submitted to the jury his tort claim for compensatory and punitive damages based on Continental’s refusal to make payment under the policy. Initially, we note our uncertainty that Kentucky recognizes a cause of action in tort for refusal to pay an insurance claim. See McNutt v. State Farm Mutual Automobile Ins. Co., 369 F.Supp. 381, 385-86 (W.D.Ky.1973), aff’d 494 F.2d 1282 (6th Cir. 1974); United States Fidelity & Guar. Co. v. Fyffe, 471 S.W.2d 23 (Ky. 1971); General Accident Fire & Life Assurance Corp. v. Judd, 400 S.W.2d 685 (Ky.1966).
As we view the matter, however, this question of Kentucky law need not be resolved. Mr. Alford does not argue that he is entitled to recover in tort in the absence of bad faith or unreasonable conduct on the part of the insurer, and in this respect the proof was entirely inadequate. The record in this case demonstrates that Continental obtained several medical reports from the doctors who treated Mr. Alford. This information was examined by Continental’s claims adjusters and reviewed by the company’s medical staff. Mr. Alford’s claim was considered thoroughly by Continental employees in consultation with each other. In addition, it was by no means obvious that Mr. Alford’s loss of sight was accidental within the meaning of the insurance policy. There is simply no evidence that Continental’s refusal to make payment was motivated by other than a good-faith belief that Mr. Alford’s loss was not covered under the policy. Since there was no evidence of bad faith or unreasonable conduct, the District Court properly directed a verdict in favor of Continental on the tort issue,
The judgment of the District Court is affirmed. No costs are taxed; each party will bear its own costs on appeal,
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
Appellant has been convicted under an indictment which charged that he sold a certain narcotic drug “not in the original stamped package and not from the original stamped package.” Appellant contends that this does not sufficiently charge the statutory offense of selling a narcotic drug “except in the original stamped package or from the original stamped package.” 26 U.S.CsA. Int.Rev.Code, § 2553(a). But the indictment plainly excludes both of the statutory exceptions. The particular language in which it does .so is immaterial.
Appellant contends that evidence which was seized during a search should have been excluded, because of an asserted conflict between the affidavit on which the search warrant was based and the affiant!s subsequent testimony at the trial. We need not consider the effect of such a conflict, for none exists. The affidavit states, as though on personal knowledge, that appellant “did unlawfully sell” narcotic drugs “on or about the 8th day of August 1946”; and the only testimony at appellant’s trial that tended in any degree to show that the' affidavit was not in fact made on personal knowledge was affiant’s testimony that he did not “see” appellant “on the 8th of August, 1946.” [Italics supplied.]
Since the affidavit was not based on mere information and belief the Schencks case, 55 App.D.C. 84, 2 F.2d 185, has no bearing on this case.
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MARTIN, Circuit Judge.
This case was commenced in October 1974 by Frank L. Hawkins against Holiday Inns, Inc. for alleged violations of Section 1 of the Sherman Act (15 U.S.C. § 1) and Section 3 of the Clayton Act (15 U.S.C. § 14). Prior to trial, Hawkins dismissed his claims under Section 3 of the Clayton Act.
Hawkins has been a franchisee of Holiday Inns in the Mobile, Alabama area since 1961, and for an even longer period of time elsewhere. As of 1973, Hawkins owned three motels in the Mobile area, all three then being operated as Holiday Inns motels pursuant to franchises granted by Holiday Inns.
In the franchise agreements between Holiday Inns and Hawkins, Hawkins agreed not to own, operate, be connected with or associated with any hotel or motel other than Holiday Inns hotels or motels. This is the so-called “non-Holiday Inn clause.”
The non-Holiday Inn clause reflected Holiday Inns’ unilaterally adopted policy of not granting franchises to competitors. It is undisputed that Holiday Inns never prevented Hawkins from owning, operating, being connected with or associated with any other hotel or motel. In fact, on two occasions Hawkins owned motels other than Holiday Inns motels, without objection from Holiday Inns.
In 1972 and 1973, Hawkins, through a real estate broker, Hardin B. Arledge, solicited negotiations with Radice Realty and Construction Corp. looking toward the sale of his Mobile motels and the franchises granted to him by Holiday Inns. Although Hawkins owned the motels, the franchise agreements between Holiday Inns and Hawkins could not be unilaterally assigned by Hawkins to a third party. At the time of the negotiations with Hawkins, Radice Realty owned motels other than Holiday Inns motels.
While Hawkins knew of Holiday Inns’ policy of not granting a franchise to a competitor, he wrote to Holiday Inns and generally inquired if Holiday Inns would waive its non-Holiday Inn policy for a potential purchaser of his motels and franchises. Hawkins did not disclose Radice Realty’s identity or submit any information relating to it, other than to state that the potential purchaser owned competing motels. Hawkins did not seek a waiver of the non-Holiday Inn policy on his own behalf because he was not seeking to own or operate a competing motel.
Holiday Inns responded by restating its policy of not issuing franchises to competitors and its intention to maintain this policy to the extent permitted by law. Hawkins did not communicate further on this subject with Holiday Inns; Radice Realty never communicated with Holiday Inns.
Hawkins sued. Simply put, the gravamen of Hawkins’ complaint was that Holiday Inns unreasonably restrained trade by enforcing the clause in his franchise agreements which prevented Hawkins from buying an interest in a competing motel by preventing him from selling his trademark and service mark agreements with Holiday Inns (i. e., his franchises) to a competitor. Hawkins admits he was free to sell his motels without the Holiday Inns license agreements.
Hawkins has never asserted any claim for or on behalf of Radice Realty, nor has Rad-ice Realty asserted any claim on its own behalf. Rather, Hawkins asserted that Holiday Inns’ conduct constituted an unreasonable restraint which injured him in his trade or business and sought damages of $2-million before trebling.
The case was tried in Memphis. At the close of Hawkins’ case, Holiday Inns moved for a directed verdict, pursuant to Rule 50(b), Federal Rules of Civil Procedure. The trial court took the motion under advisement.
At the close of all the evidence, both parties moved for a directed verdict. Hawkins’ motion was summarily denied; the trial judge continued to reserve decision on Holiday Inns’ motion. The jury returned responses to jury interrogatories finding in favor of Hawkins in the amount of $674,000 single damages, subject to trebling.
The trial court never entered judgment based upon the responses to jury interrogatories. On January 25, 1978, an opinion granting Holiday Inns’ motion for a directed verdict was entered which stipulated that if the directed verdict were set aside by this Court, the verdict would be set at a maximum of $280,000 damages, before trebling. On February 7, 1978, the Clerk of Court filed a judgment in accordance with the memorandum opinion.
Hawkins appealed the judgment entered on the directed verdict in favor of Holiday Inns. Holiday Inns cross-appealed from the portion of the judgment which allows, in the event judgment in its favor is set aside, the verdict to be set at $280,000, subject to trebling.
The trial court applied the correct standard in directing a verdict in favor of Holiday Inns as a matter of law, and the evidence was such that there could be but one reasonable conclusion as to the correct verdict. Hawkins never received a bona fide offer to purchase his Holiday Inns motels from Radice Realty.
Holiday Inns never enforced the non-Holiday Inn clause in its franchise agreements with Hawkins against Hawkins. There was no evidence from which it could reasonably be concluded that Holiday Inns refused to deal with anyone. Holiday Inns’ contracts with Hawkins' were not in restraint of trade. The rule of law sought to be imposed by Hawkins lacks any commercial value.
Considering all the evidence most favorably to Hawkins, at most he has proven that Holiday Inns unilaterally refused to deal with an unidentified entity, Radice Realty, conduct which was and is lawful under United States v. Colgate & Company, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919).
As a matter of law, there was no evidence from which anyone could reasonably conclude that: (a) Holiday Inns caused Hawkins any injury in fact; (b) the interest Hawkins sought to protect was in the zone of interests protected under Section 1 of the Sherman Act; or (c) any injury to Hawkins was a direct result of Holiday Inns’ conduct. Hawkins has suffered no legally cognizable injury, for he still owns and operates the three inns as Holiday Inns motels and is receiving all of the benefits of his contractual relationship with Holiday Inns.
In Byars v. Bluff City News Co., 609 F.2d 843 (6th Cir. 1979), this Court outlined the law on refusals to deal for the benefit of the lower court to which it was remanding the case. At the outset, the Court stated that, as a general rule, “there exists no duty to deal, so long as the determination is made unilaterally.” 609 F.2d at 854. The Court then noted:
Franchisees and distributors which have been unilaterally terminated have discovered to their chagrin that ordinarily the law offers them no remedy absent proof that a conspiracy against them took place. (Citations omitted).
Even the use of unfair business practices as part of the termination may not invoke sanction under the antitrust laws. (Citations omitted)
609 F.2d at 854-855.
This Court concluded by stating that if the defendant in Byars were found not to possess monopoly power, it could have terminated, with impunity, its relationship with plaintiff.
It is clear from the record that Holiday Inns has acted unilaterally in the instant case. Further, there was not even an allegation that Holiday Inns possessed monopoly power in the hotel-motel business. Holiday Inns did not refuse to deal with Radice Realty. Even if it had refused, however, the refusal was unilateral and, as recognized in Byars, would not invoke sanction under Section 1 of the Sherman Act.
The judgment of the District Court in favor of the defendant Holiday Inns, Inc. is affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM:
This appeal arises in a Federal court suit brought in 1978 by nearly 100 property owners or residents (plaintiffs) in the Abbs Valley Community of Tazewell County, Virginia, with private water supply systems approved by the State Water Authority, against the members of the Tazewell County Water and Sewage Authority and the Board of Supervisors of the County (defendants) to enjoin them from requiring plaintiffs to connect to a public water system at their own expense and also preventing them from using their existing water sources.
Plaintiffs declared on the Sherman and Clayton Antitrust Acts, charging that the mandatory connection eliminates competition from private .sources. They also complained that the State statute’s exaction that they join in the water service and abandon their own potable water wells and springs is a “taking” of their property, without just compensation, and so is invasive of their Constitutional protections.
Responding, defendants first pleaded to the jurisdiction on a catholicity of grounds including: (1) the Johnson Act barring the suit as one involving “an order affecting rates . . . (2) the doctrine of comity, alleging it dictated abstention by the Federal court here, because the State’s internal administrative regulation is in issue; and (3) lack of justiciability, maintaining that the action was premature and unripe since the water project had not been completed. The principal defense to the claim of taking without just compensation was that the ordinance is a reasonable exercise of police power and compensation is, therefore, unnecessary.
Upon a comprehensive consideration of each issue tendered by these contentions and upon apt invocation of unquestionable principle and precedent, the Court accepted jurisdiction but dismissed the action on the merits. We affirm on the District Judge’s opinion. Shrader v. Horton, 471 F.Supp. 1236 (W.D.Va.1979).
Affirmed.
. Va. Code § 15.1-1261 (Repl.Vol.1973) reads as follows:
Water and sewer connections. — Upon the acquisition or construction of any water system or sewer system under the provisions of this chapter, the owner, tenant, or occupant of each lot or parcel of land which abuts upon a street or other public way containing a water main or a water system, a sanitary sewer which is a part of or which is served or may be served by such sewer system and upon which lot or parcel a building shall have been constructed for residential, commercial or industrial use, shall, if so required by the rules and regulations or a resolution of the authority, with concurrence of such local government, municipality, or county that may be involved, connect such building with such water main or sanitary sewer, and shall cease to use any other source of water supply for domestic use or any other method for the disposal of sewage, sewage waste or other polluting matter. All such connections shall be made in accordance with rules and regulations which shall be adopted from time to time by the authority, which rules and regulations may provide for a charge for making any such connection in such reasonable amount as the authority may fix and establish.
. 15 U.S.C. §§ 51, 2 and 8.
. The District Court found that the State action immunity doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), controlled, rendering defendants immune from the antitrust claims because of the State policy to provide monopoly public water service under Va. Code § 15.1-1261. Shrader v. Horton, 471 F.Supp. 1236 (W.D.Va.1979). The antitrust question has not been raised on appeal.
. The Johnson Act, 28 U.S.C. § 1342 (1948), provides:
The district courts shall not enjoin, suspend or restrain the operation of, or compliance with, any order affecting rates chargeable by a public utility and made by a State administrative agency or a rate-making body of a State political subdivision, where:
(1) Jurisdiction is based solely on diversity of citizenship or repugnance of the order to the Federal Constitution; and,
(2) The order does not interfere with interstate commerce; and,
(3) The order has been made after reasonable notice and hearing; and,
(4) A plain, speedy and efficient remedy may be had in the courts of such State.
. Since the District Court decision was rendered, the Virginia statute, § 15.1-1261, supra, was amended April 3, 1980 to read as follows:
Water and sewer connections. — Upon the acquisition or construction of any water system or sewer system under the provisions of this chapter, the owner, tenant, or occupant of each lot or parcel of land which abuts upon a street or other public way containing a water main or a water system, a sanitary sewer which is a part of or which is served or may be served by such sewer system and upon which lot or parcel a building shall have been constructed for residential, commercial or industrial use, shall, if so required by the rules and regulations or a resolution of the authority, with concurrence of such local government, municipality, or county that may be involved, connect such building with such water main or sanitary sewer, and shall cease to use any other source of water supply for domestic use or any other method for the disposal of sewage, sewage waste or other polluting matter. All such connections shall be made in accordance with rules and regulations which shall be adopted from time to time by the authority, which rules and regulations may provide for a charge for making any such connection in such reasonable amount as the authority may fix and establish.
Provided, however, notwithstanding any other provision of this chapter, those persons having a domestic supply or source of potable water shall not be required to discontinue the use of same, but may be required to pay a connection fee, a front footage fee, and a monthly nonuser service charge that shall not be more than that proportion of the minimum monthly user charge as debt service compares to the total operating and debt service costs. Such fees and charges may not be less than any monthly nonuser fee or service charge being charged by any county, city or town in which the authority operates.
Inasmuch as the amendment does not affect the outcome of the present case, no discussion of it is requisite.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
ERVIN, Circuit Judge:
This is an appeal in an action alleging breach of contract. The district court found in favor of plaintiff 1616 Reminc Limited Partnership (hereinafter “Rem-inc”) on its breach of contract claim, and found in favor of defendant Commonwealth Land Title Insurance Company (hereinafter “Commonwealth”) on a counterclaim for certain attorney’s fees against Reminc. Thid case is the second legal action to arise from a series of agreements entered into between the parties in which Commonwealth, an insurer of Reminc’s property, agreed to pay Reminc $150,000 in exchange for Reminc’s obtaining release of mechanic’s liens against property insured by Commonwealth. Commonwealth placed $150,-000 in an escrow account which would be payable to Reminc if the latter performed its obligation by a certain date. In the first round of litigation, a bankruptcy court ruled that Reminc had not met the conditions of the parties’ escrow agreement by the time that agreement expired and consequently Commonwealth was entitled to the $150,000 it had placed in escrow. This court affirmed that decision. Having obtained release of the liens, Reminc then sought $150,000 plus interest allegedly due Reminc under the underlying agreement. Commonwealth argued that this action was barred by res judicata due to the litigation on the escrow agreement. The district court ruled in favor of Reminc on its breach of contract claim and ruled in favor of Commonwealth on a counterclaim for attorney's fees for the defense of certain liens. Both parties now appeal from the portion of the judgment adverse to them. We affirm in part and reverse in part.
I.
Reminc is the owner and mortgagor of the Xerox Building in Arlington, Virginia. Commonwealth is the insurer under title insurance policies running to the mortgage on the property. During the time the Xerox Building was under construction, numerous mechanic’s liens totalling $2,706,000 were filed against the property for which Commonwealth was potentially liable.
On August 15, 1975, Reminc initiated bankruptcy proceedings. Simultaneously, Reminc filed suit against Commonwealth in the Circuit Court of Arlington County alleging, in part, that Commonwealth had breached an agreement to pay Reminc to induce discharge of the mechanic’s liens. In the spring of 1976, Reminc and Commonwealth reached an agreement in settlement of the lawsuit. The agreement was set forth in three documents: an “Agreement,” an "Indemnity Agreement” and an “Escrow Agreement.” In the Agreement, Reminc promised to indemnify Commonwealth for any loss on the title insurance policy for the Xerox Building, to dismiss a Virginia state court suit against Commonwealth seeking recovery under the title insurance policy, and to have all liens against the Xerox Building extinguished or subordinated to the first and second mortgages held by Metropolitan Life Insurance Company and its investors. In return, Commonwealth promised to place $150,000 in escrow to be paid to Reminc on the condition that Reminc satisfy its obligations under the Agreement within four years. The settlement also provided that each of the three subsidiary agreements was subject to ratification and confirmation by the bankruptcy court.
The Indemnity Agreement contained the specific conditions of Reminc’s promise to indemnify Commonwealth for losses on the title policy. The Escrow Agreement provided that the $150,000 placed in escrow, plus interest, would be paid to Reminc once three conditions were met: (1) the extinguishment of all valid mechanic’s liens; (2) acknowledgement of nondefault by the Xerox Building’s mortgagees; and (3) a certification that no outstanding certificates of indebtedness or other priority claims exist superior to the mortgages. It further provided that
in the event that the Escrow Account or any portion thereof has not been disbursed for any reason whatsoever, within four (4) years from the date hereof then the Escrow Agent shall forthwith disburse to [Commonwealth] the balance of the Escrow Account, including principal, any and all income and interest accrued thereon.
(J.A.Ex. 99) (emphasis added).
On May 18, 1976, Reminc and Commonwealth signed all three agreements. The agreements were approved by the bankruptcy court on June 3, 1976. Reminc then implemented its plan of remedial construction and extinguishment of the liens which involved both settlements with the claimants and litigation. By May 18, 1980, all but two of the original thirty lien claims were extinguished. These two claims amounted to $10,033.07. Releases of these claims were recorded on June 9, 1980.
On May 20, 1980, Commonwealth filed a motion for entry of an order directing disbursement of the escrow funds to it. In the motion, Commonwealth alleged that four years had elapsed from the date on the Escrow Agreement (May 18, 1976), that Reminc had failed to fulfill all conditions precedent, and that Commonwealth was therefore entitled to the escrow funds. Following extinguishment of the final liens, Reminc sought disbursement of the escrow funds to it. The escrow agent refused to disburse the funds to either party without a court order.
On July 22, 1981, the bankruptcy court entered an order directing disbursement of the escrow funds to Commonwealth. The court found that the Escrow Agreement had been entered into by the parties on May 18, 1976, and that four years later, on May 18, 1980, two liens had not been extinguished. Consequently, under the terms of the Escrow Agreement, Commonwealth was entitled to the funds. Matter of 1616 Reminc Limited Partnership, 13 B.R. 948, 949-950 (Bankr.E.D.Va.1981), aff'd, 679 F.2d 887 (4th Cir.1982) (unpublished).
Reminc then filed this action in federal district court alleging breach of contract by Commonwealth on the underlying agreement concerning cancellation of the mechanic’s liens. Commonwealth argued that the suit was barred by res judicata due to the bankruptcy court order. Commonwealth also filed a counterclaim for attorney’s fees for expenses it incurred in defending certain mechanic’s liens. The case was tried on April 24, 1984 on stipulated facts, with brief oral testimony on the counterclaim. The district court concluded that
read as a whole, the three contracts reveal an intended agreement that Reminc would be paid $150,000.00 for its undertaking to defend and secure the release of the liens; that the Escrow Agreement was no more than a security vehicle for the holding of the $150,000.00 pending the completion of Reminc’s undertaking; that the bankruptcy court’s order releasing the escrow funds to Commonwealth was a determination of no more than that under the strict terms thereof the Escrow Agreement had expired; that neither the Escrow Agreement nor the bankruptcy court order resolves the questions whether the underlying agreement has been performed by Reminc or Reminc is entitled to payment for that performance; that Reminc has performed the intended agreement and is entitled to payment of $150,000.00 plus interest; and that under the terms of the Indemnity Agreement and the circumstances of this ease, Commonwealth is entitled to indemnity for the attorney’s fees and costs it has incurred.
(J.A. 169). The district court awarded Reminc interest on the $150,000 judgment from August 2, 1976, the date upon which it found Reminc’s obligation to perform under the contract had accrued. (J.A. 174).
Reminc and Commonwealth now appeal from the parts of the judgment adverse to them. Commonwealth argues that the suit is barred by res judicata and collateral estoppel, and that the district court erred in considering parol evidence, in finding an agreement between the parties independent of the Escrow Agreement, and in awarding interest on the judgment. Reminc argues that the district court did not award it the proper rate of interest on the judgment, and that the court erred in finding that Commonwealth was entitled to attorney’s fees.
II.
In applying the doctrine of res judicata, three questions must be considered: (1) whether the issue decided in the prior case was identical to the question presented in this action; (2) whether the prior action reached a final judgment on the merits; and (3) whether the party against whom the plea is asserted was a party or was in privity with a party to the prior action. Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 323-24, 91 S.Ct. 1434, 1439-40, 28 L.Ed.2d 788 (1971); Concordia v. Bendekovic, 693 F.2d 1073, 1076 (11th Cir. 1982); Nash County Board of Education v. Biltmore Co., 640 F.2d 484, 486 (4th Cir.1981).
The issue before the bankruptcy court in In re 1616 Reminc Limited Partnership concerned only one aspect of the series of agreements between the parties. That court heard argument on the narrow question of “the proper interpretation of paragraph 4(c) of the Escrow Agreement,” which concerned time limitations on compliance with that agreement. 13 B.R. at 949. Further, “[t]he sole issue determined by the court was the date by which Reminc was required to comply with the conditions of the Escrow Agreement.” Id. While the Escrow Agreement is a part of the broader contractual relationship between the parties, the question of compliance with the time limitations in that agreement is a discrete question which is not dispositive of other liabilities that may exist between the parties. Consequently, this case and the one before the bankruptcy court are not “identical” for the purpose of res judicata.
Although res judicata does not apply, collateral estoppel precludes relitigation of those matters actually considered and decided by the bankruptcy court. See Commissioner v. Sunnen, 333 U.S. 591, 598, 68 S.Ct. 715, 719, 92 L.Ed. 898 (1948). Therefore, Reminc may not relitigate the question of whether the conditions of the Escrow Agreement were fulfilled. This case does not attempt to relitigate that question, but rather to determine liability on the underlying agreement. Accordingly, this action is not barred by collateral estoppel.
III.
Commonwealth argues that the district court improperly considered parol evidence in interpreting the contract between the parties. Parol evidence is inadmissible to vary or explain the terms of an unambiguous contract. Globe Iron Construction Co. v. First National Bank of Boston, 205 Va. 841, 140 S.E.2d 629, 633 (1965). However, it may be used so that “[ajmbiguities may be cleared away and weasel words explained.” Title Insurance Co. v. Howell, 158 Va. 713, 164 S.E. 387, 389 (1932).
The contract in this case is ambiguous. The final paragraph states that if certain actions are undertaken by Reminc,
[Commonwealth] will deposit the sum of $150,000.00, into an escrow account established at and held by American Security & Trust Company, a District of Columbia corporation, pursuant to an escrow agreement, a copy of which is attached hereto, marked as Exhibit “C”, and expressly made a part hereof.
(J.A.Ex. 19). In a letter from Stephen M. Pratt, counsel for Commonwealth, which was expressly incorporated as part of the Agreement (J.A.Ex. 18), Pratt states that if certain conditions are met, Commonwealth “will advance up to the sum of $200,-000.00.” (J.A.Ex. 22). Some of the conditions outlined in the letter included conditions later contained in the Escrow Agreement such as the extinguishment of mechanic’s liens. Two ambiguities appear. First, the Agreement standing by itself is ambiguous because it could be read as contemplating the establishment of an escrow account as Commonwealth’s only obligation to Reminc. However, the nature of an escrow agreement is that it acts as security for an independent obligation. 1A Corbin on Contracts § 249 at 418 (1963). Consequently, the fact that payment is contemplated through an escrow agreement implies that the duty to pay is independent of the escrow agreement and that the escrow agreement simply secures that underlying obligation. From the terms of the Agreement, the substance of the underlying obligation in this case is unclear. The second ambiguity arises from the Pratt letter. The language that up to $200,000 will be advanced conflicts with an interpretation that only the Escrow Agreement, and not necessarily actual payment, was contemplated. Because of these ambiguities, the district court did not err in considering parol evidence in interpreting the Agreement.
IV.
Considering both the language of the contract and the previous correspondence between the parties, the district court found that Commonwealth’s duty to pay Reminc under the Agreement did not expire with the Escrow Agreement. Prior to signing the Agreement, Commonwealth sent Reminc two letters which clarify the intent of the parties. A July 28,1975 letter began, “This will confirm the agreement of Commonwealth Land Title Insurance Company ... to pay the sum of $200,000 in satisfaction of the claims of all mechanic’s lien and potential unfiled lien claimants. ...” (J.A.Ex. 5). The July 28 offer was subsequently withdrawn, and on July 30, 1975, Commonwealth wrote Reminc a letter which stated in part: “This letter will confirm Commonwealth[’s] ... present offer to pay the sum of $100,000.00 in satisfaction of all claims for mechanic’s liens and potential unfiled liens____” (J.A.Ex. 7). This correspondence clarifies the fact that Commonwealth anticipated that its obligation under the Agreement was a requirement to actually pay Reminc upon Reminc’s fulfillment of its obligations.
As the bankruptcy court ruled, Reminc forfeited its right to the proceeds of the escrow account when it failed to extinguish all mechanic’s liens by the date the Escrow Agreement expired. The remaining liens were released on June 9, 1980, within one month after the Escrow Agreement expired. At that point Reminc had fully performed its obligations under the underlying Agreement, and Commonwealth was obliged to pay Reminc.
Commonwealth argues that such a construction of the contract effectively nullifies the Escrow Agreement. However, as the district court noted, the function of the Escrow Agreement was “to secure the ready availability of payment, from Rem-inc’s point of view, and to insure that, from Commonwealth’s point of view, the funds were not put in the hands of a potentially bankrupt debtor prior to release of the liens. The arrangement also undoubtedly made the settlement more attractive for the necessary bankruptcy court approval.” (J.A. 172).
The district court’s findings (1) that the Agreement contemplated an obligation on Commonwealth’s part to pay Reminc independent of the Escrow Agreement, and (2) that Reminc fulfilled its part of the bargain when it extinguished the mechanic’s liens, are not clearly erroneous. See Anderson v. City of Bessemer City, — U.S. -, 105 S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985) (findings of fact based on documentary evidence must be upheld if not clearly erroneous). Therefore, the district court properly found that Commonwealth breached the contract when it failed to pay Reminc after Reminc performed its contractual obligations. The judgment against Commonwealth on the merits is accordingly affirmed.
V.
Both parties challenge the way the district court calculated interest on the judgment. The district court awarded simple interest from August 2, 1976, finding that “[w]hile Reminc did not fully perform until June 9, 1980, its obligation to perform, for which it was entitled to payment, accrued on August 2, 1976.” (J.A. 174).
A.
Reminc claims that the rate of interest awarded is improper. Reminc argues that it is entitled to all interest actually earned by the funds in the escrow account, as the parties contemplated that Reminc could direct the investment of the funds in that account. This argument is beside the point. Reminc forfeited its right to the funds in the escrow account by failing to perform on time. As a result, it cannot look to the agreement governing the escrow funds as determining its right to interest on non-escrow funds.
B.
Commonwealth argues that interest should be calculated from the date Reminc completed performance, not from the date the final agreements between the parties were signed. When a breach of contract consists of a'failure to pay a definite sum of money, interest is payable as part of damages from the time the amount was due. Burruss v. Baldwin, 199 Va. 883, 103 S.E.2d 249, 252 (1958); Restatement (Second) of Contracts § 354a (1981). Under the agreement between the parties, Commonwealth was obligated to pay Rem-inc $150,000 once Reminc had extinguished all the mechanic’s liens against the Xerox Building. Reminc completed performance of its obligations on June 9, 1980. Consequently, Commonwealth’s obligation to pay accrued on that date. Because it failed to pay Reminc on that date and thereby breached the agreement, Commonwealth is liable for interest from June 9, 1980. The district court erred in assessing interest from an earlier date.
VI.
Reminc claims that the district court erred in granting Commonwealth attorney’s fees incurred in Commonwealth’s defense of certain mechanic’s liens. The Indemnity Agreement between the parties provided that
Notwithstanding the performance of the parties of the first and third parts under the terms of this Indemnity Agreement, parties of the first and third part agree and hereby ratify any action, cost or expense which [Commonwealth] may undertake or incur in connection with its obligations under its binders, commitments or policies of title insurance with respect to any and all liens, claims or actions indemnified against hereunder, and the parties of the first and third parts expressly agree to reimburse and repay [Commonwealth] promptly the full and total amounts of any costs and expenses incurred by it in connection therewith immediately upon demand thereof.
(J.A.Ex. 26). The district court found that Commonwealth became dissatisfied with Reminc’s defense of certain liens and voluntarily undertook to assist Reminc with the legal work. The court found that such “volunteering was contemplated by the agreement.” (J.A. 175). The district court’s reading of the agreement is correct, as the document provides for reimbursement of costs incurred by Commonwealth “[notwithstanding the performance of the parties.” Therefore the award of attorney’s fees to Commonwealth on its counterclaim was proper and is affirmed.
Accordingly, the judgment of the district court is affirmed in part and reversed in part. The case is remanded for recalculation of the award of interest on the judgment.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
. '‘Reminc” refers to all plaintiffs/appellants collectively.
. "J.A.Ex.” refers to the Joint Appendix, Exhibits Volume.
. The bankruptcy court refused to consider parol evidence offered by Reminc which Reminc argued established that the Escrow Agreement was executed at a later date. 13 B.R. at 950. The bankruptcy court's order was affirmed by the district court and by this court in unpublished opinions. 679 F.2d at 887.
. Alternatively, the district court found that Reminc was entitled to prevail because it had substantially performed its obligations under the contract.
. Commonwealth's alternative arguments regarding the admissibility of the parol evidence are meritless. Commonwealth claims that the evidence was irrelevant and was inadmissible as an offer of compromise. The evidence is clearly relevant under Fed.R.Evid. 401. The documents are not inadmissible as offers of compromise because they are not offered to prove liability on the claims extinguished by the settlement. Fed.R.Evid. 408.
. The party of the first part is Reminc. The parties of the third part are appellants 1616 Arlington Associates, Theodore B. Gould and Washington Properties, Inc.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
SOBELOFF, Circuit Judge.
The United States appeals from a judgment entered against it in the District Court for the Eastern District of Virginia in a condemnation proceeding which it instituted to acquire approximately two hundred and fifty acres of land for the Army with a view to establishing thereon a radio transmitter station. The owner cross-appeals.
The tract, belonging to Smoot Sand and Gravel Corporation, is located in Prince William County, Virginia, and is riparian to Occoquan Bay, a tidal estuary of the Potomac River. The question presented is whether the Court erred in permitting the jury, in valuing the condemned land, to include as appurtenant thereto the rights of the owner in such sand and gravel deposits as extended uninterruptedly from the mean low water mark into the abutting tidal waters of the Bay.
The Smoot Corporation contended that a Virginia statute gave it, as owner of the riparian land, the right to dig and sell sand and gravel from deposits which extended uninterruptedly into the Bay, and that for the loss of this right through condemnation, it was entitled to be compensated. The United States interpreted the statute differently, contending that it conferred no rights upon the landowner for which it was entitled to compensation and that the statute was directed to other purposes. In point of fact, the Government contended that there was no deposit extending uninterruptedly from the fast land and that the intermittent traces shown from the borings had no commercial value.
In a pretrial order, the District Judge upheld Smoot’s contention as to the meaning and legal effect of the statute. He ruled that the landowner was entitled to be compensated for the fair value of the rights conferred upon it by the statute in respect to any sand and gravel deposit that may extend uninterruptedly from the fast land into the Bay.
At the trial, the Court submitted special issues to the jury. These are, first, what is the fair market value of the fast land, irrespective of any rights conferred by the statute; second, whether or not any sand deposits extended from the main land into the tidal waters; and third, if the second question is answered in the affirmative, what is the fair market value of the tract taken as a whole, including the value of the rights arising under the statute. The jury was instructed to take into consideration that the right or privilege in regard to the underwater deposits, if any, was subject to the paramount powers of the State and Federal Governments. They were told to consider, in their' answer to the third question, the probability or improbability that the privilege would ever be disturbed by either sovereignty.
The jury returned answers to these questions and valued the land, exclusive of any rights to sand or gravel below the low water mark, at $40,000.00; it answered that there were deposits of sand or gravel which extended from the Smoot land uninterruptedly from the low water mark into the bed of the tidal waters, and it determined that just compensation for the tract condemned, including the owner’s rights in such deposits, was $90,000.00. Judgment was entered for $56,200.00, with interest, that figure being the difference between the jury’s valuation and the sum of $33,800.00 deposited by the United States into the registry of the Court as estimated compensation when the declaration of taking was filed.
We turn to the law of Virginia to ascertain the rights of a riparian proprietor, for it depends upon the laws of each state how far the prerogative of the state to lands under water shall extend. Hardin v. Jordan, 1891, 140 U.S. 371, 11 S.Ct. 838, 35 L.Ed. 428. It cannot be doubted that in Virginia the title of the landowner runs only to the low water mark, and that title to the soil under tidal waters is in the State. This is in accordance with the recognized common law rule and is confirmed by declaratory statutes. Virginia Code, 1950 Ed., Secs. 62-1 and 62-2; Taylor v. Commonwealth of Virginia, 1904, 102 Va. 759, 47 S.E. 875; Newport News Shipbuilding and Dry Dock Co. v. Jones, 1906, 105 Va. 503, 54 S.E. 314, 6 L.R.A.,N.S., 247; Meredith v. Triple Island Gunning Club, 1912, 113 Va. 80, 73 S.E. 721, 38 L.R.A.,N.S., 286. As the Government recognizes, the riparian owner always had certain rights in the adjacent submerged land, such as to enjoy the natural advantage of his location; to use a right of way to and from the navigable water; to build a pier or wharf, subject to the regulation of the State; to have the benefit of accretions or alluvium, and to make reasonable use of the water as it flows past his land. It is not necessary to explore in further detail the common law rights of the owner of land adjacent to tidal waters, and it may be said at once that these were never considered to include the right to remove substances from the soil under water. See Taylor v. Commonwealth of Virginia, supra, and Lewis on Eminent Domain (2d Ed.), Sec. 83.
The common law is, however, subject to modification by statute. Without altering the rule as to title to the land under water, the Virginia Code undertakes to regulate the removal of sand and gravel from the beds of rivers, streams, or other waters within the jurisdiction of the commonwealth. It first reaffirms Virginia’s property in all the beds of the bays, rivers, creeks, and the shores of the sea, not conveyed by special grant or compact according to law, reserving such beds to the use of the people of the State, subject to any future laws that may be passed by the General Assembly. Sec. 62-1. It then provides that the limits of tracts lying on such waters shall extend to the low water mark. Sec. 62-2. It further provides for leasing of such beds, for limited periods, under conditions, for the removal of oil, gas, and other mineral substances. Sec. 62-3.
In 1920 several new sections of the law were enacted to deal with the subject of sand and gravel. These provisions made it unlawful to dredge or remove sand or gravel from any part of the fast land or beach or bluff abutting on such waters, or from the beds of the waters between the high and low water marks. Where any such deposit extends uninterruptedly from the low water mark out, digging and carrying away any part of such extended deposit between low water mark and the middle line of such waters is made unlawful. Sec. 62-178. Violation is a misdemeanor subject to fine and imprisonment. Sec. 62-179.
The last mentioned provision is prohibitory and carries criminal sanctions, but there follow other sections, highly pertinent here, that look primarily and specifically to the rights of abutting owners and to the vindication of such rights, if invaded. The owner of the fast land from which a deposit of sand or gravel extends toward the middle line of the water, may obtain a perpetual injunction against anyone’s removing such deposit. He may also recover from the violator, as damages, treble the value of the material taken, Sec. 62-180. A final section exempts from the criminal prohibition the landowner or anyone acting with his permission, or under a contract with him, and anyone acting under authority of the United States in the lawful improvement or regulation of navigation. Sec. 62-181.
What is the true meaning of these provisions, taken as a whole, and do they confer rights for the loss of which riparian owners may demand compensation in a condemnation proceeding ? It is a rule, firmly established beyond debate, that any purported grant by a sovereign is to be strictly construed, Shively v. Bowlby, 1894, 152 U.S. 1, 10, 14 S.Ct. 548, 38 L.Ed. 331; yet it must foe construed, not emasculated. There is wisdom in the rule that in examining a grant by the sovereign, if the words can without distortion be understood broadly or narrowly, they are to be taken in the more limited sense; but it would be an abuse of this rule to search for subtleties in an effort to defeat a grant, however phrased, when its meaning is self-evident.
We cannot accept the suggestion of the Government that this is merely a criminal statute to prevent depredation of the shores of the waters of the State by the indiscriminate removal of sand. Nor do we agree that since the law contains an exemption in behalf of dredging by the United States to improve navigation, the exemption expressed in behalf of the owner is merely to dredge when necessary to the enjoyment of pre-existing rights, such as the construction of a pier or wharf, or to make a channel to navigable waters. The exemption of the United States is merely a recognition of its paramount rights in the navigable waters. This exemption in no other way qualifies the grant of dredging privileges to the abutting owner.
The creation in a riparian owner of a right to damages against anyone removing sand or gravel, and supplying a statutory measure of damages according to the value of the material removed, plainly implies a right in the landowner for the invasion or loss of which he is to be indemnified. It is notable that the damages are measured by the value of the sand or gravel removed, and not by the extent of the injury to any common law right to construct a pier or wharf. This award of damages is in addition to the criminal penalty which the State imposes to maintain public order. Even a narrow construction of the statute cannot overlook what seems to us obvious, namely, that the riparian owner is awarded the exclusive right to dredge, and in case of its infringement by anyone, he is entitled to be reimbursed for the loss which he thus sustains. It cannot be disputed that when one is assigned the right, pending its revocation, to use or consume something to the exclusion of all others, and to receive compensation from anyone who ventures to exercise the privilege without his authority, he has a species of property, regardless of what theory of property we may adopt. Rights in or appurtenant to land, whether dry or under water, even if they amount to less than fee simple title, are property. Whether the right with which the owner is endowed by this statute is called a revocable though unrevoked “license,” or a “profit a prendre,” is immaterial. The label does not matter; the substance cannot be taken away by the United States even for a public use without the owner being made whole. 1 Minor on Real Property (2d Ed., Ribble) 70 and 132.
The legal power to confer such benefit upon the abutting landowner rests with the State of Virginia. Questions as to the wisdom and the social utility of the action of its lawmakers are not for us; our sole function is fairly to ascertain and give effect to their action. If, as the Government asserts, the State has needlessly enriched riparian owners at its own expense, we cannot on this account disregard Virginia’s statute or ignore Federal constitutional guarantees.
This does not mean that the State has divested itself of title to the land beyond the low water mark. It has, however, conferred certain rights while retaining title, and the riparian owner may not by condemnation be divested of these rights, which are valuable, without just compensation. This is the clear command of the Fifth Amendment to the Constitution of the United States.
The Cross-Appeal
As not infrequently happens in condemnation cases, wide disparities developed between the condemning authority and the condemnee as to the value of the property taken. The Government’s-witnesses, valuing the fast land in disregard of any right to remove sand and. gravel from the Bay — maintaining that-the submarine deposit opposite the Smoot, land had no value — said that the highest, utility of the tract was for farming purposes, and appraised it at $25,000.00 to $31,250.00. On the other hand, Smoot’s witnesses, computing the estimated cubic yardage at commercial prices of sand and gravel, declared that the fast land alone was worth $750,000.00 to $890,-000.00, and put the value of the offshore deposit at $668,000.00. The jury, as also often happens, did not agree with either side in its valuation of the property as a whole or, apparently, in the appraisal of component factors in the valuation.
In arguing its appeal, the Government points to the inclusion of $50,000.00 in. the total verdict of $90,000.00 to cover the offshore rights, as an indication that these rights have been overvalued. It seeks reversal, but no new trial. It wishes the case remanded with directions to enter judgment limited to $40,000.00, in accordance with the verdict as to the fast land. Smoot’s cross-appeal, on the other hand, also claims an inconsistency-in the verdict, but draws different conclusions therefrom. It stresses that the jury allowed less for the fast land than for the rights in the submerged land, although according to Smoot’s claim, the former had larger deposits of sand and gravel than the latter. It points out that the Government’s testimony also ascribed greater value to the fast land ($25,000.00 to $31,250.00) than to the offshore rights, which the Government contended were without actual value even if legally such rights could be included in a verdict. Therefore, Smoot reasons, the verdict was erroneous, contrary to the Judge’s charge, and without supporting evidence. It insists that the District Judge should have granted its motion for a new trial under Rule 59 of the Rules of Civil Procedure, 28 U.S.C.A. While conceding that refusal of a motion for a new trial is not reviewable on appeal save in exceptional circumstances, it claims that the above analysis of the testimony and the verdict presents a case requiring reversal and a new trial.
For the reasons already stated, we think the Government is not entitled to have the case remanded for the entry of a judgment limited to $40,-000.00 and disallowing all compensation for underwater sand and gravel rights. Smoot’s cross-appeal must also be denied. Smoot points to no evidence offered by it that was excluded, and to none that was improperly received at the instance of the Government. It made no objection to the charge. Essentially, the basis of the cross-appeal is that the jury rejected the owner’s valuations and declined to adopt its theoretical computation. That the jury’s verdict is not consistent with either party’s theory of valuation is no ground for a retrial. The jury heard the experts presented by the parties and could accept or reject any part of their testimony. It was not bound by the estimates as to the size of sand and gravel deposits, and it was certainly not required to make the witnesses’ calculations of the value of these deposits the only basis in arriving at the fair market value of the property taken. Having seen the property, it had wide latitude for the application of its own judgment. Its verdict is within the range of the credited testimony, which should not be reweighed on appeal. Stephens v. U. S., 5 Cir., 1956, 235 F.2d 467. The circumstances certainly indicate no abuse of the Court’s discretion in refusing the motion for a new trial. Trout v. Cassco, 4 Cir., 1951, 191 F.2d 1022.
Affirmed.
. Sections 62-1 through 62-3 and 62-178 through 62-181 of the Virginia Code (1950 Ed.) provide as follows:
“62-1. Ungranted beds of bays, rivers, creelcs and shores of the sea to remain in common. — All the beds of the bays, rivers, creeks, and the shores of the sea within the jurisdiction of this Commonwealth, and not conveyed by special grant or compact according to law, shall continue and remain the property of the Commonwealth of Virginia, and may be used as a common by all the people of the State for the purpose of fishing and fowling, and of taking and catching oysters and other shellfish, subject to the provisions of Title 28 [rules for taking and catching fish, oysters and shellfish], and any future laws that may be passed by the General Assembly. And no grant shall hereafter be issued by the State Librarian to pass any estate or interest of the Commonwealth in any natural oyster bed, rock, or shoal, whether the bed, rock or shoal shall ebb- bare or not. (Code 1919, § 3573.)”
“62-2. Rights of oioners to extend to low watermarlc.- — Subject to the provisions of the preceding section, the limits or bounds of the several tracts of land lying on such bays, rivers, creeks and shores, and the rights and privileges of the owners of such lands, shall extend to low watermark, but no farther, unless where a creek or river, or some part thereof, is comprised within the limits of a lawful survey. (Code 1919, § 3574.)”
“62-3. Leasing of the beds of certain waters. — The Attorney General with the consent and approval of the Governor, shall have authority to lease the beds of such of the waters within the jurisdiction of the State, without the Baylor survey, as they deem proper, for periods not exceeding five years, with the right to renew the same for additional periods not exceeding five years each to such persons and upon such terms as they deem expedient and proper, which leases shall authorize the lessees to prospect for and take from the bottoms covered thereby, oil, gas, and such other minerals and mineral substances as are therein specified; provided, that no such lease shall in any way affect or interfere with the rights vouchsafed to the people of the State concerning fishing, fowling, and the catching and taking of oysters and other shellfish, in and from the bottoms so leased, and the waters covering the same. All leases made under the authority granted by this section, shall be executed in the name and for and on behalf of the State, by the Attorney General, and shall be countersigned by the Governor. The Commissioner of Fisheries and the Attorney General shall make reports to the General Assembly of all such leases so made, such reports to be made on or before the first day of December preceding the convening of each regular session thereof. (1946, p. 948; Michie Suppl.1946, § 3573a.)”
“62-178. Dredging of sand or gravel prohibited. — It shall be unlawful for any person or corporation to dredge, dig, or otherwise remove and carry away any part of any deposit of sand or gravel, or mixture of sand and gravel from any part of the fast land, or beach or bluff, abutting upon any of the rivers, streams or other waters within the jurisdiction of the Commonwealth, or from any part of the bed of such rivers, streams or other waters between high and low water marks.
“In case any such deposit extends uninterruptedly from low water mark out into the bed of such waters, it shall, except as hereinafter provided, be unlawful to dig and carry away any part of such extended deposit lying between such low water mark and the middle line of such waters. (1920, p. 284; Michie Code 1942, § 4441(1).)”
“62-179. Violation a misdemeanor.— Any person or corporation violating the provisions of this chapter shall be guilty of a misdemeanor, and, upon conviction, shall be subject to a fine of not exceeding three hundred dollars, or imprisonment not exceeding six months, or both, in the discretion of the court. (1920, p. 284; Michie Code 1942, § 4441(1).)”
“62-180. Injunction and damages.— Any owner of any such fast land or beach, bluff, or bed of stream, between high and low water mark on which any such deposit exists or from which it extends towards the middle line of the water, as aforesaid, may, by appropriate proceedings brought by such owner, have a perpetual injunction against any person or corporation removing and carrying away or attempting to remove and carry away any such deposit or extension thereof, and may, in such proceeding, or by separate action, recover against such violation of this act damages in treble the value of the material removed. (1920, p. 284; Michie Code 1942, § 4441(1).)”
“62-181. Exemptions from chapter. — ■ The prohibitions of this chapter shall not apply to any owner of any fast land, bluff, beach or bed of stream, upon or in front of which such deposits may lie, nor to any person or corporation acting under written permission from, or contract with such owner, nor to any person or corporation, acting under the authority of the United States, necessarily removing such deposit in the lawful improvement or regulation of navigation of any waters subject to the authority of the United States.
“None of the provisions of this chapter shall be deemed to interfere in any manner with the provisions of any law of this State relating to taking fish and oysters.
“The provisions of this chapter shall not apply to Princess Anne county nor to Pulaski county or New river therein. (1920, p. 284; Michie Code 1942, § 4441 (1).)”
. Maryland has a similar statute. Art. 27, sec. 572 (1957 Supplement to Md.Code.) After setting forth the general prohibition against digging sand and gravel from the state-owned beds, the Maryland statute continues, “that it shall be lawful for any riparian owner of lands in the State of Maryland * * * to dig, dredge, take and carry away sand, gravel or other materials irom the bed of said river opposite said lands * "
The Virginia statute, constructed somewhat differently, accomplishes the same result in a negative fashion. Section 62-178 contains the general prohibition against such digging, and section 62-179 makes the unlawful digging a crime. Following these, section 62-181 says that, “the prohibitions of this chapter shall not apply to any owner of fast land, bluff, beach or bed of stream upon or in front of which such deposits may lie * *
In addition, the Virginia statute, unlike the Maryland Act, implements the abutting owner’s rights by specifically giving him the right to an injunction and treble damages from others who, without his permission, dig from the bed in front of his land. Section 62-180.
Yet, with less statutory material from which to ascertain the grant of a legislative privilege, the Maryland Court of Appeals said:
“The right conferred by the [Maryland] statute in question is in the nature of a license or privilege to the riparian owner, and those with whom he has a contract in writing, which may be revoked at any time by the Legislature.” Smoot Sand and Gravel Corp. v. Columbia G & D Corp., 146 Md. 384, 126 A. 91, 93, 1924.
. Maryland has not seen fit to construe its legislative privilege as a “profit a prendre.” It has been held that the assignability of the privilege is limited to the duration of the assignor’s title to the fee, and that it is not an independent incorporeal estate in the land. Smoot Sand and Gravel Corp. v. Columbia G & D Corp., ibid.
. In response to a letter of the Attorney General of the United States, inviting the Attorney General of Virginia to participate as amicus curiae, the latter declined, saying: “I am constrained to believe that Judge Bryan’s construction of the Virginia statutes — to confer upon riparian owners a right in the nature of a license or profit a prendre, revocable by the Virginia Legislature — is a supportable interpretation. * * * ”
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
Plaintiffs-appellants, the Church of Scientology of Minnesota and two of its ministers, appeal from a decision of the United States District Court for the District of Minnesota, Honorable Gunnar H. Nordbye, .presiding, granting summary judgment to appellees.
In November, 1968, appellants received notices of detention and hearing, stating that a device, known as the “Hubbard Electrometer for use in Scientology” that had been manufactured in the United Kingdom and addressed to them, was being detained because it failed to comply with the Federal Food, Drug and Cosmetic Act, 21 U.S.C.A. § 301 et seq.
After an adverse decision at the hearing, appellants brought the instant suit to enjoin appellees from (1) refusing admission of E-Meters into the United States, (2) promulgating any policy or rule or regulation which requires detention of any E-Meter, and (3) from interfering in any way with the shipment of E-Meters addressed to appellants.
In January, 1971, a case involving similar factual and legal issues was decided by the Court of Appeals for the Ninth Circuit in Church of Scientology of California v. Richardson, 9 Cir., 1971, 437 F.2d 214. There summary judgment in favor of the Secretary which had been granted by the District Court was affirmed on appeal. See, also, United States v. An Article or Device . “Hubbard Electrometer” or “Hubbard E-Meter,” etc., Founding Church of Scientology et al., D.C.D.C., 1971, 333 F.Supp. 357, on remand from Founding Church of Scientology, supra.
Judge Nordbye examined the literature of the Church of Scientology and found that:
“ * * * the E-meter as used in the auditing ceremony is an instrument which is used by the Church for certain diagnostic and therapeutic purposes in improving the health of the person audited, usually after Dianetic auditing, and therefore the machine and the use thereof come within the scope of Section 352(f) (1), 21 U.S. C., and [the Court also] finds that the machines transported from the United Kingdom to this country and seized by the defendants do not bear adequate instructions for their use.”
We have reviewed appellant’s contentions as against the findings of fact and law made by the District Court and are in complete agreement with the District Court. Accordingly, we affirm on the basis of Judge Nordbye’s well considered opinion as published, D.C.Minn., 1972, 341 F.Supp. 563. Cf. Church of Scientology of California v. Richardson, supra.
Affirmed.
. For a discussion of the religious tenets of the Church of Scientology and the use of the “Hubbard Electrometer” (E-Meter) by the Church see Founding Church of Scientology v. United States, 1969, 133 U.S.App.D.C. 229, 409 F.2d 1146, 1151-1153.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MORRIS, District Judge.
The Bonnot Company and the Hagan Corporation, engaged in the manufacture and sale, respectively, of pulverized fuel burning apparatus, the purchasers of which were threatened with infringement suits under patents Nos. 1,441,-703 and 1,460,916, then owned by Locomotive Pulverized Fuel Company, filed their bill in equity against that company to perpetuate the testimony of certain witnesses relating to the prior public use of the apparatus and processes of those patents. In its answer the defendant set up by way of counterclaim infringement by the plaintiffs of all the claims of each patent. Thus the suit became the usual infringement suit in equity, save that here the owner of the patents is the defendant and the plaintiffs are the alleged infringers.
The earlier patent, applied for February 5, 1918, and granted January 9, 1923, is for an apparatus or furnace for burning pulverized coal. The later patent, applied for April 27, 1921, granted July 3, 1923, and asserted by the defendant to be a division of the former, is for methods of burning that fuel. On December 11, 1922, the original application was amended by striking out certain paragraphs and by adding the matter now appearing from line 98, page 2, to line 13, page 3, both inclusive, of the apparatus patent. The plaintiffs say that the amendment was not an amplification of the original disclosure, but was a departure therefrom, constituting new matter; that all the claims of that patent rest in whole or in part upon the amendment, and that they are, hence, invalid.
The plaintiffs further assert that the process patent is not entitled to the benefit of the filing date of the 1918 application, in that it, too, rests upon the amendment to that application, not upon the original disclosure, and that more than two years before the application for the process patent was filed the methods of burning pulverized fuel therein claimed were in public and successful use. Again, the plaintiffs say that the disclosures of the original application and the disclosures of the amendment and of the process patent were all anticipated by prior public use at the Phipps power plant in Pittsburgh from 1910 to 1912, by an article in “Power” for February, 1911, illustrating and describing the furnace and method therein employed to bum pulverized coal at that plant, and that the original disclosure was anticipated by prior public use at the Calumet Steel Company plant.
The key to the solution of the problem— Do the amendment to the original disclosure and the specification of the process patent consist of new matter, and not a mere amplification of the original disclosure? — is,'the plaintiffs contend, to be found in the answer to the inquiry: Was not the original disclosure restricted to the employment of an intensely hot, hard, short flame, and the amendment and the process patent to the lazy, slowbuming, temperature-controlled, stream line, long, soft flame? The defendant asserts and the plaintiffs deny that the original disclosure covered the long-flame process and a furnace operating upon the long-flame principle.
The hard flame, with localized intense heat, results whenever the combustion of the mass of fuel is rapid. It is a consequence of providing an immediate, ever-present, fresh supply of oxygen to the burning particles of fuel. It is brought about by constant rapid mixing of air and fuel. Its effect is a melting and destruction of the refractory walls of the furnace, and usually, too, a fusing of the refuse, rendering it difficult to remove. The long, soft, temperature-controlled, stream line flame is produced by the slow, retarded, prolonged combustion of the fuel. It is brought about by tbe slow, unagitated, nonturbulent, stream line flow of the fuel, and air admitted therewith, through the combustion space. It exists when the oxygen exhausted gas surrounding each particle of burning fuel is not replaced instantly and constantly by a fresh supply of oxygen.
Its primary advantage lies in the fact that it does not produce a localized zone of extreme temperature, destructive of the brick work of the furnace and productive of the formation of slag. The secondary advantage is that, when that flame is employed, currents of outside air can be induced into the furnace to flow between the walls and the flame, thereby giving direct protection to the walls by insulation and indirect protection by cooling that part of the flame nearest the walls. Moreover, in the long-flame process the cooling current of air finds its way also between the flame and the bottom of the furnace and there serves to cool, below its fusing point; the temperature of the refuse passing from the flame to the bottom of the furnace, thus making the refuse easily and readily removable.
The furnace of the original application is of the type having a combustion chamber and a mixing oven projecting in front. Fuel and air, entering the oven at relatively high velocity through a burner positioned more or less vertically in its top wall, impinge upon a target wall at the bottom. Auxiliary air enters through pipes in its front wall. A furnace easily repaired during operation and an improved method of feeding and mixing with air were the broad objects of the patent sought. The application stated:
“Heretofore those parts of the furnace which deteriorated rapidly were inaccessible during the operation of the furnace, and it was therefore not possible to repair'or renew the same without putting the- furnace out of use. It is proposed in the present invention to enable the renewal of these parts while the furnace is in use. * * * ” Page 1, lines 26-33.
To this end a door was provided above the floor of the oven or target wall. Page 1, lines 76-81. The application further stated:
“The target wall, because of its intense" heat and the impingement of the fuel thereon, very rapidly deteriorates, the bricks becoming melted, burnt out, and otherwise affected, so that renewal becomes necessary. Heretofore renewal or repair of such parts necessitated the putting out of operation and complete cooling of the furnace. According to the present invention, we propose to permit the renewal of the target wall surface during operation of the furnace. To this end, the target wall is disposed laterally adjacent the front wall of the mixing oven, or other point at which accessibility may be possible, and by opening the door 17 bricks may be inserted and placed upon the target wall by a suitable tool, or the same may be thrown therein, thereby providing a new surface. Slag and the melted and bumt-out refractory material forming the target wall flow into the base 20 and may be removed through the door 21. 'By enabling this renewal of the target wall surface at frequent intervals, the furnace may be maintained at its maximum efficiency at all times, without necessitating any loss of time or heating effect.” Page 2, lines 71-97.
An “improved feeding means” (the burner), an upwardly inclined guide wall opposed to the target wall, a slag reservoir common to and intermediate the target wall and the inclined wall, were also specified. The burner consists of a fuel pipe, containing a small steam or air nozzle pipe, surrounded by a number of air channels controlled by dampers. The inclined wall is an element of some evidential value in determining the principle of the furnace and the process of combustion to be employed therein; but it may be best considered in connection with the process. With the slag reservoir we are not particularly concerned. Nowhere did the original application specify dimensions of parts or directions as to relative sizes, save by the implication that they should be such as would carry out the described process.
In the process of burning the fuel the original application contemplated high velocity feed, agitation of fuel and air in the furnace, rapid combustion, and impingement upon the target wall. The application stated:
“It is proposed in the present invention to * * * greatly improve the process of combustion. A further object is to provide an improved feeding means, whereby a more perfect mixture of the fuel and combustion air is afforded, permitting rapid combustion to take place, and to this end we propose in one embodiment of our invention to feed the fuel in separate streams independently embraced by air.” Page 1, lines 31-42,
Again:
“In operation, the pulverized fuel enters through the nozzle pipe 35, fed by means of air under pressure or by induction produced by the induction jet from the nozzle 36, causing the fuel1 to enter at a relatively high velocity. A combined mixture of fuel and air is forced by air pressure or induction through the fuel nozzle 36. This stream is surrounded and mixed with additional air entering by induction through the channel 24, which mixture of fuel and air is again surrounded and mixed with additional air entering by induction through the channels 26, 27, 28. The fuel, being now mixed with sufficient air for combustion and subjected to the radiant heat from the incandescent target wall 16, burns. The process of combustion is assisted by the air entering the air openings 14, which tends to break up the surrounding layer of consumed gas by causing eddies, and permitting additional air to come into intimate contact with the partially consumed gas in the core of the flame causing complete combustion. The mixture impinges against the target wall 16, and by reason of the inclination of the said wall is deflected in the direction of the arrows toward the inclined rear wall 19, which guides the same upwardly through the furnace. The target wall is incandescent during operation of the furnace, and causes ignition of the fuel. In order to promote the production of a perfect mixture of the fuel and air, and to prevent the impinging of the fuel upon the target wall in spots, air is admitted transversely of the incoming streams from the burners through the pipes 14; the effect of this being to thoroughly mix the fuel and air and to exert a change in the course of the fuel to the extent that it impinges upon the entire surface of the incandescent target wall.” Page 2, lines 18-60.
As I read these disclosures, they not only point with meticulous care the way to the short, hot flame, but with equal certainty they bar the road to the long, soft flame. The parting of the ways and the direction to be taken are definitely marked by the stated object itself: “Whereby a more perfect mixture of the fuel and combustion air is afforded, permitting rapid combustion.” Page 1, lines 34-36. Nor is the means of bringing about that “more perfect mixture” left to conjecture. The fuel, entering “at a relatively high velocity,” is mixed and surrounded “with sufficient air for combustion.” Page 2, line 32. But, unless the oxygen-exhausted gases surrounding the particles of burning fuel are quickly dissipated and replaced by oxygen-bearing air, the combustion •will not be “rapid.” Henee air entering through the pipes in the front wall, and moving transversely to the fuel flow, is provided-“to break: up the surrounding layer of consumed gas, * * * causing complete combustion.” Page 2, lines 36-42.
That the force or pressure behind the air entering through the pipes in the front wall was to be adequate for that purpose is not left in doubt. The air from the pipes was to reach “the core of the flame,” notwithstanding the fuel was caused to enter the mixing oven at a velocity sufficiently high to cause it .to impinge upon the target wall, be deflected against the inclined wall, and be guided by that second contact upwardly through the furnace. It was to have momentum sufficient, not only “to thoroughly mix the fuel and air,” but also “to exert a change in the course of the fuel.” Page 2, lines 56-58. The defendant, to show that the long flame is indicated or suggested by the original disclosure, points to original claims 11 and 12, the first of which was:
“In the art of burning fuel, that step which consists in feeding mixed fuel and air, and subjecting said.mixed fuel and air to embracing columns of air.”
Claim .12 differed from claim 11 only in that it applied to a plurality of columns of mixed fuel and air. Tn the “embracing columns of air” of these claims the long flame_ cannot exist. The columns of air there referred to embrace only the entering “fuel and air,” and are immediately destroyed and thoroughly mixed with the fuel and other air (page 2, line 56) by the force of the air entering through the front pipes, while the air essential to the existence of the long flame must embrace, not the entering mixture of fuel and air alone, but the length of the flame, and remain in large measure unmixed.
The original application, as I view it, discloses a process of burning pulverized coal by the hard, short flame only, and a furnace functioning or having a principle of operar tion suitable to carry out that process. Moreover, it says nothing which to my mind indicates, suggests, or discloses the long-flame process or furnace.
On April 27, 1921, while the original application stood unamended by the addition of the matter now appearing at line 98, page 2, to line 13, page 3, the so-called divisional application was filed. That application, as I understand it, not only points with meticulous care the way to the long, temperature-controlled flame, but with, equal certainty bars the road to ’the hot, short flame. Instead of teaching that the fuel should be injected forcibly into the mixing oven at relatively high velocity, it teaches that it should be introduced “more or less gently.” Page 1, lines 53-91; page 2, line 72. Instead of the forcible impingement of the fuel upon the walls, causing the walls quickly to melt, run, and be destroyed, it’ forbids impingement and describes a furnace with walls of long life. Page 2, line 88. Instead of igniting the fuel by “the radiant heat from the incandescent target wall” (page 2, lines 31-34), this is brought about by the heat from the ascending portion of the flame stream. In place of the violently agitated mixture of fuel and air of the original application, it “contemplates the introduction of the fuel, or a mixture of the fuel and air, and the admission of a supporter of combustion, such as air, in sueh manner as not to destroy stream line combustion” (page 1, lines 31-35).
It has for one of its objects “to admit and burn (italics mine) the fuel in the presence of an embracing or surrounding envelope of columns of air” (page 1, lines 36-39), which, in the absence of the forbidden agitation, “will naturally follow the stream line of the burning fuel” (page 1, lines 88-95), and provide, not only protection to the walls (page 2, line 126), but “a neutral or cooling zone * * * through which the precipitating ash is cooled below slag-forming temperature, and the deposit on the floor of the furnace is in a more or less floeculent condition, which permits of its ready removal” (page 2, lines 92-99). In opposition to the rapid combustion of the original application is placed retarded combustion. Page 3, line 23. In striking contrast to the short, hot flame, having a localized zone of extreme temperature destructive of the brickwork, and productive of the formation of slag by virtue of its relatively higher radiation, is the long, soft flame, nowhere of excessively high temperature. Page 3, lines 3-10.
All the claims are built around the long, stream line, temperature-controlled flame, and, in my opinion, are the embodiment of an idea wholly foreign to the disclosures of the original application. It follows that the effective date of the process patent in suit is that upon which its application was filed, and not that of the filing of the original application.
The original application was amended December 11, 1922, a year and a half after the filing of the application for the separate process patent, and almost five years after the date of the original application. This amendment for the first time tacked onto the original disclosures the new ideas of the separate process patent. As against the teaching of the first column of the second page of the apparatus patent, that the air entering through the pipes in the front wall of the- mixing oven should be forcibly injected, the second column of that page, which now embodies the amendment in part, instructs that through those pipes the air is “induced.” Against the thorough mixing of the fuel and air of the first column, the second now sets up a delayed admixture. Lines 119, 120. Against the teaching of the first column that the transversely injected air should enter the core of the flame, the second tells us that it follows “a stream line course or path,” paralleling “the general stream line course of the fuel and flame stream with some air at the lower region thereof, until the temperature is sufficiently raised for complete commingling.”
Set off in striking contrast to the impingement of the fuel on the target wall, its deflection toward the rear wall, and its there being guided upwardly, all by the velocity of the injection of the fuel into the mixing oven, is the conclusion of the amendment, which reveals that “the admission of air through the pipes 14 [obviously by induction as theretofore set out in the amendment] protects the front wall and makes it possible to shift the admission means or burner near such wall, which in turn makes possible the TJ-shaped course of the fuel and flame stream in the chamber” (italics mine). Page 3, lines 7 — 13.
Thus by amendment the defendant would change, not only the originally disclosed process of burning pulverized fuel, but, as well, the principle of the furnace in which that process was to be employed, and cause it to function in a different way to produce a different result. Such amendments are invalid. Robinson on Patents, §§ 561, 635. See Heller Bros. Co. v. Crucible Steel Co. (C. C. A.) 297 F. 39.
I am at a loss to understand how a patent, whose teachings and instructions are so generally and sharply conflicting, both as to the steps of the process and the principle of the machine or apparatus, can be held to meet the requirements of R. S. § 4888 (Comp. St. § 9432), which demands as a prerequisite to the granting of a valid patent a description of the invention “in such full, clear, concise, and exact terms as to enable any person skilled in the art or-science to which it appertains, or with which it is most nearly connected, to make, construct, compound, and use the same; and in case of a machine, he shall explain the principle thereof. • • * ” Yet a finding of invalidity of the claims of the apparatus patent need not be based upon that ground, for each of the claims embodies an element found only in the new matter of the amendment. For instance, in claim 2, designated by the defendant as one typifying all the claims of the patent, it is required, among other things, that “the coal admission means being located to one side of the outlet, so that the fuel and flame stream describes a' U-shaped course through the chamber to the outlet under the action of the draft, Said chamber being provided with means through which a flow of air is induced thereinto by the draft near the entering fuel whereby the entering fuel particles flow past a slower moving bordering body of air.”
The reason for the appearance of the new matter set out in the amendment to the original application and in the application for the process patent is found in the failure of a furnace built and operated early in 1918, in conformity with the principle and process of the original disclosure, by the defendant at the Oneida Street’ station of the United Electric Light & Power Company at Milwaukee, and in the subsequent alteration of that furnace so as to embody the principle of the present claims of the apparatus patent, and to operate in accordance with the steps of the present claims of the process patent. When so altered and operated, it was a success.
Though the facts and ideas developed at Milwaukee urgently demanded that the patent disclosures be made to conform to, the new discovery, and constituted the reason for the ultimate appearance of the new matter in the patent proceedings, yet, either through a failure to recognize the demand or a failure to act thereon, nothing was done until the filing on April 27, 1921, of the application for the process patent. This disclosed and claimed the process found successful at Milwaukee, and there put into public use as early as August, 1918. As that process was not suggested by the original disclosure, the process patent has for-its effective date that upon which its application was-filed. As that date was more than two years after the successful public use of the process in Milwaukee, all of the claims of the process patent are invalid.
It is true that the furnace manufactured by the defendant, embodying the principle of the apparatus claims and employing the process of the method claims, has gone into wide and successful public use. Though usually such fact might be pertinent to the validity of the claims, yet here it cannot avail the defendant, for the widely used furnace and process are not those of the original disclosure. Moreover, all the claims of both patents must fail, I think, by reason of a prior public use of the claimed furnace and process at the Henry Phipps plant in Pittsburgh. The furnace and process as there first employed were described in the issue of “Power” of February 14, 1911. The testimony discloses that changes in the furnace and the process were subsequently made. The record, as I see it, makes clear, however, that in 1912, at least, they were beyond the experimental stage (Buser v. Novelty Tufting Machine Co., 151 F. 478, 81 C. C. A. 16), and that they then constituted complete anticipations of all the claims in suit.
Unquestionably, defendant’s furnace is much larger; but a mere increase in size does not involve patentable novelty. A complete analysis of the evidence touching the prior use at the Phipps plant would, I think, serve no useful purpose, for, in my opinion, the matters hereinbefore considered at length are determinative of the decree here to be entered.
The counterclaim must be dismissed.
Pending the litigation, the title to the patents in suit was assigned by the original defendant, Locomotive Pulverized Fuel Company, to Lopuleo Systems, Inc., and the assignment and a license agreement between that company and Combustion Engineering Corporation put in evidence. The assignee and licensee, by proper proceedings had, became the parties defendant or counterclaimants, entitled to the benefit and bound by all the proceedings in the cause.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
This is an appeal from the judgment of the District Court granting a writ of habeas corpus to William Archie May-field, Jr. (Mayfield). We affirm.
Mayfield was convicted of second degree murder in Arkansas state court by a jury from which all women were admittedly systematically excluded. His conviction was affirmed by the Arkansas Supreme Court. Judge Eisele, in a soundly reasoned memorandum opinion, held that the systematic exclusion of .women is impermissible under the rationale of Peters v. Kiff, 407 U.S. 493, 92 S.Ct. 2163, 33 L.Ed.2d 83 (1972), and Ballard v. United States, 329 U.S. 187, 67 S.Ct. 261, 91 L.Ed. 181 (1946).
Pursuant to the provisions of Rule 8 of the rules of this Court, we affirm the judgment of the trial court on the basis of its memorandum opinion. Mayfield v. Steed, 345 F.Supp. 806 (E.D.Ark.1972)
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
ALTIMARI, Circuit Judge:
Daniel J. Devaney, as the trustee in bankruptcy for CB & R (Holdings), Ltd. and its subsidiaries, appeals from an order of the United States District Court for the Southern District of New York (John F. Keenan, Judge), dismissing appellants’ claims against appellee Salomon Brothers Inc and denying leave to amend, pursuant to Fed.R.Civ.P. 9(b). We affirm the district court’s dismissal of the claims for failing to plead fraud with sufficient particularity, but we reverse the court’s denial of leave to amend, and remand with instructions to grant appellants leave to replead their fraud claims against Salomon Brothers.
BACKGROUND
Between June and November of 1982, CB & R (Holdings), Ltd. (“CB & R”) negotiated with the majority shareholders of American Marine Industries, Inc. (“AMI”) to purchase the shares of AMI. CB & R was controlled by Erik K. Klaussmann, III and David Lindsay. The First Boston Corporation acted as CB & R’s advisor and investment banker in this transaction.
In August 1982, AMI retained Salomon Brothers Inc as its exclusive agent to assist in the sale of the company. In late September 1982 Salomon Brothers sent a prospectus on AMI to Klaussmann, Lindsay and First Boston. This prospectus was accompanied by a cover sheet dated “September, 1982,” which states in pertinent part:
AMERICAN MARINE INDUSTRIES, INC. CONFIDENTIAL MEMORANDUM
Salomon Brothers Inc has been appointed exclusive agent by American Marine Industries, Inc. (“AMI”) to assist in the sale of the Company.
This Confidential Memorandum has been prepared by Salomon Brothers Inc from information furnished to it by the management of AMI____
This Confidential Memorandum has been prepared for the purpose of providing prospective buyers with general business, financial and other information concerning AMI. While the information contained herein is believed to be accurate, Salomon Brothers Inc and AMI expressly disclaim any and all liability for representations, expressed or implied, contained in, or for omissions from, this Confidential Memorandum or any other written or oral communication transmitted to any interested party in the course of the evaluation of AMI.
The prospectus itself contained, inter alia, the following statements:
Over the past two years, after a lengthy period of generally consistent profits, AMI has come to face a situation of declining profits and cash shortages. The Company [AMI] believes this situation is wholly transitory, and has resulted from a depressed world economy, difficulty in controlling costs, and also disagreements among senior management.
AMI believes that its American Atlantic subsidiary [AAS] has a unique franchise to capitalize on an impending pooling agreement covering all trade between the U.S. and the North Coast of Brazil, including the Amazon region.
The sale of AMI’s shares was closed on November 24, 1982, at which time CB & R purchased 99.5% of AMI’s outstanding common stock for over nine and one-half million dollars. Although CB & R believed it had purchased a viable operation, AMI remained unable to pay its debts. In June 1983, both AMI and CB & R filed for Chapter 11 bankruptcy.
In November 1983, appellant Daniel J. Devaney, as the Chapter 11 Trustee for CB & R and its subsidiaries, brought suit against the former majority shareholders of AMI and other defendants. The complaint alleged, in essence, that AMI had defrauded CB & R by leading Klaussmann and Lindsay to believe that AMI had the potential for continuing financial success when in fact, AMI management knew that the company was on the verge of bankruptcy and would not survive.
On June 11, 1984, appellants filed a “second amended and supplemental complaint” which added Salomon Brothers as a defendant in the action. The amended complaint set forth the two previously quoted state-merits from the AMI prospectas which Salomon Brothers had sent to CB & R in September 1982. The complaint then went on to allege:
Salomon’s late September 1982 Confidential Memorandum on AMI was false and misleading in that: at the time when it was prepared and distributed, the management of AMI, to the knowledge of Salomon, had concluded that the fiscal problems of AMI were fundamental and more than transitory and that the survival of AMI was, therefore, extremely doubtful.
Complaint H 40(B)(i) (emphasis added).
The complaint then quoted portions of several internal AMI memoranda to support the contention that AMI management knew the company was in “deep trouble.” The latest and grimmest of these memoranda was dated September 28, 1982. The complaint did not, however, allege any additional facts pertaining to Salomon Brothers.
The first through fifth claims for relief charged that Salomon Brothers’ allegedly fraudulent conduct was in violation of section 12(2) of the Securities Act of 1933, 15 U.S.C. § 771(2); section 17 of the 1933 Act, 15 U.S.C. § 77q; section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.-10b-5, promulgated thereunder; section 352-c of the New York General Business Law; and the New York common law of deceit.
In two separate memorandum opinions dated April 29, 1986 and July 23, 1986, Judge Keenan granted Salomon Brothers’ motion to dismiss all claims against it, holding that the complaint failed to plead fraud with sufficient particularity, as required by Fed.R.Civ.P. 9(b). The court denied appellants leave to amend and replead.
DISCUSSION
I. Compliance with Rule 9(b)
Fed.R.Civ.P. 9(b) provides, “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.” We agree with the district court’s finding that appellants failed to plead their fraud claims against Salomon Brothers with sufficient particularity. Although Rule 9(b) permits knowledge to be averred generally, plaintiffs must still plead the events which they claim give rise to an inference of knowledge. See, e.g., Goldman v. Belden, 754 F.2d 1059, 1070 (2d Cir.1985); Ross v. A.H. Robins Co., 607 F.2d 545, 558 (2d Cir.1979), cert. denied, 446 U.S. 946, 100 S.Ct. 2175, 64 L.Ed.2d 802 (1980). This court has recently observed:
The absence of a requirement that scienter be alleged with “great specificity” is based on the premise that a plaintiff realistically cannot be expected to plead a defendant’s actual state of mind____ This does not mean, however, that plaintiffs are relieved of their burden of pleading circumstances that provide at least a minimal factual basis for their conclusory allegations of scienter.
Connecticut National Bank v. Fluor Corp., 808 F.2d 957, 962 (2d Cir.1987) (citations omitted).
Appellants’ complaint contains nothing more than the sort of conclusory allegations of knowledge which were found to be insufficient in Connecticut National Bank, id. After stating that Salomon Brothers was retained by AMI to assist in the sale of the company, and that Salomon distributed to CB & R a prospectus on AMI which contained allegedly false and misleading information, the complaint simply alleges that Salomon Brothers knew that AMI management did not subscribe to the optimistic outlook reflected in the prospectus. The complaint does not allege any facts to suggest who at Salomon Brothers possessed such knowledge, when and how they obtained the knowledge, or even why anyone at Salomon Brothers should have known that the views expressed in the prospectus did not represent the true beliefs of AMI management.
Thus, the district court was correct in finding that “[t]he conclusory statements that Salomon knew that AMI did not subscribe to the beliefs reported in the Confidential Memorandum do not allow for any inference, let alone a strong one, regarding Salomon’s knowledge.”
Appellants argue that a more relaxed standard of pleading should apply to their fraud claims, citing several bankruptcy cases which have required less particularity in pleading when claims were asserted by a trustee. See, e.g., In Re O.P.M. Leasing Services, Inc., 32 B.R. 199 (Bkrtcy.1983). The rationale for relaxing the particularity requirement in such cases is that the trustee is a “third party, who is pleading fraud on secondhand information,” id. at 202. However, even the so-called relaxed standard does not eliminate the particularity requirement, although we recognize that the degree of particularity required should be determined in light of such circumstances as whether the plaintiff has had an opportunity to take discovery of those who may possess knowledge of the pertinent facts. A complaint like plaintiff’s, which fails to adduce any specific facts supporting an inference of knowledgeable participation in the alleged fraud, will not satisfy even a relaxed standard. See Glusband v. Fittin Cunningham Lauzon, Inc., 582 F.Supp. 145, 151 & n. 13 (S.D.N.Y.1984).
The district court also found that appellants failed adequately to plead CB & R’s reliance on the allegedly misleading prospectus. The court based this conclusion on its observation that no investor with CB & R’s level of sophistication could reasonably have relied on the prospectus, in light of Salomon Brothers’ “broad disclaimers as to the source of information contained therein.” The court should not, however, have considered the reasonableness of appellants’ reliance; that issue went to the merits of appellants’ claims and thus was not properly before the court on Salomon’s 9(b) motion. Nevertheless, the court was fully justified in dismissing the claims at issue, based on the inadequacy of appellants’ pleadings relating to scienter.
II. Leave to replead
Although we agree with the district court that appellants’ claims against Salomon Brothers failed to comply with Rule 9(b), we conclude that the court abused its discretion by not granting appellants leave to replead. See Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962) (outright refusal to grant leave to amend without any justifying reason for the denial is abuse of discretion); see also Luce v. Edelstein, 802 F.2d 49, 56-57 (2d Cir.1986); Raster v. Modification Systems, Inc., 731 F.2d 1014, 1018 (2d Cir.1984).
Fed.R.Civ.P. 15(a) provides that leave to amend “shall be freely given when justice so requires.” In Luce, 802 F.2d at 56, this court observed that in cases where the denial of leave to replead after a 9(b) dismissal has been affirmed, there was a legitimate justification for the denial. Typically, the plaintiff had already been granted a prior opportunity to replead fraud with greater specificity. See, e.g., Armstrong v. McAlpin, 699 F.2d 79, 93-94 (2d Cir.1983); Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir.1982). In one such case, the deficient pleadings were made after full discovery in a related case. Billard v. Rockwell International Corp., 683 F.2d 51, 57 (2d Cir.1982).
Neither of those situations applies'to appellants in this case. The “second amended and supplemental complaint” was the first pleading to assert claims against Salomon Brothers; and appellants have had no discovery of Salomon Brothers as yet.
The district court’s order is hereby affirmed in part and reversed in part, and remanded with instructions to grant appellants leave to amend their complaint by repleading their claims against Salomon Brothers with greater particularity.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
FOSTER, Circuit Judge.
Appellant, trustee, brought this suit to set aside a transaction, by which a deposit of $2,000 in money and certain personal property passed from the bankrupt to appellee, on the ground that it created a preference under, the provisions of section 60 of the National Bankruptcy Act (11 USCA § 96), and was made with an intent and purpose on the part of the bankrupt to hinder, delay, and defraud its creditors, in violation of section 67 of the said act (11 USCA § 107). There was judgment in favor of appellee dismissing the suit. This appeal followed.
From the findings of facts by the court, which are fully supported by a stipulation as to the facts, the following material facts appear:
The bankrupt, Haston Body Works, Inc., entered into an agreement with J. V. Siegmund, appellee, to lease a building from him, to be erected according to plans and specifications furnished by it, to be used as an automobile repair shop and garage and a filling station. The building was erected at a cost of over $40,000 by Siegmund, and a lease was entered into for a period of ten years from May 1, 1931, for a consideration of $49,800, payable in installments of $415 per month in advance. The filling station was subleased by the bankrupt for a period of five years from May 1, 1931, at a rental of $150 per month. The lessee1 agreed to deposit $2,000 in cash, give a chattel mortgage on certain tools, equipment, and furniture in the leased building, estimated to be worth $5,000, and to assign the sublease of the filling station as security for any damages that might accrue from a breach of the lease by it. The agreement was carried out on October 31, 1931. At that time the bankrupt was solvent.
In September, 1932, the rent in arrears amounted to $1,650. Demand was made for payment, and the bankrupt admitted it was unable to pay, and would continue to be unable to pay. Appellee advised the bankrupt that he would forfeit the lease and foreclose the chattel mortgage. The parties then entered into an agreement, as a result of which the deposit of $2,000 and certain property covered by the chattel mortgage, but not all of it, having a fair market value of $2,000 and rental value of $20 per month, was transferred to appellee, in settlement of past-due rent and damages for the breach. The lease was surrendered, and appellee went into possession of the building. The deposit was applied to the payment of the overdue rent under the terms of the lease. Appellee accepted the property transferred, in full settlement of any damages accruing from the breach of the lease, and took possession of the premises. The bankrupt at that time was insolvent, to the knowledge of both parties, and was adjudicated bankrupt on October 31, 1932. After taking possession of the premises, appellee was unable to make a new lease for the unexpired term of the bankrupt’s lease, but rented the building, and the personal property turned over, to Bert Haston, having no connection with the bankrupt, from month to month, at $235 per month, until June 24, 1933. Hasten was then unable to continue payment of that amount, and the rent was reduced to $200 per month in order to keep a tenant. Appellee continued to collect the rent of the filling station at $150 per month. He could not have rented the property to any one else for more than $330 per month, including the filling station, at the time the lease was breached. It is unnecessary to refer to the other findings of fact.
The District Court found that the parties were in absolute good faith, and there was no intention to hinder, delay, or defraud other creditors; that the chattel mortgage and lease, in all its provisions, were valid when entered into; that the subsequent transaction by which the property was transferred amounted to no more than the enforcement of a valid lien created more than four months before and not affected by the bankruptcy; that appellee had suffered damages exceeding $6,000.
We agree with the conclusions of the District Court. Coder v. Arts, 213 U. S. 223, 29 S. Ct. 436, 53 L. Ed. 772, 16 Ann. Cas. 1008; Thompson v. Fairbanks, 196 U. S. 516, 25 S. Ct. 306, 49 L. Ed. 577; Irving Trust Co. v. Perry, Inc., 55 S. Ct. 150, 79 L. Ed.-, decided December 3, 1934.
Affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
TIMBERS, Circuit Judge:
Appellant Whimsicality, Inc. (“Whimsicality”) and appellee Rubie’s Costume Co., Inc. (“Rubie’s”) are competing costume designers and manufacturers. Believing that Rubie’s was selling “knock-offs” of its costumes, Whimsicality commenced the instant action and sought initially a preliminary injunction to prevent further manufacture and sale of the alleged knock-offs. The complaint alleged copyright infringement and unfair competition, in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1988). The District Court for the Eastern District of New York, Raymond J. Dearie, District Judge, finding that Whimsicality based its motion for in-junctive relief largely on the copyright claim, consolidated that motion with a hearing on the merits of the copyright claim, pursuant to Fed.R.Civ.P. 65(a)(2). On September 11,1989, the court granted summary judgment in favor of Rubie’s on the copyright claim and denied injunctive relief, reserving decision on the unfair competition claim. 721 F.Supp. 1566 (E.D.N.Y.1989). The court refused Rubie’s request for attorney’s fees. Whimsicality filed a timely appeal and Rubie’s filed a timely cross-appeal. Our jurisdiction rests on 28 U.S.C. § 1292(a)(1) (1982).
The district court held that Whimsicality had registered a copyright on its costumes, but that the costumes were not copyrightable. 721 F.Supp. at 1575-76. The parties, therefore, devoted most of their arguments on appeal to the latter issue. We agree with the result reached by the district court, and we affirm the dismissal of the copyright claim and the denial of injunctive relief; but we do so on grounds other than those relied on by the district court. We hold that Whimsicality obtained its copyright registrations by misrepresentation of its costumes to the United States Copyright Office. We therefore decline to reach the issue of copyrightability, since proper registration is a prerequisite to an action for infringement. Since we find bad faith on the part of Whimsicality, we vacate that part of the order which declined to award attorney’s fees to Rubie’s pursuant to 17 U.S.C. § 505 (1982) and we remand the case to the district court for determination of that issue in light of this opinion.
I.
We shall summarize only those facts and prior proceedings believed necessary to an understanding of the issues raised on appeal.
Whimsicality, a Vermont corporation, was founded in 1978 by Pierre Couture. It is a small but thriving enterprise that takes great pride in the craftsmanship of its products. Since 1985, it has carried a line of costumes designed by Mr. Couture which now numbers at least 66 varieties. In that short time it has received a great deal of publicity for the quality of its designs, including a cover photograph on New York Magazine and stories in several newspapers including the Chicago Tribune.
Whimsicality achieved sales of more than $1.4 million in 1987 and more than $2.2 million in 1988 for its costumes, which are available in children’s and adult sizes. More than 80% of its costume sales occur between the months of March and August, the time when wholesalers and retailers place their Halloween orders with manufacturers. All of Whimsicality’s promotional material (catalogs, brochures and the like) make clear that it is selling costumes. The stories in outside publications likewise are unanimous in their conclusion that Whimsicality’s products are costumes.
Rubie’s, a New York corporation, has been in the costume business for 35 years. It manufactures and markets a wide variety of masquerade and theater-related items, including Halloween costumes. Its 1988 sales totaled more than $30 million.
The dispute leading to the instant appeal apparently began at the 1989 National Halloween Show, held in the Spring, when Whimsicality discovered that Rubie’s was displaying the allegedly infringing costumes for sale in the upcoming Halloween season. On April 7, Whimsicality wrote a letter demanding that Rubie’s halt marketing the knock-offs. Rubie’s refused to do so. It displayed the costumes at another trade show in June, and has included them in its sales material for the 1989 Halloween season.
Whimsicality’s demand was based largely on the fact that, in 1988 and 1989, it sought and received copyright registration for six of its creations: the Pumpkin, Bee, Penguin, Spider, Hippo Ballerina and Tyrannosaurus Rex. Nowhere in the copyright applications, however, is the word “costume” used. Instead, Whimsicality called its creations “soft sculptures”. The costumes were displayed during the oral argument, and our visual examination disclosed that the costumes lack any firm form unless worn by a person or carefully laid out on a flat surface so that the costume’s design is revealed. Moreover, it is undisputed that the only practical use for the copyrighted material is as costumes. As the district court observed, “in all promotional literature and catalogs containing photographs of the articles, they are always being modelled by children.” 721 F.Supp. at 1570 n. 4. There is no evidence of any actual use as sculpture, as one would expect given the lack of firm form.
The explanation for this deception is not a mystery; the Copyright Office considers costumes to be wearing apparel and consistently rejects applications to register them. Whimsicality was aware of this at the time it sought to register its costumes. The district court asked Whimsicality’s attorney, “if you took this photograph [of a child wearing the costume] and sent it to the copyright office and said we’re filing an application for a children's pumpkin costume, what would happen?” The attorney responded that “[i]t would probably be rejected.”
Despite the foregoing, which the district court found “strongly suggests that Whimsicality has not been as forthright with the Copyright Office as it could have been,” Id. at 1570. The court held that Whimsicality’s conduct did not “reach the level of dissembling that would constitute a fraud.” Id. The court then rejected Whimsicality’s assertion that, despite the costumes’ status as useful articles, certain pictorial, graphic or sculptural elements of the costumes were independently copyrightable.
The court therefore denied Whimsicality’s motion for injunctive relief and granted summary judgment in favor of Rubie’s on the copyright claim. This appeal followed.
II.
The elements of a copyright infringement action are (1) ownership of a valid copyright and (2) copying by the alleged infringer. Eckes v. Card Prices Update, 736 F.2d 859, 861 (2 Cir.1984). Possession of a registration certificate creates a rebuttable presumption that the work in question is copyrightable. 17 U.S.C. § 410(c) (1982); see also Durham Indus., Inc. v. Tomy Corp., 630 F.2d 905, 909 (2 Cir.1980). The presumption generally is not overcome by an “innocent misstatement”. It may be overcome, however, by proof of deliberate misrepresentation. Eckes, supra, 736 F.2d at 861-62; M. Nimmer & D. Nimmer, 2 Nimmer on Copyright § 7.20, at 7-198 (1989). We turn therefore to the question whether Whimsicality’s use of the term “soft sculpture”, rather than “costume”, constituted fraud on the Copyright Office.
We have long held that clothes, as useful articles, are not copyrightable. Fashion Originators Guild v. FTC, 114 F.2d 80, 84 (2 Cir.1940) (L. Hand, J.), aff'd, 312 U.S. 457 (1941); see also 1 Nimmer on Copyright, supra, § 2.08[H], at 2-130.8. The Copyright Act of 1976 did not affect the prior law in this regard. H.R.Rep. No. 1476, 94th Cong., 2d Sess. 55 (1976), reprinted in 1976 U.S.Code Cong. & Admin. News 5659, 5668.
While the pictorial, graphic and sculptural aspects of useful articles may be copyrightable if they are separable from the article, physically or conceptually, 17 U.S.C. § 101 (1982), clothes are particularly unlikely to meet that test-the very decorative elements that stand out being intrinsic to the decorative function of the clothing. Cf. Brandir Int'l, Inc. v. Cascade Pacific Lumber Co., 834 F.2d 1142 (2 Cir.1987). In any event, the useful articles standing alone may never be registered. The registration must describe the separable elements. See Compendium II of Copyright Office Practices § 505.02 (1984). Appellant argues that although clothing may not be copyrightable, masquerade costumes are an exception to that general rule. In view of our disposition of this matter we need not address that contention.
Whimsicality does not assert that it is ignorant of the prior case law as to the copyrightability of garments, or of the practices of the Copyright Office. It was aware, therefore, that an application for costumes as such would be rejected. The admission of Whimsicality’s attorney before the district court proves as much. Anticipating rejection, Whimsicality had several options. It could have commenced an action for a declaratory judgment to compel the Copyright Office to change its classification of costumes as per se uncopy-rightable. More practically, it could have acknowledged in its application that the articles in question were costumes, and have requested registration for only the features it claimed were separable. That was the approach taken by the amicus in the instant case, National Theme Productions, Inc., and approved by the court in National Theme Productions, Inc. v. Jerry B. Beck, Inc., 696 F.Supp. 1348, 1352 (S.D.Cal.1988).
Instead Whimsicality chose to classify its creations as soft sculptures with no useful function as wearable articles. Unlike a useful article, a sculpture, soft or hard, is inherently copyrightable, assuming it is an original work. Mazer v. Stein, 347 U.S. 201, 213-14 (1954). Unfortunately for Whimsicality here, the evidence demonstrates not only that the costumes were not soft sculpture, but that Whimsicality knew full well that no reasonable observer could believe that the costumes were soft sculpture.
Whimsicality relies on several cases where various articles were given copyright protection as soft sculpture to support its position that costumes are copyrightable and, by implication, that its applications to the Copyright Office were not misleading. E.g., Original Appalachian Artworks, Inc. v. Toy Loft, 684 F.2d 821 (11 Cir.1982) (dolls); Kamar Int’l. Inc. v. Russ Berrie & Co., 657 F.2d 1059 (9 Cir.1981) (stuffed animals); Durham, supra, 630 F.2d 905 (wind-up toys); L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486 (2 Cir.) (en banc) (Uncle Sam bank), cert. denied, 429 U.S. 857 (1976); Past Pluto Productions Corp. v. Dana, 627 F.Supp. 1435 (S.D.N.Y.1986) (foam Statue of Liberty crown). We do not agree that cases about stuffed animals and toys lend support to the contention that costumes may be registered as soft sculpture. The word sculpture implies a relatively firm form representing a particular concept. The costumes in question have no such form. If hung from a hook or laid randomly on a flat surface, the particular animal or item depicted by the costume would be largely unidentifiable. The intended depiction is in fact recognizable only when the costume is worn by a person or is carefully laid out on a flat surface to reveal that depiction. We conclude therefore that these costumes do not constitute sculpture.
Two other cases cited by Whimsicality warrant brief mention. We have referred above to National Theme Productions, supra, 696 F.Supp. 1348. The other case is Animal Fair, Inc. v. Amfesco Indus., Inc., 620 F.Supp. 175 (D.Minn.1985), aff'd mem., 794 F.2d 678 (8 Cir.1986). At issue in Animal Fair was a slipper in the shape of a bear’s paw, which the court held to be copyrightable. Although slippers and costumes are similar in that they are wearable, we distinguish Animal Fair on two grounds. First, a slipper, unlike a costume, has a relatively firm form which can be identified for copyright purposes. Second, plaintiffs application to the Copyright Office in Animal Fair was not nearly as misleading as Whimsicality’s. While the application categorized the slipper as “sculpture”, it listed the title of the work as the “BEARFOOT slipper” (emphasis added). By contrast, Whimsicality’s works are listed as the “Whimsicality Bee” or the “Whimsicality Jack O’ Lantern,” etc. Moreover, in contrast to Whimsicality, the photos accompanying the Animal Fair application made clear that the article was a slipper.
It is the law of this Circuit that the “knowing failure to advise the Copyright Office of facts which might have occasioned a rejection of the application constitute^] reason for holding the registration invalid and thus incapable of supporting an infringement action.” Eckes, supra, 736 F.2d at 861-62 (quoting Russ Berrie & Co. v. Jerry Elsner Co., 482 F.Supp. 980, 988 (S.D.N.Y.1980)). Faced as we are with that exact situation in the instant case, we hold that Whimsicality, because of its misrepresentations, does not have valid copyrights capable of enforcement. We express no opinion on the unfair competition claim now before the district court.
III.
The Copyright Act provides that the district court, in its discretion, may award attorney’s fees to the prevailing party. 17 U.S.C. § 505 (1982). We review the determination of the district court for abuse of discretion. Roth v. Pritikin, 787 F.2d 54, 57 (2 Cir.1986).
We have interpreted the statute to distinguish between prevailing plaintiffs and defendants. Plaintiffs who prevail are awarded fees as a matter of course. Diamond v. Am-Law Pub. Corp., 745 F.2d 142, 148 (2 Cir.1984). Defendants, on the other hand, will recover if “plaintiffs claims are objectively without arguable merit,” id., or “ ‘baseless, frivolous, unreasonable or brought in bad faith.’ ” Roth, supra, 787 F.2d at 57 (quoting Grosset & Dunlap, Inc. v. Gulf & Western Corp., 534 F.Supp. 606, 610 (S.D.N.Y.1982)).
The district court here found that the issue whether costumes are copyrightable was “difficult”, and declined to award fees to Rubie’s based on its disposition. As stated above, we do not reach the copyrightability issue. Our disposition instead is premised on misconduct by Whimsicality. While the district court may not have abused its discretion in view of its substantive result, its refusal to award fees must be reassessed in light of our holding.
We know of no cases that apply § 505 to misrepresentations in a copyright application. We have little difficulty, however, in holding that Whimsicality’s willful misrepresentation falls within the meaning of “bad faith” under our case law. Cf. Mailer v. RKO Teleradio Pictures, Inc., 332 F.2d 747, 749-50 (2 Cir.1964) (assessing fees against “unreasonable” losing plaintiff).
We vacate that part of the district court’s order which declined to award attorney’s fees to Rubie’s, and we remand the case to the district court for determination of that issue in light of this opinion.
IV.
To summarize:
We affirm so much of the district court’s order which denied Whimsicality’s application for injunctive relief and granted summary judgment in favor of Rubie’s on Whimsicality’s claim of copyright infringement. We do so, however, on the ground that Whimsicality misrepresented the nature of its work to the Copyright Office. We therefore vacate that part of the district court’s order which declined to award attorney’s fees to Rubie’s, and we remand the case to the district court for determination of that issue in light of this opinion.
Affirmed in part; vacated and remanded in part.
. Since the district court reserved decision on the unfair competition claim until after discovery and a hearing on the merits as to that claim, it is not before us on this appeal. We reject Whimsicality’s contention that the district court's failure to consider the unfair competition claim fully when it denied injunctive relief constituted an abuse of discretion. Charles of the Ritz Group, Ltd. v. Quality King Distrib., Inc., 832 F.2d 1317, 1320 (2 Cir.1987).
. The copyright registration numbers for these six creations are, respectively, VA 312 952, VA 312 084, VA 312 085, VA 148 458, VA 148 459, and VA 148 460.
. Indeed, Ruble's has submitted some of its creations, including the allegedly infringing Bee, to the Copyright Office for registration as costumes. The Copyright Office responded that costumes are not copyrightable.
. While we review the district court’s factual findings under the "clearly erroneous” standard, we apply a more searching standard of review to the question whether Whimsicality committed fraud within the meaning of the Copyright Act, which is a mixture of law and fact. Weissmann v. Freeman, 868 F.2d 1313, 1317 (2 Cir.), cert. denied, 110 S.Ct. 219 (1989); Picture Music, Inc. v. Bourne Inc., 457 F.2d 1213, 1215 n. 5 (2 Cir.), cert. denied, 409 U.S. 997 (1972); Donaldson Pub. Co. v. Bregman, Vocco & Conn, Inc., 375 F.2d 639, 641 (2 Cir.1967), cert. denied, 389 U.S. 1036 (1968).
. In its applications filed in the Copyright Office, National Theme stated that "no claim is made on functional designs of clothing” but only on the allegedly separable elements. Moreover, the accompanying photos showed human models wearing the costumes. We express no opinion as to the merits of National Theme’s claim of copyrightability, accepted by the district court in that case; we wish only to demonstrate that Whimsicality had alternatives to deception, and we decline to follow the National Theme decision.
. The district court stated that "[p]ossessed of at least an understandable bias about the uniqueness of its creations, Whimsicality could arguably justify describing them to the Copyright Office as something other than just costumes." 721 F.Supp. at 1570. While we do not wish to discourage designers from taking pride in their creations, we caution applicants that, in their submissions to the Copyright Office, honesty is the best policy.
. We deny Whimsicality’s motion to strike portions of Rubie's brief.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
LOGAN, Circuit Judge.
In this diversity case an insurance sales agent, Bloomfield Financial Corporation (BFC), sued for breach of its agency contract with National Home Life Assurance Company (NHL). BFC claimed that NHL (1) failed to honor its agreement to pay BFC commissions equal to the highest percentage commission of any agency doing business with NHL, (2) breached its implied duty of good faith and fair dealing, and (3) unilaterally terminated the contract after notifying BFC that it would no longer distribute its policies through personal producing agents. BFC sought damages for the value.of the agency contract, including lost profits flowing from its impaired ability to recruit and retain agents because NHL paid higher percentage commissions to another agency. In addition, in a separate tort action BFC asked for compensatory and punitive damages based on NHL’s breach of its implied duty of good faith and fair dealing. The trial court granted NHL’s motion to dismiss the tort claim, reasoning that the Colorado Supreme Court probably would not recognize an independent tort action for breach of implied contractual duties. BFC’s three contract claims were submitted to the jury. After answering special interrogatories, the jury rendered a general verdict for BFC for $750,000.
NHL asks us to grant a new trial on the award of contract damages, alleging that the trial court erred by (1) permitting proof of gross rather than net profits and failing to require the jury to reduce damages to present worth, (2) allowing the jury to assess damages without any evidence as to how much of the loss was caused by the breach of contract and how much by market forces, (3) excluding evidence on mitigation of damages and failing to properly instruct the jury on BFC’s duty to mitigate, (4) permitting prejudicial testimony of NHL’s acts which were actually done in conformance with the contract, and (5) admitting into evidence a memorandum prepared by NHL attributing a value to BFC’s contract because the memorandum was part of settlement negotiations. NHL also asserts that it was entitled to judgment notwithstanding the verdict (1) because the parties did not contemplate BFC’s loss when they negotiated the contract, (2) because NHL’s duty to deal in good faith could not be implied from any provision of the contract, and (3) because NHL was free at any time to cease marketing its products through outside sales agencies.
BFC appeals the trial court’s dismissal of its tort claim, contending that the Colorado Supreme Court would recognize the concurrent tort and contract liability of a party that breaches its implied duty of good faith and fair dealing.
I
Before 1973 NHL marketed almost all of its insurance plans through the mail. Thomas Long and Kenneth Manley, the owners of BFC, approached the executive vice president of NHL, Robert Safford, about selling NHL insurance plans through a sales force of personal producing agents. NHL ultimately accepted the proposal and signed a standard agency sales contract in October 1973. After enjoying immediate success selling NHL products in Michigan, Long and Manley, on behalf of BFC, signed a second agreement with NHL in August 1974. This agreement provided that NHL could terminate its agency agreement with BFC only if BFC engaged in fraud or unethical practices, became bankrupt, or failed to satisfy an annual production quota. This provision appeared in all subsequent agreements between the two companies.
During the term of a third agreement signed in 1976, BFC expanded its NHL sales operation to Colorado. BFC and NHL executed the final agreement on February 3, 1978. At this time and for the preceding years, BFC had produced more premiums for NHL than any other agency. The 1978 agreement was similar to the 1976 agreement and was, according to general counsel for NHL, the best contract the company had ever given a general agent. The contract declared that the commissions payable to BFC “with respect to any policy or plan of insurance shall at all times equal the highest percentage commission payable by the Company.” In addition, BFC was to receive an annual 5% vested bonus.
Beginning in October 1978, NHL began paying higher commissions to the A.L. Williams agency than to BFC. BFC witnesses indicated that the Williams agency and its agents could make 52% more commission on a single sale than BFC and its agents, and up to 140% more commission if a rider (in essence, an additional policy for a family member of the insured) were sold with the policy. At least three of NHL’s senior officials admitted that payment of the higher commissions to the Williams agency breached its 1978 agreement with BFC. BFC officers testified that payment of higher commissions to the Williams agency made it difficult for BFC to recruit new agents and keep existing agents on the job.
After BFC complained that they were receiving lower commissions than the Williams agency, NHL set up the “Long-Manley” committee to study the 1978 agreement. Stephen West, general counsel for NHL and chairman of the committee, concluded that NHL could not terminate the agreement except for nonproduction. West wrote in a memorandum opinion to NHL officers: “The draftor [sic] of [the 1978] Agreement has effectively tied up NHL to a degree that I see no viable means of terminating this Agreement unless we have a concerted plan to so alienate L/M [Long-Manley] as to cause them to cease writing business.” As a result NHL’s division of agency operations gave BFC’s business the lowest priority for processing, and NHL’s personnel consistently failed to return BFC’s phone calls. In July 1979 West sent a letter to BFC stating that BFC could only communicate with four persons at NHL and that the communication must be in writing. NHL officials stated that they had never heard of such a restriction, and one official testified that the restriction “in effect put them [BFC] out of business.”
BFC was finally forced to close the Colorado office but was able to keep the 1978 agreement in force by producing enough first-year premiums to avoid termination. Nonetheless, NHL unilaterally terminated the agreement by a letter dated December 24, 1980. The letter stated, in pertinent part,
“Effective February 1, 1981, National Home Life will no longer distribute its life and health products through personal producing general agents. This decision was made as a result of a prior management decision to withdraw the Company’s deposit term line of products. In as much as this line of products accounted for a substantial majority of the overall production, management has decided that distribution of the remaining products through personal producing general agents would not be cost effective.”
Despite the letter NHL continued to market policies and plans of insurance through personal producing agents. Donald Williamson, NHL’s Senior Vice President of Personal Sales, testified that some of the 250 agents now with NHL were with NHL before the December 24, 1980, letter was sent. Many of the policies that NHL now sells through these agents NHL sold through BFC before NHL terminated the 1978 agreement.
II
NHL argues that a new trial should be granted on the issue of damages because the trial court permitted the jury to base its award on evidence of BFC’s loss of gross rather than net profits. BFC established its damages primarily through the testimony of Thomas McComb, a consulting actuary, who testified regarding the net value of NHL’s 1978 agreement at the time of the breach. McComb’s approach was to compute BFC’s net income loss in a single year based on the amount of premiums BFC would produce in an average year. Once McComb calculated this loss, he arrived at the total net present value of the 1978 agreement based on an assumed duration for the agreement and an assumed discount rate. See Massachusetts Bonding & Ins. Co. v. Johnston & Harder, Inc., 348 Pa. 512, 35 A.2d 721, 724 (1944) (under Pennsylvania law contract damages are measured by the value of the contract on the date of breach, taking into account the length of time the contract is assured of legal existence). McComb relied on information from BFC that the office expense allowance received from NHL covered all of BFC’s costs incurred in generating new first year premiums. NHL did not offer evidence that the office expense allowance failed to cover the cost of producing new business or that the damage calculations of McComb reflected anything other than loss of net revenues. Rather, relying upon BFC tax returns which show that BFC incurred other expenses, NHL asserts that the “office expense allowance was not comparable to all the costs of running the business.” Brief for Defendant-Appellee/Cross-Appellant at 13. We believe McComb’s testimony focused on the net profitability of the 1978 contract and hence was properly admitted.
NHL further asserts that BFC failed to demonstrate how much income loss was caused by NHL’s breach and how much by market factors. However, BFC proved the amount of net profits it lost under the 1978 agreement because of NHL’s breach and called witnesses who discussed the impact of various market factors on BFC’s business. The evidence in the record adequately supports the jury’s verdict.
III
NHL argues that the trial court erroneously instructed the jury on BFC’s duty to mitigate damages and erroneously excluded evidence of the personal earnings of BFC’s owners, Long and Manley, following the breach. The court’s instruction on mitigation of damages was as follows: “You are instructed that a corporation has the duty to take such reasonable steps under the circumstances as will minimize its damages. Any damages resulting from a failure to take such reasonable steps cannot be recovered.” We find nothing wrong with this instruction. In Nelsen v. Farmers Mutual Auto Ins. Co., 4 Wis.2d 36, 90 N.W.2d 123 (1958), also a case involving termination of an insurance agency contract, the court approved an instruction directing the jury to determine the value of plaintiff’s contract and business on the date of defendant’s breach and not to deduct personal earnings of the plaintiff following the breach. The court quoted with approval this statement from the trial court's opinion:
“ When the defendants deprived plaintiff of an asset he owned, the damages were determinable from the value of that asset at the time; they were not to be reduced by his personal earnings. The value of the asset was not to be determined by the wages earned by its owner. The plaintiff’s insurance business had value which was to be determined from its inherent worth; it was not to be found by computing how much its owner was able to earn from his personal services after the loss of such business.’ ”
90 N.W.2d at 137. The court also relied on the rule that the Wisconsin Supreme Court enunciated in Richey v. Union Central Life Ins. Co., 140 Wis. 486, 491, 122 N.W. 1030, 1032 (1909):
“The point is made that the amount of damages so found should have been reduced by what the respondent earned outside of the contract employment after breach and before trial. The court properly refused this deduction. This is an action to recover the damages caused by the breach of the contract to respondent's agency business, built up under this agreement. When appellant terminated the agreement and destroyed the business, its liability became fixed. It was responsible for the value of the agency business as- it then existed, and which went out of existence by its illegal act.”
The 1978 agreement did not limit BFC to marketing NHL policies nor did it require Long and Manley to personally oversee NHL agency business. While Long and Manley, the owners of BFC, were personally active in the business, they employed office personnel and many agents. Indeed, they had moved to Colorado, leaving the day-to-day management of the Michigan office to other BFC personnel. Under these circumstances, we believe the Pennsylvania courts would not impose a duty to offset earnings of BFC, Long, or Manley after the breach to deprive BFC of damages for NHL’s destruction of a BFC asset, the 1978 agreement. See Willred Co. v. Westmoreland Metal Mfg. Co., 200 F.Supp. 59, 63 (E.D.Pa.1961). The mitigation rule applicable in the case at bar is analogous to the damage rule applied in lost-volume sales cases. For example, when a buyer breaches a contract to purchase an automobile from a dealer, the dealer is entitled to the benefit of its bargain whether or not it ultimately resells the car intended for the breaching customer. This is so because in theory the dealer can supply as many new cars as there are buyers. The fact of resale demonstrates that two or more buyers exist and that the seller could expect to earn two profits once the original buyer agreed to make his purchase. See D. Dobbs, Remedies 889 (1973). Here the 1978 agreement did not limit BFC to marketing NHL policies. BFC could have performed similar services for other insurance companies.
IV
After examining the applicable Pennsylvania law on discounting damage awards for loss of future income, the trial court concluded that the Pennsylvania Supreme Court would apply the “total offset” rule in this case. The total offset rule assumes that the rate of inflation will cancel out the discount rate and thus does not permit any alteration of the damage award. NHL, citing Windle v. Davis, 275 Pa. 23, 118 A. 503 (1922), contends that the jury award in this case should have been discounted to present value. We disagree. In Kaczkowski v. Bolubasz, 491 Pa. 561, 421 A.2d 1027 (1980), the Pennsylvania Supreme Court wrote: “[W]e find as a matter of law that future inflation shall be presumed equal to future interest rates with these factors offsetting. Thus, the courts of this Commonwealth are instructed to abandon the practice of discounting lost future earnings.” 421 A.2d at 1038-39. NHL contends that the rule in Kaczkowski is limited to wrongful death cases. The Kaczkowski court did note that it did not intend to fashion a general rule applicable to all awards and said that whether the total offset rule should be applied should be resolved on a case-by-case basis. 421 A.2d at 1036 n. 21. But after Kaczkowski the courts have extended the total offset rule to personal injury cases. Funston v. United States, 513 F.Supp. 1000, 1009 (M.D.Pa.1981); Barnes v. United States, 516 F.Supp. 1376, 1390 (W.D.Pa.1981), aff'd, 685 F.2d 66 (3d Cir.1982). The assumption that inflation will offset the interest earned on a lump sum award applies to lost future commissions just as it applies to other lost future income. We see no meaningful distinction between Kaczkowski and the ease at bar. The trial court did not err in concluding that the Pennsylvania Supreme Court would apply the total offset rule to the facts of this case. See Pfeifer v. Jones & Laughlin Steel Corp., 678 F.2d 453, 456 (3d Cir.1982) (discounting a lump sum award for lost future earnings is a practice effectively abolished in Pennsylvania).
V
Defendant argues that the trial court should have entered a directed verdict against BFC on its cause of action for unilateral termination of the 1978 agreement. The 1978 agreement provides that the only grounds for termination are BFC’s bankruptcy, fraudulent conduct, or lack of production. The contract could continue indefinitely. NHL asserts that Moore v. Security Trust & Life Insurance Co., 168 F. 496 (8th Cir.1909), cert. denied, 219 U.S. 583, 31 S.Ct. 469, 55 L.Ed. 346 (1910), indicates that a company cannot negotiate away its right to terminate a product line or sell its business. The Moore Court examined a claim arising from the defendant insurance company’s transfer of its business to a rival company. The court said that plaintiffs’ claim that the transfer breached its agency contract was
“too feeble to withstand the compelling force of the presumption that the plaintiffs could not have intended to surrender control of their own business and services for life, and the defendant could not have intended to surrender its right or to limit the exercise of its right to manage, control, continue, or terminate its business of insurance at will.”
168 F. at 500. We believe Moore is inapplicable to the case at bar. NHL continues to market policies and plans of insurance through personal producing agents. Many of the products that NHL offers through these agents are the same products that NHL offered through BFC before termination of the 1978 agreement. Clearly, NHL’s unilateral termination violated the provision of the agreement giving BFC the right to market any policy NHL offers, especially since the evidence shows that NHL has continued to market insurance products through personal agents. The trial court properly denied NHL’s motion for a directed verdict.
VI
NHL makes a number of other arguments, including that (1) the trial court improperly admitted evidence of the difference in the percentage commission payable on riders; (2) the trial court erred in admitting an intra-corporate memorandum prepared by NHL attributing a value of $569,-000 to BFC’s “discounts and deferreds” because the memorandum was part of settlement negotiations; (3) BFC introduced no relevant evidence that would have permitted the jury to determine lost future profits; (4) BFC was not entitled to recover damages except for interest on the amount due BFC by reason of the higher commissions paid to the A.L. Williams agency; (5) BFC should not have received damages for the impairment of its ability to recruit new agents because this loss was not within the contemplation of the parties; and (6) NHL’s motion for judgment n.o.v. was improperly denied on BFC’s cause of action for breach of the implied duty of good faith and fair dealing because this implied duty cannot be implied from any provision in the contract. Some of these arguments are subsumed in the discussion above. We have examined all of the arguments and find them meritless.
VII
Finally, BFC appeals the dismissal of its tort claim for compensatory and punitive damages for breach of implied contractual duties. After noting that several jurisdictions now recognize an independent tort action based on “oppressive or willful and wanton breach of the implied duty of good faith and fair dealing,” the trial court concluded that the Supreme Court of Colorado would not recognize an independent tort action for breach of implied contractual duties.
Colorado maintains a sharp distinction between tort and contract actions, defining tort as the breach of a legal duty arising by law, independent of contract. Newt Olson Lumber Co. v. School District Number Eight, 83 Colo. 272, 274, 263 P. 723, 724 (1928); see also Davis Cattle Co. v. Great Western Sugar Co., 393 F.Supp. 1165, 1196 (D.Colo.1975), aff'd, 544 F.2d 436 (10th Cir.1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1109, 52 L.Ed.2d 541 (1977). In Davis the plaintiff claimed that the defendant breached an implied contractual duty to deal in good faith in determining the highest practicable price to be paid for sugar beets. 393 F.Supp. at 1181. Despite expressly finding that defendant breached its contractual obligations in bad faith, the trial court denied recovery in tort.
“The gravamen of plaintiff’s claim under ... which I have allowed recovery is ultimately founded on breach of contract — either outright breach of a specific covenant or a bad faith breach of a contractual duty to use good faith. Although I have imposed liability on defendant for its ‘fraud, or such gross mistake on (its) part (which implies) bad faith, or a failure to exercise an honest judgment,’ this is not equivalent to a finding of common law fraud. What I have ultimately found is bad faith or gross mistake on defendant’s part in disobeying its contractual obligations, and I have imposed liability on this ground. I have recognized no tort liability as such. That being true, exemplary damages cannot be awarded under the law of Colorado.”
Id. at 1196.
BFC would have us ignore such cases as Newt Olson and Davis Cattle because of Colorado’s alleged penchant for following new tort trends. The eases that BFC cites suggest that the Colorado Supreme Court has typically embraced only those new causes of action consistent with the Restatement (Second) of Torts and previously adopted by the courts of numerous other states, e.g., Towns v. Anderson, 195 Colo. 517, 579 P.2d 1163 (1978) (impact requirement abolished in cases of negligent infliction of emotional distress); those supported by strong policy considerations, e.g., Mile High Fence Co. v. Radovich, 175 Colo. 537, 489 P.2d 308 (1971) (abolition of classification system to determine duty owed to person injured while on another’s property); or those in which the Colorado state legislature directed recognition, e.g., Rugg v. McCarty, 173 Colo. 170, 476 P.2d 753 (1970) (recognition of tort action for invasion of right to privacy). None of these circumstances are present here. In fact, recovery in tort for breach of an implied contractual duty has been permitted only in a few jurisdictions, and generally only under extraordinary circumstances. See B.B. Walker Co. v. Ashland Chemical Co., 474 F.Supp. 651, 665 (M.D.N.C.1979) (punitive damages for tortious breach of contract should be assessed when defendant’s wrongdoing is intentional and deliberate and rises to a degree of outrageousness frequently associated with crime); National Homes Corp. v. Lester Industries, Inc., 336 F.Supp. 644, 647 (W.D.Va.1972) (recovery of exemplary damages for breach of contract limited to those exceptional cases in which the breach amounts to an independent, willful tort). But cf. Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 729-30 (7th Cir.1979), cert. denied, 445 U.S. 917, 100 S.Ct. 1278, 63 L.Ed.2d 601 (1980) (court awarded punitive damages to a franchisee for multiple, oppressive, and intentional breaches when evidence showed that defendant sought to ruin plaintiff’s business and thereby force plaintiff to resell its franchises to the franchisor at a reduced rate). The trial court did not err in dismissing BFC’s tort action.
AFFIRMED.
. Both parties agree that because the 1978 agreement was negotiated and executed in Pennsylvania that state’s law applies to the interpretation of the contract’s provisions.
. BFC concedes that it is not entitled to a second recovery of actual damages for NHL’s alleged tortious breach of contract. At stake in this appeal is whether NHL is entitled to a jury trial on the issue of punitive damages.
. Both parties agree with the trial court that Colorado law governs BFC’s claim in tort.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
COFFIN, Chief Judge.
These are cross appeals arising out of the actions of the district court in dismissing a negligence count in plaintiff’s libel complaint against defendant newspaper and in granting plaintiff’s motion to compel the disclosure of three of defendant newspaper’s confidential sources and information conveyed by them to defendant. Each appeal presents an important question: first, whether plaintiff corporation, as described in the complaint, was correctly held by the district court to be a “public figure”, and must thus meet the standard of “actual malice”, i. e., proof that defendant’s statements were made “with knowledge that [they were] false or with reckless disregard of whether [they were] false or not”, under New York Times Co. v. Sullivan, 376 U.S. 254, 280, 84 S.Ct. 710, 726, 11 L.Ed.2d 686 (1964); and second, whether, on the record so far established in this case, defendant has a privilege to refuse to reveal confidential sources relating to the subject matter of the statements sued upon.
Plaintiff, Bruno & Stillman, Inc. (hereinafter “the company”), is a Delaware corporation engaged in the manufacture and sale of commercial fishing boats with a principal place of business in New Hampshire. The defendant is the Globe Newspaper Company, publisher of the Boston Globe (hereinafter “the Globe ”), with a principal place of business in Massachusetts. According to the facts alleged in the complaint, the company began building 35 to 55 foot fiberglass workboats in 1971, selling eight in that year. By dint of “enormous work and effort... in manufacturing, promoting and selling boats”, sales increased steadily, so that in 1977 the company sold nearly forty 35-foot boats, forty 42-footers, and ten 55-footers, and some newly introduced 35-foot pleasure boats. Between 1971 and the end of 1977 the company had sold over 400 boats “throughout the world” and had become the largest builder of fishing boats in New England. It enjoyed an “excellent reputation as a quality boat builder in the tough and competitive commercial fishing industry”.
On Sunday, December 25, 1977, the Globe published a full page story on the company. On the following day, the Globe published a second such story, occupying parts of three pages, over the byline of William P. Cough-lin. Both stories listed and described alleged reports of some thirteen defects observed in one or more of five named boats built by the company. Critical comments of owners, surveyors, Coast Guard marine inspection officers, some company employees, and a repairman were narrated. Roughly a fifth of a page was devoted, under the caption of “Builder’s Answers”, to company comments on nine alleged defects. Three specific hull problems found in company-built boats-splitting of the bow, cracking of the keel, and water seepage into the balsa wood core between fiberglass layers-occupied the second article. A month later, on January 23 and 25, 1978, two more stories reported alleged defects that may have played a part in the sinking of two company-built boats on January 17 and 20. On January 26, the Globe carried an article in which the captain of one of the sunken vessels denied the company’s claim that clogged scuppers were the cause, and gave the crew’s opinion that the boat’s skeg had separated from the bottom.
After the company complained to the Globe of distortions and inaccuracies, a final article was published in April of 1978, over the byline of the Globe’s “Ombudsman”, reviewing Coughlin’s reporting of problems with 37 company-built boats, finding it “legitimate news” and fairly written, but noting matters that had come to light that were more favorable to the company and concluding that definitive answers were yet to be awaited.
The company, unsatisfied, brought suit on August 18, 1978. Count I sounds in negligence; Counts II and III allege intentional and malicious libel. The prayer for relief seeks ten million dollars, costs, expenses, and attorney’s fees. Discovery on the part of plaintiff ensued, resulting in the production by the Globe of some 1500 pages in 66 file folders of notes of the reporter Cough-lin, but not including notes containing the names of and some information from three sources who were said to have given information in the expectation that their identity would be kept in confidence. A lengthy deposition of Coughlin revealed no information as to the role these sources had. played in the series of Globe stories. In answering interrogatories the Globe stated that it would not rely at trial on any documents as to which a claim of confidential source is made. It acknowledged that there are reports, tests, or evaluations among such documents.
The district court, in responding to the Globe’s motion to dismiss, took note of the efforts of the Supreme Court “to accommodate the First Amendment’s guarantee of a free press with the competing interest which States have in protecting the reputation of natural persons”, from New York Times Co. v. Sullivan, supra, to Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). Its essential reasoning and ruling were as follows:
“The crucial inquiry here is whether corporations, for purposes of the First Amendment, are more akin to public figures or private individuals. In the two key respects outlined in Gertz, corporations appear more like public figures. First, corporations often enjoy greater access to the channels of communication than do private individuals. Second, and more importantly, by engaging in the business of selling products, corporations voluntarily place before the public an issue of some importance regarding the quality and integrity of their products. In addition, corporations generally promote the sale of their products to the public by engaging in some form of advertising. Thus, at least to the extent that allegedly defamatory publications relate to the quality of the products which a corporation markets, I rule that corporations should be treated as public figures. Trans World Accounts, Inc. v. Associated Press, 425 F.Supp. 814 (N.D. Cal.1977); Reliance Insurance Co. v. Bar ron’s, 442 F.Supp. 1341, 1348-49 (S.D.N. Y.1977).”
Since all of the Globe’s articles related to the quality of the company’s products, plaintiff fitted within this context. The court dismissed the Count based on mere negligence and entered final judgment under Fed.R.Civ.P. 54(b).
Next, in dealing with plaintiff’s request to compel discovery, the court drew on Herbert v. Lando, 441 U.S. 153, 99 S.Ct. 1635, 60 L.Ed.2d 115 (1979), which had declined, in a defamation suit by a public figure, to add to plaintiff’s burdens by precluding inquiry into the editorial process. The district court also relied on Garland v. Torre, 259 F.2d 545 (2d Cir.), cert. denied, 358 U.S. 910, 79 S.Ct. 237, 3 L.Ed.2d 231 (1958), and adopted its prudential guidelines predicating disclosure of a confidential source on criticality of the information sought to plaintiff’s claim, non-availability of the information from other sources, and non-frivolousness of plaintiff’s cause of action. Finding these requirements satisfied, the court compelled disclosure of the confidential sources and the information derived therefrom. It certified an interlocutory appeal under 28 U.S.C. § 1292(b).
I. PUBLIC FIGURE
Before New York Times v. Sullivan, supra, defamation law strongly favored the state’s interest in protecting reputation, approached strict liability, and gave little room to First Amendment considerations. Once a plaintiff put into evidence a reputa-. tion-harming statement and proof that defendant caused it to be disseminated, he enjoyed an irrebuttable presumption of injury and a rebuttable presumption of falsity. Eaton, The American Law of Defamation Through Gertz v. Robert Welch, Inc. and Beyond: An Analytical Primer, 61 Va. L.Rev. 1349, 1353 (1975) (hereinafter “Eaton”). In 1964 the Court in New York Times significantly changed the balance. It recognized, in Madison’s phrase, that “[T]he censorial power is in the people over the Government”, 376 U.S. at 275, 282, 84 S.Ct. at 721, 727; that keeping this power free of fetters called for “uninhibited, robust, and wide open” debate on public issues, id. at 270, 84 S.Ct. at 720; and that, since “erroneous statement is inevitable in free debate”, even such a statement must be protected to a greater extent than was afforded by the mere defense of truth. Id. at 271-72, 84 S.Ct. at 721. Consequently, the Court held, public officials, in order to prevail in defamation suits, must establish “actual malice”. Furthermore, not only must such knowledge of falsity or reckless disregard of truth be established but it must be established by clear and convincing proof.I.
It is relevant to our deliberations to recognize the almost decisive amplitude of “breathing space” surrounding defamatory falsehood, once a plaintiff is obliged to meet the New York Times standard. One commentator concludes that “[T]he constitutional privilege [recognized in New York Times] in practical effect became a near-immunity from defamation judgments.” Eaton, supra, at 1373. The Court in Gertz, supra, uses only slightly less emphatic language:
“This standard administers an extremely powerful antidote to the inducement to media self-censorship of the common-law rule of strict liability for libel and slander. And it exacts a correspondingly high price from the victims of defamatory falsehood. Plainly many deserving plaintiffs, including some intentionally subjected to injury, will be unable to surmount the barrier of the New York Times test.” 418 U.S. at 342, 94 S.Ct. at 3008.
In cases subsequent to New York Times, the Court has varied its formulations of underlying policy and has first expanded, then shrunk the quantum of deference to First Amendment considerations. In Rosenblatt v. Baer, 383 U.S. 75, 85-86, 86 S.Ct. 669, 675-676, 15 L.Ed.2d 597 (1966), the term “public official” was declared to include at least those in the hierarchy of government employees “who have, or appear to have, substantial responsibility for or control over the conduct of governmental affairs.” In the following year, Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967), the Court extended “public official” requirements of proof to nonofficial “public figures”, in this case a famous football coach. The widening of the area subject to the New York Times standard reached its outermost limits in Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 (1971). In this case the Court, sharply divided, subjected to the “actual malice” standard a defamation plaintiff who was neither a public official nor a public figure but a magazine distributor who had been arrested for distributing obscene literature in the course of a law enforcement drive, had been labelled a “smut merchant”, and subsequently was acquitted. The linchpin of analysis had become, in the opinion of the plurality, simply “whether the utterance concerns an issue of public or general concern.” Id. at 44, 91 S.Ct. at 1820.
This pronouncement lasted some three years, until in 1974 in Gertz, supra, the Court decided that “The extension of the New York Times test proposed by the Ro-senbloom plurality would abridge this legitimate state interest [in protecting the reputation of a private individual] to a degree that we find unacceptable.” 418 U.S. at 346, 94 S.Ct. at 3010. The Court noted the additional difficulty of plunging judges into the business of deciding which issues were or were not of “general or public interest”. Id. While thus easing the task of the defamed private plaintiff, the Court established a higher threshold of liability for statements by publishers and broadcasters by precluding states from imposing liability without fault. It also barred punitive damages absent a showing of knowledge of falsity or reckless disregard for the truth. Having reached what it deemed the correct accommodation of the competing debate and reputation values at stake, the Court proceeded to endeavor to lay down a broad rule, which would preclude an ad hoc balancing of competing interests in each case.
It began by noting, without significant emphasis, that one factor usually distinguishing public officials and public figures was the remedy of self-help, “significantly greater access to the channels of effective communication... and... a more realistic opportunity to counteract false statements than private individuals normally enjoy.” Id at 344, 94 S.Ct. at 3009. In the same breath the Court acknowledged that “an opportunity for rebuttal seldom suffices to undo harm of defamatory falsehood.” Id n. 9.
The Court then delineated three major classes of public figures. The first included persons who have “assumed roles of especial prominence in the affairs of society”, id. at 345, 94 S.Ct. at 3009, or who have achieved “pervasive fame or notoriety”, id. at 351, 94 S.Ct. at 3012, as well as those who “occupy... positions of... persuasive power and influence”, id. at 345, 94 S.Ct. at 3009, or are “pervasively] involve[d] in the affairs of society.” Id at 352, 94 S.Ct. at 3013. Such persons are considered public figures for all purposes. A second class envisaged might consist of those who become public figures through no purposeful action, “but the instances of truly involuntary public figures must be exceedingly rare.” Id. at 345, 94 S.Ct. at 3009. The third class, the relevant one for the purposes of this case, is constituted of persons who “have thrust themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved.” Id. at 345, 94 S.Ct. at 3009. These persons are public figures for a limited range of issues. The Court gave guidance as to this category: “It is preferable to reduce the public-figure question to a more meaningful context by looking to the nature and extent of an individual’s participation in the particular controversy giving rise to the defamation.” Id. at 352, 94 S.Ct. at 3013.
In Gertz, the plaintiff was a lawyer for a family seeking civil damages from a policeman for the killing of a son. A periodical of the John Birch Society, exercised over the criminal prosecution of the policeman, charged that plaintiff played a part in framing the policeman, falsely labelled plaintiff a “Leninist”, “Communist-fronter”, and planner of attacks on the police, and implied, falsely, that he had a criminal record. Despite the fact that plaintiff, a Chicagoan, had been an officer of civic groups and professional organizations, and had published several legal books and articles, the Court observed that he had had nothing to do with the criminal prosecution and had never discussed either the civil or criminal litigation with the press. “He plainly did not thrust himself into the vortex of this public issue, nor did he engage the public’s attention in an attempt to influence its outcome.” Id. at 352, 94 S.Ct. at 3013.
With Gertz, tinkering with the doctrinal balance struck between protecting uninhibited debate and protecting reputations seems to have ceased, at least for the present. The subsequent Supreme Court cases have, however, added a gloss in applying doctrine to specific cases. In Time, Inc. v. Firestone, 424 U.S. 448, 96 S.Ct. 958, 47 L.Ed.2d 154 (1976), the Court had occasion to deal with a plaintiff who, to use the Gertz lexicon, had prominence, fame, and notoriety. A prominent member of Palm Beach society, she had gained even more publicity as the result of hotly contested divorce proceedings. The Court, however, stopped at the threshold, declining “to equate ‘public controversy’ with all controversies of interest to the public.” Id. at 454, 96 S.Ct. at 965. Marital difficulties, even among the wealthy, did not qualify, and plaintiff had not (despite holding some press conferences “to satisfy inquiring reporters”) publicized issues bearing on her married life. Id. at 454-55, 96 S.Ct. at 965.
In Wolston v. Reader’s Digest Ass’n, Inc., 443 U.S. 157, 99 S.Ct. 2701, 61 L.Ed.2d 450 (1979), plaintiff had, in the late 1950’s, failed to respond to a grand jury subpoena in a major Soviet spy ring investigation, pleaded guilty to a contempt charge, and received a suspended sentence. In a 1974 publication, plaintiff was referred to as a Soviet agent. The Court held that plaintiff’s voluntary choice not to appear before the grand jury, even knowing that publicity would result, was not enough to make him a public figure. Merely being associated “with a matter that attracts public attention”, absent any attempt to engage the attention of the public to influence the resolution of issues involved, was “no basis whatsoever for concluding that petitioner relinquished, to any degree, his interest in the protection of his name.” Id. at 167-68, 99 S.Ct. at 2708. Nor does a prior conviction “create an ‘open season’ for all who sought to defame persons convicted of a crime.” Id. at 169, 99 S.Ct. at 2708.
The last in the series, Hutchinson v. Proxmire, 443 U.S. 111, 99 S.Ct. 2675, 61 L.Ed.2d 411 (1979), concerned a plaintiff who was a research behavioral scientist mentioned unfavorably in connection with Senator Proxmire’s “Golden Fleece of the Month” award to governmental agencies that had sponsored his research. Notwithstanding the facts that plaintiff had applied for and received funds from several federal and state agencies for his research in the amount of nearly half a million dollars over seven years and had filed required reports with at least one federal agency, the Court reasoned that any publicity came as a result of, and after, the Golden Fleece Award, that “those charged with defamation cannot, by their own conduct, create their own defense by making the claimant a public figure.”, id. at 135, 99 S.Ct. at 2688, that he did not thrust himself into controversy to influence others, that concern over public expenditures was not enough to make plaintiff a public figure, that he had not attained any “role of public prominence in the broad question of concern about expenditures”, and finally, that he “did not have the regular and continuing access to the media that is one of the accouterments of having become a public figure.” Id. at 135-36, 99 S.Ct. at 2688.
Although few generalizations can safely be promulgated, this review of Gertz and post- Gertz cases seems to warrant the comment of one scholar that: “A fairly high threshold of public activity is evidently necessary for a finding that a person has voluntarily plunged into a public controversy.” L. Tribe, American Constitutional Law 645 (1978). Moreover, the detailed, fact-sensitive nature of the precedent indicates that particularized determinations of public figure status are the rule. Accordingly, we begin our analysis by adopting a different approach from that of the district court, which took the broad position of deeming all corporations that sell products public figures, at least in relation to allegedly defamatory statements made about the quality of their products. We recognize the attraction of broad and clearcut definitions in terms of simplifying litigation, but we cannot see how corporations as a class can be said to be “public figures” for First Amendment purposes. For the most part, libel cases involving corporate plaintiffs, including the cases relied on by the district court, have not been decided on the broad grounds that all corporations are public figures. See, e. g., Trans World Accounts, Inc. v. Associated Press, 425 F.Supp. 814 (N.D. Cal. 1977). Indeed, not all such plaintiffs have been found to be public figures. See Vegod Corp. v. American Broadcasting Companies, Inc., 25 Cal.3d 763, 160 Cal.Rptr. 97, 603 P.2d 14 (1980). To the extent that access to the channels of communication is a meaningful factor, we suspect that many, if not most, corporations have no particular advantage over private individuals. The more significant factor of “thrusting”, here presumably by means of promotional efforts, is no less vulnerable to any effort to generalize. And the mere selling of products itself cannot easily be deemed a public controversy.
The only case that supports the district court’s approach rests upon an assumption that a corporation’s interest in protecting its reputation is less important than that of an individual person. Martin Marietta Corp. v. Evening Star Newspaper, 417 F.Supp. 947 (D.D.C.1976). We know of no support in New Hampshire libel law-the applicable substantive law in this diversity action-for such an assumption, and doubt that the damages awarded in various libel actions are consistent with this view. In any event, the assumption’s implications are certainly overbroad within the context of the constitutional issue presented, for they would suggest that any plaintiff, whether a corporation, unincorporated business, sole proprietorship, or even a private individual, would have to meet the public figure’s burden of proof wherever the aspects of the plaintiff’s reputation that was allegedly damaged were economic or pecuniary, as opposed to personal.
We shall therefore follow a more particularized approach. Our first task, following the guidance of Firestone, is to determine whether there was “the sort of public controversy referred to in Gertz”, 424 U.S. at 454, 96 S.Ct. at 965. Distinguishing what would be “an issue of public or general concern” under Rosenbloom, supra, 403 U.S. at 44, 91 S.Ct. at 1820, from a “public controversy” under Gertz is not a clearcut task. To the extent that we distinguish, we find ourselves returning to the job from which the Court in Gertz felt it had liberated us.
The ipse dixit in Firestone that marital difficulties even of the wealthy were not matters of public controversy is understandable as an instinctive reaction that the public can have no interest other than satisfaction of its curiosity in the outcome of a divorce proceeding. The mere fact that the immediate proceeding is between private individuals, however, does not guarantee that there could be no public controversy. A court proceeding to authorize the termination of provision of life support equipment to an infant or ward might, for example, be the center of a public controversy.
A case closer to the facts before us, i. e., a case involving commercial operations, is Vegod Corp. v. American Broadcasting Companies, Inc., supra. Plaintiff corporation engaged in the business of closing out stores and was allegedly defamed. The California Supreme Court, while conceding that the quality of goods for sale was a matter of public interest, held:
“Criticism of commercial conduct does not deserve the special protection of the actual malice test. Balancing one individual’s limited First Amendment interest against another’s reputation interest (Herbert v. Lando (1979) 441 U.S. 153, 169, 99 S.Ct. 1635, 1645, 60 L.Ed.2d 115...), we conclude that a person in the business world advertising his wares does not necessarily become part of an existing public controversy. It follows that those assuming the role of business practice critic do not acquire the First Amendment privilege to denigrate such entrepreneur.” (Footnote omitted.) 25 Cal.3d at 770, 160 Cal.Rptr. at 101, 603 P.2d at 18.
To the extent that this language can be read as insulating all advertising and pro-business promotional efforts from public controversies, it is probably overbroad. Even though the need for “breathing space” to safeguard and ensure lively discussion of public issues originated in matters relating to governance, we can contemplate public controversies arising from commercial conduct as the cases we now discuss indicate.
A starting point more fruitful than cata-loguing the field of action in which the alleged public controversy is found is inquiry as to whether the controversy preceded the alleged defamation. Gertz’s requirement that in order for individuals, otherwise not famous or pervasively influential, to merit public figure status, they must “have thrust themselves to the forefront of particular public controversies” would seem to imply a pre-existing controversy. This implication is reinforced by the stricture that “Those charged with defamation cannot, by their own conduct, create their own defense by making the claimant a public figure.” Hutchinson v. Proxmire, supra, 443 U.S. at 135, 99 S.Ct. at 2688. See also Waldbaum v. Fairchild Publications, 627 F.2d 1287, 1295 n.19 (D.C.Cir. 1980). Thus, even in the case so strongly relied upon by the Globe, Steaks Unlimited, Inc. v. Deaner, 623 F.2d 264 (3d Cir. 1980), where plaintiff complained about television broadcasts highly critical of the price and quality of plaintiff’s meat products, both the television stations and the Bureau of Consumer Affairs had, well before the broadcasts, received numerous telephone complaints from consumers. Id. at 273-74.
In Trans World Accounts, Inc. v. Associated Press, 425 F.Supp. 814 (N.D.Cal.1977), the plaintiff corporation, engaged in debt collecting, claimed to be libelled by erroneous reports of an impending Federal Trade Commission complaint against it. Plaintiff was held to have become a public figure not because of the alleged defamatory newspaper stories, but because an “integral feature of the Commission’s enforcement effort... [was] the publicity which attends the issuance of proposed complaints”, the purposes being both to warn consumers and to induce prompt compliance with remedial orders. Id. at 820. See also Orr v. Argus-Press Co., 586 F.2d 1108 (6th Cir. 1978) (prior criminal proceeding); Hoffman v. Washington Post Co., 433 F.Supp. 600 (D.D. C.1977) (prior Federal Trade Commission proceeding).
In the instant case the record reveals no public controversy antedating the publication of the Globe articles. The articles report that a number of owners of company-built boats had had unhappy-or worse-experiences but we know little or nothing of ongoing private controversies, not to mention public ones. This case is to be contrasted with one where “persons actually were discussing some specific question... [and] a reasonable person would have expected persons beyond the immediate participants in the dispute to feel the impact of its resolution.” Waldbaum v. Fairchild Publications, Inc., supra, 627 F.2d at 1297 (footnote omitted).
Even if it could be said that a prior public controversy existed, a second task of analysis is to look “to the nature and extent of [the plaintiff’s] participation in the particular controversy giving rise to the defamation.” Gertz, supra, 418 U.S. at 352, 96 S.Ct. at 3013. Wholly apart from a prior controversy, there is a consistent strain of inquiry in which the Court looks to see if a plaintiff, caught involuntarily in a proceeding, nevertheless exercises his volition in an effort to “engage the public’s attention in an attempt to influence [the] outcome.” Id., Firestone, supra, 424 U.S. at 454, n. 3; 455, 96 S.Ct. at 965; Proxmire, supra, 443 U.S. at 135, 99 S.Ct. at 2688; Wolston, supra, 443 U.S. at 167, 99 S.Ct. at 2708.
The meager facts to be extracted from the complaint at bar reveal no suggestion of a “thrusting into the vortex”. Prior to the publication, we know only that the company had steadily, over seven years, increased its production tenfold, from eight to ninety a year. We know absolutely nothing of its promotional efforts, either in scale or nature. This record is to be contrasted with the concentrated “advertising blitz” which the Third Circuit held “invited public attention, comment, and criticism” in Steaks Unlimited, supra, at 274. See also Waldbaum v. Fairchild Publications, Inc., supra, 627 F.2d at 1300 (activist president of large cooperative, “mover and shaper of many of the cooperative’s controversial actions”, engaged in promotional activities projecting own image and that of cooperative); Yiamouyiannis v. Consumers Union of the United States, Inc., 619 F.2d 932 (2d Cir. 1980) (plaintiff was active opponent of fluoridation, had written 15 articles, testified in Congress, was paid employee of leading antifluoridation promotional organization, obtained wide publicity for himself and his views).
Based on the record before us, what we appear to face in the case at bar is the paradigm middle echelon, successful manufacturer-merchant. While the company is recognized in its field and in its area, if such activity and success were alone sufficient to make it a public figure, virtually every entrepreneur, however parochial, who has avoided bankruptcy might also qualify. If it be suggested that only those who dominate or lead in a market be so designated, the courts would be thrust into the same sort of market and product analysis as occupies to such a large extent the antitrust field. If the plaintiff were to be deemed a public figure on the basis of the record before us, so might be, equally successful individuals, and so might be, we suggest, sellers of services as well as goods. At this point the law of defamation would largely be obliterated.
The Globe, in language reminiscent of Rosenbloom, see n. 3 supra, argues that “Issues concerning the reliability of a product, the quality of a product, the utility of a product, and the safety of a product thus may well be just as important to the continued operation of a sound capitalistic democracy as issues concerning the fitness of an individual to hold public office.” Discounting a bit for hyperbole, we grant that today the interest of the consumer is taking on increased importance. Consumer-oriented legislation, agencies such as the Federal Trade Commission and the Food and Drug Administration, and the common and statutory law of product liability testify to and implement this newly recognized value in our society. But we do not feel justified in adding to the armament by declaring all reasonably successful manufacturers and merchants (and professionals) to be, without more, “public figures” in their community and obliged to prove “actual malice” to vindicate any maligning of their names and reputations.
We therefore conclude that the Globe has not, on this limited record, met its burden of establishing that the company is a public figure. Its motion to dismiss was improperly granted. This is not to say that under no circumstances could the Globe meet that burden. On remand it is not foreclosed from attempting to introduce additional evidence to satisfy the standard. It will then be for the district court, on a fuller record, to determine whether a public controversy implicating the company existed apart from the challenged statements (or, perhaps, whether the likelihood of harm was such that public controversy was highly probable); and whether the prominence, power, or involvement of the company in respect to the controversy-or its public efforts to influence the results of such controversy-were such as to merit public figure treatment. Such questions as the extent to which the threshold of reputation protection depends upon the nature of the industry must await the completion of a more particularistic inquiry and argument directed thereto.
II. DISCLOSURE OF CONFIDENTIAL SOURCES
The Globe’s appeal is from the granting of plaintiff’s motion to compel answers to certain questions at deposition and to require production of certain documents. The documents and questions relevant to this appeal relate to the identity of and information imparted by three individuals who assertedly served as “confidential sources” for the Globe reporter. While it is not apparent from the record how many persons served as sources, the three “confidential” sources were clearly few among many non-confidential sources. The reporter’s deposition and the allegedly defamatory articles identify many named sources and the Globe proffered during discovery approximately 1500 pages of handwritten reporter’s notes in some 66 files.
The record is sparse with respect to the nature of the confidential information withheld. One document was an apparently unsolicited letter to the Globe. A Globe editor passed the letter on to reporter Coughlin, thereby initiating research on the Bruno & Stillman story. The reporter subsequently spoke with the author of the letter, and at his request promised him confidentiality with respect to all information imparted. Two other persons were asserted to be confidential sources. With respect to all three individuals, the motion to compel sought no more than withheld reporter’s notes which named the sources:
“Mr. Nix [plaintiff’s counsel]:... in addition to simply naming the three people, do those notes contain other information which bear on the factual investigation which went into the Bruno and Stillman articles?
“Mr. McHugh [defendant’s counsel]: Those notes contain information imparted to Mr. Coughlin by one or more of those three people.”
The Globe also answered “yes” to an interrogatory asking whether “there are any reports, tests or evaluations among the documents claimed to be covered by the ‘confidential sources.’ ” Evidently the reporter’s notes sought contain or would lead to discovery of such “reports, tests or evaluations.”
No specific reasons for the basis of the confidentiality claim shielding these two sources appears in the record. However, the following colloquy occurred during questioning about a source whom the reporter did not treat as confidential:
“Q. Do you have a policy as to when you consider sources confidential and when you don’t?
A. Yes, sir.
Q. Can you explain to me what that is?
A. It’s when I tell them I don’t so treat them.
Q. Fair enough. When you tell someone that you will treat them confidentially, that is when it is confidential to you?
A. Yes, sir.
Q. But when a witness says to you this is confidential, and you don’t say it back to them, it’s not confidential? You don’t treat it as confidential?
A. Not necessarily.
Q. Not necessarily? That is up to you to decide?
A. Yes, sir.”
The Globe asserts a conditional privilege on its part to refuse to disclose a reporter’s confidential source until the party seeking disclosure establishes generally that the public interest in disclosure is compelling enough to override the disruption or threat to the continued free flow of information to the media by showing specifically that (1) the information sought is critical to plaintiff’s claim and (2) the information is not available from other sources.
Whether or not such a privilege is available to a defendant in a civil defamation case where the plaintiff is not a public figure is a question left open by recent Supreme Court precedent. Branzburg v. Hayes, 408 U.S. 665, 92 S.Ct. 2646, 33 L.Ed.2d 626 (1972), denied such a privilege to a reporter called as a grand jury witness in a criminal investigation. Herbert v. Lando, 441 U.S. 153, 99 S.Ct. 1635, 60 L.Ed.2d 115 (1979), the only Supreme Court case directly discussing the use of discovery procedures in libel suits, required defendants in a libel suit brought by a public figure to answer questions directed to the state of mind of editors preparing a broadcast. In both cases the generally compelling need for disclosure was obvious. In Branzburg the importance of the role of the grand jury in investigating crime was implicated, 408 U.S. at 700-701, 92 S.Ct. at 2666. In Herbert the Court noted the substantial burden upon a public figure to prove “the ingredients of malice” with “convincing clarity”, 441 U.S. at 170, 174, 99 S.Ct. at 1646, and the information sought went directly to the state of mind of the editor.
In each case, however, the Court did refer to situations presenting other and less compelling needs. In Branzburg, the Court, although dealing only with a request by a grand jury, pointed to the disclosure of sources in civil cases, 408 U.S. at 702, 92 S.Ct. at 2667. In Herbert, the Court indicated that its rationale concerning the discovery needs of a public figure plaintiff applied also to cases where plaintiff’s burden is only to prove “some degree of culpability”, 441 U.S. at 172, 99 S.Ct. at 164; see also id. at 174, 176, 99 S.Ct. at 1648-49. Yet, despite this refusal to give doctrinal recognition to any automatic, categorical, across-the-board privileges, in neither ease did the Court suggest the opposite, that the interests underlying the asserted privileges were a priori and by definition beyond the pale of any protection.
In Branzburg, the opinion of Mr. Justice Powell, needed to make a majority, stressed that “The Court does not hold that newsmen, subpoenaed to testify before a grand jury, are without constitutional rights with respect to the gathering of news or in safeguarding their sources.” 408 U.S. at 709, 92 S
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
Opinion
PER CURIAM.
Opinion filed by Chief Judge BAZELON, concurring in part and dissenting in part.
PER CURIAM:
This case involves a determination by the National Labor Relations Board (the Board) that Local 814 of the Teamsters Union violated sections 8(b)(4) and 8(e) of the National Labor Relations Act, 29 U.S.C. §§ 158(b)(4) and 158(e) (1970), by entering into and attempting to enforce a provision of its collective bargaining agreement with Santini Brothers, Inc. For the reasons stated herein, we remand the record for clarification.
Prior to 1948, movers of household goods and office furniture in the New York metropolitan area utilized employees represented by Local 814 of the Teamsters Union to perform all aspects of their business. However, in that year, a large interstate moving company began utilizing “owner-operators” for so-called long distance hauling, moves in excess of 500 miles. The owner-operators own the tractors that pull the trailers used in long distance moving, contract with the moving companies for hauling business and generally lease the trailers from the company. This method of performing long distance hauling proved attractive to both drivers and companies, and presently, the twenty New York area carriers that perform the bulk of long distance hauling use owner-operators. Santini Brothers, Inc., one of the largest movers in that area, began using owner-operators in 1962 to counteract the deterioration in its long distance moving business as its best drivers became owner-operators for competitors; by 1967, Santini used owner-operators for virtually all of its long distance moving.
Local 814’s concern with the practice of using owner-operators first manifested itself in the 1962 — 1965 collective bargaining agreement between the union and the Moving and Storage Industry of New York, a multi-employer bargaining unit representing approximately 300 area moving and storage companies including Santini. This agreement, and subsequent contracts through 1971, provided that: “the owner-operator, commission or percentage method of operation shall not be practiced on local work covered by this agreement. The percentage or commission method of operation shall likewise not be practiced on long distance moving.” These agreements also provided for joint study to explore the effects of utilizing owner-operators for long distance hauling.
In the 1971 negotiations between the union and the industry, the union demanded that all persons involved in long distance moving be treated as employees under the contract, regardless of whether they had been defined as owner-operators. From initial opposition, the employers acceded to .the union’s demands, accepting the following provision in Article 24 of the agreement.
A.l. All persons performing long distance driving under contract to an employer covered by this agreement (whether as “owner-operator,” “percentage driver,” “commission driver,” or otherwise) shall be covered by this agreement as employees (hereinafter referred to as contract employees).
Since the collective bargaining agreement contained a union security clause, the effect of this provision was to require that the owner-operators join Local 814 or lose their contracts.
The union sought to enforce Article 24 in the spring and summer of 1972 by advising Santini that it was violating the agreement and by notifying the owner-operators that they were required to join the union. On October 30, 1972, Local 814 engaged in a work stoppage to protest Santini’s failure to implement Article 24. The work stoppage ended only after Santini’s President agreed to transmit signed membership applications from the owner-operators as he obtained them and to forbid nonsigners to load or unload in the New York metropolitan area. Several owner-operators refused to apply for membership. Thereafter, Santini allowed those who joined Local 814 to load and unload in New York, but not those who refused to join.
On November 8, 1972, Karl J. Lieb, on behalf of several owner-operators, filed unfair labor practice charges against Local 814 and Santini. On June 29, 1973, an Administrative Law Judge (ALJ) found that Local 814 had violated the “secondary boycott” provisions of the National Labor Relations Act and that Local 814 and Santini had entered into an illegal agreement because Article 24 was a prohibited “hot cargo” clause. On January 8, 1974, the Board affirmed this decision without comment. Local 814, Teamsters (Santini Brothers, Inc.) 208 NLRB No. 22 (1974).
By adopting the ALJ’s opinion, the Board held that the owner-operators were not employees within the meaning of section 2(3) of the Act, 29 U.S.C. § 152(3) (1970), but rather were “independent contractors.” Therefore, the Board concluded that Article 24 itself and the union activity aimed at enforcing Article 24 were directed at forcing Santini to engage in conduct prohibited by the Act, specifically to coerce the independent contractors to join the union or to cease doing business with them.
Local 814 contends initially that the Board erred in concluding that the union violated sections 8(b)(4) and 8(e) of the Act, for even if the owner-operators were independent contractors, Article 24 is a legitimate work preservation clause. We cannot agree. As written, Article 24 neither establishes union work standards for the subcontracting of work nor requires that specific work be done by members of the bargaining unit. Rather, Article 24 purports to require the owner-operators to join the union by defining them as “employees,” and hence subjecting them to the union security agreement.. If Article 24 were drafted to require that only members of Local 814 may engage in long distance hauling or that any subcontracting to owner-operators must be consistent with union work standards, the case would be much different. However, the provision before us is clearly a union signatory agreement violative of sections 8(b)(4) and 8(e) if the owner-operators are not “employees.”
As to this question, the Board adopted the opinion of the ALJ, which concluded that the owner-operators were not employees within the meaning of section 2(3) of the National Labor Relations Act. However, shortly thereafter, the Board also adopted the decision of another ALJ in Local 814, Teamsters (Molloy Brothers Moving and Storage, Inc.), 208 N.L.R.B. No. 43 (1974), which concluded that owner-operators who contracted with another member of the Moving and Storage Industry of New York were employees within the meaning of the Act. We believe the two decisions are factually similar and ostensibly inconsistent. Because the Board has not explained its reasons for reaching different results, see Greater Boston Television Corp. v. F. C. C., 143 U.S.App.D.C. 383, 444 F.2d 841, 850-52 (1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971), we remand the record for clarification. If the Board finds the two indistinguishable, it should so inform the court. See N. L. R. B. v. Metropolitan Life Insurance Co., 380 U.S. 438, 442, 85 S.Ct. 1061, 13 L.Ed.2d 951 (1965).
Chief Judge Bazelon dissents from the scope of this remand, arguing that it can only produce a post hoc rationalization for the Board’s actions. We cannot agree. This court has continually stressed that we are partners with, rather than adversaries to, the administrative agencies. See, e. g., Greater Boston Television Corp., v. F. C. C., supra, 444 F.2d at 851. As such, we think it only fair to give the agency a full and frank opportunity to explicate its actions before we consider reversal. While the possibility exists that the agency will offer a post hoc rationalization, that possibility also exists under Judge Bazelon’s broader proposal. Indeed, we believe that Judge Bazelon’s proposal would heighten the possibility that the agency might substitute rationalization for reasoning, since his call for a “thorough reconsideration of the doctrinal quicksand in this area” would place the court firmly in an adversary position to the Board.
Moreover, we cannot agree with the dissent’s characterization of the circumstances under which the remand for clarification may be utilized. Most recently, this device was utilized in Local 441, IBEW v. N. L. R. B., 167 U.S.App. D.C. 53, 510 F.2d 1274 (1975) the division sought clarification, inter alia, of the Board’s position concerning the legal effect of the conduct at issue. We therefore believe that the remand for clarification remains a useful and appropriate device for determining that an agency has engaged in reasoned decision making.
So ordered.
. On November 10, 1972, the Union requested that Santini discharge 13 owner-operators for not joining the Union and paying dues. Santini refused and another work stoppage occurred on November 20. On January 22, 1973, the Board’s Regional Director sought a preliminary injunction against the Union under section 10(7) of the Act, 29 U.S.C. § 160(1) (1970). The injunction was granted on March 16, 1973. Danielson v. Local 814, Teamsters, 355 F.Supp. 1293 (S.D.N.Y.1973).
. Section 8(b)(4)(i), (ii)(A), (B), 29 U.S.C. § 158(b)(4)(i), (ii)(A), (B) (1970).
. Section 8(e), 29 U.S.C. § 158(e) (1970).
. See National Woodwork Mfg. Ass’n. v. N. L. R. B„ 386 U.S. 612, 87 S.Ct. 1250, 18 L.Ed.2d 357 (1967); Orange Belt Dist. Council No. 48 v. N. L. R. B., 117 U.S.App.D.C. 233, 328 F.2d 534 (1964).
. See Local 1288, Retail Clerks v. N. L. R. B., 129 U.S.App.D.C. 92, 390 F.2d 858, 861-62 (1968); A. Duie Pyle, Inc. v. N. L. R. B„ 383 F.2d 772, 777-78 (3rd Cir. 1967), cert. denied, 390 U.S. 905, 88 S.Ct. 819, 19 L.Ed.2d 871 (1968); cf. Denver Bldg. & Constr. Trades Council v. N. L. R. B., 341 U.S. 675, 71 S.Ct. 943, 95 L.Ed. 1284 (1951); Marriot Corp. v. N. L. R. B., 491 F.2d 367 (9th Cir.), cert. denied sub nom. International Ass’n of Machinists v. N. L. R. B., 419 U.S. 881, 95 S.Ct. 146, 42 L.Ed.2d 121 (1974); Local 710, Meat & Highway Drivers v. N. L. R. B., 118 U.S.App.D.C. 287, 335 F.2d 709 (1964); Local 5, Plumbers & Pipefitters v. N. L. R. B., 116 U.S.App.D.C. 100, 321 F.2d 366 (1963), cert. denied, 375 U.S. 921, 84 S.Ct. 266, 11 L.Ed.2d 165 (1964); District No. 9, Machinists v. N. L. R. B.,114 U.S.App.D.C. 287, 315 F.2d 33, 36 (1962); Washington Oregon Shingle Weavers Dist. Council, 101 N.L.R.B. 1159 (1952), aff’d, 211 F.2d 149 (9th Cir. 1954). See also N. L. R. B. v. Local 825, Operating Eng’rs, 400 U.S. 297, 91 S.Ct. 402, 27 L.Ed.2d 398 (1971). Of course, if the owner-operators were “employees” (and thus presumably within the union’s jurisdiction and certification), then the union’s actions are permissible attempts to enforce a union security agreement on its unit employees. Absent state law to the contrary, union security agreements are permitted under present law subject to certain restrictions. NLRA §§ 8(a)(3), (b)(2), (5), 14(b), 29 U.S.C. §§ 158(a)(3), (b)(2), (5), 164(b) (1970). On the relationship of a finding of “independent contractor” status and a finding of a violation of the secondary boycott provisions of the NLRA, see Local 417, Carpet Layers v. N. L. R. B„ 151 U.S.App.D.C. 338, 467 F.2d 392, 399-401, 404-06 (1972).
. The Administrative Law Judge in Santini Brothers, although cognizant of his colleague’s position in Molloy Brothers, did not attempt to distinguish the two cases.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
HARTIGAN, Circuit Judge.
This is an appeal from an order of the United States District Court for the District of New Hampshire dismissing for lack of jurisdiction plaintiff's action for breach of contract against the defendant foreign corporation on the ground that defendant’s activities in New Hampshire did not establish a sufficient nexus with that state to render it amenable to suit by plaintiff.
This proceeding involves three principal parties. Plaintiff-appellant, Sanders Associates, Inc., (hereinafter called “Sanders”) is a Delaware corporation with its principal place of business in Nashua, New Hampshire. Plaintiff is engaged in the invention, design and manufacture of electronic and hydraulic devices for a wide variety of uses.
Defendant-appellee, the Gabon Iron Works & Manufacturing Company (hereinafter called “Gabon”), is an Ohio corporation with its principal place of business in Gabon, Ohio. Defendant is engaged in the manufacturing and sale of motor graders and road rollers.
R. G. Hazelton Company, Inc. (hereinafter called “Hazelton”) is the exclusive distributor for Gabon in New Hampshire. Its activities on behalf of Gabon are governed by an extensive working agreement, some of the details of which will be discussed below.
Plaintiff’s action for breach of contract stemmed from the following events. Following two preliminary conferences held at Nashua, New Hampshire, on May 9, 1957 and June 12, 1957 an agreement was executed on July 22, 1957 under the terms of which Gabon placed an order with Sanders for development of a grader attachment (attachable to the regular Gabon grader) by which the slope of the grader blade would adjust automatically to compensate for variations in the terrain under construction. Gabon wanted a control system that would automatically sense true vertical and control the grader blade to maintain a preset level or grade, even over irregular terrain. Such an attachment would simplify the operator’s job and give a more accurate finish.
On November 26, 1967 a second agreement denominated as “supplemental” was executed. Under the terms of this instrument Sanders agreed to construct two “preproduction” models which were to be field tested by Galion to insure that they conformed with the specifications which Sanders had prepared. Upon the completion of five hundred hours of satisfactory testing by Galion, Sanders was to receive payment.
The research and developmental nature of this project required extensive liaison between Galion and Sanders. In the words of the district court:
“The nature of the agreement was such as to require frequent consultation between the parties and such consultation was largely carried out in New Hampshire. The majority of the meetings were engineering conferences generally between Gabon’s project engineer and employees of Sanders at Nashua. At other times, several officials of Galion came into the state to confer and witness demonstrations of the device, mounted on a Galion grader. It appears that such a grader was located in New Hampshire from August, 1957, until June, 1958.” 203 F.Supp. 522 at 524.
Gabon’s contacts with Sanders in New Hampshire stemmed from the foregoing implementation of this agreement and, as noted, the instant action arose from an alleged breach of the contract.
Gabon’s other contacts with the State of New Hampshire arose from its dealings with Hazelton. Hazelton is one of the largest distributors of heavy construction equipment in New Hampshire, marketing the products and machinery of approximately fifteen manufacturers.
In 1955 Hazelton became Gabon’s exclusive New Hampshire distributor and has continued in that capacity down through the date of the present action. During this period, 1955-1961, Hazel-ton sold about $500,000 worth of Gabon’s products in New Hampshire and supplied an estimated 20 to 25 per cent of the New Hampshire grader market and about 25 per cent of the New Hampshire roller market. All of Gabon’s products reaching New Hampshire were sold to Hazelton, f. o. b. Galion, Ohio.
The terms of the exclusive distributorship agreement signed by Hazelton provided, inter alia, as follows: Hazelton was granted the exclusive right to market Gabon’s equipment in New Hampshire territory subject to two important exceptions. Galion reserved the right to sell its equipment directly to the United States and State Highways Departments. The agreement also contained an express reservation to other distributors of the right to sell to companies having a place of business in another distributor’s territory, notwithstanding “the fact that the equipment is to be delivered into and initially used in” Hazelton’s territory. Hazelton was prohibited from soliciting outside the State of New Hampshire or from accepting orders from outside its territory without the other distributor’s consent and the consent of Gabon. There was a similar proscription on all export orders. Finally, under the terms of the agreement, Hazelton could not engage directly or indirectly in the marketing and sale or procurement of sales of any new motor graders or road rollers other than those made by Gabon. As found by the district court, Hazelton could handle no other new equipment “that competed with Galion products.” 203 F.Supp. 522 at 524.
Galion furnished Hazelton a list of prices and available discounts. Under the agreement Hazelton consented to the insertion of prices in orders received by Gabon and agreed that Hazelton would be bound “thereby as if such details, prices, etc. had been contained in the order at the time he signed it.”
Under paragraph 6 of the agreement Hazelton agreed to keep on hand not less than three graders and two rollers as well as a complete supply of replacement parts; to use “its best efforts in the promotion and sale in its territory and diligently canvass and regularly circularize with literature supplied by [Gabon], the town, city, county and contractor trade in such territory;” to provide adequate sales, storage and service facilities; to maintain in good condition, in conspicuous and appropriate location inside and outside of its place of business, signs identifying Hazelton as a distributor of Gabon’s equipment; to engage, train and maintain sales, service, parts, handling and accountant personnel sufficient to obtain a reasonable share of the sales possibilities for motor graders and road rollers in the territory; to promptly and efficiently service the equipment in its territory and to maintain proper and adequate accounting records; and to comply with Gabon’s policies in effect from time to time concerning delivery service and on service after delivery on the equipment embraced by the agreement.
Under paragraph 7 of the agreement Hazelton was obliged to “assume complete responsibility for the proper inspection and assembly of the equipment and deliver the same to its vendee in good operating condition; train the operators and mechanics of its vendee to operate, lubricate and maintain such equipment correctly; inspect the equipment free of charge thirty (30) days (as nearly as practicable) after delivery to its vendee; again inspect the equipment free of charge five (5) months (as nearly as practicable) after delivery to its vendee; and furnish to the Company a delivery report, 30-day inspection report and 5-month inspection report on forms furnished by the Company, signed by the Distributor and an authorized representative of its vendee. * * * ”
Gabon gave a six months warranty against defective material or workmanship and, as found by the district court, “Hazelton serviced any complaints and apparently bore the labor costs involved.” 203 F.Supp. 522 at 524.
Hazelton was required to furnish Galion a monthly sales report indicting sales for the preceding thirty days, inventory, unfilled orders, and projections of future sales. Hazelton contributed to advertising programs of Gabon appearing in trade journals circulated in New Hampshire. Upon the termination of the agreement and under specified conditions, Galion agreed to repurchase from Hazelton all new, current, unused and salable service parts.
There was continuing assistance and personal contact between Galion and Hazelton. Galion furnished training services for Hazelton’s salesmen and made available to Hazelton a Gabon airplane by which prospective New Hampshire customers could be flown to Galion's plant in Ohio.
One David Gillespie, Galion’s “district representative,” was in periodic personal contact in New Hampshire with Hazel-ton and, as noted, monitored its monthly sales performance. His function was to insure that “Gabon has its share of the New Hampshire market,” and his liaison with Hazelton was aimed at fostering this objective.
On these facts the issue is raised whether the Gabon corporation could be subjected to suit in the State of New Hampshire and accordingly, in a United States district court where, as here, there exists diversity of citizenship. As the trial judge correctly noted, in this class of case two questions must be anwered.
In Pulson v. American Rolling Mill Co., 170 F.2d 193, 194 (1 Cir.1948), this court indicated the scope of that dual inquiry thusly:
“There are two parts to the question whether a foreign corporation can be held subject to a suit within a state. The first is a question of state law; has the state provided for bringing the foreign corporation into its courts under the circumstances of the case presented ? There is nothing to compel a state to exercise jurisdiction over a foreign corporation unless it chooses to do so, and the extent to which it so chooses is a matter for the law of the state as made by its legislature. If the state has purported to exercise jurisdiction over the foreign corporation, then the question may arise whether such attempt violates the due process clause or the interstate commerce clause of the federal constitution. Const, art. 1, § 8, cl. 3; Amend. 14. This is a federal question and, of course, the state authorities are not controlling. But it is a question which is not reached for decision until it is found that the State statute is broad enough to assert jurisdiction over the defendant in a particular situation.”
We had occasion to consider the pertinent New Hampshire statute and the relevant state cases in W. H. Elliott & Sons Co. v. Nuodex Products Co., 243 F.2d 116 (1 Cir.1957), cert. den., 355 U.S. 823, 78 S.Ct. 30, 2 L.Ed.2d 38, and there concluded that New Hampshire placed no constrictions on its in 'personam, jurisdiction vis a vis foreign corporations. On the contrary, now Chief Judge Woodbury, concurring, specifically pointed out that it was the objective of the local statute to exercise jurisdiction to the full extent of the constitutional limit. We adhere to that view.
Thus, unfettered by local statutory inhibitions, the question then arises as to whether—consistent with the due process clause of the Fourteenth Amendment—Galion may be subjected to New Hampshire in personam jurisdiction by Sanders. The trial court held that Gabon could not. For reasons developed below, we disagree with that conclusion.
The district judge, in resolving the present issue, sought to compartmentalize the activities of Gabon vis a vis Hazel-ton and vis a vis Sanders. Thus he stated:
“In considering that question, I suggest that two independent areas of activity which relate to the defendant must be examined; those which concern the distributor Hazel-ton and those which concern the plaintiff Sanders. It has been urged by the plaintiff that the court consider both these activities as an integral whole, but this view does not accord with fact or logic. The activities of Gabon in relation to Sanders were clearly collateral to the mainstream of its business and should be so dealt with which I will now proceed to do.” 203 F.Supp. 525-526.
Thereafter after analyzing the dealings between Sanders and Gabon (arising from the developmental agreement), the court concluded that these activities did not of themselves rise to a level sufficient to render Galion amenable to service of process in New Hampshire. The court then turned to the relationship obtaining between Hazelton and Galion. Here the district court concluded that while the scope of Gabon’s activities might validly permit a suit by Hazelton, again the activities were not such as would permit Gabon to be sued by a third party (Sanders) on a matter collateral to the “mainstream” of intercourse between Gabon and Hazelton. In the language of the trial judge:
“ * * * It might be one thing to say that Gabon should be subject to suit at the instance of Hazelton, but it is quite another to say that it may be called upon to answer to this plaintiff in regard to collateral matters. Were this a suit by Hazel-ton or one of its customers, it might be persuasively argued that the state would have an interest in protecting local purchasers and that Gabon might be reasonably expected to have anticipated that it would be subjected to the jurisdiction of the courts of the state for the purpose of answering complaints by such persons. However, I do not believe that it would comport with ‘traditional notions of fair play and substantial justice’ to hold that Gabon, as a result of its dealings with Hazel-ton, should have foreseen that it was exposing itself to the institution of litigation in respect to matters unconnected with those dealings.” Id., at 526-527.
We may pretermit considerations as to the correctness of the district court’s in vacuo approach to Gabon’s activities relative to Sanders and Hazelton as well as the potential jurisdictional ramifications stemming exclusively from the Sanders-Galion relationship. For it is our belief that Gabon so injected and impressed itself upon the State of New Hampshire through its distributor Hazel-ton as to render it liable to suit on any and all claims otherwise properly brought in the New Hampshire courts; whether or not these suits be “unconnected” with the central course of conduct involving Gabon and Hazelton.
Any resolution of an issue of this kind starts with International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 164, 90 L.Ed. 95 (1946). That case, in assaying the question of state court jurisdiction over foreign corporations eschewed the “consent” and “presence” theories of jurisdiction formerly in vogue in favor of a new standard. Under that standard, courts were to inquire as to whether the foreign corporation had such “minimum contacts” with the forum that the maintenance of the action would not offend “traditional notions of fair play and substantial justice.” The Court said that the question of whether due process is satisfied turns on the “ * * * quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure” Id., at 319, 66 S.Ct. at 159. In short, jurisdiction is to turn on a qualitative analysis of the nature and kind of a defendant’s local activities.
It is our belief that a qualitative analysis of Gabon’s activities in New Hampshire compels the conclusion that it had established “sufficient contacts or ties” with that state “to make it reasonable and just, according to our traditional conception of fair play and substantial justice, to permit the state to enforce the obligations which appellant has incurred there.” Id., at 320, 66 S.Ct. 160.
While it has been held that the mere sale of goods to a local distributor will not in itself provide a basis of jurisdiction over a foreign corporation, Schmidt v. Esquire, Inc., 210 F.2d 908 (7 Cir. 1954); Favell-Utley Realty Co. v. Harbor Plywood Corp., 94 F.Supp. 96 (N.D.Cal.1950), the degree of control which Gabon maintained over Hazelton removes their relationship from that line of cases.
Although Hazelton technically acquired complete title to a piece of Gabon equipment in Ohio, f. o. b., it was anything but free in regard to what it might thereafter do with that equipment. It was neither the complete captain of its marketing fate in the initial sale of the goods or for a considerable time thereafter. Under the terms of its distributorship agreement Hazelton could not sell this equipment to a federal highway department without the express approval of Gabon. It could not sell to a state highway department without the express approval of Gabon. It could not sell outside its territory. It could not export the equipment. It could not sell other new equipment performing functions similar to Gabon’s. All of these provisions (together with the corollary provision that other distributors might not otherwise sell or solicit in Hazelton’s territory) demonstrate the very meaningful and effective control which Gabon exercised over the New Hampshire market in general and over Hazelton in particular, a leverage which would scarcely seem to comport with the surface appearance of “an independent distributor."
Moreover, Gabon reserved the right to establish prices and discounts and Hazel-ton agreed to be bound “thereby as if such * * * prices had been contained in the order at the time [it was signed].”
Gabon dictated the size of Hazelton’s inventory and the extent of its replacement parts supply. It molded Hazel-ton’s advertising policies and promotional policy and dictated the use of Gabon signs on “conspicuous and appropriate” places on the Hazelton outlet. It required Hazelton to hire men skillful in sales, service, and parts, handling of its equipment.
After Hazelton sold a piece of equipment its obligations flowing from the Galion distributorship agreement were not over. Hazelton had to promptly and efficiently service the Galion equipment in its territories. Hazelton was obliged under the agreement to train the mechanics and operators of the customers to which it sold a particular piece of equipment. It was required to inspect the. customer’s equipment free of charge on both the first and fifth month after the date of sale and to furnish Galion with reports covering both inspections. In addition, Hazelton was required to submit estimates of future sales, records of sales and inventory reports.
Galion gives a six months warranty against defective parts or workmanship. Hazelton understood this to be a warranty by Galion to Hazelton’s vendee. Significantly as the court found, “Hazel-ton serviced any complaints and apparently bore the labor costs involved.”
Finally, there is the pattern of continuing assistance between Galion and Hazelton manifested by such items as the ready availability of the Galion airplane to fly customers to the Galion plant in Ohio.
In sum, we believe that a consideration of all the foregoing factors compels the conclusion that the manifested activities of Galion— albeit accomplished through the “independent” distributor Hazelton—makes it eminently reasonable that Galion here should be subject to service of process within the State of New Hampshire.
Surely there would be no serious question if Galion had established its own branch outlet in New Hampshire and staffed it with its own personnel, whose work was to perform functions coextensive with those now handled by Hazel-ton, that it would be “doing business” within the state sufficient to satisfy the minimum constitutional requirements of jurisdiction. However, in the instant case, Galion through control of the retail price, requirements as to the maintenance of a sales force, proscription against selling the comparable products of competitors, specifications as to the maintenance of a service department and display area, insured a diligence in the marketing of Gabon’s products which compels the conclusion that, when all was said and done, Galion had actually obtained all the economic benefits that could have been derived from establishing its own distribution outlet in New Hampshire and derived this economic benefit without incurring the burden of capital outlay to establish its own distribution force. We believe that the degree of control and leverage which it exercised over Hazelton negates any due process objection on the face of this record.
In this connection the language of the Fourth Circuit in Kahn v. Maico Company, 216 F.2d 233 (1954), is particularly appropriate. The question in that case was whether a foreign corporation was “doing business” within the meaning of the local Maryland statute so as to render it amenable to service of process. Although that case involved a suit by a Maryland partnership against the nonresident corporation for breach of its franchise contract with defendant (and thus was an action “connected” with the business of the defendant), we believe that its rationale is equally applicable here.
“ * * * Upon the evidence taken as a whole, however, it is impossible to escape the conclusion that through the plaintiffs, defendant was advertising and selling its hearing aids in the State of Maryland, that the business was in effect done in defendant’s name and that it was as completely controlled by defendant as it would have been if plaintiffs had been mere selling agents. Furthermore, there can be no doubt but that defendant actually participated in the sales made by plaintiffs, since the guaranty given in connection with the sale of a hearing aid was a part of the sale, and in making the guaranty the plaintiffs were unquestionably acting as agents of defendant. They were also acting as agents of defendant in adjusting complaints made under the guarantees.
“On these facts, we think that defendant was clearly doing business in the state within the meaning of the statute. In La Porte Heinekamp Motor Co. v. Ford Motor Co., D.C., 24 F.2d 861, and the very recent case of Thomas v. Hudson Sales Corp., [204] Md. [460,] 106 A.2d 225, 228, in both of which jurisdiction was sustained, it was pointed out that, while it did not constitute doing business within the state for a foreign corporation to make sales outside the state to distributors who carried on business therein, even though a district superintendent might visit them and advise with respect to selling policies, nevertheless such foreign corporation would be held to be doing business within the state if it went beyond this pattern and exercised substantial control over the business of the local distributor. Here the defendant not only controlled the business policies of the distributor, but also regulated the details of the business almost as completely as if the distributor had been an agent in all repects. No one would contend that what was done did not constitute doing business by defendant if plaintiffs had been compensated on a commission basis instead of by discounts allowed from the sale price which defendant fixed; but the method of compensating the one who carries on the business cannot defeat jurisdiction when it appears that it was in reality defendant’s business that was being carried on.
"The case is not one where sporadic or occasional transactions are relied on to establish the doing of business within the state; but one in which it is shown that business of defendant was regularly carried on. * * *" Id., at 235.
Moreover, the Supreme Judicial Court of Massachusetts has consistently held that where the agents of a foreign corporation set about investigating and servicing complaints arising from the sale of goods of the foreign corporation that such activity will be sufficient to bring the corporation within the local “doing business statute.” These cases have arisen both in the context of claims “connected” and “unconnected” with the mainstream of defendant’s business in the state.
In Wyshak v. Anaconda Copper Mining Co., 328 Mass. 219, 103 N.E.2d 230 (1952), the court stated:
“ * * * The investigation of complaints is an important factor in the completion "of business transactions, an indispensable aid to performance and a conservor of good will. Investigation and correspondence as to complaints partake of activity outside the simple solicitation of business. * * *” Id., 103 N.E.2d at 232.
This result was followed in Jet Mfg. Co. v. Sanford Ink Co., 330 Mass. 173, 112 N.E.2d 252 (1953), where the Massachusetts court stated:
“ * * * Here again there was more than mere solicitation. There was the investigation of complaints by a permanent representative resident in the Commonwealth, who was empowered to do whatever was incidental to selling and fostering good relations with the trade. We are unable to see where the functions of this representative were substantially different from the handling of complaints and the ‘promotional work’ which were present in the Wy-shak case. That it is not necessary to maintain an office in order to become subject to the jurisdiction of this Commonwealth is manifest from the language of § 38.” Id., 112 N.E.2d at 254.
In the instant case the district court found that Hazelton serviced any complaints stemming from the sale of the Galion equipment. While, as the trial judge noted, Hazelton apparently bore the cost of this activity, the activity was undoubtedly calculated to inure to Galion’s benefit and undertaken at its direction.
Upon a consideration of the record as a whole, we believe that Galion was “doing business” within the State of New Hampshire and that its contacts with the forum were of sufficient sweep and scope to make it eminently reasonable that it be amenable to suit in that jurisdiction both as to claims related and unrelated to the “mainstream” of its commercial intercourse within the state.
Judgment will be entered vacating the judgment of the district court and remanding the action to that court for further proceedings not inconsistent herewith.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
MINER, Circuit Judge:
Plaintiffs, Rastafarian inmates in the custody of the New York State Department of Correctional Services (“DOCS”), appeal from a judgment entered in the United States District Court for the Southern District of New York (Stanton, J.) rejecting claims, brought pursuant to 42 U.S.C. § 1983 (1982), that various regulations and policies of DOCS violate their first amendment right to free exercise of their religion and their fourteenth amendment right to equal protection of the laws. Benjamin v. Coughlin, 708 F.Supp. 570 (S.D.N.Y.1989). Specifically, the district court rejected plaintiffs’ contentions that they were entitled to weekly congregate prayer, unrestricted wearing of religious headgear and a diet consistent with their religious beliefs.
Defendants, the Commissioner of DOCS and three correctional facility superintendents, appeal from so much of the judgment as enjoins the enforcement of a regulation requiring members of the plaintiff class to submit to a haircut upon admission to a facility under defendants’ jurisdiction. The district court found that defendants were precluded from enforcing the regulation under the doctrine of collateral estoppel, and that the regulation violates the free exercise clause of the first amendment. Defendants contend that the regulation is reasonably related to valid penological interests and that litigation of the issue was improperly precluded by the district court.
For the following reasons, we affirm.
BACKGROUND
The Rastafarian religion was founded in Jamaica. Adherents believe that the coronation of Haile Selassie, the deceased emperor of Ethiopia, constituted the fulfillment of a prophesy. Aside from the belief in the divinity of Haile Selassie, the religion is marked by a decentralized structure and the absence of a conventional religious hierarchy. The closest example of an authoritative figure is an “Elder,” one who has studied the tenets of the religion.
A fundamental tenet of the religion is that a Rastafarian’s hair is not to be combed or cut, resulting in rope-like strands known as “dreadlocks.” Directive 4914 of the DOCS, however, requires all newly admitted males to submit to a haircut and photograph upon arrival at a DOCS facility. Male inmates are then permitted to regrow their hair to any length and are subject to rephotographing if their appearance changes drastically.
Plaintiffs also believe that, whenever they are in public places, their dreadlocks must be covered by loose-fitting knit headgear known as “crowns.” Under current policy, crowns may be worn only in designated areas of DOCS facilities. Jewish and Muslim inmates, however, are permitted to wear their respective religious headgear throughout the prison facilities, subject to frisk searches.
Rastafarians engage in congregate religious observance — “Issembly”—which consists of chanting, beating of drums, readings, and religious conversation called “reasoning.” Plaintiffs have been denied the right to congregate for weekly religious observance. This restriction is based on defendants’ interpretation of New York Correction Law § 610 (McKinney 1987) as prohibiting religious congregation unless an outside spiritual sponsor is available to supervise the service. Although Muslim and Buddhist inmates are permitted to use inmate religious leaders, under the supervision of an outside sponsor who is not present at the meeting, plaintiffs have not been permitted to use inmate leaders because no outside sponsor has come forward.
Many Rastafarians observe a strict vegetarian diet called "Ital," which includes prohibitions on the consumption of meat and caffeine and restricts the diet to natural foodstuffs. Dietary habits vary among Rastafarians, but consumption of pork seems to be prohibited generally. Under DOCS policy, alternative portions are offered to all inmates whenever pork is served, and special kosher meals are provided for inmates at some facilities. Muslim and Buddhist inmates are provided special meals during certain holidays.
In August 1986, the district court granted a preliminary injunction enjoining the enforcement of the initial haircut requirement as it applied to the plaintiffs. Benjamin v. Coughlin, 643 F.Supp. 351 (S.D.N.Y.1986). The court based this injunction on the preclusive effect of New York state court decisions in Lewis v. Commissioner of the Dep`t of Correctional Servs., No. 85-11167, slip op. (Sup.Ct. Aug. 1, 1985), aff'd sub nom. People v. Lewis, 115 A.D.2d 597, 496 N.Y.S.2d 258 (2d Dep't 1985), aff'd, 68 N.Y.2d 923, 502 N.E.2d 988, 510 N.Y.S.2d 73 (1986) (mem.), and Overton v. Department of Correctional Servs., 131 Misc.2d 295, 499 N.Y.S.2d 860 (Sup.Ct.1986), aff'd, 133 A.D.2d 744, 520 N.Y.S.2d 32 (2d Dep't 1987) (mem.), appeal dismissed, 72 N.Y.2d 838, 526 N.E.2d 42, 530 N.Y.S.2d 551 (1988). Benjamin v. Coughlin, 643 F.Supp. at 357.
Defendants moved to vacate the injunction in June of 1987 on the ground that the Supreme Court's decisions in Turner v. Safley, 482 U.S. 78, 107 S.Ct. 2254, 96 L.Ed.2d 64 (1987), and O'Lone v. Estate of Shabazz, 482 U.S. 342, 107 S.Ct. 2400, 96 L.Ed.2d 282 (1987), altered the standard of review for prisoners' rights claims. The district court reserved decision and heard testimony without a jury on all of plaintiffs' claims. In its post-trial decision in 1989, the district court reaffirmed the application of nonmutual offensive collateral estoppel but also found that Directive 4914 did not pass constitutional muster under Turner and Shabazz. Benjamin, 708 F.Supp. at 573. The court enjoined enforcement of the haircut regulation as it applied to the plaintiff class but rejected plaintiffs' challenges to the denial of the right to congregate, to wear crowns, and to be provided with a special diet. Id. at 573-76.
DISCUSSION
I. Standards to be Applied
Balanced against the constitutional protections afforded prison inmates, including the right to free exercise of religion, are the interests of prison officials charged with complex duties arising from administration of the penal system. Pell v. Procunier, 417 U.S. 817, 822, 94 S.Ct. 2800, 2804, 41 L.Ed.2d 495 (1974). Recognizing that federal courts are ill-equipped to deal with the complexities of prison administration, the Supreme Court has accorded great deference to determinations of prison officials and fashioned "a lesser standard of scrutiny ... in determining the constitutionality of the prison rules." Turner, 482 U.S. at 81, 107 S.Ct. at 2257; see also Shabazz, 482 U.S. at 349, 107 S.Ct. at 2404.
The governing standard is one of reasonableness, taking into account whether the particular regulation affecting some constitutional right asserted by a prisoner is "reasonably related to legitimate peno-logical interests." Turner, 482 U.S. at 89, 107 S.Ct. at 2261; Shabazz, 482 U.S. at 349, 107 S.Ct. at 2404, The Turner Court determined that the factors to be considered are: 1) whether there is a rational relationship between the regulation and the legitimate government interests asserted; 2) whether the inmates have alternative means to exercise the right; 3) the impact that accommodation of the right will have on the prison system; and 4) whether ready alternatives exist which accommodate the right and satisfy the governmental interest. Turner, 482 U.S. at 89-90, 107 S.Ct. at 2261-62; Fromer v. Scully, 874 F.2d 69, 72 (2d Cir.1989).
In addition to their first amendment claims, plaintiffs here assert that they have been denied equal protection by reason of treatment different from that afforded to other religious groups. While the Turner /Shabazz standard was established in the context of first amendment issues, it is also relevant to the assessment of equal protection claims in the prison setting. As to such claims, the reasonableness of the prison rules and policies must be examined to determine whether distinctions made between religious groups in prison are reasonably related to legitimate penological interests. See Williams v. Lane, 851 F.2d 867, 877 (7th Cir.1988), cert. denied, — U.S.-, 109 S.Ct. 879, 102 L.Ed.2d 1001 (1989). We must determine whether “the ... groups are so similar that discretion has been abused.” Jones v. North Carolina Prisoners’ Labor Union, Inc., 433 U.S. 119, 136, 97 S.Ct. 2532, 2543, 53 L.Ed.2d 629 (1977).
II. The Haircut Regulation
A. Issue Preclusion
Departmental Directive 4914 requires that upon entry into a correctional institution all male inmates receive a haircut for purposes of an identification photograph. Defendants maintain that the haircut highlights an inmate’s facial and cranial features in the photograph, and thus facilitates recapture in the event of escape. After the initial haircut, an inmate is permitted to regrow his hair to any length but is subject to being rephotographed if his appearance changes drastically. The challenge to Directive 4914 is founded on the contention that it violates the inmates’ free exercise clause rights. “Many Rastafari-ans take the ‘vow of the Nazarite’ never to cut their hair,” believing that the wearing of dreadlocks is sacred. Benjamin, 708 F.Supp. at 572.
The district court enjoined enforcement of the Directive on two grounds. Applying the doctrine of offensive collateral estop-pel, the court determined that the defendants were precluded from relitigating the validity of the Directive because the issue previously had been decided against them by the New York Court of Appeals in Lewis and Overton. Id. at 573. The court further determined that, even if preclusion was improper, Directive 4914 failed to pass constitutional muster under Turner. Id. We agree with both determinations.
On appeal, defendants challenge the application of the collateral estoppel doctrine on three grounds. They assert that there is an absence of identicality of issues between the state cases and the case here; that offensive issue preclusion should not apply against the government; and that a subsequent change in law renders preclusion improper.
In determining the preclusive effect given a state court judgment under 28 U.S.C. § 1738 (1982), a federal court must “give that judgment the same effect that it would have in the courts of the state under state law.” Cullen v. Margiotta, 811 F.2d 698, 732 (2d Cir.), cert. denied, 483 U.S. 1021, 107 S.Ct. 3266, 97 L.Ed.2d 764 (1987); see Wilder v. Thomas, 854 F.2d 605, 616 (2d Cir.1988), cert. denied, — U.S. -, 109 S.Ct. 1314, 103 L.Ed.2d 583 (1989). Defendants argue that the prior proceedings involved only the validity of Directive 4914 as it applied to the individual inmates in those cases and not its constitutionality as applied to any other parties, including members of the plaintiff class. They note that the state courts found that DOCS objectives could be achieved by merely tying back the hair of those individual inmates during their initial photographs. See Lew* is, 68 N.Y.2d at 925, 502 N.E.2d at 989, 510 N.Y.S.2d at 74; Overton, 133 A.D.2d at 746, 520 N.Y.S.2d at 34.
Application of the doctrine of collateral estoppel requires a finding of “the identicality of an issue necessarily decided in the prior action” and “a full and fair opportunity to contest the issue in the prior action.” Halyalkar v. Board of Regents, 72 N.Y.2d 261, 266, 527 N.E.2d 1222, 1224, 532 N.Y. S.2d 85, 87 (1988) (citation omitted). We are confronted here with the constitutional validity of Directive 4914 as it applies to the plaintiffs, a mixed question of law and fact necessarily confronted by the state courts in assessing the legitimacy of the security concerns raised by the DOCS. See Lewis, 68 N.Y.2d at 924-25, 502 N.E.2d at 989, 510 N.Y.S.2d at 74; Overton, 133 A.D.2d at 745-46, 520 N.Y.S.2d at 34.
In the district court, defendants presented much of the same evidence that they presented in the state courts, including testimony of Deputy Commissioner Coombe, various sets of photographs, and even photographs of Messrs. Lewis and Overton. The only set of photographs presented in the Overton case, however, was that of Mr. Overton. We find that, between the state and federal proceedings, there is a “substantial overlap” of evidence and arguments. Restatement (Second) of Judgments § 27 comment c (1982); see Koch v. Consolidated Edison Co. of New York, 62 N.Y.2d 548, 554 n. 2 & 555 n. 4, 468 N.E.2d 1, 4 nn. 2 & 4, 479 N.Y.S.2d 163, 166 nn. 2 & 4 (1984) (adopting the issue preclusion factors outlined in the Restatement), cert. denied, 469 U.S. 1210, 105 S.Ct. 1177, 84 L.Ed.2d 326 (1985).
The action at bar was commenced in 1979, several years before the state court decisions in Lewis and Overton. Therefore, defendants had a strong incentive, as well as a fair opportunity, to contest the haircut issue fully in the New York State courts, recognizing that any determination might have a preclusive effect in the pending federal action. See Winters v. Lavine, 574 F.2d 46, 59 n. 14 (2d Cir.1978).
Defendants urge that nonmutual offensive collateral estoppel cannot be invoked against the government. See United States v. Mendoza, 464 U.S. 154, 104 S.Ct. 568, 78 L.Ed.2d 379 (1984). The Mendoza Court declined to apply offensive issue preclusion against the federal government, finding that certain policy considerations weighed against preclusion in that case. Id. at 160-61, 104 S.Ct. at 572-73. Significantly, the Solicitor General had decided not to appeal a previous adverse judgment, id. at 159, 161, 104 S.Ct. at 572, 573, unlike the situation here, where the defendants appealed two prior judgments resolving the same issues to the state’s highest court.
The major policy interests outlined in Mendoza were avoidance of premature es-toppel and assurance of an opportunity for the government to consider the administrative concerns that weigh against initiation of the appellate process. Id. Here, the issue percolated through the state courts and was decided by the New York Court of Appeals during the pendency of the ease at bar. Decisions by several state courts assured defendants that preclusion was not premature, that proper review of the issues occurred prior to application of preclusion principles, and that the DOCS had the opportunity to consider appeal of the state court decisions in light of the pending federal action.
Lastly, defendants contend that a change in the governing constitutional standard since Lems renders preclusion improper. We note that Lewis considered two levels of scrutiny and found that even under a standard more burdensome to the plaintiffs than the Turner/Shabazz reasonableness standard, plaintiffs would prevail. Lewis, 68 N.Y.2d at 924-25, 502 N.E.2d at 989, 510 N.Y.S.2d at 74. The decision in Overton, decided after pronouncement of the new standard, followed the mandate of the Supreme Court. Overton, 133 A.D.2d at 745, 520 N.Y.S.2d at 34.
In light of the foregoing, we find the district court properly gave preclusive effect to the prior state court proceedings.
B. Constitutionality of Directive 4914
Defendants argue that the initial haircut is necessary for purposes of identification in the event of escape. Accepting the existence of reasonable security concerns, we find there is an alternative that can accommodate both parties. See Turner, 482 U.S. at 91, 107 S.Ct. at 2262. After reviewing the voluminous record and hearing testimony from both Rastafarian inmates and prison officials, the district court determined that pulling plaintiffs’ hair back met the purported security needs. Benjamin, 708 F.Supp. at 573. Great deference must be accorded the DOCS’ position that this solution is inadequate. Fromer, 874 F.2d at 73. Defendants, however, have failed to establish that the accommodation here has more than a de min-imis effect on valid penological interests. Turner, 482 U.S. at 91, 107 S.Ct. at 2262. In Fromer, it appeared that there was no alternative to shaving the appellant’s beard to reveal his facial features properly. Fromer, 874 F.2d at 76. Here, however, tying plaintiffs’ hair in pony tails adequately accommodates the interests of prison authorities in revealing an inmate’s cranial and facial features.
Plaintiffs are permitted to regrow their hair to any length after the initial haircut. While defendants assert that this is an accommodation, this “misses the point of the violence done to [an inmate’s] religious beliefs when his hair is cut.” Benjamin, 708 F.Supp. at 573. Although length of hair makes identification difficult upon escape, a photograph of a Rastafarian when his hair is short would create the same identification problems, because he certainly will regrow his hair. The fact that inmates are rephotographed if their appearance changes drastically indicates that defendants believe they will be able to identify the plaintiffs from the new photographs. It is unclear how this is any different from identifying plaintiffs as they appear upon arrival. Accordingly, we find that there exists an alternative means of accommodating plaintiffs’ religious rights without undermining the legitimate peno-logical interests identified by the defendants.
III. Weekly Religious Congregation
Plaintiffs maintain they have been denied the right to congregate for weekly religious observance in violation of the free exercise clause of the first amendment, and that the prohibition is inconsistent with the permissible congregation of other religious groups in DOCS facilities. They further assert that section 610 of the New York Correction Law does not require outside clergy to conduct services but merely allows religious groups the right to have services conducted by outside clergy if available. Section 610 provides, in relevant part, that “inmates ... shall be allowed such religious services and spiritual advice and spiritual ministration from some recognized clergyman of the denomination or church which said inmates may respectively prefer or to which they have belonged prior to their being confined_” N.Y. Correct. Law § 610.
The DOCS has interpreted section 610 to mean that inmate religious groups are permitted to congregate for religious observance only under the supervision of a non-inmate spiritual leader known as a “free-world sponsor.” It has adopted Directive #4760, entitled “Inmate Group Activities and Organizations,” which is applicable to religious groups. Paragraph 111(C)(3) of the Directive provides that a “[b]ona fide ‘outside sponsor’ is mandatory for each inmate organization.” A bona fide sponsor is defined as:
any individual or group duly registered and approved with the Volunteer Services Program that will visit the facility regularly to provide assistance to the inmate organization. A minimum of one visit per quarter is desired. In addition, ongoing communication with the facility Volunteer Services Office should be carried on. (All volunteer participants from the community must meet the registration and approval requirements of Directive #4750, “Volunteer Services Programs.”)
While it may be that the free-world sponsor requirement is inconsistent with the statutory language, determination of that issue is reserved for state courts. Cf. Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 106, 104 S.Ct. 900, 911, 79 L.Ed.2d 67 (1984). We must resolve whether the present interpretation of section 610 by DOCS is consistent with constitutional standards.
The sponsor requirement is said to be intended to ensure that the meeting is convened for religious purposes and not to hold kangaroo courts, foster extortion, or provide a venue for the dissemination of conspiratorial information. As well, the use of sponsors is thought to minimize conflicts among inmates as to the nature and content of the service. Other circuits have given their imprimatur to the requirement of free-world sponsors based upon similar security concerns. See, e.g., Johnson-Bey v. Lane, 863 F.2d 1308, 1310-11 (7th Cir.1988); Cooper v. Tard, 855 F.2d 125, 129-30 (3d Cir.1988); Hadi v. Horn, 830 F.2d 779, 784-86 (7th Cir.1987); Tisdale v. Dobbs, 807 F.2d 734, 736, 740 (8th Cir.1986). We also are satisfied that the sponsor requirement meets the rational relationship and impact of accommodation prongs of the Turner standard.
Applying the second Turner prong, alternative means, it appears that plaintiffs are not prohibited from “reasoning,” a form of religious discussion, as an alternative means of prayer. Cooper, 855 F.2d at 129-30. In fact, part of the Rastafarian service consists of reasoning. As long as plaintiffs are permitted to engage in such discussion, they have other means of exercising their right of congregate prayer.
As to the fourth prong, availability of ready alternatives, defendants have suggested that they might accept an outside “Elder” as a free-world sponsor. An Elder is not a clergyman but retains authority as a result of his education and familiarity with the Rastafarian religion. Any objection to the authority of an Elder, simply because the Rastafarian religion lacks conventional clergyman, would be unwarranted. In view of the legitimate security reasons supporting the free-world sponsor requirement, the failure of an outside Elder to come forward cannot justify the finding of a first amendment violation. The inmates’ proposal that a non-religious supervisor be used would not resolve the doctrinal disputes that are the subject of security concerns. See Hadi, 830 F.2d at 786-87.
Similarly, we are not persuaded that the free-world sponsor requirement violates plaintiffs’ right to equal protection of the laws. The plaintiffs argue that defendants have permitted the use of inmate Imams to conduct Muslim services and therefore they should be accorded the same privilege. This contention, however, fails to recognize the reason for the free-world sponsor requirement. It is not the presence or absence of the sponsor at the service that is the concern but rather the availability of an outside ministerial authority in religious matters.
The requirement of an outside resource is compelled by the defendants' concern that the authenticity of the service will be compromised or that particular religious issues may arise which cannot be resolved by DOCS staff. Thus, the defendants have expressed a rational basis for requiring outside sponsors even if the sponsors are not required to attend every service. The DOCS has an outside resource to contact with respect to Muslim and Buddhist services, and it indicated that it would “allow Rastafarians to hold congregate services when and if ... an outside sponsor comes forth.” Benjamin, 708 F.Supp. at 576.
The apparent unavailability of a Rastafarian Elder or similar religious authority willing to serve as an outside sponsor is not the fault of the defendants. Had the plaintiffs proved that the DOCS arbitrarily rejected available sponsors, then a cognizable claim might exist. However, the district court found that the defendants have made a good faith effort “to locate and obtain the services of a sponsor.” Id. at 576-77. We agree with the district court that the free-world sponsor requirement does not violate equal protection because it has a legitimate basis and is imposed on all religious groups.
IV. The Wearing of Crowns
We next address the constitutionality of the DOCS regulations which restrict the wearing of crowns to designated areas. From the perspective of first amendment analysis, legitimate security reasons are raised in support of present policy. Preventing the smuggling of contraband, such as weapons and drugs, comports with the type of penological interests contemplated under the Turner/Shabazz standard. See Turner, 482 U.S. at 89, 107 S.Ct. at 2261. We have examined each prong of the first amendment analysis and find plaintiffs’ claim to be without merit. See, e.g., Standing Deer v. Carlson, 831 F.2d 1525, 1528 (9th Cir.1987); Rogers v. Scurr, 676 F.2d 1211, 1215 (8th Cir.1982).
Jewish inmates are permitted to wear yarmulkes throughout DOCS facilities, and Muslim prisoners may wear kufis. The right of Rastafarians to wear crowns, however, is limited, and in some facilities crowns are wholly prohibited. Plaintiffs contend that the unlimited right granted Jewish and Muslim inmates, as opposed to Rastafarian prisoners, to wear religious headgear establishes an equal protection violation. We disagree.
The district court found that crowns are large and loose-fitting, providing a readily available means for “concealing and transporting weapons, controlled substances or other contraband, thus posing a threat to prison security.” Benjamin, 708 F.Supp. at 574. While security problems may exist with respect to yarmulkes and kufis, defendants maintain that a heightened security concern is posed by crowns, because of the size of the headgear and the ease with which contraband can be secreted. Here, legitimate security interests have been raised by the prison authorities, who must be accorded great deference in these matters. Turner, 482 U.S. at 84-85, 107 S.Ct. at 2259-60.
The fact that the defendants are willing to conduct spot searches of Jewish and Muslim inmates does not mean that they are required to do the same for all prisoners claiming a right to wear headgear. The prison officials justifiably expressed the belief that crowns presented a greater danger than yarmulkes and kufis. The greater security concern associated with the wearing of crowns, including the enhanced potential for concealing contraband and the obvious increase in guard/inmate contact that would result from searches of crowns, provides a rational basis for treating the plaintiffs differently from the other religious groups with respect to headgear. See North Carolina Prisoners’ Union, 433 U.S. at 136, 97 S.Ct. at 2543. The district court found that “yarmulkes and kufis are smaller and fit closely to the head, while the crown is of a size and shapelessness which would facilitate uses which are legitimately forbidden.” Benjamin, 708 F.Supp. at 574. Accordingly, we find no merit to plaintiffs’ contention that the restriction imposed on the wearing of crowns violates their equal protection rights.
V. Ital Diet
Rastafarians observe a diet called Ital, which “symbolizes a belief in life and an avoidance of symbols of death.” Benjamin, 708 F.Supp. at 575. The exact nature of the Ital diet varies among individuals and Rastafarian sects. Id. The district court denied plaintiffs’ dietary claim, determining that the varied individual practices “would impose undue financial and administrative burdens on defendants.” Id. Although it appears that plaintiffs originally sought a strict Ital diet, they now “ask that their dietary needs be accommodated in a way similar to that defendants have already adopted for other religious groups.” On appeal, plaintiffs advance an equal protection challenge, asserting that similar dietary requests have been granted to other religious groups.
Prisoners have a right “to receive diets consistent with their religious scruples.” Kahane v. Carlson, 527 F.2d 492, 495 (2d Cir.1975). Courts, however, are reluctant to grant dietary requests where the cost is prohibitive, see Martinelli v. Dugger, 817 F.2d 1499, 1507 & n. 29 (11th Cir.1987), cert. denied, 484 U.S. 1012, 108 S.Ct. 714, 98 L.Ed.2d 664 (1988); Kahey v. Jones, 836 F.2d 948, 951 (5th Cir.1988), or the accommodation is administratively unfeasible, see Kahey, 836 F.2d at 951; Kahane, 527 F.2d at 495.
The dietary programs presently in effect are well-defined. Muslim inmates are provided the alternatives to pork available to all inmates, and receive a special dietary accommodation during the month-long Muslim holiday of Ramadan. During Ramadan, Muslims are permitted to prepare and eat food in their cells, but the foodstuffs they receive are those served to the entire prison population. In order to accommodate the dietary habits of Orthodox Jewish inmates, a kosher dietary plan is provided at the Green Haven facility; and neutral diets, consisting mainly of canned goods, eggs, and occasionally fresh vegetables, are provided at other facilities as alternatives to the kosher dietary plan.
Plaintiffs now seek a “vegetarian diet with foodstuffs that their faith permits them to eat.” They also contend that a kosher diet would “substantially meet their religious need.” Notwithstanding this attempted clarification, the varied nature of the Ital diet raises questions as to the foodstuffs that will satisfy their request. This problem exists because Rastafarians will not consume canned goods, and fresh fruits and vegetables have a limited availability and are not cost-effective. Benjamin, 708 F.Supp. at 575.
We remain uncertain as to the exact nature of the dietary request, which has varied during the course of this litigation. Based on the present state of the record, we find that the dietary claim must be rejected because plaintiffs have failed to clearly define the claim or to make the evidentiary showing required to establish any constitutional dietary claim.
CONCLUSION
For the foregoing reasons, we affirm. No costs are awarded to either side.
. Defendants do not raise the issue whether Rastafarianism is a religion protected by the first amendment. That issue has been resolved against them in state court. Overton v. Coughlin, 133 A.D.2d 744, 745-46, 520 N.Y.S.2d 32, 34 (2d Dep’t 1987).
. The Rastafarian service is also said to involve the smoking of marijuana. Plaintiffs, however, do not assert that they should be permitted to smoke marijuana during their services.
. Male inmates also receive an initial shave; however, that facet of Directive 4914 was found to be constitutional in Fromer, 874 F.2d at 76.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | B | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
In this diversity suit Champlin & Wells, Inc. was adjudged liable in contribution under Arkansas law to Missouri Pacific Railroad Company in an amount equal to 95% of a settlement reached between Missouri Pacific and Clifford W. Clarke. The settlement was of an F.E.L.A. claim Clarke had brought against the railroad for personal injuries. Champlin & Wells and its liability insurer, Northeastern Fire Insurance Company of Pennsylvania, now appeal from the district court’s judgment, contending that tortfeasor Steven Conder was acting for Missouri Pacific as a “borrowed servant” at the time Clarke was injured, and that Champlin & Wells therefore should not have been held responsible for Conder’s negligence. We affirm.
By written contract dated August 20, 1975, Champlin & Wells agreed to furnish Missouri Pacific with “one (1) fork lift ... fully manned and maintained with all supplies, to unload and handle Carrier’s track material and secure track panels on Carrier’s cars at the Track Panel Facilities in North Little Rock, Arkansas.” The contract set hourly rates at which Champlin & Wells would be paid for labor and equipment. The contract also stated “[t]he Contractor shall at all times be and remain an independent contractor hereunder, and Carrier shall have no control over the employment, discharge, compensation, and services rendered by Contractor’s employees or agents.” Work under the contract was to be “prosecute[d] with diligence and completefd] in a substantial and workmanlike manner, and to the express satisfaction of Carrier’s Contracting Officer.”
Various individuals testified at trial about the manner in which the parties operated under this contract. Champlin & Wells hired and paid its own employees, but instructed them to do whatever railroad personnel told them to do. An assistant roadmaster for Missouri Pacific would tell the forklift operator what to move and where to move it; he did not give instructions regarding the operation of the forklift. Champlin & Wells typically did not supervise or monitor its forklift operators. If the railroad was unhappy with a particular operator, it would contact Champlin & Wells, and the latter would take appropriate action.
Steven Conder was the forklift operator furnished by Champlin & Wells on February 3,' 1978. Clifford Clarke, a Missouri Pacific employee, was helping Conder unload a railcar on that date when Conder negligently swung a heavy metal “raildog” attached to the forklift over Clarke’s head. When Clarke stood up suddenly from a crouching position, the raildog struck him.
Clarke, who suffered neck and back injuries, filed an F.E.L.A. claim against the railroad. Missouri Pacific settled the claim for $155,514.34. Missouri Pacific then brought this suit against Champlin & Wells for contribution; Champlin & Wells joined Northeastern as a third party defendant.
The case was tried before the district court, Missouri Pacific Railroad Co. v. Champlin & Wells, Inc., 600 F.Supp. 182 (E.D.Ark. 1985). Conder was not available as a witness. The court found that Conder and Clarke were both negligent, but that 95% of the fault lay with Conder. The district court further found that at the time of the accident, Conder had been an “employee of Champlin & Wells acting within the scope of his employment” (emphasis added). The court accordingly concluded that Champlin & Wells was liable under Arkansas contribution statutes (Ark.Stat.Ann. §§ 34-1001 — 1009) for 95% of the settlement Missouri Pacific had paid Clarke.
Champlin & Wells contends that in the circumstances of this case, Conder was a “loaned servant” of Missouri Pacific, and that the district court erred in holding Champlin & Wells responsible for Conder’s negligence. In support of this argument, Champlin & Wells cites a number of Arkansas cases in which the loaned servant doctrine has been applied. Barton-Mansfield Co. v. Bogey, 201 Ark. 860, 147 S.W.2d 977 (1941); Mississippi River Fuel Corp. v. Morris, 183 Ark. 207, 35 S.W.2d 607 (1931); Arkansas Logging Co. v. Martin, 116 Ark. 318, 173 S.W. 184 (1915); St. Louis, Iron Mountain & Southern Railway v. Yates, 111 Ark. 486, 165 S.W. 282 (1914).
The applicability of the loaned servant defense here depended upon whether, at the time of Conder’s negligent act, he was under the direction and control of his employer, Champlin & Wells, or that of Missouri Pacific, the party to whom he had been lent or hired. See Barton-Mansfield Co., 201 Ark. at 867, 147 S.W.2d at 980. “Ordinarily the question whether the general or special employer had the right of control and thus was the employee’s master, presents an issue of fact____” Watland v. Walton, 410 F.2d 1, 3 (8th Cir.1969). Accord Steel Erectors, Inc. v. Lee, 253 Ark. 151, 484 S.W.2d 874 (1972); Bell Transportation Co. v. Morehead, 246 Ark. 170, 437 S.W.2d 234 (1969).
After reviewing the record, we cannot say that the findings of the district court regarding the loaned servant issue were clearly erroneous. Conder was hired by Champlin & Wells to operate the forklift; and it was in the course of discharging that duty that he negligently injured Clarke. In addition, the parties’ written contract specified that Missouri Pacific would have “no control over ... the services rendered by Contractor’s employees or agents.” While it perhaps would have been open to Champ-lin & Wells to prove that the practices of the parties had varied the terms of the agreement, the evidence of such variance would have had to have been substantial to have raised a triable issue of fact. Ozan Lumber Co. v. McNeely, 214 Ark. 657, 661, 217 S.W.2d 341, 343 (1949). In this regard, it appears Missoúri Pacific registered any complaints it had about the forklift drivers with Champlin & Wells, rather than addressing the drivers directly. Missouri Pacific instructed the operators as to what work needed to be done, but did not tell them how to do it. Thus the evidence tended to reinforce, rather than modify, the allocation of authority as established by the written agreement. The fact that no Champlin & Wells agent was supervising Conder at the time of the accident is not controlling. It is the right to direct the manner in which work is done, rather than the actual exercise of that right, which determines whether a master-servant relationship is present. Wilson v. Davison, 197 Ark. 99, 103, 122 S.W.2d 539, 541 (1938).
Of the authorities cited by appellants, the closest on point — Mississippi River Fuel Corp., 183 Ark. 207, 35 S.W.2d 607 — is distinguishable. In that case, the party for whom the work was being done did not contractually disclaim responsibility for the acts of the workers, and in fact supervised the workers as they did their work. Id. In the other cases, the Arkansas court merely affirmed jury verdicts finding the loaned servant doctrine applicable; and the tor-tious acts occurred while the tortfeasors were performing special services that were clearly separate and distinct from the usual duties they performed for their regular employers. Barton-Mansfield Co., 201 Ark. 860, 147 S.W.2d 977; Arkansas Logging Co., 116 Ark. 318, 173 S.W. 184; St. Louis, Iron Mountain & Southern Railway, 111 Ark. 486, 165 S.W. 282.
Finding no error of law or fact, we affirm.
. The Honorable Henry Woods, United States District Judge, Eastern District of Arkansas.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
NORTHCOTT, Circuit Judge.
This is an appeal from a final decree, entered in the District Court of the United States for the Northern District of West Virginia, at Wheeling, in a suit in equity, in' which the appellants were plaintiffs below and the appellee was the defendant below.
. The suit involved the will of one Albert P. Tallman and the disposition and administration of his estate, and has already been before this court twice. Tallman v. Ladd et al., 5 F. (2d) 582, and Tallman v. Ladd et al., 41 F.(2d) 1015.
A copy of the will in question, the conditions that existed at th'e time of the filing of the suit, and the allegations of the bill will be found in the opinion of this court in Tallman v. Ladd et al., 5 F.(2d) 582. Reference to a special master was ordered by the judge below, and the special master, after a full hearing, in an able and exhaustive report, held that appellee had, in the administration of her husband’s estate, acted in the “best of faith”; had been wisely counselled and advised; and had made full, complete, and,regular settlements, both as executrix and guardian in the county court of Ohio county, W. Va., that being the court vested with sole jurisdiction to administer fiduciary accounts in West Virginia.
The judge below, after hearing on exceptions to the special master’s report, entered a decree confirming the .report, from which action this appeal was brought.
It is contended on behalf of the appellants that there were not proper findings' of fact and conclusions of law made by the court, and that the special master should have gone in detail into the settlements made by appel-lee before the county court of Ohio county.
An examination of the record shows that the court below made findings of fact and conclusions of law amply sufficient to comply with Equity Rule 70% (28 USCA § 723).
It has been repeatedly held, and we know of no decision to the contrary, -that federal courts may not fake jurisdiction in eases involving the probate of a will or eases attempting to disturb the possession of an estate properly in the hands of a state probate court or involving the conelusiveness of judgments of state courts in such matters. Kieley v. McGlynn et al., 21 Wall. 503, 22 L. Ed. 599; Stone v. Simmons, 56 W. Va. 88, 48 S. E. 841; Page v. Huddleston, 98 W. Va. 104, 126 S. E. 579; Byers v. McAuley et al., 149 U. S. 608, 13 S. Ct. 906, 37 L. Ed. 867; Waterman v. Canal-Louisiana Bank & Trust Co., Executor, etc., 215 U. S. 33, 30 S. Ct. 10, 13, 54 L. Ed. 80.
As was said by Mr. Justice Day in Waterman v. Canal-Louisiana Bank & Trust Co., supra: “ * * * For it is the result of the eases that, in so far as the probate administration of the estate is concerned in the payment of debts, and the settlement of the accounts by the executor or administrator, the jurisdiction of the probate court may not be interfered with. * * * ”
A discussion of this principle by this court will also be found in Cottingham v. Hall, 55 F.(2d) 664. The judge below was clearly right in holding that the settlements made by the appellee in her fiduciary capacity could not be interfered with.
It is also contended, on behalf of appellants, that the judge below was in error in decreeing certain costs against the appellants.
Questions of costs in equity are discretionary, and the court’s action is presumptively correct. Newton v. Consolidated Gas Co., 265 U. S. 78, 44 S. Ct. 481, 68 L. Ed. 909; The Scotland, 118 U. S. 507, 6 S. Ct. 1174, 30 L. Ed. 153; Kittredge v. Race et al., 92 U. S. 116, 23 L. Ed. 488; Ex parte Peterson, 253 U. S. 300, 40 S. Ct. 543, 64 L. Ed. 919.
Here we are of the opinion that the action of the judge in apportioning the costs was not only presumptively, but actually, correct.
The decree of the court below is therefore affirmed.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
ALSCHULER, Circuit Judge.
The United States appeals from a judgment recovered by Harris on March 1, 1935, in an action which was begun November 12, 1929, on a war risk insurance policy. September 26, 1932, the action was dismissed by the court for want of prosecution when reached on the trial call. January 7, 1933, Harris moved the court to set aside the order of dismissal and reinstate the cause, which motion was not decided, but was renewed on June 15, 1933. Harris set up in his verified motion that his attorneys were nonresidents of Illinois, and that attorneys representing the United States had agreed with Harris’ attorneys that when the case was called they would notify the court of plaintiff’s readiness for tidal; that such notification was not given; that Harris and his attorneys did not become aware of the dismissal of the cause until January, 1933, just before making their motion to set aside the dismissal and reinstate the cause; and that from January to June, 1933, both sides had been in correspondence respecting a stipulation for reinstatement of the cause. June 15, 1933, the court entered the following order: “On agreement of the parties to this suit now here made in open Court It Is Ordered that the order of dismissal and judgment heretofore taken and entered herein of record be and the same is hereby vacated and set aside and cause reinstated upon the dockets of this Court.”
February 16, 1935, by leave of court," Harris filed his amended petition, to which on February 21, 1935, the United States filed its answer. The cause was tried February 27, 1935, before a jury, which returned a verdict for Harris.
Harris contends he was totally and permanently disabled from September 28, 1918, at which time his policy was in force. In view of the conclusion we reach, it will not be necessary to recite in detail the history of his insurance, its lapses, and its revivals by application upon the premium payments of his disability payments of considerable amounts which had been awarded him.
We first meet the contention that, since a number of the terms of the District Court had passed after the cause was dismissed for want of prosecution, and before motion was made to set aside the order of dismissal and to reinstate the cause, the court had lost jurisdiction of the cause, and was wholly without power to grant reinstatement. This might, be so were it not for the fact that this order for reinstatement was made upon agreement of the parties to the action. We can see no reason, either upon principle or authority, why the parties were not competent to enter into such agreement, and having entered into it, and the cause upon reinstatement having proceeded to'trial and judgment, why the court did not have jurisdiction to render a judgment which was as binding as if there had been no previous dismissal for want of prosecution. The subject-matter of the litigation was one within the court’s jurisdiction; and whether jurisdiction over the person of the defendant was derived from service of process or from its entry of appearance and answering and thus submitting itself to the jurisdiction of the court, seems to us quite immaterial.
The particular circumstances of this case cry out loudly against the application of a rule as here contended for by appellant. Under the applicable statutes, upon dismissal of such an action for want of prosecution a plaintiff has one year in which to begin another action. 38 U.S.C. § 445 (38 U.S.C.A. § 445). So when this suit was thus dismissed, Harris might have begun a new action within one year, or until September 26, 1933, but not thereafter. At the time of the agreed reinstatement he had still left about three months in which to begin the suit. But, relying upon the Government’s agreement, he did not begin a new suit; and if the Government’s contention were here allowed, Harris’ right of action would, through such reliance, be barred. Surely no defendant, individual or corporate, private or public, should be permitted to profit by such breach of its agreement.
The stipulated reinstatement may in any event be regarded as in itself the institution of a new action; and while there was no new service of process on the defendant, yet if conduct indicating waiver of service were necessary to be shown to give jurisdiction of the defendant, this does appear in the Government’s filing, shortly before the trial, its answer to Harris’ amended petition, as well as in its full and unrestricted participation in the trial.
Various errors are assigned respecting matters which arose in the course of the trial. We deem it necessary to consider but one; viz., the court’s direction to the jury at the close of the trial to find a verdict for plaintiff. If it could be said that all the evidence in the case, with all reasonable deductions therefrom, supports the plaintiff’s right of recovery, such a direction to the jury would be sustainable; but not where there is substantial evidence which tends to support the defense. The parties are in accord on these propositions, and citation of authorities is unnecessary.
That the record discloses evidence from which it might properly be concluded that Harris was totally and permanently disabled, may be conceded; but for the purposes hereof we are interested in the question whether there is disclosed by the record any substantial evidence to the contrary.
The policy was first issued to Harris August 5, 1918, while he was in training af Camp Grant. He testified that when he arrived there on August 2, 1918, and for several weeks thereafter, he was feeling well; but that when he was inoculated against typhoid fever he became ill, and so remained until he was discharged from the service, on a physician’s certificate, September 27, 1918; and that he has been ill much of the time since his discharge. After his discharge Harris stopped paying premiums on his policy and permitted it to lafise. He stated at the 'trial that he did not then know he was totally and permanently disabled or he would not have permitted the policy to lapse. Indeed, if while the policy was in force he became totally and permanently disabled, it would not have lapsed.
In September, 1920, he married, and he testified he did not then think he was permanently and totally disabled, and would not have married if he had thought he could not take care of a family. In 1919, upon his application, he was granted soldiers’ compensation, and under section 305 of the World War Veterans’ Act (38 U. S.C. § 516 [38 U.S.C.A. § 516]) this revived his insurance otherwise lapsed — unless, indeed, total and permanent disability was then present. The policy was suffered to lapse a number of times thereafter, but was each time reinstated. With each reinstatement Harris was asked whether, at that time, he was totally and permanently disabled, and each time he answered “No.” The Government offered in evidence three such applications, dated respectively December 31, 1919, June 23, 1923, and August 26, 1926. They are important not only as declarations against interest made by Harris himself, but also in connection with-the statute (38 U.S.C. § 515 [38 U.S.C.A. § 515]), which sets up the following condition precedent to the approval of applications for reinstatement: “That the applicant during his lifetime submits proof satisfactory to the director showing that he is not totally and permanently disabled.” Such statements by the claimant, however they may be explained by him or by other facts and circumstances in the case, constitute evidence of no mean degree, and should, with all the other evidence in the case, have been submitted to the jury for its consideration.
There was evidence also that in the years following the date of the disability as fixed in the court’s direction Harris has had quite a number of employments. The work record of such a claimant is generally important as bearing on totality and permanence of disability. It is true that the amount of work he has done does not appear to have been as much as in some such cases where recovery has been allowed for alleged total and permanent disability; but it is perhaps more than in some other cases where recovery has been denied. The influence of the quantum of work done, upon the question of total and permanent disability, is usually for the jury. To be sure, there are cases where the record is so replete with proof of employment and earnings that the court may properly say that this of itself indicates the disability was not total and permanent. On the other hand, where the work periods have been less frequent and protracted, or are entirely absent, this need not necessarily be taken to indicate total disability. There may be circumstances disclosed indicating that the claimant’s financial situation was such that he did not need to work, or reasons other than disability appear to explain his idleness; and so the mere fact of not having worked would not conclusively indicate total and permanent disability. Indeed, it appears that during all the time since 1919 this claimant has been receiving disability compensation from the Government — some of the time as low as $19 monthly, but more of the time as high as $100 a month, and sometimes even more.
Several doctors testified that Harris was suffering from mitral stenosis; that it is a slowly developing disease; and that one so suffering would not get well. One of claimant’s witnesses, Dr. Arkin, testified that thousands of people are “working as doctors, lawyers, elevator operators and all kinds of occupations with mitral stenosis.” Other medical witnesses made statements to about the same effect, saying that mitral stenosis would not necessarily disable one from all work, but that-heavy physical labor should be avoided; also that light work giving some exercise and occupying the mind would probably do no more harm than sitting around the house reading newspapers.
According to Harris, his heart condition was brought on by his inoculation at Camp Grant against typhoid. As to this Dr. Arkin said, in effect, that he never knew of such inoculation causing mitral stenosis.
It cannot be said that all such evidence carried no weight at all and was entitled to no consideration. We are of the view that it was for the trier of the facts - — in this case the jury — to pass upon the weight which .should be accorded this evidence.
Upon the record, we are convinced that the peremptory instruction 'o find for the plaintiff should not have been given, and for this reason alone the judgment is reversed, with direction to grant a new trial.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |
What follows is an opinion from a United States Court of Appeals. Your task is to determine whether there were cross appeals from the decision below to the court of appeals that were consolidated in the present case.
PER CURIAM.
Defendants-appellants William Abraham, Ronald Henkin and Francis M. Mulligan, together with four co-defendants, were tried by a jury on a one count indictment charging them with conspiracy to commit extortion, in violation of Title 18, United States Code, Section 1951.
The indictment charged that, at various times from January 1964 to the date on which the indictment was filed, the defendants were members of the Chicago Police Department assigned to the vice squad of the 19th Police District. Further, the indictment charged that they wrongfully used their positions as Chicago Police Officers to obtain sums of money from named retail liquor dealers and their employees, inducing the consent of the liquor dealers under color of official right. It was also alleged that the money so obtained was distributed among the members of the police vice squad. Of the seven defendants, the jury convicted only Abraham, Henkin and Mulligan. Judge McGarr sentenced Henkin to one year and Abraham and Mulligan each to eighteen months.
The government’s evidence at trial centered around the evidence presented by a key witness, Joseph Thomas, an unindicted co-conspirator who testified pursuant to a grant of immunity. When Thomas, also a Chicago Policeman, joined the 19th District vice squad in February of 1964 he discovered that the vice squad was organized to collect monthly payments from “the club”.
The payments constituted “the package”, which would be divided among the vice officers at a monthly “sit-down”. The club was composed of tavern owners and bookmakers located in the 19th District. The officers assigned to the night shift collected the “night package” primarily from the tavern owners. The other officers collected the “day package” from other sources. The officers would bring what money they collected to the sit-downs where the package was divided and current club membership discussed. Relief officers shared in the package, but did not attend the monthly meetings. The sit-downs were held at the beginning of the month in various locations.
Thomas’ periods of duty with the 19th District vice squad overlapped those of Abraham, Henkin and Mulligan. During the periods of overlap, Thomas discussed the club with each defendant. Thomas’ share of the package was $125 a month when he first joined the vice squad and eventually got as high as $500 a month. In addition to the regular monthly collection, there was an extra collection at Christmas.
Seventeen tavern owners testified that, as members of the club, they had made payments to members of the vice squad. They paid monthly, giving extra for Christmas and generally paying in cash from the tavern receipts. The club was originally organized by Gene Benjamin, who pleaded guilty before trial. Some club members paid only Benjamin. Four tavern owners, however, each testified that they paid money to, or discussed the club with, Henkin and Abraham. Six tavern owners testified that they paid money to, or discussed the club with, Mulligan. In return for their payments, the tavern owners avoided harassment and diligent law enforcement that could discourage business.
Various liquor distributors testified that they shipped, in interstate commerce, whiskey and beer to certain tavern owners who belonged to the club. They further testified that the beer and whiskey they sold was purchased by them from sources outside of Illinois. There was no testimony that any liquor was shipped in interstate commerce to these tavern owners during 1964 to 1966.
On appeal the defendants claim that their convictions should be reversed because the evidence presented showed a minimum of two separate conspiracies creating a fatal variance; that the trial court erred in his evidentiary rulings and instructions to the jury; and that the prosecutor’s final argument was improper. We will consider each of these points separately.
I. THE GOVERNMENT’S EVIDENCE PRESENTED AT TRIAL ESTABLISHED A SINGLE CONTINUOUS CONSPIRACY.
The details of the conspiracy were provided by former policeman Thomas. Because of his duty assignments he did not serve in the vice squad the entire eleven years covered by the indictment. But he did testify that during the two periods he was assigned to the vice squad he participated in the conspiracy with the defendants. From February 1964 through October 1965 Thomas worked with defendants Abraham and Hen-kin. In fact Abraham was Thomas’ partner for six of those months. Thomas testified that during this time the defendants shared in the proceeds of the extortion plot. In addition, various tavern owners testified that Abraham and Henkin received payoffs from them.
Abraham and Henkin both left the vice unit in mid-1966 and returned after Thomas left in late 1970. Defendant Mulligan joined the vice unit in early 1968 and was still a member when Thomas left. Thomas testified that at various times Mulligan also affirmatively participated in the conspiracy. Certain tavern owners also named Mulligan as a recipient of the payoffs.
The defense argues that, as a result of the various assignments of Thomas and the other defendant police officers, the government failed to prove a single continuous conspiracy. We disagree. The periods in which the defendants were not actively participating in the conspiracy, and the absence of a direct link between Mulligan and the other two defendants, does not create a fatal variance between the proof offered and the indictment. We see the evidence as establishing a single ongoing conspiracy in which various co-conspirators moved in and out of active participation. There is no evidence that the defendants ever took affirmative action to withdraw from the conspiracy. Hyde v. United States, 225 U.S. 347, 369, 32 S.Ct. 793, 56 L.Ed. 1114 (1912); United States v. Borelli, 336 F.2d 376, 388-90 (2d Cir. 1964), cert. denied, 379 U.S. 960, 85 S.Ct. 647, 13 L.Ed.2d 555 (1965).
In nearly every conspiracy case the claim is made that a variance exists because multiple conspiracies were shown. This line of argument is based upon Kotteakos v. United States, 328 U.S. 750, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946), in which thirty-two persons were indicted and the government admitted that eight or more conspiracies were present with little factual connection. But this case does not involve a factual situation as was presented in Kotteakos. Rather, this case meets the test as described in United States v. Varelli, 407 F.2d 735 (7th Cir. 1969), in which this Court set forth one method to distinguish between a single conspiracy and multiple conspiracies. The Court stated:
“While the parties to the agreement must know of each other’s existence, they need not know each other’s identity nor need there be direct contact. The agreement may continue for a long period of time and include the performance of many transactions. New parties may join the agreement at any time while others may terminate their relationship. The parties are not always identical, but this does not mean that there are separate conspiracies.
The distinction must be made between separate conspiracies, where certain parties are common to all and one overall continuing conspiracy with various parties joining and terminating their relationship at different times. Various people knowingly joining together in furtherance of a common design or purpose constitute a single conspiracy. While the conspiracy may have a small group of core conspirators, other parties who knowingly participate with these core conspirators and others to achieve a common goal may be members of an overall conspiracy.
In essence, the question is what is the nature of the agreement. If there is one overall agreement among the various parties to perform different functions in order to carry out the objectives of the conspiracy, the agreement among all the parties constitutes a single conspiracy.”
Id. at 742 (citation omitted).
The Court reversed the convictions in Varelli because it did not believe that there was “one overall agreement among the various parties. . . . ” But in this case there was evidence showing one agreement to organize, maintain and collect monthly payments from a club of tavern owners. The Thomas testimony is not continuous due to the various district reassignments of Thomas and the other defendants. Nevertheless, the collections from the tavern owners did not stop while Thomas was absent from the vice squad during October 1965 through June 1966. Mr. Baukas, owner of the Beritz Theatre Lounge, testified that he made monthly payments to members of the vice squad from sometime in 1964 through late 1971 or early 1972. Nor did the conspiracy terminate when Thomas left the vice squad in November 1970. Various tavern owners testified that they continued to make payments to three defendants after Thomas left the vice squad.
The defense also argues that the refusal to instruct the jury on the question of multiple conspiracies was improper. United States v. Varelli, supra, and United States v. Borelli, supra, both hold that the trial judge should instruct the jury on multiple conspiracies when the possibility of a variance appears. The record discloses that the trial judge discussed the proposed defense instruction at a conference with counsel. After hearing argument, the judge concluded that the instruction would not help the jury, stating:
“This whole thing is premised on the possibility that the jury might find one or more of the defendants guilty of a conspiracy not charged in the indictment. But don’t we define the conspiracy charged in the indictment [in other instructions] and isn’t it a rather . [simple] one count conspiracy indictment, so that the jury knows what it is that they are charged with, and they either find that or acquit them. We have told them that a half a dozen times. My problem is that I am not at all sure that this would contribute to the jury’s body of knowledge at all, it would confuse them.” July 7, 1975 transcript, p. 76.
In light of the trial judge’s well founded comments, we find no error in his refusing the defense instructions dealing with multiple conspiracies. Admittedly, the case law requires an instruction to be given in some situations. However, in this case, where there is a simple one count indictment, where the crime of conspiracy has been previously outlined in other instructions, and where the evidence shows a single ongoing conspiracy, we see no reason to overrule the decision of a respected trial judge merely to be faithful to our previous decision in Varelli, supra, which encourages but does not demand the giving of such an instruction. The trial judge was in the best position to determine whether the evidence created the possibility of a variance. Now, on appeal, from a position of hindsight, we believe his decision was correct in that such an instruction would only confuse the issue before the jury. However, our decision in this case should not be read as discouraging the giving of an instruction when the possibility of a variance clearly exists.
II. THE COURT DID NOT ERR IN DENYING DEFENDANTS’ MOTION FOR A SEVERANCE.
Prior to the trial, all defendants joined in a motion for severance on the ground that the defendants believed the testimony of other defendants would be material to their defense and that a joint trial with any of the defendants named in the indictment would deny them the right to call such as a co-defendant as a witness.
The chief government witness, Thomas, testified that the majority of the sit-downs, where the monies were divided among the vice officers, were held at the home of defendant Richard Weingart. The questions of whether Weingart’s home was used as the conspiratorial meeting place and whether Weingart observed any of the defendants receiving monies from Thomas or Benjamin became important issues for the defense.
The motion for a severance was later renewed by an affidavit from defendant Richard Weingart. He stated that he was willing to be a witness on behalf of all defendants to the facts that there were no sit-downs at his house; that neither he nor any of the other defendants, to his knowledge, participated in any conspiracy to extort money from tavern owners; and that he did not observe any of the defendants, including himself, receive monies allegedly collected from these tavern owners.
At the beginning of the presentation of the defendants’ case, defendant Weingart informed the court that he wished to take the witness stand. At that time, the government told the court of its desire to cross-examine Weingart concerning prior acts of misconduct, admittedly independent and separate from the conspiracy charged in the indictment. The government stated that the purpose of the introduction of this evidence was solely to demonstrate Weingart’s intent, purpose and state of mind. The district court properly ruled that evidence of prior acts would be admissible since Weingart was a defendant and since his intent and state of mind were in issue.
As his affidavit stated, though Weingart was willing to be a witness on behalf of all the defendants, were there not a joint trial, he felt that he could not be a witness in a joint trial when the court had ruled that these alleged prior acts of misconduct could be used against him.
This Court has previously ruled that a single joint trial of several defendants may not be had at the expense of the defendant’s right to a fundamentally fair trial. United States v. Echeles, 352 F.2d 892 (7th Cir. 1965). But the evidence offered in this case sharply contrasts with the co-defendant’s testimony in Echeles. There the testimony did not merely counter details of the government’s proof: Echeles’ sole co-defendant made statements protesting Echeles’ innocence. Weingart’s proposed testimony in this case would only contradict certain details of the government’s proof. Unlike in Echeles, the testimony would not amount to a dramatic and convincing exculpation of the co-defendants.
Further, and perhaps more importantly, the defendants’ convictions were not based solely upon the testimony of Joseph Thomas, the only witness whom Weingart could have contradicted directly. Numerous tavern owners testified that they made payments directly to Abraham, Henkin and Mulligan.
In order to obtain a severance the defendants must show actual prejudice, i. e., “that [they] will be unable to obtain a fair trial without severance, not merely that a separate trial will offer a better chance of acquittal.” United States v. Blue, 440 F.2d 300, 302 (7th Cir. 1971); accord, United States v. Kahn, 381 F.2d 824, 838 (7th Cir. 1967); United States v. Bastone, 526 F.2d 971, 983 (7th Cir. 1975); United States v. Serlin, 538 F.2d 737, 743 n. 5 (7th Cir. 1976). In this case co-defendant Weingart’s proposed testimony would simply cast doubt upon part of the government’s proof. We do not believe that his refusal to testify prevented the defendants from obtaining a fair trial. Simply because a co-defendant’s testimony would contradict the government’s case does not mandate a severance. United States v. Braasch, 505 F.2d 139 (7th Cir.), cert. denied, 421 U.S. 910, 95 S.Ct. 1562, 43 L.Ed.2d 775 (1975).
III. THE TRIAL COURT DID NOT ERR IN ITS EVIDENTIARY RULINGS AND IN INSTRUCTING THE JURORS.
Defendants assert that the trial court erred in admitting evidence that the defendants received payoffs from “bookies” or gamblers. Such evidence, although prejudicial, is admissible if material and relevant to the charges in the indictment. United States v. Braasch, supra. In addition to their above objection, the defendants also requested the trial judge to reopen the voir dire of the jurors to determine whether any juror was so biased against gambling that the defendants would be denied a fair trial. In refusing to reopen the voir dire the trial judge was acting within his discretion. Ham v. South Carolina, 409 U.S. 524, 93 S.Ct. 848, 35 L.Ed.2d 46 (1973). Reviewing the entire record, we see no abuse of the judge’s discretion since the references to gambling activities were quite limited.
The defendants also contend that the trial court’s refusal to instruct the jury to consider with caution the testimony of an admitted perjurer constituted reversible error. Defendants based their tender of the admitted-perjurer instruction on Thomas’ admission that he had not included his share of the extortion payoffs on his income tax returns. The government argues that the court was justified in not giving such an instruction because Thomas never read his returns, which were filed by his attorney, and thus there was no evidence that he willfully lied on the income tax returns. We cannot accept this argument. Every taxpayer can be held responsible for statements or omissions in an income tax report which he signs. In many instances false statements or omissions can amount to perjury under 18 U.S.C. § 1621. However, in this case we need not decide whether Thomas became a perjurer by signing his income tax return. The only question is whether the jury was advised that the credibility of his testimony might be open to question. We think the jury was sufficiently informed by defense counsel during closing argument and by the court’s instruction regarding how jurors are to determine credibility of witnesses.
The defendants also objected to the court’s giving an instruction that witness Thomas had no reason to lie because he was given immunity. Originally the court refused to give this instruction. Thus, the defense argues, it was a violation of Federal Rule of Criminal Procedure 30 for the judge to give the instruction because defense counsel were not informed prior to giving their closing argument. But we think the record is sufficiently clear that the judge warned defense counsel he would still give the immunity instruction should the argument be made that Thomas did not have to tell the truth because he was immunized. After the closing argument the judge once again discussed the immunity instruction issued and concluded:
“My concern for changing my mind on the immunity instruction, occurred after someone argued — and I don’t recall who — that Thomas the perjurer, after he had done his dirty work, would walk out of this courtroom, free, while these other defendants stood trial.
That suggested to me such a strong inference that he was immune from any consequences of his sordid misconduct on the stand, that I thought my warning had been disregarded — my ruling had been disregarded; and that the issue had been raised and that I thought this instruction should be given.
I know I am paraphrasing that argument and not quoting it exactly; but that was the impression I think that was conveyed to the jury.” July 9, 1975 transcript, pp. 5-6.
It seems clear that the judge not only informed counsel of his proposed action, but also acted precisely as he had said he would. Consequently we do not think that the spirit or the letter of Rule 30 was violated.
Finally, the defendants argue that two comments by the prosecutor in closing argument constitute reversible error. We have read the prosecutor’s argument in its entirety and do not believe the boundaries of zealous advocacy were crossed.
In the first instance, the prosecutor made a statement which may have been interpreted by the jury as an argument to buttress Thomas’ testimony by interjecting his personal belief that the testimony was credible. We have previously stated in United States v. Phillips, 527 F.2d 1021, 1023-25 (7th Cir. 1975) that although counsel may properly argue as to the weight and sufficiency of the evidence, and argue the credibility of witnesses’ testimony based on the evidence, he may not frame an argument to the jury based on his own personal knowledge or belief that a witness is lying or that a certain defendant is guilty. In this instance we believe that the prosecutor’s comment was not of the type condemned in Phillips. We do not see it as an attempt to persuade the jury to reach a decision based on personal beliefs rather than the evidence.
The second statement can be characterized as an appeal to the jury’s sense of the social significance of their verdict. This line of argument is only improper where the government’s case lacks substance or hard evidence such as in Perry v. Mulligan, 399 F.Supp. 1285 (D.C.N.J.1975). In that case the prosecutor obtained a conviction, in spite of weak evidence, by attempting repeatedly to “[enlist] the jury in a public crusade,” combined with an attack on the defendant’s attorney. Such a situation did not exist in this instance, and it was not improper for the prosecutor to remind the jurors of the important role they assume in the criminal justice system or the fact that their decision would have an impact within the community.
Accordingly, the judgment of the trial court is affirmed.
AFFIRMED.
. Title 18 U.S.C. § 1951 states, inter alia:
“(a) Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by . . extortion . shall be fined not more than $10,000 or imprisoned not more than twenty years, or both.
(2) The term ‘extortion’ means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.”
. The jury acquitted Donald G. Herman and failed to reach a verdict regarding Robert J. Herman, David W. McNee and Richard L. Weingart. The trial court subsequently granted McNee’s motion for judgment of acquittal.
. Defendants claim, as a matter of law, that at least Abraham and Henkin abandoned the conspiracy. We agree with the government’s argument. Defendants misplace their reliance on United States v. Goldberg, 401 F.2d 644 (2d Cir.), cert. denied, 393 U.S. 1099, 89 S.Ct. 895, 21 L.Ed.2d 790 (1968), in which the Court held that one conspirator had withdrawn as a matter of law and was entitled to acquittal under the statute of limitations. In Goldberg, the acquitted defendant had left permanently the position essential to his participation in the conspiracy. By contrast, the defendants in the instant case were only temporarily assigned out of the vice squad, and they returned to it while the conspiracy was still operating.
. The defense submitted the following two instructions dealing with the multiple conspiracy problem:
“Proof of several separate conspiracies is not proof of the single, overall conspiracy charged in the indictment unless one of the several conspiracies which is proved by the single conspiracy which the indictment charges. What you must do is determine whether the conspiracy charged in the indictment existed between two or more conspirators. If you find that no such conspiracy existed, then you must acquit. However, if you are satisfied that such a conspiracy existed, you must determine who were the members of that conspiracy.
If you find that a particular defendant is a member of another conspiracy, not the one charged in the indictment, then you must acquit the defendant. In other words, to find a defendant guilty you must find that he was a member of the conspiracy charged in the indictment and not some other conspiracy.
If you find that the Government has failed to prove the existence of only one conspiracy you must find the defendants not guilty. United States v. Bynum, 485 F.2d 490 at 497 (2d Cir. 1973).”
The alternative instruction stated:
“Proof of several separate conspiracies is not proof of the single, overall conspiracy charged in the indictment unless one of the several conspiracies which is proved is the single conspiracy which the indictment charges. What you must do is determine whether the conspiracy charged in the indictment existed between two or more conspirators. If you find that no such conspiracy existed, then you must acquit. However, if you are satisfied that such a conspiracy existed, you must determine who were the members of that conspiracy.
If you find that a particular defendant is a member of another conspiracy, not the one charged in the indictment, then you must acquit that defendant. In other words, to find a defendant guilty you must find that he was a member of the conspiracy charged in the indictment and not some other conspiracy. United States v. Tramunti, 513 F.2d 1087 (2d Cir. 1975).”
. 18 U.S.C. § 1621 states, in relevant part:
“Whoever, having taken an oath before a competent tribunal, officer, or person, in any case in which a law of the United States authorizes an oath to be administered, that he will testify, declare, depose, or certify truly, or that any written testimony, declaration, deposition, or certificate by him subscribed, is true, willfully and contrary to such oath states or subscribes any material matter which he does not believe to be true, is guilty of perjury. . . ”
. Rule 30 of the Federal Rules of Criminal Procedure states:
“At the close of the evidence or at such earlier time during the trial as the court reasonably directs, any party may file written requests that the court instruct the jury on the law as set forth in the requests. At that same time copies of such requests shall be furnished to adverse parties. The court shall inform counsel of its proposed action upon the requests prior to their arguments to the jury, but the court shall instruct the jury after the arguments are completed. No party may assign as error any portion of the charge or omission therefrom unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection. Opportunity shall be given to make the objection out of the hearing of the jury and, on request of any party, out of the presence of the jury.”
. The prosecutor stated as follows in closing argument:
“You are not even going to remember, necessarily, whose character witnesses went on first and whose went on second. That is what they are asking you to acquit the defendants on, because Thomas didn’t particularize the dates. That argument had no merit. And if that wasn’t credible evidence, it wouldn’t be before you.” July 9, 1975 transcript, pp. 66-67.
. The second statement by the prosecutor which is challenged is as follows:
“And make no mistake about it, your verdict will be heard once in this courtroom, but it will be repeated a number of times. And there are those who watch and await what your verdict is. If it is guilty, those who have like motives and are similarly inclined [objection].” July 9, 1975 transcript, pp. 52-53.
Question: Were there cross appeals from the decision below to the court of appeals that were consolidated in the present case?
A. No
B. Yes
C. Not ascertained
Answer: | A | songer_crossapp |