author: STEPHENSON, Circuit Judge.

text:
    Anna C. BAGBY, Individually and as Guardian of Kenneth Bagby and Dixie Bagby, Minors, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Appellant, v. COMMERCE BANK OF KANSAS CITY, Appellee, v. TRADERS NATIONAL BANK and City National Bank and Trust Co., Fourth-Party Defendants. Anna C. BAGBY, Individually and as Guardian of Kenneth Bagby and Dixie Bagby, Minors, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Defendant, v. COMMERCE BANK OF KANSAS CITY, Appellee, v. TRADERS NATIONAL BANK and City National Bank & Trust Company, Appellants.
    Nos. 72-1511, 73-1191.
    United States Court of Appeals, Eighth Circuit.
    Submitted Nov. 16, 1973.
    Decided Jan. 15, 1974.
    Rehearing and Rehearings En Banc Denied Feb. 6, 1974.

      F. Philip Kirwan, Kansas City, Mo., for Merrill Lynch.
    John C. Thurlo and Richard K. Andrews, Kansas City, Mo.,‘for Commerce Bank.
    Robert K. Ball, II, Kansas City, Mo., for Traders National Bank.
    Before HEANEY, ROSS and STEPHENSON, Circuit Judges.
   STEPHENSON, Circuit Judge.

This appeal involves an interpretation of § 3-406 of the Uniform Commercial Code, as adopted in Missouri, which specifies that negligence which “substantially contributes to * * * the making of an unauthorized signature * * * ” wiH preclude the drawer from asserting a forgery.

The appeal is a consolidation of two diversity actions originally brought in the United States District Court for the Western District of Missouri. Initially, plaintiff Anna C. Bagby sought damages from defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) for the conversion and sale of certain shares of common stock. Merrill Lynch in turn brought a third-party action against its drawee-bank, Commerce Bank of Kansas City (Commerce Bank), for conversion of funds by paying certain checks over unauthorized or forged indorsements. Commerce Bank then brought a fourth-party action against two collecting banks, Traders National Bank (Traders Bank) and City National Bank (City Bank) seeking indemnification based upon indorsement guarantees. Mrs. Bagby’s original claim against Merrill Lynch was subsequently settled, and her complaint was dismissed upon her motion. The remaining claims of Merrill Lynch were tried to the court sitting without a jury, and resulted in a judgment in favor of Commerce Bank. The district court’s memorandum and order, filed July 11, 1972, is reported at 348 F.Supp. 969 (W.D.Mo.1972). The facts are fully set forth in Judge Hunter’s excellent opinion and will be reported only to the extent necessary for disposition of the issues presented.

Later, the fourth-party complaint was tried to the court with judgment being rendered in favor of Commerce Bank against Traders Bank and City Bank for attorney fees and litigation expenses incurred by Commerce in defending the claim against Merrill Lynch. This opinion was not published.

Both the third and fourth party actions presented questions of first impression in Missouri. Although under such circumstances we give “great weight” to the determination of local law by a district court, we are not bound by that determination. Luke v. American Family Mutual Insurance Company, 476 F.2d 1015, 1019 & n. 6 (CA 8, 1972), aff’d, en banc, 475 F.2d 1023.

I. Merrill Lynch v. Commerce Bank

Following the death of her husband, Mrs. Bagby contacted attorney Marshall Lyons for the primary purpose of obtaining an appointment of guardianship for her two minor children so that certain shares of Sears, Roebuck stock could be issued to them. She and her children were beneficiaries of the Savings and Profitsharing Pension Fund of the Sears Company. She was so appointed.

In December of 1967, several shares of Sears stock were issued to Mrs. Bag-by, both as an individual and in her capacity as guardian. They were sent to her in care of attorney Lyons. Lyons thereafter contacted a Merrill Lynch account executive through whom an account was opened in the name of Mrs. Bagby individually and another opened in her name as guardian. No Merrill Lynch representative ever met Mrs. Bagby personally, nor confirmed Lyons’ authority to open the accounts. No contact whatsoever was made with Mrs. Bagby. All information received by Merrill Lynch was obtained through Lyons. Merrill Lynch dealt solely with Lyons and it did not at any time give Mrs. Bagby personal confirmation that the accounts had been opened.

On two occasions in 1968, the Probate Court of Ray County, Missouri authorized the sale of Sears stock in the guardian estate. There is no evidence that Merrill Lynch ever received copies of these orders. On four occasions between January 1, 1968 and June 19, 1968, Sears stock certificates in Mrs. Bagby’s name both as an individual and as guardian of the minor children were indorsed with a facsimile signature of Mrs. Bagby and delivered to Merrill Lynch, who, in turn, sold the stock through the accounts opened by Lyons. Merrill Lynch did not verify whether Mrs. Bagby had authorized anyone to indorse any of the stock certificates with a stamped facsimile signature. As payment, Merrill Lynch drew four checks against its checking account which it maintained with Commerce Bank. The initial check was made payable to “Mrs. Anna C. Bagby, c/o Marshall W. Lyons,” and was indorsed “Anna C. Bagby, c/o Marshall W. Lyons, Marshall W. Lyons.” The second check was made payable to “Anna C. Bagby” and indorsed “Anna C. Bagby, M. W. Lyons.” Both checks were deposited by Lyons in his personal account at Traders Bank. The third cheek was made payable to “Anna C. Bagby, Gdn. Est., Kenneth R. and Dixie Bagby” and indorsed “Anna C. Bagby, Est. Kenneth R. and Dixie Bagby M. W. Lyons.” The final check was made payable to “Anna C. Bagby, Gdn. Est. of Kenneth R. Bagby” and indorsed “Anna C. Bagby Gdn. Est. Kenneth R. Bagby M. W. Lyons.” These latter two checks were deposited by Lyons in his personal account at City Bank, with the exception of $250.00 of the amount of the fourth check which was paid in cash to Lyons. Merrill Lynch never obtained authorization from Mrs. Bagby for the drawing and issuance of the checks to Lyons.

In reliance upon guarantees of prior indorsements, Commerce Bank paid the checks upon presentment by the collecting banks and charged the respective indicated sums against Merrill Lynch’s account. At the time it paid on the checks, Commerce Bank had no actual knowledge that the indorsements were forged or unauthorized.

Mrs. Bagby denied the genuineness of the indorsements as her signature and denied that she authorized anyone to indorse the checks with her signature. She further denied that Lyons had any authority to have the checks drawn or to receive them. She never received any proceeds from the checks, and denied knowing of their existence prior to their payment by Commerce Bank.

Merrill Lynch, after settling with Mrs. Bagby, pressed its third-party complaint against Commerce Bank for paying the Bagby checks over the forged indorsements. The district court, however, held that Merrill Lynch was foreclosed from recovering against Commerce Bank under V.A.M.S. § 400.3-406 (1959), (§ 3-406). It held that Merrill Lynch by its own actions (1) in failing to ascertain Lyons’ authority and (2) in placing the checks in Lyons’ hands on four separate occasions in violation of its own regulations, and the Rules of the New York Stock Exchange and sound business practices, was guilty of negligence which “substantially contributed” to the payment of the checks over unauthorized signatures.

In so holding, the district court determined that the adoption by Missouri of § 3-406 “materially altered the test of causation” previously applied in Missouri under the Uniform Negotiable Instruments Act. Under pre-code Missouri law only negligence which proximately related to a forgery or the detection thereof, and not merely to the issuance of the checks, would relieve a drawee-bank of liability for payment. American Sash & Door Co. v. Commerce Trust Co., 332 Mo. 98, 56 S.W.2d 1034, 1038 (1932); accord, Scott v. First Nat. Bank in St. Louis, 343 Mo. 77, 119 S.W.2d 929, 936-937 (1938).

It is our view that Missouri’s adoption of § 3-406 did not materially change the test of causation necessary to preclude a drawer from recovery, and that in this respect pre-code Missouri law has not been modified.

§ 3-406 reads as follows:

Any person who by his negligence substantially contributes to a material alteration of the instrument or to the making of an unauthorized signature is precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee’s or pay- or’s business. (Emphasis supplied.)

Commerce Bank urges our acceptance of the district court’s rationale that the use of the expression “substantially contributes” in § 3-406, rather than the wording “direct and proximate cause” (as was the sine qua non of pre-code law necessary to deny a drawer’s recovery) creates a broader test which shortens the chain of causation. See, Thompson Maple Products v. Citizens National Bank, 211 Pa.Super. 42, 234 A.2d 32, 34 (1967); accord, National Bank & Trust Co. of Central Pa. v. Commonwealth, 9 Pa.Cmwlth. 358, 305 A.2d 769 (1973). We do not agree.

Although the official comment to § 3-406 expressly states that no attempt is made to define negligence, we are persuaded that the intended use of “substantially contributes” necessarily requires some showing of a causal relationship equivalent to the “substantial factor" test generally applied in the law of negligence. Gast v. American Casualty Company of Reading, Pa., 99 N.J.Super. 538, 240 A.2d 682, 685 (1968); Gresham State Bank v. O. & K. Construction Co., 231 Or. 106, 370 P.2d 726, 372 P.2d 187 (1962); National Bank & Trust Co. of Central Pa. v. Commonwealth, supra, 9 Pa.Cmwlth. 358, 305 A.2d 769 (1973); 2 Anderson, Uniform Commercial Code, § 3-406:7 at 943 (1971); but see, Fidelity & Deposit Co. cf. Md. v. Chemical Bank of N.Y.T. Co., 65 Misc.2d 619, 318 N.Y.S.2d 957, 959 (1970); Thompson Maple Products, Inc. v. Citizens National Bank, supra, 211 Pa.Super. 42, 234 A.2d 32, 34-35 (1967). In 6 Willier & Hart, U.C.C. Reporter Digest, § 3-406 A3 at 2964 (1973) the authors reject the “shortened chain of causation” test of Thompson Maple Products, supra in favor of the narrow doctrine of pre-code estoppel:

While no attempt is made in Section 3-406 to specify what is negligence, the court’s holding that the plaintiff’s conduct of its business over the course of years fitted the ‘substantially contributed' negligence test of that section appears to be beyond the boundaries implied by the Official Comment to Section 3-406. It is submitted the draftees of the Code intended to continue the narrow doctrine of pre-code estoppel rather than to broaden the scope of contributory negligence beyond the passing of the forgery as the court did in the instant case.

Compare, Salsman v. National Community Bank of Rutherford, 102 N.J.Super. 482, 246 A.2d 162, 166 (1968).

The district court notes, however, that “[i]n any event, the ‘substantial factor’ test is broad enough to include [Merrill Lynch]’s conduct in the transactions involved herein.” 348 F. Supp. 969, 978 n. 7. We disagree. It is our view that the situation created by Merrill Lynch’s issuance of the checks was not enough to constitute a “substantial factor” in bringing about the forgery. See, Restatement of Torts 2d §§ 431 and 433 & Comment e (1965).

The district court found, and Merrill Lynch admits, that it was negligent in handling the stock transactions and in bringing about the existence and the mistaken issuance of the checks. But such negligence related only to their issuance—not to the forgery itself.

Despite its wrongful sale of the certificates and its failure to conduct of customer investigation pursuant to Rule 405 of the New York Stock Exchange, for which it admitted liability, Merrill Lynch correctly made the checks payable to the true owner, Mrs. Bagby, individually and as guardian of the minor children. Its action in mailing the checks to her attorney was consistent with standard business practices.

In the final analysis, we are convinced that the meaning of § 3-406 is best reflected by precluding a drawer from recovery under these or similar circumstances only where his negligent conduct contributes to the forgery, not merely to the unwarranted issuance of the checks, such as in the situation before us. To this extent it is our view that the pre-code holdings of American Sash and Scott remain viable law in Missouri.

The decision of the district court is reversed and judgment is accordingly entered in favor of Merrill Lynch on its third-party claim.

II. Commerce Bank v. Traders & City Banks

In an unreported memorandum and order, the district court awarded Commerce Bank the sum of $14,512.-75, as reasonable attorney fees and litigation expenses incurred by it in defending the third-party claim of Merrill Lynch, the award to be paid by Traders and City Banks. It found that Traders and City Banks breached their express and implied warranties of indorsement given to Commerce Bank under V.A.M.S. § 400.4-207 (§ 4-207). It further found that timely demand for defense was made by Commerce Bank and held that “this does appear to be an ‘appropriate case’ for an award of attorneys’ fees and litigation expenses.”

Commerce Bank gave both Traders and City Banks adequate and timely notice of its demand that they assume the defense of this action and hold Commerce Bank harmless from any claims asserted against it by Mrs. Bagby or by Merrill Lynch. Commerce Bank further notified Traders and City Banks that if it were required to defend the third-party action, it would look to Traders and City Banks for complete reimbursement for any loss and expenses incurred.

Traders and City Banks did not directly respond. Commerce Bank then filed its answer to the third-party complaint. Thereafter, the Insurance Company of North America (INA) on behalf of its insureds, Traders and City Banks, responded to Commerce’s demand. It declined to assume Commerce’s defense for the stated reason that there was a serious question as to liability on the part of any of the banks. INA, however, on behalf of Traders and City Banks, agreed to indemnify Commerce Bank for any loss “in accordance with the Uniform Commercial Code” if Merrill Lunch were to prevail in its third-party action against Commerce Bank. INA also offered Commerce Bank a defense of the third-party action under the terms of the bond which Commerce Bank purchased from INA, provided formal notification and demand were made under the terms of that bond. The bond had a $25,000 deductible provision.

Commerce Bank made no demand for indemnity or defense under the terms of its bond with INA, but instead undertook the defense of the third-party action. Commerce then filed its fourth-party complaint against Traders and City Banks demanding indemnity for any amounts it might be held liable to Merrill Lynch, plus attorneys’ fees and litigation expenses.

Traders and City Banks now contend that the district court was wholly without power to make the award to Commerce Bank since no warranty had been breached under § 4-207. They erroneously reason that a successful defense of the third-party claim by Commerce Bank based upon V.A.M.S. § 3-406, supra, necessarily carried with it the result that Commerce Bank acquired “good title” to the checks, and that no warranty of “good title” could therefore have been breached by Traders and City Banks under § 4-207.

Despite our disposition of the third-party claim, suffice it to say that a finding of negligence necessary to preclude a drawer from recovery under § 3-406 does not a priorori mean that a drawee has obtained “good title” to the instrument(s) through the collection process, and that no “good title” warranty given by the collecting banks has been breached. Application of § 3-406 does not extinguish the drawer’s rights against the drawee, but instead serves only to bar his 'remedy. Furthermore, although the Uniform Commercial Code does not define “good title,” the draftsmen have made it clear that a good title warranty is a warranty of “the genuineness of indorsements,” § 4-207, Comment 1 and § 3-417, Comment 3, which in this instance were unauthorized.

Traders and City Banks also assert that the initial demand made upon them to defend all claims necessarily included claims for punitive damages since Merrill Lynch’s original complaint sought punitive damages against Commerce Bank. It is their position that such demands were in excess of statutory limits under § 4-207, and that they were therefore justified in refusing such defense. As the district court noted, there was no allegation in the original third-party complaint that the acts of Commerce Bank were malicious or wilful or in any way such that a claim for punitive damages could be supported. An improper charge was made against Merrill Lynch’s account under V.A.M.S. § 400.4-401(1), for which Merrill Lynch had the right to insist upon a recrediting subject to the defense of § 3-406. The inclusion of a frivolous claim of punitive damages does not justify the refusal by Traders and City Banks to assume the defense of Commerce Bank in the third-party action. Moreover, approximately seven months prior to trial of the third-party claim, the third and fourth-party complaints were amended reducing the amount of damages to the face value of the checks. Traders and City Banks still refused to defend the third-party action and denied liability for attorneys’ fees and expenses thereby incurred.

Additionally, Traders and City Banks contend that this is not an “appropriate case” for the award of such fees and expenses under § 4-207 because Traders and City Banks offered Commerce Bank indemnity “in accordance with the Uniform Commercial Code” and because a defense was available under the terms of Commerce Bank’s bond with INA. Neither of these contentions precludes Commerce Bank from recovering its collateral litigation expenses. Under either argument, the practical effect was to require Commerce Bank to defend the third-party claim itself. INA, which bonded all parties to the fourth-party action, agreed to indemnify Commerce Bank on behalf of Traders and City Banks only if Commerce failed in the third-party action. This conditional offer falls well short of the mark where full indemnity was required under § 4-207. Moreover, under § 4-406(5), Commerce Bank would be entitled to indemnity only if no defense were waived by it in the third-party action. This left Commerce Bank with a Hobson’s choice. If it had called upon INA to assume its defense in the third-party action under the terms of its own bond with INA, Commerce Bank would have run the risk of INA failing in the defense, thereby precluding indemnification in the fourth-party action. Commerce Bank’s recovery would then be diminished by the $25,000 deductible feature of its bond.

We deem other contentions made by appellant to be without merit and not worthy of comment.

The decision of the district court in awarding attorneys’ fees and litigation expenses to Commerce Bank on its fourth-party claim is hereby affirmed.

Reversed in part; affirmed in part.

      . As noted by the district court, the respective rights of the parties hereto are governed by the Uniform Commercial Code, Vernon’s Ann.Mo.Stat. § 400.1-101 et seq. (1959), adopted in Missouri prior to the events giving rise to this cause. See, 348 F.Supp. 969, 975.

      . Neither Traders Bank nor City Bank made any effort to ascertain the genuineness of and authorization for the indorsements by Lyons. See, V.A.M.S. § 400.4-207(2) (b) (1959). As noted by the district court, 348 F.Supp. 969, 973, Traders Bank’s personnel did not know Anna Bagby and did not remember whether she accompanied Lyons when he deposited the checks. Similarly, City Bank’s personnel did not know whether Anna Bagby indorsed the checks in tire presence of any bank officer, nor did they know who presented the checks.

      . See, 348 F.Supp. 969, 976-977.

      . § 3-406, Comments 3 & 7.

      . Thompson Maple Products, Inc., supra, held that several standard business practices of the drawer company viewed in their entirety were sufficient to support a finding that the company “substantially contributed” to the making of unauthorized signatures.

      . American Sash, supra, 56 S.W.2d 1034, 1038-1039 (1932), framed negligence necessary to assert the defense in terms of “direct” and “proximate” cause, which is essentially the equivalent of “legal cause” utilized by the Restatement. See, Restatement of Torts 2d, § 431, supra, and Scope Note at 425-26 (1965) ; see also, Ricketts v. Kansas City Stock Yards Co. of Maine, 484 S.W.2d 216, 221-222 (Mo.1972) (per Hyde, Sp. C., three JJ. concurring, two JJ. concurring in the result, and two JJ. dissenting). Compare, American Sash, supra, with Society Nat. Bank of Cleveland v. Capital Nat. Bank, 30 Ohio App.2d 1, 281 N.E.2d 563, 566 (1972), in which the court stated: “mere laxity [by the drawer in the conduct of his business affairs] is not sufficient to prevent him from recovering against the drawee bank for the amount charged against his account and paid by the drawee over a forged indorsement, unless the lax conduct was the proximate cause of the’ loss.” (Emphasis supplied.) We note by the court’s citation to pre-code law that the adoption of the Code by that jurisdiction has not modified prior law. Accord, 2 Anderson, Uniform Commercial Code § 3-406:9.1 (1972-73 supp.).

      . See generally, Comment, The “Know Your Customer” Rule of the NYSE: Liability of Broker—Dealers Under the UCC and Federal Securities Law, 1973 Duke L. J. 489.

      . Under § 4-207, the burden rests upon the first bank in the collection chain to assure that indorsements are valid. The rationale is that the first collecting bank is in the best position to insure that it is taking the instrument from one with good title. See, Federal Deposit Ins. Corp. v. Marine Nat. Bank of Jacksonville, 303 F.Supp. 401, 403 (D.C.Fla.1969).

      . Under § 4-207(3), “damages for breach of such warranties * * * shall not exceed the consideration received by the customer or collecting bank responsible plus * * * expenses related to the items,- if any.” Comment 5 to § 4-207 states in part that “[t]he expenses referred to in this phrase may be ordinary collecting expenses and in appropriate oases could also include such expenses as attorney fees.” (Emphasis supplied.)
      In the absence of a statute or contract providing for their allowance, attorney fees are not recoverable by the prevailing party. City of Grandview, Missouri v. Hudson, 377 F.2d 694, 696 (CA 8 1967). However, an exception to the general rule is that attorneys’ fees which have been reasonably incurred in the defense of a claim indemnified against may be recovered where the right to indemnity either arises under a contract or is implied by law, provided that the indemnitor has notice of the lawsuit and an opportunity to defend. General Electric Company v. Mason & Dixon Lines, Inc., 186 F.Supp. 761, 766 (W.D.Va.1960) ; McDonough Construction Co. v. H. B. Fowler & Co., 281 F.Supp. 90, 95-96 (E.D.La.1968) ; 5 Corbin, Contracts § 1037 (1964). Such fees are limited, however, to those incurred in the defense of the claim indemnified against, and there should be no recovery for fees and expenses incurred in establishing the right to indemnity. General Electric Company v. Mason & Dixon Lines, Inc., supra; accord, McDonough Construction Co. v. H. B. Fowler & Co., supra. Missouri decisions are in accord. See, e. p.’s, State of Missouri: ex rel. Algiere v. Russell, 359 Mo. 80, 223 S. W.2d 481, 483 (Mo.1949) ; Hunter v. DeLuxe Drive-In Theaters, 257 S.W.2d 255, 260-261 (Mo.App.1953).

      . Contrary to Traders and City Banks’ interpretation of § 4-207 (3), and Comment 5 thereof, the section does not require recovery by the drawee-bank of the consideration received by the collecting bank(s) as a prerequisite to recovery of attorneys’ fees and litigation expenses.

      . See, D. Whaley, Forged Indorsements and the U.C.C.’s “Holder”, 6 Ind.L.Rev. 45, 59-60 (1972).

      . Traders and City Banks argue that the district court erroneously decided that the provisions of V.A.M.S. § 400.3-419(2) compelled the abandonment of Merrill Lynch’s claim for punitive damages. Although the authorities disagree as to whether a drawer may pursue the drawee upon a theory of conversion under § 3-419, see, 2 Anderson, Uniform Commercial Code, § 3-419:11 at 1037 (1971) ; see also, Stone & Webster Engineering Corp. v. First National Bank & Trust Co., 345 Mass. 1, 184 N.E.2d 358 (1962) ; but see, Prudential Ins. Co. of America v. Marine National Exch. Bank, 315 F.Supp. 520, 522 (E.D.Wis.1970), Merrill Lynch’s right under § 4-401(1) was nevertheless limited to restitution of the face amounts of the checks, and an inclusion of such a claim for punitive damages in any event was frivolous.

      . The basis of this argument is I.N.A.’s letter of September 16, 1970, written to Commerce Bank on behalf of Traders and City Banks, which reads in part:
      * * * * * *
      “INA does recognize the liability of Traders Bank and City National if Merrill Lynch should prevail in their action against Comtuerce Bank. In such an event, and in behalf of Traders National Bank and City National Bank and Trust Company, INA does agree to indemnify Commerce Bank of Kansas City for any loss in accordance with the Uniform Commercial Code.”


source: Caselaw Access Project

author: STUART, District Judge.

license: Public Domain

text:
    Robert J. WILSON, Regional Director of Region 18 of the National Labor Relations Board, for and on behalf of the National Labor Relations Board, Petitioner-Appellant, v. MILK DRIVERS AND DAIRY EMPLOYEES UNION, LOCAL 471, affiliated with International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America, Respondent-Appellee.
    No. 73-1690.
    United States Court of Appeals, Eighth Circuit.
    Submitted Dec. 13, 1973.
    Decided Feb. 11, 1974.

      Marvin Roth, Atty., N. L. R. B., Washington, D. C., for appellant.
    Richard A. Williams, Jr., Minneapolis, Minn., for appellee.
    Before BRIGHT and STEPHENSON, Circuit Judges, and STUART, District Judge.

       W. C. STUART, District Judge, Southern District of Iowa, sitting by designation.

   STUART, District Judge.

This is an appeal by the National Labor Relations Board (Board) from an Order of the United States District Court for the District of Minnesota entered by Judge Neville denying its petition for a preliminary injunction sought under Section 10(1) of the National Labor Relations Act as amended (the Act), 61 Stat. 149; 73 Stat. 544; 29 U.S.C. § 160(1). The petition for the section 10(1) injunction was based upon a charge filed with the Board on July 24, 1973 by Ronald Roth (Roth) d/b/a Ronco Delivery (Ronco) alleging that Milk Drivers and Dairy Employees Local 471 (Union) was engaging in the unfair labor practice of secondary boycott in violation of section 8(b) (4) of the Act. After investigation, the Regional Director determined he had reasonable cause to believe the charge was true. A complaint issued and the petition for injunctive relief was filed as required by section 10(1). The District Court conducted an evidentiary hearing and on August 20, 1973, filed a Memorandum Opinion unofficially reported at 84 LRRM 2124 in which he held that the Board did not have reasonable grounds to believe a violation of section 8(b) (4) (i), (ii) (B) had occurred. An Order denying injunctive relief was filed the same day.

The sole issue on appeal is whether the District Court erred in concluding the Board did not have reasonable cause to believe the Union was violating section 8(b) (4) (i), (ii)(B) of the Act.

Roneo, the charging party, is a milk delivery service .owned by Roth. Roth’s father, Mel Roth, is president and general manager of Zayre Shoppers City (Zayre), which owns several retail stores handling milk and dairy products in and around the Twin Cities. Ewald Bros. Inc. (Ewald) is a processor and distributor of dairy products at wholesale and retail levels. It is a signatory to a collective bargaining agreement between the Union and a multi-employer bargaining association in the Twin Cities area.

Ronco, which picked up milk at Ewald’s dock for delivery to one of Zayre’s stores, filed the charge after the Union had, on July 23, 1973, (1) blocked Ewald’s dock facilities to prevent the ingress and egress of Ronco trucks, (2) ordered employees not to load Ronco vehicles, and (3) ordered supervisors and managers not to load Ronco vehicles. Ronco charged this constituted a secondary boycott in violation of section 8(b) (4) (i), (ii)(B) of the Act. The Union claimed the action was directly aimed at preventing violations of the collective bargaining agreement and enforcing of the work preservation clause of the agreement. The trial court so found.

In proceedings under section 10 (Z) of the Act the district court is not called upon to decide whether, in fact, a violation has occurred. The determination of this question is reserved exclusively for the Board with review by the Court of Appeals under section 10(e) and (f) of the Act. The inquiry of the district court is limited to a determination of whether the Board has reasonable cause to believe the Act was being violated as charged, and if it so concludes, it must grant such relief as it deems just and proper. Local Joint Board Hotel & Restaurant Employees etc. v. Sperry (8th Cir., 1963), 323 F.2d 75, 77; Schauffler v. Local 1291, International Longshoremen’s Association (3d Cir., 1961), 292 F.2d 182, 187-188.

The statutory standard of “reasonable cause” is satisfied if there is a showing of factual issues which must be resolved by the Board. Section 10 (Z) commands the courts to disregard their traditional reluctance to issue preliminary injunctions when there is a substantial conflict in the evidence.

Kennedy v. Sheet Metal Workers Int. Assn. Local 108 (D.C.C.D.Cal., 1968), 289 F.Supp. 65, 91. See also, Local Joint Board v. Sperry, supra, 323 F.2d at 77-78; Douds v. Milk Drivers & Dairy Employees Union (2d Cir., 1957), 248 F.2d 534, 537.

It is not necessary that the sole object of the Union action was that of forcing or requiring of Ewald to cease doing business with Ronco. Section 8(b) (4) (i), (ii) (B) is violated if this is one of its objects although the Union’s conduct may also have other legitimate objects. NLRB v. Denver Bldg. Council (1951), 341 U.S. 675, 689, 71 S.Ct. 943, 95 L.Ed. 1284; Riverton Coal Co. v. United Mine Workers of America (6th Cir., 1972), 453 F.2d 1035, 1040; NLRB v. Milk Drivers & Dairy Employees Local Union No. 584 (2d Cir., 1965), 341 F.2d 29, 32; NLRB v. Local 294, International Brotherhood of Teamsters (2d Cir., 1960), 273 F.2d 696, 698; NLRB v. Wine, Liquor & Distillery Workers Union (2d Cir., 1949), 178 F.2d 584, 586, 16 A.L.R.2d 762.

The propriety of injunctive relief does not depend upon traditional equitable principles, but whether it is necessary to effectuate policy as announced by Congress. It is just and proper when the circumstances of a case create a reasonable apprehension that the statutory remedial purposes will be frustrated in the absence of such relief. Minnesota Mining & Mfg. Co. v. Meter (8th Cir., 1967), 385 F.2d 265, 270-272.

Section 10(Z) reflects a Congressional determination that the unfair labor practices enumerated therein are so disruptive of labor-management relations and threaten such danger of harm to the public that they should be enjoined whenever a district court has been shown reasonable cause to believe in their existence and finds that the threatened harm or disruption can best be avoided through an injunction.

Retail Clerk’s Union v. Food Employers Council, Inc. (9th Cir., 1965), 351 F.2d 525, 531 (emphasis in original).

We have held that the scope of review when a preliminary injunction is granted is limited to determining whether the district court’s finding that there was reasonable cause to believe that unfair labor practices had occurred is clearly erroneous and whether the court abused its discretion in granting injunctive relief. Minnesota Mining & Mfg. Co. v. Meter, supra, 385 F.2d at 269; Local Joint Board v. Sperry, supra, 323 F.2d at 77. However, we have not considered the scope of review in instances where the district court found the Board had no reasonable cause to believe the Act was being violated. The Second Circuit has considered this question and stated:

While the responsibility of the district court is well defined, our own role on appeal is less clear. Were this an appeal from the grant after an evidentiary hearing of a § 10(J) injunction our scope of inquiry could be limited by the “clearly erroneous” test. However, when the appeal is from the denial of a petition for a § 10(i) injunction, it seems that, in light of congressional policy favoring the grant of such injunctions in appropriate circumstances, our scope of review ought not to be so limited.

National Maritime Union of America v. Commerce Tankers Corp. (2d Cir., 1972), 457 F.2d 1127, 1133-1134. See also, Boire v. International Brotherhood of Teamsters (5th Cir., 1973), 479 F.2d 778, 793 n. 15; Local No. 83, Construction etc. Drivers Union v. Jenkins (9th Cir., 1962), 308 F.2d 516, 517 n. 1; Brown v. Pacific Telephone & Telegraph Co. (9th Cir., 1954), 218 F.2d 542, 544 and Pope, J., concurring, 544.

We believe this line of cases takes the correct approach to appellate review of a denial of section 10 (i) injunction. We therefore examine the evidence to determine whether the trial court erred in refusing to grant injunctive relief.

Summary of the Evidence

In late winter or early spring of 1971 Robert Hosp, president and general manager of Ewald sold one share each of his own stock in Ewald to Roth and two other gentlemen in the retail dairy business in an attempt to increase Ewald’s business. All three were elected to the Ewald Board of Directors increasing its number to six.

Ewald and Roth also entered into a personal service contract under which Roth was to receive $500 per month to obtain new business for Ewald. Ewald also agreed to lease Roth a fully depreciated truck for $100 per month. After one payment the truck was sold to Roth for that payment and a small tractor. Roth had spent $600 in repairs. They agreed this amount was more than the truck was worth. An Ewald employee testified Hosp told him he intended to set Roth up in the milk delivery business.

At about the same time Ewald, for the first time, began selling dairy products at wholesale to Zayre’s stores on a day-to-day basis. Zayre was billed at Ewald’s dock price plus 8 percent for delivery expense.

In February, 1971, Roth sought a collective bargaining agreement with the Union. Robert Moran, the Union secretary-treasurer denied Roth and his sole employee membership and refused to negotiate a contract because Ronco was not yet in business. Ronco was formed in March, 1971, and began delivering milk from non-union Shroeder Dairy to Zayre. In April, 1971, Roth met Moran in front of a Zayre’s store passing out handbills which read “Shroeder Milk is non-union milk.” Roth again requested negotiations with Moran for a collective bargaining agreement with Ronco. Moran refused “because he could not allow Shoppers City [Zayre] to have a contract.” Roth told him he was no longer with Zayre but was in business for himself.

In the fall of 1972, Zayre opened the South Roberts Store in Minneapolis. Zayre had discussed Ewald’s supplying the store and Hosp assumed the same sale and delivery arrangement would prevail. However, Zayre informed Hosp that Ronco would deliver Ewald products to that store. Ewald continued to deliver to all other stores. On products sold for the South Roberts Store, Ewald billed Zayre for the delivered price and paid the 8 percent delivery charge to Ronco. The Union was aware that Ronco was delivering to this one Zayre store but made no protest.

The store had not opened when Roth told Moran about it so none of the Union members would be losing a job. Moran testified:

We were very fearful that being the son of the owner of [Zayre] that he would go into the other stores and we didn’t want our members serving those stores to lose their jobs.

Roth and the Union began contract negotiations. Moran asked Hosp during these negotiations if Ewald would grant its employees special leave of absence to work for Ronco with the understanding that they could return to Ewald if Ronco failed. Hosp agreed if Ewald continued to supply Zayre’s stores.

The Union refused to let Ronco contract under the association collective bargaining agreement but insisted on three additional conditions:

(1) Ronco would give first hiring opportunities to Ewald employees.

(2) Ronco would handle only union produced dairy products.

(3) Ronco would arrange for Zayre to cease buying non-union milk.

On December 28, 1972, Roth accepted the first two conditions. In a letter written the next day by his attorney, the Union was informed he could not agree to the third condition because

(a) he has no control over the operation of Zayre’s and (b) by comparative price the non-union dairy products sell in the store for less than the union produced products, and we are advised that the consumers request the availability of these products.

On January 9, 1973, the Union refused Roth’s partial acceptance.

In mid-January, 1973, Moran and business agent Peters instructed^ Hosp that Ewald should cease loading Ronco trucks. Hosp protested that Ewald would lose a large portion of its business and said the matter should be resolved between Ronco and the Union. Ewald continued to load the Ronco trucks.

Moran testified negotiations with Roth were closed January 9, 1973, and that at Hosp’s request the Union agreed to give him more time to see if he could negotiate with the Roths. Hosp testified he asked Moran in early spring how the Union was proceeding with the Ronco contract and was told Moran was too busy now but that Hosp should not worry about it.

On or about July 13, Moran called Hosp and told him he had heard a rumor Ronco was to start hauling all Ewald products sold to Zayre’s. Hosp said he had heard the rumor but nothing had changed. Moran commented, “I guess we will have to stop the son of a bitch.”

On July 16, Ewald received a letter from Moran as secretary-treasurer of the Union stating:

This letter is to notify you that Local 471 intends to enforce Article V.Z.A. of the contract concerning the delivery of milk by union personnel.
Therefore, as of the end of this week, July 21, 1973, the products being delivered by non-union personnel to [Zayre’s] stores shall be discontinued.
Please comply.

So far as the record shows this is the first time contract violations were mentioned to Ewald. Hosp so testified.

Hosp notified Roth of the Union letter and discussed the serious effect on Ewald’s business with Moran, who replied they were not going to load Ronco.

On July 18, Mel Roth, owner of Zayre and father of Roth, informed Hosp by letter that Zayre had contracted for Ronco to become its “exclusive distributor of milk and milk products.” The written agreement was executed July 20, 1973. Under the agreement Zayre purchased all dairy products from Ronco and Ronco purchased from any source it chose. Father and son had contemplated this relationship since Roth started Ronco.

On July 23, 1973, the Union business agent acting in accordance with the Moran letter of July 16 instructed Ewald's employees, supervisors and managers not to load Ronco trucks. Ewald’s dock was blocked by a business agent’s automobile. On that same date Hosp wrote Ronco and Zayre that Ewald could no longer deliver dairy products to Ronco. Since July 23, no Ewald products have been picked up by Ronco for resale to Zayre.

Zayre’s purchases had previously constituted 40 percent of Ewald’s wholesale sales and 20 percent of Ewald’s total sales of $125,000 per month. Sales volume dropped about $1,000 per day. Ewald has continued to deliver special orders to Zayre’s but very little fluid milk is delivered.

At the hearing on August 9,1973, there was testimony that other non-union dairies had picked up milk at the Ewald dock without Union objection before and after July 23, 1973. The Union denied knowing these dairies were non-union. After the hearing, notices were posted that Gustafson Dairy and Morning Fresh Dairy trucks were not to be loaded. The Board then moved the district court for leave to amend the Board’s petition for injunctive relief to include enjoining the Union from pressuring Ewald to force it to cease doing business with these two dairies. The motion was granted. The trial court did not rule one way or the other on this new alleged violation because no evidence was presented.

While one view of the evidence adduced at the hearing might have supported the district court’s decision that Ewald was not a neutral vis-a-vis Ronco and that the primary dispute was between Ewald and the Union to enforce the work preservation provision of the collective bargaining agreement, the evidence viewed as a whole would also furnish ample support for the Board’s allegations that it had reasonable cause to believe that one of the objects of the Union action against Ewald was to force Ewald to cease doing business with Ronco and constituted a secondary boycott. The assertion of a contractual right is not a defense to conduct which is proscribed by section 8(b) (4) (B). Local 1976, United Brotherhood of Carpenters v. NLRB (1958), 357 U.S. 93, 104-106, 78 S.Ct. 1011, 2 L.Ed.2d 1186.

In our opinion this record presents such conflicting evidence from which different inferences and conclusions may be drawn that the resolution of these disputed factual issues either by this court or the district court would constitute an invasion of the fact-finding function reserved by Congress to the Board. We therefore hold that the district court erred in finding the Board had no reasonable cause to believe the Act had been violated in the charge brought by Ronco.

Gustafson and Morning Fresh

The evidence here is in conflict as to whether the Union knew these were non-union dairies prior to the hearing on August 9. In any event notice not to load Gustafson and Morning Fresh trucks was posted on August 10. There was no claim Ewald employees had ever delivered to these two dairies. Mr. Moran testified the letter to Ewald was a request that it cease distributing any milk through non-union personnel. There was reasonable cause for the Board to believe the Union’s primary object was not to preserve work properly claimable for Ewald employees but to increase the field of dairy transportation for Local 471 members generally. If this was the purpose, the Union’s action at the Ewald dock on August 10 in stopping deliveries to Gustafson and Morning Fresh would have been a violation of section 8(b)(4) (i), (ii) (A) and (B). NLRB v. Milk Drivers’ Union, Local No. 753 (7th Cir., 1968), 392 F.2d 845, 847.

Injunctive Remedy

The evidence here discloses that Ewald suffered a substantial loss of sales to Zayre through Ronco as a result of the Union action. This appears to be the typical situation in which injunctive relief would be just and proper after a finding there was reasonable cause to believe the Act had been violated.

We hold that the issuance of an injunction would be just and proper here and therefore we remand for its issuance after a determination by the district court of the extent of the relief required to preserve the status quo until an adjudication by the National Labor Relations Board.

Reversed and remanded.

      . Section.8(b) (4) (i), (ii) (B) of the Act makes it an unfair labor practice for a labor organization or its agents:
      (4) (i) to engage in, or to induce or encourage any individual employed by any person engaged in commerce or in an industry affecting commerce to engage in, a strike or refusal in the course of his employment to use, manufacture, process, transport, or otherwise handle or work on any goods, articles, materials or commodities or to perform any services; or (ii) to threaten, coerce or restrain any person engaged in commerce or in an industry affecting commerce, where in either case an object thereof is:
      (B) forcing or requiring any person to cease using, selling, handling, transporting, or otherwise dealing in the products of any other producer, processor, or manufacturer, or to cease doing business with any other person * * *. Provided That nothing contained in this clause (B) shall be construed to make unlawful, where not otherwise unlawful, any primary strike or primary picketing.

      . Prior to submission of this case on appeal, an administrative law judge rendered a decision holding that the Union had engaged in unfair labor practices within the meaning of section 8(b) (4) (i), (ii) (A) and (B) of the Act.


author: PER CURIAM.

text:
    COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, Plaintiff-Appellee, v. UNITED TELEPHONE COMPANY OF OHIO, Defendant-Appellant,
    No. 73-1840.
    United States Court of Appeals, Sixth Circuit.
    Feb. 7, 1974.
    James Allan Smith, . David S. Engle Smith, Currie & Hancock, Atlanta, Ga., on brief for defendant-appellant.
    Metzenbaum, Gaines, Finley & Stern Co., L. P. A., by Melvin S. Schwarzwald, Mark A. Rock, Cleveland, Ohio, on brief for plaintiff-appellee.
    Before EDWARDS, CELEBREZZE and McCREE, Circuit Judges.
   PER CURIAM.

We have before us appellee’s motion to dismiss an appeal brought by appellant, United Telephone Company of Ohio, from an order entered by the District Court on June 29, 1973. Appellee contends that said order was not the final order of the court within the meaning of 28 U.S.C. § 1291 (1970), and in any event it was not “a separate document” within the meaning of Rule 58(2) of the Federal Rules of Civil Procedure, and hence, that this court lacks jurisdiction cf. the appeal.

In the June 29 order the District Court specifically indicated, “Findings of fact and conclusions of law shall follow,” and thereafter on July 19 a subsequent Memorandum Opinion and Order, signed by the District Judge, was filed.

Meantime, however, appellant had filed a Notice of Appeal, dated July 11, 1973, from the court’s June 29 order.

Still later, the Clerk of the Court entered a judgment in compliance with the Memorandum Opinion and Order of July 19, which judgment was dated July 27, 1973. No subsequent Notice of Appeal was filed.

Under Rule 58 of the Federal Rules of Civil Procedure amended in 1963, a judgment must be “a separate document” which must in complex orders (Rule 58(2) ) be approved as to form by the coui’t. The purpose of the separate document provision is thus explained:

“This represents a mechanical change that would be subject to criticism for its formalism were it not for the fact that something like this was needed to make certain when a judgment becomes effective, which has a most important bearing, inter alia, on the time for appeal and the making of post-judgment motions that go to the finality of the judgment for purposes of appeal.” 6A J. Moore, Federal Practice ¶ 58.04 [4.2], at 58-161 (1973).

In this appeal neither the Order of June 29, 1973, nor the Memorandum Opinion and Order of July 19, 1973, was a judgment within the meaning of this rule, since neither was “a separate document” as opposed to “a decision by the court” within the meaning of Rule 58(2). Richland Trust Co. v. Federal Insurance Co., 480 F.2d 1212 (6th Cir. 1973). See also United States v. Indrelunas, 411 U.S. 216, 93 S.Ct. 1562, 36 L.Ed.2d 202 (1973).

The remaining question for determination on this motion to dismiss appeal is whether the form of the judgment entered by the Clerk on July 27, 1973, had been approved by the court within the meaning of Rule 58(2). We note in this regard that the language of the body of the judgment of July 27 was an exact copy of the last three paragraphs of the July 19, 1973, Memorandum and Order of the District Judge which bore his personal signature. Nonetheless, we consider it both safer procedure in dealing with a complex order and more in compliance with the technical nature of Rule 58(2) for the judgment to show the court’s approval as to form in some appropriate notation on its face.

The case is remanded to the District Court for re-entry of the judgment of July 27, with such a notation. It is from that document with its new date that appeal may be taken.


author: FEINBERG, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Alex DeLAURENTIS et al., Defendants-Appellants.
    No. 516, Docket 73-2330.
    United States Court of Appeals, Second Circuit.
    Argued Dec. 6, 1973.
    Decided Jan. 21, 1974.

      Seymour M. Waldman, New York City. (Waldman & Waldman; Louis Waldman and Martin Markson, New York City, on the brief), for defendants-appellants.
    Frank D. Allen, Jr., Atty. Dept. of Justice, Washington, D. C. (Henry E. Petersen, J. Stanley Pottinger, Asst. Attys. Gen., Phillip Wilens, Atty., on the brief), for plaintiff-appellee.
    Before WATERMAN and FEINBERG, Circuit Judges, and GURFEIN, District Judge.

       Of the United States District Court for the Southern District of New York, sitting by designation.

   FEINBERG, Circuit Judge:

In this extraordinary case, the United States has utilized an 1870 Civil Rights statute to prosecute three officers of a labor union for conspiring to “injure, oppress, threaten and intimidate” members of the union in the free exercise of their right not to participate in a concerted labor activity. The three defendants, Alex DeLaurentis, Hy Juvall and Willie Morales, appeal from their conviction in the United States District Court for the Eastern District of New York, after a jury trial before John F. Dooling, Jr., J., of violating 18 U.S.C. § 241. Although the conduct of these union officials may have been reprehensible, we do not believe that Congress has made it criminal. Therefore, we reverse the convictions and direct that the indictment be dismissed.

I

The prosecution grows out of a labor dispute in early 1969 between Local 1115, Nursing Home, Hospital, Senior Citizens Hotel Employees Union, and Doctors Hospital in Freeport, Long Island. The three appellants were officers of that union, which represents blue collar workers and nurses aides at private hospitals operated by one Dr. Anton Notey. The issue at Doctors Hospital, which was one of Dr. Notey’s facilities, was whether the union should be recognized as bargaining agent for the hospital’s licensed practical nurses (LPN’s). On April 21, 1969, DeLaurentis, Mrs. Marjorie Grogan (an LPN who had organized co-workers at the hospital) and several other LPN’s met with Dr. Notey to tell him that a majority of the LPN’s had selected Local 1115 as bargaining representative and to request union recognition on the basis of signed union authorization cards. After Dr. Notey checked the authenticity of the cards, he apparently told DeLaurentis that he would recognize the union. When word of this got out, some of the nurses advised Dr. Notey that they did not wish to be represented by a union that also represented blue collar hospital employees, and if there was to be unionization of LPN’s they preferred a “professional” union, the Licensed Practical Nurses Association (LPNA). Two days later, Dr. Notey told DeLaurentis that he would not recognize Local 1115 without an election. In response, De-Laurentis, with the cooperation of Juvall and Morales, organized “sit-ins” at three hospitals (including Doctors) and a nursing home, all facilities of Dr. Notey. The purpose of the sit-ins, which lasted about four days, was to bring pressure on Dr. Notey to agree to the recognition of Local 1115 at Doctors Hospital.

The sit-ins were commenced by directing union members, when they appeared at work, to “meetings” at the hospitals. Under union rules, attendance at “shop meetings” is compulsory. At the “meetings,” for which no advance notice was given, members were told of the dispute with Dr. Notey over recognition and that there would be sit-ins in sympathy for the LPN’s. There was a conflict in testimony as to whether there was an opportunity to vote for approval of such concerted activity. There was also a conflict as to whether the defendants compelled individuals to participate in the “meetings” or sit-ins by violence or threats of violence. Government witnesses testified to a few incidents of “violence” or threats; e.g., a nurses aide at Doctors Hospital was shoved back into the meeting room when she attempted to go back to work; another nurses aide was told that “we have our own way of . . . taking care of people.” Defense witnesses offered a more innocent version of events occurring at the sit-ins. The controversy was not settled by the jury verdict since the judge charged that neither violence nor a threat of violence was a necessary element of the crime. Instead, the judge instructed that it was enough if the defendants conspired to “overcome the will” of the employees in the sense of inducing them to do what they did not voluntarily want to do. We will assume that proof of the conspiracy as charged was sufficient since our disposition of the case does not depend on resolution of this issue.

The pressure on Dr. Notey was successful. On April 27, 1969, he agreed to recognize Local 1115 as representative of the LPN’s at Doctors Hospital, and the sit-ins ended. Two series of events flowed from this unfortunate episode. One, hardly unexpected, was that rival union LPNA filed unfair labor practice charges against Local 1115 and Doctors Hospital. We are told that these were sustained by the National Labor Relations Board and eventually the employees selected LPNA over Local 1115 in a close election. The other aftermath of the sit-ins was much more unusual. In January 1973, appellants were indicted for —and in May 1973, found guilty by a jury of—violating 18 U.S.C. § 241. After Judge Dooling denied motions for a judgment of acquittal or for a new trial, this appeal followed.

II

The basic question before us is whether 18 U.S.C. § 241 renders criminal the activities of defendants in this case, assuming arguendo that they committed the acts charged. Appellants principally argue that it does not, for two reasons. The first is that section 241 protects the fundamental civil rights of citizens generally, but not those rights “secured to narrow economic groups or classes under federal regulatory statutes.” The second asserted reason why section 241 cannot apply here is that the rights specified in section 7 of the National Labor Relations Act must be vindicated exclusively through the procedures set forth in that Act and may not serve as the basis for a prosecution under section 241. Because we find this second argument determinative, we do not decide the issues raised by the first.

Section 241 provides, in relevant part, as follows:

If two or more persons conspire to injure, oppress, threaten, or intimidate any citizen in the free exercise or enjoyment of any right or privilege secured to him by the Constitution or laws of the United States, or because of his having so exercised the same;
They shall be fined not more than $10,000 or imprisoned not more than ten years, or both.

Originally enacted in 1870 as part of the post-Civil War legislation to implement the rights of the newly-freed Negroes, the section has been changed only minimally in subsequent codifications. United States v. Williams, 341 U.S. 70, 71 S.Ct. 581, 95 L.Ed. 758 (1951) (Appendix). The Government’s position is that the language of the statute plainly covers the activities of appellants here. Appellants conspired to “threaten, or intimidate” various union members in the “exercise” of their, right not to join the sit-ins; that right is “secured” to them by the 1947 Taft-Hartley amendments to the National Labor Relations Act, 29 U.S.C. § 157 (“right to refrain from any or all [concerted] activities. . . .”); ergo, according to the Government, section 241 applies to appellants’ activities.

Thus phrased, the argument seems persuasive, even compelling. But further reflection and competing considerations weaken its force. “Conspiracies” to deprive employees of rights under the National Labor Relations Act are not, after all uncommon, whether stemming from union or employer. In the almost four decades since that Act first became law, there have been untold reported violations of employee rights guaranteed by section 7 of the Act. In many of them, two or more supervisory employees are, or could be, found to have violated the Act by illegally discharging or interrogating a union adherent or by refusing to bargain with a union. Can Congress have intended the consequences of such improper, but nevertheless not uncommon acts, to be up to ten years in prison, or a $10,000 fine, or both? The thought does more than give one pause; it brings one to a halt, and to a further, more careful look at the Government’s position.

Initially, we note that before this indictment, there has apparently been only one reported case in which prosecution was commenced on the same theory. And in that case—-United States v. Bailes, 120 F.Supp. 614 (S.D.W.Va.1954)—the indictment was dismissed on the ground that it did not charge a federal crime. Cf. United States v. Berke Cake Co., 50 F.Supp. 311 (E.D.N.Y.), appeal dismissed, 320 U.S. 807, 64 S.Ct. 368, 89 L.Ed. 487 (1943). Although this decision hardly determines the issue of statutory construction before us, the paucity of prosecutions suggests that the “plain meaning” of section 241 may not have been so plain to everyone. Certainly, the Supreme Court in construing both section 241 and an analogous statute has done far more than look to the language of the statute alone. In United States v. Johnson, 390 U.S. 563, 88 S.Ct. 1231, 20 L.Ed.2d 132 (1968), the question was whether section 241 could be used to prosecute persons who had assaulted blacks exercising their right to equality-in public accommodations under the Civil Rights Act of 1964. The Court concluded that the legislative history of the 1964 Act precluded criminal liability for owners of such establishments, but not for “outside hoodlums” like the defendants there. On that basis it reinstated the indictment. Three Justices dissented on the ground that the language and history of the 1964 Act prevented its use as the predicate of any criminal prosecution at all under section 241. Thus, the entire Court agreed that the language and history of a particular federal statute determined whether it could serve as the source of a “right” underlying a section 241 prosecution. The significance» of the case for us is that the Court re-J jected the simplistic course of looking! only at the language of section 241.

Similarly, in United States v. Enmons, 410 U.S. 396, 93 S.Ct. 1007, 35 L.Ed.2d 379 (1973), the Court constructed the Hobbs Act, 18 U.S.C. § 1951, under an indictment resembling the one in this case. The defendants in Enmons, union officials and members, were charged with conspiring to obtain moneys from an employer through use of violence far more serious than any alleged here. As in this case, the violence occurred in the course of a labor dispute and defendants were not charged with seeking personal gain, but with conspiring to advance by illegal means the aims of their union. Although the statutory language arguably applied, the Court affirmed the dismissal of the indictment. Pointing out that there had been no similar prosecution in the nearly 30 years since the Hobbs Act was enacted, the Court held that the Act did not reach violent conduct committed during a strike to achieve valid union objectives. The Court noted:

It is unlikely that if Congress had indeed wrought such a major expansion of federal criminal jurisdiction in enacting the Hobbs Act, its action would have so long passed unobserved.

410 U.S. at 410, 93 S.Ct. at 1015. The Enmons opinion emphasized that statutory language and history must be “much more explicit than that before us here to lead to the conclusion that Congress intended to put the Federal Government in the business of policing the orderly conduct of strikes.” Neither language nor history, the Court said, “can justify the conclusion that Congress intended to work such an extraordinary change in federal labor law or such an unprecedented incursion into the criminal jurisdiction of the States.” 410 U.S. at 411, 93 S.Ct. at 1015.

These observations are pertinent here. Until 1947, there was no “right . secured” by federal law not to join in concerted union activities. That statutory right came into being with the Taft-Hartley amendments of 1947. The legislative history of, that enactment clearly indicates that criminal penalties were not intended for violations of the National Labor Relations Act, as amended. Thus, Senator Taft, the main architect of the 1947 amendments, stated on the floor of the Senate: “There is no criminal penalty of any sort.” When specifically questioned about applicability of the criminal conspiracy statutes, the Senator replied in the negative. Moreover, the Hartley bill, as it passed the House, would have authorized private damage suits against those committing certain coercive acts similar to the ones involved here. This provision was deleted in conference, but the House managers noted the sanctions that still remained—a criminal penalty was conspicuously absent. "’it seems unlikely that a Congress that was not prepared to allow civil damage suits in these circumstances intended the same conduct to constitute a federal crime punishable by up to ten years in jail and a heavy fine.» In addition, section 241 by its terms applies only to conspiracies; as the court said in United States v. Bailes, supra, 120 F.Supp. at 637:

It seems unreasonable to believe that Congress would provide that the consummated violation of the rights under Section 157 would constitute only an unfair labor practice, without even a fine or any punishment as a misdemeanor, but should punish as a ten year felony the mere conspiring to do such thing.

Congress has paid a great deal of attention to its enactments in the labor field. Cases construing the National Labor Relations Act in its early days held that violation of employee rights thereunder does not carry criminal consequences. There is nothing in the legislative history of the 1947 amendments to indicate that this rule was changed when the right not to join a union was added to those protected by section 7 of the Act. Courts, in a variety of ways, have emphasized that enforcement of rights under the Labor Act is entrusted exclusively to the Labor Board as an expert administrative agency, whose orders are reviewed by the courts. See, e.g., Amalgamated Ass’n of Street, Electric Ry. & Motor Coach Employees v. Lockridge, 403 U.S. 274, 91 S.Ct. 1909 29 L.Ed.2d 473 (1971); Amalgamated Utility Workers v. Consolidated Edison Co., 309 U.S. 261, 60 S.Ct. 561, 84 L.Ed. 738 (1940). Moreover, whether or not a “right” exists under’ section 7 of the Labor Act and whether or not that right has been violated are frequently complex questions of fact and law—hardly issues that are best resolved by a jury in a criminal trial. Of course, this incongruity would not be significant had Congress clearly intended to ignore it, but such is not the case.

Against these precedents and considerations, the Government relies on various cases preceding United States v. Johnson, supra, and on the broad language of section 241. None of the cited decisions involved application of that section to rights guaranteed by section 7 of the National Labor Relations Act, and Johnson made clear that the “plain meaning” of section 241 is not determinative. The Government also argues that the Taft-Hartley amendments themselves show that Congress did not intend to create an “exclusive remedy” in the Labor Board to remedy unfair labor practices; e.g., 29 U.S.C. § 187 provides for civil actions in federal district courts against unions engaging in certain kinds of secondary boycotts. But the argument proves too much. The care and compromise that went into that section suggest that Congress would not silently import sweeping criminal liability into the regulation of labor relations. The Government maintains that United States v. Bailes, supra, rested on erroneous conclusions and was wrongly decided. However, we believe that the reasoning of that case (which we have quoted) was correct. Finally, the Government points to 29 U.S.C. § 530 to show that Congress recognized that federal court juries could in a criminal case decide issues arising out of labor problems. But that section, enacted as part of the Labor-Management Reporting and Disclosure Act of 1959 to regulate internal union procedure and to protect union members against arbitrary union leadership, hardly helps the Government here. It demonstrates that when Congress imposes even modest criminal liability in this field, it does so after deliberation and scrutiny.

In short, we conclude that in this case the Government has unjustifiably used federal law to convert an unfair labor practice into a criminal conspiracy. See Bailes, supra, 120 F.Supp. at 637. We share the Government’s concern over a union’s “sit-in” at a hospital, even if, as appellants contend was the case here, the sit-in is not on floors occupied by patients and there is no attempt to immobolize essential facilities or to involve nurses or professionals. And, we certainly do not imply that in this context state law cannot make criminal conduct that is violent or endangers life. See United States v. Enmons, supra, 410 U. S. at 411-412, 93 S.Ct. 1007. But the application of section 241 sought here is unjustified under relevant Supreme Court precedents. Moreover we believe that the huge expansion of federal criminal liability of employer and union officials envisioned by the Government would be a shock to the 1870 Congress that enacted section 241, to the 1947 Congress that legislated the right not to join a .union, and to the present Congress, as well. Accordingly, we reverse the judgment of conviction with instructions to dismiss the indictment.

      . Conviction was on Count II of a three-count indictment. On that count, a co-defendant was acquitted by the trial judge at the end of the Government’s case. On Count I, which charged only defendant De-Laurentis with violating 18 U.S.C.' § 245, the jury did not agree, and the count was subsequently dismissed. On Count III, which charged appellant Morales and a fifth defendant with violating 18 U.S.C. §§ 1510 and 2, the jury acquitted.

      . Since the district judge charged the jury that the holding of a strike vote was not a material issue, the conviction cannot be regarded as resolving this factual question.

      . On the ground that when Dr. Notey recognized Local 1115 a genuine question of representation existed.

      . LPNA won by two votes, after an earlier election had resulted in a tie vote.

      . This indictment superseded an earlier indictment.

      . Appellants’ brief at 16.

      . Cf. United States v. Pacelli, 491 F.2d 1108 (2d Cir. Jan. 11, 1974). Similarly, we need not deal with appellants’ contentions that the evidence was insufficient to establish a conspiracy having the specific objective of interfering with federal statutory rights, and that the trial judge’s charge in this respect was erroneous.

      . Justice Marshall took no part in the consideration or decision of the case.

      . 18 U.S.C. § 1951 provides in pertinent part:
      (a) Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined not more than $10,000 or imprisoned not more than twenty years, or both.

      . 2 Legislative History of the Labor Management Relations Act 1371 (1948) [hereinafter Legislative History].

      . Id. at 1371-72.

      . 1 Legislative History 79 ; United States v. Bailes, supra, 120 F.Supp. at 635.

      . 1 Legislative History 562-63.

      . Although it would allow them for violation of section 8(b) (4) of the National Labor Relations Act dealing with secondary boycotts. See Labor Management Relations Act § 303, 29 U.S.C. § 187.

      . S. Buehsbaum & Co. v. Beman, 14 F.Supp. 444, 448 (N.D.Ill.1936) ; Associated Press v. Herrick, 13 F.Supp. 897, 900 (S.D. N.Y.1936).

      . Thus, if only existing union members are the object of the alleged criminal conspiracy, as appellants assert was the case here, fine questions are raised as to the extent of the right to refrain from participating in concerted activities. See, e. g., NLRB v. Boeing Co., 412 U.S. 67, 93 S.Ct. 1952, 36 L.Ed.2d 752 (1973) ; Scofield v. NLRB, 394 U.S. 423, 89 S.Ct. 1154, 22 L.Ed.2d 385. (1969) ; NLRB v. Allis-Chalmers Mfg. Co., 388 U.S. 175, 87 S.Ct. 2001, 18 L.Ed.2d 1123 (1967). Similarly, cf. the many cases illustrating the difficulty of defining some of the key terms in the National Labor Relations Act: e. g., NLRB v. Metropolitan Life Ins. Co., 405 F.2d 1169 (2d Cir. 1968) (supervisor) ; Continental Bus System, Inc. v. NLRB, 325 F.2d 267 (10th Cir. 1963) (independent contractor).

      . E. g., United States v. Price, 383 U.S. 787, 86 S.Ct. 1152, 16 L.Ed.2d 267 (1966) ; United States v. Guest, 383 U.S. 745, 86 S.Ct. 1170, 16 L.Ed.2d 239 (1966) ; United States v. Mosley, 238 U.S. 383, 35 S.Ct. 904, 59 L.Ed. 1355 (1915).

      . See text following note 13, supra.

      . The section provides :
      It shall be unlawful for any person through the use of force or violence, or threat of the use of force or violence, >to restrain, coerce, or intimidate, or attempt to restrain, coerce, or intimidate any member of a labor organization for the purpose of interfering with or preventing the exercise of any right to which he is entitled under the provisions of this chapter. Any person who willfully violates this section shall be fined not more than $1,000 or imprisoned for not more than one year, or both.

      . 1959 U.S.Code Cong. & Admin.News p. 2497. Compare the sanctions of 29 U.S.C. § 530 (maximum fine—$1,000; maximum prison term—one year) with the much harsher penalties of 18 U.S.C. § 241 (maximum fine —$10,000 ; maximum prison term—ten years).

      . Apparently, there was no evidence of the latter here.


author: OAKES, Circuit Judge:

text:
    UNITED STATES of America, Appellee, v. Vincent RIZZO et al., Appellants.
    Nos. 379, 381 and 382, Dockets 73-1941 to 73-1943.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 13, 1973.
    Decided Jan. 17, 1974.
    Certiorari Denied May 13, 1974.
    See 94 S.Ct. 2399.
    Henry J. Boitel, New York City, for appellant Rizzo.
    Theodore Krieger, New York City, for appellant Benjamin.
    Nathaniel D. Kramer, New York. City, for appellant Otero.
    John C. Sabetta, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty., for the S. D. N. Y., Henry Putzel, III, and S. Andrew Schaffer, Asst. U. S. Attys., on the brief), for appellee.
    Before KAUFMAN, Chief Judge, SMITH and OAKES, Circuit Judges.
   OAKES, Circuit Judge:

On April 4, 1973, all appellants were found guilty, after a jury trial, of the charge of conspiracy to import into the United States and to distribute Schedule I and Schedule II drugs in violation of 21 U.S.C. §§ 812, 841(a)(1), 841(b) (1) (A), 842(b), 846, 952(a), 960(a)(1) and 960(b)(1). Appellants Rizzo and Benjamin were also found guilty on five and six counts, respectively, of violating the Travel Act, 18 U.S.C. § 1952, relating to travel, or causing others to travel, 18 U.S.C. § 2, in interstate and foreign commerce to promote such distribution, and were also found guilty on two and three counts, respectively, of using a telephone in furtherance of the conspiracy in violation of 21 U.S.C. § 843(b).

The indictment in this case charged eight persons with participation in a conspiracy to import substantial quantities of cocaine from Latin America into the United States for distribution. The trials of the five defendants named along with appellants were severed due to their fugitive status. Further elucidation of the evidence adduced at trial to support the convictions is not required here except with respect to the evidence pertaining to the wiretaps which appellants Rizzo and Benjamin claim were improperly executed and that pertaining to Otero’s participation in the conspiracy.

Appellants Rizzo and Benjamin argue that the testimony at the suppression hearing held by the district court below on the question whether agents—who executed 29 state warrants authorizing electronic eavesdropping during the course of the investigation—had complied with the “minimization” provision of 18 U.S.C. § 2518(5), was insufficient as a matter of law for the district judge to find that minimization had been achieved. These appellants ask this court to remand this issue to the district court below for yet another evidentiary hearing; we decline to do so.

Before the district court, appellants conceded the validity of the wiretap orders themselves. The wiretaps at issue were conducted during the period from February 8, 1972, to June 6, 1972, at various locations in New York City. On February 26, 1973, appellant Benjamin’s counsel filed motions seeking, inter alia, the disclosure by the Government whether any electronic surveillance had been conducted concerning Benjamin and, if so, requesting authority to inspect all material related to such surveillance. No less than twelve days prior to trial, the Government provided these materials to counsel as requested. On March 21, 1973, the day trial was to commence, Benjamin’s counsel moved the court for a hearing to determine whether minimization had been achieved. The Government initially opposed this motion as untimely, characterizing it as having not been made “prior to trial.” The district court, while reserving judgment on the Government’s timeliness contention, proceeded to hold a hearing on the motion to suppress. Although it appears to us that the motion was timely made within the purview of 18 U.S.C. § 2518(10), we need not reach that question because we find it possible to resolve the minimization question on the basis of the record produced at the suppression hearing itself.

At the hearing itself, the only testimony presented was by a Government witness, Detective Coffey of the New York City Police Department. Coffey was in supervisory charge of the personnel who actually conducted the wiretap. He testified that he personally was at the central pick-up and processing point 80 to 90 per cent of the time that the tapping was carried on. His uncontradicted testimony showed that an order to record and monitor only conversations pertaining to the defendants named in the court order and only to the pertinent crimes referred to therein had been given him by the Assistant District Attorney in charge of the investigation and also by his immediate police department superior; that the beginning of each conversation was monitored and recorded, but both monitoring and recording were stopped when it had been determined that a call was “not pertinent”; and that none of the approximately 50 privileged conversations were either monitored, recorded or spot-checked. He also testified that careful logs were kept and that these reflected what calls were not recorded. After this testimony, with no evidence having been presented by any of the appellants, the court found that minimization had been achieved. When that ruling was made, and we think this to be critical to our resolution of this aspect of the case, defense counsel neither formally objected to the ruling nor requested the court for a recess or further time to analyze any of the materials connected with the surveillance. In this posture, the question we must resolve is whether the testimony of Detective Coffey, credited fully by the court below, is sufficient to sustain the Government’s burden of proof on the minimization issue. If not sufficient, appellants Rizzo and Benjamin would prevail.

We are met at the outset by the fact that both the trial judge and the Assistant United States Attorney trying the case explicitly assumed that federal standards, i. e., 18 U.S.C. § 2518(5) and case law thereunder, applied to the question of minimization where a state-authorized wiretap is the subject of a motion to suppress in a federal criminal trial. As this court held recently in United States v. Manfredi, 488 F.2d 588, 598-599 (2d Cir. Nov. 23, 1973), the question whether minimization has been achieved where a motion to suppress evidence gathered under a state warrant is made in a federal prosecution must be answered in the first instance by reference to state law. While the district court here did not, of course, have the guidance of Manfredi when it ruled on the motion to suppress, there is no need to remand here because in our judgment the evidence introduced by the Government in the suppression hearing was sufficient to carry the Government’s burden of proof on the minimization question under both state and federal law. Our decision in Manfredi reviewed the various New York cases which construed and applied the minimization requirement imposed under New York CPL § 700.30, subd. 7, McKinney’s Consol.Laws, c. 996. Under those decisions, e. g., People v. Castania, 73 Misc.2d 166, 340 N.Y.S.2d 829 (Monroe Cty. Ct.1973), as well as under Manfredi, supra, there is no question that the procedures employed in this case to effect minimization pass muster, whether under state or federal law. It is true, as appellants argue, that we do not have before us as detailed an analysis of the wiretap materials as was before this court after the remand of United States v. Bynum, 475 F.2d 832 (2d Cir. 1973), convictions affirmed, 485 F.2d 490 (2d Cir. 1973). But it is also true that here, unlike Bynum, the district court conducted a suppression hearing, as requested by defense counsel, at which defense counsel had the opportunity to rebut evidence proffered by the Government. Such rebuttal was not forthcoming, no delay in the proceedings was requested to assemble and present such evidence, and we, as an appellate court, cannot disturb the district court's ruling as long as the. Government’s evidence was sufficient to make a prima facie showing that minimization was achieved. Such a showing was made on the basis of Detective Coffey’s testimony; justice neither suggests nor demands relitigation of this issue.

Appellant Otero argues that the evidence adduced by the Government at trial tended to show two separate conspiracies, one which he labels the “Crotti” conspiracy and the other he calls the “Rizzo” conspiracy. Only the latter was the subject of the indictment under which Otero was tried and convicted, but Otero now asserts that the evidence tended to show his involvement only in the former. It is clear that the jury could have properly inferred from the evidence at trial that Otero was, in effect, working for a codefendant, Canonico, who was the supplier of the cocaine, and with others in a single conspiracy. While Otero’s participation as a salesman admittedly did not involve him in all aspects of the overall conspiracy, it was sufficient to tie him to the conspiracy charged. United States v. Bynum, 485 F.2d at 495-497. In view of this holding, it cannot be successfully argued that the evidence against Otero was either so little or so “vastly disproportionate” in comparison with that adduced against appellants Rizzo and Benjamin that the district court erred in not granting, sua sponte, a severance to Otero.

Judgments affirmed.

      . Rizzo received concurrent terms of imprisonment of 15 years on the conspiracy count, five years on each of the travel counts and four years on each of the telephone counts; Benjamin received concurrent terms of seven and one-half years on the conspiracy count, two and one-half years on each of the travel counts and two years on each of the telephone counts. Otero received a five year sentence under 18 U.S.C. § 4208(a) (2) on the conspiracy count, with a recommendation of deportation on completion of the term.

      . Rizzo and Benjamin do not argue insufficiency of the evidence.

      . One federal warrant authorizing the use of a “pen register” to identify numbers called from a telephone was also executed but is irrelevant to this appeal because neither state nor federal minimization laws are applicable to mere interception of what telephone numbers are called, as opposed to the interception of the contents of the conversations.

      . Every order and extension thereof shall contain a provision that the authorization to intercept . . . shall be conducted in such a way as to minimize the interception of communications not otherwise subject to interception under this chapter
      18 U.S.C. § 2518(5).

      . Intermittent monitoring of “not pertinent” calls continued in order to determine whether the same two parties who commenced the call were still on the phone.

      . Indeed, when counsel for Benjamin initially raised this issue on the day of trial, he stated to the court: “we are not asking for an adjournment .... [W]e are asking that this matter be resolved prior to the empaneling [sic] of the jury.” Transcript of Proceedings Concerning Minimization at A18.

      . The burden of proof on the minimization issue under either federal or state law necessarily rests, in the first instance, on the Government. See text, infra. The United States Attorney must be prepared to sustain that burden even in a case where the defense is unprepared or chooses not to present its own evidence on the issue. The Government might, of course, in a proper case, move for a postponement or adjournment when, after meeting its initial burden, it becomes necessary to present more extensive analysis of eavesdropping materials to rebut analysis and argument by defense counsel.

      . Id. at A18.

      . Our remarks with respect to the Government's responsibilities in presenting evidence on the question of minimization, note 7 supra, are equally applicable to defense counsel. Particularly in complex conspiracy cases involving extensive use of electronic eavesdropping, the difficult determination whether minimization has been achieved is best arrived at after full exposure of the question to the adversary process. Cf. United States v. Huss, 482 F.2d 38, 47 & n. 8 (2d Cir. 1973). This court will always give most careful consideration to all evidence and arguments considered by the district court; we see no reason, however, to assume responsibility for performing our own analysis of voluminous eavesdropping materials in the absence of contested facts or rulings of law in the district court.