text:
    Amory H. BRADFORD, Plaintiff-Appellant, v. The NEW YORK TIMES COMPANY, Defendant-Appellee.
    No. 784, Docket 73-2264.
    United States Court of Appeals, Second Circuit.
    Argued April 29, 1974.
    Decided June 21, 1974.

      J. Asa Rountree, New York City (De-bevoise, Plimpton, Lyons & Gates, Joseph Leibowitz, New York City, of counsel), for plaintiff-appellant.
    John W. Castles 3d, New York City (Lord, Day & Lord, Muriel Bell, Stephen M. Hudspeth, New York City, of counsel), for defendant-appellee.
    Before WATERMAN, FRIENDLY and MULLIGAN, Circuit Judges.
   MULLIGAN, Circuit Judge:

This is an appeal from a judgment dismissing the plaintiff’s complaint after a non-jury trial before Hon. Morris E. Lasker, United States District Judge, Southern District of New York, which was conducted in October, 1972. Judge Lasker’s opinion, not yet reported, was filed on July 17 and the judgment appealed from was entered on July 18, 1973. Affirmed.

The plaintiff, Amory H. Bradford (Bradford), was the General Manager, Vice President and a Director of the New York Times Company (Times) at the time of his voluntary resignation on June 6, 1963. He had been employed by the Times since 1947 in various executive capacities. At the time of his departure and for several years before, Bradford had broad and vital corporate responsibilities. He was in charge of all business operations, reporting directly to the publisher. He headed the Times’ advertising, circulation, production and promotion departments. He was responsible for acquiring newsprint. He set policy for the advertising department, including the fixing of rates. He was unquestionably the major figure on the. business side of the newspaper.

In 1959, the Times adopted an Incentive Compensation Plan (Plan), and Bradford participated in its drafting and, as a director, voted for its approval. The purpose of the Plan was “to retain and attract executives and employees who enhance [the Times’] tradition and contribute to its success.” The Plan provided for “retirement units” for selected executives and other personnel. The units were based upon the value of the participant’s service to the Times. The units were credited to the account of each participant and, upon his death, retirement or severance, he would receive in 10 equal annual installments shares of stock in the Times equal in sum to the number of his units.

Paragraph 14 of the Plan provided:

a. Each Participant shall enter into an agreement with The Times which shall provide that during the period payments will be made to him hereunder and in consideration of such payments, the Participant will not engage in any business or practice or become employed in any position in competition with The Times or which is otherwise prejudicial to the interests of The Times, and that he will hold himself available to The Times for reasonable consultation and other services.
b. In the event of any breach of such agreement by the Participant, The Times, in its sole discretion, may discontinue the installments still unpaid.

Paragraph 27 '• of the Plan provided:

c. Any decision or action taken by The Times, the Board or the Committee appointed by the Board to administer the Plan, arising out of or in connection with the construction, administration, interpretation and effect of the Plan shall be conclusive and binding upon all Participants and any person claiming under or through any Participant.

After the Plan had been adopted, Bradford was designated as a participant and was awarded 50 units for each of the years 1959, 1960, 1961 and 1962. On December 22, 1959, he entered into an agreement pursuant to Paragraph 14 of the Plan. It provided:

In accordance with Part I of The New York Times Incentive Compensation Plan, in which I am a participant, I agree that during the period that payments are made to me under the Plan and in consideration of such payments I will not engage in any business or practice or become employed in any position in competition with The Times or which is otherwise prejudicial to the interests of The Times and that I will hold myself available to The Times for reasonable consultation and other services.

At the time of his resignation in June, 1963, Bradford had accumulated 205 units (including a dividend credit). In July, 1963, Bradford received his first annual installment under the Plan, consisting of 21 shares of stock (then worth about $7000), leaving a balance due of 184 units (then worth about $60,000). The Times further voluntarily paid him six months salary amounting to $40,000.

On October 21, 1963, Bradford advised Harding Bancroft, a senior executive of the Times, that he was taking a position as an assistant to Mark Ferree, General Manager of Scripps-Howard Newspapers. That organization released an announcement of this fact to the press on October 23, 1963. Bradford became Assistant General Manager of Scripps-Howard Newspapers on January 1, 1964. This organization was a division of E. W. Scripps Company, which owned or controlled a chain of 16 newspapers in the United States, one of which was the New York World-Telegram & Sun. The division provided management services for all of the papers in the chain, including the World-Telegram. Bradford’s salary was fixed at $65,000 for one year. After consultation among executives and with outside counsel, the Times, on November 15, 1963, notified Bradford, by a letter which cited Paragraph 14 of the Plan, that by assuming his new position he had relinquished any further rights he might have had under the Plan. In response, by letter dated November 19, 1963, Bradford indicated that, while he did not contest that the Times had the right to discontinue the payments if it considered that a breach had occurred, he did not consider his new position to be “in any material way in competition with The Times or . otherwise prejudicial” to its interests. Before that letter was received (Bradford had written it while on vacation in Greece), the Times’ Board had approved the discontinuance of his payments, and it reaffirmed its determination on reconsideration of the matter on December 19, 1963.

Bradford’s employment at Scripps-Howard terminated on December 31, 1964. In April, 1966, he wrote to the Times requesting a resumption of payments. Due to stock splits and market changes, Bradford’s 184 units had risen in value from $60,000 to about $230,000. On May 2, 1966, the Times advised Bradford that since he had breached his agreement, his rights had terminated and were not resurrected by his subsequent separation from Scripps-Howard. On October 2, 1967, this diversity suit was commenced for breach of contract, seeking delivery of 12,300 shares of Class A common stock of the Times plus cash for dividend credits. The complaint was later amended to include a count alleging a violation of section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, for which Bradford sought treble damages and costs, including reasonable attorneys’ fees, pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15.

I

On appeal, Bradford principally urges that the' noncompetition agreement which he executed pursuant to the Plan constituted a restraint of trade which is void and unenforceable under New York law. The court below found that there was no restrictive covenant in restraint of trade because the agreement did not absolutely prohibit Bradford from working for a competitor, but rather offered him an “attractive option,” the retention of substantial retirement benefits. The court concluded that this was an “employee choice” case under New York law and therefore not to be tested by common law restraint doctrines.

Since the Plan and the agreement executed pursuant to its terms did limit Bradford’s employment opportunities after he severed his relationship with the Times, we are dealing with a restraint which is valid only if it is found to be reasonable. The New York Court of Appeals has announced that there are powerful considerations of public policy which militate against the sanctioning of the loss of a man’s livelihood. The covenant not to compete with a former employer is subject to an “overriding limitation of reasonableness.” Karpinski v. Ingrasci, 28 N.Y.2d 45, 49, 320 N.Y.S.2d 1, 4, 268 N.E.2d 751, 753 (1971); Purchasing Associates, Inc. v. Weitz, 13 N.Y.2d 267, 272, 246 N.Y.S.2d 600, 603-604, 196 N.E.2d 245, 247-248 (1963). In view of the strong public policy of the state, we cannot accept the theory that New York has adopted the so-called “employee choice” doctrine, which is alleged to make judicial determination of reasonableness unnecessary. Kristt v. Whelan, 4 A.D.2d 195, 164 N.Y.S.2d 239 (1st Dep’t 1957), aff’d without opinion, 5 N.Y.2d 807, 181 N.Y.S.2d 205, 155 N.E.2d 116 (1958), which is urged as the basis for the rule, has not been discussed in any subsequent court of appeals decision. The cases in New York have consistently been concerned with occupational limitations upon former employees, and we do not believe that Kristt is of significance in light of Chief Judge Fuld’s searching opinions for the court of appeals in Kar-pinski and Purchasing Associates.

In any event, we cannot characterize the contract before us as one which afforded Bradford a choice of alternative performances. Bradford’s agreement executed pursuant to Paragraph 14 of the Plan provided: “I agree that ... I will not engage in any business or practice . . . . ” The Plan itself (Paragraph 14) does not provide simply for the conditional forfeiture of benefits, but refers to an “agreement” not to compete and for discontinuance of unpaid installments in the event of a “breach.” New York recognizes that on occasion a contract may truly provide one of the parties the alternative of one performance or another. Hasbrouck v. Van Winkle, 261 App.Div. 679, 27 N.Y.S.2d 72 (3d Dep’t 1941), aff’d without opinion, 289 N.Y. 595, 43 N.E.2d 723 (1942). We do not construe this contract to be of this category. Bradford promised only to avoid competing and to hold himself ready for consulting service. The contract gave him no options with respect to his performance. In the event that the contract was breached, the Times reserved the right to withhold stock payments. In our view, this was provision for liquidated damages, which is a normal provision in contracts of this nature and which New York has consistently held to be, not an alternative contract affording the employee an option, but rather one specifically performable at the option of the employer. Karpinski v. Ingrasci, supra, 28 N.Y.2d at 52, 320 N.Y.S.2d at 7, 268 N.E.2d at 755; Diamond Match Co. v. Roeber, 106 N.Y. 473, 486, 13 N.E. 419, 423-424 (1887); Restatement of Contracts, § 325 & comment b at 492-93 (1932). As Professor Corbin has written, “if there is a promise to render one particular performance, with a provision for payment of a sum of money as a penalty or as liquidated damages for breach, without anything more, the contract is not an alternative contract.” 5A A. Corbin, Contracts § 1213, at 436 (1964).

The court below indicated that the forfeiture of stock here did not constitute a liquidated damages clause because no “sum” was fixed in the agreement and, furthermore, because the employee’s units would vary according to the importance of his position, length of service and the value of units paid at different times. The proposition that liquidated damages clauses are only valid if fixed sums of money are involved rather than the forfeitüre of property is not supportable. The Restatement of Contracts § 340 refers to the forfeiture of “a sum of’money or other property.” The fact that the amount of stock forfeited will vary with the value and length of the employee’s service as well as the time of the breach only confirms the proposition that it is a valid liquidated damages clause which is the product of some good faith effort on the part of the parties to estimate at the time of contracting the damage which would flow from a breach. In fact, setting a fixed amount for any breach irrespective of its gravity or the probable damage to be contemplated might well classify the clause as an unenforceable penalty. Lenco, Inc. v. Hirschfeld, 247 N.Y. 44, 159 N.E. 718 (1928); Seidlitz v. Auerbach, 230 N.Y. 167, 129 N.E. 461 (1920).

At the time Bradford commenced this suit, the value of his “retirement units” had escalated to $500,000, and the argument is made that this disparity between the amount forfeited and the damages to be reasonably anticipated renders the provision an unlawful penalty. However, it is well settled that the reasonableness of the sum selected as liquidated damages will depend upon the estimate of the parties at the time the agreement was made, not at the time of breach or at the time suit was commenced. United States v. Bethlehem Steel Co., 205 U.S. 105, 27 S.Ct. 450, 51 L.Ed. 731 (1907); Curtis v. Van Bergh, 161 N.Y. 47, 55 N.E. 398 (1899); Restatement of Contracts § 339 (1932); C. McCormick, Damages § 150 (1935); 5 S. Williston, Contracts § 777, at 683-85 (3d ed. W. Jaeger 1961). There is no claim here that the units initially determined on the basis of length and value of service were so disproportionate as to constitute a penalty. Obviously, the possibility of fluctuation in value was contemplated by the parties, and Bradford must have realized this when he decided to work for Scripps-Howard.

In sum, we are persuaded that we are presented with a restraint upon a former employee with a provision for liquidated damages in the event of a breach. The reasonableness of the restraint must be tested by the facts in the case before the court. Karpinski v. Ingrasci, supra, 28 N.Y.2d at 49, 320 N.Y.S.2d at 4, 268 N.E.2d at 753. We do not agree that Kristt represents the law of the state if it be construed to eliminate any inquiry into reasonableness because of some purported doctrine of “employee choice.” The inquiry remains whether or not the restraint was reasonable and the contract was breached.

II

In determining whether or not the restraint was reasonable, we are faced in this case with a question which thus far has not been discussed in any of the New York cases but which we think is pertinent and logically would be considered by the courts of that state. Common law courts in general and the courts of New York in particular have distinguished between, on the one hand, a covenant barring an employee or partner from competing while he is employed or engaged in the business of the partnership (e. g., Lynch v. Bailey, 275 App.Div. 527, 90 N.Y.S.2d 359 (1st Dep’t), aff’d without opinion, 300 N.Y. 615, 90 N.E.2d 484 (1949)) and covenants by the seller of a business and its good will to refrain from competing with the buyer (e. g., Hackenheimer v. Kurtzmann, 235 N.Y. 57, 138 N.E. 735 (1923)) and, on the other hand, covenants which bar an employee from competing after he has severed his relationship with his employer. E. g., Purchasing Associates, Inc. v. Weitz, supra. There is more flexibility in the first two categories in determining whether or not the covenant is reasonable because the employee or seller is receiving some consideration for the covenant — his salary is being paid or he has received consideration for the sale of the good will. The employee in the last category, however, may become a public charge, and, in any event, it is distasteful to curtail his opportunity to make a living. The case before us presents no such elements of unfairness. Bradford’s resignation did not terminate his employer’s obligations. He was to receive annual installments of stock for a ten-year period so long as he abided by his promise not to compete. There was a continuing consideration being paid for his loyalty and good will. While this was a restraint upon his liberty, it can hardly be described as unreasonable. Had he persevered, his reward would have been great indeed. In the employee restraint cases we have considered, breach led either to injunctive relief, in which case of course the employee was prevented from going elsewhere and at the same time received no new or continuing consideration from his former employer, or to the forfeiture of an amount posted by the employee or a judgment against him for the sum fixed as liquidated damages. Here, Bradford paid nothing but merely disabled himself from collecting the continuing payments made by the Times. We think, therefore, that the case has ah element not present in the prior employee cases in which there was no consideration for the post-employment covenant against competition, and that this factor cannot be overlooked in determining the reasonableness of the restraint presented here.

Appellant argues that New York law prohibits the enforcement of an agreement which restricts the competition of a former employee unless he threatens to disclose trade secrets or solicits business directly from former customers. However, in Purchasing Associates, Chief Judge Fuld stated:

If, however, the employee’s services are deemed “special, unique or extraordinary”, then, the covenant may be enforced by injunctive relief, if “reasonable,” even though the employment did no.t involve the possession of trade secrets'or confidential lists.

13 N.Y.2d at 272, 246 N.Y.S.2d at 604, 196 N.E.2d at 248.

The earlier description of Bradford’s duties should leave no real doubt that he, if anyone at the Times, was in the category “special, unique or extraordinary.” He was the No. 2 executive of the publication directly responsible for its business operation, which involved circulation, advertising, production and promotion. He was privy to confidential discussions regarding possible mergers and joint printing arrangements with other New York papers. He reported directly to the publisher.

We see no other elements of unreasonableness in the agreement. The time fixed, ten years, is commensurate with the payment of benefits. There is no geographical limitation set forth, but, by the terms of his agreement, Bradford is only precluded from competition which is detrimental to the Times, which is no greater than that to which the paper is entitled.

While not mentioned in the complaint, the appellant urges that the agreement violates the Donnelly Act, N. Y.Gen.Bus.Law § 340(1), which renders illegal contracts which restrain competition or the free exercise of any activity in the conduct of any business, trade or commerce. However, it is well understood that the New York statutory prohibition is no broader than the common law and that it adds no further strictures on otherwise reasonable restraints. See In re Davies, 168 N.Y. 89, 61 N.E. 118 (1901); In re Jackson, 57 Misc. 1, 107 N.Y.S. 799 (1908). Muggill v. Reuben H. Donnelley Corp., 62 Cal.2d 239, 42 Cal.Rptr. 107, 398 P.2d 147 (1965). relied upon by the appellant, did apply state law to void an employee restriction comparable to the one before us. However, that decision rested upon section 16,600 of the California Business and Professions Code providing that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” That section had been interpreted by California courts as an absolute bar to any employee restraints. Chamberlain v. Augustine, 172 Cal. 285, 288, 156 P. 479, 480 (1916). In 1949, Justice Dore in his opinion in Lynch v. Bailey, supra, had already noted the strict construction given to the California statute by the courts of that state. 275 App.Div. at 5, 90 N.Y.S.2d at 365. New York, on the other hand, has consistently followed the rule of reason approach, whether the action is based on common law or Donnelly Act grounds. See Paramount Pad Co. v. Baumrind, 4 N.Y.2d 393, 175 N.Y.S.2d 809, 151 N.E.2d 609 (1958). In sum, we find the agreement fair and reasonable under the law of New York.

Ill

The appellant argues that the agreement before us is so flagrantly unreasonable that it violates section 1 of the Sherman Act, and even urges this court to find that the employee non-competition covenant constitutes a per se violation of the Act. Having found the agreement before us to be reasonable, we of course must decline without reluctance to find that it constitutes a per se violation. Not only has the appellant failed to supply us with any case holding an employee restrictive covenant to be a per se violation, but no court applying the rule of reason has ever held such a contract violative of section 1 of the Sherman Act.

Judge Taft’s classic opinion in United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898), aff’d, 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136 (1899), relied upon by both sides here, did presage the rule of reason and the subsequent decisions of Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911), and United States v. American Tobacco Co., 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663 (1911), which limited the Sherman Act’s application to undue or unreasonable restraints of trade in light of their common law antecedents. These cases effectively overcame any earlier intimations that all restraints of trade, whether valid or not at common law, were now literally prohibited by section 1 of the Sherman Act. E. g., United States v. Trans-Missouri Freight Ass’n, 166 U.S. 290, 17 S.Ct. 540, 41 L.Ed. 1007 (1897). See M. Handler, Antitrust in Perspective 4-6 (1957).

It is true that certain agreements because of their “pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable . . . . ” Northern Pacific Ry. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). However, the litany of per se restraints, which includes horizontal price-fixing or division of markets, group boycotts and tying provisions, involves arrangements which have a major trade regulatory impact which is not at all discernible here. As Mr. Justice Marshall noted in United States v. Topco Associates, Inc., 405 U.S. 596, 607-608, 92 S.Ct. 1126, 1133, 31 L.Ed.2d 515 (1972): “It is only after considerable experience with certain business relationships that courts classify them as per se violations of the Sherman Act.” See also White Motor Co. v. United States, 372 U.S. 253, 261-263, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963). Although employee restraints have been known to the common law since the 15th century, their evolving history illustrates that rule of reason considerations continue to apply; and a state court or, in a diversity case, a federal court applying state law, provides the usual forum for protecting the employee and whatever interest the public may have. There is certainly a total absence of federal Sherman Act experience. There is therefore not enough here to justify our acceptance of the invitation to classify such a restraint as a per se violation of the Sherman Act.

IV

The appellants further urge that, in any event, Bradford did not breach the agreement. The pertinent language of the agreement is: “I will not engage in any business or practice or become employed in any position in competition with The Times or which is otherwise prejudicial to the interests of The Times .' . . . ” Appellant construes this language to mean that it precludes Bradford either from going into business on his own in. competition with the Times or from taking a position which involves him personally in prejudicial competition with the Times. The court below, properly in our view, construed the agreement to prevent Bradford from going to work for a competitor in a position in which his work would assist his employer to better compete with the Times. That would certainly be detrimental or prejudicial to the Times. To construe the clause as urged by the appellant would make the first part of the prohibition precluding him from setting up his own business in competition with the Times mere sur-plusage.

The court below found that Scripps-Howard was in competition with the Times:

[W]e find that the Times has established by a clear preponderance of the evidence (1) that Scripps and the Scripps chain were, as a unit, in competition with the Times, (2) that the New York World-Telegram was in competition with the Times and (3) that Bradford’s work for Scripps breached his agreement with the Times by contributing to the chain as a unit and by benefiting the Telegram as a member of the unit.

We do not find it necessary to discuss the district judge’s first finding. The substantial competition for readership in New York between the Times and the World-Telegram was established beyond any doubt. While Bradford’s affiliation with the World-Telegram was limited, the record does reveal that a major problem of the chain was the financial support of the World-Telegram and that Bradford was directly concerned with the strengthening of its position.

Paragraph 27 of the Plan provided that decisions or actions taken by the Times or its Board, arising out of or in connection with the construction, administration, interpretation and effect of the Plan, “shall be conclusive and binding.” Appellant urges that this clause gave the Times no power to determine that a breach had occurred, and that, if it did, it would be contrary to public policy since it would constitute an ouster of the courts from their nondelegable role of enforcing state policies. Gitelson v. Dupont, 17 N.Y.2d 46, 268 N.Y.S.2d 11, 215 N.E.2d 336 (1966), is in point and is precisely contrary to the contention of the appellant. There it was held that the rights of an employee under a comparable retirement plan were purely contractual and that a determination by a pension board that a claimant was ineligible, was, as provided in the agreement, final and conclusive absent a showing by the claimant that the board’s ruling was motivated by bad faith or fraud or was arbitrary. See also Menke v. Thompson, 140 F.2d 786, 791-792 (8th Cir. 1944). The lower court in the case before us not only found that a breach did occur, but further commented that it was difficult to find that the Times could have come .to any other conclusion. There is no charge of fraud or bad faith here, and the contention that the action was arbitrary finds no support in the record.

Appellant argues that Gitelson, supra, is distinguishable since that case did not involve a restrictive covenant. Appellant relies on Aimcee Wholesale Corp. v. Tomar Products, 21 N.Y.2d 621, 289 N.Y.S.2d 968, 237 N.E.2d 223 (1968), and American Safety Equipment Corp. v. J. P. Maguire & Co., 391 F.2d 821 (2d Cir. 1968), for the proposition that it is beyond the power of the parties to provide in an arbitration clause, which is asserted to be final and binding upon the parties, a determination as to whether or not a violation of state or federal antitrust laws has taken place. The proposition is unassailable but just as clearly inapplicable here. The Times made a determination that the contract was breached and that Bradford forfeited his rights under the Plan. No determination was made as to whether or not the agreement violated the state or federal trade regulatory laws, and, if it had been made, it would of course not bind this court. This court and not the Times has made the determination that no common law or statutory violation occurred.

Finally, appellant urges that, if a breach occurred, section 14(b), which provided that the Times may “discontinue” payments, should be interpreted to mean “suspend” payments until Bradford completed his service with ScrippsHoward (one year), at which point they should be resumed. In view of the power vested in the Times to interpret the agreement, we agree with the court below that the construction employed by the Times was not arbitrary. It is conceded that the word “discontinue” can mean either “suspend” or “terminate.” Allowing an executive of the calibre of Bradford to bring his expertise to a competitor even for a limited time would be injurious to the Times. The construction given by the Times to “discontinue” was to “terminate,” and we do not disagree.

Affirmed.

      . That case has been relied upon in several lower court cases which have enforced comparable restraints without inquiry with respect to or even any discussion of reasonableness. See Kidd v. Oakes, 39 Misc.2d 645, 241 N.Y.S.2d 403 (Sup.Ct.App. Term 1963) (per curiam) ; Kerpen v. First Investors Corp., 45 Misc.2d 793, 257 N.Y.S.2d 880 (Sup.Ct.1965), aff’d without opinion, 26 A.D.2d 620, 272 N.Y.S.2d 687 (1st Dep’t 1966) ; In re Kumm, 36 Misc.2d 816, 233 N.Y.S.2d 598 (Sup.Ct.1962). In Jacobus v. Massachusetts Mut. Life Ins. Co., 91 F.Supp. 674 (W.D.N.Y.1950), the court did not discuss the issue of possible restraint upon an employee and cited no cases.

      . We do not overlook the language of Paragraph 14(b) of the Plan, which provided that in the event of a breach, the Times “may discontinue the installments still unpaid.” This by no means gives Bradford the option to perform or not. As the court of appeals pointed out in Rubinstein v. Rubinstein, 23 N.Y.2d 293, 297-298, 296 N.Y.S.2d 354, 358-359, 244 N.E.2d 49, 51-52 (1968), the presence of a liquidated damages clause does not bar specific performance unless there is language which provides that recourse to liquidated damages shall be the “sole” remedy. The court there also noted the absence of the use of the term “option,” which is also a factor here. The courts of New York will look to the reasonableness of the agreement whether the employer seeks equitable relief or damages. Paramount Pad Co. v. Baumrind, 4 N.Y.2d 393, 175 N.Y.S.2d 809, 151 N.E.2d 609 (1958), is a case in which the employer sought damages rather than injunctive relief and the court applied a reasonableness test. Hence, we see no pertinence here in the claim that whether or not the restriction is reasonable is of no judicial concern since the Times has failed to seek equitable relief. The remedy sought by the employer is not pertinent.

      . The court below found that the amount of $60,000 was, in any case, not disproportionate to the expected damages. The stock involved, when traded publicly, rose to a peak of $900,000 in value in 1963, but apparently was worth $500,000 if it had been taken at the times provided in the agreement. In view of the position taken below and here, the actual intermediate values are irrelevant.

      . New York oases holding employees not to be “special, unique or extraordinary” include : Clark Paper & Mfg. Co. v. Stenacher, 236 N.Y. 312, 140 N.E. 708 (1923) (drummer) ; Kaumagraph Co. v. Stampagraph Co., 235 N.Y. 1, 138 N.E. 485 (1923) (printers of fabric designs) ; Frederick Bros. Artists Corp. v. Yates, 271 App.Div. 69, 62 N.Y.S.2d 714 (1st Dep’t 1946), aff’d without opinion, 296 N.Y. 820, 72 N.E.2d 13 (1947) (theatrical booking agent) ; Corpin v. Wheatley, 227 App.Div. 212, 237 N.Y.S. 205 (4th Dep’t 1929) (beauty improver) ; Magid v. Tannenbaum, 164 App.Div. 142, 149 N.Y.S. 445 (1st Dep’t 1914) (traveling representative for tailors); Small v. Kronstat, 175 Misc. 626, 24 N.Y.S.2d 535 (Sup.Ct. 1940) (skilled watch artisan). Bradford’s responsibilities and skills were of an obviously higher order.

      . Appellant’s major reliance for the proposition that employee restrictive covenants are violative of the Sherman Act is Professor Blake’s article Employee Agreements Not to Compete, 73 Harv.L.Rev. 625, 628 n. 8 (1960). However, it is not at all suggested in the cited footnote that such agreements are “per se” violative. It is indicated that if “the required effect on commerce is present, unreasonable postemployment restraints would seem clearly to violate the Sherman Act . . . .” It is very dubious that Bradford’s employment with Scripps-Howard had more than a de minimis effect, if any, upon interstate commerce. In any event, the comment is limited to “unreasonable” restraints with no suggestion that all restraints are per se unreasonable,

      . The common law hardly provided a reasonable basis for prediction of the outcome of litigation involving restraints. Dewey, The Common-Law Background of Antitrust Policy, 41 Va.L.Rev. 759, 761 (1955). Of course, the fact that incentive plans such as that which we have before us were not known prior to the Sherman Act is not at all decisive. The common law continues, and emerging schemes of restraint will not escape scrutiny. Cf. Standard Oil Co. v. United States, supra, 221 U.S. at 59-60, 31 S.Ct. 502.


source: Caselaw Access Project

author: ADAMS, Circuit Judge:

license: Public Domain

text:
    In the Matter of I. J. KNIGHT REALTY CORP., Bankrupt. Appeal of UNITED STATES of America, Claimant.
    No. 73-2008.
    United States Court of Appeals, Third Circuit.
    Argued June 28, 1974.
    Decided July 31, 1974.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Crombie J. D. Garrett, Karl Schmeidler, Attys. Tax Div. Dept, of Justice, Washington, D. C. for claimant; Robert E. J. Curran, U. S. Atty., of counsel.
    P. J. DiQuinzio, Stephen P. Dicke, De-chert Price & Rhoads, Philadelphia, Pa., for bankrupt; Gordon W. Gerber, Arthur E. Newbold, III, Dechert, Price & Rhoads, Philadelphia, Pa., of counsel.
    Before ADAMS, HUNTER and GARTH, Circuit Judges.
   OPINION OF THE COURT

ADAMS, Circuit Judge:

Is a “non-operating” trustee of a bankrupt corporation liable for the payment of federal taxes on income generated during the liquidation and distribution of the bankrupt estate? That is the primary question presented on this appeal.

I.

The facts of the case are undisputed. I. J. Knight Realty Corporation, the bankrupt, owned as its principal asset a building located in Philadelphia. Its sole business was the leasing of space in the building, and the provision of maintenance services to its tenants.

Knight filed a petition for an arrangement under Chapter XI of the Bankruptcy Act in November of 1962. A receiver was appointed and authorized to continue operation of Knight’s business. Shortly thereafter, in January of 1963, Knight’s building was destroyed by fire; consequently, no business remained for the receiver to operate.

In May of 1963, Knight was adjudicated a bankrupt, and a trustee was appointed. At that time, the bankrupt’s assets consisted of the following: (1) claims against various insurance companies in the amount of $1,440,000; (2) the land on which Knight’s building had stood; and (3) cash in the amount of $2,030.11. The City of Philadelphia, in September of 1963, instituted condemnation proceedings against the land owned by Knight, and the trustee was subsequently awarded $130,000. plus interest for the land. In November of 1963, the bankruptcy referee approved a settlement in the amount of $800,000. for Knight’s claim against one of the insurance companies. In March of 1964, the trustee, pursuant to authorization by the Bankruptcy Court, paid $162,789.45 out of the insurance proceeds to satisfy an outstanding mortgage on Knight’s building. Later that same month, the trustee deposited $500,000. of the insurance proceeds in interest-bearing accounts, and in fiscal year 1966 deposited another $65,000.

Counsel for the trustee, in February of 1967, filed with the District Director of Internal Revenue the trustee’s federal income tax returns for the fiscal years 1963 through 1966. Each return was filed on a corporate income tax Form 1120, and each set forth various items of income and deductions, including interest earned on bank deposits. Based on the trustee’s computations, each return showed no taxable income, and hence no tax due, after giving effect to net operating loss carryovers. Returns for the fiscal years 1967 through 1970 were filed in due course, and also showed no taxable income for the years in question.

The Commissioner in 1971 conducted an audit of the trustee’s returns for the years 1963 through 1970. Various adjustments in the trustee’s computations were made by the Commissioner and resulting deficiencies were determined.

In March of 1973, the Commissioner filed a proof of claim against the trustee in the bankruptcy proceeding, asserting that the trustee was liable for payment of corporate income taxes, personal holding company taxes, and penalties and interest in the total amount of $366,736.-05 for various of the years 1963 through 1970. The income in question was claimed to have been derived by the trustee from a capital gain on the condemnation sale of the land, and from interest on the insurance proceeds that had been deposited in interest-bearing accounts.

Upon cross-motions for summary-judgment the district court, 366 F.Supp. 450, held that a “non-operating” trustee is not liable for payment of federal income taxes, and entered judgment for the trustee. The Commissioner has appealed.

II.

Whether a trustee in bankruptcy is liable to pay federal income taxes on the bankrupt’s income is determinable, certainly in the first instance, by reference to the Internal Revenue Code. Section 61 of the Code sweepingly defines “gross income” (the base for calculating taxable income) as “all income from whatever source derived.” However, section 61 does not purport to establish the tax liability of particular classes of individuals. Rather, that task is accomplished by the sections grouped under Subtitle F of the Code. Section 6012(b) provides in part as follows:

(b) Returns Made by Fiduciaries and Receivers—
(3) Receivers, trustees and assignees for corporations, — In a case where a . trustee in bankruptcy . . ., by order of a court of competent jurisdiction, by operation of law or otherwise, has possession of or holds title to all or substantially all the property or business of a corporation, whether or not such property or business is being operated, such trustee . . . shall make the return of income for such corporation in the same manner and form as corporations are required to make such returns.

Section 6151, part of the same Code Subtitle, states that:

“Except as otherwise provided in this section, when a return of tax is required under this title or regulations, the person required to make such a return shall . . . pay such tax . at the time and place fixed for filing the return. . . . ”

There is no provision in the Code that explicitly exempts a trustee in bankruptcy from the duty imposed by section 6151. Thus, application of the plain terms of that section require that a trustee in bankruptcy — provided he is required to file a return under section 6012 — must pay taxes on the income generated by a bankrupt estate. Since the trustee here concedes that he “ha[d] possession of or [held] title to all or substantially all [of Knight’s] property” within the meaning of section 6012, it would appear that he was required to file returns for the years 1963 through 1970, and so is liable for the taxes levied on Knight’s income for those years.

The taxpayer mounts a multifaceted attack on this conclusion. His first contention is that a literal reading of section 6151 does not result in the imposition of any tax liability upon a non-operating trustee. This argument appears, at first, to draw sustenance from a difference in the terminology used in sections 6012 and 6151. Section 6012 provides that a non-operating trustee in the taxpayer’s circumstances must file a “return of income,” while section 6151 speaks in terms of a “return of tax.” Consequently, argues the taxpayer, the obligation to pay (to file a “return of tax”) established by 6151 does not automatically befall all those who are required by section 6012 to file a “return of income.” The taxpayer maintains that, before concluding that section 6151 results in any tax liability to a trustee, we must find in the Code an explicit direction to non-operating trustees to file “returns of tax.” Not surprisingly, the Code is devoid of such a direction. The final step in the trustee’s syllogism is that a non-operating trustee is not liable for the payment of taxes on the bankrupt’s income.

The appeal of this argument is quickly deflated by a glance at the realities of taxation and of the underlying schema of the Code. The “return of income” required to be filed under section 6012 is, for a trustee of a bankrupt corporation, Form 1120. A trustee in bankruptcy need file no other basic federal income return on behalf of the corporation, except perhaps informational returns setting out the amount of distributions in liquidation. Form 1120 provides space for the listing of the bankrupt’s income, its deductions, and significantly the “tax due” for the taxable year.

Therefore, the “return of income” required by section 6012 is, we think, precisely the same “return of tax” to which reference is made by section 6151. Accordingly, we reject on a terminological basis the taxpayer's argument that sections 6012 and 6151 cannot be read in pari materia. The two statutory sections, read in conjunction, impose tax liability on one who, like this taxpayer, is required to file a “return of income” and who, in fact, has had taxable income.

The taxpayer seeks to resuscitate and buttress his interpretation of sections 6012 and 6151 by referring to their statutory predecessors. Section 52(a) of the 1939 Code, for instance, imposed an obligation to file an income tax return and to pay any tax due only upon trustees in bankruptcy who were actually operating the business of the bankrupt. Similar provisions were in the revenue laws since the Revenue Act of 1916. Cases interpreting these early statutes uniformly denied that a non-operating trustee had any obligation to file a return or to pay tax on the income of the bankrupt estate, despite a contrary implication in the corresponding Treasury Regulations. Section 6012(b) (3) was enacted in 1954 and altered prior law at least to the extent of imposing upon certain non-operating trustees the duty of filing returns. However, argues the taxpayer, there is a positive indication in the legislative history of that section that Congress had no intention in 1954 of subjecting a non-operating trustee to a payment obligation, an obligation that had clearly not existed under prior law.

Taxpayer’s expositional odyssey through sections 6012 and 6151 relies heavily on section 960 of the Judicial Code, which provides as follows:

“Any officers and agents conducting any business under authority of a United States court shall be subject to all Federal, State and local taxes applicable to such business to the same extent as if it were conducted by an individual or corporation.”

The wording in this section predated the 1954 enactment of section 6012(b)(3) of the Revenue Code, and his remained unchanged to date. The taxpayer seizes upon the words “conducting any business” in section 960, and maintains that these are “substantive” terms which limit liability for any and all tax payments to operating trustees. He argues that the change in the law effected by section 6012(b)(3) is merely a “procedural” change regarding filing requirements and, since the limited “substantive” liability set forth by the terms of section 960 has not been altered, a non-operating trustee is not liable for the payment of taxes under that section.

This argument is not persuasive. Section 960 of the Judicial Code was not intended to establish or limit substantive income tax liability. Rather, the section was originally designed to avoid what the Commissioner refers to as “importunate litigation” between state taxation authorities and court-appointed guardians of corporate property. The addition of the word “federal” to the statute in 1948 was designed to confirm the liability of court-appointed officers for federal excise taxes, and to negate any implication that the omission of a reference tc federal taxes in the pre-1948 statute was intended to confer an immunity from federal taxation. Moreover, we hardly think it likely that Congress would have sought to establish or limit substantive income tax liability by a provision in the Judicial Code. The sheer extent and intricacy of the Revenue Code evinces Congress’ attempt to provide therein a comprehensive plan of taxation; the wording of a discrete section of the Judicial Code cannot be deemed to have been meant to serve as a primary exposition of the duties and obligations of a trustee qua taxpayer.

Any argument that section 960 was adopted to create and define the parameters of a non-operating trustee’s income tax liability is laid to rest by the Supreme Court’s analysis of Congress’ intention in enacting that section. In Palmer v. Webster and Atlas National Bank the Court stated that the purpose of section 960 was to equalize the competitive situations of operating businesses, be they in bankruptcy or not, by affirming the tax liability of those under court supervision. The Supreme Court perceived no design on Congress’ part to comment upon, by negative implication, the tax liability of non-operating trustees.

To reiterate, we think that a fair reading of the pertinent sections of the Internal Revenue Code renders the non-operating trustee of a bankrupt corporation liable for the payment of taxes on the bankrupt’s income, provided the trustee has possession of, or title to, substantially all the bankrupt’s property. Since, as the taxpayer concedes, he did satisfy this proviso, he is liable for the payment of taxes on taxable income, if any there be, derived from Knight’s property. This conclusion follows directly, if not ineluctably, from the terms of the statutes, their supporting policies, and their practical implementation.

There is, unfortunately, a dearth of prior judicial decisions concerning the question in issue. The Ninth Circuit, in United States v. Sampsell. expressed the same view regarding sections 6012(b) (3), 6151, and 960 that we adopt here. However, consideration of the precise point contested in this case was not essential to the decision in Sampsell, thus perhaps rendering the Ninth Circuit’s exposition a dictum. The Supreme Court has avoided deciding the question. A conclusion contrary to ours was reached by a referee in bankruptcy in In re Statmaster Corp. The referee relied on reasoning substantially similar to that advanced by the trustee here, but, for the reasons we have stated in analyzing the trustee’s arguments, we decline to follow the view announced by the referee in Statmaster.

At oral argument, the taxpayer pointed out that requiring the trustee to pay a tax on income produced by the bankrupt’s estate depletes the assets available for distribution to creditors. Exempting the trustee from such tax would, according to the taxpayer, serve to further one of the primary objectives of the Bankruptcy Act, that of compensating creditors as fully as possible from the assets of bankrupt estates. If some believe they detect an inconsistency between the mandate of the Internal Revenue Code and a policy consideration arguably reflected in the Bankruptcy Act, Congress, not the courts, appears the proper forum to effect a reconciliation. However great the temptation, it is hardly our province to expand or contract the terms of a taxing statute to comport with what may seem to some to be salutary policy principles, absent a clearer statutory expression of such principles than that offered' by the taxpayer in this case. Where Congress has intended to exempt a particular class of, persons from the obligation to pay income taxes, it has done so explicitly in the Code. Encountering no such exemption covering trustees in bankruptcy, there is no viable alternative but to hold the trustee here liable for the payment of taxes on the bankrupt’s income for the years in question.

Accordingly, the judgment of the district court will be reversed, and the case remanded for further proceedings not inconsistent with this opinion.

      . The taxpayer also challenges the imposition of a i>ersonal holding company tax, the taxation of certain capital gains, and the Commissioner’s calculation of the amount of taxes, interest and penalties due for certain years. Since the district court’s’ grant of the taxpayer’s motion for summary judgment was based upon the proposition that a non-operating trustee is simply not liable for any federal tax on the bankrupt’s income, we shall resolve that issue alone, and leave for further treatment by the district court the other questions.

      . Speaking retrospectively, the district court stated, at page 4 of its opinion, that “the fair market value of the company’s gross assets as of May, 1963, had equalled $988,280.-ll-$856,250. in unsettled insurance claims, $130,000. in land, and $2,030.11 in cash.”

      . The fact that the taxpayer calculated that no tax was due, and did so by claiming loss carryovers, might indicate that he thought he was liable for taxes on the bankrupt’s income, assuming of course that there was net income.

      . 26 U.S.C. § 61. Section 61 specifies that income derived from interest and from dealings in property — the two sources of Knight’s income from 1963 through 1970— are includable in gross income.

      . Subtitle F is headed “Procedure and Administration.” The provisions pertinent to this case appear in Chapters 61 and 62, styled respectively as “Information and returns” and “Time and place for paying tax.”

      . 26 U.S.C. § 6012(b).

      . 26 U.S.C. § 6151.

      . Form 1120 is headed “U. S. Corporation Income Tax Return.” It is the form, in fact, filed by the trustee here in each of the taxable years 1963-1970.

      . See, e. g., Forms 966 and 1099L.

      . The taxpayer does not contest that he was required by § 6012(b) (3) to file a Form 1120.

      . The taxpayer points out that § 6011(e) of the Code requires “that returns of income taxes be made whether or not there is tax liability.” However, this provision only tends to confirm that a “return of income” and a “return of tax” are one and the same thing.

      . See, e. g., Revenue Act of 1916, c. 463, 39 Stat. 756, Sec. 13(c).

      . See, e. g., In re Heller, Hirsh & Co., 258 F. 208 (2d Cir. 1919).

      . Treasury Regulations 86, Art. 52-2, promulgated under the Revenue Act of 1934, broadly construed the statutory term “operating” to provide that, if a receiver had full custody and control over the business and property of the corporation, he was to be deemed to be operating the business within the meaning of the statute. The Regulations have contained substantially the same interpretation since.

      . 28 U.S.C. § 960.

      . Prior to 1948, section 960 made reference only to state and local taxes. In 1948, the reference to federal taxes was added.

      . See 3A Collier, Bankruptcy § 62.14, p. 1523-26.

      . See Brown v. Collector of Taxes for District of Columbia, 101 U.S.App.D.C. 200, 247 F.2d 786, 788 n. 9 (1957).

      . 312 U.S. 156, 163, 61 S.Ct. 542, 85 L.Ed. 642 (1941).

      . 266 F.2d 631 (9th Cir. 1959).

      . In Sampsell, the trustee was held to be, in effect, an operating trustee.

      . See Nicholas v. United States, 384 U.S. 678, 694 n. 28, 86 S.Ct. 1674, 16 L.Ed.2d 853 (1966).

      . 332 F.Supp. 1248 (S.D.Fla.1971), aff’d 465 F.2d 978 (5th Cir. 1972). The district court reversed the referee on jurisdictional grounds, not on the basis of the question in issue here. In so doing, the district court stated: “The Court does * * * take note of the troublesome problems in the administration of bankruptcy which are raised and discussed in the Referee’s thoughtful opinion. While the temptation to do otherwise is surely great, the resolution of these problems must be left to Congress.”

      . The district court, in the present case, in a thorough opinion, agreed with the analysis of the referee in Statmaster.

      . The referee in Statmaster listed two additional policy considerations supporting the exemption of the trustee from income taxation. First, “there are many small estates in which deposits at interest may be deterred if the trustees are subjected to the burden of filing returns and trying to determine what deductions may be authorized, . . .” 332 F.Supp. at 1259. Second, the trustee may well be forced to sign and certify a tax return without personal knowledge of the facts, and to secure appropriate bookkeeping and accounting assistance despite meager funds to do so. “A failure to perform this duty if it is required could result in personal liability for the trustee,” and possible civil and criminal penalties exist. Id.

      . Cf. Nicholas v. United States, supra, 384 U.S. at 690, 86 S.Ct. 1674.

      . For instance, an insolvent bank is exempted by section 7507 of the Code, 26 U.S.O. § 7507. See also, 26 U.S.C. §§ 501-521, 6033. It is generally recognized that exemptions from taxation, being matters of legislative grace, must be narrowly construed. See Commissioner v. Jacobson, 336 U.S. 28, 69 S.Ct. 358, 93 L.Ed. 477 (1949) ; New Colonial Ice Co. v. Helvering, 292 U.S. 435, 54 S.Ct. 788, 78 L.Ed. 1348 (1934).


author: MULLIGAN, Circuit Judge:

text:
    UNITED STATES of America, Appellee, v. Vincent GUGLIARO, Appellant.
    No. 1089, Docket 74-1378.
    United States Court of Appeals, Second Circuit.
    Argued June 6, 1974.
    Decided July 19, 1974.

      Shirah Neiman, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty. for the S. D. of N. Y., John D. Gordan III, Asst. U. S. Atty., of counsel), for appellee.
    Gustave H. Newman, Brooklyn, N. Y., for appellant.
    Before KAUFMAN, Chief Judge, and MANSFIELD and MULLIGAN, Circuit Judges.
   MULLIGAN, Circuit Judge:

Vincent Gugliaro appeals from a judgment convicting him of making false declarations while under oath in a federal court. Judgment was entered in the United States District Court for the Southern District of New York on March 1, 1974, after a jury trial before Hon. Inzer B. Wyatt, United, States District Judge. He also appeals from an order of Judge Wyatt of February 28, 1974, denying his motion for a new trial. Gugliaro was indicted on seven counts for making false declarations in violation of 18 U.S.C. § 1623. He was acquitted on six counts and convicted of one count (count 4) for which, he was sentenced on March 1, 1974, to two years imprisonment with three months to be served in jail, followed by two years probation plus a $3,000 fine. His conviction is affirmed.

I

Gugliaro and fifteen other defendants were initially indicted on November 19, 1970, on charges of conspiracy to violate the securities laws and to commit mail fraud, together with the corresponding substantive crimes, in connection with the manipulation of securities of the Imperial Investment Corporation. The appellant and nine other defendants were tried on these charges before Judge Morris E. Lasker and a jury. Only two defendants, Bernard Weiss and Ronald Alpert, were convicted. Gugliaro was acquitted on the substantive counts and the jury disagreed on the conspiracy count. (This trial is hereinafter referred to as Imperial I). Gugliaro, together with other defendants, was retried on the conspiracy count before Judge Lawrence Pierce and a jury, and all were acquitted. (This trial is hereinafter referred to as Imperial II). Gugliaro, who did not take the stand in Imperial II, did testify.in his own defense in Imperial I, and his indictment for perjury in the present case was based on that testimony.

Gugliaro was convicted on count 4 below because the jury found false his testimony in Imperial I that he had not been in the Potpourri Restaurant and had never seen Weiss there. Weiss and Alpert, who had been convicted in Imperial I and who were the co-owners (with a third party) of Potpourri, were stock swindlers who had played leading roles in the scheme. On the trial below, both Weiss and Alpert testified that, from November, 1969 through late January or February, 1970, they had had numerous meetings with Gugliaro at various places, including the Potpourri, to discuss the Imperial stock manipulation. Michael Hellerman, who had pleaded guilty in Imperial I prior to trial, also testified below that he had met with Gugliaro on numerous occasions at Gatsby’s Restaurant, and also that Gugliaro had told him that he (Gugliaro) could meet with Alpert and Weiss at Potpourri. At one of the Gatsby meetings, Hel-lerman testified, he had paid Gugliaro $10,000, which represented profits on the deal and which was to be split with Alpert, Weiss and others. Weiss further testified that, after the Imperial I trial, Gugliaro had been fearful that the Government might be able to establish that he actually had been at Potpourri. He had advised Weiss that his defense would be that he had made an honest mistake since he knew the restaurant as Chez Joey before its name was changed to Potpourri. Both Weiss and Alpert testified that, after the name change, the Potpourri sign had been installed in October, 1969, and that the restaurant was eventually closed in May, 1970. Frances Sanoff testified that she had been employed by Alpert and Weiss as a hat-check girl and had seen Gugliaro in the restaurant on several occasions. Lucille Cicalo, who had worked as a waitress at the restaurant when it was known as Chez Joey and later when it became the Potpourri, testified that she had seen Gugliaro there on various occasions from September, 1969 until May, 1970.

II

Appellant’s major argument on appeal is that his perjury prosecution is barred by the constitutional guarantee against double jeopardy, i. e., the jury’s acquittal of Gugliaro in Imperial II necessarily determined the issue to be decided on his perjury trial. The question presented here is the same as that raised in our recent opinion in United States v. Tramunti, 501 F.2d 1334, 1346 (2d Cir. 1974), and the same principles of law are applicable.

It is well understood that if an issue of ultimate fact has once been determined by a final judgment in a criminal case, the same issue cannot be relitigated between the same parties in a later prosecution. Ashe v. Swenson, 397 U.S. 436, 443, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970); United States v. Zane, 495 F.2d 683 (2d Cir. 1974). However, the burden is upon the defendant to show that the jury’s verdict in the prior trial necessarily decided the issues raised in the second prosecution. United States v. Friedland, 391 F.2d 378, 382 (2d Cir. 1968); see United States v. Zane, supra, 495 F.2d at 691 n.5. Moreover, as we have noted in United States v. Tramunti, supra, this presents the defendant who has been acquitted in a criminal case with a most difficult burden since it usually cannot be determined with any certainty upon what basis the previous jury reached its general verdict. 501 F.2d at 1346. See United States v. Cioffi, 487 F.2d 492, 498 & n.8 (2d Cir. 1973), cert. denied, 414 U.S. 1151, 94 S.Ct. 907, 39 L.Ed.2d 105 (1974).

The burden is thus upon the appellant here to establish that by acquitting him of conspiracy in Imperial II, the jury necessarily rejected the Government’s evidence that Gugliaro met with Weiss at the Potpourri. As we have noted in Tramunti, this burden is particularly onerous where the acquittal in the criminal case involves the crime of conspiracy. 501 F.2d at 1346-1349. In order to prove Gugliaro’s guilt of the conspiracy charge in Imperial II, the United States had to establish not simply that Gugliaro met Weiss at Potpourri, but, in addition, that they were conspiring to commit securities and mail fraud violations. In determining whether a rational jury could have believed that Gugliaro was present at Potpourri with Weiss and yet could have based its verdict of acquittal on other issues, we must look to the entire record of Imperial II, including the pleadings, the summations, the charge and the evidence. Ashe v. Swen-son, supra, 397 U.S. at 444, 90 S.Ct. 1189; Sealfon v. United States, 332 U.S. 575, 578-579, 68 S.Ct. 237, 92 L.Ed. 180 (1948).

In our view, the jury might well have decided that the Government’s proof that Gugliaro frequented the Potpourri and met with Weiss was credible but that this alone- failed to establish the conspiracy. It was suggested by trial counsel in his opening and summation in Imperial II that even if Gugliaro had been present at some meetings and known some of the persons charged with being parties to the scheme, it did not follow that his connection with the alleged conspirators was other than innocent. The restaurant was, after all, a public place and Weiss and Alpert were owners. The jury could reasonably have decided that the mere frequenting of the restaurant and being seen with a proprietor was not tantamount to participation in an unlawful conspiracy. See United States v. Tramunti, supra, 501 F.2d at 1348. In this connection, Judge Pierce had properly instructed the jury:

I want to caution you that mere association with one or more of the conspirators does not make one a member of the conspiracy. Nor is knowledge without participation sufficient. What is necessary is that the defendant you are considering be found to have participated with knowledge of at least some of the purposes of the conspiracy and with intent to aid in the accomplishment of those unlawful ends.

In short, the jury may have acquitted Gugliaro not because he had never been to the Potpourri or seen Weiss there, but because he lacked sufficient knowledge or intent to be a conspirator in the Imperial scheme.

Another rational explanation for the acquittal here is that although the indictment charged that Gugliaro was a member of a single conspiracy, the jury may have found that several conspiracies existed, and that he could therefore not have properly been found guilty. United States v. Lopez, 420 F.2d 313, 317 (2d Cir. 1969). The jury was instructed on the issue of multiple conspiracies, and, in summation, one defense counsel argued the point to the jury.

Appellant further argues that if his presence in the Potpourri with Weiss was not necessarily determined in the Imperial II acquittal, then his denial of this in Imperial I was not of sufficient materiality to sustain the indictment and conviction of perjury here. The argument is without merit. The test of materiality in a perjury case is whether or not the false testimony was capable of influencing the jury on the issue before it. United States v. Gremillion, 464 F.2d 901, 905 (5th Cir.), cert. denied, 409 U.S. 1085, 93 S.Ct. 683, 34 L.Ed.2d 672 (1972); United States v. Whitlock, 456 F.2d 1230 (10th Cir. 1972). The misstatement of fact need not be “dispositive” of the inquiry in quéstion to be material. United States v. Birrell, 470 F.2d 113, 115 n.1 (2d Cir. 1972). See also Barnes v. United States, 378 F.2d 646, 649 (5th Cir. 1967), cert. denied, 390 U.S. 972, 88 S.Ct. 1056, 19 L.Ed.2d 1184 (1968). Quite obviously it was material to the Government’s conspiracy case to establish that Gugliaro met with Weiss at the Potpourri, since it tended to establish that Gugliaro was part of the Imperial scheme.

As we have already indicated, the United States had to establish not only the meeting with Weiss, but also that Gugliaro’s meeting was evidence of participation with knowledge and the requisite intent in the single conspiracy with which the appellant was charged. While the meetings with another conspirator were clearly sufficiently material by any test to sustain a perjury indictment and conviction if Gugliaro had falsely denied them, a rational jury could find that they were, standing alone, insufficient to demonstrate participation with knowledge and the requisite intent in a single conspiracy. The appellant has therefore failed to establish that collateral estop-pel barred the prosecution for perjury.

Ill

The only other argument on appeal which merits discussion is the contention that the Government suppressed exculpatory material when it failed to disclose information that Weiss had been an FBI informant prior to the Imperial I trial. This is alleged to constitute a failure to comply with 18 U.S.C. § 3500 and also a violation of Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). On the trial below, Weiss testified that he had begun his cooperation with the United States Attorney’s office in the autumn of 1972, while memoranda which were allegedly suppressed indicated that he had started to report to the FBI in February, 1971. It is argued that Weiss’ testimony on the question of his cooperation was shown by the memoranda to have been false and that by permitting Weiss to falsely testify and failing to correct the record, the Government had violated its obligations under United States v. Lusterino, 450 F.2d 572 (2d Cir. 1971). Moreover, the argument runs, Weiss the informant was permitted to infiltrate Gugliaro’s defense in Imperial I in violation of his sixth amendment rights.

The argument is not supported by the facts in the record before us. In the ease below, Weiss testified that during Imperial I he had had a conversation with Gugliaro in which the latter revealed his fear that his testimony that he had never met Weiss at Potpourri might well be vulnerable and that his defense to any Government efforts to prove its falsity would be that he knew the restaurant as Chez Joey. At the end of his direct examination the prosecutor turned over to Judge Wyatt for in camera inspection the allegedly suppressed memoranda. The memoranda, summaries of Weiss’s cooperation with the FBI and his involvement in criminal activity, had previously been revealed to Judge Lasker and Judge Charles L. Brieant, Jr. on the sentencings of Weiss for the Imperial stock fraud and a second unrelated stock fraud respectively. Judge Wyatt ruled that since the. memoranda were not statements of the witness, they were not properly 3500 material. This was a matter to be determined by the trial court in the first instance, Campbell v. United States, 373 U.S. 487, 493, 83 S.Ct. 1356, 10 L.Ed.2d 501 (1963), and his determination was not clearly erroneous. United States v. Covello, 410 F.2d 536, 546 (2d Cir.), cert. denied, 396 U.S. 879, 90 S.Ct. 150, 24 L.Ed.2d 136 (1969).

Judge Wyatt made no ruling on the Brady question at that time. However, while the jury was deliberating below, Weiss was testifying in another criminal case not involving Gugliaro. In that case, statements Weiss made to the FBI prior to the commencement of his cooperation with the United States Attorney’s office were turned over to defense counsel as 3500 material. Trial counsel for Gugliaro obtained this material and made a motion for a new trial urging the points made here. Judge Wyatt denied that motion, thus rejecting the Brady claim.

We find that the motion was properly denied. The claim of suppression is groundless since material indicating Weiss’s relationship with the FBI was turned over for Judge Wyatt’s examination below. .Moreover, after our own review of the various reports, we conclude that the information concerning Weiss’s status as an informant was not exculpatory. Indeed, with but one exception, the reports do not even mention Gugliaro’s name. Obviously, the mere fact that the statements to the FBI may have been relevant § 3500 material in an unrelated case does not make them pertinent here.

Furthermore, we find no false statement in Weiss’s testimony concerning his cooperation in the Imperial prosecution, and thus there is no reason to apply United States v. Lusterino, supra. The reports shown to Judge Wyatt and the one turned over in the other case indicate that Weiss was giving information to the FBI as early as February, 1971, about certain organized crime figures engaged in other criminal activities. But with respect to the Imperial matter, which is germane here, Weiss continued to maintain his innocence and did not fully cooperate with the United States Attorney’s office until the fall of 1972, just as he testified below. In fact, not only was Weiss tried and convicted in Imperial I, but he also failed to testify on behalf of the Government in Imperial II, which concluded in July, 1972. Moreover, Weiss’s jail sentence for his Imperial I conviction was not suspended by Judge Lasker until March of 1973.

Since Weiss in fact testified accurately about his cooperation with the prosecution, the only use that could possibly have been made of the fact that he had been giving unrelated information to the FBI in early 1971 would have been to shake his credibility before the jury as the expectant recipient of Government benevolence in return for incriminatory evidence. We see no “reasonable likelihood” that this could have influenced the verdict. Giglio v. United States, 405 U.S. 150, 154, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972). The argument that Weiss was suspect was repeatedly made below on summation by defense counsel. The appellant here was acquitted of all counts except count 4 and the testimony of Weiss was there corroborated by other witnesses. In view of the extensive attack upon Weiss’ credibility that was in fact made, there is no doubt that the additional information would, at best, have been of minimal value. United States v. Pfingst, 490 F.2d 262, 276 (2d Cir. 1973), cert. denied, 417 U.S. 919, 94 S.Ct. 2625, 41 L.Ed.2d 224 (1974).

The argument that Weiss was a sham defendant introduced into Imperial I as an informant to lull the suspicions of the other co-defendants is belied by the record. Weiss did not cooperate with the Government in regard to the Imperial scheme, he was convicted in that case and was thereafter twice indicted. His conversion came only at a later point. Gugliaro’s disclosure to him of his intended perjury was a statement to a legitimate co-defendant and was a risk that people in this business will have to assume. United States v. Rosner, 485 F.2d 1213, 1226-1227 (2d Cir. 1973), cert. denied, 417 U.S. 950, 94 S.Ct. 3080, 41 L.Ed.2d 672 (1974). The conversation antedated the appellant’s indictment for perjury and, for that reason, was not within the proscription of Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246 (1964).

Affirmed.

      . Count 4 charged that Gugliaro knowingly testified falsely at Imperial I when he testified as follows:
      Q. Did you ever see him [Weiss] in the Potpourri restaurant?
      A. No, sir.
      Q. Were you ever in that restaurant, Mr. Gugliaro ?
      A. No.

      . Prior to trial of this case, the defense made a motion seeking dismissal of the indictment on the ground that the prosecution was barred by the doctrine of collateral es-toppel. The motion was denied.

      . The credibility of Alpert was clearly in issue in Imperial II, and the jury could sensibly believe that, while the owner might well be minding the store, he had ample motive to implicate Gugliaro in order to curry Government favor.

      . The court charged :
      However, if you find that the evidence does not show one overall conspiracy but instead shows the existence of a number of separate and independent conspiracies, as some of the defendants here have argued to you, each with its own aims and objectives and each with its own separate nucleus or core of conspirators, then you would have multiple conspiracies, and the government would have failed to establish the single overall conspiracy as charged, and it would be your duty to acquit the defendants on the charge of conspiracy.

      . The only reference to Gugliaro in the reports is a statement in those turned over to Judge Wyatt in this case that Weiss had testified before a grand jury about Gugli-aro’s perjury in Imperial I. Weiss’ grand jury testimony was presented to the defense upon completion of the direct examination of Weiss below.

      . Defense counsel referred to Weiss at one point in his summation as follows:
      He acknowledged that he faced a long time in jail, maybe ten years, with 27 counts in Computer Field and he was allowed to plead to one count, and he admitted that this was his inducement for testifying and he admitted, also, on cross-examination — and that’s why I say, you’ve got to look at the entire picture to look at the evidence, not when a man gets up here well-dressed on that witness stand, well-attired, in the latest of fashions and presents a story.
      Listen to that story. See how he handles it. See what its substance is. See whether it is believable.
      He tells you that he probably wouldn’t testify if he couldn’t save time from going to jail. The eight-month sentence he tells you was reduced. His one-year sentence on Lanai was suspended, and he hasn’t been sentenced yet on Home of Country. And don’t you think you are entitled to consider whether uppermost in Mr. Bernie Weiss’s mind is the idea that he wants to cooperate so that he gets a recommendation from this prosecutor to that sentencing judge? Don’t you think that after he has told you that he is here to save time in jail that he wants again, a favorable recommendation, a favorable word? And don’t you think what he’s doing by this testimony is seeking the favor and seeking that favorable word?


author: ELY, Circuit Judge:

text:
    EDDIE DASSIN, INC., a California corporation, Appellant, v. EASTERN AIRLINES, INC., a corporation, Appellee.
    No. 73-2113.
    United States Court of Appeals, Ninth. Circuit.
    Aug. 5, 1974.
    Ronald L. M. Goldman of Goldman, Gangloff & Boehme, Beverly Hills, Cal., for appellant.
    Donald G. Shanahan, John R. Johnson of Brill, Hunt, Debuys & Burby, Los Angeles, Cal., for appellee.

      Before ELY and CARTER, Circuit Judges, and EAST, District Judge.

       Honorable William G. East, Senior United States District Judge, Eugene, Oregon, sitting by designation.

   OPINION

ELY, Circuit Judge:

Appellant, Eddie Dassin, Inc. (hereinafter “Dassin”), is a California corporation which designs and sells knitwear, primarily sweaters to wholesale customers. Dassin instituted suit against Eastern Airlines, Inc. (hereinafter “Eastern”) for Eastern’s alleged negligence in connection with two separate shipments of garments to Puerto Rico. The District Court found that Eastern, after taking possession of the goods, negligently delayed the delivery of one shipment for approximately two months and that the consignee, Darlene Knitwear, Inc. (hereinafter “Darlene”) justifiably refused to accept the goods due to the tardiness of the delivery. As to Dassin’s second claim, the court found that the subsequent shipment, due to Eastern’s negligence, was lost and never delivered to the consignee. The court concluded adversely to Dassin, however, that Eastern’s liability was limited to damages calculated at $0.50 per pound, rather than damages for the actual value of the garments. The court based its conclusion on Tariff Rule No. 52, filed by Eastern with the Civil Aeronautics Board pursuant to 49 U.S.C. § 1373. We affirm.

In October of 1970 Dassin and Eastern entered into a written agreement in which Eastern agreed to transport two shipments of ladies’ apparel from Los Angeles, California, to San Juan, Puerto Rico. Eastern further agreed to deliver the shipments to Darlene in Cayey, Puerto Rico. The shipping contract was entered into by Dassin through Steve Goldberg & Company (hereinafter “Goldberg”), an authorized cargo agent for certain airlines, including Eastern. The agreement was embodied in two shipping documents which were completed by Goldberg. In one space designated “DECLARED VALUE FOR CARRIAGE,” each Airway Bill contained the notation “MAX FREE.” The term “MAX FREE” is an abbreviation of “maximum free value” and indicates that a shipment is protected only to the amount of the tariff limit. In another space designated “NATURE AND QUANTITY OF GOODS,” however, there appeared a description and estimated value of the garments.

Since the District Court found that Eastern was negligent in shipping the goods, both parties agree that Eastern’s Tariff Rule No. 52 governs the disposition of the appeal. See Tishman & Lipp, Inc. v. Delta Air Lines, 413 F.2d 1401 (2d Cir. 1969); Blair v. Delta Air Lines, Inc., 344 F.Supp. 360 (S.D.Fla. 1972), aff’d mem., 477 F.2d 564 (5th Cir. 1973). Rule 52(A) provides in part :

“[A] shipment shall have a declared value of $0.50 per pound but not less than $50.00 unless a higher value is declared on the Air Bill at the time of receipt of the shipment from the shipper, and if a higher value is so declared, an additional transportation charge of $0.10 shall be required for each $100.00 ... by which such higher value exceeds $0.50 per pound or $50.00, whichever is higher.” (Emphasis added.)

One of the purposes of the rule is to permit the carrier to determine and fix its rates according to the risk assumed. Because of this, a carrier such as Eastern is able to furnish the transportation of goods at a minimum rate, with corresponding limited liability, unless the shipper voluntarily chooses to pay an additional charge and thereby secure additional protection.

A representative of Eastern testified at trial that the phrase “MAX FREE,” when placed in the section entitled “DECLARED VALUE FOR CARRIAGE,” indicated that Eastern agreed to incur liability only to the extent of the maximum tariff amount without an additional transportation charge. Moreover, he explained that statements of value appearing elsewhere than in the “DECLARED VALUE FOR CARRIAGE” space on the Airway Bill are ignored and do not constitute a declaration of value for the purpose of obtaining protection greater than the tariff limit. Conversely, Dassin claimed that in its agreement with Eastern’s agent, Goldberg, it had declared a higher value for shipment purposes since the value of the goods was placed on each Airway Bill, albeit in an improper place. The president of Dassin testified that the shipments were sent on a “collect” air freight basis and that he assumed that Darlene, the consignee, would pay any additional charge. This testimony was contradicted to some extent, however, when he further testified that he was unaware of the fact that an additional charge was necessary in order to acquire added protection. Although the president of Goldberg testified as to his understanding of the contents of the Airway Bills, he also explained that he was not personally involved in the transaction. Moreover, it is undisputed that Dassin failed to instruct either Eastern or Goldberg that an additional valuation charge should be assessed, nor did it pay an additional amount. In line with its own understanding of the terms of the agreement, Eastern did not in fact assess an additional shipping charge.

Based on the foregoing facts, the District Court found that Dassin did not make a declaration of value for the purpose of obtaining increased protection under Eastern’s Tariff Rule No. 52.

Under the applicable tariff rule, the shipper, Dassin, had the obligation to inform the carrier that it desired protection in excess of the tariff limit. Additionally, a shipper, in order to obtain enlarged coverage, must agree to pay the carrier the additional transportation charge specified in Tariff Rule No. 52. Obviously, the Airway Bills pertaining to the subject shipments did not clearly indicate a desire on the part of Dassin to acquire the additional coverage. There was substantial evidence at trial which supports the conclusion that neither party intended that the garments be shipped at the higher rate. Moreover, there was ample evidence to support the court’s finding that Dassin did not inform the carrier that it desired the additional coverage. The District Court’s dispositive factual findings are amply supported by substantial evidence, and it correctly concluded that Dassin’s recovery was restricted by the tariff limitation of 50 cents per pound.

Dassin’s contention that the trial judge erroneously failed to consider certain hearsay evidence is without merit.

Affirmed.

      . Jurisdiction was based on diversity of citizenship, 28 U.S.C. § 1332.

      . On Dassin’s first claim, the court held that Dassin was entitled to damages in the amount of $1,800.50, or that Dassin could recover the goods, which remained in Eastern’s possession. Additionally, the District Court held that Dassin was entitled to $1,786.50 on its second claim.

      . The two documents were designated “Airway Bill No. 007-0312 8366” and “Airway Bill No. 007-0312 8370.”


author: MOORE, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. John Marion EATON, Defendant-Appellant.
    No. 73-3905.
    United States Court of Appeals, Fifth Circuit.
    Sept. 20, 1974.
    Lee A. Chagra, El Paso, Tex., for defendant-appellant.
    Frank McCown, U. S. Atty., W. E. Smith, Asst. U. S. Atty., Fort Worth, Tex., for plaintiff-appellee.
    Before MOORE, AINSWORTH and RONEY, Circuit Judges.

       Hon. Leonard P. Moore, Senior Circuit Judge for the Second Circuit, sitting by designation.

   MOORE, Circuit Judge:

This is an appeal from a judgment of conviction by the United States District Court for the Northern District of Texas, the Honorable William M. Taylor, Jr., Judge, entered after trial to the court. Appellant was convicted of possession with intent to distribute approximately 19.4 pounds of marijuana in violation of Title 21, United States Code, Section 841(a)(1).

An indictment had originally been returned against appellant on October 4, 1972, charging that:

On or about the 24th day of August, 1972, in the Northern District of Texas, John Marion Eaton knowingly and intentionally did possess with intent to distribute to a, Government Agent about 8,780 grams of marijuana, a Schedule I controlled substance. (Emphasis supplied).

Appellant was tried on this charge before a jury on November 13 and 14, 1972, the Honorable Leo Brewster, United States District Judge, presiding, and was found guilty.

After the government had completed the presentation of its evidence, defendant’s attorney moved for a judgment of acquittal on the ground that, as a matter of law, the evidence adduced was insufficient to convict defendant for the crime charged, i. e., that the evidence did not prove that Eaton specifically intended to distribute the marijuana to a government agent. The motion was denied. After the verdict was announced, defendant renewed his motion for acquittal. The motion was again denied but ttié trial court, at that time, “set aside the verdict . . . [a]nd grant [ed] a new trial” sua sponte. The Judge was moved to take this action by his observation that the original indictment was defective because it specifically alleged that the defendant had intended to distribute a controlled substance “to a Government Agent,” an allegation that, taken literally, was nonsensical. The Judge remarked:

I just cannot imagine a darn fool allegation like they have got in this indictment. It sure would pay if you [the prosecution] would just start thinking a little before drawing these indictments .... Frankly, I think that I am going to have to grant a new trial in it because of the way the indictment is drawn. I just do not see how a man could possess marijuana unlawfully with the intent specifically to sell it to a government agent. I do not think the evidence shows he had that intent.

The prosecution took Judge Brewster’s observations to heart and handed down a second indictment, charging that:

On or about the 24th day of August, 1972, in the Northern District of Texas, John Marion Eaton, defendant, knowingly and intentionally did possess with intent to distribute approximately 19.4 pounds of marijuana, a Schedule I controlled substance.

Appellant filed a Motion En Barre to block his second prosecution on the grounds that it violated his Fifth Amendment right to be put in double jeopardy. His motion was denied and a second trial began. Both sides stipulated that the transcript of the first trial could be submitted to the presiding judge of the second, who would try the facts solely on the basis of the evidence adduced at the first trial. Based upon the transcript of the first proceeding, appellant was found guilty of the crime charged in the second indictment.

Appellant contends on appeal: that he has been forced to submit to double jeopardy in violation of his constitutional rights; that the second trial and conviction should therefore be nullified ; and that since, as a matter of law, the trial judge in the first proceeding found that there was insufficient evidence to warrant conviction of the offense charged, prosecution against the appellant should be dismissed. We find it unnecessary to entertain Eaton’s claim of double jeopardy because we find that Judge Brewster lacked the authority to order a new trial when one had not been requested by the defendant.

In many important respects this case is identical to United States v. Vanter-pool, 377 F.2d 32 (2d Cir. 1967). In that case the defendant had been tried before a jury on two counts of selling a controlled substance (heroin). During the course of the two day trial, defendant objected to the introduction of prior statements which he had made to government investigators. His objection was based on the authority of Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). Eight days after the jury returned a verdict of guilty, the trial judge asked counsel for both sides to submit memoranda on the Miranda issue. The judge, after considerable reflection, found that the defendant’s prior statements, which had been introduced at trial, should have been suppressed. He therefore set the jury verdict aside and ordered a new trial even though the defendant had never requested this action.

Approximately two months later defendant was retired before a different judge and was found guilty upon the same evidence (with the exception of the now suppressed prior statements) originally introduced against him. Defendant moved for a dismissal of the indictment against him on the ground that he had been subjected to double jeopardy. The trial court denied the motion and sentenced him.

On appeal, Judge Kaufman (now Chief Judge) of the Second Circuit wrote that it was unnecessary to reach the issue of double jeopardy because the original trial judge had lacked the power to order a new trial. He pointed out that Rule 33 of the Federal Rules of Criminal Procedure was amended in 1966 in order to underscore the fact that a trial judge could not order a new trial on his own motion. He refers to the Note of the Advisory Committee on Rules which accompanied the amendment of Rule 33. That Note provides that:

The amendments to the first two sentences make it clear that a judge has no power to order a new trial on his own motion, that he can act only in response to a motion timely made by a defendant. . . .

The conclusion of the Second Circuit has since adhered to by the United States Court of Appeals for the District of Columbia in United States v. Green, 134 U.S.App.D.C. 278, 414 F.2d 1174 (1969).

Both Green and Vanterpool point out that the trial court’s lack of authority to order a new trial sua sponte makes a nullity of the second trial and the conviction emanating therefrom. However, as both decisions specifically hold, this determination does not automatically lead to the conclusion that the original conviction ought to be overturned or the original indictment dismissed.

Eaton’s second indictment and conviction are void in all respects. This can only mean that Eaton’s first conviction remains intact. As in Green this result “leaves the case in the posture of a jury verdict having been returned with [a] post-verdict motion . . . pending . . . ,” i. e., the motion of defendant under Rule 29(c) of the Federal Rules of Criminal Procedure for a judgment of acquittal.

The district court must now once again go forward on this motion as he sees fit. If it determines that the variance between the crime charged and the proof adduced at trial was immaterial, i. e., if it did not affect the substantial rights of the accused because it did not impair the defendant’s ability to defend himself through failing to identify the nature of the charge, United States v. Schrenzel, 462 F.2d 765 (8th Cir.), cert. denied, 409 U.S. 984, 93 S.Ct. 325, 34 L.Ed.2d 248 (1972), the trial court is entitled to ignore the variance and impose sentence pursuant to the jury verdict. United States v. Duran, 411 F.2d 275 (5th Cir. 1969).

On the other hand, if the district court determines on remand that the variance was material, it is obliged to render a verdict of acquittal on the ground that the evidence is insufficient to sustain conviction. United States v. Musquiz, 445 F.2d 963, 966 (5th Cir. 1971). Se& also Virgin Islands v. Aquino, 378 F.2d 540 (3d Cir. 1967); Epstein v. United States, 174 F.2d 754 (6th Cir. 1949).

Reversed and remanded for proceedings consistent with this opinion.

      . The court on motion of a defendant may grant a new trial to him if required in the interest of justice. If trial was by the court without a jury, the court may vacate the judgment if entered, take additional testimony and direct the entry of a new judgment. A motion for a new trial based on the ground of newly discovered evidence may be made only before or within two years after final judgment, but if an appeal is pending the court may grant the motion only on remand of the case. A motion for a new trial based on any other grounds shall be made within 7 days after verdict or finding of guilty or within such further time as the court may fix during the 7-day period.
      Fed.R.Crim.P. 33

      . If the jury returns a verdict of guilty or is discharged without having returned a verdict, a motion for judgment of acquittal may be made or renewed within 7 days after the jury is discharged or within such further time as the court may fix during the 7-day period. If a verdict of guilty is returned, the court may on such motion set aside the verdict and enter judgment of acquittal. If no verdict is returned the court may enter judgment of acquittal. It shall not be necessary to the making of such a motion that a similar motion has been made prior to the submission of the case to the jury.
      Fed.R.Crim.P. 29(c)