author: SNEED, Circuit Judge:

text:
    TROUT UNLIMITED et al., Plaintiffs-Appellants, and Randy Berry, Plaintiff-Intervenor-Appellant, v. Rogers C. B. MORTON, Secretary of the Department of the Interior of the United States of America, et al., Defendants-Appellees, and Fremont-Madison Irrigation District and Madison County, a political subdivision of the State of Idaho, Defendants-Intervenors Appellees.
    No. 74-1974.
    United States Court of Appeals, Ninth Circuit.
    Dec. 23, 1974.

      Allen W. Stokes, Jr. (argued), of Sierra Club Legal Defense Fund, Inc., Denver, Colo., for plaintiffs-appellants.
    Neil Proto (argued), Appellate Sections, Lands and Natural Resources Division, Dept, of Justice, Washington, D. C., for defendants-appellees.
    William S. Holden, Esq. (argued), Idaho Falls, Idaho, for defendants-intervenors.
    Before KILKENNY and SNEED, Circuit Judges, GRAY, District Judge.

       Honorable William P. Gray, United States District Judge, Central District of California, sitting by designation.

   OPINION

SNEED, Circuit Judge:

Appellants appeal from a judgment holding the environmental impact statement for the Teton Dam and Reservoir Project adequate under the National Environmental Policy Act, 42 U.S.C.A. § 4321 et seq., and denying injunctive relief against further construction. We affirm the judgment of the district court.

Parties

Appellants, plaintiffs below, are five environmental organizations, an Idaho corporation which operates float trips and other excursions on various rivers in Idaho, and two named individuals who claim a recreational interest in the Teton River. Plaintiff-intervenor Randy Berry is a guide and outfitter who has conducted float trips on various portions of the river. Some, if not all, of the plaintiffs have standing to bring this action. In any event, standing is not at issue in this appeal.

Appellees, defendants below, are the Secretary of the Interior and four named officials of the Bureau of Reclamation who are charged with various responsibilities in the planning and implementation of the Teton Dam and Reservoir Project. Defendant-intervenor Fremont-Madison Irrigation District has, by contract with the Bureau of Reclamation, subscribed for 100 percent of the active storage capacity of the Teton Reservoir and obligated itself to repay certain portions of the costs of construction and costs of maintenance and operation properly allocable to irrigation. Madison County is an additional defendant-intervenor.

The Teton Dam and Reservoir Project

There was evidence before the district court to support the following statement of facts.

The Teton River is formed near the town of Victor, Idaho at the upper end of Teton Valley by the confluence of Trail Creek and Little Pine Creek. The river flows north from Victor for approximately 15 miles and then descends into a narrow canyon and flows northward for eight miles. It then turns abruptly westward and flows through another 22 miles of canyon. Approximately four miles downstream from the canyon mouth, the river divides into the North and South Forks of the Teton River. Each of these forks is approximately eight miles in length and each enters Henry’s Fork of the Snake River near Sugar City, Idaho.

The Teton River is a source of severe flooding in Madison County, Idaho and the surrounding areas. Annual spring flooding causes extensive damage to bridges, roadways, and private property. The Bureau of Reclamation has concluded that the proposed Teton Dam is the only practicable means to control this flooding.

In 1964, Congress enacted Public Law 88-583, 78 Stat. 925, which authorized construction of the “First Phase” of the Lower Teton Division of the Teton Basin Project. The principal facilities planned are a dam and reservoir. The damsite is some three miles upstream from the mouth of the 22 mile long canyon of the Teton River and approximately 18 miles northeast of the City of Rexburg, Idaho. The Teton Dam will be an earth fill structure, approximately 300 feet high, 3000 feet wide, and 35 feet thick at the top. The reservoir will inundate approximately 17 miles of the canyon and have a storage capacity of approximately 300,-000 acre feet of water, of which approximately 200,000 acre feet will be active capacity and 100,000 acre feet will be a permanent pool. It will have a shore line of some 50 miles and a water surface area, when full, of 2,100 acres.

Additional facilities include a power plant consisting of two 10,000 kilowatt units and a pumping plant with a capacity of 70 cfs (cubic feet per second) which will discharge water through a buried pipeline to the Fremont Pump Canal. This open canal will be 2.5 miles long and will provide supplemental water for some 4,000 irrigated acres through the Canyon Creek Canal. Additional irrigation water will be provided through a buried pipeline and open canal which will connect with the existing Enterprise and East Teton Feeder Canals. A system of approximately 27 deep wells will be developed throughout the valley to provide replacement irrigation water when no uncommitted surface water is available in the Upper Snake River Basin. Through direct service and water exchange ' arrangements, the reservoir and wells will provide supplemental irrigation water for approximately 107,000 acres. Additionally, an electric transmission line, switchyard, and a construction and maintenance building will be constructed. Bids for construction of the “First Phase” of the project were opened on October 29, 1971, approximately 30 days after appellants filed their original complaint in the district court. The construction contract was awarded on December 14, 1971. As of March 20, 1974, construction of the overall project was approximately 52% complete.

The principal benefits which will be derived from this project are flood control and storage of irrigation water. Secondary or incidental benefits include production of electric power estimated at 92,300,000 kilowatt-hours per year and opportunities for flatwater recreation on the reservoir.

Significant environmental damage will also occur. The area of the canyon to be inundated is a winter range for mule deer. Winter co.unts by the Idaho Fish and Game Department have recorded about 400 deer wintering in the affected area. This area is also home to a small number of elk, various small mammals, and numerous birds, including a few bald and golden eagles, turkey vultures, and prairie falcons. Some ducks also winter in the canyon.

The Teton River is presently an excellent fishing stream for cutthroat, rainbow, and brook trout although it is little used by sportsmen because of its limited accessibility. The 17 miles of the river canyon which will be inundated will wipe out this stream fishery. However, a kokanee salmon and rainbow trout fishery will be established in the reservoir.

In April 1971, a draft environmental impact statement (hereinafter EIS) was prepared on the First Phase of the project under the direction of the Regional Director of Region One of the Bureau of Reclamation. In this preparation the personnel of the Bureau had available to it various studies of the area prepared by certain Federal agencies and other organizations having appropriate qualifications. The draft was distributed to the appropriate federal, state and local agencies, as well as to many private organizations and individuals for review and comment. Approximately one hundred and fifty comments were received.

In June 1971, the EIS was revised in response to both these comments and the guidelines issued by the Council on Environmental Quality.

The revisions reflected a decision to relocate the borrow area for dirt-fill used in the construction of the damsite. The Draft EIS had articulated the intent to borrow material in the canyon bottom, downstream from the damsite. However, the Final EIS revealed that a plan had been devised to obtain these materials from the designated reservoir area in order to avert environmental damage to the downstream water quality. Another revision indicated that the release of water flow was to be increased from 150 cfs to 300 cfs in order to preserve the aquatic habitat and related fishery.

Additionally, spawning facilities and hatchery flows, fish screens for new and existing canal headings, wildlife protective fencing, browse planting on 700 acres, and an acquisition of 430 acres of wildlife habitat were added in the plan to minimize the loss of fish and wildlife resulting from the dam construction and inundation.

Subsequently ten copies of the Final EIS for the project were prepared by the United States Department of Interior. All of the above mentioned proposals were adopted in the Final EIS and copies were forwarded to the Chairman of the Council on Environmental Quality, on July 22, 1971. See CEQ Guidelines 36 Fed.Reg. 7724 (Apr. 23, 1971), guideline numbers 3 and 10.

Proceedings Below

On September 27, 1971, appellants filed this action for injunctive relief in the United States District Court for the District of Idaho. On October 1, 1971, appellants filed their First Amended Complaint alleging that defendants had violated numerous laws and moved for a preliminary injunction enjoining further construction of the Teton Dam and Reservoir. Following a hearing, the district court denied such motion on March 2, 1972.

On April 4, 1972, appellants filed a motion for a Temporary Restraining Order and a second motion for a preliminary injunction. The motion for a temporary restraining order was heard on April 12 and denied on April 19, 1972.

On May 12, 1972, appellants filed their Second Amended Complaint containing five claims and seeking injunctive, declaratory, and other relief. Appellants alleged, inter alia, that the Final EIS prepared by appellees was inadequate under the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C.A. § 4321 et seq. Defendants-intervenors moved to dismiss the Second Amended Complaint on June 14, 1972. A hearing was held on this motion on August 24. On September 29, 1972, the district court ordered all claims dismissed except for the claimed violation of NEPA.

Trial was held from June 25 through July 2, 1973. On January 24, 1974, Judge Fred M. Taylor issued Findings of Fact and Conclusions of Law, finding that the Final EIS complied with the requirements of NEPA. Specifically, the court concluded that (1) the EIS prepared for the “First Phase” complied with NEPA, 42 U.S.C.A. § 4332(2)(C); (2) no EIS need be prepared as to the “Second Phase” of the project, since no feasibility finding had yet been made by the Secretary of the Interior; and (3) that no irreparable injury had been established as to the plaintiffs. On February 13, 1974, Judge Taylor entered his order denying permanent injunctive relief. This appeal followed.

On February 20, 1974, appellants filed a motion for injunction pending appeal which was denied by the district court on March 20, 1974. Appellants then sought an injunction pending appeal in this court. This motion was consolidated with the appeal. Oral argument was heard on August 14, 1974, and the case was submitted for decision.

Appellants argue that the Final EIS fails to meet NEPA requirements in four respects: (1) it does not adequately detail the environmental impacts of the project; (2) it fails to discuss the environmental impact of the “Second Phase” of the project; (3) it does not adequately discuss alternatives to the project; and (4) it does not include and thoroughly discuss a benefit-cost ratio for the project. We affirm the judgment of the district court in all respects.

The National Environmental Policy Act

NEPA sets forth a declaration of national environmental policy and requires the Federal Government to use “all practicable means, consistent with other essential considerations of national policy, to improve and coordinate Federal plans, functions, programs, and resources” to achieve a wide range of environmental goals. Sec. 101, 42 U.S.C.A. § 4331. To advance this policy, Section 102(2) of the Act, 42 U.S.C.A. § 4332(2)(C), requires that all agencies of the Federal Government:

include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on—
(i) the environmental impact of the proposed action;
(ii) any adverse environmental effects which cannot be avoided should the proposal be implemented;
(iii) alternatives to the proposed action;
(iv) the relationship between local short-term uses of man’s environment and the maintenance and enhancement of long-term productivity; and
(v) any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented.

The purposes intended to be served by this “detailed statement”, the EIS, basically are two. First, it should provide decision-makers with an environmental disclosure sufficiently detailed to aid in the substantive decision whether to proceed with the project in light of its environmental consequences. See Calvert Cliffs’, Coord. Comm. v. A.E.C., 146 U.S.App.D.C. 33, 449 F.2d 1109 (1971). Secondly, the impact statement should provide the public with information on the environmental impact of a proposed project as well as encourage public participation in the development of that information. See, e. g., E.D.F. v. Corps of Engineers, 325 F.Supp. 749, 759 (E.D. Ark.1971), dismissed 342 F.Supp. 1211, aff’d 470 F.2d 289 (8th Cir. 1972).

Standard of Review

The proper standard by which to review the adequacy of the EIS has been the subject of some confusion in this court. The nature of the confusion has been whether the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), the “arbitrary, capricious, an[d] abuse of discretion” standard, or § 706(2)(D), the “without observance of procedure required by law” standard or some third standard not precisely conforming to either § 706(2)(A) or § 706(2)(D) is the proper standard. See Environmental Defense Fund v. Armstrong, 487 F.2d 814 (9th Cir. 1973); Life of the Land v. Brinegar, 485 F.2d 460 (9th Cir. 1973); Jicarilla Apache Tribe of Indians v. Morton, 471 F.2d 1275 (9th Cir. 1973). This confusion was eliminated from our law by Lathan v. Brinegar, 506 F.2d 677 (9th Cir. 1974). We held that the § 706(2)(D) standard was the proper one because NEPA is essentially a:

procedural statute. Its purpose is to assure that, by following the procedures that it prescribes, agencies will be fully aware of the impact of their decisions when they make them. The procedures required by NEPA, 42 U.S. C.A. § 4332(2)(C), are designed to secure the accomplishment of the vital purpose of NEPA. That result can be achieved only if the prescribed procedures are faithfully followed; grudging pro forma compliance will not do. We think that the courts will better perform their necessarily limited role in enforcing NEPA if they apply § 706(2)(D) in reviewing environmental impact statements for compliance with NEPA . . . Lathan v. Brinegar, supra, at 693.

The “without observance of procedure required by law” § 706(2)(D) standard, however, is less helpful in reviewing the sufficiency of an EIS than one might wish. Its difficulty lies in the fact that the “procedure required by law” by which the sufficiency of the EIS is measured consists substantially of judicial responses to specific allegations of insufficiency directed at specific impact statements prepared in connection with particular projects that were challenged in various federal courts. Neither NEPA nor the “Guidelines” of the Council on Environmental Quality set forth sufficiently comprehensive “procedures” to obviate the necessity to resort to such judicial responses. The consequence has been and, to a degree, is that the judicial review of the adequacy of an EIS employs standards fashioned to meet the needs of the particular case in which the standards are applied. In due course the presence of a large volume of case law and the principle of stare decisis will yield reasonably precise “procedural rules” by which the adequacy of an EIS can be measured. That time, however, has not arrived.

It follows, therefore, that in determining whether the appellees prepared an adequate EIS we will be guided in large part by “procedural rules” rooted in case law. No synthesis of these rules will be attempted other than to point out that all such rules should be designed so as to assure that the EIS serves substantially the two basic purposes for which it was designed. That is, in our opinion an EIS is in compliance with NEPA when its form, content, and preparation substantially (1) provide decision-makers with an environmental disclosure sufficiently detailed to aid in the substantive decision whether to proceed with the project in the light of its environmental consequences, and (2) make available to the public, information of the proposed project’s environmental impact and encourage public participation in the development of that information.

We shall now turn to the specific allegations of the appellants with respect to the adequacy of the EIS. Our disposition of these allegations is based on a thorough review of the record in which the determination of the trial court, which appears to have employed the “arbitrary and capricious” § 706(2)(A) standard of review, is not accorded the weight to which it might otherwise be entitled had the proper standard been employed.

Lack of Detail

Appellants urge that the EIS is inadequate because it fails to discuss many possible environmental consequences. Many of these consequences while possible are improbable. An EIS need not discuss remote and highly speculative consequences. EDF v. Corps of Engineers, 348 F.Supp. 916, 933 (N.D. Miss.1972), aff’d, 492 F.2d 1123 (5th Cir. 1974).. This is consistent with the (CEQ) Council on Environmental Quality Guidelines and the frequently expressed view that adequacy of the content of the EIS should be determined through use of a rule of reason. Lathan v. Brinegar, supra; EDF v. Corps of Engineers, 492 F.2d 1123 (5th Cir. 1974); Life of the Land v. Brinegar, supra; National Resources Defense Council v. Morton, 458 F.2d 827 (D.C.Cir. 1972). A reasonably thorough discussion of the significant aspects of the probable environmental consequences is all that is required by an EIS.

Nonetheless, the appellant’s contention that the EIS should have included a discussion of the environmental impact of the development of docks, second homes and corresponding structures and facilities as well as an analysis of the projected land-use pattern change that could result from the project gives us pause. We agree that the statement could have been improved by a discussion of these issues. However, our review of the record convinces us that second home development and its consequences in connection with this project are only remote possibilities. In studying the area to be served with supplemental irrigation water from the project, the Bureau of Reclamation and the other agencies involved concluded that since the land immediately surrounding the reservoir and the land to be served by the project was a highly developed agricultural area with only a few small towns, no significant change could be expected either in population or land use patterns. Moreover, the testimony offered at trial was not sufficient to rebut this conclusion. At best it merely showed that when second homes are planned around a reservoir, second homes are built. There was no such plan here nor has such a probability been demonstrated. It follows that the EIS is not deficient in its failure to discuss second home development. This failure does not impair its ability to serve the basic purposes it is required to serve.

Appellants also assert that the required detail of the EIS is lacking because neither does it fully discuss the supporting studies on which its conclusions are based nor are these studies attached to it. This assertion is without merit. The statement identifies and discusses the significant environmental impacts in sufficient detail, although its conclusory form requires that we caution those charged with the responsibility to prepare impact statements against too heavy reliance on such a form of presentation. It must be remembered that the public must be adequately informed of the probable significant environmental impacts by an impact statement. Finally, it is well settled that supporting studies need not be physically attached to the EIS. They only need be available and accessible. Life of the Land v. Brinegar, supra, 485 F.2d 468-469.

It is also asserted by the appellants that the EIS fails to discuss adequately measures which could have been taken to minimize harm to the environment as required by EDF v. Froehlke, 473 F.2d 346 (8th Cir. 1972); Sierra Club v. Froehlke, 359 F.Supp. 1289 at 1339-1341 (S.D.Texas, 1973); CEQ Guidelines § 11, 36 Fed.Reg. 7727. We disagree. While it is obvious that the mitigation measures could have been discussed in greater detail, it remains true that the EIS discussed these factors under eight headings, viz. Construction Specifications, Minimum Flows, Upstream Borrow, Transmission and Switchyard Facilities, Field Station and Operators’ Residence, Roadway to Damsite, Fish and Wildlife, and Temperature Study Based on Reservoir Liminology. This discussion could have been more extensive, but we believe it was adequate. We are comforted in reaching this conclusion by the fact that subsequent to the filing of the Final EIS the Bureau of Reclamation prepared a fairly elaborate plan for mitigating fish and wildlife losses. The plan included numerous suggestions such as providing for spawning facilities and hatchery ponds, fish screens at new and existing canal headings, and the maintenance of a minimum flow at 300 cfs in the downstream waters. While this plan would not absolve a failure to prepare an adequate EIS, its existence does suggest that the EIS did inform the decision-makers adequately.

The Second Phase

The Teton Dam and Reservoir Project is divided into two “phases”. The so called First Phase, with which the EIS presently before us deals, comprises the actual construction of the dam and reservoir and disposition of 100,000 acre feet of active reservoir capacity for irrigation purposes.

The Second Phase of the project as authorized by Congress, calls for disposition of the remaining 100,000 acre feet of active reservoir capacity. This, however, can occur only after the Secretary of the Interior submits a finding of “feasibility” to Congress and the President.

The appellants contend that the EIS is fatally inadequate because it does not discuss the environmental impact of the Second Phase. They rely upon cases which hold that a series of interrelated steps constituting an integrated plan must be covered in a single impact statement. We believe these authorities are inapposite and that the failure of the EIS to discuss the Second Phase does not render it inadequate. The distinction between those situations in which it has been held that the EIS must cover subsequent phases and that before us is that here the First Phase is substantially independent of the Second while in those in which the EIS must extend beyond the current project, that project was dependent on subsequent phases. The dependency is such that it would be irrational, or at least unwise, to undertake the first phase if subsequent phases were not also undertaken. This is not the case here. Congress clearly intended that the First Phase of this project would be constructed without regard to whether the Secretary ever submits a finding of “feasibility” with regard to the Second Phase.

Alternatives

The appellants’ assertion that the EIS does not adequately discuss alternatives is based, of course, on Section 102(2)(C) of NEPA which requires the EIS to present alternatives to the proposed action and Section 102(2)(D) which requires the agency to “study, develop, and describe appropriate alternatives to recommended courses of action in any proposal which involves unresolved conflicts concerning alternative uses of available resources.” The purposes of these requirements are to assure that alternatives are explored in the initial decision-making process and to provide an opportunity to those removed from that process also to evaluate the alternatives. See Calvert Cliffs’, supra.

The range of alternatives that must be considered need not extend beyond those reasonably related to the purposes of the project. See Life of the Land, supra. Also, EDF v. Corps of Engineers, 492 F.2d 1123, 1135 (5th Cir. 1974). The district court found that the primary purposes of the project are to control flooding in the Lower Teton Valley and to provide a source of irrigation water. It also established that the secondary purposes are to provide hydroelectric power and recreational benefits.

The EIS considered the alternatives of (1) no development whatsoever (the alternative of not accomplishing the project’s purposes), (2) ground water pumping to obtain irrigation water, and (3) levees to control flooding in the Lower Teton Valley. The costs of doing nothing were considered excessive, ground water pumping would not produce enough water, and levees would not alleviate all ice jam type flooding. It also appears from the record of the proceedings below that other less reasonably related alternatives to the project’s purposes were considered and rejected.

After considering these alternatives the EIS concluded that after fully assessing the environmental costs, the benefits to be derived from the accomplishment of the primary purposes of the project exceed such costs. It is our view that the range of alternatives considered by the EIS was adequate and that compliance with both Sections 102(2)(C) and 102(2)(D) of NEPA has been achieved.

Cost-Benefit

Notwithstanding this evaluation of reasonably related alternatives and the conclusion of the EIS that the project’s benefits exceed its costs, the appellants insist that the EIS is inadequate because it does not contain a formal and mathematically expressed cost-benefit analysis. We do not believe such an analysis is necessary to enable an EIS to serve the purposes for which it is designed.

This conclusion rests upon the hard fact that there is sufficient disagreement about how environmental amenities should be valued to permit any value so assigned to be challenged on the grounds of its subjectivity. It follows that in most, if not all, projects the ultimate decision to proceed with the projects, whether made by Congress or an agency, is not strictly a mathematical determination. Public affairs defy the control that precise quantification of its issues would impose.

This is not to say that progress is not being made in devising techniques which will make cost-benefit analyses more reliable. Nor is it to say that under no circumstances should the EIS contain a numerically expressed cost-benefit analysis. We intend merely to say that under the circumstances of this case the absence of such an analysis in the EIS is not fatal. The EIS before us is sufficiently detailed to aid the decision-makers in deciding whether to proceed or not and to provide the information the public needs to enable both those who would challenge, and those who would support, the project to respond effectively. No controlling authority brought to our attention forecloses this determination. We would be less confident that these purposes have been achieved were it not clear from the record of this case that this project has undergone a cost-benefit analysis because of its status as a reclamation project. As it is, we consider the EIS adequate.

Affirmed.

      . Trout Unlimited; Treasure Valley Chapter of Trout Unlimited; Sierra Club; Natural Resources Defense Council; and Idaho Environmental Council.

      . The “Second Phase” provides for the disposition of the second 100,000 acre feet of the total 200,000 active feet; the purpose is mainly to provide irrigation for 37,000 acres of land. The “Second Phase” will not begin until the Secretary of the Interior conducts a “feasibility study” as to its development and prepares an environmental impact statement on the proposed action.

      . Congress has appropriated funds for this project for every year since 1967. These appropriations through Fiscal Year 1974, total $36,470,917. For Fiscal Year 1975, the President’s budget contains $11,675,000 for continued construction of the project and related facilities.

      . The record indicates that the following studies were available and utilized:
      (a) A study of 1959 conducted by the Bureau of Sport Fisheries and Wildlife. This study appeared as a part of House Document 208, printed January 29, 1964.
      (b) An archaelogical exploration of the Teton Reservoir site was made in 1967 by Idaho State University for the National Park Service.
      (c) An investigation conducted by the United States Bureau of Mines.
      (d) An extensive study of the probable effect of the project on the quality of the water, both in the reservoir and downstream in the river, completed by water quality experts of the United States Bureau of Reclamation.
      (e) Extensive foundation studies of the damsite and reservoir area have been conducted by geologists of the United States Bureau of Reclamation.
      (f) Studies conducted by the National Park Service and Idaho Department of Parks.
      (g) Since the early 1950’s and even before, the Corps of Engineers of the United States Army, as well as the United States Bureau of Reclamation, had made studies of the magnitude and extent of flooding from the Teton River.
      (h) Ground water hydrology studies and tests performed over a period of many years by the United States Geological Survey and Bureau of Reclamation.

      . See Council on' Environmental Quality, Guidelines for Implementation of National Environmental Policy Act, 36 Fed.Reg. 7724 (April 23, 1971), modified subsequently in 40 C.F.R. Sec. 1500.13, 38 Fed.Reg. 20550 (August 1, 1974).

      . Some objections to the project were also filed. The record discloses that the Environmental Protection Agency (EPA) submitted a memorandum containing its objections to the project to the Council on Environmental Quality in August 1971. These comments were then referred by CEQ to the Department of Interior. In September of 1971, the Department of Interior submitted to CEQ a detailed response to the EPA comments. CEQ never registered any objections to the adequacy of the EIS nor the continued construction of the project.

      . Executive Order No. 11514 (March 5, 1970), 1970 U.S.Code Cong, and Adrain. News, p. 6228, the “Guidelines” of the President’s Council on Environmental Quality (CEQ), 36 Fed.Reg. 7724 (April 23, 1971) superseded by “Guidelines” 40 C.F.R. Sec. 1500.13, 38 Fed. Reg. 20550 (August 1, 1973), and the Manual of the Department of the Interior, Part 516, Chapter 2, implement of the provisions of NEPA and place mandatory duties upon the Bureau of Reclamation regarding preparation of environmental impact statements and compliance with the procedures of NEPA.

      . Section 102 grants public access to an EIS pursuant to 5 U.S.C.A. § 552.

      . Appellants argue that an EIS must include a discussion of the secondary impacts as a substantive requirement. See CEQ Guidelines, 36 Fed.Reg. 7725 (April 23, 1971). While agreeing that under a given factual situation failure to include a discussion of secondary impacts might render an EIS fatally defective, we can not say that a specific treatment of secondary impacts is a substantive requirement of the impact statement. The central focus should not be on a primary/secondary impact analysis but upon those impacts (either primary or secondary) which have a “significant impact” upon the environment.

      . See Finding of Fact XII, paragraph 7 of the trial court based upon an independent study conducted by the Federal Bureau of Land Management.

      . 43 U.S.C.A. § 616qq(c). The Second Phase of the project would require three steps before it could get underway. No actual construction of the Second Phase can begin until (a) the Secretary of Interior makes a determination that the Second Phase is feasible, (b) an EIS is prepared and submitted to Congress simultaneously with the feasibility report and (c) the Congress then decides to appropriate __ funds.

      . Appellants cite Jones v. D.C. Redevelopment Land Agency, 163 U.S.App.D.C. 366, 499 F.2d 502 (1974) for support of their argument that the project’s “Second Phase” should have been included in the impact statement. In that case the court required the Redevelopment Land Agency to prepare an EIS prior to its submission of an urban renewal plan to the National Capital Planning Commission for approval, even though the commission could have modified the plan and itself prepare an impact statement and even though the Department of Housing and Urban Development was also required to prepare an EIS. The court specifically required the preparation of the EIS because they found that the RLA submission constituted a distinct stage in the plan approval process and was itself a major federal action significantly affecting the environment. No such analogy exists in the present circumstances. The district court found that the “Second Phase” would require an EIS before construction and therefore such an impact statement would be prepared at the “earliest possible time.”

      . Appellants rely on a number of cases to demonstrate that a series of steps constituting an integrated plan must be covered in a single impact statement. These cases have little application to the present state of facts. The decisions which hold that agencies may not submit separate statements for planned interconnecting highway segments stress that each segment has little independent significance in itself and that the first-constructed segment necessarily predetermines the location of succeeding segments. See Thompson v. Fugate, 347 F.Supp. 120 (D.Conn.1972); Indian Lookout Alliance v. Volpe, 345 F.Supp. 1167 (S.D. Iowa 1972), mod. 484 F.2d 11 (8th Cir. 1973).
      Nor is Scientists’ Institute for Public Information v. Atomic Energy Comm’n, 156 U.S. App.D.C. 395, 481 F.2d 1079 (1973) particularly pertinent here. There an EIS was required for continued research and development on the AEC’s Liquified Metal Fast Breeder Reactor (LMFBR) Program covering foreseeable environmental effects if such a reactor were put into future use. The LMFBR has no independent significance absent such future uses. The court was careful to emphasize that its decision to require an EIS was based in large part upon the significance of the overall reactor program as a radical change in the manner in which the entire nation produces electricity. See 481 F.2d at 1089. Unlike Scientists’ Institute, supra, the immediate benefits of flood control, irrigation and hydroelectric power, (all covered by the EIS) will result from the First Phase. The question of when or if the Second Phase would ever be implemented did not play a significant part in the decision to go forward with the project and can therefore be appropriately delayed until such time as the Secretary of Interior makes the requisite finding of feasibility.

      . Appellants rely primarily upon Calvert Cliffs’, supra, to support their contention that the impact statement must include a cost-benefit analysis. See also, Natural Resources Defense Council v. Morton, 148 U.S.App.D.C. 5, 458 F.2d 827 (1972); Cape Henry Bird Club v. Laird, 359 F.Supp. 404 (W.D.Va.1973), aff’d 484 F.2d 453 (4th Cir. 1973). However, compare; EDF v. Armstrong, 352 F.Supp. 50, 57 (N.D.Cal.1972), aff’d 487 F.2d 814 (9th Cir. 1973). However, such reliance is misplaced. First, there are no specific statutory requirements which would mandate the inclusion of a cost-benefit formula in the impact statement. Moreover, there is nothing in these opinions which suggests that a formal equation need be included as an independent requirement of NEPA nor considered under any stricter standard than any other of the determinants involved in the substantive decision to proceed with a particular project.

      . See 33 U.S.C.A. § 701 et seq.; Such an analysis was provided to the House of Representatives, see House Document 208, 88th Congress, 2d Sess., pp. XIII to XIX (1964).


source: Caselaw Access Project

author: SPRECHER, Circuit Judge. FAIRCHILD, Circuit Judge

license: Public Domain

text:
    Robert SCHAEFER and Sandra Schaefer, Plaintiffs-Appellants, v. FIRST NATIONAL BANK OF LINCOLNWOOD et al., Defendants-Appellees.
    No. 73-2128.
    United States Court of Appeals, Seventh Circuit.
    Argued Sept. 20, 1974.
    Decided Jan. 30, 1975.
    Rehearing and Rehearing En Banc Denied April 4, 1975.

      S. John Templeton, Lawrence Walner, Harvey Walner, Chicago, Ill., for plaintiffs-appellants.
    Jerald P. Esrick, W. Thomas Rosemond, Jr., Michael B. Roche, Stewart S. Dixon, Chicago, Ill., John J. Loflin, New York City, Narcisse A. Brown, Warren E. King, Constantine N. Kangles, Samuel Weisbard, James E. S. Baker, Brimson Grow, Chicago, Ill., Mandel E. Himelstein, Phoenix, Ariz., Gerald Walpin, Rosenman, Colin, Kaye, Petschek, Freund & Emil, New York City, Howard L. Kastel, Chicago, Ill., for defendants-appellees.
    Before CASTLE, Senior Circuit Judge, and FAIRCHILD and SPRECHER, Circuit Judges.
   SPRECHER, Circuit Judge.

Plaintiffs, private parties suing individually and as a class, appeal from unfavorable summary judgments and orders dismissing their complaint alleging common-law fraud, violations of the Securities Acts and violations of the Sherman and Clayton Antitrust Acts.

The plaintiffs purchased Hercules-Gal-ion Products, Inc. stock during a period of market manipulation between 1965 and 1967. They have based their civil claims on events which were grounds earlier for criminal prosecutions in the Southern District of New York. United States v. Projansky et al., 67 CR 729, aff’d, 465 F.2d 123 (2d Cir. 1972). Named as defendants here were the criminal defendants and the non-indicted co-conspirators of the Projansky case and a number of additional non-criminal parties, including several brokerage houses and their salesmen and others. The defendants who are appellees in this appeal. include the brokerage house of Rodman & Renshaw; the American Stock Exchange (AMEX) and a group of its specialists, John Rissetto, Al Vernieri, Edward Crooks and Frank Alter; Charles F. Myers, the former president of Hercules-Galion Products, Inc.; Wilbur A. Gorman, chief operating officer of the brokerage house of Link, Gorman & Peck Co.; Arthur Dickholtz, an officer of the First National Bank of Lincoln-wood; and Jerry and David Fogelson, partners in Investment Associates. These defendants successfully argued in the district court that the claims against them based on the Securities Acts were time barred and that the antitrust laws do not apply to securities market rigging schemes. Consequently, the district court dismissed the suit against them. These same contentions are at issue on appeal. We reverse in part and affirm in part.

I

The original complaint in this action alleged substantially the same events as were alleged in the criminal indictment returned in New York. The original complaint sought relief from common law fraud; violations of section 1 of the Sherman Act (15 U.S.C. § 1), sections 1, 4, 5, 12 and 16 of the Clayton Act (15 U.S.C. §§ 12, 15, 16, 22 and 26); sections 15, 16, 17(a), and 22 of the Securities Act of 1933; (15 U.S.C. §§ 77o, 77p, 77q and 77v) and sections 9(a)(2), 10, 27 and 28 of the Securities Act of 1934 (15 U.S.C. §§ 78i, 78j, 78aa and 78bb).

In addition, however, to the sixteen criminal defendants and the six non-indicted co-conspirators, the plaintiffs named the seven brokerage houses employing some of the criminal conspirators. Among these was Rodman & Renshaw, the house which employed Harris Nagorsky, a Chicago broker who from the first figured prominently in the scheme, and Edward Wetzel. Rodman & Renshaw was generally charged in the original complaint with conspiring to defraud the plaintiffs. It was specifically charged with failing to supervise Nagorsky and thereby aiding and abetting the alleged conspiracy, fraud and stock manipulation. The plaintiffs broadened these claims in subsequent pleadings.

Briefly the facts are these. Between July 1, 1965 and August 23, 1967, the sixteen criminal defendants conceived and executed a plan to manipulate the price of Hercules-Galion (Hercules) stock. By a furious promotion campaign, the group was able to raise the price of Hercules stock from $6 to over $14 per share. The heart of the scheme was for the defendants to regularly purchase from among themselves large blocks of Hercules stock on the AMEX at prearranged prices. The price was slowly raised by design, and as public interest and the price increased, the stock was sold and the profits taken.

After the criminal indictments were returned by a New York federal grand jury on August 23, 1967, the allegations were published immediately in many newspapers and news magazines. One and one-half years later, on February 19, 1969, the plaintiffs filed their original complaint. Of those now on appeal, only the defendant Rodman & Renshaw was named in the original complaint.

The first amended complaint was filed on July 25, 1969. Again, of the defendants here on appeal, only Rodman & Renshaw was named. Substantially the same allegations were repeated.

In the fall of 1969, both the plaintiffs and the defendants made the several pretrial motions. The plaintiffs moved for discovery and the defendants sought dismissal of the action. Discovery of the criminal defendants was stayed until their criminal trial was completed. The antitrust claims against the defendants were dismissed. The district court held that the securities acts allegations and the common law fraud allegations stated claims for relief. The court, applying the Illinois five year statute of limitations for fraud, also found the securities acts claims timely.

Subsequently, two events took place setting the stage for this appeal. The first was the end of the criminal trial wherein all of the indicted conspirators were convicted. Discovery resumed and proceeded on schedule, first with the taking of the depositions of the individual criminal defendants followed by that of the brokerage houses’ representatives. On October 18, 1972, the plaintiffs filed their amendment to the first amended complaint adding as defendants the AMEX, the specialists, and Myers, Gorman, Dickholtz and the Fogelsons. The second event was this court’s decision in Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123 (7th Cir. 1972). In Parrent we held that Rule 10b-5 actions were subject to the three year limitations period contained in the Illinois Securities Act.

At this point, Rodman & Renshaw and all the defendants added in the newly amended complaint moved for summary judgment in the light of the shorter limitations period announced in Parrent. The district court then found the three year period applicable and ordered the dismissal of all three counts, including the securities and common law fraud claims and the antitrust claims which had been re-alleged. This order was made final under Rule 54(b), Fed.R. Civ.P., and is the subject of this appeal. The plaintiffs contend that their suit against Rodman & Renshaw as well as all the other non-criminal defendants is timely, and that the district court erred in dismissing all their claims against the defendants.

II

Plaintiffs contended that they have an implied right of action under section 10(b) of the 1934 Act and Rule 10b-5 and under section 17 of the 1933 Act. The defendants contended that plaintiffs’ sole relief lies under section 9 of the 1934 Act. The original complaint stated a claim for relief averring market manipulation of the price of Hercules stock. The defendants argued that section 9(a)(2) specifically prohibits the conduct which the complaint alleges. Arguing that a claim may not be duplicated within the framework of a single act in derogation of its specific limitations, the defendants concluded that the claims based on Rule 10b-5 and section 17 may not be raised in this case.

A

Section 10(b) of the 1934 Act and Rule 10b-5 provide a private claim for relief from market manipulation.

Section 10(b) and Rule 10b-5 have been liberally construed by the Supreme Court and include private actions arising from manipulative stock transactions. In Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1971), the Court recognized a private right of action where the claim for relief based on Rule 10b-5 arose from a stock rigging scheme. By fraudulently misstating the prevailing market price of Ute Distribution Corporation stock, the defendant bankers artificially depressed its purchase price. Once they bought the stock, the defendants then sold it at its higher, true market value. Finding this practice unlawful, the Court remarked on the scope of section 10(b) and Rule 10b-5:

These proscriptions, by statute and rule, are broad and, by repeated use of the word “any,” are obviously, meant to be inclusive. The Court has said that the 1934 Act and its companion legislative enactments embrace a “fundamental purpose ... to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry.” SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186 [84 S.Ct. 275, 11 L.Ed.2d 237] (1963). In the case just, cited the Court noted that Congress intended securities legislation enacted for the purpose of avoiding frauds to be construed “not technically and restrictively, but flexibly to effectuate its remedial purposes.” Id., at 195 [84 S.Ct. at 285.] This was recently said once again in Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 12 [92 S.Ct. 165, 169, 30 L.Ed.2d 128] (1971). 406 U.S. at 151, 92 S.Ct. at 1471.

Similarly this Circuit has recognized a private implied right under 10b-5 where the defendant’s conduct only threatened to create artificial market conditions. Carroll v. First National Bank of Lincolnwood, 413 F.2d 353 (7th Cir. 1969).

The remedies provided by section 10(b) as well as the other sections of the securities acts are cumulative and not mutually exclusive. In Jordan Building Corporation v. Doyle, O’Connor & Co., 401 F.2d 47 (7th Cir. 1968), this Circuit took what it called the “direct approach” in allowing a private plaintiff to bring an action under Rule 10b-5 although the conduct alleged fell squarely within either section 12 of the 1933 Act or section 15 of the 1934 Act. The defendants contended that the plaintiffs attempted to avoid the limitations period of specifically applicable sections of the securities acts by making their claims under section 10(b) and Rule 10b-5. The defendants went on to argue, as the defendants do here, that the specific sections were exclusive remedies.

Recalling the broad Congressional intent expressed in the language of section 10(b) and the serious remedial purposes of the Acts, the Jordan court concluded that the “remedies supplied by and under these acts are cumulative and not mutually exclusive”. 401 F.2d at 51. By this same approach, the remedies afforded by section 9(a)(2) are not, as the defendants contend, the plaintiffs’ sole remedy for market manipulation. The plaintiffs may make their claim for relief under Rule 10b-5 even though the alleged market rigging scheme also falls squarely within section 9(a)(2). Their remedies are cumulative. They may make their claim for relief under either or both or several sections of the acts.

In two cases the Securities and Exchange Commission found a series of stock transactions resulting in an artificial market to be violative of both Rule 10b — 5 and section 9(a)(2). In Adams & Co., 33 SEC 444 (1952), the Commission revoked the registration of two broker dealers when they conspired with a third person to raise the price of Mohawk Distillery stock by fraudulently creating apparent activity in the stock on the Chicago Board of Trade. The parties falsified records, reported false bids and offers and engaged in a series of prearranged sales and purchases at increasingly higher prices, causing the price of the stock to become artificially inflated. The Commission found simultaneous violations of sections 10(b), 17(a), 9(a)(2) and Rule 10b-5. In Thornton & Co., 28 SEC 208 (1948), aff’d sub nom. Thornton v. Securities and Exchange Commission, 171 F.2d 702 (2d Cir. 1948), these sections were all found applicable to a single scheme of market manipulation. The facts which supported a section 9(a)(2) claim also gave rise to an equally valid Rule 10b-5 claim. We will leave it to the private plaintiff to make his claims under either Rule 10b-5 or 9(a)(2) or both. The allegations of the pleadings in the case contain elements of both. The Rule 10b-5 claim is therefore appropriate.

B

The defendants have attacked the sufficiency of plaintiffs’ section 17 claim on the grounds that (1) no right of action can be implied under section 17 and (2) the parties are not in privity. The defendants’ argument has assumed that plaintiffs’ Rule 10b-5 claim will be dismissed leaving section 17 to stand alone.

While there is authority in this Circuit for sustaining an implied right of action under section 17 alone, we need not deal directly with this issue. There is an implied right of action under section 10(b) and Rule 10b-5. Judge Friendly’s concurrence in SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968), cert. denied, sub nom. Coates v. SEC, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1968), often cited for denying implication, acknowledged that:

Once it had been established . that an aggrieved buyer has a private action under § 10(b) of the 1934 Act, there seemed little practical point in denying the existence of such an action under § 17 — with the important proviso that fraud, as distinct from mere negligence, must be alleged. See Fischman v. Raytheon Mfg. Corp., 188 F.2d 783, 787 n. 2 (2 Cir. 1951); Weber v. C. M. P. Corp., 242 F.Supp. 321, 322-325 (S.D.N.Y.1965) (Wyatt, J.); Thiele v. Shields, 131 F.Supp. 416, 419 (S.D.N.Y.1955) (Kaufman, J.). 401 F.2d at 867.

Since fraud as well as negligence has been alleged and the section 10(b) claim established, plaintiffs’ section 17 claim will be allowed to stand.

Similarly, we need not deal with defendants’ contention that section 17 has a privity requirement. Where section 17 has been concurrently pleaded with a sufficient Rule 10b-5 claim, as here, courts forbear to rule on the sufficiency of the section 17 claim. 6 Loss, Securities Regulation 3913 (Supp. 2d ed. 1969).

Ill

Every defendant appealing here has contended that the statutory period within which to bring a Rule 10b — 5 action is three years. Each has further contended that this period expired before the plaintiffs’ filed their various complaints. Since the defendants stand in different factual circumstances, they must be dealt with separately.

This Circuit determined in Parrent v. Midwest Rug Mills, 455 F.2d 123 (7th Cir. 1972), that Rule 10b-5 and section 17 actions arising in Illinois were subject to a three year statute of limitations. Since no federal provision limits Rule 10b-5 actions, the Parrent court looked to the law of the forum state, Illinois, for the statute of limitations which best effectuated the policies of Rule 10b-5 and section 17. This was held to be the three year limitation found in section 13 of the Illinois Securities Law.

The plaintiffs contend that Illinois’ five year statute of limitations for fraud applies. Judge Decker applied this limitation at an earlier stage in this litigation before the Parrent case was decided. Subsequently Judge McMillen, succeeding Judge Decker in this action, found the three year limitation applicable on the basis of Parrent. The plaintiffs urged that the five year limitation is “the law of the case.” They also argued that Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (Í971), precluded retrospective application of Parrent.

The doctrine of the law of the case did not bind Judge McMillen to apply the five year limitations period. Federal rule of the case doctrine is a rule of practice. It does not limit a court’s power. Messenger v. Anderson, 225 U.S. 436, 444, 32 S.Ct. 739, 56 L.Ed. 1152 (1912); Drinan v. A. J. Lindermann & Hoverson Co., 238 F.2d 72, 74 (7th Cir. 1956). A district judge has the power to undo the work of his predecessor in the same action. Bowles v. Wilke, 175 F.2d 35 (7th Cir. 1949).

Although the parties there did not raise the issue of retroactivity, we applied Parrent retroactively in Hupp v. Gray, 500 F.2d 993 (7th Cir. 1974). Under Chevron, supra, the doctrine of nonretroactivity is applied when those invoking it receive favorable consideration on three separate factors. As set out by the Supreme Court these are:

In our cases dealing with the nonretroactivity question, we have generally considered three separate factors. First, the decision to be applied non-retroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, see, e. g., Hanover Shoe, Inc. v. United Shoe Machinery Corp., supra, 392 U.S. [481], at 496 [88 S.Ct. 2224, at 2233, 20 L.Ed.2d 1231], or by deciding an issue of first impression whose resolution was not clearly foreshadowed, see, e. g., Allen v. State Board of Elections, supra [393 U.S. 544], at 572 [89 S.Ct. 817, at 835, 22 L.Ed.2d 1], Second, it has been stressed that “we must . . . weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” Linkletter v. Walker, supra [381 U.S. 618], at 629 [85 S.Ct. 1731, at 1738, 14 L.Ed.2d 601]. Finally, we have weighed the inequity imposed by retroactive application, for “[w]here a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the ‘injustice or hardship’ by a holding of nonretroactivity.” Cipriano v. City of Houma, supra [395 U.S. 701], at 706 [89 S.Ct. 1897, at 1900, 23 L.Ed.2d 647], Chevron v. Huson, 404 U.S. at 106-107, 92 S.Ct. at 355.

The first factor for consideration is decisive. Although the statute of limitations issue was one of first impression in Parrent, the Parrent court did not overrule “clear past precedent.” The court said:

It is clear that under the resemblance test the three year limitation in Section 13, subd. D of the Illinois Securities Law (Ill.Rev.Stat. ch. I2IV2, § 137.13, subd. D) applies to the 10b-5 actions stated in Counts I and II.
The three year limitation is closer to the express limitation periods in the various sections of the federal act . . . . Furthermore, logic dictates selection of the three year Illinois limitation as tending more toward an orderly development of law, than reaching into a different Illinois Act (Ill.Rev.Stat. ch. 83, § 16) for the appropriate limitation. 455 F.2d at 127.

Before Parrent, circuit courts forced to choose between a state’s fraud or Blue Sky statute of limitation used the “resemblance test.” Charney v. Thomas, 372 F.2d 97 (6th Cir. 1967); Vanderboom v. Sexton, 422 F.2d 1233 (8th Cir.), cert. denied, 400 U.S. 852, 91 S.Ct. 47, 27 L.Ed.2d 90 (1970). They looked to the limitations period of the state action which was most like section 10(b) or Rule 10b-5. Ruder, Limitations on Civil Liability Under Rule 10b-5, 1972 Duke L.J. 1125, 1142-50 (1972); Note, Parrent v. Midwest Rug Mills, Inc.: Statute of Limitations Under Section 10(b), 68 Nw. U.L.Rev. 162 (1973).

It is apparent from a reading of section 12 of the Illinois Securities Law (Ill.Rev.Stat., ch. I21V2, § 137.12), for which section 13 supplies the three year limitation, that it closely parallels Rule 10b-5 and a study of the Illinois Securities Laws reveals a nearly identical aim. Parrent, supra, 455 F.2d at 127. Circuits which do not apply Blue Sky limitations either have higher standards for proof of scienter or dissimilar state securities statutes. Martin, Statute of Limitations in 10b-5 Actions: Which State Statute is Applicable?, 29 Bus.L. 443 (1974). Clearly, application of the Illinois Blue Sky limitations period was foreshadowed, and in any event Parrent did not constitute an overruling of any clear past precedent of the Seventh Circuit.

Furthermore, following the rule in Parrent is not detrimental to the operation of Rule 10b-5 in this case inasmuch as the plaintiffs may and do call upon the mitigating doctrine of tolling. Equitable tolling is always available where fraud has concealed the wrong done. See part IV, infra. Since Chevron does not operate here, Parrent’s three year limitations period applies retroactively.

IV

The defendants have challenged the plaintiffs’ reliance on the theory of equitable tolling on two grounds: (1) that tolling does not apply to claims based on negligence and (2) that the allegations of the complaints are insufficient to toll the limitations period.

A

Rodman & Renshaw, named a defendant along with six other brokerage houses in the original complaint of February 19, 1969, had employed Harris Nagorsky, one of the parties indicted in August 1967. During the period he was with Rodman, Nagorsky participated in the planning of the manipulation scheme, but he left in October 1965 before the scheme had run its course. Rodman contended that the limitations period ran from the time Nagorsky left its employ. This would mean that the original complaint was time barred by more than three months. The plaintiffs, however, claimed that the limitations period began to run in 1967. They argued that the period between 1965 and 1967 was tolled and that the statute of limitations did not begin to run until the alleged fraud was discovered when the New York indictment was returned.

Federal courts have long recognized the theory of equitable tolling in fraud actions. Clearly, it is available to claimants in Rule 10b-5 actions. In Par-rent the court said:

We must read into the three year limitation applied in the Rule 10b-5 count the “equitable doctrine” that the statute does not begin to run until the fraud is discovered where a plaintiff injured by fraud “remains in ignorance of it without any fault or want of diligence or care on his part . . . .” 455 F.2d at 128.

In Hochfelder v. Midwest Stock Exchange, 503 F.2d 364, 375 (7th Cir. 1974), Chief Judge Swygert said:

The equitable tolling doctrine provides that where a fraud which is the foundation of the suit has actively been concealed or is of such a nature as to conceal itself, the statute of limitations is tolled until the plaintiff has obtained knowledge of the fraud or in the exercise of due care should have obtained knowledge of the fraud. Bailey v. Glover, 88 U.S. (21 Wall.) 342, 349, 22 L.Ed. 636 (1874); Holmberg v. Armbrecht, 327 U.S. 392, 396, 66 S.Ct. 582, 90 L.Ed. 743 (1945); Morgan v. Koch, 419 F.2d 993, 997 (7th Cir. 1969).

The federal tolling doctrine operates both against those who commit the alleged fraudulent acts and those who negligently facilitate fraud. The defendants have claimed that the tolling doctrine only operates against those who commit the fraud. They sought to find support in Bryan v. United States, 99 F.2d 549, 552 (10th Cir. 1938), cert. denied, 305 U.S. 661, 59 S.Ct. 364, 83 L.Ed. 429 (1939), and Hayden v. Thompson, 71 F. 60 (8th Cir. 1895), both fraud actions. Bryan is no support because the fraud suit was dismissed upon the defense of sovereign immunity where the defendant employer was the United States Government. Application of the tolling doctrine to a negligent employer was not an issue. Neither does Hayden lend any support to the defendants’ argument. In Hayden, the plaintiff, a customer, sued to recover fraudulently distributed dividends from a. bank, its directors and shareholders. The court held that equitable tolling did not apply to one of the bank’s shareholders since neither a fraud nor a negligence claim had been alleged against him. The plaintiff’s claims against the other shareholders and the directors were held to be timely on the theory of equitable tolling.

Equitable tolling embraces defendants such as Rodman & Renshaw who have facilitated by their negligence a Rule 10b-5 fraud. Chief Judge Swygert continued in Hochfelder v. Midwest Stock Exchange, supra, 503 F.2d at 375— 376:

If claims brought in the same posture as the instant action — asserting charges amounting to negligence but short of fraud — are to have any vitality, it cannot be contended that the tolling doctrine should not apply. Often the underlying fraud, carefully concealed in and of itself, would cloak the implementing actions of others. Accordingly, where the acts of a defendant facilitate the perpetration of a concealed fraud of another, the bar of the statute of limitations should not begin to run until a plaintiff obtains knowledge or through due diligence should have obtained knowledge of the underlying fraud.

This passage was cited approvingly in Hochfelder v. Ernst & Ernst, 503 F.2d 1100, 1119 (7th Cir. 1974), where equitable tolling was held to operate against the accounting firm of Ernst & Ernst for negligent facilitation and implementation of fraud although that firm was not chargeable with acts of fraud or fraudulent concealment.

Clearly, the action of Rodman & Renshaw fell within the ambit of equitable tolling. In their original claim for relief the plaintiffs alleged direct participation in the conspiracy to manipulate the price of Hercules stock as well as negligent facilitation. Even as equitable tolling works to prevent the defrauder from taking advantage of his wrongdoing, it also works to prevent the negligent person from taking advantage of his carelessness.

B

The plaintiffs’ allegation of fraudulent concealment is sufficiently specific to support a request for equitable tolling. The defendants contended that the plaintiffs merely alleged their ignorance of the fraud. They claimed that the plaintiffs must allege their own diligence as well.

When pleading Rule 10b-5 fraud, plaintiffs must comply with Rule 9(b), Fed.R.Civ.P. Once the underlying fraudulent practices are correctly pleaded, plaintiffs may then avail themselves of equitable tolling. The allegations of the pleadings here stated with particularity the circumstances of the conspiracy to defraud the purchasers of Hercules stock through market rigging. They were drawn primarily from the lengthy criminal indictment and were a detailed basis from which to claim fraudulent concealment. In paragraph 27 of the original complaint, the plaintiffs first alleged under the heading “Fraudulent Concealment” their own ignorance of the fraud until its discovery in 1967. They then stated:

Plaintiffs and members of the class could not have discovered the combination, conspiracy, and other fraudulent acts at an earlier date by the exercise of due diligence since the combination, conspiracy, and fraudulent acts set forth herein had been fraudulently concealed by the defendants by various means and methods used to avoid the detection thereof.

In paragraph 25 of the first amended complaint they added:

[T]he action is brought within one year after the discovery of the untrue statements and omissions of material facts alleged herein, and within one year after such discovery should have been made by the exercise of reasonable diligence ....

Furthermore, throughout the pleadings plaintiffs gave details of the active, continuous concealment of the fraud and have supported with discovery testimony their diligence.

Clearly the plaintiffs have alleged all the necessary elements of fraudulent concealment. In Baker v. F&F Investment, 420 F.2d 1191 (7th Cir. 1970), the court laid down the proper test:

In order to obtain the shelter of the federal doctrine of fraudulent concealment, plaintiffs must be prepared to adduce sufficient evidence to warrant the conclusion that defendants concealed the basic facts disclosing the existence of a cause of action and that plaintiffs remained in ignorance of those facts through no fault of their own. 420 F.2d at 1199.

The plaintiffs have expressly alleged that they did not know of Rodman & Renshaw’s involvement until .the criminal indictment in United States v. Projansky, supra, was returned in August 1967. All of the plaintiffs deposed testified that they first learned of the rigging scheme either upon the publication given to the indictment or later from friends or their attorneys. The plaintiffs also alleged and deposed that the criminal conspirators concealed the fraud from them. There is ample discovery testimony showing that the conspirators gave the plaintiffs with whom they directly dealt misleading information, hiding from them at all times the true nature of their stock transactions. This testimony also stands uncontradicted. Finally by implication as well as expressly, the plaintiffs have alleged that their delayed discovery of the fraud was not their fault. A complaint when tested by summary procedures must be given the benefit of every possible implication. United States v. Crown Zellerbach Corp., 141 F.Supp. 118 (N.D.Ill.1956).

The discovery testimony of Robert Schaefer supported his claims. During the fall of 1965, he repeatedly telephoned Nagorsky and defendant Epstein and questioned them concerning the value and future of Hercules stock. The defendants have not put Schaefer’s testimony into question.

Nor did the plaintiffs realize that Myers, Gorman and the Fogelsons might be participants in the manipulation scheme until 1972. These defendants were not indicted nor mentioned in the criminal indictment. In no way could the plaintiffs have known the part these defendants played until they had deposed the criminal defendants. Since discovery of the indicted conspirators was stayed until after their criminal trial, the plaintiffs were first able to take their testimony in the latter months of 1971. They did so promptly. By deposing Spero Furia, the plaintiffs learned of the meeting between five of the conspirators and Charles Myers, the president of Hercules-Galion, at the Hercules plant in the fall of 1965 after the market rigging plan had been put into operation. They also found that Myers was fully aware of the manipulation. By deposing Buddy Kozak, the plaintiffs learned of his activities while an employee of Link, Gorman & Peck and his relationship to its chief operating officer, Wilbur Gorman. By deposing Mark Rolland, they learned of David Fogelson’s involvement.

In brief, the plaintiffs’ Rule 10b-5 claims against Rodman & Renshaw, Myers, Gorman, Dickholtz and the Fogelsons are timely. The complaint as amended alleged with particularity the conspiracy to manipulate Hercules stock and stated all the necessary elements of defendants’ fraudulent concealment. Equitable tolling must apply. The plaintiffs discovered the existence of the fraud in August 1967. The three year limitations period commenced running then for Rodman & Renshaw. One and one-half years later, in February 1969, the original complaint was filed naming Rodman & Renshaw among other brokerage houses. The plaintiffs discovered the roles which Myers, Gorman, Dickholtz and the Fogelsons played between November 1971 and March 1972. The limitations period then began running for these defendants. Less than a year later, in October 1972, the plaintiffs amended the complaint and added their names as parties-defendant.

The district court’s orders granting judgment on the pleadings to defendant Rodman & Renshaw and summary judgment to defendants Myers, Gorman, Dickholtz and the Fogelsons are reversed. The district court will have jurisdiction over the pendent common law fraud claims. United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

C

Plaintiffs’ action against the American Stock Exchange and its specialists is time barred. These defendants were first named in the amendment to the first amended complaint which was filed three and one-half years after the original complaint and more than five years after the criminal indictments. The plaintiffs contend that the AMEX and its specialists aided and abetted the manipulation scheme through lack of proper supervision.

The plaintiffs argued that they could only have discovered the AMEX’s negligence after taking the following depositions from the brokerage houses:

(1) Deposition of Defendant Hertz-Warner & Co. per Irving Hertz 6/27/72 pp. 19 et seq.; and Henry Warner 6/27/72 pp. 83 et seq.
(2) Deposition of Defendant Edward Wetzel 5/25/72, pp. 81 se seq. [sic.].
(3) Deposition of Defendant Reynolds & Co., per Anthony H. Englese 6/29/72 pp. 53 et seq.
(4) Deposition of Defendant Hornblower & Weeks, Hemphill, Noyes per William J. Lawlor, Jr. 8/1/72 pp. 59— 61.
(5) Deposition of Defendant Link, Gorman & Peck per Wilbur A. Gorman 8/15/72 p. 21 and per June E. Carlson 7/6/72 pp. 69, 70. (Plaintiffs’ Brief, p. 26.)

These depositions were taken after the criminal trial and after the plaintiffs had first deposed the criminal defendants. This discovery sequence, the plaintiffs believed, gave them a strategical advantage over the brokerage houses. Once the brokerage houses were deposed, the plaintiffs added the AMEX and its specialists to their list of defendants in October 1972.

The plaintiffs delayed discovery of the brokerage houses for too long. The criminal indictment stated that the criminal defendants were certified to trade securities on the AMEX, that they manipulated a stock registered with the AMEX, and that the manipulation took place on the floor of the Exchange itself. Also, the plaintiffs could have preliminarily deposed the brokerage houses on the behavior of the AMEX before the criminal trial. All of the depositions which the plaintiffs list above as essential to discovering the role which the AMEX and its specialists played during the stock rigging (except that of Wetzel) could have been taken before the crimi'nal trial. The stay of discovery order was directed only to the indicted conspirators. Finally, gaining a strategical advantage is not a sufficient reason for delaying five years before naming these defendants. The sum of information the plaintiffs had concerning the AMEX before taking discovery of the brokerage houses was not increased by the 1971 and 1972 depositions. The three year limitations period had expired. The amendment to the first amended complaint came too late insofar as the AMEX and its specialists, John Rissetto, Al Vernieri, Edward Crooks and Frank Alter, were concerned.

The order of the district court granting summary judgment to the AMEX and its specialists must be affirmed.

V

The district court properly dismissed the plaintiffs’ antitrust claims. At the start of this action the plaintiffs included a claim under section 1 of the Sherman Act, 15 U.S.C. § 1. Judge Decker dismissed it against the original brokerage house and criminal defendants. Schaefer v. First National Bank of Lincolnwood, 326 F.Supp. 1186 (N.D.Ill. 1970). Subsequently, on the basis of Judge Decker’s opinion, Judge McMillen dismissed it against the non-criminal defendants.

The plaintiffs contended that the conspiracy to create and maintain an artificial trading price for Hercules stock on the AMEX was price fixing and a per se violation of the Sherman Act prohibition against conspiracies and combination to fix and maintain the price of goods in interstate commerce. The plaintiffs argued that the district court should not have dismissed the antitrust claims because the defendants’ manipulatory practices fall within the literal language of the Sherman Act.

Securities exchanges do not enjoy a blanket exemption from the antitrust laws. In Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), the Supreme Court held that the antitrust laws do apply to exchanges and made such an assumption the starting point for any analysis of a conflict arising from their collision with the securities laws. The Court said at 357, 83 S.Ct. at 1257:

The Securities Exchange Act contains no express exemption from the antitrust laws or, for that matter, from any other statute. This means that any repealer of the antitrust laws must be discerned as a matter of implication, and “[i]t is a cardinal principle of construction that repeals by implication are not favored.” United States v. Borden Co., 308 U.S. 188, 198 [60 S.Ct. 182, 188, 84 L.Ed. 181]; see Georgia v. Pennsylvania R. Co., 324 U.S. 439, 456-457 [65 S.Ct. 716, 725-726, 89 L.Ed. 1051]; California v. Federal Power Comm’n, 369 U.S. 482, 485 [82 S.Ct. 901, 903, 8 L.Ed.2d 54], Repeal is to be regarded as implied only if necessary to make the Securities Exchange Act work, and even then only to the minimum extent necessary. This is the guiding principle to reconciliation of the two statutory schemes.

In fact, the antitrust laws are a necessary complement to the regulatory scheme of the securities acts. As the Silver Court said:

Since the antitrust laws serve, among other things, to protect competitive freedom, i. e., the freedom of individual business units to compete unhindered by the group action of others, it follows that the antitrust laws are peculiarly appropriate as a check upon anticompetitive acts of exchanges which conflict with their duty to keep their operations and those of their members honest and viable. 373 U.S. at 359, 83 S.Ct. at 1258.

Although the Silver case was distinguished, its further operation was seriously questioned by the Supreme Court’s opinion in Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d 525 (1973), holding that an antitrust action against a commodity exchange should be stayed to afford the Commodity Exchange Commission an opportunity to determine if the challenged conduct of the exchange was in compliance with the applicable statute and with exchange rules. See also Chicago Mercantile Exchange v. Deaktor, 414 U.S. 113, 94 S.Ct. 466, 38 L.Ed.2d 344 (1973).

Private parties may only bring antitrust claims against an exchange or its members when there is no other vehicle for review. In Silver, the Court allowed a private antitrust suit because the Securities and Exchange Commission was not granted any statutory means under the securities acts for reviewing a New York Stock Exchange order terminating direct wire telephone connections with non-members. The Court added in a footnote (373 U.S. 358 n. 12, 83 S.Ct. 1257) that “[w]ere there Commission jurisdiction and ensuing judicial review for scrutiny of a particular exchange ruling ., a different case would arise concerning exemption from the operation of laws designed to prevent anticompetitive activity . . (emphasis added).

The plaintiffs here have a forum for review unlike the plaintiffs in Silver. The plaintiffs have chosen to make claims both under section 10(b) and section 17 of the securities acts and under the antitrust laws.

By electing to make their claim for relief under the securities acts, the plaintiffs have rendered their antitrust claims superfluous. The sort of manipulation scheme underlying the plaintiffs’ claim here was envisioned to be fully dealt with under the securities acts. 3 Loss, Securities Regulation 1529-70 (2d ed. 1961). The plaintiffs’ Sherman and Clayton antitrust claims are dismissed for these reasons and for those appearing in Judge Decker’s opinion, 326 F.Supp. 1186, 1190-1192.

In summary, (1) we affirm the district court’s dismissal of Count II (antitrust claims) as to all parties; (2) we affirm the district court’s dismissal of Counts I (securities acts claims) and Count III (common law fraud claims) as to the American Stock Exchange, John Rissetto, Al Vernieri, Edward Crooks and Frank Alter; but we reverse the court’s dismissal of Counts I and III as to all other defendants. The case is remanded for further proceedings consistent herewith.

Reversed in part; affirmed in part; and remanded.

FAIRCHILD, Circuit Judge

(concurring).

I agree in almost all respects with the opinion ably written for the court by Judge Sprecher. With respect to Part V (dismissal of the antitrust claims), the most persuasive argument seems to me to arise out of the contrast between the relevant language of the Securities Exchange Act and that of the antitrust laws. Although it is arguable whether or not, before the enactment of the Securities Exchange Act, the manipulation specifically described in § 9(a)(2), 15 U.S.C. § 78i, fell within the far more general language of § 1 of the Sherman Act, 15 U.S.C. § 1, the later enactment not only specifically described the activity (expressly including acting “with one or more other persons,” as well as “alone”) and declared it unlawful, but in § 28(a), 15 U.S.C. § 78bb(a), very closely limited the recovery for violation, i. e., actual damages under the Securities Exchange Act, contrasted with treble damages under the antitrust laws, 15 U.S.C. § 15. Under all the circumstances, it seems to me the more logical conclusion that the later enactment was either an implied amendment of the earlier, or was itself recognition by Congress that the activity described in § 9(a)(2) of the Securities Exchange Act had not previously been prohibited by the antitrust laws.

      . These are Irving Projansky, Harry Brainin, Gerald Leavitt and Michael Geier, the four appellants in United States v. Projansky, and Arthur Keller, Stuart Projansky (Irving’s son), Fred Weitz, Mark Rolland, Spero Furia, Murray Peltz, Burton Buddy Kozak, Harris Nagorsky, Herbert Werman, Edward Wetzel, Zafe Zafer, and David Zisfein. Named as co-conspirators but not as defendants were Morris and Eva Childs, George Georges, Irving Taub, the First National Bank of Lincolnwood, and Argus Capital Corporation. United States v. Projansky, 465 F.2d 123, 124 n. 1 (2d Cir. 1972).

      . For a complete history of the manipulation scheme consult the Second Circuit’s recounting of the facts in United States v. Projansky, supra at 124-135.

      . See 6 Loss, Securities Regulation 3869-73 (Supp. 2d ed. 1969); 3 Loss, Securities Regulation 1763 et seq. (2d ed. 1961). Cf. Tcherepnin v. Knight, 389 U.S. 332, 88 S.Ct. 548, 19 L.Ed.2d 564 (1967); J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964); Supt. of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971).

      . Section 10(b), 15 U.S.C. § 78j(b), provides:
      It shall be unlawful for any person . [t]o use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

      . Rule 1 Ob-5, 17 C.F.R. 240.1 Ob-5, provides:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange,
      (a) To employ any device, scheme, or artifice to defraud,
      (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or' course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

      . Surowitz v. Hilton Hotels Corporation, 342 F.2d 596, 604 (7th Cir. 1965), rev’d on other grounds, 383 U.S. 363, 86 S.Ct. 845, 15 L.Ed.2d 807 (1966). But compare Reid v. Mann, 381 F.Supp. 525 (N.D.Ill.1974), and authorities cited there.

      . See also Dauphin Corp. v. Redwall Corp., 201 F.Supp. 466, 469 (D.Del.1962).

      . The rule of the law of the case may have a different effect upon a federal court in a diversity case where a state court has previously acted. Barrett v. Baylor, 457 F.2d 119, 123-124 (7th Cir. 1972).

      . “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be,stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.”

      . The record is not clear as to whether Dickholtz and the Fogelsons were parties to the original order of dismissal dated June 25, 1973, but the district court expressly included them in the “clarification” order of September 13, 1973.