author: EDWARDS, Circuit Judge.

text:
    George J. HOGAN and Marian M. Hogan, Plaintiff-Appellants, v. UNITED STATES of America, Defendant-Appellee.
    No. 74-1379.
    United States Court of Appeals, Sixth Circuit.
    March 18, 1975.
    Patrick J. Regan, Regan, Sargent, Klenda, McGannon, Paup & Gliekman, James J. McGannon, Wichita, Kan., for appellant.
    Ralph B. Guy, Jr., U. S. Atty., Detroit, Mich., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Chief, Appellate Section, Ernest J. Brown, Jonathan S. Cohen, Donald H. Olson, Tax Div., Dept. of Justice, Washington, D. C., for appel-lee.
    Before EDWARDS, CELEBREZZE and LIVELY, Circuit Judges.
   EDWARDS, Circuit Judge.

This is an appeal from dismissal of a suit for refund of federal taxes paid for the tax year 1968 by a federal Civil Service employee. He seeks return of taxes he was required to pay upon the percentage of his salary (6.5%) which was deducted in the year in question and credited in his name to the Civil Service Retirement and Disability Fund, 5 U.S.C. § 8334(a) and § 8348 (1970).

The statute provides that the federal employee “is deemed to consent and agree to these deductions from basic pay.” 5 U.S.C. § 8334(b) (1970). It also provides for an equal amount to be contributed by the government to the Civil Service Retirement Fund “from the appropriation or fund used to pay the employee.” 5 U.S.C. § 8334(a) (1970). These matching funds are not, however, included in the employee’s gross income for purposes of income tax.

This case was heard in the District Court on a stipulation of facts which is a part of our appellate record which we incorporate by reference, quoting herein only directly pertinent paragraphs as follows:

9. Under Section 8334(a) of the Civil Service Retirement Act as it was in force during the year in suit, 6V percent of the basic pay of an employee covered by the Act .was required to be withheld from his payroll cheek and deposited with the Treasury of the United States to the credit of the “Civil Service Retirement and Disability Fund” (hereinafter Fund); and an equal amount was deposited in the Treasury of the United States to the credit of the Fund by the Government agency which employed him. Said amounts withheld from the employee’s basic pay and deposited to the credit of the Fund were entered on the individual employee’s retirement record pursuant to Section 8334(f) of the Civil Service Retirement Act. Said amounts deposited by the Government agency employing the individual employees were not credited to any individual employee’s retirement record. Pursuant to Section 8334(b) of the Civil Service Retirement Act, each employee is deemed to consent and agree to the above-described deductions from basic pay. Said deductions shall hereafter be referred to in this stipulation as the employee’s “Section 8334 deduction.” During 1968 approximately 2,650,000 persons had such Section 8334 deductions under the Act.

10. For executive branch employees, the percentage rates of such Section 8334 deductions under the Civil Service Retirement Act from its inception and with its various amendments are as follows:

Date of Service Percentage Rates for Deductions from Basic Pay
Before August, 1920 0
From August, 1920, to June, 1926 2Va
From July, 1926, to June, 1942 3V2
From July, 1942, to June, 1948 5
From July, 1948, to September, 1956 6
From October, 1956, to December, 1969 6V2
From January, 1970, to Present 7

11. The unrefunded amounts entered on an individual employee’s retirement record constitute his “lump-sum credit” which includes the employee’s Section 8334 deductions as well as sums deposited covering prior service and certain interest, all as described in Section 8331(8) of the Civil Service Retirement Act. The employee has no access to his lump-sum credit except upon conditions set forth in the Civil Service Retirement Act which in general are retirement, death, disability or termination of service.

12. Pursuant to Section 8333 of the Civil Service Retirement Act there are two general requirements which a classified employee must meet before he or his survivors are eligible for an annuity:

1. He must have completed at least five years of civilian service with the Government;
2. He must have been subject to the provisions of the Civil Service Retirement Act for at least one year out of the last two years pre-ceeding separating from service unless separation is due to death or disability.

13. Pursuant to Section 8339 of the Civil Service Retirement Act the amount of the annuity payable upon retirement is directly related to the earnings and years of service of the individual employee. The formula is generally based on a percentage of the highest rate of service, the percentage increasing with the total number of years of service up to a maximum of eighty percent.

14. Most employees covered by the Civil Service Retirement Act are required to retire when they become 70 years of age if they have completed 15 years of service. An employee covered by the Act is entitled to an annuity after becoming 55 years of age and completing at least 30 years of service; after becoming 60 years of age and completing at least 20 years of service; and after becoming 62 years of age and completing five years of service. Total disability payments are payable after five years of service.

15. The Civil Service Retirement Act provides for additional benefits such as survivor-annuity benefits to widows or widowers and dependent children of deceased employees. If all annuity rights under the Civil Service Retirement Act which are based on the service of a deceased employee or members terminate before the total annuity paid equals the lump-sum credit, the difference is paid to the survivors or next of kin of the employee or member.

16. Regardless of length of service, an employee who departs from Government service for any reason, may withdraw his retirement fund lump-sum credit if his departure occurs and his refund claim is filed with the Civil Service Commission at least thirty-one (31) days before the commencing date of any annuity for which he may be eligible. Receipt of the lump-sum credit voids all annuity rights unless reemployed under the retirement system and a new retirement right is acquired. An employee with more than five years of service has, on departure, the option of leaving his lump-sum credit in the retirement fund and drawing regular deferred annuity benefits starting at age sixty-two.

* * * * * *

21. The original Civil Service Retirement Act was enacted on May 22, 1920. The Section 8334 deductions were first deducted from the Federal Employees’ pay on August 1, 1920. As of June 30, 1969, the Fund balance in the Civil Service Retirement Fund was $20.6 billion. On that date the unfunded liability was $57.7 billion.

23. As on June 1969, the annual input into the Fund from employees’ Section 8334 deductions and equal contributions by Government agencies was 13 percent of payroll, whereas benefits and administrative expenses under the Act cost an amount equal to 13.86 percent of payroll. It was estimated that at the rate by 1975 the cost of benefits and administrative expenses under the Act would exceed the income of the Fund from all sources and by 1987 the Fund balance would be completely exhausted.

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27. In 1969 the Administration and Congress recognized that the situation described in paragraph 23 existed. Legislation was proposed to stabilize and control the unfunded liability. In 1969 Public Law 91 — 93 was enacted which contained financing provision in a “three-step” method as follows:

(1) The employees’ Section 8334 deductions and the Government agencies’ employer contributions were raised to 7 percent each, for a total of 14 percent of payroll, to cover the costs of current benefits and administrative costs which were 13.86 percent of payroll at that time;
(2) All future legislation creating retirement liability by benefit or pay increases or extension of coverage would be deemed to authorize appropriations to the Fund to finance the unfunded liability attributable thereto on a thirty-year amortization schedule;
(3) Permanent indefinite appropriations were provided in gradually increasing amounts over ten years so that they would equal, in 1980, 100 percent of the amount equivalent to what would be the interest on the unfunded liability each year, computed at the interest rate used in computing the unfunded liability; as well as the estimated costs of annuities for that year attributable to credit allowed for military service.

Under these financing provisions, it is estimated that the unfunded liability will level off at approximately $76 billion in 1980 with the exception of additional liability attributable to the cost-of-living increases pursuant to Section 8340 of the Act.

Appellant taxpayer contended below, and contends here, that the 1968 retirement deductions should be treated as an employer contribution and, hence, under recent income tax rulings, not taxable to him until received. He argues that the funds deducted are not includable in gross income since the Civil Service Employees Retirement Fund is neither a “qualified” plan nor “an independent trust” within the meaning of Sections 401 and 402 of the Internal Revenue Code of 1954. Finally, (without distinguishing between equal protection and due process) he contends the tax as assessed against and paid by him is discriminatory as compared to the treatment accorded privately employed or self-employed taxpayers and violates his right to due process of law.

Appellant, as we read his argument, emphasizes four facts: 1) that the 1968 deductions for the retirement fund were mandatory, 2) that the Civil Service Retirement Fund is not funded so as to be able presently to pay off its accrued liability, 3) that the fund is not independent of his employer and, hence, not an independent trust, and 4) that an increasing number of privately employed or self-employed persons are • allowed to make payments (or have payments made) to pension funds which payments are not includable in their gross income for tax purposes.

The questions posed are not new ones and they have been answered repeatedly by denial of the taxpayers’ claims. Miller v. Commissioner of Internal Revenue, 144 F.2d 287 (4th Cir. 1944); Megibow v. Commissioner, 218 F.2d 687 (3d Cir. 1955); Lawrence J. Cohen, 63 T.C. No. 23 (Nov. 26, 1974). See also Eugene G. Feistman, 63 T.C. No. 13 (Nov. 12, 1974).

In our instant appeal the District Judge relied strongly upon the Miller and Megibow cases in holding that the Civil Service Retirement Fund deductions from appellant’s pay check were part of his gross income for purposes of income taxation.

We have reviewed this record and the old and the new cases cited above, and the more recent legislation and regulations which are cited to us by appellant in his discrimination argument. We believe that the Miller, Megibow and Go-hen cases just cited clearly represent accurate interpretation of the intention of Congress in relation to the legislation in question.

1) Appellant’s salary is and was fixed by statute. It included the sum which was deducted in 1968 for purposes of the Civil Service Retirement Plan. The deduction was made because he was eligible for retirement benefits. If he had not been eligible for the retirement plan, his compensation clearly would have been the full amount. In the Cohen case the Tax Court said:

As is clear from the . . . Me-gibow case, we considered the same argument with respect to the amount withheld from the taxpayer’s salary being a contribution to a qualified pension plan by the employer that petitioner has made in the instant case. As respondent points out, the salaries, of Federal employees in the various grades provided by Civil Service are set by statute, and as the stipulated facts show this statutory salary is the starting point in computing the amount of the paycheck to be issued to each employee. If for some reason such as being a temporary employee or a non-electing Member of Congress, a person is not covered by the Retirement Act but does have a salary fixed by statute, his gross pay is computed on the basis of the statutory salary for his classification or grade even though there is no section 8334 deduction made for an amount withheld under the Retirement Act. In our view petitioners have shown no basis for their position that the amount withheld under the Civil Service Retirement Act from an employee’s basic pay is not a part of the employee’s compensation. We therefore conclude that there is no basis for changing the holding we made in Isaiah Megibow, supra, that the withheld amount is an employee’s payment into the Civil Service Retirement Fund and not an employer’s payment. Lawrence J. Cohen, supra at 25 — 26 of the slip opinion. (Footnote omitted.)

We agree with the Tax Court (and with the District Court below) that the disputed 1968 deductions were employee contributions and not employer contributions for income tax purposes.

2) Appellant’s 1968 contributions did represent valuable rights which were vested in him at the time. For example, they, plus the equal or greater sums pledged by the government, served to purchase specified retirement benefits available to him on retirement as well as disability benefits in the event of disabling accident or illness. 5 U.S.C. §§ 8336—8338 (1970). They were also returnable to him, usually with interest, in the event of his leaving the service before eligibility for retirement. 5 U.S.C. §§ 8331(8) and 8342 (1970).. They were also payable, usually with interest, to his heirs if at death the lump sum credit had not previously been paid to him in benefits. 5 U.S.C. § 8342(d — f) (1970). And these rights, if for any reason they were denied him, appellant could enforce through suit against the United States under the Tucker Act, as amended, 28 U.S.C. § 1346 (1970); Dismuke v. United States, 297 U.S. 167, 170, 56 S.Ct. 400, 80 L.Ed. 561 (1936).

Present vesting of a right, even if its enjoyment is postponed to the happening of a future event, is an important aspect of gross income for income tax purposes. Renton K. Brodie, 1 T.C. 275 (1942). See also United States v. Basye, 410 U.S. 441, 452, 93 S.Ct. 1080, 35 L.Ed.2d 412 (1973).

3) Congress has intentionally required the employee contribution which is disputed here with the full knowledge that income tax liability resulted. In the legislative history of the Employee Retirement Income Security Act of 1974, we find this pertinent discussion:

Designated contributions. — Under present law, contributions which are designated as employee contributions are generally treated as employee contributions for purposes of the Federal tax law. For example, this is the case with respect to employee contributions under the Federal Civil Service plan. Your committee’s bill contains a provision to clarify this rule for the future. This provision provides that amounts that are contributed to a qualified plan are not to be treated as an employer contribution if they are designated as employee contributions.
This provision gives effect to the source of the contributions, as designated in the plan. For example, if the appropriate committees of the Congress were to report legislation regarding employee contributions under the Federal Civil Service plan so that the present employee’s contributions would become employer contributions under the Federal Civil Service plan (and that legislation were to be enacted), then those contributions would constitute employer contributions to the plan, which would be excludable from the employee’s income when made. The same rule would apply to State and local governmental plans which now designate contributions as employee contributions, if the appropriate governmental bodies change the provisions of their plans. H.R.Rep.No. 93 —807, 93rd Cong., 2nd Sess., reported in 8A U.S.Code Cong. & Adm.News 288, 428 (1974).

4) Since we have held that the disputed amounts of gross income are includable for income tax purposes because they are employee contributions rather than employer contributions, we do not need to determine whether or not the Civil Service Employee Retirement Plan is a “qualified” plan under Section 401 or an Independent Trust under Section 402 of the Internal Revenue Code of 1954.

If there were need for findings on either issue, however, we observe that Congress has specifically designated the Civil Service Employees Retirement Fund as an Independent Trust.

In 31 U.S.C. § 725s (1970), Congress declared:

725s. Trust funds. — (a) The funds appearing on the books of the Government and listed in subsections (b) and (c) of this section shall be classified on the books of the Treasury as trust funds. All moneys accruing to these funds are appropriated and shall be disbursed in compliance with the terms of the trust.
(6) Civil Service Retirement and Disability Fund (0t843).

5) We do not believe this record presents any significant constitutional issue arising out of discriminatory treatment of federal civil service employees as compared to private employees or the privately self-employed. There are many distinctions between pension plans for employees in the private sector and this pension plan for government employees to warrant separate classification of the latter to be found to be reasonable. One of the primary distinctions, of course, is the relative insecurity of many private pension plans compared to the statutory commitment of the United States Government to the payment of the Civil Service Retirement Plan benefits. See, e. g., H.R.Rep.No.93—807, supra at 297.

We have also considered the fact that the statutory language we quoted at the outset of this opinion appears in form to create an irrebuttable presumption that each employee has consented to the deductions — a presumption which (at least in the case of an employee who intended to stay on the government job for less than five years) might well not be true. Despite the form of language employed, however, we believe that Congress’ intention was to make employee participation in the Civil Service Retirement Plan a mandatory condition of employment. Such a condition is by no means uncommon in private pension schemes, see, e. g., Rev.Rul. 70-658, 1970—2 Cum.Bul. 87, and does not serve to deprive government employees of any constitutional right.

We conclude that Congress has determined that the federal employee contribution to the Civil Service Pension Fund is presently includable in gross income, that Congress has so specified and has the right to do so, and that any relief must be by Congressional enactment.

The judgment of the District Court is affirmed.

      . Marian M. Hogan is a joint plaintiff only because as the taxpayer’s wife she signed the joint tax return.

      . The Civil Service Retirement Act was originally passed in 1920. Act of May 22, 1920, Pub.L. No. 66-215, 41 Stat. 618. The Act is codified as subchapter III of chapter 83 of Title 5 of the United States Code. 5 U.S.C. §§ 8331-8348 (1970). Thus the references to the Act in this stipulation incorporate the section denomination used in the Code.

      . Act of Oct. 20, 1969, Pub.L. No. 91-93, 83 Stat. 137, amending 5 U.S.C. § 8348 (1966). •

      . Act of Sept. 2, 1974, Pub.L. No. 93-406, 88 Stat. 829.

      . See § 1015 of 1974 Act, supra.


source: Caselaw Access Project

author: HUFSTEDLER, Circuit Judge:

license: Public Domain

text:
    Morris B. SINGER, Plaintiff-Appellant, v. Caspar W. WEINBERGER, Secretary of Health, Education and Welfare of the United States, Defendant-Appellee.
    No. 74-1122.
    United States Court of Appeals, Ninth Circuit.
    March 17, 1975.
    Joel Goldfarb, Berkeley, Cal., for plaintiff-appellant.
    Brian B. Denton, Asst. U. S. Atty., San Francisco, Cal., Robert E. Kopp and Stanton R. Koppel, Civ. Div., Dept, of Justice, Washington, D. C., for defendant-appellee.
    Before CARTER and HUFSTEDLER, Circuit Judges, and JAMESON, District Judge.

       Honorable William J. Jameson, District of Montana, sitting by designation.

   OPINION

HUFSTEDLER, Circuit Judge:

Singer sought review of a final decision of the Secretary of Health, Education and Welfare disallowing his applications for disability benefits under the Social Security Act (42 U.S.C. §§ 416(i), 423). The district court granted the Secretary’s motion for summary judgment, and Singer appeals from the ensuing judgment against him. We reverse.

Singer applied for disability benefits in 1970, claiming disability beginning in 1969. His claim was denied, and he then sought no judicial review. He reapplied in 1972, reviving his 1969 claim and making an additional claim for disabilities commencing in 1965. The administrative law judge rejected the 1972 claim on the ground that Singer in 1965 and 1969 did not have the requisite “quarters of coverage” (20 three-month periods in which he earned $50 or more in the 10-year period anteceding his claimed disability, 42 U.S.C. §§ 413(a), 416(i)(3)(B)(i)). Accordingly, the administrative law judge did not reach the merits of Singer’s claimed disability.

The Secretary’s records revealed that Singer had been eligible as late as September 30, 1964. If he had been able to prove that he had two or more additional quarters of coverage, he would have kept alive his 1965 claim. His problem is that the Social Security Administration had no record of additional earnings in the required period. Section 405(c)(3) gives three different effects to the absence of entries of income in the Secretary’s records: (1) within 3 years, 3 months, and 15 days after expiration of the qualifying year (§ 405(c)(1)(A), (B)) the absence of entries of either wages or self-employment income is evidence that no such wages or earnings were received; (2) after the statutory limitation period, the absence of entry of wages in the Secretary’s records creates a rebut-table presumption that no- such wages were paid (Breeden v. Weinberger (4th Cir. 1974) 493 F.2d 1002; Thacker v. Gardner (4th Cir. 1967) 387 F.2d 387, aff’g (W.D.Va.) 268 F.Supp. 663; Ewing v. Black (6th Cir. 1949) 172 F.2d 331); (3) after the limitation period, the absence of entry of self-employment income in the Secretary’s records, coupled with an absence of the claimant’s tax returns showing such income, creates a conclusive presumption that no such income was received.

Singer’s attempt to prove self-employ-' ment income was foreclosed by the conclusive presumption against him. However, he was confronted with a rebut-table, rather than a conclusive, presumption that he had not received wages during the quarters unrecorded by the Secretary. The burden Singer faced was formidable: he was a sick layman trying to prove very old facts, unassisted by counsel. He was also handicapped because many of his personal records had been destroyed by a fire in his residence. His presentation was not orderly, and he offered documents that were irrelevant as well as some that were relevant. He testified, without documentary support, that he held two different jobs during the unrecorded period; he also attested to a third job during two quarters in 1960-61, supported by some inconclusive documentation. His alleged employers had filed no records of their payments to him; he was able to produce some records of their bankruptcies, but those records did not reflect any claims of his for unpaid wages.

The administrative law judge was not required to believe Singer’s testimony, nor was he obliged to accord any specific weight to the documentary evidence that Singer produced. However, he was required to consider the evidence carefully, to be liberal in excusing deficiencies that are indigenous to a layman’s presentation of evidence, and to weigh that evidence against the statutory presumption. The administrative law judge did not perform that duty, apparently relying on some misconceptions of law.

After summarizing the documentary evidence that Singer had presented, the judge’s decision states: “These were submitted as a basis for a presumption that in these periods claimant received wages and had self-employment income not appearing on the Secretary’s records and that such records be corrected to show such unrecorded items. These submissions confuse rather than clarify the issues and . do not comply with the provisions of section 205(c) of the Act.”

The administrative law judge’s statement is puzzling. Singer’s evidence could not have been “submitted as a basis for a presumption.” Perhaps the judge confused the statutory conclusive and rebuttable presumptions, or he may have thought that Singer’s evidence had to have the force of a presumption to overcome the rebuttable presumption. Despite the difficulty of construing the statement, it is evident that he was not aware that Singer’s burden on the unrecorded wage claim was limited to his rebutting the rebuttable presumption. The error led him not to consider or to weigh the oral and documentary evidence in order to ascertain whether the presumption had been rebutted. A remand is thus necessary to permit the agency to evaluate the evidence heretofore presented, together with any other evidence that has since become available, in the light of the correct standard of law. In ordering remand, we express no views on the credibility of the testimony or the weight of the relevant evidence.

The secretary’s belated claim that Singer’s 1972 claim was foreclosed by res judicata because his earlier claim had been denied is without merit. The agency’s decision reopening both claims in 1972 precludes reliance on res judicata. (Cf. Stuckey v. Weinberger (9th Cir. en banc 1973) 488 F.2d 904.)

The judgment is reversed and the cause is remanded with directions to remand it to the Secretary for further proceedings consistent with the views herein expressed.

      . Proof of even one quarter might have been enough, depending on how Singer’s recorded quarters are distributed. If the Secretary’s records show one quarter in the summer of 1954, and none for six months thereafter, proof of one extra quarter would produce the required twenty. If Mr. Singer was paid in the summer and fall of 1954, however, he must prove two unrecorded quarters.
      To save his 1969 claim, Mr. Singer has a more difficult task. The Administration had entries for oniy 4 quarters of coverage in 1959-69; he must therefore show 16 unrecorded quarters of coverage to establish his eligibility.

      . The Secretary’s records shall be evidence for the purpose of proceedings before the Secretary or any court of the amounts of wages paid to, and self-employment income derived by, an individual and of the periods in which such wages were paid and such income was derived. The absence of an entry in such records as to wages alleged to have been paid to, or as to self-employment income alleged to have been derived by, an individual in any period shall be evidence that no such alleged wages were paid to, or that no such alleged income was derived by, such individual during such period.
      42 U.S.C. § 405(c)(3).

      . After the expiration of the time limitation following any year . . . the absence of any entry in the Secretary’s records as to the wages alleged to have been paid by an employer to an individual during any period in such year shall be presumptive evidence for the purposes of this subchap-ter that no such alleged wages were paid to such individual in such period; .
      42 U.S.C. § 405(c)(4)(B).

      . After the expiration of the time limitation following any year . . the absence of an entry in the Secretary’s records as to the self-employment income alleged to have been derived by an individual in such year shall be conclusive for the purposes of this subchapter that no such alleged self-employment income was derived by such individual in such year unless it is shown that he filed a tax return of his self-employment income for such year before the expiration of the time limitation following such year, in which case the Secretary shall include in his records the self-employment income of such individual for such year.
      42 U.S.C. § 405(c)(4)(C).

      . Section 205(c) of the Social Security Act is now codified in 42 U.S.C. § 405. Cf. Act of August 10, 1939, ch. 666, tit. II, § 201, 53 Stat. 1362.


author: GIBSON, Chief Judge. ROSS, Circuit Judge

text:
    Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellant-Cross-Appellee, v. MAXEY’S YAMAHA, INC., et al., Appellee-Cross-Appellant.
    Nos. 74-1354, 74-1478.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 8, 1975.
    Decided March 26, 1975.

      Sylvia S. Ellison, Atty., U. S. Dept, of Labor, Washington, D. C., for Secretary of Labor.
    John J. Respeliers, Omaha, Neb., for Maxey’s Yamaha.
    Before GIBSON, Chief Judge, and HEANEY, and ROSS, Circuit Judges.
   GIBSON, Chief Judge.

The Secretary of Labor brought this action to enjoin alleged violations of the Fair Labor Standards Act of 1938, as amended (FLSA), 29 U.S.C. § 201 et seq., including the withholding of overtime compensation due to employees of Maxey’s Yamaha, Inc., a Nebraska corporation engaged in retail sales and service of motorcycles. Both parties appeal portions of the District Court’s March 13, 1974, order denying the Secretary’s requested injunction with respect to all but one of Maxey’s various alleged violations of the Act. As to the remaining violation, the court enjoined Maxey’s from withholding $1,708.54 in overtime compensation denied Donald Holub as a result of his misclassification under the Act as an exempt executive or administrative employee.

On appeal the Secretary challenges (1) the trial court’s finding that another Maxey’s employee, Judith Holman, was not discharged in violation of 29 U.S.C. § 215(a)(3) for asserting her rights under the Act, and (2) the trial court’s omission of prejudgment interest from its award of unpaid overtime compensation to Ho-lub. On cross-appeal Maxey’s asserts that under 29 U.S.C. § 213(b)(10) Holub is exempt from the maximum hour provisions of the Act because he is a “mechanic primarily engaged in selling or servicing automobiles.” We reverse the trial court’s finding that Judith Holman’s discharge was nondiscriminatory and its denial of prejudgment interest.

I. Discriminatory Discharge.

The Act prohibits discrimination against an employee who asserts or threatens to assert his or her FLSA rights. The Secretary charged Maxey’s with having discriminatorily discharged Holman, an office worker, on July 28, 1972, because of her assertion of rights under the Act.

The discharge followed a 1972 investigation by the Department of Labor which disclosed minimum wage and maximum hour violations with regard to nine of Maxey’s employees. At the Government’s request, Maxey’s promptly agreed to pay its employees all back wages found to be due and issued a check to each along with scheduled July 28 paychecks. At least five of the nine workers, however, were asked to endorse their back wage checks back to Maxey’s and to sign wage receipt forms without actually receiving and retaining the check proceeds. Apparently these amounts were treated as loans to the company and later repaid.

The Secretary urges that the discharge of Holman by Maxey’s president and sole owner, Mr. McBride, was discriminatory because it was prompted by Holman’s complaint that her rights under the FLSA were being violated. McBride admitted that before July 28 he had no intention to fire Holman, but decided to do so after a July 28 outburst following her refusal to take part in what she thought was an unlawful scheme. Although Maxey’s argues that Holman was legitimately discharged because of unsatisfactory job performance and overall emotional conduct, it appears unrefuted that the check endorsement scheme, as Holman believed it to exist, was a patent violation of the Act and the immediate cause of her July 28 outburst.

Where the immediate cause or motivating factor of a discharge is the employee’s assertion of statutory rights, the discharge is discriminatory under § 215(a)(3) whether or not other grounds for discharge exist. Goldberg v. Bama Manufacturing Corp., 302 F.2d 152 (5th Cir. 1962); Mitchell v. Goodyear Tire & Rubber Co., 278 F.2d 562 (8th Cir. 1960). In the Mitchell case we reversed as clearly erroneous the trial court’s finding that an employee’s discharge was unrelated to his mailing a letter of complaint to the Wage and Hour Division of the Department of Labor a few days earlier. On the contrary, the record revealed that although a few days before his wage-hour complaint he had been scheduled for future discharge, he would not have been discharged at that particular time but for his admission of authorship of the letter. Similarly, in Goldberg the Fifth Circuit remanded the trial court’s refusal to grant reimbursement of lost wages to an employee who could have, and in the court’s opinion, “probably ought” to have been fired for half a dozen reasons, where the firing was motivated in part by the assertion of her statutory rights. 302 F.2d at 153. In the instant case, however, Holman was not scheduled for discharge and had not been advised that McBride or any person with hiring authority considered her work unsatisfactory.

Holman’s protest of what she believed to be unlawful conduct on Maxey’s part was an act protected from reprisals and rendered her firing discriminatory regardless of the existence of other grounds for her discharge. As in Wirtz v. Ross Packaging Co., 367 F.2d 549 (5th Cir. 1966), she insisted on receiving and retaining her back wage check before signing her receipt and was promptly dismissed. Her discharge was a direct result of her insistence upon receiving retroactive benefits required under the Act. That a scheme was proved to exist in Wirtz but only believed to exist in the instant case does not deny Holman a remedy. Her reasonable belief was caused entirely by Maxey’s conduct, and her lawful assertion of rights based on that belief must be protected. To hold otherwise would defeat the Act’s purpose in § 215(a)(3) of preventing employees’ attempts to secure their rights under the Act from taking on the character of “a calculated risk.” Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 293, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960).

Three witnesses to the July 28 incident, McBride, Holman, and Mr. Rupiper, the company bookkeeper, testified as to the facts surrounding Holman’s discharge. Holman testified that she first learned she was entitled to back wages on the morning of July 28 when she overheard McBride tell Rupiper to issue back wage checks to the employees from one account, to have the employees endorse them and sign government wage receipts, and then to deposit the checks in Maxey’s account in another bank. She voiced her disapproval at the time, but to no avail. McBride then left and Rupiper presented a back wage check in the amount of $110.63 and a blank receipt to Holman, asking her to endorse both without receiving any money. She refused. That afternoon McBride returned and in a private conversation in his office purportedly told Holman she would be fired if she did not sign. She then signed, received her check, and was discharged.

McBride testified to two conversations with Holman on July 28. The first, in the morning, occurred just after he learned of the Government’s determination that back wages were due Maxey’s employees. McBride admitted that he was displeased with having to pay back wages. This is understandable as is his reaction that the overtime back wages might not be merited. But the Government ordered the wages paid. If McBride wanted to contest the order, he was free to do so; otherwise he should have made payment without giving with one hand and taking back with the other. This does not mean that legitimate loans between the company and the employees could not have been mutually agreed upon. But in Holman’s case there was no agreement. When McBride returned later that afternoon, Holman was still upset. He talked with her privately in his office and reportedly tried to calm her in order to explain why she was being paid the back wages, but she was out of control. Finally, because of her continuing outburst, McBride discharged her. McBride denied having personally ordered her to endorse the check and receipt without being paid.

Rupiper testified that he presented the check and receipt to Holman the morning of July 28. He admitted commenting to her that she did not deserve the money — suggesting that she should endorse the check back to the company— but he denied ordering her to do so.

The District Court’s finding that there was no scheme to deprive employees of their back overtime wages appears correct. The three employees who were owed the greatest amounts ended up as part owners of the business; however, the manner in which the back.wage payments were discussed and presented to Holman did appear highly suspect and could readily have been viewed by her as a scheme to circumvent the Act. Many of the employees felt similarly about the pay-back or lend-back angle. Even Ru-piper admitted that he understood why Holman felt cheated. Under these circumstances it was incumbent upon the employer to promptly and effectively dispel and correct any coercive atmosphere or erroneous impression that its tactics in issuing the checks and requesting an endorsement back to thé company might have formed in the minds of the employees. It appears that the company did not have sufficient funds to cover the back wage checks. The company should therefore have leveled with the employees and reached a mutually satisfactory arrangement on paying the back amounts. This it apparently did with most of its employees but not with Holman.

While on appeal we do not try a case de novo and we give great weight and deference to trial court factual findings, we are convinced that the District Court’s finding that discrimination played no part in Holman’s discharge is clearly erroneous and must be set aside. Rule 52(a), Fed.R.Civ.P. The whole episode resulted from Maxey’s violation of the Act coupled with its ill-devised method of facial compliance.

Certainly the court cannot place its imprimatur on these coercive tactics. While some employees cashed their checks at Maxey’s, voluntarily loaned the cash directly back to the company, and apparently ended up owning part of the business, Holman was given no unfettered choice. While Holman’s outburst and emotional conduct apparently played a role in her discharge, she did have a clear right to protest the antics and tactics employed by Maxey’s in complying with the Act’s demands. Maxey’s tactics precipitated the incident which Maxey’s uses as a basis for her discharge. Since Holman’s interpretation, although erroneous, was reasonable, the fault lies with Maxey’s in not handling the Government-ordered payments in a proper manner. Holman therefore should be compensated for the loss in wages she suffered as a result of her unlawful dismissal.

II. Prejudgment Interest.

The Secretary challenges the District Court’s omission of prejudgment interest on the award of $1,708.54 representing unpaid overtime compensation due Mr. Holub. Although the Secretary demanded interest in his complaint, the trial court awarded none. The defendant contends it in good faith withheld the overtime wages because it considered Holub exempt under the Act as an executive or administrative employee. Good faith withholding by the employer, however, is no justification for penalizing the employee by denying prejudgment interest. Brennan v. City Stores, Inc., 479 F.2d 235, 241-42 (5th Cir. 1973); Hodgson v. Daisy Manufacturing Co., 445 F.2d 823 (8th Cir. 1971). Although there was a dispute as to the precise number of hours worked by Holub for the periods in question, the employer’s breach of its duty to maintain adequate employment records is not an equitable basis for penalizing the employee. Cf. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946).

Because the trial court in its memorandum opinion intimated no specific reason for denying the interest, we apply the general rule governing injunction proceedings under 29 U.S.C. § 217 and award the interest in line with the basic remedial policy of the FLSA. In this circumstance the employer, Maxey’s was unjustly enriched at the expense of the employee, Holub. Hodgson v. American Can Co., 440 F.2d 916, 922 (8th Cir. 1971). Interest on the underpayments should thus be awarded to the employee from the respective dates the wages became due. Hodgson v. Daisy Manufacturing Co., supra, 445 F.2d at 824-25.

III. The Exemption Under Section 213(b)(10).

Finally, in its cross-appeal, relying on Shultz v. Louisiana Trailer Sales, Inc., 428 F.2d 61 (5th Cir.), cert. denied, 400 U.S. 902, 91 S.Ct. 139, 27 L.Ed.2d 139 (1970), Maxey’s argues for the first time in these proceedings that the District Court’s finding that Holub was not an exempt executive or administrative employee under the Act in turn compels a finding that he is exempt under § 213(b)(10). That provision, as amended in 1966, states:

§ 213. Exemptions
(b) The [maximum hour] provisions of * * * this title shall not apply with respect to—
* * * * * *
(10) Any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trailers, trucks, farm implements, or aircraft if employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles to ultimate purchasers^]

Maxey’s argues that the District Court’s now uncontested finding that Holub spent more than fifty percent of his time doing actual repair work leads to the conclusion that he was primarily a mechanic, and that because a motorcycle dealership is not distinguishable from an automobile dealership, Holub is exempt under § 213(b)(10).

While Maxey’s contention that motorcycles are generically akin to automobiles has some logic to commend it, we are foreclosed from considering it because it was not raised below. Mitchell v. Williams, 420 F.2d 67, 68 n. 2 (8th Cir. 1969); Mid-Continent Petroleum Corp. v. Keen, 157 F.2d 310, 315 (8th Cir. 1946).

The judgment of the District Court is reversed and the cause remanded for entry of judgment in accordance with this opinion. Judith Holman is to receive damages in the appropriate amount for lost wages resulting from her discriminatory discharge, and Donald Holub is to receive prejudgment interest on the amounts of underpaid overtime compensation from the dates the wages became due. In all other respects the judgment . of the District Court is affirmed.

Costs of this appeal are to be taxed against Maxey’s.

ROSS, Circuit Judge

(dissenting).

This is an extremely close case, but because the trial court had the best opportunity to view the witnesses and judge their credibility, I would defer to his determination that discrimination played no part in Holman’s discharge. I concur in Parts II and III of Judge Gibson’s opinion.

      . The Secretary alleged that Maxey’s violated the provisions governing minimum wages, §§ 206(b) and 215(a)(2); overtime compensation, §§ 207(a)(2) and 215(a)(2); record keeping, §§ 211(c) and 215(a)(5); discriminatory discharges, § 215(a)(3); and false reporting, §§ 211(c) and 215(a)(5).

      . 29 U.S.C. § 215(a)(3). That section reads:
      § 215. Prohibited acts, prima facie evidence (a) [I]t shall be unlawful for any person—
      * it: H* * JH
      (3) to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding, or has served or is about to serve on an industry committee!.]

      . At the time of Holman’s discharge McBride owned 100% of the stock of Maxey’s Yamaha, Inc. Later, prior to trial, however, all shares of stock in Maxey’s Yamaha, Inc., were purchased by a successor corporation, Maxey's, Inc., owned by some of the former employees and another individual.

      . On direct examination Holman reported that on July 28 McBride told Rupiper to draw “the checks from one checking account, to have the checkfs] and the releases endorsed, not telling the employees exactly what they were for, and then [to deposit] these checks * * * in another checking account.”

      . On direct examination Holman was asked whether she voiced her disapproval immediately upon overhearing McBride’s conversation with Rupiper:
      A. Yes, I did. I told them that it was illegal, that it was wrong, and if they would happen to be caught that they would be in serious trouble, but Mr. McBride said to me that if I didn’t say anything, no one would find out.

      . On direct examination Holman was asked:
      Q. Did Mr. Rupiper ask you to sign a receipt and endorse the check without actually receiving the money?
      A. Yes, he did.

      . On direct examination relating to her July 28 conversation with McBride, Holman was asked:
      Q. What did he tell you at that time?
      A. He asked me why I would not sign the release and check. I told him again that I didn’t approve of the tactics he was using, and he said that if I didn’t sign it, I could seek employment elsewhere, and I said, “If I do sign, I will take the check with me,” which I did.
      Q. Subsequently to that conference, you were paid back wages?
      A. Yes, I was paid the back wages, my regular salary, and I obtained a copy of the receipt.

      . On direct examination McBride described Holman’s final dismissal:
      Q. Do you recall the actual termination?
      A. I remember something about her not wanting to sign for the check * * * . She was hollering about quitting, and to be quite truthful, it just got to the point where I couldn’t take it much more, and I told her she didn’t have to quit; she was fired.

      . On cross-examination Rupiper was asked:
      Q. You did offer her her check and she refused to take it? Is that what you are saying?
      A. I offered it to her, and I felt that she did not deserve it; that she did not work 40 hours.
      Q. In fact, you told her that since you felt she didn’t deserve it that she should sign it over back to Maxey’s, is that right?
      A. I mentioned that. I didn’t tell her that is what had to be done, but I did say, “I don’t think you deserve the check. I think it should go back to Maxey’s.”

      . After entry of the District Court’s order, the statute was altered once again in the Fair Labor Standards Amendments of 1974, Pub.L. No. 93-259, § 14 (Apr. 8, 1974).


author: WILLIAM E. DOYLE, Circuit Judge.

text:
    Norman LEWELLYN et al., Plaintiffs-Appellants, v. Virgil H. GERHARDT et al., Defendants-Appellees.
    No. 74-1443.
    United States Court of Appeals, Seventh Circuit.
    Argued Feb. 5, 1975.
    Decided March 21, 1975.

      Theodore Lockyear, Steven T. Barber, Evansville, Ind., for plaintiffs-appellants.
    Theodore L. Sendak, Atty. Gen., Donald P. Bogard, Asst. Atty. Gen., Indianapolis, Ind., Charles L. Martin, Boonville, Ind., for' defendants-appellees.
    Before SWYGERT, STEVENS and DOYLE, Circuit Judges.

       Circuit Judge William E. Doyle of the Tenth Circuit is sitting by designation.

   WILLIAM E. DOYLE, Circuit Judge.

The plaintiffs, Trustees of the Hemen-way Memorial Presbyterian Church, brought this action against the Governor of Indiana, the Attorney General, the Board of Commissioners of Warrick County, Indiana and the members of the Board of the Warrick County Park and Recreational Department. They sought recovery of a tract of land which was conveyed on December 2, 1933 by Travis E. Scales and Sarah C. Scales to the State of Indiana. The deed contained a proviso that if the grantee failed or refused to maintain the land at all times for the benefit of the public as a place of recreation for a period of three consecutive years, the land would revert' to the grantors or their survivors. If at the time of the reversion the grantors had died, there was a proviso that the plaintiffs, Trustees of the Hemenway Memorial Presbyterian Church, would then become the beneficiaries of the possibility of reverter. The complaint alleged that the above mentioned condition was violated and that the possibility of reverter clause had become activated. The violation relied on arose, it is alleged, as a result of adoption by the Indiana General Assembly of a statute authorizing the transfer of this property to Warrick' County. The deed of conveyance to Warrick County made pursuant to the statute contained a condition similar to that in the original deed that the property be used as a park and recreation area. There was also (as in the original deed) a provision for reversion to the state in the event of failure to so use it. Plaintiffs’ contention was that the public law authorizing this transfer was void under the due process and equal protection clause of the Fourteenth Amendment of the Constitution of the United States. A declaratory judgment to this effect was sought in the district court. Jurisdiction is predicated on 28 U.S.C. § 1343(3). The complaint requests appointment of a three-judge court pursuant to 28 U.S.C. § 2281.

Defendants filed a motion to dismiss the complaint. This motion was granted. It is this judgment which is appealed. In dismissing, the court ruled that the cause lacked subject matter jurisdiction and failed to state a claim upon which relief could be granted. The trial court held that the scope of § 1343(3) is the same as 42 U.S.C. § 1983, the so-called civil rights statute. The trial court further noted that an action cannot be maintained against the state or the county, and that the county and state were the real parties in interest here. The court also ruled that a three-judge court was not called for since the statute which was attacked was not general and state-wide in its application. A further holding was that by the very terms of the possibility of reverter there existed no entitlement to the land since the three-year period after the date of the transfer has not run.

Our conclusion is that it was unnecessary to reach the merits of plaintiffs’ claim because the issue is non-fed.eral-involving as it does the meaning and consequences of a conveyance of land and the construction of a state statute, Thus the cause may be disposed of by applying state law. For that reason, it is clearly inappropriate to determine the federal constitutional questions which have been tendered.

Although the result which we reach is the same as that of the trial court, our view as to the manner of disposition is somewhat different. In view of the predominant state character of the case, the doctrine of abstention applies. This calls for the federal court staying its hand to allow the state courts to rule on the state questions. Where, as here, state action is being challenged in federal court and there are questions of state law which are capable of disposing of the case, a federal court should defer to the state court and allow it to deal with the questions of state law. But see Drexler v. Southwest DuBois School Corp., 504 F.2d 836, 839 (7th Cir. 1974).

The leading Supreme Court decision dealing with the kind of abstention applicable to our facts is Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). There the company was seeking to enjoin enforcement of an order of the Texas Railroad Commission. Its claim was that the order denied its rights under the Fourteenth Amendment. A secondary contention was that the Commission lacked authority to make the proposed order under Texas law. The Supreme Court ruled that a federal equity court was being asked to grant relief by making a tentative answer which could be displaced the next day by state adjudication. The Court went on to say that a court of equity should in these' circumstances avoid the tentative and premature consideration of the constitutional issue by abstaining and allowing the state court to decide the local question. The court pointed out that if the state court held that the order was unauthorized under state law, that would make it unnecessary for the federal court to pass on the federal question.

Numerous decisions of the Supreme Court have followed the rule of the Pullman case. See Note, Hart and Wech-sler’s The Federal Courts and The Federal System, p. 988 et seq. (2d ed. P. Bator, D. Shapiro, P. Mishkin and H. Wechsler, 1973). See also Harris County Commissioners Court v. Moore, 420 U.S. 77, 95 S.Ct. 870, 43 L.Ed.2d 32 (1974).

The use of abstention in cases which raise questions of state law predates the Railroad Commission case. See, for example, Railroad Commission v. Rowan & Nichols Oil Co., 311 U.S. 614, 61 S.Ct. 66, 85 L.Ed. 390 (1940) and 310 U.S. 573, 60 S.Ct. 1021, 84 L.Ed. 1368 (1940); Gilchrist v. Interborough Rapid Transit Co., 279 U.S. 159, 49 S.Ct. 282, 73 L.Ed. 652 (1929).

Since the Pullman decision there have been many decisions requiring abstention , on unsettled state law issues when resolution of those issues is necessarily pre- ■ liminary to consideration of federal con- j stitutional questions. See, for example,-' City of Meridian v. Southern Bell T. & T. Co., 358 U.S. 639, 79 S.Ct. 455, 3 L.Ed.2d 562 (1959); Albertson v. Millard, 345 U.S. 242, 73 S.Ct. 600, 97 L.Ed. 983 (1953); Spector Motor Service v. McLaughlin, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101 (1944); see Hart and Wechsler, supra.

The fact that the plaintiff brings I the suit as a civil rights action does not 1 preclude abstention. See Lynch v. Household Finance Corp., 405 U.S. 538, 92 S.Ct. 1113, 31 L.Ed.2d 424 (1972) and Harrison v. National Assn. for the Advancement of Colored People, 360 U.S. 167, 79 S.Ct. 1025, 3 L.Ed.2d 1152 (1959). In the latter case a Virginia statute sought to regulate the giving of financial assistance to organizations which supported integration or segregation. A three-judge court had decided that the statutes were an attempt to nullify the school desegregation cases, but certain of the statutes were held to be open to possible state interpretation. The Supreme Court ruled that the entire group of statutes should be submitted to the Virginia courts for construction.

Still another decision which contains the suggestion that abstention is appropriate in a Fourteenth Amendment equal protection situation is Askew v. Har-grave, 401 U.S. 476, 91 S.Ct. 856, 28 L.Ed.2d 196 (1971).

At bar the questions arising from the two conveyances, involving as they do a possibility of reverter clause, and a determination as to whether the condition in the original deed has been violated are necessarily issues which are anterior to questions invoking constitutional rights.

It may be that the federal questions here presented are frivolous or even spurious. Regardless of this fact, our view is that it is inappropriate for the federal courts to consider their merits where it is likely that it will prove to have been an unnecessary effort as here.

The case before us appears to be a classic Pullman-type abstention case because there is presented in addition to the alleged federal claim an unsettled issue of state law which is capable of superseding altogether the federal question.

For the reasons which we have given, we conclude that the cause be remanded to the district court with directions to that court to reinstate the cause of action herein and to enter an appropriate abstention order which postpones any decision of the federal question pending the determination by the state court of the state questions which are inherent in the fact situation presented.

      . The mentioned statutes are as follows:
      The transfer shall be conditioned by the following: That said Scales Lake, or by whatever name, when in full possession by the recipient shall be forevermore maintained, developed and used as a general park and recreation area; that the recipient of said property shall not have the right to sell, lease or in any way transfer the control of the property, in whole or in part, to any person, firm, party, or agency or government, except for use as a general park and recreation area; that any subsequent owner, lessee or controller of the property shall not have the right to use or cause the property to be used for any purpose other than a general park and recreation area; and that should the property, in whole or in part, ever be used for other than the stated purposes, the Director of the Department of Natural Resources, on approval of the Governor, shall have the authority to cause the property, in whole, to revert to the status of ownership prior to the passage of this act. SEC. 2. Following agreement by the War-rick County Park and Recreational Department, Warrick County, Indiana, the Governor of the State of Indiana and the Director of the Indiana Department of Natural Resources as to the land to be conveyed, the Governor shall direct the Auditor of State to cause to be prepared, executed, and delivered a deed of conveyance to the Warrick County Park and Recreational Department, Warrick County, Indiana, transferring and conveying on January 1, 1972, all rights, title and interest, except as defined herein, which the State of Indiana may have in the real estate, which deed shall be signed by the Governor and the Director of the Indiana Department of Natural Resources and shall be attested by the Auditor of State, with the seal of the State of Indiana affixed thereto.
      Indiana Public Law 484 (1971).

      . Compare Murdock v. City of Memphis, 87 U.S. 590, 20 Wall. 590, 22 L.Ed. 429 (1875), an early Supreme Court decision which involved facts amazingly similar to our case. It was held that there was an adequate independent state remedy. The Court treated this issue as preemptive. Cf. Miller’s Executor v. Swann, 150 U.S. 132, 14 S.Ct. 52, 37 L.Ed. 1028 (1893).

      . England v. Louisiana State Board of Medical Examiners, 375 U.S. 411, 426, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964).


author: PER CURIAM.

text:
    SECURITIES AND EXCHANGE COMMISSION, Petitioner-Appellee, v. Jack W. SAVAGE, and National Commodity Research & Statistical Service, Inc., Respondents-Appellants.
    No. 74-1290.
    United States Court of Appeals, Seventh Circuit.
    Argued Sept. 27, 1974.
    Decided March 17, 1975.
    David F. Silverzweig, Harry G. Fins, Chicago, 111., for respondents-appellants.
    Lawrence E. Nerheim, Gen. Counsel, Walter P. North, Associate Gen. Counsel, SEC, Washington, D. C., John I. Mayer, SEC, Chicago, 111., for petitioner-appel-lee.
    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, sitting by designation pursuant to 28 U.S.C. § 294(d) (1970).

   PER CURIAM.

This appeal has been taken from an order of the district court that directed National Commodity Research and Statistical Service (hereinafter, “NAT-COM”) and its president, Jack Savage, to comply in all respects with a subpoena duces tecum issued by the Securities and Exchange Commission (hereinafter, “SEC”). The subpoena required Savage to appear personally and listed by category and called for the production of a great quantity of business records of NATCOM.

The Securities Act and the Securities Exchange Act authorize administrative investigations of suspected violations, of those statutes. 15 U.S.C. § 77t(a) and § 78u(a) & (b). The latter section, paralleling the former, provides: “The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this chapter or any rule or regulation thereunder . . .And, in so doing, “the Commission ... is empowered to subpena witnesses, compel their attendance, take evidence, and require the production of any . records which the Commission deems relevant or material to the inquiry”.

In November, 1973, pursuant to the above cited statutory authority, SEC had undertaken a formal private investigation to determine whether NATCOM’s acts or practices in connection with “commodity futures contracts” that it offered or sold to its customers involved violations of the registration requirements and the anti-fraud provisions of the federal securities laws. The challenged subpoena issued in furtherance of. that investigation.

From the beginning the essential contention of the appellants has been that SEC must establish its “jurisdiction” by showing that appellants’ commodity futures contracts are “securities” within the meaning of the Securities Act before they can be compelled to obey the subpoena. However, the very purpose of the present investigation is to examine the appellants’ course of business in detail and with particularity, a procedure which, in the above quoted language of the statute, “the Commission in its discretion . . . deems necessary” to determine whether the present law is applicable to and is being violated by appellants’ transactions. Thus, the appellants would require SEC to answer at the outset of its investigation the possibly doubtful questions of fact and law that the investigation is designed and authorized to illuminate.

The courts should not frustrate the Commission’s performance of its legislatively assigned and specified responsibility by imposing any such requirement. In Oklahoma Press Publishing Co. v. Walling, 1946, 327 U.S. 186, 216, 66 S.Ct. 494, 509, 90 L.Ed. 614, an analogous situation led the Supreme Court to observe that the administrative agency’s “investigative function, in searching out violations with a view to securing enforcement of the Act, is essentially the same as the grand jury’s, or the court’s in issuing other pretrial orders for the discovery of evidence, and is governed by the same limitations”. Accordingly, the Court said that such an inquiry must not be “limited ... by ... forecasts of the probable result of the investigation”. To the same effect, see United States v. Powell, 1964, 379 U.S. 48, 57, 85 S.Ct. 248, 13 L.Ed.2d 112; United States v. Morton Salt Co., 338 U.S. 632, 642-43, 70 S.Ct. 357, 94 L.Ed. 401.

In two recent cases the Court of Appeals for the Second Circuit has refused to impose upon SEC just such a burden in justification of an investigative subpoena as appellants would have us impose here. Securities and Exchange Commission v. Brigadoon Scotch Distributors, Ltd., 1973, 480 F.2d 1047, cert. denied 415 U.S. 915, 94 S.Ct. 1410, 39 L.Ed.2d 469; Securities and Exchange Commission v. Wall Street Transcript Corp., 1970, 422 F.2d 1371. In our view those cases were correctly decided.

Separately, appellants complain that the subpoena’s demand for records is so comprehensive that it’s enforcement could seriously and unreasonably disrupt NATCOM’s business. Certainly a mass removal of business records currently in use could have that effect. However, counsel for SEC has assured this court that some records can adequately be examined without removal from NAT-COM’s place of business and that any removal of others will be organized and scheduled in cooperation with NATCOM to minimize disruption of business.

We have no reason to doubt the good faith of those assurances. However, if particular demands for production or removal of records should threaten unwarranted disruption of NATCOM’s business, appellants shall be free to ask the district court for appropriate protective restrictions. Securities and Exchange Commission v. Wall Street Transcript Corp., supra, at 1381.

We find no merit in any other contention advanced by appellants but not discussed in this opinion.

The judgment is affirmed.

Affirmed.


author: STEPHENSON, Circuit Judge.

text:
    Iris BIRD BEAR and Rosalie Bird Bear (a/k/a Rose Chavarria), Appellants, v. McLEAN COUNTY et al., Appellees.
    No. 74-1641.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 10, 1975.
    Filed April 1, 1975.
    Thomas K. Schoppert, North Dakota Legal Services, Inc., New Town, N. D., for appellants.
    Andrew R. Tossett, Minot, N. D., for appellees.
    Before MATTHES, Senior Circuit Judge, and STEPHENSON and WEBSTER, Circuit Judges.
   STEPHENSON, Circuit Judge.

The issue on this appeal is whether section 8 of the Highway Act of 1866, 43 U.S.C. § 932 (1970) [hereinafter cited as Highway Act], granted an easement for section line roads over appellants’ property which is operative notwithstanding the fact that the Indians appellants hold the land pursuant to a trust patent issued by the United States in accordance with 25 U.S.C. § 331 et seq. (1970). We find that the right of way granted by the Highway Act was not divested by the subsequent allotment and thus affirm the district court’s dismissal with prejudice of appellants’ suit against the county and township seeking compensation.

The facts in this action were stipulated. Appellants Iris Bird Bear and Rosalie Bird Bear (a/k/a Rose Chavarria) are enrolled members of the Three Affiliated Tribes, Fort Berthold Reservation, North Dakota. They are joint tenants of approximately eighty acres of land in Lo-quemont County, North Dakota. This land was allotted to their father, Rabbit Bird Bear, on December 19, 1910, and has been held in trust by the United States since that time. Pursuant to 25 U.S.C. § 348, a trust patent was issued to Bird Bear in 1910 and is now held by appellants, to whom the land was transferred in 1952.

Appellee McLean County maintains a gravel road on the western edge of the Bird Bear allotment. Appellee Loque-mont Township maintains a similar road on the southern edge of the property. These two roads diminish the allotment by approximately 1.8 acres. The roads were constructed along the section lines bordering the Bird Bear allotment pursuant to North Dakota Century Code § 24-07-03 (1970).

Appellants brought suit under 25 U.S.C. § 345 (1970) seeking damages from appellees either on the basis of trespass or of unlawful diminishment of their allotment without the consent of the Secretary of the Interior or compliance with state condemnation procedures. This appeal followed the district court’s denial of appellants’ motion for a partial summary judgment and dismissal of the complaint with prejudice, based upon the reasoning in Faxon v. Lallie Civil Township, 36 N.D. 634, 163 N.W. 531 (1917).

Appellants initially contend that the district court erred in denying their motion for a partial summary judgment which was based upon this court’s holding in United States v. Bennett County, 394 F.2d 8 (8th Cir. 1968). We disagree. In Bennett County this court found that the land across which the county sought to build a section line road pursuant to the right of way across public lands granted by the Highway Act of 1866 was not subject to that Act by virtue of the fact that Indian title to the land had been continually recognized since the Treaty of Fort Laramie of 1851, 11 Stat. 749. 394 F.2d at 10-13. The instant case involves a wholly different fact situation.

The Bird Bears’ allotment is located north and east of the Missouri River. The Indian title recognized in Bennett County that antedated the Highway Act concerned lands that lay south and west of the river. See Treaty of Fort Laramie of 1851, supra. The Bird Bears’ allotment was not made part of the Fort Berthold Reservation until 1880. See Executive Order of July 13, 1880, I Kappler, Law and Treaties 883 (2d ed. 1904); Act of March 3, 1891, 26 Stat. 989. In 1866 the land currently held in trust for the Bird Bears was public land. Thus, the court’s rationale in Bennett County regarding the status of the land at the time of the Highway Act is inapplicable here.

Instead, we believe that the reasoning in Faxon v. Lallie Civil Township, 36 N.D. 634, 163 N.W. 531 (1917), is dis-positive of this appeal. In that case, as here, the plaintiff sought compensation from the township for the road built across his land. The North Dakota Supreme Court found that the state’s right to construct section line roads had vested prior to the setting aside of the land as an Indian reservation.

Similarly, in the instant case the grant to the state under the Highway Act had vested prior to the inclusion of what is now the Bird Bear allotment in the Fort Berthold Reservation. There is no evidence to suggest that the rights in this land, which was clearly subject to the Highway Act’s grant at the time the legislation was enacted, have been divested by subsequent Congressional action. Further, as stated by the North Dakota court in analyzing the scope and substance of the grant to the state made by the Highway Act:

It is * * * clear that the right granted to the state was not in the nature of a license, revocable at the pleasure of the grantor, but that highways once established over the public domain under and by virtue of the [Highway] act become vested in the public, who had an absolute right to the use thereof which could not be revoked by the general government, and that whoever thereafter took the title from the general government took it burdened with the highways so established.

163 N.W. at 533 (citations omitted). We are convinced that the grant of right of ways initially attached to the land in question in 1866 and has been operative since that time.

We do not feel that the Bird Bears’ status as Indian trust patentees alters this result in any respect. Appellants claim that 25 U.S.C. § 348 (1970) flatly prohibits the burdening of allotted land with encumbrances such as the roads involved here. However, 25 U.S.C. §§ 311 and 357 expressly provide for the opening of such highways across individually allotted Indian land either with the permission of the Secretary of the Interior or after compliance with state condemnation procedures. See United States v. State of Minnesota, 113 F.2d 770 (8th Cir. 1940). Thus, it is clear that the “free of all charge or incumbrance whatsoever” language in § 348 is not to be taken literally, at least as it relates to the grant of right of ways. Therefore, since the grant of a right of way over individually allotted land is not precluded by or inconsistent with Congressional Indian policy, we find that the Highway Act, construed in connection with the various allotment statutes, compels the conclusion that the land involved here was allotted to the Bird Bears fully subject to the prior statutory grant of right of ways to the state.

Affirmed.

      . The Honorable Bruce M. Van Sickle, United States District Judge for the District of North Dakota.

      . This present statute was derived from chapter 33 of the Session Laws of the Territory of Dakota 1870-71. That law was an acceptance by the territorial government (and subsequently by the state) of the right of way grant contained in § 8 of the Highway Act of 1866, now 43 U.S.C. § 932. See discussion infra.

      . 25 U.S.C. § 345 provides, in relevant part, that:
      All persons who are in whole or in part of Indian blood or descent who are entitled to an allotment of land under any law of Congress, or who claim to be so entitled to land under any allotment Act or under any grant made by Congress, or who claim to have been unlawfully denied or excluded from any allotment or any parcel of land to which they claim to be lawfully entitled by virtue of any Act of Congress, may commence and prosecute or defend any action, suit, or proceeding in relation to their right thereto in the proper district court of the United States; and said district courts are given jurisdiction to try and determine any action, suit, or proceeding arising within their respective jurisdictions involving the right of any person, in whole or in part of Indian blood or descent, to any allotment of land under any law or treaty (and in said suit the parties thereto shall be the claimant as plaintiff and the United States as party defendant); * * *.

      . 25 U.S.C. § 311 provides that:
      The Secretary of the Interior is authorized to grant permission, upon compliance with such requirements as he may deem necessary, to the proper State or local authorities for the opening and establishment of public highways, in accordance with the laws of the State or Territory in which the lands are situated, through any Indian reservation or through any lands which have been allotted in severalty to any individual Indian under any laws or treaties but which have not been conveyed to the allottee with full power of alienation.

      . 25 U.S.C. § 357 provides that:
      Lands allotted in severalty to Indians may be condemned for any public purpose under the laws of the State or Territory where located in the same manner as land owned in fee may be condemned, and the money awarded as damages shall be paid to the allottee.

      . Appellants now contend that the district court also erred in reaching the merits of this case in view of the fact that an indispensable party, the United States, had not been joined. This issue was not raised in the district court. The United States was notified of this suit by the mailing of the complaint and summons by registered mail to the Attorney General of the United States, but the United States Attorney for the District of North Dakota was not served as required by 25 U.S.C. § 346 (1970). That statute further provides that when the United States does not respond, plaintiff shall not have judgment unless he establishes the' claim by proof satisfactory to the court. No response was filed by the government in this case.
      Under the circumstances and facts present in the instant case, we do not believe that the United States is an indispensable party without whose joinder complete relief cannot be granted. Cf. Fontenelle v. Omaha Tribe, 430 F.2d 143, 145-46 (8th Cir. 1970). Nor do we feel that the absence of the United States as a party will expose any party herein to multiple lawsuits or judgments. See generally Fed.R.Civ.P. 19(a). We further note that this court invited the Department of Justice to submit a brief as amicus curiae in this matter. That invitation was declined.

      . The Bennett County decision also disposes of appellants’ claim that reservation land is public land reserved for a public use and therefore not subject to the grant of right of way in the Highway Act, 43 U.S.C. § 932 (1970). See 394 F.2d at 12.

      . As mentioned above, the state of North Dakota (then the Territory of Dakota) accepted the grant of right of ways across public lands contained in the Highway Act in 1871. See Faxon v. Lallie Civil Township, 36 N.D. 634, 163 N.W. 531, 532 (1917).

      . That statute provides in part that:
      Upon the approval of the allotments provided for in sections 331-334 of this title, by the Secretary of the Interior, he shall cause patents to issue therefor in the name of the allottees, which patents shall be of the legal effect, and declare that the United States does and will hold the land thus allotted, for the period of twenty-five years, in trust for the sole use and benefit of the Indian to whom such allotment shall have been made, or, in case of his decease, of his heirs according to the laws of the State or Territory where such land is located, and that at the expiration of said period the United States will convey the same by patent to said Indian, or his heirs as aforesaid, in fee, discharged of said trust and free of all charge or incumbrance whatsoever: Provided, That the President of the United States may in any case in his discretion extend the period. * * *

      . It would appear that the main reason for including this language in the statute was to restrict the allottees’ power of alienation. See Arenas v. United States, 322 U.S. 419, 420-21, 64 S.Ct. 1090, 88 L.Ed. 1363 (1943); United States v. Oklahoma Gas Co., 318 U.S. 206, 211, 213, 63 S.Ct. 534, 87 L.Ed. 716 (1943).

      . The Supreme Court, in similar cases involving the trust relationship between Indians and the United States government, has sought to determine whether or not a specified activity or piece of legislation is consistent with the overall Indian policy. See Morton v. Ruiz, 415 U.S. 199, 236, 94 S.Ct. 1055, 39 L.Ed.2d 270 (1974); Mescalero Apache Tribe v. Jones, 411 U.S. 145, 156 n.12, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973); Squire v. Capoeman, 351 U.S. 1, 6, 76 S.Ct. 611, 100 L.Ed. 883 (1956).


author: BREITENSTEIN, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Francis Story GOELTZ et al., Defendants-Appellants.
    Nos. 74-1379, 74-1380 and 74-1381.
    United States Court of Appeals, Tenth Circuit.
    Argued Feb. 28, 1975.
    Decided March 21, 1975.

      Rodney G. Snow, Asst. U. S. Atty. (William J. Lockhart, U. S. Atty., on the brief), for plaintiff-appellee.
    Walker E. Anderson, Salt Lake City, Utah, for defendant-appellant Goeltz.
    William K. Reagan, Salt Lake City, Utah, for defendants-appellants Bray and Wray.
    Before BREITENSTEIN, McWIL-LIAMS and DOYLE, Circuit Judges.
   BREITENSTEIN, Circuit Judge.

Defendants-appellants Goeltz, Bray, and Wray were charged in a one-count information with possession of official insignia in violation of 18 U.S.C. § 701. Each was found guilty after trial to the court and appeals. We affirm.

Defendants demanded, and were refused, a jury trial. Section 701 authorizes a maximum penalty of six months imprisonment, a $250 fine, or both. The sentences for Goeltz and Bray were for six months imprisonment and a $250 fine. Wray received three years probation and a $250 fine. Section 1(3), 18 U.S.C., defines a petty offense as a misdemeanor the penalty for which does not exceed six months imprisonment or a $500 fine or both. The provisions of the Constitution, Art. Ill, § 2, cl. 3, and the Sixth Amendment, relating to jury trials in criminal cases do not apply to petty offenses. Frank v. United States, 395 U.S. 147, 148, 89 S.Ct. 1503, 23 L.Ed.2d 162. See also Taylor v. Hayes, 418 U.S. 488, 94 S.Ct. 2697, 2701, 41 L.Ed.2d 897 and cases there cited. Curtis v. Loether, 415 U.S. 189, 94 S.Ct. 1005, 39 L.Ed.2d 260 has no pertinence. The concern there was with the Seventh Amendment provision for jury trial in suits at common law where the value in controversy exceeds $20. Denial of jury trial in the instant case was proper.

Section 701 proscribes the possession of any “badge, identification card, or other insignia, of the design prescribed by the head of any department or agency of the United States for use by any officer or employee thereof, or any color-able imitation thereof, * * * except as authorized under regulations made pursuant to law * * *

The charge relates to an Internal Revenue Service seizure notice. It bears the seal of IRS in the upper left-hand corner and reads:

“WARNING
UNITED STATES GOVERNMENT SEIZURE
This property has been seized for nonpayment of internal revenue taxes, by virtue of levy issued by the District Director of Internal Revenue. All persons are warned not to remove or tamper with this property, in any manner, under severe penalty of the law.” •

The design was prescribed by IRS and the form was for use of revenue officers of grade nine or higher for the collection of federal taxes by the seizure of property.

An undercover IRS agent infiltrated a Salt Lake City group participating in a tax protest movement. At an April 5, 1973, meeting conducted by Goeltz, Bray said that seizure cards would be placed on automobiles; that this would cause irate citizens to call IRS; and that good publicity would result. Later Bray told the agent that about 2,000 notices had been printed and that “we are going to do some midnight riding.” At an April 19 meeting, attended by the three defendants and others, in Bray’s office, Goeltz displayed the seizure notices and said that he had received them “out of the blue.” The notices bore the facsimile signature of “Lloyd Fries-Revenue Officer.” Goeltz told the group that the notices should be discreetly placed where IRS agents would normally place them; that if anyone was caught he should state that he was replacing what apparently had fallen off; and that a person should not have more than one notice in his possession at one time. Bray said that gloves should be worn to avoid leaving fingerprints. Goeltz added that a stack of notices would be left on the table and that each should take some as leaving the meeting. Shortly after the meeting broke up, agents arrested the three defendants, each of whom had a large number of the notices in his possession. None of the defendants were IRS officers.

Defendants say that § 701 is vague and overly broad and hence violates due process requirements. The attack is against the word “insignia” and the phrase “colorable imitation.” Their clandestine activities show, and the court found, defendants’ knowledge of unauthorized possession and intent to violate § 701. Defendants’ acts were not unwitted, unintended or inadvertent. See Morissette v. United States, 342 U.S. 246, 270, 72 S.Ct. 240, 96 L.Ed. 288. They were done knowingly with intention to harass innocent citizens and embarrass IRS. In assessing vagueness, a statute must be considered in the light of the conduct with which a defendant is charged. See United States v. National Dairy Products Corp., 372 U.S. 29, 32-33, 83 S.Ct. 594, 9 L.Ed.2d 561.

The attacked provisions are not indefinite, vague or uncertain. Webster’s New International Dictionary, 2d ed., defines insignia as meaning “distinguishing marks of authority, office, or honor.” Black’s Law Dictionary defines “colorable imitation” to mean “such a close or ingenious imitation as to be calculated to deceive ordinary persons.” When measured by common understanding and practice, the challenged language conveys a sufficiently definite warning as to the proscribed conduct. United States v. Petrillo, 332 U.S. 1, 8, 67 S.Ct. 1538, 91 L.Ed. 1877. We find no unconstitutional infirmity in § 701.

Next, defendants argue that the statute does not apply to them. Using the principle of ejusdem generis, they say that the reference to “badge, identification card, or other insignia” limits insignia to badges and identification cards. Ejusdem generis is a canon of construction and may not be used to defeat the intent of Congress. United States v. Alpers, 338 U.S. 680, 682, 70 S.Ct. 352, 94 L.Ed. 457 and Gooch v. United States, 297 U.S. 124, 128, 56 S.Ct. 395, 80 L.Ed. 522. The enactment of § 701 was intended to protect the public against the use of a recognizable assertion of authority with intent to deceive. Defendants’ conduct was well within the statute’s proscription.

Defendants say that their acts were for the promotion of their political and philosophical views on taxation and, hence, were within the free speech protection of the First Amendment. It is difficult to relate the defendants’ possession of simulated seizure warnings to the communication of ideas. Defendants’ conduct was of the dirty-trick variety and was for the purpose of enraging its victims and annoying IRS.

If this non-speech activity had any idea-communication overtones, the First Amendment is no protection. The constitutional power to lay and collect taxes is broad and sweeping. Const. Art. I, § 8, cl. 1, and Sixteenth Amendment. Collection of taxes by distraint and seizure is authorized. 26 U.S.C. § 6331. The warning which defendants simulated was a proper notice of seizure. The protection which § 701 affords constitutionally furthered an important and substantial governmental interest unrelated to the suppression of free expression. The incidental, if any, restriction on First Amendment rights “is no greater than is essential to the furtherance of” the governmental interest. United States v. O’Brien, 391 U.S. 367, 376-377, 88 S.Ct. 1673, 20 L.Ed.2d 672. Defendants’ First Amendment claim has no merit.

Defendants assert that they were unlawfully arrested because the , charge was a misdemeanor not committed in the presence of the officers. One officer saw each defendant take possession of some of the simulated warnings and communicated his observations to his associates. Consideration must be given to the collective knowledge of all the officers involved. United States v. Sheppard, 10 Cir., 455 F.2d 1081, 1083. Also the information of the officers sufficed to furnish probable cause for belief that at least three felonies, e. g. 18 U.S.C. § 506 (possession of a counterfeit seal), 26 U.S.C. §§ 7206 (false statements) and 7212 (corrupt interference with administration of IRS laws), had been committed. The subsequent charge of a misdemeanor does not affect the legality of the arrests. The arrests, and the searches incidental thereto, were legal.

Defendants complain that they were not given a speedy trial. The arrests were on April 19, 1973; the information was filed on April 20, and the trial was on March 13, 1974. Between May 29, 1973, and March 11, 1974, defendants filed about 24 motions. At all times after April 20 defendants were released on personal recognizance.

In Barker v. Wingo, 407 U.S. 514, 530, 92 S.Ct. 2182, 33 L.Ed.2d 101 the Court said that a balancing test requires court approach to speedy trial problems on an ad hoc basis. Four factors which should be assessed are length of delay, reason for the delay, defendant’s assertion of his rights, and prejudice to defendant. In the instant case the delay was about 11 months and was due in large part to defense tactics. The government never requested any delay. Defendants did not assert a right to speedy trial. The record does not show any prejudice to any defendant because of the delay. No Fifth or Sixth Amendment rights of any defendant were denied by the delay. See United States v. Merrick, 10 Cir., 464 F.2d 1087, 1090-1091, cert. denied 409 U.S. 1023, 93 S.Ct. 462, 34 L.Ed.2d 314.

The claim of insufficient evidence to sustain the convictions borders on the frivolous. The evidence, which we have outlined in part, shows that each defendant knowingly and intentionally possessed reproductions of the official IRS warning of seizure under levy bearing the IRS seal and purporting to be signed by an IRS officer.

Arraignment was on July 26, 1973. The case was later set for trial on January 9, 1974, and eventually tried on March 13. On January 24, 1974, Bray filed a motion charging Judge Ritter with bias and prejudice and asking that the trial be before another judge. Bray’s appointed counsel sought to withdraw the motion but Bray would not permit him to do so. The motion falls far short of meeting the requirements of 28 U.S.C. § 144. It was untimely. It states conclusions rather than facts and shows at the most that Bray did not like Judge Ritter, not that Judge Ritter was prejudiced against Bray. A decision against Bray in another case does not show prejudice. The motion was properly denied. Knoll v. Socony Mobil Oil Company, 10 Cir., 369 F.2d 425, 429-430, cert. denied 386 U.S. 977, 87 S.Ct. 1173, 18 L.Ed.2d 138.

Defendants say that they did not have a fair trial because of the conduct of the judge. To support their claim they take numerous incidents out of context. On consideration of the entire record we are convinced that the judge exercised commendable restraint in the face of impertinent and contemptuous behavior. The trial was to the court. The judge did no more than that necessary to keep the proceedings within reasonable bounds. Cooper v. United States, 10 Cir., 403 F.2d 71, 73. A party may not taunt a judge into a reprimand and then on appeal claim the reprimand was justification for a new trial. These defendants had a fair trial and were properly convicted.

Affirmed.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Joseph Christopher ORTIZ, Defendant-Appellant.
    No. 74-2900.
    United States Court of Appeals, Ninth Circuit.
    March 21, 1975.
    M. L. Cheryl Rhodes, San Diego, Cal., for defendant-appellant.

      Harry D. Steward, U. S. Atty., William A. Bower, Asst. U. S. Atty., for
   OPINION

Before ELY and HUFSTEDLER, Circuit Judges, and CONTI, District Judge.

PER CURIAM:

After a jury trial, Ortiz was convicted on one count of an indictment charging a conspiracy to possess marijuana with intent to distribute, a violation of 21 U.S.C. § 846, and on a second count charging the substantive offense of possessing the same marijuana with intent to distribute, a violation of 21 U.S.C. § 841(a). On the conspiracy conviction, the District Court committed Ortiz, who was twenty-one years of age at the time of his convictions, to the custody of the Attorney General for treatment pursuant to the Youth Corrections Act, 18 U.S.C. § 5010(b). On the substantive count, however, the District Court treated Ortiz as an adult, sentencing him to five years confinement, with the sentence suspended and Ortiz placed on probation for five years, said sentence to be served consecutively to Ortiz’s commitment under the Youth Corrections Act.

On this appeal, Ortiz originally made three contentions: (1) that the District Court erred in reversing its original order suppressing the incriminating contraband, (2) that the search disclosing the contraband was illegal, and (3) that the evidence presented at trial was insufficient to support the two convictions. After careful study, we have concluded that none of the three contentions has merit; consequently, we affirm the judgment of convictions on both counts.

Acting sua sponte, however, this Court has raised the question whether the District Court erred in imposing an adult sentence to be served consecutively to Ortiz’s commitment pursuant to the Youth Corrections Act. We have requested and received additional written briefs directed to this issue.

When the District Judge sentenced Ortiz under the provisions of the Youth Corrections Act, he undeniably found, by implication, that Ortiz would derive benefit from the rehabilitative treatment contemplated and provided by that Act. Having so found, it was inconsistent for the judge to treat Ortiz as an adult for the purpose of sentencing on the substantive conviction and to impose the additional five year consecutive sentence. See United States v. Mollet, 510 F.2d 625, 626 (9th Cir. 1975); Cramer v. Wise, 501 F.2d 959 (5th Cir. 1974); United States v. Hayes, 474 F.2d 965 (9th Cir. 1973); United States v. Waters, 141 U.S.App.D.C. 289, 437 F.2d 722 (1970); Price v. United States, 384 F.2d 650, 652 (10th Cir. 1967); cf. Dorszynski v. United States, 418 U.S. 424, 94 S.Ct. 3042, 41 L.Ed.2d 855 (1974).

We therefore vacate that portion of the District Court’s judgment that imposes upon Ortiz the consecutive sentence for the substantive offense. In all other respects, the judgment of the District Court is affirmed.

Affirmed in part; vacated in part.

       The Honorable Samuel Conti, United States District Judge, Northern District of California, sitting by designation.

      . The Order calling for additional briefs was filed on February 6, 1975, and the submission of this appeal for decision was thereupon deferred. Upon the receipt and filing of the supplemental briefs, the appeal became ripe for decision. Accordingly, the Court hereby orders the submission of the appeal.


text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. C & W LEKTRA BAT CO., Respondent.
    No. 74-1600.
    United States Court of Appeals, Sixth Circuit.
    March 26, 1975.
    Elliott Moore, Deputy Associate General Counsel, National Labor Relations Bd., Peter G. Nash, John S. Irving, Jr., Patrick H. Hardin, Joseph E. Mayer, Alan D. Longman, Sandra McCandless, Washington, D. C., Bernard Gottfried, Director, Region 7, N. L. R. B., Detroit, Mich., for petitioner.
    Marvin Breskin, David B. Gunsberg, Breskin & Cox, Detroit, Mich., for respondent.
    Before PHILLIPS, Chief Judge, EDWARDS, Circuit Judge, and HERMANSDORFER, District Judge.

       Honorable H. David Hermansdorfer, Judge, United States District Court for the Eastern District of Kentucky, sitting by designation.

   ORDER

This case is before the court on the application of the National Labor Relations Board for the enforcement of its order issued against C & W Lektra Bat Company on April 3, 1974.

During negotiations for a collective bargaining agreement the Company insisted on a one year contract, while the Union insisted on a three year contract. The Union further stated that, in accordance with its policy, the contract would be submitted to the members for ratification. The Company met the three year demand, thus satisfying all items of mandatory bargaining. The Union decided against submitting the agreement to its members, but the Company refused to execute the agreement unless and until the Union complied with its original plan to submit the plan for ratification.

The Board held that the Company violated § 8(a)(1) and (5) of the National Labor Relations Act, 29 U.S.C. § 158(a)(1) and (5), by refusing to execute the collective bargaining agreement. 209 N.L.R.B. No. 165, (April 3, 1974).

Upon consideration, the court concludes that the order of the Board is supported by substantial evidence on the record considered as a whole, and that enforcement is required by the decisions of this court in Houchens Market of Elizabethtown, Inc. v. N. L. R. B., 375 F.2d 208 (6th Cir. 1967) and N. L. R. B. v. Big Run Coal & Clay Co., 385 F.2d 788 (6th Cir. 1967), cert. denied, 393 U.S. 824, 89 S.Ct. 83, 21 L.Ed.2d 95 (1968).

Accordingly, it is ordered that enforcement be granted.