author: LIVELY, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Anthony Joseph GARGOTTO, Defendant-Appellant.
    No. 72-1862.
    United States Court of Appeals, Sixth Circuit.
    Argued Feb. 16, 1973.
    Decided April 24, 1973.

      Frank E. Haddad, Jr., Louisville, Ky., for defendant-appellant.
    James H. Barr, Asst. U. S. Atty., Louisville, Ky., for plaintiff-appellee; George J. Long, U. S. Atty., Louisville, Ky., on brief.
    Before CELEBREZZE, KENT and LIVELY, Circuit Judges.
   LIVELY, Circuit Judge.

Appellant was convicted on 13 counts of filing false wagering excise tax returns and two counts of failing to file such returns and was sentenced to five years imprisonment on each count, the sentences to run concurrently. On appeal, he contends that his conviction flowed directly from a search of the building owned by him and seizure of documents there and that such search and seizure violated rights guaranteed to him by the Fourth Amendment.

Appellant owned a three-story building in the central area of Louisville which contained a movie theatre on the first floor. According to prosecution witnesses the second and third floors were used for a handbook operation where bets were taken on horse races and other sporting events. At about 8:00 o’clock on the morning of March 22, 1969 a fire was discovered in the building of appellant, and a number of units of the Louisville Fire Department responded to an alarm. At about 8:20 a. m. the commanding officer at the fire called Lieutenant William Foushee, an arson investigator, and requested him to come to the scene because of his suspicions about the origin of the fire. Lieutenant Foushee testified that when he arrived 25 to 30 minutes after receiving the call, the fire had been extinguished but the equipment and fire fighters were still at the scene. Shortly after his arrival and after discussing the fire with the commanding officer, Lieutenant Foushee noticed that Detective John Aubrey of the Intelligence Division of the Louisville Police Department was at the scene and requested his assistance in making an investigation. Detective Aubrey testified that he had noticed the fire while on his way to work, and after checking in at his office had returned to the scene of the fire to see if his services were needed. Having been advised that the fire originated above the first floor of the building, the two men entered by a front stairway and climbed to the second floor. It was immediately obvious to them that there were numerous separate and unrelated fires, and at the top of the stairway they found very sharp burn patterns which indicated that some sort of flammable liquid had been used to set the fire. In addition to a hallway, the second floor of the building contained two rooms, and trash appeared to have been set on fire in at least one of the rooms. The third floor apparently consisted of one large room where one or more trash fires had been set.

The two investigators noticed a number of papers scattered on the floor of both the second and third floor rooms. Some of the papers appeared to have been scattered out on the floor by the stream of water from hoses of the firemen and these were placed in a fire fighter’s coat which was spread on the floor. In addition to the papers on the floor, Lieutenant Foushee directed Detective Aubrey to remove papers from cabinets which were located in the various rooms on the second and third floors. The papers from the different rooms were commingled, and those taken from the cabinets were commingled with the papers picked up from the floor. Although some of the papers were wet and a few were scorched, there was no evidence that flammable liquids or other fire accelerants had been applied to any of the papers which were collected by the investigators. Lieutenant Foushee said that he realized the papers were records of some sort but that he did not take the time to study them that day. Detective Aubrey said that he thought he recognized the papers as containing betting records, but that he did not advise Lieutenant Foushee of this. Lieutenant Foushee testified concerning the purpose of picking up the papers as follows:

“Since we were unaware at this point as to who may have set the fire or what might be behind this setting of the fire I felt it necessary to remove any evidence that we could find, which included records.”

All of the records taken from the two rooms on the second floor and the one large room on the third floor were bundled up in a single fire fighter’s coat and were taken to Detective Aubrey’s office at police headquarters. There apparently was never any attempt to separate the records taken from the various rooms or to keep those picked up off the floor separate from those removed from cabinets. At the time the investigation was begun the premises were secured by the fire and the police departments and no one other than officials were permitted inside the building.

Detective Aubrey described his part in the investigation as follows:

“ . . .we spoke and he asked me if I would mind going in with him and that he suspected arson in this particular case, and help him pick up some things that he wanted to seize as evidence.”

He said that Lieutenant Foushee picked up various items and put them in the fire coat and pointed to other things which he wanted removed and that he, Aubrey, put those items in the coat and it was all wrapped up and brought out together. He specifically recalled that there was a desk and metal cabinet in one room and that he and Lieutenant Foushee opened drawers and took papers from the desk and cabinet. It was testified that although the appellant, Gargotto, was at the scene of the fire he was not advised that papers had been removed from the rooms on the second and third floors.

Although the two investigators agreed that the fire had been extinguished and the building secured, nevertheless Detective Aubrey said that there were a number of firemen in the building still using hoses and axes and working on hot spots in the walls. He said that he and Lieutenant Foushee worked right in the middle of the firemen. After the papers were taken to police headquarters, the two men just looked at them briefly and locked them in a room. Lieutenant Foushee testified that he was needed back at the scene of the fire and did not have time to examine the papers carefully. Detective Aubrey said that he merely confirmed that the papers contained some sort of betting records but did not examine them closely. Lieutenant Foushee testified that he never examined the papers to determine whether they might furnish evidence of a motive for the fire because someone other than Mr. Gargotto was arrested the same day and charged with arson, and no charges were ever made against Mr. Gargotto in connection with the fire.

About a week after the fire all of the records were delivered to the office of the Commonwealth Attorney where Mr. Gargotto appeared and demanded their return. Detective Aubrey testified that although he couldn’t tell by looking at the papers that any federal crime had been committed, the day after the fire he called an agent iii the Intelligence Section of the Internal Revenue Service and advised him that he might be interested in looking at the records. Two agents of the Internal Revenue Service contacted Lieutenant Foushee and he gave them permission to examine the records which they proceeded to do in Detective Aubrey’s office. Aubrey testified that the IRS agents brought their own copying equipment and microfilmed all of the records. This took place two days after the fire.

A timely motion was made by the appellant to suppress all evidence seized from the premises of the fire and any evidence derived therefrom. Following a hearing, the trial judge overruled the motion and also overruled objections to introduction of the evidence at the trial and the renewal of the motion to suppress made at the conclusion of the trial.

It is not questioned that Lieutenant Foushee had the duty under relevant statutes of the Commonwealth of Kentucky and ordinances of the City of Louisville to investigate the cause and circumstances of the fire for the purpose of detecting arson and related offenses. Kentucky Revised Statutes § 227.220(2) (a); 227.240. Specific authority to enter the property of appellant is conferred by KRS § 227.270(2) which provides:

(2) The commissioner may at all reasonable hours of the day or night enter in or upon any property to make an inspection or investigation for the purpose of preventing fire loss or determining the origin of any fire, but this subsection shall apply to the interior of private, occupied dwellings only when a fire has occurred therein or when the officer has reason to believe that unsafe fire conditions exist in the building.

At the time material to this case there was no Kentucky statute describing the authority of arson investigators. However, by a law enacted in 1972 such officers were given “ . . . the general powers of peace officers for the enforcement of other offenses against the Commonwealth.” Regardless of state authority, when challenged on Fourth Amendment grounds the acts of the state officers must be judged by federal standards. Preston v. United States, 376 U.S. 364, 84 S.Ct. 881, 11 L.Ed.2d 777 (1964); Elkins v. United States, 364 U.S. 206, 223, 80 S.Ct. 1437, 4 L.Ed.2d 1669 (1960); Rios v. United States, 364 U.S. 253, 80 S.Ct. 1431, 4 L.Ed.2d 1688 (1960).

An effective investigation of the origin of the fire required a prompt inspection of the building. Admittedly neither Lieutenant Foushee nor Detective Aubrey had a search warrant. However, upon reaching the landing at the top of the stairs at the second floor of the building, the investigators found definite evidence that a fire accelerant had been used in the building. Though the fire had been extinguished, the firemen were still using water hoses and axes in the burned areas.

A warrantless search is per se unreasonable, and therefore prohibited by the Fourth Amendment, unless the facts of a particular case bring it within one of the specifically established exceptions to this rule. Coolidge v. New Hampshire, 403 U.S. 443, 454, 91 S.Ct. 2022, 29 L.Ed.2d 564 (1971); Katz v. United States, 389 U.S. 347, 357, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967). In Brinegar v. United States, 338 U.S. 160, 175-176, 69 S.Ct. 1302, 1311, 93 L.Ed. 1879 (1949), the Supreme Court defined the “probable cause” exception to the requirement of a warrant as follows:

“Probable cause exists where ‘the facts and circumstances within their [the officers’] knowledge and of which they had reasonably trustworthy information [are] sufficient in themselves to warrant a man of reasonable caution in the belief that’ an offense has been or is being committed. Carroll v. United States, 267 U.S. 132, 162, 45 S.Ct. 280, 69 L.Ed. 543.”

We believe there was sufficient evidence of arson to establish probable cause for a further search when viewed by a “man of reasonable caution” or a “man of prudence and caution.” Carroll v. United States, 267 U.S. 132, 161, 45 S.Ct. 280, 69 L.Ed. 543 (1925). Furthermore, the fact that the fire had been so recently extinguished and the firemen were still working in the area where the records were found was an “exigency” which completed the justification for proceeding to search without a warrant. Coolidge v. New Hampshire, supra, 403 U.S. at 463-464, 91 S.Ct. 2022.

The rooms from which the papers of the appellant were taken were the locations of several fires involving trash and debris, although there was no indication that an accelerant had been used in any of them. In pursuing their investigations of the cause or origin of the fire, the investigators saw papers scattered on the floor in each of these rooms. These were obviously in plain view, and Lieutenant Foushee testified that often papers and records provide evidence of the purpose of a fire. These objects were subject to seizure under the circumstances because they fit the “plain view” exception to the prohibition against warrantless seizures.

In Coolidge v. New Hampshire supra, the requirements for a valid seizure of evidence in plain veiw without a warrant were set forth. The first requirement is that the officers’ “initial intrusion” be justified. This requirement has been met in the present case, as we have held that the officers had probable cause to enter pursuant to the statute, and to search for evidence of arson under the exigencies of the situation. The second requirement is that the discovery of the evidence in plain view must be “inadvertent.” Since the investigators had no prior knowledge of the location of the gambling records in appellant’s building, their discovery was an inadvertent result of the lawful search for evidence of arson. It was not a “planned” warrantless search. We hold that the seizure of the documents on the floor, and otherwise in plain view, was not unreasonable within the meaning of the Fourth Amendment.

We do not believe that Colonnade Catering Corporation v. United States, 397 U.S. 72, 90 S.Ct. 774, 25 L.Ed.2d 60 (1970); Camara v. Municipal Court, 387 U.S. 523, 87 S.Ct. 1727, 18 L.Ed.2d 930 (1967), or See v. City of Seattle, 387 U. S. 541, 87 S.Ct. 1737, 18 L.Ed.2d 943 (1967), all cited by appellant, are controlling here. Those cases did not deal with administrative inspection at the time of an unusual occurrence or emergency situation such as the fire which caused the officers to conduct the search and seizure in this case. The same is true of State of Indiana v. Buxton, 238 Ind. 93, 148 N.E.2d 547 (1958), where the arson investigation was not conducted at the time of the fire and the court held that a search warrant was required.

The appellee relies on Bennett v. Commonwealth, 212 Va. 863, 188 S.E.2d 215 (Va.1972), where two distinct arson investigations were made. The first was carried out while the building was still burning and the evidence seized was a plastic jug containing a flammable fluid. It was in plain view near the rear of the house and was obviously subject to seizure under the circumstances. The second search, of the interior of the house, by an arson investigator took place the day following the fire. No search subsequent to the time of the fire is involved in the present case, and the validity of such a search is not before us.

The appellant further contends that the evidence seized consisted of private, personal papers and its introduction violated his right against self-incrimination guaranteed by the Fifth and Fourteenth Amendments. The records here involved are similar to those considered by this Court in United States v. Blank, 459 F.2d 383 (6th Cir. 1972). Although that case dealt with a prosecution for unlawfully conducting a gambling business rather than irregularities in filing returns, we believe that its holding controls the motion to suppress on grounds of self-incrimination in the present case. To the extent that any of the records are found to have been legally seized, they will not be subject to suppression as violative of the privilege against self-incrimination.

Appellant also argues that even if his records were legally seized by Officers Foushee and Aubrey, they had no right to deliver them to the federal agents. Lieutenant Foushee testified that he knew the records had nothing to do with the fire when he turned them over to the agents of the I.R.S. Appellant relies on United States v. Birrell, 470 F.2d 113, decided December 4, 1972 by the Second Circuit. In that case, evidence which was legally seized in a state murder investigation came to the attention of federal authorities through a news story. The federal district attorney, believing this evidence might be relevant to a pending charge against the owner of the seized property, obtained permission from the state authorities to examine it. Before the examination was made, the federal agents were advised that the owner had demanded that the property be returned to him.

The court held that under the particular facts presented in that case a motion to suppress the evidence should have been granted. The court emphasized the fact that the demand by the owner that the property be returned put the state officials on notice that a search by officers of the federal government for a different purpose could not be made without a warrant. In the present case there was no demand by appellant for return of the papers until after the federal agents had completed their examination of them. Furthermore, in this case the initiative was by the state officials who contacted the I.R.S. agents and suggested that they might be interested in the records. Thus there are factual differences between Birrell and the present case and these very facts were emphasized in the opinion.

Evidence legally obtained by one police agency may be made available to other such agencies without a warrant, even for a use different from that for which it was originally taken. Gullett v. United States, 387 F.2d 307 (8th Cir. 1967), cert. denied 390 U.S. 1044, 88 S.Ct. 1645, 20 L.Ed.2d 307 (1968).

There remains the difficult question of the proper disposition of evidence consisting of documents which were removed from drawers in the desks and cabinets. After describing the “plain view” exception, the opinion of the Court in Coolidge continues, at page 466, 91 S.Ct. at page 2038:

Of course, the extension of the original ' justification is legitimate only where it is immediately apparent to the police that they have evidence before them; the ‘plain view’ doctrine may not be used to extend a general exploratory search from one object to another until something incriminating at last emerges. (Citations omitted)

While it was immediately apparent to Lieutenant Foushee that the papers on the floor might supply evidence of a motive for burning the buliding, was it reasonable to extend the search to the drawers for further evidence? Or should the search have been broken off until a search warrant could be obtained? The answers to these questions depend upon an understanding of the conditions existing at the time the officers were required to make a decision. These facts were not sufficiently developed at the hearing on appellant’s motion to suppress for this Court to make a determination from the record. Upon remand the District Court will hold an evidentiary hearing to determine (1) whether the exigencies of the sitúation were such at the time the search was extended to the drawers of the desks and cabinets to justify such search, and seizure of the contents, without a warrant; and, if no such justification is found, (2) whether the papers found in plain view can be identified and segregated from those that were removed from drawers. The results of the hearing will determine whether or not a new trial is required.

The case is remanded to the District Court for proceedings consistent herewith.


source: Caselaw Access Project

author: LAY, Circuit Judge. BRIGHT, Circuit Judge, STEPHENSON, Circuit Judge, with whom GIBSON and BRIGHT, Circuit Judges, join,

license: Public Domain

text:
    Larry LUKE, Individually, et al., Appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellee. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant, v. Larry LUKE, Individually, et al., Appellees.
    Nos. 71-1348, 71-1374.
    United States Court of Appeals, Eighth Circuit.
    Submitted June 12, 1972.
    Decided Nov. 2, 1972.
    Submitted March 12, 1973.
    On Rehearing En Banc April 16, 1973.
    Rehearings Denied May 21, 1973.

      Gerald L. Reade and John R. Kabeiseman, Yankton, S. D., for Luke.
    J. B. Shultz, Sioux Falls, S. D., for American Family Mut. Ins. Co.
    Before VAN OOSTERHOUT, Senior Circuit Judge, and LAY and HEANEY, Circuit Judges.
   LAY, Circuit Judge.

The plaintiffs, Larry Luke, individually and as the administrator of the estate of Lisa Luke, and Kathleen Luke, are the assignees of the insured, Herbert Carl Llewellyn, and the holders of judgments totaling $138,840.12 plus interest, costs and attorney fees against Llewellyn.

The plaintiffs alleged that American Family wrongfully denied coverage under its policy with Llewellyn. Plaintiffs further charged that the company in bad faith failed to settle within the policy limits of its insured’s policy. Both parties moved for summary judgment. The trial court found that coverage existed but refused to allow damages in excess of the policy limits. 325 F.Supp. 1330 (D.S.D.1971). Cross appeals followed. The insurance carrier contests the finding of coverage, and the plaintiffs appeal from the denial of the damages over the policy limits. We affirm the trial court’s finding that coverage should have been afforded the insured, however, we find that the insurer was liable for the full amount of the judgment in excess of its policy limits. We deny plaintiffs their requested attorney fees.

The insured owned a 1966 Pontiac which was covered by American Family’s liability policy No. 40-054467. On October 15, 1966, while the 1966 Pontiac was in possession of the insured’s estranged wife, Llewellyn purchased for $460 under a conditional sales agreement a 1959 Oldsmobile for his use from Wilson Motor Company of Sioux City, Iowa. An Iowa certificate of title was issued in Llewellyn’s name with the car dealer holding it for security. Llewellyn made no effort to insure this car.

On January 15, the Oldsmobile became disabled with engine trouble, and Llewellyn had Wilson Motor tow the car to their garage. Llewellyn still owed $350 on the purchase price. On January 31, 1967, Wilson Motor Co. legally repossessed the Oldsmobile and transferred the title back to its name, however, Llewellyn could have reacquired the title by payment of the contract balance before February 9, 1967. Wilson Motor Co. later sold the car for salvage. On January 16, the day after Llewellyn had Wilson Motor tow in his Oldsmobile, he purchased a 1967 Pontiac from another car dealer in Sioux City. On February 4, 1967, Llewellyn, while intoxicated and driving on the wrong side of the road, was involved in the accident with the Luke family. He was subsequently convicted for manslaughter and sent to prison.

The basic issue as to coverage concerns the “newly acquired automobile” clause under Llewellyn’s insurance contract with American Family. The clause reads:

“Owned automobile means b. a private passenger or utility automobile ownership of which is acquired by the named insured during the policy period, provided the named insured within 30 days after its acquisition notifies the company thereof and of his election to make the insurance afforded by this and no other policy . issued by the company applicable to such automobile and . (2) the company insures under the Liability Coverage, all private passenger and utility automobiles owned by the named insured on the day of its acquisition . . . .” (Emphasis ours.)

American Family denied coverage arguing that Llewellyn was still the legal title holder to the uninsured Oldsmobile on the date of acquisition of the 1967 Pontiac, therefore, it did not insure all automobiles owned by the insured on that date. As a result automatic coverage of the 1967 Pontiac was not afforded.

The district court held that the 1967 Pontiac was covered under the policy since the 1959 Oldsmobile was not an “owned” automobile within the meaning of the “newly acquired automobile” provision at the time the 1967 Pontiac was purchased. We affirm this ruling.

American Family contends that the construction of the newly acquired automobile clause is controlled strictly by the Iowa Certificate of Title statute; however, the trial court, citing Canal Insurance Company v. Brooks, 201 F.Supp. 124, 128 (W.D.La.1962), aff’d, 309 F.2d 751 (5 Cir. 1962), held that “the phrase ‘all private passenger and utility automobiles owned by the named insured’ contained in this policy ‘does not contemplate a vehicle which is in such a position or condition that a reasonable person would not include it in a policy of public liability insurance.’ ” 325 F. Supp. at 1332.

Other courts construing the same provision have almost uniformly defined an owned automobile within the policy coverage as an operable automobile, one capable of being used on the streets and highways. See e. g., Glens Falls Insurance Company v. Gray, 386 F.2d 520 (5 Cir. 1967); Patrick v. State Farm Mutual Automobile Insurance Company, 90 N.J.Super. 442, 217 A.2d 909, 912-913 (1966); cf. Lynam v. Employers’ Liability Assurance Corp., 218 F.Supp. 383, 385 (D.Del.1963), aff’d 331 F.2d 757 (3 Cir. 1964). The ownership of an automobile which is junk or needs major repairs can hardly be thought to be ownership for liability insurance purposes “since the principal purpose of such insurance is to provide coverage for an automobile which is to be driven and which may become involved in an accident or other mishap.” Glens Falls Insurance Company v. Gray, supra 386 F.2d at 524-525. Cases which have differed from this view have usually done so where the car is temporarily inoperable and is being repaired for future service. Williams v. Standard Accident Insurance Company, 158 Cal.App.2d 506, 322 P.2d 1026 (Cal.App.1958); cf. Allstate Insurance Company v. Stevens, 445 F.2d 845 (9 Cir. 1971).

The 1959 Oldsmobile in the present ease was disabled with engine trouble; in fact, Wilson Motor was able to sell it for only $75 to a salvage dealer (the car was “junked out”). After January 15 the Oldsmobile was at all times in the possession of Wilson Motor, and Llewellyn showed no intention of reclaiming it. Moreover, on the day following the vehicle’s failure Llewellyn unsuccessfully attempted to purchase a replacement automobile from Wilson Motor, and later that day he bought the 1967 Pontiac from another dealer. Thus, we agree with the trial court that a reasonable construction of American Family’s policy would not include the inoperable and abandoned Oldsmobile as an owned automobile.

LIABILITY FOR EXCESS DAMAGES

The district court found that American Family exercised good faith in refusing to provide coverage and therefore was not liable for damages over the limits afforded. In Kunkel v. United Security Insurance Company of New Jersey, 84 S.D. 116, 168 N.W.2d 723, 726 (1969), the Supreme Court of South Dakota, in passing on the question of liability of an insurance carrier for excess damages in refusing to settle within policy limits, stated:

“The trial court submitted the matter to the jury under the bad faith rule which we believe to be the better rule and the one prevailing in the majority of jurisdictions and we approve it. . However, . . . the character and extent of the insurer s negligence are factors to be considered by the trier of fact in determining if there is bad faith. The insured has the burden of establishing his claim by a preponderance of the evidence.”

The federal district court acknowledged two lines of authorities, one holding that good faith in refusing to defend is not a valid defense in an excess action where there has been a reasonable offer to settle, and the other line of cases holding a good faith decision in refusing to defend does constitute a defense to an excess action even when accompanied by a refusal to settle within policy limits. The trial court observed that the issue was one of first impression in South Dakota and concluded that the South Dakota Supreme Court would apply the Kunkel good faith test to the present situation. The district court then found that the carrier was in good faith in initially refusing coverage and therefore denied liability for damages in excess of the contract coverage afforded.

Although this court gives special weight to the determination of local law by a federal district judge, a court of appeals cannot be irrevocably bound by a district judge’s choice of one of two or more alternative rules to follow in a diversity ease. To hold otherwise would be to abdicate our appellate responsibility.

In the instant case American Family was presented with several demands by the plaintiffs and its assured to settle the three cases for $49,000 which was within the limits of the $25,000-50,000 policy. These demands were repeatedly ignored. At one time the plaintiffs offered to hold their suits in abeyance to provide the company an opportunity to file a declaratory judgment suit to determine whether coverage was provided. Although the liability of the company’s assured was clear, and the potential damages for the wrongful death of the infant and for the serious injuries to the other plaintiffs were obviously greater than the policy limits, the company refused to consider both settlement and declaratory relief.

The rule announced by the South Dakota court in Kunkel is not apposite in determining the precise problem before us. Kunkel involved an insurer who assumed its obligation to defend its assured but exercised bad faith in refusing to settle within the policy limits. There exists an important difference between the liability of an insurer who performs his obligation to defend the insured but fails to exercise good faith in settling within the policy limits and an insurer who breaches his contract by failing to defend and who then rejects a reasonable offer to settle.

When it is alleged that the sole breach of duty by the carrier is its refusal to settle within the policy limits, good faith becomes the central issue to be decided. On the other hand, good faith is not relevant to an insurer’s wrongful breach of its contract to provide coverage. A breach of contract is never justified simply because the offending party in good faith believed he was entitled to refuse performance. When a breach occurs the basic question then concerns the proper measure of damages which flow from the breach. When an insurer refuses to defend and, additionally, refuses to accept a reasonable settlement within the policy limits, the company’s liability for damages may be measured as well by its rejection of the offer to settle and may thus exceed the policy limits. As stated by the California Supreme Court in Comunale v. Traders & General Insurance Co., 50 Cal.2d 654, 328 P.2d 198, 202 (Cal. 1958):

“An insurer who denies coverage does so at its own risk, and, although its position may not have been entirely groundless, if the denial is found to be wrongful it is liable for the full amount which will compensate the insured for all the detriment caused by the insurer’s breach of the express and implied obligations of the contract. Certainly an insurer who not only rejected a reasonable offer of settlement but also wrongfully refused to defend should be in no better position than if it had assumed the defense and then declined to settle. The insurer should not be permitted to profit by its own wrong.”

See also Landie v. Century Indemnity Co., 390 S.W.2d 558, 564-565 (Mo.App. 1965). Although there exists some authority to the contrary, the vast number of jurisdictions which have considered the .question hold that when an offer of settlement within the policy limits has been made and ignored, a good faith refusal to defend is not a valid defense to a claim in excess of the policy limits. Western Casualty & Surety Company v. Herman, 405 F.2d 121 (8 Cir. 1968); Trahan v. Central Mutual Insurance Company, 219 So.2d 187 (La.App.1969); Jenkins v. General Accident Fire & Life Assurance Corp., 349 Mass. 699, 212 N.E.2d 464, 467 (1965); American Fidelity Fire Insurance Company v. Johnson, 177 So.2d 679 (Fla.App.1965), cert. denied, 183 So.2d 835 (1966); Landie v. Century Indemnity Company, 390 S.W. 2d 558 (Mo.App.1965); Comunale v. Traders & General Insurance Company, 50 Cal.2d 654, 328 P.2d 198 (1958). Cf. Cheek v. Agricultural Insurance Company of Watertown, New York, 432 F.2d 1267 (5 Cir. 1970); Foundation Reserve Insurance' Company v. Kelly, 388 F.2d 528, 530-532 (10 Cir. 1968); Seward v. State Farm Mutual Automobile Insurance Company, 392 F.2d 723 (5 Cir. 1968); Prince v. Universal Underwriters Insurance Company, 143 N.W.2d 708 (N.D.1966); American Home Assurance Company v. Sand, 253 F.Supp. 942, 949 (D.Ariz.1965).

There exists another compelling reason for rejecting the company’s defense of good faith in denying coverage. By statute South Dakota has adopted a measure of damages for breach of contract which would allow recovery “for all the detriment proximately caused” by the breach. A more simple or explicit expression of the allowable damages can hardly be imagined. S.D.C.L.Ann. § 21-2-1 (1967) states:

“General measure of damages for breach of contract — Uncertain damages not recovered. — For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom. No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and their origin.” (Emphasis ours.)

In Comunale v. Traders & General Insurance Company, supra, 328 P.2d at 202, the California Supreme Court interpreted Section 3300 of the California Civil Code, which is identical to the South Dakota statute (except for the last sentence), to authorize a recovery in excess of the insurer’s policy limits upon a breach of the insurance contract. The court declared:

“A breach which prevents the making of an advantageous settlement when there is a great risk of liability in excess of the policy limits will, in the ordinary course of things, result in a judgment against the insured in excess of those limits. Section 3300 of the Civil Code provides that the measure of damages for a breach of contract is the amount which will compensate the party aggrieved for all the detriment proximately caused by the breach, or which, in the ordinary course of things, would be likely to result from it. .
“It is clear that section 8300 of the Civil Code authorizes a recovery in excess of the policy limits, . . .”

Comunale is convincing authority for the proposition that this statutory measure of damages authorizes recovery for the entire judgment even though it exceeds the policy limits.

Comunale concerned an insurer who had wrongfully refused to defend and settle within the policy limits. The assured in Comunale, however, was able to employ competent counsel to represent him. In the present case not only did American Family refuse to defend or negotiate a settlement for Llewellyn, but it wrongfully abandoned its assured when he was unable to afford legal counsel and, because of his imprisonment, was unable to conduct his own defense. Cf. Siegel v. William E. Bookhultz & Sons, Inc., 136 U.S.App.D.C. 138, 419 F.2d 720, 725 (1969).

We find the entire judgment was the natural consequence and proximate result of the defendant’s breach of its obligation to defend its assured.

ATTORNEY FEES

Plaintiffs have also appealed under South Dakota law the denial of attorney fees against the insurer. S.D.C.L. Ann. § 58-12-3 (1967) reads:

“In all actions hereafter commenced against any insurance company, including any reciprocal or interinsurance exchange, on any policy or certificate of any type or kind of insurance, if it appears from the evidence that such company or exchange has refused to pay the full amount of such loss, and that such refusal is vexatious or without reasonable cause, the court, if judgment is rendered for plaintiff, shall allow the plaintiff a reasonable sum as an attorney’s fee to be recovered and collected as a part of the costs, provided, however, that when a tender is made by such insurance company or exchange before the commencement of the action in which judgment is rendered and the amount recovered is not in excess of such tender, no such costs shall be allowed.”

Plaintiffs bring this action under an assignment from the assured and as such possess his rights and claims. The issue of whether there has been a vexatious refusal or a refusal made without reasonable cause is one of fact depending upon the existing circumstances. Wilson v. Allstate Insurance Co., 186 N.W.2d 879, 883 (S.D.1971); Tracy v. T & B Construction Co., 182 N.W.2d 320, 323 (S.D.1970). The trial court held that plaintiffs were not entitled to attorney fees since there was reasonable cause for American Family’s refusal of coverage. Plaintiffs have failed to allege any dispute of fact which ordinarily might be left for the jury to resolve. As the trial judge pointed out in discussing the refusal to provide coverage :

“(1) [Defendant conducted a thorough investigation into the facts relative to the existence of policy coverage; (2) Llewellyn was promptly notified of the decision to deny coverage; (3) the clause upon which coverage turns has not been interpreted by the state supreme court; and (4) the interpretation relied upon by the insurer in reaching its decision to deny coverage under the policy was not unreasonable.” 325 F.Supp. at 1334.

We find in the trial court’s discussion sufficient basis on which the denial of attorney fees can be affirmed. Even though good faith is not a valid defense for breach of the contract, good faith is essentially relevant to the issue as to whether the refusal was “vexatious or without reasonable cause.”

Judgment affirmed in part and reversed in part. The claim is remanded to the trial court for entry of judgment in accordance with our opinion.

ON REHEARING EN BANC

Before MATTHES, Chief Judge, VAN OOSTERHOUT, Senior Circuit Judge, and MEHAFFY, GIBSON, LAY, HEANEY, BRIGHT, ROSS and STEPHENSON, Circuit Judges, en banc.

On motion for rehearing it is urged that the South Dakota statute, S.D.Code Ann. § 21-2-1 (1967), governing damages for breach of contract is not applicable in measuring damages arising .from the insurer’s failure to settle within the policy limits. However, assuming arguendo that this is true, under the facts of this particular case, we would reach the same result in holding that the insurer is liable for the damages over and above its policy limits.

Assuming the statute is not applicable, the insurer’s liability must be measured by the “bad faith” standard set forth in Kunkel v. United Security Insurance Company of New Jersey, 84 S. D. 116, 168 N.W.2d 723 (1969). Under the Kunkel test the insurer who breaches his contract by refusing to defend would be placed in the same shoes as the insurer who assumes coverages but refuses to settle by accepting an offer to settle within the policy limits.

Applying the Kunkel rule of bad faith, it remains undisputed on the present record that the insurer failed to fulfill its responsibility to its insured. The record shows that once the insurer refused coverage it failed to investigate further or even consider the likelihood of excess damage to its insured in light of the facts and circumstances of the case. Under the facts existing here we hold the insurer was guilty of bad faith in refusing to settle as a matter of law.

The defendant urges, however, that a finder of fact should be able to consider the “good faith” of the insurer in denying coverage as one of the factors in considering its good faith in refusal to settle. We reject this argument for the reasons set forth by Judge Van Oosterhout in Western Casualty & Surety Company v. Herman, 405 F.2d 121 (8 Cir. 1968), adopting the language of Landie v. Century Indemnity Company, 390 S.W.2d 558 (Mo.App.1965), that notwithstanding an honest belief by the insurer that the policy is not in effect, the company must in good faith consider offers for settlement within the limits of the insurance policy. The effect of this holding is that an insurer who breaches its contract to provide coverage is placed in no better and in no worse position than if it had assumed coverage when considering whether it acted in good faith in refusing to settle.

We, therefore, reaffirm our prior holding.

Circuit Judges VAN OOSTERHOUT, LAY and HEANEY adopted our prior opinion; Chief Judge MATTHES and Circuit Judges MEHAFFY and ROSS concur only on the basis set forth in this opinion filed on rehearing.

BRIGHT, Circuit Judge,

separately concurring and dissenting, in which GIBSON and STEPHENSON, Circuit Judges, join.

I join in the concurring and dissenting opinion of Judge Stephenson but add my additional views in this case. I feel this case is important, relating, as it does, to the imposition of liability upon an insurer to pay to claimants an amount in excess of policy limits.

The obligation of the insurer toward its insured needs to be evaluated realistically, not by way of hindsight. In this case, application of the literal language of the policy might not impose any liability on the insurer. The language of the policy extended coverage to a newly acquired automobile if the company insures “all * * * automobiles owned by the insured on the date of its acquisition.” While the insured purchased a “newly acquired” 1967 Pontiac automobile, he retained ownership of a disabled Oldsmobile which was never brought under the liability policy coverage as well as a 1966 Pontiac which was specifically described in the policy. However, the district court determined that American Family’s liability policy extended to the third (Pontiac) automobile because the second (Oldsmobile) automobile, when delivered to the seller’s garage, proved to be unrepairable and thus no longer needed to be considered as a car owned by the insured. Thus the “newly acquired automobile” clause applied to the 1967 Pontiac acquired by the named insured only because the trial court created an exception to the literal language of the policy. Although this construction may be a permissible one, nothing in this record indicates that the insurance carrier should have reasonably anticipated that ruling.

Given the paucity of authority on the subject, we believe the insurer was entitied to view its policy defense as meritorious and justified, subject only to the usual vagaries and uncertainties of litigation.

The panel hearing this appeal initially, on the basis of the Comunale case, ruled that the insurer’s good faith could not limit its liability for all damages flowing from a breach of contract. Thus, under this contract theory, the insurer who mistakenly relies on a policy coverage defense and fails to consider a settlement within the policy limits becomes strictly liable to the insured for a judgment in excess of the policy limits.

As I understand the opinion on rehearing, three judges not on the original panel and the three concurring and dissenting judges reject the application of the Comunale rule to this case. Although the strict liability rule in Comunale has been frequently cited, this rule has been infrequently applied.

Moreover, the Comunale decision was based upon a particular interpretation of California contract law, which is distinguishable from the construction given by the South Dakota Supreme Court to sections of the South Dakota Code which deal with the measure of damages flowing from breach of contract.

Recently, the South Dakota Supreme Court, in Big Band, Inc. v. Williams, 202 N.W.2d 121 (S.D.1972), said of these sections:

When the action is for breach of contract, plaintiff is entitled to recover all his detriment proximately caused by the breach, not exceeding the amount he would have gained by full performance. (Emphasis supplied) [Id. at 123.]

The limiting phrase emphasized in the above quotation casts grave doubt upon the applicability in South Dakota of the sweeping pronouncement of Comunale.

The strict liability doctrine of Comunale represents a minority view which I do not believe would be followed in South Dakota and which the trial court properly rejected.

Courts seem to have applied three different rules in circumstances analogous to those in the instant case, as follows:

1) A rule that a good faith but mistaken declination of coverage insulates the insurance carrier from an excess judgment for refusal to accept an offer of settlement within the policy coverage. This is the rule which Judge Nichol applied in the trial of this case and which was also applied by the Fifth Circuit in Beck v. Pennsylvania National Mutual Cas. Ins. Co., 429 F.2d 813 (1970) (Pennsylvania law), the Tenth Circuit in State Farm Mutual Ins. Co. v. Skaggs, 251 F.2d 356 (1957) (Oklahoma law), and National Service Fire Ins. Co. v. Williams, 454 S.W.2d 362 (Tenn.App.1969).

2) The Comunale rule, Comunale, supra, 50 Cal.2d 654, 328 P.2d 198, of per se liability based on the California statutory law, which rule is not applied in this ease by a majority of the court.

3) A middle view which holds an insurer liable for more than the policy limits when the insurer, after declining coverage in good faith, is shown to have failed to exercise good faith in refusing to settle or consider settlement of the claim within the limits of the policy. I construe the following cases to reflect this view: Western Casualty & Surety Co. v. Herman, 405 F.2d 121 (8th Cir. 1968); Foundation Reserve Ins. Co. v. Kelley, 388 F.2d 528 (10th Cir. 1968) (undisputed facts demonstrate bad faith refusal to settle as a matter of law); Gordon v. Nationwide Mutual Ins. Co., 30 N.Y.2d 427, 334 N.Y.S.2d 601, 285 N.E.2d 849 (1972); Landie v. Century Indemnity Co., 390 S.W.2d 558 (Mo.App. 1965).

The initial panel opinion adopted the second rule. Although the majority of judges sitting en banc adopt the third rule, three judges of this en banc court join in the reversal of the district court for an alternate reason. These judges hold that, in considering whether a refusal to settle is in good or bad faith, the trier of fact should not give weight to a policy defense held in good faith by the insurer. I believe this view to be erroneous.

The rule applied does not reflect South Dakota law. I note with interest that the majority of this court has adopted this rule as the law of South Dakota without giving the trial judge an opportunity to state his views of South Dakota law. The alternate theory rests solely on the language of two cases arising under Missouri law; Western Casualty, supra, and Landie, supra. The opinion on rehearing cites no South Dakota case. Yet in Kunkel v. United Security Ins. Co. of New Jersey, 84 S.D. 116, 168 N.W.2d 723 (S.D.1969), in applying a “bad faith” standard in establishing an insurer’s liability to pay more than policy limits for refusing to settle, but where no coverage issue existed, the South Dakota Supreme Court indicated that “any * * * factors tending to establish or negate bad faith on the part of the insurer” should be considered. The Kunkel court said:

Good faith is a broad and comprehensive term. Whether an insurer had adhered to it usually depends upon circumstances and elements involved in a particular case. The decision not to settle must be thoroughly honest, intelligent, and impersonal. It must be a realistic decision tested by the expertise which an insurer necessarily assumes under the terms of its policy. * * *
* * * While no single satisfactory test has been formulated as to what constitutes good or bad faith courts uniformly hold that the insured’s interests must be considered. It appears to have been most frequently held the insured’s interests must be given “equal consideration” with those of the insurer * * *. [168 N.W.2d at 726.]

In light of this language of the Supreme Court of South Dakota, the majority has ignored the local law in this diversity case contrary to the mandate of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

In summary, the majority of judges on this en banc court have disapproved of the application of the per se rule of the Comunale case, discussed above. I join in this disapproval.

The majority of the court, however, have ruled that the insurer’s good faith policy defense should not be considered as a factor in determining whether the insurer’s refusal to settle a case was in bad faith. I join Judges Gibson and Stephenson in rejecting this theory. Bad faith, or its converse good faith, is discernable only by taking into account all the circumstances of a particular case. The strength of a policy defense plays an important role in the evaluation of a settlement offer. Logically, this factor should be assessed in determining the existence of good faith of the insurer in refusing a settlement offer. In this case, that offer was for almost the full amount of the policy limits. I do not believe the views of the majority can be justified on the basis of sound judicial policy applicable to cases of this kind nor as consistent with South Dakota law as reflected in Kunkel, supra.

Accordingly, I would remand this case to the district court for its further consideration.

STEPHENSON, Circuit Judge, with whom GIBSON and BRIGHT, Circuit Judges, join,

concurring and dissenting.

We concur with the majority in affirming the trial court’s finding of coverage. We dissent on the excess liability issue.

We specifically reject the contention that South Dakota would apply the rule of Comunale which it is claimed holds that an insurer who denies coverage does so at its own risk, and, that a good-faith-but-mistaken declination of coverage followed by a refusal to consider a settlement offer within the policy limits makes the insurer strictly liable for the amount of any judgment rendered against the insured including the excess over the policy limits.

It is our view that the ultimate test to be applied under South Dakota law in determining whether an insurer is liable for damages in excess of the policy limits is, “was the insurer guilty of bad faith in refusing to settle within the policy limits?” Kunkel v. United Security Ins. Co. of New Jersey, 84 S.D. 116, 168 N.W.2d 723 (S.D.1969). This is a fact question to be determined from all the circumstances and elements involved in a particular case. Kunkel, supra,, at pp. 726, 730; see also, Dairyland Insurance Company v. Hawkins, 292 F.Supp. 947 (S.D.Iowa 1968); Landie v. Century Indemnity Company, 390 S.W.2d 558 (Mo.App.1965). In determining the issue of bad faith in refusing to settle within the policy limits the trier of fact is entitled to consider, among other factors, the good faith of the insurer in refusing to defend because of the circumstances indicating lack of coverage. “Obviously, in considering its own interest the insurer may, in good faith, determine whether, under the circumstances, it would be held liable at all, i. e., whether there is coverage” Beck v. Pennsylvania National Mutual Cas. Ins. Co., 429 F.2d 813, 819 (CA5 1970). The refusal to defend and refusal to settle within the policy limits are often interrelated. See, Gordon v. Nationwide Mutual Ins. Co., 30 N.Y.2d 427, 334 N.Y.S.2d 601, 285 N.E.2d 849 (1972); National Service Fire Ins. Co. v. Williams, 454 S.W.2d 362 (Tenn.App. 1970). In the latter case the Tennessee Court of Appeals in reversing the trial court held that the insurer did not act in bad faith in refusing to defend and settle within the policy limits where the insured named in the policy unequivocally stated that the defendant driver did not have permission to drive the insured’s automobile at the time of the accident. The trial court found from other evidence that the driver in question did have permission to drive and that the insurance company acted in bad faith in refusing to defend and in refusing to consider or make settlement. In reversing the appeals court observed:

“We think an insurer, under circumstances such as depicted in this case, is justified in accepting as true the information given it by its named insured which has a bearing on the liability of the insurer under its policy, and that the insurer can act reasonably on the basis of the information without being guilty of bad faith.”

The above case demonstrates the fundamental unfairness of a “refusal to defend at your own risk” doctrine.

In the matter at hand the trial court held as a matter of law that the defendant was not guilty of bad faith in its denial of coverage and refusal to defend, and therefore, denied the claim for damages in excess of the policy limits. 325 F.Supp. at 1334. It is our view that the controlling issue is whether the insurer’s refusal to settle was in bad faith and that the good faith refusal to defend must be considered along with all other circumstances in making a finding with respect thereto. We would remand for a determination of that issue by the trier of fact.

      . Iowa Code Ann. § 321.45 reads in part:
      “2. No person shall acquire any right, title, claim or interest in or to any vehicle subject to registration under this chapter from the owner thereof except by virtue of a certificate of title issued or assigned to him for such vehicle or by virtue of a manufacturer’s or importer’s certificate delivered to him for such vehicle . . . . ”

      . It should be noted that “[i]n general the ‘newly acquired automobile’ clause is intended for the benefit of the insured and should be liberally construed in his favor.” Glacier General Assurance Company v. State Farm Mutual Automobile Insurance Company, 150 Mont. 452, 436 P.2d 533, 535 (1968). See also, Canal Insurance Company v. Brooks, 201 F.Supp. 124, 128 (W.D.La.1962), aff’d, 309 F.2d 751 (5 Cir. 1962); 12 Couch on Insurance 2d § 45:185, at 235-236 (1964).

      . In adopting this position the South Dakota Supreme Court rejected those decisions which premise liability on evidence of negligence. See generally, 14 Couch on Insurance 2d § 51.5 at 510-511 (1965).

      . See e. g., Herman v. Western Casualty & Surety Co., 271 F.Supp. 502 (E.D.Mo. 1967), aff’d, 405 E.2d 121 (8 Cir. 1968); Comunale v. Traders & General Insurance Co., 50 Cal.2d 654, 328 P.2d 198 (Cal. 1958).

      . See e. g., State Farm Mutual Automobile Ins. Co. v. Skaggs, 251 F.2d 356 (10 Cir. 1957); Dairyland Ins. Co. v. Hawkins, 292 F.Supp. 947 (S.D. Iowa 1968).

      . This circuit has often stated that where the trial judge arrives at a permissible conclusion with respect to the law of his state, such conclusion will be binding on appeal. H. K. Porter Co. v. Wire Rope Corporation of America, Inc., 367 F.2d 653, 662-663 (8 Cir. 1966); Homolla v. Gluck, 248 F.2d 731, 733-734 (8 Cir. 1957). Only the Sixth Circuit has recited a similar position. See Lee Shops, Inc. v. Schatten-Cypress Co., 350 F.2d 12, 17 (6 Cir. 1965), cert. denied, 382 U.S. 980, 86 S.Ct. 552, 15 L.Ed.2d 470 (1966); Rudd-Melikian, Inc. v. Merritt, 282 F.2d 924, 929 (6 Cir. 1960). The continued application of such a rule has been soundly criticized. See 1 Barron & Holtzoff, Federal Practice and Procedure § 8, at 42-43 (1960); 1A Moore’s Federal Practice § .309 [2], at 124-125 n. 15 (1971 Supp.); Wright, Law of Federal Courts § 58, at 241 (1970). The legal effect of this principle on questions of first impression is to preclude appellate consideration of an issue involving a significant question of law. The impropriety of the rule is pointed up by Mr. Justice Frankfurer’s observation in Bernhardt v. Polygraphic Company, 350 U.S. 198, 209, 76 S.Ct. 273, 100 L.Ed. 199 (1956) (concurring opinion) : “[T]he defendant is entitled to have the view of the Court of Appeals on Vermont law and cannot, under the Act of Congress, be foreclosed by the District Court’s interpretation.” See also, Huddleston v. Dwyer, 322 U.S. 232, 236, 64 S.Ct. 1015, 1018, 88 L.Ed. 1246 (1944) (“It is the duty of the federal appellate courts, as well as the trial court, to ascertain and apply the state law where [that law] controls [the] decision.”) See generally Kurland, Mr. Justice Frankfurter, The Supreme Court and the Erie Doctrine in Diversity Cases, 67 Yale L.J. 187, 216-218 (1957).
      Other circuits have not “bound” themselves to the district judge’s initial choice of state law. Rather, they tend to accord “great weight” to the district court’s determination of local law unless they believe it to be clearly erroneous. See e. g., Freeman v. Heiman, 426 F.2d 1050, 1053 (10 Cir. 1970); Minnesota Mutual Life Insurance Co. v. Lawson, 377 F.2d 525, 526 (9 Cir. 1967); Lomartira v. American Automobile Insurance Co., 371 F.2d 550, 554 (2 Cir. 1967). We feel future adherence to the principle set forth by the Fifth Circuit more adequately reflects a court of appeals’ proper course of review: “We give great weight to the view of the state law taken by the district judge experienced in the law of that state, although of course the parties are entitled to review by us of the trial court’s determination of state law just as they are of any other legal question in a case.” Freeman v. Continental Gin Co., 381 F.2d 459, 466 (5 Cir. 1967). See also Stool v. J. C. Penney Co., 404 F.2d 562, 563 (5 Cir. 1968).

      . It is generally held that where the only wrongful act of the insurer is the refusal to defend, the liability of the insurer is ordinarily confined to the limits of the policy. Fidelity & Casualty Co. of New York v. Gault, 196 F.2d 329, (5 Cir. 1952); Myers v. Farm Bureau Mutual Insurance Co. of Michigan, 14 Mich.App. 277, 165 N.W.2d 308 (1968); Mannheimer Brothers v. Kansas Casualty & Surety Co., 149 Minn. 482, 184 N.W. 189 (1921). This follows from the general contract principle that upon breach of a contract a party is only entitled to be restored to the same position he was in before the breach. Liability for excess damages does not follow from the failure to defend when there has been no offer to settle within the policy limits. When an assured hires his own counsel it is generally reasoned that damages would not be any less if the insurance company had provided the defense. Furthermore, if the assured is indigent and cannot afford a defense, it can only be assumed a court will allow damages, even upon default, which are prima facie commensurate and reasonable to compensate the injury suffered.

      . See note 5, supra. The cases holding that good faith in refusing coverage is a proper defense to excess liability fail to offer any reason for the adoption of the rule. The apparent rationale seems to be that since bad faith must be shown on the refusal to settle it necessarily follows that the same rule is applicable when there has been a refusal to defend.
      Most legal commentators have rejected the good faith defense to excess liability when applied to the carrier’s decision not to defend. Cf. Keeton, Liability Insurance and Responsibility for Settlement, 67 Harv.L.Rev. 1136 (1954). See also 47 Geo.L.J. 601 (1959); 57 Mich.L.Rev. 775 (1959); 107 U.Pa.L.Rev. 571 (1959); 10 Hastings L.J. 198 (1958).

      . The annotation to South Dakota Statute 21-2-1, under “source” cites earlier South Dakota statutes and Section 3300 of the California Civil Code.

      . The states of Montana and North Dakota have similar statutes and their supreme courts follow the same rationale as Comunale. Lewis v. Mid-Century Insurance Co., 152 Mont. 328, 449 P.2d 679, 682-683 (1968); Prince v. Universal Underwriters Insurance Co., 143 N.W.2d 708, 715-717 (N.D. 1966).

      . This statute was amended in 1972 to provide attorney fees on appeal as well.

      . It is likewise doubtful whether the issue of vexatious or unreasonable refusal to provide coverage is one for a jury to resolve. By statute the attorney fees are to be determined and awarded by the court.

      . For instance, the case of Canal Insurance Co. v. Brooks, 201 F.Supp. 124, 127 (W.D.La.1962), aff’d, 309 F.2d 751 (5th Cir. 1962), relied upon by the district court for its decision on coverage, is not directly in point. In the Canal Insurance Co. case, the omission of the insured, pointed to by the insurer, was the failure to list a certain boat trailer and other unserviceable semitrailers as vehicles which the insured owned. The policy called for a listing of all owned automobiles. No South Dakota court had considered a similar problem of coverage.

      . Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 328 P.2d 198 (Cal.1958).

      . The panel decision has cited Western Casualty & Surety Co. v. Herman, 405 F.2d 121 (8th Cir. 1968), and Landie v. Century Indemnity Co., 390 S.W.2d 558 (Mo.App.1965), as cases supporting the application of the Comunale rule. In Herman, our affirmance rested upon a specific finding of fact by the district court, Herman v. Western Casualty & Surety Co., 271 F.Supp. 502 (E.D.Mo. 1967), that the insurer was guilty of bad faith in refusing to settle, notwithstanding that it had sought to litigate a good faith policy defense. In Landie, the case authority which underlay our Herman decision, the Missouri court, in affirming an excess judgment over the policy limits, made this xiertinent observation,
      From this fact situation the jury could well have found, as they did, that the [insurance] company acted in bad faith in refusing to settle. [Landie, supra, 390 S.W.2d at 566.]

      . The pertinent sections read :
      For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom. No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and their origin. [S.D.C.L. § 21-2-1 (1967).]
      Notwithstanding the provisions of these statutes, no person can recover a greater amount in damages for the breach of an obligation than he could have gained by the full performance thereof on both sides [with exceptions not here applicable], [S.D.C.L. § 21-1-5 (1967).]

      . In fact, the majority has completely disregarded the obligation to give “special weight” to the determination of local law by a district judge. Panel slip opinion at 7. Although the district court, on determining good faith, initially gave conclusive weight to the insurer’s assertion that it did not believe the insured to be covered under the policy, the majority has declined to allow the trial judge to determine whether, under South Dakota law, a refusal to grant policy coverage made in good faith is even a factor in assessing whether a rejection of a settlement offer was made in good faith.

      . Commuale v. Traders & General Ins. Co., 50 Cal.2d 654, 328 P.2d 198, 68 A.L.R.2d 883 (Cal.1958).


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Belmer Lewis WRIGHT, Jr., Defendant-Appellant.
    No. 72-3137
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Feb. 27, 1973.
    Rehearing Denied March 28,1973.

      Sam Houston Clinton, Jr., Austin, Tex., for defendant-appellant.
    Anthony J. P. Farris, U. S. Atty., James R. Gough, Asst. U. S. Atty., Houston, Tex., Dan Alfaro, Asst. U. S. Atty., Laredo, Tex., for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

On appeal from a conviction of possession with intent to distribute 319 pounds of marijuana, a violation of 21 U.S.C.A. § 841, Appellant Wright raises only one contention — that the search of his vehicle which produced the voluminous quantities of the forbidden weed was violative of the guarantees of the Fourth Amendment, even under the broad “border search” rubric. We hold that the instant search falls well within the bounds of the border search doctrine and, accordingly, affirm.

Appellant and a female companion were stopped by agents of the Immigration and Naturalization Service at a point approximately 11 miles north of Laredo, Texas, and the Mexican border. According to the testimony of Immigration Officer James W. Knight, the officers’ suspicions were somewhat aroused by the presence of a spare time in the back of Appellant’s 1971 Ford station wagon. This seemingly harmless factor was suspicious when viewed through the eyes of these officers because of their knowledge and experience that spare tire wells were often used to conceal aliens. Officer Knight requested the Appellant to open the rear door of the station wagon. Looking inside the vehicle, the Officer saw that the floor deck was covered by a white cloth. He pulled back the cloth and opened the rear seat compartment which was under it. Officer Knight observed several large heavily wrapped, plastic covered bundles in this compartment. Detecting an odor of marijuana, he promptly placed the Appellant under arrest. Upon further inspection it was determined that the bundles contained the marijuana.

It is a well-settled principle of law in this Circuit that Immigration Officers may search any vehicle which they have a reasonable suspicion to believe may contain aliens. United States v. McDaniel, 5 Cir., 1972, 463 F.2d 129; United States v. De Leon, 5 Cir., 1972, 462 F.2d 170; United States v. Maggard, 5 Cir., 1971, 451 F.2d 502; United States v. Bird, 5 Cir., 1972, 456 F.2d 1023. The test is not one of probable cause, but “reasonable suspicion”. “In substance, the term ‘border search’ is merely a short-hand method of stating that a search is, under the circumstances, a ‘reasonable’ stretch of the usual Fourth Amendment standard of ‘probable cause’ because of the proximity of an international frontier and other attendant factors.” McDaniel, supra, 463 F.2d at 132.

In his excellent brief on appeal, Appellant seeks to distinguish McDaniel on several grounds. First, he suggests that because the internal check point therein was merely a temporary one rather than the permanent one in McDaniel there is less of a right to search. We fail to see the logic in this distinction, for, as we have stated, the Immigration Officers are authorized by statute and regulation to search at any point within a “reasonable distance” from the border line. The effectiveness of the Border Patrol would be greatly diminished if the law required them to become creatures of their own habit.

Appellant also suggests that McDaniel requires “something more than just the stop before approving a search for aliens.” Under McDaniel, a border search for aliens may be conducted if, in light of all the apparent facts at the time, government agents have adequate grounds for a reasonable suspicion that illegal aliens may be concealed within the vehicle, United States v. McDaniel, supra, at 133. In this case, Officer Knight’s observation of a spare tire in the luggage compartment of the station wagon coupled with his knowledge that spare tire wells were often used to conceal aliens, justified his decision to open the rear compartment.

While the Immigration Officers are powerless to search bound bags too small to conceal aliens under the auspices of their immigration badges, the Court below found, as in McDaniel, supra, that Agent Knight and his partner had two badges — they were not only agents of the Immigration and Naturalization Service, but were also authorized Customs Officers. As such, they are authorized to search any package which they may have a reasonable suspicion to believe contains merchandise which was imported contrary to law. Thus, it was perfectly permissible for the Agents to convert what began as a search for aliens into a detailed search for contraband. McDaniel, supra at 134.

Affirmed.

      . Actually the compartment was designed to hold the fold-down third rear seats. Being unfamiliar with the design on a 1971 Ford station wagon, Officer Knight did not know that this was not the spare tirewell. Of course this simple factual mistake has no bearing on the validity of the search — Immigration agents are authorized by law to search any compartment where an unauthorized alien might be concealed. Thus, 8 U.S.C.A. § 1357 (a) (3) gives immigration officers the authority :
      “(3) within a reasonable distance from any external boundary of the United States, to board and search for aliens any vessel within the territorial waters of the United States and any railway car, aircraft, conveyance, or vehicle, and within a distance of twenty-five miles from any such external boundary to have access to private lands, but not dwellings, for the purpose of patrolling the border to prevent the illegal entry of aliens into the United States.”

      . “The term ‘reasonable distance,’ as used in [8 U.S.C.A. § 1357(a) (3)] of the Act, means within 100 air miles from any external boundary of the United States or any shorter distance which may be fixed by the District Director.” 8 C.F.R. § 287.1(a)(2). Of course mere presence within the hundred mile limit of the border does not, without more, justify all searches. See Carroll v. United States, 1925, 267 U.S. 132, 154, 45 S.Ct. 280, 285, 69 L.Ed. 543, 552; Marsh v. United States, 5 Cir., 1965, 344 F.2d 317, 324.

      . In order to foreclose the possibility that any wolf could slip by the border in sheep’s clothing, Congress has granted extensive authority to the Customs Agents for the search of vehicles, beasts and persons:
      “Any of the officers or persons authorized to board or search vessels may stop, search, and examine, as well without as within their respective districts, any vehicle, beast, or person, on which or whom he or they shall suspect there is merchandise which is subject to duty, or shall have been introduced into the United States in any manner contrary to law, whether by the person in possession or charge, or by, in, or upon such vehicle or beast, or otherwise, and to search any trunk or envelope, wherever found, in which he may have a reasonable cause to suspect there is merchandise which was imported contrary to law,; and if any such officer or other person so authorized shall find any merchandise on or about any such vehicle, beast, or person, or in any such trunk or envelope, which he shall have reasonable cause to believe is subject to duty, or to have been unlawfully introduced into the United States, whether by the person in possession or charge, or by, in, or upon such vehicle, beast, or otherwise, he shall seize and secure the same for trial.” 19 U.S.C.A. § 482. See also 19 U.S.C.A. § 1581; United States v. Caraway & Scales, 5 Cir. 1973, 474 F.2d 25.


author: COFFIN, Chief Judge.

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. OIL, CHEMICAL AND ATOMIC WORKERS INTERNATIONAL UNION, AFL-CIO, Respondent. CATALYTIC INDUSTRIAL MAINTENANCE COMPANY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    Nos. 72-1347, 72-1379.
    United States Court of Appeals, First Circuit.
    April 17, 1973.

      Alan H. Randall, Hato Rey, P. R., with whom Edward M. Borges and O’Neill & Borges, Hato Rey, P. R., were on brief, for petitioner.
    Lawrence D. Levien, Atty., Washington, D. C., with whom Peter G. Nash, Gen. Counsel, Patrick Hardin, Marcel Mallet-Prevost, Asst. Gen. Counsels, and Elliott Moore, Deputy Asst. Gen. Counsel, Washington, D. C., were on brief, for respondent.
    Ginoris Vizcarra De Lopez-Lay, San Juan, P. R., with whom Lopez-Lay & Vizcarra, San Juan, P. R., was on brief, for intervenor, Oil, Chemical and Atomic Workers International Union, AFL-CIO.

      Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.
   COFFIN, Chief Judge.

These proceedings involve an application for enforcement and petition for review of an order of the National Labor Relations Board (the Board) issued pursuant to a settlement agreement between the General Counsel and the Oil, Chemical and Atomic Workers International Union, AFL-CIO (the Union) entered into after an unfair labor practice complaint issued pursuant to the charges filed by the Catalytic Industrial Maintenance Company (the Company). The principal issue raised by the Company’s challenge to the consent order concerns the conditions under which a charging party, dissatisfied with a consent order issued by the Board against a charged party, is entitled to an administrative hearing on its objections.

On March 17, 20, and April 3, 1972, the Company filed charges with the Regional Director alleging that since March 15, the Union had engaged in conduct violative of Sections 8(b)(1) (A) and 8(b)(4)(i) and (ii)(B). Specifically, one charge alleged that in the course of an organizational strike against the Company at the Puerto Rico Olefins job site, the Union coerced and restrained employees in the exercise of their rights under section 7 of the Act by blocking ingress and egress from the premises, threatening violence against those who entered the premises, and by mass picketing. The other charges were that by these and other means the Union prevented employees of other companies from working at the Olefins and later the so-called PPG Industries job site.

Subsequently, after a complaint issued, the Union and the General Counsel entered into a proposed consent settlement. The Company objected to the non-admission of proscribed conduct clause, claiming that this would prevent the Board from using the settlement as either a basis for court contempt proceedings or a broad Board order in the event of future violations. It also objected to the absence of the admittedly unusual remedy of back pay to employees who had been prevented from working during the strike. Pursuant to § 101.9(c) of the Board’s Rules, 29 C.F. R. § 101.9(c), the Regional Director and the General Counsel each in turn wrote letters to the Company explaining their reasons for rejecting the Company’s objections. After receiving a further statement of these objections, the Board finally approved the settlement.

After the Board applied to us for enforcement of its order, # 72-1347, the Company filed a motion to intervene, which the Board opposed. Because of our doubts as to the availability of intervention to a charging party opposing parts of a consent judgment in light of UAW, Local 283 v. Scofield, 382 U.S. 205, 86 S.Ct. 373, 15 L.Ed.2d 272 (1965), we suggested that the Company file a petition for review of the Board’s order which it did shortly thereafter, # 72-1379. The Union subsequently submitted an unopposed motion to intervene in the latter case to defend the consent order.

We now deny the Company’s motion to intervene in the Board’s application for enforcement and grant the Union’s motion to intervene in the Company’s petition for review. We find Scofield controlling, although it does not deal explicitly with this problem. There the Supreme Court held that a successful charging or successful charged party could intervene in the subsequent application for enforcement or petition for review. The Court found in each instance several policy reasons for permitting intervention. One underlying concern was that denying intervention to the winner would create the anomaly that the right to participation in subsequent court proceedings would hinge on the nature of the decision of the Board, the loser having an absolute statutory right to petition for review under § 10(f), 29 U.S.C. § 160(f), but the winner being made to “suffer by his own success”. See 382 U.S. at 210, 216, 222, 86 S.Ct. 373. The Court’s ruling there created a simple and clear procedural rule: the party supporting a Board order, or the part challenged, may intervene, while the party opposing a Board order or a portion of it may petition for review. We see no reason why this rule which applies when the Board issues an order after full adjudication should not apply when it does so based on a settlement agreement. Since the Union is supporting the Board’s order insofar as it rejected the Company’s objections, it may intervene; since the Company is attacking the Board’s order, it may come into court only on its petition for review.

This leads us to the Company’s principal contention — that the charging party in an unfair labor practice proceeding has a right to a hearing before the Board on its objections to a proposed settlement between the Board and the charged party. We reject that claim here both because the charging party did not present this claim to the Board and, assuming in light of the Board’s stance in this court that such a presentation would have been unavailing and that we can consider the claim, because we find that the right to a hearing is not absolute and the necessary pre-conditions do not exist in this case.

Initially, we agree with the Second Circuit, Local 282, International Brotherhood of Teamsters v. N.L.R.B., 339 F.2d 795 (2d Cir. 1964), that section 5(b) of the Administrative Procedure Act, 5 U.S.C. § 554(c), does not guarantee the charging party a hearing on its objections to a settlement. We note first that were § 554(c) applicable it would not merely provide a right to a hearing on objections to a settlement, as the Third Circuit indicated, Marine Engineers Beneficial Ass’n No. 13 v. N.L.R.B., 202 F.2d 546 (3d Cir.), cert. denied, 346 U.S. 819, 74 S.Ct. 32, 98 L.Ed. 345 (1953), but would permit obstruction of the settlement itself and a right to a hearing on the merits of the complaint. If a charging party were held to be an “interested party” under that subsection, it could decide whether to “determine [the] controversy by consent” or insist on a “hearing and decision on notice”. It would then have “a complete veto on the public interest in compromise”, 339 F.2d at 801, a power wholly out of step with the unique and carefully structured role of a charging party in labor cases, see discussion infra. Moreover, the language of the APA does not compel such a holding. The term “interested parties” is not as broad as the term “person aggrieved” to whom rights to petition for court review are granted by the Labor Act or the term “persons entitled to notice of an agency hearing” used in the preceding subsection (b) of 5 U.S.C. § 554. “In this context, ‘interest’ means a legally recognized private interest and not simply a possible pecuniary benefit resulting from an agency’s enforcement of a public right.” 339 F.2d at 800. As the court there notes, a person can make such a showing “only if the statute can fairly be construed as vesting him with a new private right.” Id. Amalgamated Utility Workers v. Consolidated Edison Co., 309 U.S. 261, 60 S.Ct. 561, 84 L.Ed. 738 (1940), established that the ban on unfair labor practices was created to enforce the public’s interest in peaceful and fair settlement of labor disputes and not to enhance the property rights of the labor disputants. Finally, the legislative history of the APA indicates that Congress did not intend more than to insure the availability of informal means of settlement; it did not address the question of who was entitled to demand a hearing. 339 F.2d at 801. Since 5 U.S.C. § 554(c) is not applicable, it neither permits the charging party to obstruct a settlement nor bestows any rights to a hearing on objections to a settlement.

Turning to the Labor Act, we note that courts of appeals have reacted variously to a charging party’s claim to a hearing on its objections. At one end of the spectrum, the Third Circuit, in Marine Engineers, supra, held that a charging party is always entitled to a hearing on its objections to a settlement once a complaint has issued. This view was reaffirmed in Leeds & Northrup Co. v. N.L.R.B., 357 F.2d 527 (3d Cir. 1966), on which the petitioner heavily relies, and in Terminal Freight Cooperative Ass’n v. N.L.R.B., 447 F.2d 1099 (3d Cir. 1971), cert. denied, 409 U.S. 1063, 93 S.Ct. 553, 34 L.Ed.2d 516 (1972), in which the court refused to extend its holding to cases in which a complaint has not issued. In International Union, United Automobile, Aircraft, and Agricultural Implement Workers of America v. N.L.R.B., 231 F.2d 237 (7th Cir.), cert. denied, 352 U.S. 908, 77 S.Ct. 146, 1 L.Ed. 2d 117 (1956), the Seventh Circuit adopted the position enunciated in Marine Engineers. At the other extreme, the Second Circuit held in Local 282, Teamsters, supra, that the charging party has no rights at all to a hearing on its objections.

The remaining circuits have taken intermediate positions. In Textile Workers Union of America v. N.L.R.B., 111 U.S.App.D.C. 109, 294 F.2d 738 (1961), the District of Columbia Circuit refused to lay down a general rule, insisting rather that:

“Regard must be had to the particular circumstances bearing upon whether or not there would be an abuse of discretion in entering a consent order without a hearing notwithstanding detailed and substantial objections and request for a hearing thereon.” 294 F.2d at 741.

Under the circumstances of that case, the court held that the order could not stand without “either (1) a reasonable opportunity for the Union to be heard on its objections or (2) a presentation on the record of reasons for acceptance of the stipulation . . . notwithstanding the Union’s objections.” Id. [Emphasis added.] After an extensive survey of the problem, the Fifth Circuit held that a charging party:

This position was reaffirmed in Poloron Products of Mississippi, Inc. v. N.L.R.B., 450 F.2d 793 (5th Cir. 1971), and expressly followed by the Ninth Circuit in N.L.R.B. v. International Brotherhood of Electrical Workers, Local 357, 445 F.2d 1015 (9th Cir. 1971).

“must be afforded (1) an evidentiary hearing on any material issues of disputed fact presented by [the] objections . . . and (2) a presentation on the record of reasons for acceptance of the settlement agreement . notwithstanding [the] objection.” Concrete Materials of Georgia, Inc. v. N.L.R.B., 440 F.2d 61, 68 (5th Cir. 1971). [Emphasis added.]

The Company has asked us to follow the Third and Seventh Circuits but argues that even under the more moderate approaches of the Fifth, Ninth, and District of Columbia Circuits, it is entitled to a hearing. The Board asks us to adopt the Concrete Materials standard adopted by the Fifth and Ninth Circuits. Essentially for the reasons stated in that opinion, we adopt the Concrete Materials standard and find that under it, this charging party is not entitled to a hearing.

As the other courts have noted, the charging party in an unfair labor practice proceeding possesses a unique legal status. Although like a complaining witness in a criminal prosecution in that it cannot compel issuance of a complaint, it has far greater powers once the complaint issues. By Board rule, 29 C.F.R. § 102.8, pursuant to statutory authorization; 29 U.S.C. § 160(b), it is considered a “party”, and may, subject to limitations imposed to parallel the extent of its interest, participate fully in the subsequent hearing and proceedings before the Board, by introducing and objecting to evidence, cross-examining witnesses, filing exceptions, arguing orally before the Board, and petitioning for reconsideration. If its position is unsuccessful before the Board, it may petition the appropriate court for review, as “a person aggrieved” under § 10(f), 29 U.S.C. § 160(f). Finally, if successful before the Board, it may intervene in the court proceeding brought by the Board to enforce its order. See Scofield and discussion, supra. On the other hand, the charging party is not the alter ego of the Board or the equivalent of a civil litigant. It may not overrule a decision not to issue a complaint. See Vaca v. Sipes, 386 U.S. 171, 182, 87 S.Ct. 903, 17 L. Ed.2d 842 (1967). Its consent is not necessary for a stipulated settlement. It may not move a court to enforce a Board order or to find a party in contempt of an order already enforced. Amalgamated Utility Workers, supra. It is rather the gadfly insuring that the Board considers all relevant facts and acts in the public interest and the enforcer of whatever private rights the Act recognizes. Scofield, supra, 382 U.S. at 218-221, 86 S.Ct. 373.

This dual role suggests the scope of a charging party’s participation in a settlement proceeding. That it may file and press objections, 29 C.F.R. § 101.-9(c), even by court petition, is a reflection of its role both in keeping the Board within the statute and the public interest and in presenting its private interest in the dispute. That it may not obstruct the settlement by its disapproval is a corollary of the Board’s ultimate and exclusive power to enforce the unfair labor practice provisions of the Act. Amalgamated Utility Workers, supra. Similarly, we believe that its right to obtain a hearing is limited to those instances in which it alleges facts which are both disputed and material to the Board’s decision; to give a broader opportunity would be to render private rights predominant and obstruct expeditious Board dispositions without concomitant benefit to its decision-making process. In addition, since court review is available, it must be made meaningful. It cannot be without a statement by the administrative agency of its reasons for rejecting the challenge. Only then can the charging party, the public and the court be sure that the Board in fact gave consideration to the objections raised and only then can the court intelligently review the decision, to insure its compliance with law and the scope of agency discretion. Textile Workers, supra, 294 F.2d at 741. Accordingly, we hold, with the Fifth and Ninth Circuits, that after the filing of an unfair labor practice complaint and presentation of a settlement agreement, the charging party must be afforded: (1) an evidentiary hearing on any material issues of disputed fact presented by its objections; and (2) a presentation on the record of reasons for acceptance of the settlement agreement notwithstanding the objections.

The Company here raises no material issue of disputed fact. It objects to the non-admission clause first on the grounds that it renders the resulting consent order an insufficient basis for a court contempt citation should the Union subsequently violate the consent order and hence the court judgment enforcing it. We note initially that the sufficiency of the consent order for contempt purposes is a matter of law, probably resolved in the Board’s favor by Swift & Co. v. United States, 276 U.S. 311, 48 S.Ct. 311, 72 L.Ed. 587 (1928), and N.L.R.B. v. Ochoa Fertilizer Corp., 368 U.S. 318, 82 S.Ct. 344, 7 L.Ed.2d 312 (1961). Moreover, insofar as courts might hesitate to use their power to cite for contempt when the underlying conduct is not admitted, a proposition for which the Company cites N.L.R.B. v. International Hod Carriers Union, 228 F.2d 589 (2d Cir. 1955), the decision whether to accept the non-admission clause and risk court reluctance to find contempt rather than adjudicate the issue of guilt is a matter for the Board’s administrative discretion, which we cannot say was here abused.

The Company also objected to the non-admission clause because it would be an insufficient basis for a subsequent broad order against the Union —prohibiting it from engaging in similar conduct at any location — if it repeated the illegality in the future. When this objection was rejected by the General Counsel in part because there was no evidence of Union “proclivity” to violence, stated to be the applicable standard, the Company claimed, both before the Board and here, that the record was sufficient justification for a broad order now. Given the Company’s concession that there are no other prior proven instances of this Union’s violence, we think the Board was justified in not finding “proclivity” and thus not seeking a broad order in the settlement. The Regional Director admitted that a Board order issued by consent is not considered by the Board in a subsequent proceeding with regard to whether a. broad order should then issue. But again, as he noted in his letter to the Company, the decision whether to accept the non-admission clause in a consent settlement, which as here fully remedies all of the violations listed in the charges filed by the Company and the complaint, or to expend the time and money required to litigate the issue of culpability before the Board and court so that the order could be used in the future to remedy broadly repeated violations is a matter for the Board’s sound discretion, which we again cannot say was improperly exercised here.

Lastly, the Company seeks the unusual remedy of back-payments by the Union to the employees prevented from working because of the Union’s conduct. Again, the appropriate remedy is a matter for administrative judgment. Butz v. Glover Livestock Commission Co., Inc., 411 U.S. 182, 93 S.Ct. 1455, 36 L.Ed.2d 142 (1973). The Board has a long-standing policy against such awards in this type of case, Colonial Hardwood Flooring Co. Inc., 84 N.L.R.B. 563 (1949), grounded in sound policy, Long Construction Co., 145 N.L.R.B. 554 (1963), which it has recently reaffirmed, over dissent, in the face of contrary recommendations by the General Counsel and the Administrative Law Judge. Union de Tronquista de Puerto Rico, Local 901 (Lock Joint Pipe & Co. of Puerto Rico, 24-CB-774, 775 (N.L.R.B. Mar. 15, 1973). We can see no error in enforcing what was then and still is existing Board policy. Nor can we say that that policy, or its application in this case, is “unwarranted in law” or “without justification in fact” Glover Livestock, supra, 411 U.S. 186, 93 S.Ct. 1455.

In addition, we find that the Company has received the statement of reasons for acceptance of the settlement and rejection of its objections to which it is entitled. Both the Regional Director and General Counsel wrote letters, the first quite extensive, answering specifically each of the objections raised, generally with the explanations given above. Finally, the Board, in an extensive footnote to its decision and order, described the Company’s objections and the General Counsel’s responses and, after careful review of the record and the recommendations of the Regional Director and General Counsel, stated its approval of the stipulation and dismissal of the objections as lacking in merit. Both the Board and its agents have fully and carefully presented their decision and the factors weighed in reaching it; this is all that is necessary for intelligent and fair review.

We find no merit in the Company’s other contentions.

In # 72-1347, the Company’s motion to intervene is denied and the order is enforced. In # 72-1379 the Union’s motion to intervene is granted and the petition is denied. Costs to the Board in both cases and to the Union in # 72-1379.

      . In Scofield, the Board argued to the Supreme Court that a decision there permitting court intervention by the successful charging party in the Board’s application for enforcement would make it possible for the charging party to thwart settlements while the case was pending before the Court of Appeals. The Court refused to consider that argument, 382 U.S. at 222, 86 S.Ct. 373 n. 19, finding nothing in the record to support the claim. That argument is of course not applicable here — the whole purpose of the Company’s participation in these court proceedings is to thwart a settlement arrived at during agency consideration, a role the Board does not claim is improper.

      . In neither its letter of June 6 to the Regional Director nor its letter of August 8 to the Board did petitioner request or argue its right to a hearing. The first letter closed with a statement of petitioner’s correct understanding of the procedure under § 101.9(c), which does not mention hearings. The second letter closed with the sentence: “If the Board desires further detailed argument, I will submit it upon request.” [Emphasis added.] The Board could hardly be expected to construe this as a request for an evidentiary hearing as of right.

      . We note that it is the Union and not the Board which objects here on the grounds that the Company failed to raise this issue before the Board.

      . Section 554(c) provides in full:
      “(c) The agency shall give all interested parties opportunity for — (1) the submis-, sion and consideration of facts, arguments, offers of settlement, or proposals of adjustment when time, the nature of the proceeding, and the public interest permit; and (2) to the extent that the parties are unable so to determine a controversy by consent, hearing and decision on notice and in accordance with sections 556 and 557 of this title.”