author: GODBOLD, Circuit Judge:

text:
    Charles R. MEDNICK, Plaintiff-Appellant, v. ALBERT ENTERPRISES, INC., and Bal Harbour Towers, Inc., Defendants-Appellees.
    No. 73-3781.
    United States Court of Appeals, Fifth Circuit.
    Feb. 13, 1975.

      Gene J. Tischer, Miami, Fla., for plaintiff-appellant.
    W. Reynolds Allen, Donald T. Ryce, Jr., Robert L. Norton, Coral Gables, Fla., for defendants-appellees.
    Before THORNBERRY, GOLDBERG and GODBOLD, Circuit Judges.
   GODBOLD, Circuit Judge:

This is a suit under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., by one claiming to be an employee, seeking to recover wages, overtime pay and liquidated damages. The case was tried to the court, which found for the defendants on the sole ground that the plaintiff was not an employee but an independent contractor. Plaintiff appeals. The only issue to be reviewed is the finding that plaintiff was an independent contractor.

Plaintiff Mednick worked in Harbour House, the apartment house-hotel of the defendants, overseeing the operation of the cardrooms. These were rooms generally devoted to the playing of card games, such as bridge or gin rummy, on most afternoons and evenings. Med-nick’s principal obligation was to attend to the needs of the players. For the most part this consisted of supplying them with candy and fresh decks of playing cards, and occasionally of other amenities, such as ice, soft drinks, cigars and cigarettes, and sometimes other services, such as walking one regular patron back to her rooms. Mednick paid for the candy, cards, cigars and ice out of his own pocket, as was the practice for the person running the cardrooms. It was understood that his sole compensation would be the gratuities he received from the players. These apparently were fairly standardized — $1.00 for the use of a table by four patrons, which included a candy bar for each, another 75 cents or a dollar when he supplied a deck of cards. Some patrons were more generous, and five dollar tips were not uncommon, and even larger tips not unheard of. These rooms were put to other uses of a group nature, primarily bingo, movies, card parties and occasional business meetings, for which Mednick provided some services by way of preparing the rooms for these activities. The groups were largely composed of Harbour House residents and were subsidized by Harbour House. For these services, Mednick rendered monthly handwritten bills to the groups.

Other pertinent facts found by the trial court or that fairly appear undisputed in the record, are as follows: Harbour House paid no health insurance premiums for Mednick, nor did it give him paid vacation or sick leave as it did for conceded employees. Mednick paid his own social security and withholding taxes, and his federal income tax returns were filed on the form for self-employed taxpayers. Harbour House did not set hours for operation of the cardrooms, nor did it even require that Mednick be present. He hired and fired his own employees, about ten in all over a five year period, who would work in the card-rooms in his stead four or five times a week for half-day periods. He never had more than one or two such sub-employees working for him at a time, and he made no profit from them when he did, remitting to them exactly what he would have received had he himself done the work. Further Harbour House manager Taplin was involved in decisions to hire and fire; occasionally he told Med-niek he did not approve of certain applicants, whom Mednick then did not hire, or certain employees, whom Mednick then fired. Whether Taplin’s statements on such occasions are deemed requests or orders, it was clear that all parties understood that they would be complied with.

Mednick received no specific orders from Taplin about the services he performed in the cardrooms. But Taplin did give Mednick a variety of orders concerning the care of the facilities. Although the rooms were normally cleaned by full-time Harbour House janitorial staff, Taplin ordered Mednick to do cleaning jobs a number of times. Taplin usually provided Mednick with a uniform jacket bearing the Harbour House name. The cardrooms were furnished with Harbour House furniture. The rooms assigned to cardroom use were not fixed by contract or agreement, and on occasion Taplin changed the room arrangements with no prior consultation with Mednick. Use of the rooms was limited to Harbour House tenants, their guests, members of the house clubs, and customers of the restaurant on the premises. Mednick did not advertise to increase his clientele.

There was never any written contract between the parties, and no document reciting that Mednick was either an independent contractor or an employee. There was no writing as to the duration of the relationship, so presumably either party could terminate at will.

Prior to taking on the cardroom position in 1968, Mednick worked for Har-bour House as a menial employee. He had no experience in operating card-rooms. He had never advertised or otherwise held himself out as a cardroom operator or concessionaire. He did not operate cardrooms for anyone else since at least 1970.

The terms “independent contractor,” “employee,” and “employer” are not to be construed in their common law senses when used in federal social welfare legislation. N.L.R.B. v. Hearst, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944) (for purposes of the National Labor Relations Act); United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947), and Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947) (for purposes of employment taxes on employers under the Social Security Act, as amended); and Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947) (for purposes of the Fair Labor Standards Act). Rather, their meaning is to be determined in light of the purposes of the legislation in which they were used. “[I]n the application of social legislation employees are those who as a matter of economic reality are dependent upon the business to which they render service.” Bartels, supra, 332 U.S. at 130, 67 S.Ct. at 1550, 91 L.Ed. at 1953. This court said in Fahs v. Tree-Gold Co-op. Growers of Florida, Inc., 166 F.2d 40, at 44 (CA5, 1948):

The ultimate criteria are to be found in the purposes of the act.
Under these decisions [Silk, Rutherford, Bartels and Hearst], the act is intended to protect those whose livelihood is dependent upon finding employment in the business of others. It is directed toward those who themselves are least able in good times to make provisions for their needs when old age and unemployment may cut off their earnings. The statutory coverage is not limited to those [whose work activities satisfy the common law “control” test] but rather to those who, as a matter of economic reality, are dependent upon the business to which they render service, (footnotes omitted)

And we said more recently in an employment tax case that the test is whether “as a matter of economic reality, [the alleged employees were] dependent upon the taxpayers’ business as their means of livelihood.” Shultz v. Hinojosa, 432 F.2d 259 (CA5, 1970). See also Walling v. Twyeffort, Inc., 158 F.2d 944 (CA2, 1947), where the court held that a tailor was an employee, despite some indicia of independent contractor status, because the presence of these factors “did not relieve that tailor from exposure ‘to the evils the statute was designed to eradicate’,” id., at 947 — 948.

In Rutherford Food Corp. v. McComb, supra, the Supreme Court set out specific guidelines for distinguishing employees from independent contractors for purposes of the F.L.S.A.:

(1) The workers did a specialty job on a production line.

(2) The contractual terms did not vary in any material way as one worker succeeded another.

(3) The premises and equipment were those of the proprietor.

(4) The workers had no “business organization” that could offer their services to others.

(5) The proprietor’s manager kept close watch over the workers’ activities.

(6) The workers could profit from “efficiency,” but it was the efficiency of the pieceworker, not that of an “enterprise that actually depended for success upon the initiative, judgment or foresight of the typical independent contractor.” 331 U.S. at 730, 67 S.Ct. at 1477, 91 L.Ed. at 1778. In United States v. Silk, supra, the companion case to Rutherford dealing with the meaning of employee for purposes of Social Security taxes, the Court cited other factors that should be taken into consideration: “degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation and skill required in the claimed independent operation . . . ” 331 U.S. at 716, 67 S.Ct. at 1469, 91 L.Ed. at 1769.

Both parties have selected Rutherford and Silk factors, showing their presence or absence in subsequent cases with results favorable to their own, arguing that therefore such selected factors should control the disposition of the present case. These arguments give too little weight to the ultimate criteria pointed out above. Additionally, the court below and the parties placed too great reliance on the bare legal powers which each of the parties had under their informal working agreement. The result was to permit potential powers of little or no effective significance in the actual operation of the working arrangement to overweigh the actual operation, the “economic reality” of the situation. Under the Supreme Court’s opinion in Goldberg v. Whitaker House Coop., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961), this was error.

Considered in isolation, the Rutherford and Silk criteria produce no clear cut conclusion in this case. Mednick’s work was not specialized and could be learned in about an hour’s time. But it was not an integrated part of the business of Harbour House in the same way as the work of the meat boners in Rutherford or of the mechanic in Hodgson v. Ellis Transportation Co., 456 F.2d 937 (CA9, 1972), although it may have been very useful or even necessary in the market in which Harbour House competed. The premises and equipment — furniture and chairs — were those of Harbour House, but not much other equipment was needed for the service-oriented business. Harbour House’s manager did watch over Mednick, but more to protect Harbour House’s interest in its facilities and the general run of operations than to oversee the detail of work as in Rutherford. Mednick’s supply of inventory in the form of candy and playing cards gave some room for economizing and thus increasing “profits,” but the leeway and the amounts involved were too modest to be probative. And the investment was in inventory which was recouped almost immediately. Mednick had other means of increasing his “profits,” but the means available were really indistinguishable from those available to any employee who relies for his livelihood on gratuities from customers. The relationship was somewhat more permanent than is normally the case for an independent contractor. More significant is the lack of any contractual tie. Mednick could be fired as quickly as he fired his own employees. Finally, Mednick had nothing that could be called a “business organization.” He could hire and fire subemployees, and had only one or two persons working for him at a time; he paid these subemployees; his presence was not required; and he could have worked elsewhere. Whatever the Court might have meant as “business organization” in Rutherford, it could not have meant these factors, for all were present in that case as well.

There are factors which arguably suggest that Mednick was an independent contractor. He hired and fired his own employees. But the courts have had little difficulty in finding employment status though the employee could hire others within his own discretion. Rutherford, supra, Twyeffort, supra, Mitchell v. Strickland Transportation Co., 228 F.2d 124 (CA5, 1955). He received compensation from third parties, patrons of the cardrooms and the house social clubs. Again, redcaps who receive as their only compensation gratuities from railroad station patrons have been treated as employees. Southern Ry. Co. v. Black, 127 F.2d 280 (CA4, 1942), Walling v. Portland Terminal Co., 330 U.S. 148, 67 S.Ct. 639, 91 L.Ed. 809 (1947). Finally, Med-nick was free to make certain purchases out of his own pocket to improve the services and increase his compensation. But persons with much more substantial pecuniary obligations have been held to be employees. Tobin v. Cherry River Boom and Lumber Co., 102 F.Supp. 763 (S.D.W.Va., 1952); Hodgson v. Pulley, supra at 1046 (S.D.Ohio, 1972).

But when we consider the precisely targeted criteria in the light of the ultimate inquiries that are drawn from the purposes of the Act itself, the answer becomes clear. Is Mednick the kind of person meant to be protected by the F.L. S.A.? Is he “dependent upon finding employment in the business of others ., [one of] those who themselves are least able in good times to make provisions for their needs when old age and unemployment may cut off their earnings”? Tree-Gold, supra. See also Shultz v. Hinojosa and Walling v. Twyeffort, supra. The concept has also been put in terms of whether the individual is “in business for himself,” Hodg-son v. Ellis Transportation Co., supra. In Mitchell v. Strickland Transportation Co., supra, this court held two workers’ power to hire subemployees was not “a manifestation of a business operation by each as entrepreneur,” id, 228 F.2d at 128. In Mitchell v. John R. Cowley and Bro., Inc., 292 F.2d 105 (CA5, 1961), this court looked to the “economic reality” behind a night security guard’s contract to find:

[T]his record does not supply any of the indicia of a genuinely maintained and operated watchman enterprise followed by the worker ... as a business as distinguished from personal employment, (footnote omitted)

Id., at 109. When the entire spectrum of circumstances is examined in these terms, we think Mednick is within the protection of the Act.

Next we consider the undue reliance given to bare legal powers. The courts have struggled with the disparity between legal relations and economic reality in a number of differing situations. It is clear beyond peradventure that the parties’ attempt to fasten a name of “independent contractor” or “employment” to their relationship by their own agreement — or, worse, where one party imposes a name on the other — will avail them little in ascertaining what the relationship is for purposes of the F.L.S.A. or similar legislation. Bartels v. Birmingham, and Mitchell v. Strickland Transportation Co., supra. The Supreme Court has also held that even relationships deriving from corporate identities properly established under state law will not be controlling for ascertaining whether the relationship is also one of employment, vel non, for the purposes of the F.L.S.A. Goldberg v. Whitaker House Coop., supra.

In the instant case, the putative independent contractor appeared to have certain legal rights and powers that are normally incidents of independent business establishments. The court below put considerable reliance on the various ways Mednick could have acted under the terms of the unwritten working agreement. Mednick was free to make potentially significant purchases out of his own funds. He was free to hire others to work in his stead, and never to appear personally at all if he so chose. He had patrons whom he billed separately on a monthly or multi-monthly basis. All of these powers are normally incident to one running his own business. But under the circumstances shown here, there was no economic substance behind these various powers. The purchases were only a burden on Mednick; they did not enable him to derive any distinct source of profit. At best they might bring an increase in gratuities. His power to hire and fire was as a practical matter narrowly circumscribed by Tap-lin, and whether he could have had subemployees do any more than work weekends and on occasional days off for him is not clear. He “billed” his group patrons, but their access to the card-rooms was narrowly circumscribed by Harbour House, which allowed only residents, their guests, and customers of the on-premises restaurant to use the rooms. At no point did Mednick have anything that could be called a business, assuming that Harbour House would have permitted itself to lose control of an operation so important to it. The inchoate economic character of these legal powers and relationships is underscored by the origin of the work relationship. Mednick was a menial employee with no experience or qualifications to distinguish him from the general run of workers. He was given certain freedoms and liabilities, and to some degree the appearance of an independent contractor. An employer cannot saddle a worker with the status of independent contractor, thereby relieving itself of its duties under the F.L.S.A., by granting him some legal powers where the economic reality is that the worker is not and never has been independently in the business which the employer would have him operate. Cf. Goldberg v. Whitaker House Coop., supra. Whatever the formal legal powers subsisting in the relationship, Med-nick did not have his own business calling of “cardroom concessionaire” and cannot be considered an independent contractor for purposes of the F.L.S.A.

In light of our disposition of the employee-independent contractor issue, we need not rule on any other issues.

Reversed and remanded.

      . As provided in 29 U.S.C. §§ 206, 207 and 216(b).

      . The trial court found that Mednick worked solely for Harbour House for the period May 1, 1970, the cut-off date under the statute of limitations, to April 1973.

      . As in Hodgson v. Pulley, 20 W. H. Cases 1046 (S.D.Ohio, 1972).

      . Cf. Rutherford, in which the court noted that the boners could increase their “profits” by being more efficient, but where such efficiency was the same that any piecerate employee would use to increase his income. 331 U.S. at 730, 67 S.Ct. at 1476, 91 L.Ed. at 1778-1779.

      . Appellee’s assertion that this case is different from Rutherford because the boners there were required to join the union is disingenuous at best. The boners were never a party to that agreement, they were not classified in the union contract, they were not represented by or answerable to the union steward, their dues were not under check-off as other employees’ were, and their dues were never collected by the plant operator. All of this suggests that their union membership was illusory, an attempt by the union to assert jurisdiction which the company permitted but which neither bothered to enforce, if they could have. See Walling v. Rutherford Food Corp., 156 F.2d 513, 515-516 (CA10, 1946), and Rutherford Food Corp. v. McComb, 331 U.S. at 725, 67 S.Ct. at 1474, 91 L.Ed. at 1776.

      . Wirtz v. Welfare Finance Corp., 263 F.Supp. 229 (N.D.W.Va., 1967), illustrates the use to be made of indicia like those prescribed by Rutherford and Silk and the ultimate significance of the individual’s “economic dependence” or “independent calling,” in particular the history and background of the individual’s work activity. The court was faced with two individuals doing janitorial work under similar contracts for the same company. Both did some janitorial work for other companies. But one had advertised as a janitorial service contractor and had worked for other companies over a period of about ten years, and thus had held himself out as in the business of supplying janitorial services under contract. The other worker had not so held herself out nor had she a history of performing such work for others, although she did have one other cleaning job contemporaneous with her work for defendant in that case. The contractual relationships between the workers and the company were essentially identical, but the former was held to be an independent contractor and the latter an employee. Id., at 238.
      The court correctly perceived that the test of “economic reality” goes to the question of whether the individual whose status is in question was in fact an independent businessman.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    Earnest BACH and Robert Pryor, Plaintiffs-Appellants, v. Joseph S. COUGHLIN et al., Defendants-Appellees.
    No. 73-2094.
    United States Court of Appeals, Seventh Circuit.
    Heard Sept. 27, 1974.
    Decided Dec. 20, 1974.

      Frank S. Merritt, Joseph J. Putnick, Chicago, 111., for plaintiffs-appellants.
    William J. Scott, Atty. Gen., Melbourne A. Noel, Jr., Asst. Atty. Gen., Chicago, 111., for defendants-appellees.
    Before HASTIE, Senior Circuit Judge, and PELL and TONE, Circuit Judges.

       Senior United States Circuit Judge William H. Hastie of the United States Court of Appeals for the Third Circuit is sitting by designation.

   PER CURIAM.

This is an appeal from a District Court’s dismissal of a pro se complaint under the Civil Rights Act, 42 U.S.C. § 1983, for failure to state a claim upon which relief can be granted. Plaintiffs, Bell, Bach and Pryor, were all incarcerated in the Stateville Branch of the Illinois Department of Corrections on June 12, 1973, the date. the complaint was filed. The defendants are directors and officials of the Illinois Department of Corrections.

The complaint, purportedly filed on behalf of a class consisting of all inmates under defendants’ jurisdiction, alleges that defendants deprived plaintiffs of their civil rights by denying them access to courts and legislative bodies through a postage regulation, by refusing to let them meet with other prisoners concerning pending cases and by denying them access to the prison law library during an institutional lockup. The complaint seeks declaratory and injunctive relief, costs, and such further relief as is necessary to assure that the plaintiffs “are afforded constitutionally required legal and legislative redress.”

On September 25, 1973, the District Court dismissed the complaint. In the part of the opinion that dealt with plaintiffs’ claim concerning the postage regulation, the District Court concluded that Administrative Regulation 824 of Illinois Department of Corrections, Adult Division was reasonable. Plaintiff Bach, on October 5, 1973, moved to have the judgment vacated “as to Count I.” Although the complaint was not divided into counts, the plaintiffs adopted the numbering system used by the District Court in its opinion, where the postal regulation was discussed under Roman number one. The motion to vacate was based on the court’s erroneous consideration of Regulation 824 before it was revised. On November 8, 1973, the District Court vacated its judgment “as to Count I,” considered plaintiffs’ complaint under revised Regulation 824, and dismissed the count for failure to state a claim upon, which relief can be granted. Only plaintiffs Bach and Pryor appealed from the District Court’s judgment.

The court did not rule on whether the action should proceed as a class action, and since the class allegations were not mentioned in the briefs and arguments here, we consider them abandoned.

I

During the pendency of this appeal, an event took place which both appellant Bach and appellees concede may moot the case as to Bach. On August 27, 1974, Bach was granted parole, and on September 12, 1974, he was released to Wisconsin authorities for delivery to Wisconsin State Prison. Since the relief sought in the complaint is prospective, no damages for past wrongs being sought, there is no longer any live controversy between Bach and the defendants.

The recent Seventh Circuit decision in Morales v. Schmidt, 489 F.2d 1335 (7th Cir. 1973), aff’d in banc, 494 F.2d 85 (7th Cir. 1974), is inapplicable. There the District Court had granted the prisoner a preliminary injunction enjoining the supervisor of prisons from preventing the prisoner from communicating with his sister-in-law. Morales v. Schmidt, 340 F.Supp. 544 (W.D.Wis.1972). On appeal, this court held the release of the prisoner on parole did not moot his request for injunctive relief for two reasons. First, the supervisor of prisons still retained legal custody of the paroled prisoner and permitted him to communicate with his sister-in-law only because he was compelled to do so by the injunction. 489 F.2d at 1336. In the present case, in contrast, Bach will receive no benefit from any relief this court might grant, since it would apply only to those still within the Illinois penal system. The second reason the Morales court relied upon, the possibility that the prisoner might violate the terms of his parole and be returned to the same prison system (id.), although present, is less compelling. The likelihood that Bach could both violate the terms of his parole and be returned to the Illinois Corrections System is slim, since he is presently incarcerated elsewhere.

We conclude that there is no longer any concrete controversy touching the legal relationship between the defendants and Bach. See North Carolina v. Rice, 404 U.S. 244, 246-248, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971); Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-241, 57 S.Ct. 461, 81 L.Ed. 617 (1937). Since Bach no longer possesses any legally cognizable interest in the outcome of this appeal, his controversy with the defendants is moot. See Powell v. McCormack, 395 U.S. 486, 495-500, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969). We, therefore, vacate the portion of the order that relates to Bach and remand his action to the District Court with instructions to dismiss it as moot. See Schoop v. Mitchell, 143 U.S.App.D.C. 405, 444 F.2d 863 (1971), cert. denied, 402 U.S. 988, 91 S.Ct. 1663, 29 L.Ed.2d 154 (1971); Todd v. Joint Apprenticeship Committee, 332 F.2d 243 (7th Cir. 1964), cert. denied, 380 U.S. 914, 85 S.Ct. 880, 13 L.Ed.2d 800 (1965); In re Chicago Rys., 168 F.2d 65 (7th Cir. 1948).

II

The only remaining plaintiff is Pryor. The Notice of Appeal and Motion for Leave to Proceed in Forma Pauperis, filed on November 26, 1974, was signed by both Bach and Pryor. Pryor, however, took no further action in the prosecution of the appeal. It appears that he relied on his fellow prisoner to insure that the appeal was properly briefed and argued. Since the record indicates that Pryor is still a prisoner at Stateville, a live and concrete controversy still exists between him and the defendants. Because Pryor’s and Bach’s interests were the same at the time this appeal was commenced and since Pryor relied on Bach to pursue the appeal, we attribute the efforts Bach made on behalf of both of them to Pryor’s case on appeal.

III

This court must determine what issues have been preserved for appeal. In so doing we are bound by Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972), reh. denied, 405 U.S. 948, 92 S.Ct. 963, 30 L.Ed.2d 819 (1972), to liberally construe the notice of appeal since it is a pro se prisoners’ petition.

The notice of appeal is specifically limited to “Count I” of the complaint, which the District Court in its memorandum opinions considered only to relate to the postage regulation, and not to the other allegations of the complaint. Appellants, both in their motion to vacate and in their notice of appeal, adopted the District Court’s terminology and limited their motion and notice to “Count I.” Furthermore, in a letter to the Chief Judge of this Circuit, dated December 28, 1973, Bach indicated that the decision to appeal only “Count I” was intentionally made because the chance that an appeal taken on the other issues would succeed was slight. The letter further asked whether the appeal could be amended to include the other issues even though the 30-day period to file a timely notice had already elapsed. F.R.App.P. 4(a).

It is urged on behalf of Pryor that the liberal construction of his notice of appeal required by Haines v. Kerner, supra, means that all issues have been preserved for appeal, or, alternatively, that the letter of December 28, 1973 should be taken to amend his notice of appeal. Neither theory is supportable. First, the rationale of Haines v. Kerner is to prevent inartfully drawn pleadings from being dismissed. 404 U.S. at 520-521, 92 S.Ct. 594. Here, the notice of appeal, modelled after the form in the Appendix to the Federal Rules of Appellate Procedure, is properly drawn and unambiguous. In conformity with Rule 3(c) of the Federal Rules of Appellate Procedure, it indicates the part of the judgment appealed from — only “Count I.” That this was a deliberate limitation and not inadvertent is clear from the acknowledgment of that fact in the letter of December 28, on which Pryor alternatively relies as an amendment to the notice of appeal.

Pryor’s alternative argument, that the letter of December 28, 1973 should be taken to amend the notice of appeal must also fail. The cases Pryor cites for this proposition are not controlling. Courts of Appeals have permitted notices of appeal to be amended where the notice contained a technical error (e. g., United States v. Calandra, 455 F.2d 750, 753 (6th Cir. 1972), rev’d on other grounds, 414 U.S. 338, 94 S.Ct. 613, 38 L.Ed.2d 561 (1974); In re Wyse, 340 F.2d 719, 725 (6th Cir. 1965)) or a misdescription (e. g., Preble v. Johnson, 275 F.2d 275, 277 (10th Cir. 1960)). Where however, as in this case, a party intentionally does not appeal a part of judgment, he cannot, after the time for filing has elapsed, change his mind and appeal from that part of the judgment. See Ruckman and Hansen, Inc. v. Contracting & Material Co., 328 F.2d 744, 749 (7th Cir. 1964); Donovan v. Esso Shipping Co., 259 F.2d 65, 68 (3rd Cir. 1958), cert. denied, 359 U.S. 907, 79 S.Ct. 583, 3 L.Ed.2d 572 (1959).

We therefore hold that only the part of the District Court’s judgment concerning the postal regulation is before us and that the issues of use of the prison library and denial of consultation between prisoners were not appealed.

IV

The gravamen of appellant’s appeal is that the prison postage regulation denies prisoners their constitutional right of access to courts and legislative bodies. When the complaint was originally filed, revised Regulation 824 was in effect. It provided free and unlimited postage for correspondence with federal and state courts and the Department of Corrections. This correspondence, as well as any to legislative officials or attorneys, is privileged, /. e., the envelope may be sealed by the prisoner and the contents are kept confidential. It, additionally, provided each prisoner with the right to send three one-ounce letters a week to any proper correspondent without having these letters read or approved by the institution. These three letters may not be cumulated from week to week, nor may the three ounces be aggregated. The regulation also provided for sending letters at the institution’s expense if the letter was a special letter and was read and approved by the institution. Finally, prisoners could send an unlimited number of letters at their own expense. The appellant contends that these regulations are too restrictive because the institution does not provide postage for serving pleadings on opposing counsel or writing letters to one’s own counsel where the correspondence exceeds one ounce and the prisoner wishes to keep it confidential or where the prisoner has already sent three one-ounce letters in a given week.

During the pendency of this case, the postage regulations of the correctional system were changed. Regulation 823, which is presently in effect, provides basically for the same mailing privileges as does former revised Regulation 824, with one exception. A prisoner may now send at institution expense without regard to the one-ounce limitation, correspondence to the Illinois Attorney General. Since the relief sought in this action is prospective only, we consider any contention that prisoners are denied access to court by their inability to correspond freely with the Illinois Attorney General to be moot under the new regulation. Cf. Rolfe v. County Board of Education, 282 F.Supp. 192, 201-202 (E.D.Tenn.1966), aff’d, 391 F.2d 77 (6th Cir. 1968). See also the cases cited in Part I, above.

Finally, we turn to the merits of claim that the postage regulation currently in effect violates Pryor’s right to access to the courts and the legislature. In reviewing the District Court’s dismissal of the complaint for failure to state a claim upon which relief can be granted, we apply the liberal construction rule to the pro se complaint as required by Haines v. Kerner, supra, 404 U.S. 519, 92 S.Ct. 594. We agree with the District Court that the regulations do not deny prisoners access to the courts or legislature and affirm that court’s determination.

Although a prisoner has the right of access to the courts and legislature, Ex parte Hull, 312 U.S. 546, 61 S.Ct. 640, 85 L.Ed. 1034 (1941); Palmigiano v. Travisono, 317 F.Supp. 776 (D.R.I.1970), which necessarily includes the right to use the mails, he does not have a right to unlimited free postage. See Thomas v. Pate, 493 F.2d 151, 161-162 (7th Cir. 1974), vacated on other grounds sub nom., Cannon v. Thomas, 419 U.S. 813, 95 S.Ct. 288, 42 L.Ed.2d 39 (1974). The regulations used by the Department of Corrections are a reasonable attempt to balance the right of prisoners to use the mails with prison budgetary considerations.

Prisoners’ rights to access to both judicial and legislative forums by means of privileged communications are protected and guaranteed by Regulation 823. The institution pays the postage for all communications to judicial forums and for three letters a week to legislative officials. It is the ancillary right of communicating with their own and opposing counsel in judicial proceedings that Pryor alleges is improperly limited by the postage regulation. Regulation 823, however, provides for privileged communications to and from attorneys. A prisoner may send unlimited communications to attorneys at his own expense. He may also send, at state expense, three one-ounce communications to attorneys each week. This is a reasonable numerical limitation. See Jones v. Wittenberg, 330 F.Supp. 707, 719 (N.D.Ohio 1971), aff’d sub nom., Jones v. Metzger, 456 F.2d 854 (6th Cir. 1972) (five free letters a week is a reasonable limitation). In addition, a prisoner can seek a special letter designation and have correspondence sent at state expense provided he permits the institution to read it and it weighs one ounce or less.

The appellant has not indicated how his access to the courts or legislature has been infringed upon or how any judicial proceeding he is involved in has been prejudiced by the regulation. The allegations of the complaint, read in obedience to the rule of Haines v. Kerner, do not state a claim upon which relief can be granted.

The dismissal of Pryor’s action for failure to state a claim upon which relief can be granted is affirmed. As to Bach, the judgment is vacated and the action is remanded to the District Court with instructions to dismiss his action as moot.

Affirmed in part. Vacated and remanded with instructions in part.


author: JAMES HUNTER, III, Circuit Judge:

text:
    UNITED STATES of America, Appellee, v. Lewis KATES, Appellant, et al.
    No. 74-1805.
    United States Court of Appeals, Third Circuit.
    Argued Dec. 10, 1974.
    Decided Jan. 28, 1975.

      Robert E. J. Curran, U. S. Atty., Thomas A. Bergstrom, Walter S. Batty, Jr., Philadelphia, Pa., for appellee.
    Donald J. Goldberg, Philadelphia, Pa., for appellant.
    Before ALDISERT, ADAMS and HUNTER, Circuit Judges.
   OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge:

This is an appeal from a conviction, under 18 U.S.C. § 371, of conspiracy to defraud the United States and an agency thereof, the Department of Housing and Urban Development (HUD). The alleged conspiracy involved a scheme to rig estimates and to inflate billings in order to destroy competitive bidding on moving contracts and to overcharge the Philadelphia Redevelopment Authority (RDA) for the cost of moving displaced businesses. Under contracts with HUD, RDA was reimbursed by the federal government in whole or in substantial part for all the payments it was required to make for these moving costs.

The procedure for awarding contracts to movers and the outline of the alleged conspiracy are as follows: When the RDA condemned a particular area, it was obligated to reimburse condemned businesses for the cost of relocating. In order to facilitate competitive bidding for the moving contracts, the RDA had to require the condemnee to obtain and submit to it estimates from three separate movers of the cost of the move. In addition, the RDA had the option of soliciting an estimate itself from a fourth mover, as a check on the three solicited by the condemnee. The lowest estimate submitted would constitute a ceiling on the amount of reimbursement that the RDA was to pay, and the mover could recover only his actual costs if they turned out to be less than estimated. RDA inspectors were supposed to make periodic on-site inspections to determine that the mover' was in fact using the same number of men and trucks as he claimed.

When one of the conspiring movers desired a particular job, he would determine what his own estimate would be and would then contact two other movers in the conspiracy and ask them to submit “courtesy bids” higher than his so that he would be the low bidder. When he learned that RDA would solicit a fourth bid, he would ask that mover to submit an inflated bid also. Often, he would pay a cash bribe, equal to ten percent of the estimated cost, to Edward Cavanaugh, RDA’s Deputy Director of Commercial Relocation, so that the latter would select one of the conspirators as the fourth bidder. The mover who obtained this particular contract would reciprocate by submitting “courtesy bids” on contracts sought by other conspiring movers. He would also make further cash payments of five percent each to two RDA inspectors, Jack Si-mons and Leland Lamar, so that he could inflate his costs to bring them up to the estimate.

The evidence relating to Kates, an attorney for several displaced businesses, shows that he was at most only on the fringes of this conspiracy. While the conspiring movers rigged bids and padded estimates on countless numbers of moves, Kates was alleged to be involved with respect to about ten moves, and only when one of his clients was a con-demnee. Furthermore, the evidence produced at trial, if believed, demonstrated only that appellant exacted ten percent payments from the movers in return for giving them his permission or approval to perform the moves of some of his clients. There was no testimony that Kates had any dealings with Cavanaugh, Simons or Lamar, that he was aware of the payoffs to them, that he was aware that the movers were inflating their billings to obtain higher profits themselves or that he was involved in any bid-rigging or cost inflation.

Nevertheless, at his second trial, the jury returned a verdict of guilty, and Kates was sentenced to imprisonment for one year and one day and fined $10,-000. Because we believe the evidence insufficient to sustain a verdict that Kates was a participant in the conspiracy described above, we reverse.

We acknowledge that a defendant challenging the sufficiency of the evidence in a conspiracy case has a heavy burden. Since the jury has returned a verdict of guilty, we are required to view the evidence in the light most favorable to the prosecution. Where the Government has established the existence of a conspiracy, as it has done here, “slight evidence may be sufficient to connect a defendant with it.” Furthermore, a formal agreement need not be established; rather, a defendant’s involvement in the conspiracy may be inferred from circumstantial evidence. The Government need not show that the defendant participated in every transaction or even that he knew the identities of his alleged conspirators or the precise role which they played.

It is imperative, however, that we keep in mind the essential nature of what a conspiracy is in general and what this particular conspiracy was proven to be. It is well established that the “gist” of a conspiracy is an agreement. However slight or circumstantial the evidence may be, it must, in order to be sufficient to warrant affirmance, tend to prove that the appellant entered into some form of agreement, formal or informal, with his alleged co-conspirators. Similarly, we have stated that the essence of a conspiracy is a “unity of purpose” or “common design.” We must also find in this case that Kates knowingly entered into the conspiracy and that he had the specific intent to defraud the Government. As the Court of Appeals for the Ninth Circuit stated in reversing a conspiracy conviction under this same statute, “we must be ever mindful that the requisite mental state in a prosecution for fraud is a specific intent to defraud and not merely knowledge of shadowy dealings.” United States v. Piepgrass, 425 F.2d 194, 199 (9th Cir., 1970).

In our view, the evidence in this case tends only to establish that Kates was involved in kickback activities on his own, in whieh he demanded and received cash payments from heads of moving companies, all private individuals. His scheme operated independently of the conspiracy proved at trial, which was essentially a plan to frustrate the system established by the Government to ensure competitive bidding and to keep costs down. The conspiring movers acted with the specific intent to collect more money from the Government than that to whieh they were entitled and to make a mockery of the competitive bidding principle. The RDA officials played an integral role in this scheme by allowing the movers to overcharge the Government in return for cash bribes. Kates’ activities, however, as disclosed by the evidence elicited at trial, bore no logical relationship to this conspiracy and were not necessary to further it. He could have insisted on and received the same “commissions” completely irrespective of whether the movers rigged their bids or inflated their bills for their own profit. The evidence shows that he sought payments from private movers, not that he sought to obtain extra funds from the Government, and there is no evidence or any basis for inferring that Kates had any interest in the success of the conspiracy between the movers and the RDA officials. We therefore do not believe that the evidence establishes that Kates and the movers had a “unity of purpose” or “common design” or that Kates had the specific intent to defraud the Government.

The Government points to several facts adduced at trial which it claims provides circumstantial evidence of Kates’ involvement in the conspiracy, but we believe that they are insufficient as a matter of law. The Government first notes that several movers testified that they paid Kates a ten percent “kickback fee” and that this pattern of activity was “identical” to that involving the RDA officials. However, Kates’ receipt of ten percent cash payments was not “identical,” as the prosecution argues, to the actions of Cavanaugh, Simons and Lamar. With respect to the RDA officials, the relationship between their receipt of the payments and the conspiratorial actions of the movers is obvious— those payments were necessary to induce the RDA officials to violate their responsibilities so that the rigging of bids and the inflation of billings would be possible. The payments to Kates, which by the movers’ own testimony were at most designed to obtain moving contracts with Kates’ clients, were for an entirely different purpose and bore no logical relationship to the workings of the conspiracy. Given this fundamentally different purpose, the mere similarity in the amount and manner of payment is not sufficient to show that Kates and the others had a “common design” or that Kates, like the others, had the specific intent to defraud the Government.

For the same reason, the testimony by several movers that they could not get a job with one of Kates’ clients without first paying him is not evidence that Kates conspired with the movers and the RDA officials to defraud the Government. Rather than being in furtherance of that conspiracy, his activities, as depicted by the evidence, are at least independent of it and perhaps even an obstruction to it. Similarly, the fact that Kates insisted that the movers pay him in cash, while accepting payments by check from his clients, does not tend to show that he was involved in this particular conspiracy to defraud the Government. That Kates may have wanted to conceal his transactions may tend to show that he was involved in an activity of dubious propriety, but not necessarily that he has part of the conspiracy charged. In fact, the only evidence in the record pertaining to Kates’ motivation for insisting on cash was testimony by Jay Borowsky to the effect that Kates wanted cash so that he could avoid income tax payments (N.T. 233), and we note that this case does not involve alleged income tax evasion.

The Government also claims that Kates was well aware of the conspiracy and argues that his knowledge is evidence of his participation in it. As we stated earlier, however, mere “knowledge of shadowy dealings” is insufficient to infer that a defendant was part of the conspiracy. Piepgrass, supra, 425 F.2d at 199. While such knowledge may have some probative value by giving meaning to seemingly innocuous acts by the defendant, the evidence introduced at trial pertaining to Kates’ knowledge of the workings of the conspiracy was too sketchy to warrant an inference by the jury that he shared its purpose and was a part of it. Furthermore, we do not see any evidence of knowledge on Kates’ part that his activities furthered a conspiracy to defraud the Government.

As noted earlier, there is no evidence that Kates had any dealings with Cava-naugh, Simons or Lamar or knew of their respective activities, that he was aware of the movers’ payoffs to them, or that he was aware that the movers were inflating their billings. Similarly, while several movers testified that they raised their estimates and padded their bills in part to cover the cost of the payments to Kates, there is no testimony that Kates was aware that they were doing so and that the Government was being defrauded thereby. None of the immunized movers testifying for the Government ever stated that he told Kates about the conspiracy or any segment thereof, and all the conversations between Kates and the movers related solely to Kates’ insistence on the ten percent commission.

One mover, Jay Borowsky, testified that Kates was aware of the bid-rigging. However, Borowsky did not explain the basis on which he knew of Kates’ knowledge of the bid-rigging, and he did not draw any connection between Kates’ knowledge of it and his insistence on ten percent commissions. Also, contrary to the assertion by the Government, there is no testimony in the record that Kates was aware that the fourth or “check” bid was being abused.

The Government also argues that Kates was well aware that the movers paid bribes to the RDA officials, but we find no support for this in the record. The Government relies in part on the statement by Jack Albert, one of the movers, that Kates told him, after he had failed to obtain a moving contract, that Albert had not held “good enough cards at the Redevelopment Authority.” This one ambiguous and unexplained statement is not sufficient evidence on which a jury could logically have decided that Kates was “well aware” that the movers were bribing RDA officials, and it certainly is an insufficient basis for concluding that Kates was part of the conspiracy to defraud. Nor is the other statement of Albert on which the Government relies sufficient to sustain a conviction. In that statement, Kates allegedly told Albert that in the future he would have to pay him (Kates) whether he got the move or not. Since that statement suggests that Kates was demanding payments on his own and was operating independently of the conspiracy to defraud, we do not believe that a jury could logically infer from it that Kates was part of the conspiracy charged.

In sum, we believe that the evidence is insufficient to support a jury finding that Kates entered into even an informal agreement with the movers and the RDA officials to defraud the Government. Far from showing that he and the others shared the “common design” of defrauding the Government, the evidence tends only to show that Kates operated independently of the conspiracy by insisting on payment from private movers for the right to move his clients, also private firms. His actions bore no necessary relationship to the conspiracy established at trial, and there was a paucity of evidence regarding Kates’ knowledge of the workings of the conspiracy from which his participation in it might possibly have been inferred.

The judgment of the district court will be reversed.

      . This statute provides:
      “If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.”

      . The first trial ended in a mistrial when the jury was unable to agree on a verdict with respect to Kates. The first trial did result in guilty verdicts against co-defendants Cava-naugh, Simons, Lamar, and Stanley Salkow-itz, head of a moving company.

      . Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v. DeCavalcante, 440 F.2d 1264, 1273 (3d Cir., 1971).

      . DeCavalcante, supra at 1273; United States v. Cohen, 197 F.2d 26, 29 (3d Cir., 1954).

      . Glasser, supra, 315 U.S. at 80, 62 S.Ct. 457; United States v. Cudia, 346 F.2d 227, 229 — 230 (7th Cir., 1965).

      . United States v. Hutul, 416 F.2d 607, 619 (7th Cir., 1969).

      . United States v. Andolschek, 142 F.2d 503, 507 (2nd Cir., 1944).

      . Sears v. United States, 343 F.2d 139, 141 (5th Cir., 1965).

      . United States v. Falcone, 311 U.S. 205, 210, 61 S.Ct. 204, 85 L.Ed. 128 (1940).

      . DeCavalcante, supra, 440 F.2d at 1275; United States v. American Radiator & Standard Sanitary Corp., 433 F.2d 174, 182 (3d Cir., 1970); United States v. Lester, 282 F.2d 750, 753 (3d Cir., 1960), cert. denied, 364 U.S. 937, 81 S.Ct. 385, 5 L.Ed.2d 368 (1961). See also American Cyanamid Co. v. Sharff, 309 F.2d 790, 797 (3d Cir., 1962); United States v. Cudia, 346 F.2d 227, 230 (7th Cir., 1965).

      . Cf. United States v. Cangiano, 491 F.2d 906, 909 (2d Cir., 1974); United States v. Crimmins, 123 F.2d 271, 273 (2d Cir., 1941).

      . We express no opinion whether his activities constituted a violation of state or some other federal law. Our role as a reviewing court, in the posture in which this appeal is presented, is to determine whether there was sufficient evidence to sustain a conviction under the specific offense for which he was charged, i. e., conspiring to defraud the Government.

      . We note that a couple of the witnesses, Sydney Benjamin and John Ammazzalorso, testified that they paid Kates the money without specifically being asked for it, because they wanted to do work for Kates’ clients.


author: SOLOMON, District Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Francis Leo CAPPAERT et al., Defendants-Appellants, State of Nevada ex rel. Roland D. Westergard, State Engineer, Intervenor. UNITED STATES of America, Plaintiff-Appellee, v. Francis Leo CAPPAERT et al., Defendants, State of Nevada ex rel. Roland D. Westergard, State Engineer, Intervenor-Appellant.
    Nos. 74-1690, 74-2186.
    United States Court of Appeals, Ninth Circuit.
    Dec. 4, 1974.

      Samuel S. Lionel, Lionel, Sawyer, Collins & Wartman, Las Vegas, Nev., for defendants-appellants.
    V. DeVoe Heaton, U. S. Atty., District of Nevada, Las Vegas, Nev., for plaintiff-appellee.
    Ralph E. Hunsaker, Phoenix, Ariz., for amicus curiae, Arizona Water Commission.
    George V. Allison and Peter D. Laxalt, Special Deputy Atty. Gen., Carson City, Nev., for State of Nevada.
    Before CARTER and CHOY, Circuit Judges, and SOLOMON, District Judge.

       The Honorable Gus J. Solomon, Senior United States District Judge for the District of Oregon, sitting by designation.

   OPINION

SOLOMON, District Judge:

Pupfish (cyprinodon diabolis) live in Devil’s Hole, in the Death Valley National Monument in Nevada. They are a unique and endangered species. In an action filed by the United States (Government) to protect these fish, the district court limited the amount of water which the owners of a nearby cattle ranch may pump. The Cappaerts, owners of the ranch, and the State of Nevada, which intervened on the side of the Cappaerts, appeal.

The Cappaerts’ ranch consists of 12,000 acres, of which 4,000 acres are in cultivation. The ranch, which represents an investment of more than 7 million dollars, has an annual payroll of more than $340,000 and employs more than 80 people. Between 1700 and 1800 head of cattle are fed on the ranch.

The Cappaerts drilled wells and pump groundwater on their land for irrigation. Devil’s Hole, a part of the Death Valley National Monument, is located within three miles of several wells on the ranch. Devil’s Hole consists of a 40-acre tract in which there is a deep limestone cavern. At the bottom of this cavern there is a pool about 65 feet long, 10 feet wide, and more than 200 feet deep. There are steep rock walls on three sides of the pool, but on the fourth side there is a sloping rock shelf on which algae grows. This pool is part of the 4,500 square mile groundwater system from which the Cappaerts pump their water.

The Devil’s Hole pupfish live in this pool. These pupfish evolved after the Death Valley Lake System dried up, isolating this species of fish from its ancestral stock. The pupfish population varies from 200 in the winter to 800 after spawning in the spring and depends for its survival on the sloping rock shelf which provides food and a spawning ground. The Devil’s Hole pupfish are less than one inch long and do not exist anywhere else in the world. They have been designated an endangered species under the Endangered Species Act of 1973, 16 U.S.C. § 1533 (1974), 50 C.F.R. § 17.

The water level in the pool is measured from a copper washer which the U. S. Geological Survey placed on the shelf in 1962. Between 1962 and 1968 the average water level was 1.2 feet below the marker. In 1968, after the Cappaerts began to pump, the summer water level steadily decreased: in 1970 to 3.17 feet below the marker; in 1971 to 3.48 feet and in 1972 to 3.9 feet. At these water levels large areas of the critical rock shelf are exposed. At 3.6 feet below the marker, 42 per cent of the shelf is exposed, and at 3.7 feet the exposure increases to 55 per cent. The shelf exposure decreases the algae production and limits the spawning area which in turn reduces the Devil’s Hole pupfish’s chance to survive.

On June 5, 1973, following a number of hearings, the court granted the Government’s motion for a preliminary injunction. This injunction required that pumping on the Cappaerts’ ranch be limited so that the mean water level of 3.0 feet below the copper washer be attained within 90 days. The court also appointed a special master to control the pumping of other wells in order to reach and maintain this water level.

Among the extensive findings entered by the District Court were the following:

“9. Through the Presidential Proclamation of January 17, 1952, and its publication in the Federal Register on January 23, 1952 (17 Fed.Reg. 691), the unappropriated waters in, on, under and appurtenant to Devil’s Hole were withdrawn from private appropriation as against the United States and reserved to the extent necessary for the requirements and purposes of the said reservation.”
“The purposes of the reservation of Devil’s Hole as part of Death Valley National Monument includes the preservation of the pool of water and the preservation of the Devil’s Hole pup-fish (Cyprinodon diabolis) which live therein.”
“14. The natural rock shelf and rubble thereon on which the Devil’s Hole pupfish depend for feeding, reproduction and, hence, their survival, is nearly 100% covered with water when there is a mean water level of 3.0 feet below the copper washer.”
“16. The defendants’ pumping of groundwater from wells known as Nos. 1, 2, 3, 4, 5 and 6, and 16 and 17, has drawn water from the springs and underground sources which comprise the supply for Devil’s Hole. Because the defendants’ wells and Devil’s Hole are hydraulically connected, defendants’ pumping has caused the water level in Devil’s Hole to drop.”
“24. In order to maintain a viable continuous population of Devil’s Hole pupfish, the water level in Devil’s Hole must be maintained above the natural rock shelf and the rubble thereon, which is a minimum of not less than 3.0 feet below the copper washer.”
“25. If the water level at Devil’s Hole drops below 3.0 feet below the copper washer, the survival of the Devil’s Hole pupfish will be threatened, that is, the time of their becoming extinct in the natural evolutionary order will be accelerated.”

Both the Cappaerts and the State of Nevada appealed. The Cappaerts also filed motions to modify, pending appeal, the preliminary injunction to permit them to pump down to 3.7 feet below the copper washer. Pending appeal, this Court permitted the Cappaerts to pump so long as the water level did not go lower than 3.3 feet below the copper washer.

On January 17, 1952, President Truman, by Presidential Proclamation 2961, withdrew Devil’s Hole from the public domain and made it part of the Death Valley National Monument. U.S.Code Cong. & Adm.News, 82d Cong., 2d Sess., Vol. 1 at p. 964 (1952); 17 Fed.Reg. 691. The Proclamation was issued under the Act for the Preservation of American Antiquities, 16 U.S.C. § 431 (1974), which authorizes the President to declare “ . . . objects of historic or scientific interest that are situated upon the lands owned or controlled by the Government of the United States to be national monuments . . . .”

The Government contends that the Proclamation, with its express reservation of the Devil’s Hole pool and the surrounding land from the public domain, contains an implied reservation of enough groundwater to assure preservation of the pupfish in that pool.

The implied reservation of water doctrine originated in Winters v. United States, 207 U.S. 564, 28 S.Ct. 207, 52 L.Ed. 340 (1908). The Court in Winters held that private landowners could not impair Indian rights in a river which formed one boundary of a reservation, even though the Congressional grant of the land to the Indians had not mentioned water rights. The land reserved for the Indians was arid. The Court held that a grant of water rights must be implied because Congress intended by the grant of land to encourage the Indians to become farmers.

In Arizona v. California, 373 U.S. 546, 601, 83 S.Ct. 1468, 10 L.Ed.2d 542 (1963), the Supreme Court extended the reservation doctrine of Winters to include waters reserved for federal lands which had been set aside for recreation, wildlife, or forests. This was reaffirmed and extended in United States v. District Court for Eagle County, 401 U.S. 520, 522-523, 91 S.Ct. 998, 1001 L.Ed.2d 278 (1971). There the Court held that the Federal Government’s authority “to reserve waters for the use and benefit of federally reserved lands . . . ” extended to “any federal enclave.”

The Cappaerts contend, however, that the doctrine of implied reservation of water does not apply to groundwater, but only to surface water. Although these Supreme Court cases involved only surface water rights, the reservation of water doctrine is not so limited.

Two cases in the Ninth Circuit approved the application of the doctrine of implied reservation of groundwater when water was needed to accomplish the purpose of the reservation. Nevada ex rel. Shamberger v. United States, 165 F.Supp. 600 (D.Nev.1958), aff’d on other grounds, 279 F.2d 699 (9th Cir. 1960); Tweedy v. Texas Co., 286 F.Supp. 383 (D.Mont.1968).

In our view the United States may reserve not only surface water, but also underground water.

The Cappaerts assert that the 1952 Presidential Proclamation was intended to preserve only the Devil’s Hole pool with its unique limestone formation and not to protect the pupfish, and that therefore there was no implied reservation of groundwater. We reject that argument.

The Proclamation added the Devil’s Hole pool to the Death Valley National Monument after reciting:

“WHEREAS the geologic evidence that this subterranean pool is an integral part of the hydrographic history of the Death Valley region is further confirmed by the presence in this pool of a peculiar race of desert fish, and zoologists have demonstrated that this race of fish, which is found nowhere else in the world, evolved only after the gradual drying up of the Death Valley Lake System isolated this fish population from the original ancestral stock that in Pleistocene times was common to the entire region; and
“WHEREAS the said pool is of such outstanding scientific importance that it should be given special protection >>

The fundamental purpose of the reservation of the Devil’s Hole pool was to assure that the pool would not suffer changes from its condition at the time the Proclamation was issued in 1952; that condition included the pool’s unique inhabitants, the pupfish. The Proclamation referred to the significant contribution of the pupfish to the scientific importance of the Devil’s Hole pool; it implicitly reserved enough groundwater to assure preservation of the pupfish. This conclusion is reinforced by the National Park Service Act, 16 U.S.C. § 1 (1974), which states that “the fundamental purpose” of all national parks and monuments is “ . . . to conserve the scenery . . . and the wild life therein ... by such means as will leave them unimpaired for the enjoyment of future generations.”

The Cappaerts contend that under Nevada law they have ownership rights to the underground water which can only be taken from them by eminent domain. They assert that the 1952 Presidential Proclamation attempted to reserve underground water which belonged to their predecessor in interest.

In 1890 and 1892, the State of Nevada by selection acquired fee simple title from the United States Government to the land now owned by the Cappaerts. The Desert Land Act of 1877, 43 U.S.C. § 321 (1964), as construed in California-Oregon Power Co. v. Beaver Portland Cement Co., 295 U.S. 142, 162, 55 S.Ct. 725, 79 L.Ed. 1356 (1935), provides that a transfer of federal land out of the public domain after the date of the Act would not pass title to any unappropriated appurtenant water; water rights would be determined under the law of the state in which the land was located. Because water rights were severed from title in 1877, Nevada got no water rights in 1890 and 1892 when it acquired title to the Cappaerts’ land. Therefore, the Cappaerts, as successors in interest, possess no water rights unless they or a predecessor acquired such rights under Nevada law.

The Cappaerts argue that Nevada has adopted the old common law doctrine, established in Acton v. Blundell, 12 M. & W. 324 (Exch.Chamber 1843), that a landowner has unlimited dominion over all waters beneath his property. This doctrine, the Cappaerts contend, establishes their water rights as a matter of Nevada law.

The Supreme Court of Nevada in Jones v. Adams, 19 Nev. 78, 6 P. 442 (1885), rejected that common law doctrine. The court adopted and applied the theory of prior appropriation as the basis for determining water rights. The doctrine of prior appropriation was reaffirmed in Reno Smelting, Milling & Reduction Works v. C. C. Stevenson, 20 Nev. 269, 282, 21 P. 317 (1889).

In 1913 and 1939, Nevada enacted statutes providing that, subject to existing rights, all waters in Nevada belong to the public and may be appropriated as provided by statute, and not otherwise. Because no one had previously appropriated water rights through beneficial use, there were no “existing rights” to water on the Cappaerts’ land in 1939. Thereafter, water rights could only be acquired, as the statutes provided, by obtaining a permit from the state. N.R.S. 533.325.

The constitutionality of the basic principles of the Nevada Water Code was upheld in Humboldt Lovelock Irrigation Light & Power Co. v. Smith, 25 F.Supp. 571 (D.Nev.1938). Such statutes which abolished common law water rights when the landowner had not made actual beneficial use of the water were held to be a valid exercise of the police power. California-Oregon Power Co. v. Beaver Portland Cement Co., 73 F.2d 555 (9th Cir. 1934), aff’d on other grounds, 295 U.S. 142, 55 S.Ct. 725, 79 L.Ed. 1356 (1935).

Here neither the Cappaerts nor their predecessors made actual beneficial use of water until 1968. Even if they had some common law claim, they had not established a vested property right in the water based on prior appropriations before Nevada declared that groundwater belonged to the public.

Finally, the Cappaerts contend the Government is estopped from enjoining them from the unrestricted use of their wells located more than one mile from Devil’s Hole. In 1969, the Cappaerts and the Government entered into a land exchange. The Cappaerts received land within one mile of Devil’s Hole under a patent granting them “all rights, privileges, immunities and appurtenances subject to any vested and accrued water rights for mining, agriculture, manufacturing or other purposes . .” The Cappaerts have drilled wells and pumped water on this land.

The Cappaerts admit they had no oral understanding with the Government agents about the water pumping, and they further admit that these agents made no oral representation. The Cappaerts argue, however, that the Government knew at the time of the land exchange that water wells would be drilled, but that the Government specified only that no wells should be drilled within one mile of Devil’s Hole. The Cappaerts say that they spent large sums of money in drilling the wells and in changing their farming operations, relying on their justifiable belief that they could drill wells and pump water without limitation.

This contention lacks merit. Estoppel cannot be invoked against the Government under the facts of this case. The statement of Mr. Justice Black in United States v. California, 332 U.S. 19, 40, 67 S.Ct. 1658, 1669, 91 L.Ed. 1889 (1947), is particularly appropriate here.

“The Government, which holds its interests here as elsewhere in trust for all the people, is not to be deprived of those interests by the ordinary court rules designed particularly for private disputes over individually owned pieces of property; and officers who have no authority at all to dispose of Government property cannot by their conduct cause the Government to lose its valuable rights by their acquiescence, lach-es, or failure to act.”

The rule that estoppel may not be invoked against the Government in cases involving public lands is set out in the excellent opinion of Judge Barnes in Beaver v. United States, 350 F.2d 4 (9th Cir. 1965).

Even if the doctrine of estoppel were available against the Government, it could not be applied here because there were no misleading statements or conduct that would give rise to an estoppel between private parties. Here the Government is not asking the Cappaerts to stop pumping but only to limit pumping to the level at which the pupfish can survive.

The State of Nevada, as intervenor, has asserted additional grounds for reversal.

Nevada contends that the federal government is bound by state water laws and that the rights which the Government asserts here were not acquired in conformity with state law. Under the Nevada law in effect in 1952, water rights could only be perfected by the issuance of a permit by the State Engineer.

The Government asserts that its rights were established by the implied reservation in the Presidential Proclamation of 1952 and that the United States is not bound by state water laws when it reserves land from the public domain. We agree.

The Desert Land Act of 1877, supra, severed soil and water rights on “public lands” and provided that such water rights were to be acquired in the manner provided by the law of the state of location. California-Oregon Power Co. v. Beaver Cement Co., supra at 162, 55 S.Ct. 725. But state water laws do not apply to “reservations” — lands withdrawn from the public domain. Federal Power Commission v. Oregon, 349 U.S. 435, 444, 448, 75 S.Ct. 832, 99 L.Ed. 1215 (1955).

We hold that the Proclamation of 1952, which withdrew the Devil’s Hole pool from the public domain, implicitly reserved the waters necessary to sustain the pupfish and legally established the Government’s rights as against any future appropriation.

Nevada next contends that the District Court did not have jurisdiction to adjudicate the water rights in this case. Nevada argues that the Government must exhaust state procedures for determining water rights before going to a federal court. There is no merit in this contention.

Nevada relies on the so-called McCarran Amendment, 43 U.S.C. § 666 (1964). That statute waives the sovereign immunity of the United States in certain cases involving adjudication of water rights. The waiver enables states to adjudicate competing claims for water rights in certain cases in which the United States is one of the claimants.

The McCarran Amendment was enacted to waive sovereign immunity when the United States is a defendant in a state or federal action so that water rights may be fairly and fully adjudicated. Congress did not intend to limit the forums available to the United States as a plaintiff by narrowing federal court jurisdiction. In United States v. Nevada et al., 412 U.S. 534, 538, 93 S.Ct. 2763, 37 L.Ed.2d 132 (1973), the Supreme Court noted that the District Court had jurisdiction to hear a case brought by the United States involving competing claims to water rights.

Nevada also contends that even if the District Court had concurrent jurisdiction with the state courts, the doctrine of res judicata bars the Government from collaterally attacking the decision of a state administrative body — here the State Engineer.

In April, 1970, the Cappaerts applied to the State Engineer for permits to use groundwater from several wells. The United States was not a party to these proceedings, nor was it ever served with process. Nevertheless, employees of the National Park Service learned of the applications through a public notice. A field solicitor for the National Park Service protested the applications because extracting groundwater would lower the water level in the Devil’s Hole pool and might endanger the pupfish.

At the hearing held before the State Engineer in December, 1970, the solicitor explained the geological and hydrological bases for the Government’s concern. He asked that the Cappaerts’ applications be denied or postponed pending further scientific studies. The solicitor did not raise the jurisdictional issue or any of the legal issues which the United States had the right to assert.

In August, 1971, the Government filed this action in District Court to enjoin the Cappaerts from infringing on the Government’s water rights at Devil’s Hole. Nevada contends that the State Engineer’s decision is res judicata and this action is therefore barred. We disagree.

The State Engineer did not have the authority to adjudicate the water rights of the United States because the United States did not waive its sovereign immunity.

Nevada’s reliance here on the McCar-ran Amendment is misplaced. The McCarran Amendment was enacted to waive the sovereign immunity of the United States in cases in which the presence of the United States as a party was necessary to the full and fair adjudication of competing claims to water rights. The Supreme Court in Dugan v. Rank, 372 U.S. 609, 618, 83 S.Ct. 999, 1005, 10 L.Ed.2d 15 (1963), interpreted that statute to waive sovereign immunity only in “ . . .a case involving a general adjudication of ‘all the rights of various owners on a given stream,’ . . . .” See State of California v. Rank, 293 F.2d 340, 346 (9th Cir. 1961). The Senate Report on the bill which became the McCarran Amendment shows the type of adjudication which was contemplated by Congress. The Report contained the following excerpt from Pacific Live Stock Co. v. Lewis, 241 U.S. 440, 447, 36 S.Ct. 637, 641, 60 L.Ed. 1084 (1916):

“ . . . All claimants are required to appear and prove their claims; no one can refuse without forfeiting his claim, and all have the same relation to the proceeding. It is intended to be universal and to result in a complete ascertainment of all existing rights . . . .” S.Rep.No.755, 82d Cong., 1st Sess. 5 (1951).

The proceeding before the State Engineer of Nevada was not a “general adjudication”. The United States was not required to appear and prove its water rights to prevent forfeiture of its claims; the water rights of the United States were not in issue. The United States appeared only to explain the factual basis on which it opposed the Cappaerts’ applications.

Furthermore, the McCarran Amendment waives sovereign immunity only in cases in which the United States is a defendant and has been served with process. The United States was neither a defendant nor served with process in the proceedings before the State Engineer.

Even if the United States had waived its sovereign immunity, we are not bound to give res judicata effect to the decision of an administrative body in a case of this kind. As the court said in Grose v. Cohen, 406 F.2d 823, 824 (4th Cir. 1969):

“Res judicata of administrative decisions is not encrusted with the rigid finality that characterizes the precept in judicial proceedings. . . . Application of the doctrine often serves a useful purpose in preventing relitigation of issues administratively determined, . . . but practical reasons may exist for refusing to apply it, e. g., United States v. Stone & Downer Co., 274 U.S. 225, [47 S.Ct. 616, 71 L.Ed. 1013] (1927). And in any event, when traditional concepts of res judi-cata do not work well, they should be relaxed or qualified to prevent injustice. 2 Davis, Administrative Law, § 18.03 (1958).”

Although the State Engineer may have expertise in the administration of Nevada’s water laws, there is no evidence that he is qualified to consider or decide the complex issues of federal law involved in this case. The State Engineer’s decision is not entitled to res judi-cata effect in this action.

We affirm the decision of the District Court. The District Court held the water level should be maintained at 3.0 feet below the copper washer in order to preserve the pupfish in the Devil’s Hole pool. Pending this appeal, we permitted the Cappaerts to pump as long as the water level did not go below 3.3 feet. We remand this case to the District Court to determine whether, on the facts developed during the pendency of this appeal, the lower water level may be adequate to preserve the pupfish.

We direct the District Court to retain continuing jurisdiction so that it may promptly act if a change in water level is required to preserve and protect the pupfish in the Devil’s Hole pool.

Affirmed and remanded.

      . In this opinion “groundwater” will be used synonymously with “underground water”.

      . The Cappaerts pump water only from March to October. During the rest of the year the water level is higher.

      . It was established before Winters that the Federal Government has the power to reserve waters which are needed for federal lands and to exempt those waters from appropriation under states laws. United States v. The Rio Grande Dam & Irrigation Co., 174 U.S. 690, 703, 706, 19 S.Ct. 770, 43 L.Ed. 1136 (1899); United States v. Winans, 198 U.S. 371, 383, 25 S.Ct. 662, 49 L.Ed. 1089 (1905). In those cases, however, the Government had expressly dealt with water rights.

      . It is interesting that Nevada administers its water laws so as to provide that rights to groundwater can be perfected just as readily as rights to surface water.

      . Under the doctrine of prior appropriation, the first person to possess by beneficial use water for domestic purposes, mining, agriculture, or manufacturing has vested and accrued rights to the water as against any later appropriators. The central principle of the doctrine is beneficial use of water, not land ownership. Atchison v. Peterson, 87 U.S. 507, 22 L.Ed. 414 (1874); Powell, Real Property, Vol. 5, U 734, page 442.

      . N.R.S. 533.030. Appropriation for beneficial use.
      “1. Subject to existing rights, all such water may be appropriated for beneficial use as provided in this chapter and not otherwise.”

      . N.R.S. 534.020.
      “All underground waters within the boundaries of the state belong to the public, and, subject to all existing rights to the use thereof, are subject to appropriation for beneficial use only under the laws of this state relating to the appropriation and use of water and not otherwise.”

      . “Suits for adjudication of water rights— Joinder of United States as defendant; costs
      (a) Consent is given to join the United States as a defendant in any suit (1) for the adjudication of rights to the use of water of a river system or other source, or (2) for the administration of such rights, where it appears that the United States is the owner of or is in the process of acquiring water rights by appropriation under State law, by purchase, by exchange, or otherwise, and the United States is a necessary party to such suit. The United States, when a party to any such suit, shall (1) be deemed to have waived any right to plead that the State laws are inapplicable or that the United States is not amenable thereto by reason of its sovereignty, and (2) shall be subject to the judgments, orders, and decrees of the court having jurisdiction, and may obtain review thereof, in the same manner and to the same extent as a private individual under like circumstances: Provided, That no judgment for costs shall be entered against the United States in any such suit.
      Service of summons
      (b) Summons or other process in any such suit shall be served upon the Attorney General or his designated representative.”

      . Sections 534.050 and 534.080 of the Nevada Revised Statutes both provide that rights to use groundwater must be obtained in compliance with Chapter 533. That chapter provides that a person who wishes to appropriate public water for his use must file an application with the State Engineer and must then publish notice of the application. N.R.S. 533.325 and 533.360. Interested persons may protest the application, and the application and protest may be considered at a hearing by the State Engineer. N.R.S. 533.365. The application may be refused if to grant it would be “detrimental to the public welfare”. N.R.S. 533.370.

      . See Footnote 8, supra.