author: KILKENNY, Circuit Judge: KOELSCH, Circuit Judge

text:
    The GREYHOUND CORPORATION, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant. GREYHOUND LINES, INC., Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellant, v. GREYHOUND LINES, INC., Defendant-Appellee. The GREYHOUND CORPORATION and Greyhound Lines, Inc., Plaintiffs-Cross-Appellants, v. UNITED STATES of America, Defendant-Cross-Appellee.
    Nos. 71-2977 to 71-2979 and 71-2989.
    United States Court of Appeals, Ninth Circuit.
    April 11, 1974.

      Gary R. Allen, (argued), Scott P. Crampton, Asst. U. S. Atty. Gen., Meyer Rothwacks, of U. S. Dept, of Justice-Tax Division, Washington, D. C., J. L. Browning, U. S. Atty., Martin A. Sehainbaum, Asst-. U. S. Atty., San Francisco, Cal., for appellant-cross appellee United States.
    John B. Lowry, (argued), Gordon M. Weber, Robert A. Blum, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for appellee-cross appellant Greyhound Corporation.
    Before CHAMBERS, KOELSCH and KILKENNY, Circuit Judges.
   OPINION

KILKENNY, Circuit Judge:

The cases included within this consolidated appeal involve the appropriateness of refunds under 26 U.S.C. § 6421(b), of federal fuel excise taxes paid during a period encompassing April 1 to May 31, 1957, and for each quarter during the calendar years 1958 through 1963. One consolidated income tax return was filed each year on behalf of all of Greyhound’s operating divisions and subsidiaries. Greyhound Lines, Inc. and The Greyhound Corporation are treated as one entity.

Sitting without a jury, the district judge tried the consolidated actions and' entered findings of fact and conclusions of law on which judgments were entered granting a refund of the taxes as claimed, but without interest. A conforming judgment was entered in an action instituted by the United States. From these judgments, the United States filed timely notices of appeal. Greyhound filed timely cross-appeals on the issue of interest.

During the periods under scrutiny, Greyhound was principally engaged in furnishing, through its operating divisions, scheduled common carrier public passenger land transportation service along regular long distance routes. It also operated local transit systems and provided charter bus service. That Greyhound’s local service differed substantially and was treated separately from its intercity and long distance service is undisputed. The overall relevance of the dissimilarity is, however, under challenge. The appellant concedes that Greyhound’s local service was more conducive to use by short distance passengers who traveled regularly between home and work, school or shopping and similar activities. Likewise, it concedes that Greyhound’s bus service on its local routes was more frequent than on its mainline routes, and was primarily concentrated in the morning and later afternoon hours, Monday through Friday, and was characterized by frequent stops and the utilization of zone fares and commutation tickets.

ISSUE

At issue is whether Greyhound, under the factual pattern here presented, should include in the denominator of the 60% test required in 26 U.S.C. § 6421(b), the revenue from its local transit bus service, rather than the combined revenue of its local transit and mainline bus service.

The district court found that Greyhound’s local bus service was an operation separate and distinct from its mainline service. In making this determination, it followed what is well established precedent in resolving what constitutes separate local bus service. Since we are under a duty to pay due respect to the findings of the district court on factual issues, and are enjoined from overturning such findings unless clearly erroneous, we deem it appropriate to set forth in the footnote what we deem to be the controlling findings on the principal issues of fact.

For the purpose of computing the refund, if any, due under § 6421(b), the parties stipulated that the last quarter of 1963 would be the governing period. During that period, Greyhound’s passenger fare revenues reflect the following:

Passenger Eastern Div. Western Div. Other Total
fare revenue from, local service $ 433,618 $ 1,935,582 -0- $ 2,369,200
Passenger fare revenue from, mainline service $19,857,318 $16,236,619 $24,048,306 $60,142,243
Total passenger fare revenue $20,290,936 $18,172,201 $24,048,306 $62,511,443

Incorporated in the foregoing figures is a total of $1,553,523, in “commuter fare revenue”. Section 6421(b)(2) provides a limitation upon the granting of tax refunds for overpayments of diesel fuel excise taxes to those transit systems whose “commuter fare revenue” constitutes at least 60% of the total passenger revenue set forth in § 6421(b)(1). The definition of “commuter fare revenue” is set forth in § 6421(d)(2), and includes: (A) amounts paid for transportation which do not exceed 60 cents, (B) amounts paid for commutation or season tickets for a single trip of less than 30 miles or, (C) amounts paid for commutation tickets for one month or less.

By using the revenue from local service operations alone, the percentage of commuter fare revenue constitutes 65.-6% of the total and, consequently, sufficient to permit a refund under the 60% test of § 6421(b)(2). If appellant’s contention is correct, namely, that Greyhound’s total revenue should include both the local service income and the mainline service income, then the percentage of commuter revenue to the total revenue would constitute only 2.5%, and, therefore, wholly insufficient to permit a tax refund under § 6421.

' Even though the tax exemption statute construed in Public Service Coordinated Transport v. United States, 367 F.2d 417, 177 Ct.Cl. 337 (Ct.C1.1966), relates to a different section of the Code, we agree with the district court that the decision is of significant importance in providing a solution to the complex issue before us, and accordingly, use the principles enunciated therein, as guidelines to apply to the facts before us.

In Public Service, the issue centered on whether 307 buses out of a total fleet of 2,400 buses were exempt from the Federal Highway Use Tax. The Use Tax there imposed was subject to an express exemption for those buses designated as transit-type buses under the provisions of § 4483(e), providing among other things:

“§ 4483. Exemptions
**••*■**
(c)' Certain transit-type buses.— Under regulations prescribed by the Secretary or his delegate, no tax shall be imposed by section 4481 on the use of any bus which is of the transit type (rather than of the intercity type) by a person who, for the last 3 months of the preceding year (or for such other period as the Secretary or his delegate may by regulations prescribe for purposes of this subsection), met the 60-percent passenger fare revenue test set forth in section 6421(b)(2) as applied to the period prescribed for purposes of this subsection.” [Emphasis supplied].

Clearly, the tax exemption mentioned in § 4483(c) is based upon the language of § 6421(b)(2), the statute before us for interpretation. In Public Service, the problem centered on the characteristics of transit-type buses; here, the problem centers on the characteristics of “local transit systems.”

26 U.S.C. § 4483(c), 26 U.S.C. § 6416(b)(2)(H) and the tax exempt provisions of 26 U.S.C. § 6421, constitute an integral part of the Congressional plan under the Highway Revenue Act of 1956. Consequently, the tax exemption for transit-type buses involved in Public Service, and the fuel tax refund now before us, being each fundamentally based on the 60% test outlined in § 6421, should be considered together. Therefore, the criteria established in Public Service, while not absolutely controlling, is of great importance in arriving at our ultimate conclusion on whether the findings of the district court are clearly erroneous. The nine criteria established in Public Service are outlined in the footnote.

Greyhound’s own guidelines in distinguishing between its intercity runs and “local” operations, established long before the decision in Public Service, in-elude not only the nine previously mentioned, but several others, all of which were in evidence before the trial court,

The findings of the lower court that Greyhound operates two separate types of service, mainline and local, and the finding that there was “no persuasive evidence” that Greyhound was a “single, unified and integrated transportation system,” are not clearly erroneous.

CONSTRUCTION OF 26 U.S.C. § 6421(b)

When § 6421 was enacted on June 29, 1956, the exemption pertained to “ . . . tax-exempt passenger fare revenue”. The legislation defined tax-exempt passenger fare revenue as revenue attributable to fares which were exempt from the tax imposed by then § 4621 by reason of then § 4262(b) of the Revenue Code. Section 4262(b) exempted from taxation amounts paid for transportation which did not exceed thirty-five cents, amounts paid for commutation or season tickets for single trips of less than 30 miles and amounts paid for commutation tickets for one month or less.

By the amendment of June 28, 1962, 76 Stat. 118, the phrase “ . . . commuter fare revenue” was substituted for “tax-exempt passenger fare revenue” in § 6421(b)(2) and § 6421(d), the latter setting forth the definition of “commuter fare revenue”.

In our analysis of the legislation, we must look to the Highway Act of 1956, 70 Stat. 387. Section 4041 of the' Act, 70 Stat. 387, requires the imposition of the fuel tax. Recognizing the financial problems of those operating local transit-type systems in and around metropolitan areas Congress enacted, as part of the same legislation, § 6421, 70 Stat. 394, with the title “Gasoline Used for Certain Nonhighway Purposes or by Local Transit Systems.” [Emphasis supplied.] Subsection (a) was headed “NONHIGHWAY USES” and provided for a refund of the tax to nonhighway users. Subsection (b), with which we are here concerned, was headed “LOCAL TRANSIT SYSTEMS” and provided for a tax refund for overpayments of the fuel tax imposed by § 4041, the issue now before us on appeal.

Appellant argues that we should entirely overlook the title to the section and the subsection and hold that the language of (b)(1) covers intercity, interstate and transcontinental service, as well as local transit service, and that the 60% test mentioned in subsection (b) (2) should apply to all revenue of the carrier, rather than local transit type revenue. The argument is untenable. Even appellant must concede that if the language “LOCAL TRANSIT SYSTEM” was removed from the heading and inserted in what appellant claims is the controlling sentence, the result would be obvious. The forepart of the sentence would then read: “ . . .If gasoline is used by local transit systems during any calendar quarter in vehicles while engaged in furnishing scheduled common carrier public passenger land transportation service along regular routes, . . ' . .” [Emphasis supplied].

While the title to an Act may not be employed to limit the plain language of the text, it can be a very useful tool in resolving an ambiguity. Maguire v. Commissioner, 313 U.S. 1, 9, 61 S.Ct. 789, 85 L.Ed. 1149 (1941); Knowlton v. Moore, 178 U.S. 41, 65, 20 S.Ct. 747, 44 L.Ed. 969 (1900).

The legislative history of the statute reinforces our conclusion that the Congress never intended subsection (b) to apply to any type of transportation other than local transit systems.

We quote from H.R.Rep. No. 2022, 84th Cong., 2d Sess., 1956-2 Cum.Bul. 1289. [Emphasis supplied].

“Special relief is also provided, in the case of gasoline, diesel fuel, and special motor-fuel taxes, for fuel used in the operation of local or mass transportation systems.
*****
“The exemption for local mass transportation is provided because many such transportation systems already are operating near or below the break-even point and it is feared that the imposition of the additional motor-fuel taxes in this case would have a serious adverse effect upon provision for such transportation, which is essential to the large suburban population of the country.”

This type of relief is again mentioned in H.R.Rep. No. 2022, 84th Cong., 2d Sess., 1956-2 Cum.Bul. 1288, where, in substance, it is said that the purpose of the legislation is to provide relief for local or mass transit systems in the ease of the taxes on motor fuel and the tax on the use of heavy vehicles.

Of particular significance is the language of the history which demonstrates that the 60% test was intended to be applied only to the revenue obtained by the local transit systems. See H.R.Rep.No. 2022, 84th Cong., 2d Sess., 1956-2 Cum. Bui. 1305, from which we quote:

“Clause (i) of subparagraph [¶] [of § 6416(b)(2)] provides that the sub-paragraph will apply, in respect of any gasoline, diesel fuel, or special motor fuel used during any calendar quarter . . ., only if at least 60 percent of the total passenger fare revenue derived by the transit system during the prescribed period from furnishing [scheduled passenger service] was attributable to [commuter fares].” [Emphasis supplied].

The same test was applied to the parallel vehicle tax:

“An exemption is provided from the use tax for mass or local transit buses. Under the Bill buses need not pay this tax, even though weighing more than 26,000 lbs. when loaded if— *****
“(2) At least 60 percent of the passenger fare revenue of the bus system involved was attributable to [commuter fares].” [See H.R.Rep.No. 2022, 84th Cong., 2d Sess., 1956-2 Cum.Bul. 1290.]

The language of the Senate Committee Report is essentially the same as that found in the House Report. S.Rep. No. 2054, 84th Cong., 2d Sess., 1956-2 Cum.Bul. 1310-12 and 1314.

In determining the purpose and coverage of a taxing statute of doubtful meaning, a court should turn to the legislative history to determine the Congressional intent. Colony, Inc. v. Commissioner, 357 U.S. 28, 78 S.Ct. 1033, 2 L.Ed.2d 1119 (1958). Resort may be had to explanatory legislative history, no matter how clear the statutory words may appear on superficial examination. Harrison v. Northern Trust Co., 317 U.S. 476, 63 S.Ct. 361, 87 L.Ed. 407 (1943); Northwestern Mutual Fire Ass’n. v. Commissioner, 181 F.2d 133, 135 (C.A.9, 1950).

For that matter, the appellant’s position is not even supported by the Treasury Department’s Regulations or the instructions of the Internal Revenue Service to taxpayers. Regulation 26 C. F.R. 48.6421(e)-l(a) (1) provides for a refund claim on fuel used by “local transit systems”. Substantially the same language is used in 26 C.F.R. 48.-6421(c)-l(a) (2). The regulations direct that refund claims for fuel used “by local transit systems”, must be made on a special form. 26 C.F.R. 48.6421(c)-1(b) (1). Following through on the pattern for refund, 26 C.F.R. 48.6421(c)-1(b) (2) (ii) provides that such claims for refund by a “local transit system” must set forth specified information, while 26 C.F.R. 48.6421(c)-l(b) (2) (iii) provides that a statement must be submitted by a “transit system” to support a claim for payment.

The construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong. Lewis v. Martin, 397 U.S. 552, 90 S.Ct. 1282, 25 L.Ed.2d 561 (1970); United States v. Radio Television News Directors Ass’n., 395 U.S. 367, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969); Zemel v. Rusk, 381 U.S. 1, 85 S.Ct. 1271, 14 L.Ed.2d 179 (1965).

Here, it is proper to invoke the well known rule of construction that in cases of doubt, a taxing statute must be construed most strongly in favor of the taxpayer and against the government. Tax statutes are not to be extended by implication beyond the clear import of the language used and, in case of doubt, are construed most strongly against the government. Hecht v. Malley, 265 U.S. 144, 44 S.Ct. 462, 68 L.Ed. 949 (1924); Gould v. Gould, 245 U.S. 151, 38 S.Ct. 53, 62 L.Ed. 211 (1917).

We must assume that the Congress understood the meaning of the words “local transit systems” and used the words in their ordinary meaning. United States v. Wurts, 303 U.S. 414, 58 S. Ct. 637, 82 L.Ed. 932 (1938).

In construing a revenue act, we presume that the legislative authority uses words in their ordinary sense and with the meanings commonly attributable to them. Commissioner v. Plestcheeff, 100 F.2d 62 (C.A.9 1938). Where the statute does not define the words used, they must be accepted in their ordinary everyday meaning. Herring Magic v. United States, 258 F.2d 197 (C.A.9 1958). Even a judge, with his alleged tendency to find something where nothing exists, would face an insurmountable quandary in finding something mystical or obscure in the phrase “local transit system”.

It is wholly illogical to assume that the Congress intended to make it economically unattractive for intercity operators to enter the local transit fields or force those intercity operators already so engaged to abandon or discard their local transit system’s operation. The Congressional history would indicate that precisely the opposite was true. This history makes it crystal clear that the Congress was attempting to help all local transit systems for the very fundamental reason that most were in dire financial straits. Surely, the Congress did not intend that the intercity or intercontinental companies operating local transit systems would either waive the benefit of subdivision (b) or go through the mockery of incorporating “straw-men” corporations in order to operate the transit-type systems.

Appellant’s argument that only a wholly independent entity, which operates a local bus transportation system separate from an intercity system; can claim the refund under § 6421(b)(2), is meritless. Even the Treasury Department Regulations recognize that where, as here, one tax return is filed for each of the years in question and there is in-eluded in each return the revenues from both its mainline and its local systems, the one return is sufficient to permit the refund. 26 C.F.R. § 48.6421 (b)-l clearly recognizes the right of an operator engaged in both intercity and local transit transportation systems to file the one return and claim the refund under § 6421(b)(2). The example of XYZ Corporation, under 26 C.F.R. § 48.6421(b)-1(d) is a good demonstration of this interpretation.

APPELLANT’S AUTHORITIES

The appellant’s principal case is Interstate Transit Lines v. Commissioner, 319 U.S. 590, 63 S.Ct. 1279, 87 L.Ed. 1607 (1943). Despite a rather forceful argument, we do not believe that Interstate Transit stands for the proposition, on the record before us, that a transportation company and its subsidiary cannot be treated as a separate “person [s]”, within the meaning of the statute. At the outset, we place no particular significance on the use of “person” in the context of (b)(2). The word is used throughout the Act and obviously employed by the Congress to designate the owner or operator of a transportation system. Be that as it may, the Supreme Court, in Interstate Transit, did not decide whether the parent corporation and its subsidiary were a single “person”. 319 U.S. 594-595, 63 S.Ct. 1279. Indeed, the true holding of the Court was that the parent and the subsidiary conducted separate and distinct businesses and that one could not deduct the reimbursed deficit of the other. To this extent, Interstate supports appellee, rather than appellant.

Neither is Rev.Rul. 67-92, 1967-1 Cum.Bul. 361 of any help to appellant. The relevant portion of that ruling suggests that the revenue from a bus company’s airport bus service must be included with revenues from the company’s other local service in computing the 60% test under § 6421(b). The essential substance of the ruling is that all of the revenue from the bus company’s local, but public, service must be included in the return of the local transit system. The ruling has no application whatsoever to intercity, transcontinental or other mainline service.

It is interesting to note that “person” is used throughout the Internal Revenue Code to mean and include “an individual, a trust, estate, partnership, association, company or corporation.” 26 U.S.C. § 7701(a)(1). Greyhound was a corporation which was operating a local transit-type system under the district court’s findings and, consequently, a proper claimant under § 6421(b) (2).

Other rulings, regulations and authorities cited by appellant are no more in point than those just mentioned.

INTEREST

Greyhound cross-appeals on the issue of interest on the refund. It relies on 26 U.S.C. § 6611(a), which provides:

“§ 6611. Interest on Overpayments
(a) Rate. — Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax at the rate of 6 percent per annum.”

The statute was enacted long prior to the passage of 26 U.S.C. § 6421(b)(1). Subsection “b” of the latter enactment requires the Secretary to pay “(without interest)” the refund here in question.

Where, as here, we have a special statute governing a specific refund which provides for the disallowance of interest on refunded sums, the special statute normally controls even though there is a general section of the Internal Revenue Code which provides for interest on tax overpayments. Bulova Watch Co. v. United States, 365 U.S. 753, 81 S. Ct. 864, 6 L.Ed.2d 72 (1961); General Motors Corp. v. United States, 292 F.2d 502, 155 Ct.Cl. 267 (1961).

We reject the contention that interest is payable from the date the tax was collected.

As an alternative theory, Greyhound argues that the language “(without interest)” in both §§ 6416(b) and 6421(b), has no application to refund claims which are erroneously rejected or deemed rejected, and that interest should be allowed from the date of rejection. We agree.

Closely in point is General Dynamics Corp. v. United States, 324 F.2d 971, 163 Ct.Cl. 219 (1963), in which the court ruled that a statutory provision prohibiting the payment of interest on a credit or refund was not applicable and that interest should be paid. True enough, General Dynamics involved a tax which was wrongfully collected in the first instance. Be that as it may, we can draw no meaningful distinction between the allowance of interest under such circumstances and the allowance of interest where the government has wrongfully rejected a legitimate claim for refund. To hold otherwise would encourage the Internal Revenue Service to postpone action on this type of claim, or reject it, knowing there would be nothing to lose.

The cases are remanded to the lower court for computation of interest on the respective refunds from the date of erroneous rejection or when deemed rejected under the statute and regulations. Otherwise, the respective judgments are affirmed.

KOELSCH, Circuit Judge

(dissenting) :

I have no quarrel with my brothers in their view that the government should give financial encouragement to all persons who, by providing transportation services to commuters, expose themselves to the attendant financial risks.

But I am unable to read into 26 U.S. C. §§ 6416(b)(2)(H) and 6421(b) any such Congressional mandate; the plain language of these provisions more narrowly restricts this financial aid.

Both sections 6416(b)(2)(H) and 6421(b)(1) authorize tax rebates for fuel used in vehicles “while engaged in furnishing schéduled common carrier public passenger land transportation service along regular routes.” The allowances are thus made potentially available to any operator of a public transportation, or transit, system.

However, § 6421(b)(2), which is incorporated in § 6416(b)(2)(H), limits its benefits to the operators of transit systems falling within a specific class, i. e., the class of transit systems which are sufficiently “local” in nature to satisfy the “60 percent” test set forth in that subsection. A claimant is entitled to the relevant allowance “only if at least 60 percent of the total passenger fare revenue derived during . . . [the relevant] quarter from scheduled service described in paragraph (1) by the person filing the claim was attributable to commuter fare revenue derived during such quarter by such person from such scheduled service.”

It is implicit in both statutes that any “person” furnishing “scheduled common carrier public passenger land transportation service along regular routes” operates a “transit system,” though neither statute specifically employs that latter phrase in its text. The majority misconstrues § 6421(b)(2) when it permits Greyhound, in applying the “60 percent” test, to divide its system by excluding from its “total passenger fare revenue” all revenue derived from its mainline service operations, for clearly Greyhound, and not a chosen segment of its transportation operations, is the “person filing the claim” within the meaning of the statute. 26 U.S.C. § 7701(a)(1). The significance of this insight is not merely that “Greyhound was . a proper claimant under § 6421(b)(2),” as the majority observes, but that Greyhound’s own “total passenger fare revenue” derived from its own “scheduled common carrier public passenger land transportation service along regular routes” must be considered in applying the “60 percent” test.

“§ 7701. Definitions.
(a) When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof—
(1) Person. — The term ‘person’ shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.”

Insofar as the findings of the trial court establish that Greyhound operates two distinct types of transportation service, the findings are undisputed by the government and immaterial to the question before the court. The fact that one type of transportation service is operated by a separate and distinct department of a transit company, with separate employees and equipment, and the maintenance of separate accounting, does not justify the exclusion from “total passenger fare revenue” of the revenue derived therefrom. Rev.Rul. 67-92, 1967-1 Cum.Bull. 361. Moreover, the distinction between “local” and “mainline” service found by the trial court and upheld by the majority has no basis in the statute; it is authored by the management of the company making the claim. The only relevant distinction between types of transportation service contained in the statute is that between service from which “commuter fare revenue [is] derived” and service from which the claimant’s “total passenger fare revenue [is] derived.” If revenue from the former exceeds 60 percent of revenue from the latter, the test is met.

Insofar as the trial court concluded that Greyhound operates two distinct transit systems and may therefore claim the statutory allowance on behalf of one of them without reference to the revenue of the other, it was in error, for the statute, in its plain terms, contemplates that a claimant furnishing “scheduled common carrier public passenger land transportation service along regular routes” derives its “total passenger fare revenue” from the totality of its passenger transportation operations.

While the majority observes that the title to an Act may not be employed to limit the plain language of the text, it nevertheless attaches considerable significance to the headings of § 6421 (“Gasoline Used for Certain Nonhigh-way Purposes or by Local Transit Systems”) and subsection (b) {“Local Transit Systems”). However, its discussion overlooks the interpretation of the operative text, wholly consistent with the headings, that subsection (b)(1) authorizes an allowance for operators of transit systems which are sufficiently “local” or commuter-oriented in nature to qualify under the “60 percent” test of subsection (b)(2). Thus, subsection (b)(2) merely sets forth the statutory definition of a qualifying or “local” transit system, and the heading of § 6421 (b) refers to such qualifying systems, all other systems being beyond the coverage of the statute. Similarly, gasoline used by other than qualifying systems is not “Gasoline Used ... by Local Transit Systems.” However, the headings need not, and should not, be considered since the language of the operative text is plain and unambiguous.

The majority derives little assistance from its citation of Public Service Coordinated Transport v. United States, 367 F.2d 417, 177 Ct.Cl. 337 (1966). That decision makes but passing reference to the “60 percent” limitation of § 6421(b) (2) and does not attempt to construe it; rather, the court construes the phrase “bus which is of the transit type” contained in a different statute, 26 U.S.C. § 4483(c). Moreover, that latter statute provides that a “person,” and not a system, meets the “60 percent” test.

Nor is the majority’s position enhanced by the relevant Treasury Regulations. The primary regulation explaining the “60 percent” test, 26 C.F.R. § 48.6421(b)-l(b), makes clear that it is the “total passenger fare revenue” of “the person filing a claim for payment” which must be considered. Other regulations, 26 C.F.R. §§ 48.6421(e)-1(a)(1), (a)(2), (b)(1), and (b) (2) (ii), all cited by the majority, stand not for the proposition that claims are to be submitted by local transit systems, but that the allowance is available on fuel used “by local transit systems.” Even assuming arguendo that claims are intended to be submitted by “transit systems,” these regulations provide no authority that Greyhound operates a “local” or qualifying transit system as contemplated by the statute. Further, 26 C.F.R. § 48.6421(c)-l(b) (2) (ii) (i) requires that the claim set forth the “internal revenue district in which the claimant’s last income tax return was filed.”

Another provision, 26 C.F.R. § 48.-6421(b)-l(d), presents an illustration containing the following language:

“Example. The XYZ Corporation operates a local transit system furnishing scheduled common carrier public passenger land transportation service along regular routes in the city of Grandville and also operates a similar intercity service to Jones-boro.”

Although this language may arguably be read to mean that XYZ Corporation’s local service operations in Grandville constitute a distinct local transit system, it is manifest that such a “system” is neither a proper claimant under subsection (b) (2) nor an entity on whose behalf a claim may be made, for the example goes on to demonstrate that XYZ Corporation, as the “person filing the claim,” must include both its local and intercity operations in computing its “total passenger fare revenue” under the test. The hypothetical XYZ Corporation is a virtual microcosm of Greyhound, and thus it follows from the example that Greyhound must include reveune from both its local and mainline operations in determining its “total passenger fare revenue” under the test.

“(b) 60-percent passenger fare revenue test. For purposes of section 6421 and this section, the ‘60-percent passenger fare revenue test’ is met in a particular calendar quarter if during the calendar quarter the person filing a claim for payment under section 6421(b)—

I find nothing in the regulations inconsistent with the construction of the statute presently advanced by the government. Nor does the majority help itself by giving the regulations a contrary interpretation; the plain language of the statute stands as a compelling indication that such a contrary interpretation is wrong.

I cannot seriously dispute the majority’s conclusion that Congress, in enacting § 6421(b), sought to provide relief for mass transportation systems. This is undoubtedly true. Nevertheless, the question before the court is whether Greyhound provides transportation service of the type and degree which, under the statute, entitles it to the allowance. The legislative history of the statute leaves little doubt that Greyhound does not provide such service.

(1) Derived passenger fare revenue from the operation of scheduled common carrier public passenger land transportation service along regular routes, and
(2) At least 60 percent of the total passenger fare revenue was commuter fare L revenue.”

Moreover, nothing in the legislative history sustains the proposition that all operators of transit systems providing some commuter service are entitled to the allowance. The very mode of enactment mandates the other conclusion. If Congress had intended that all systems providing some commuter service receive the allowance, it could easily have done so. Instead, it created the “60 percent” limitation.

In holding that the provider of any service from which “commuter fare revenue [is] derived” is entitled to make its claim on behalf of a segment of its transportation operations almost identical to that from which the “commuter fare revenue [is] derived,” the majority rewrites the statute and substantially destroys the significance of the “60 percent” test. In so holding, it reads Greyhound’s own company distinction between “local” and “mainline” operations into the statute and imposes the burden of that distinction on other potential claimants which may be organized differently from Greyhound.'

I am compelled to conclude that Greyhound, a transportation corporation which concededly derives over 95 percent of its substantial passenger fare revenue from intercity, interstate, and transcontinental operations, is not one of the “persons” which Congress sought to aid in enacting §§ 6416(b)(2)(H) and 6421(b). I would therefore reverse the judgments of the district court and remand the causes with directions that judgments be entered in favor of the government. Because the government should prevail, I express no view on the issue of interest.

S.Rep.No.2054, 84th Cong., 2d Sess., 1956-2 Cum.Bull. 1311.

      . “§ 6421. Gasoline Used For Certain Non-highway Purposes or by Local Transit Systems
      * * * * *
      (b) Local transit systems.—
      (1) Allowance. — Except as provided in subsection (i), if gasoline is used during any calendar quarter in vehicles while engaged in furnishing scheduled common carrier public passenger land transportation service along regular routes, the Secretary or his delegate shall, subject to the provisions of paragraph (2), pay (without interest) to the ultimate purchaser of such gasoline the amount determined by multiplying—

        (A) 1 cent for each gallon of gasoline so used on which tax was paid at the rate of 3 cents a gallon and 2 cents for each gallon of gasoline so used on which tax was paid at the rate of 4 cents a gallon, by
      (B) the percentage which the ultimate purchaser’s commuter fare revenue derived from such scheduled service during such quarter was of his total passenger fare revenue derived from such scheduled service during such quarter.
      (2) Limitation. — Paragraph (1) shall apply in respect of gasoline used during any calendar quarter only if at least 60 percent of the total passenger fare revenue derived during such quarter from scheduled service described in paragraph (1) by the person filing the claim was attributable to commuter fare revenue derived during such quarter by such person from such scheduled service.
      :i= :¡: * * *
      (d) Definitions. — For purposes of this section—
      •I* V $
      (2) Commuter fair revenue. — The term ‘commuter far e revenue’ means revenue attributable to fares derived from the transportation of persons and attributable to—
      (A) amounts paid for transportation which do not exceed 60 cents,
      (B) amounts paid for commutation or season tickets for single trips of less than 30 miles, or
      (O) amounts paid for commutation tickets for one month or less.”

      . “It is manifest from the testimony adduced at trial and the Partial Agreed Statement of Facts and the elaborate briefs filed by the respective parties, that Greyhound operates two separate types of service, mainline and local. Public Service Coordinated Transport v. United States, 367 F.2d 417, 177 Ct.Cl. 337 (1966) ; see also, Plaintiff’s Exhibit 9 ‘Local operations.’ The detailed testimony of the several trial witnesses produced by plaintiffs makes it abundantly clear that Greyhound’s local service meets the criteria in Exhibit 9.
      “Plaintiffs have successfully met and sustained the burden of proof in the clear and convincing exposition of fact and the delineation of legal principles as applicable.
      “The United States vigorously contends that Greyhound is nevertheless a single, unified and integrated transportation system. However, there is no persuasive evidence, either oral or documentary, to support this contention.” [Greyhound Brief, p. 7].

      . (1) Masses of passengers are transported during rush hours; (2) Rush hour passengers are transported primarily to and from work; (3) Frequency of service is highest during rush hours and drops off in between those hours; (4) Relatively short distances are traveled by the average passenger; (5) Fares are determined by zones; (6) Limited baggage facilities are offered; (7) Services between suburban areas and core cities; (8) Operating speed may be relatively slower than that of intercity buses; (9) Passenger comfort may be of lower concern than that of intercity buses.

      . 70 Stat. 394

        “Sec. 6421. Gasoline Used For Certain Non-Mghway Purposes or by Local Transit Systems.

      (a) Nonhighway uses. — If gasoline is used otherwise than as a fuel in a highway vehicle (1) which (at the time of such use) is registered, or is required to be registered, for highway use under the laws of any State or foreign country, or (2) which, in the case of a highway vehicle owned by the United States, is used on the highway, the Secretary or his delegate shall pay (without interest) to the ultimate purchaser of such gasoline an amount equal to 1 cent for each gallon of gasoline so used.
      (b) Local Transit Systems.— (1) Allowance. — If gasoline is used during any calendar quarter in vehicles while engaged in furnishing scheduled common carrier public passenger land transportation service along regular routes, the Secretary or his delegate shall, subject to the provisions of paragraph (2), pay (without interest) to the ultimate purchaser of such gasoline the amount determined by multiplying—
      * * * * *

      (d) (2) Definitions. — For purposes of this section — ■
      (1) Gasoline. — The term ‘gasoline’ has the meaning given to such term by section 4082(b).
      (2) Tax-Exempt Passenger Fare Revenue. — The term ‘tax-exempt passenger fare revenue’ means revenue attributable to fares .which were exempt from the tax imposed by section 4261 by reason of section 4262(b) (relating to the exemption for commutation travel, etc.). * * *”

      . 26 U.S.C. § 6416(b)(2)(H) refers to “a liquid in respect of which tax was paid under section 4041,” while § 6421(b) (1) refers to “gasoline.”

      . Greyhound’s claim for a diesel fuel tax refund is made under § 6416(b) (2) (H) and is allowable, under that section, “only if the 60 percent passenger fare revenue test set forth in section 6421(b) (2) is met.”

      . 26 U.S.O. § 7701 provides in pertinent part:

      . 26 U.S.C. § 4483 provides in pertinent part:
      “§ 4483. Exemptions

      * * * * *
      (c) Certain transit-type buses. — Under regulations prescribed by the Secretary or his delegate, no tax shall be imposed by section 4481 on the use of any bus which is of the transit type (rather than of the intercity type) by a person who, for the last 3 months of the preceding year (or for such other period as the Secretary or his delegate may by regulations prescribe for purposes of this subsection), met the 60-percent passenger fare revenue test set forth in section 6421(b) (2) as applied to the period prescribed for purposes of this subsection.”

      . 26 C.F.E.. § 48.6421 (b)-l(b) provides in pertinent part:

      . The following excerpts from the legislative history of the statute serve to highlight Congressional intent:
      “Under the bill, refunds are available with respect to motor fuel used in vehicles while such vehicles are engaged in furnishing scheduled common carrier public passenger land transportation service along regular routes. However, the refund is to he available only if at least 60 percent of the total passenger-fare revenue (exclusive of any transportation of persons tax) of the carrier was attributable to fares which presently are exempt from the excise tax on the transportation of persons on the grounds that they do not exceed 35 cents or that they constitute commutation fares.” H.R.Rep. No. 2022, 84th Cong., 2d Sess., 1956-2 Cum.Bull. 1289.
      “For example, a transit company is authorized to serve the city of A and the nearby communities of B, C, D, and E. Its total passenger-fare revenue from all of its scheduled service along regular routes for the period prescribed by the Secretary or his delegate is $100,000. . . . Of this total passenger-fare revenue for the period, $72,000 is attributable to fares which are exempt from the tax on transportation of persons by virtue of the provisions of section 4262(b) of the 1954 Code.
      “The company would qualify for relief . . ., since 72 percent of its revenues during the prescribed period was from fares exempt from tax.” Id. at 1305.
      “Under the House Bill special relief was provided in the case of the gasoline, diesel fuel, and special motor fuel taxes for fuel used in the operation of local transportation systems. The relief was granted through the form of a refund . . . where the fuel was used in vehicles engaged in furnishing scheduled common carrier, public passenger, land transportation service along regular routes. In such cases the refund was to be available only if 60 percent or more of the total passenger fare revenue of the carrier was attributable to fares exempt from the excise tax on the transportation of persons (on the grounds that they do not exceed 35 cents or that they constitute commutation fares).”

      . Nothing in the legislative history of the statutes remotely suggests that in enacting the legislation Congress was cognizant of the internal organization of a transportation company such as Greyhound which may have distinguished between “local” and “mainline” operations.


source: Caselaw Access Project

author: SETH, Circuit Judge. HOLLOWAY, Circuit Judge ing) :

license: Public Domain

text:
    Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellant, v. Jerry SINE and Dora Sine, Individually and as partners doing business as Jerry Sine Investments, Appellees. Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellant, v. Jerry SINE et al., Appellees.
    Nos. 73-1738, 73-1739.
    United States Court of Appeals, Tenth Circuit.
    April 25, 1974.
    James B. Leonard, Atty., U. S. Dept, of Labor (William J. Kilberg, Sol. of Labor, Carin Ann Clauss, Associate Sol., Jacob I. Karro, Atty., Tedrick A. Housh, Jr., Regional Sol., U. S. Dept, of Labor, Washington, D. C., with him on the brief), for appellant.
    Ronald C. Barker, Salt Lake City, Utah, for appellees.
    Before CLARK, Associate Justice Retired, Supreme Court of the United States, and SETH and HOLLOWAY, Circuit Judges.

       Sitting by Designation.

   SETH, Circuit Judge.

The Secretary of Labor appeals from dismissal “with prejudice” by the United States District Court for the District of Utah of these actions brought under section 17 of the Fair Labor Standards Act, 52 Stat. 1060 (1938), as amended, 29 U.S.C. § 217, to enjoin appellees from violating the minimum wage, overtime, and record-keeping provisions of the Act, and to require payment of back wages allegedly due appellees’ employees under the Act.

On December 29, 1971, the Secretary of Labor filed complaints against the above captioned appellees, alleging violations of section 15(a)(2) and (5) of the Fair Labor Standards Act, 29 U.S.C. § 215(a)(2) and (5). At the same time he filed a request for production of documents under Fed.R.Civ.P. 34 in each case.

On January 18 (No. 73-1738) and January 19 (No. 73-1739), 1972, the appellants filed their answers in the cases, denying jurisdiction of the district court; the court’s power to require production of the records sought to be examined by the Secretary, and “all other allegations” in the complaints except for the fact that they operated or were involved in the operation of certain businesses. In addition, in No. 73-1738, the appellees asserted “their privilege against self-incrimination provided by the Fifth Amendment to the Constitution of the United States and other applicable laws,” in refusing to produce the business records sought by the Secretary.

It appears that efforts on behalf of the Secretary to obtain the requested materials were unsuccessful. As a result, on March 20, 1972, he filed a motion for order compelling discovery under Fed.R.Civ.P. 37, asserting that all the requested documents and records were subject to discovery under Fed.R. Civ.P. 26. A hearing was had on this motion on April 18, 1972, and on May 16, 1972, the court entered a formal order denying the Secretary’s Rule 37 motion, “good cause appearing therefor.” No- further exposition of this “good cause” is found.

Also on April 18, 1972, a pretrial order was entered in the two cases.

On June 5 (No. 73-1739), and June 7 (No. 73-1738), 1972, the appellees filed motions for summary judgment, followed by the Secretary’s memorandum in opposition filed on August 28, 1972. A hearing was had on the motions on September 13, 1972, at which time they were denied and, according to the clerk’s minute sheet of the hearing, the cases were to be set on the court’s trial calendar.

On February 7, 1973, appellees filed motions for “protective order re depositions” in the two cases, alleging that the Secretary was “attempting to accomplish discovery procedure by means of a deposition and subpoena” which had been previously denied him under the court’s order of May 16, 1972. In an ex parte proceeding the same day, the court issued a protective order excusing the ap-pellees from attending the deposition-taking noticed by the Secretary and from producing the documents specified in the notice and accompanying subpoena.

On June 7, 1973, the Secretary filed interrogatories to be answered by the appellees in No. 73-1739; this was followed by the appellees’ motion to be relieved from answering and objections to interrogatories and motion for sanctions. No formal resolution of these correlative motions appears in the records before this court. It does, however, appear that the court below did order the appellees to answer the interrogatories. The Secretary’s counsel, at the time the cause came on for trial on June 27, 1973, stated that “Monday, a week ago, at the time you called the calendar for trial, I had filed a set of interrogatories and at that time the defendant was ordered by the court to answer those interrogatories.”

Assuming that such an order was directed orally by the court, the two cases nevertheless came on for trial on June 27, 1973. On that day, the following colloquy immediately followed the statement of the attorney for the Secretary quoted in the preceding paragraph:

“MR. RUTTER: . . . I do not have the answers to those interrogatories. They are a large part of this case.
“THE COURT: Did I put a date on it? When were they supposed to supply them?
“MR. RUTTER: You did not specify a date, but the production would be meaningless if it didn’t occur before the trial.
“THE COURT: You prepared the order, didn’t you ?
“MR. RUTTER: No, sir. I believe it would be a minute order.
“THE COURT: Were you here when that happened ?
“MR. RUTTER: Yes, sir, I was.
“THE COURT: Did you know it was set? Did you know the case was set?
“MR. RUTTER: Yes, sir, I did.
******
“THE COURT: And you fellows didn’t follow through on it. I gave you the order. You didn’t follow through on it.
“MR. RUTTER: I am at a loss. I don’t know what I was supposed to do if they were ordered to—
“THE COURT: Well, you are supposed to say, T want those answers so I can prepare for trial. It is set and, as a matter of fact, it turns out it is being tried on the 27th day of June.’
******
“THE COURT: It is perfectly obvious to me, young man, that you fellows are not attending to your business, just not attending to your business.”

As may be apparent from the foregoing, the Secretary did not put on any evidence in either of the two cases when they were so called for trial. Nor are we able to find in the records of the two cases any request by the Secretary for a continuance so that the interrogatories might be answered, or witnesses, such as employees and the like, could be subpoenaed to testify, or other preparation made.

Under Fed.R.Civ.P. 33(a), the appel-lees had thirty days in which to answer the tendered interrogatories, absent an order from the court lengthening or shortening this time. Thus, appellees had until July 9, 1973, in which to answer the interrogatories. We are also unable to find in the record any motion by the Secretary requesting that the ap-pellees answer in a shorter time. The answer date was thus, of course, after the date set for trial.

The court dismissed the actions, and the grounds for dismissal appear to be (1) for failure to prosecute under Fed. R.Civ.P. 41(b); (2) for a failure on the part of the Secretary to present sufficient evidence to satisfy its burden of proof in the ease; and (3) on the merits for a failure to show that the appellees’ various business activities came within the provisions of the Fair Labor Standards Act.

From a reading of the record, we cannot say that the trial court abused its discretion in dismissing these actions. We express no view on the merits of the eases and will confine our comments to dismissal under Fed.R.Civ.P. 41(b). Nor do we express any view on the propriety of the court’s disposition of the Secretary’s Rule 34 request for the production of documents or its denial of the Secretary’s motions for discovery under Rule 37 and the protective order excusing the appellees from attending deposition-taking and producing documents. The Secretary sought no relief thereon.

The time period between the filing of this suit and trial is not, of itself, such as would normally justify such a dismissal. The fact, however, that during the eighteen months between the date of filing the complaint and the date of trial, the Secretary, notwithstanding the rather severe restrictions placed upon his development of the case by the trial court, took no steps to seek relief therefrom, nor otherwise to prepare the case for trial, justified the trial court’s exercise of discretion in dismissing the cases. Thus, the length of time in which this case was pending, coupled with the Secretary’s failure to have any evidence to present when he knew that trial was to be had on a date certain, justifies dismissal. Food Basket, Inc. v. Albertson’s, Inc., 416 F.2d 937 (10th Cir.).

The order of the district court, therefore, is affirmed.

HOLLOWAY, Circuit Judge

(dissent-

ing) :

I respectfully dissent. While these cases are not free from doubt, I feel that the dismissal of these actions with prejudice was an abuse of discretion when all the circumstances are considered, including the possible effect on rights of employees allegedly under the Fair Labor Standards Act.

The court’s opinion has outlined the facts in detail, and I mention only the circumstances that impel me to this view. In No. 73-1738, the suit against the Sines as partners, the Department did make a request for production of documents on filing suit in December, 1971. This request covered records relating to whether a covered enterprise existed, hours worked and rates of pay ■ — the principal issues. A letter in March, 1972 from the Department to the Clerk of the trial court states that the motions for an order compelling discovery had been delayed at the request of defendants’ counsel, but that no agreement could be reached. Plaintiff’s motion for an order compelling discovery was then filed in March, 1972. It was argued in April and denied, the trial court’s reasons not being stated in the record. The motion was argued at the same hearing where pretrial was conducted and the pretrial order stated that an issue was whether the defendants are entitled to assert their privilege against self-incrimination with respect to disclosure of information.

Following this adverse ruling the Department again sought discovery in January, 1973 in No. 73-1738. A notice for depositions was served, advising again that the same records were sought. A subpoena duces tecum for the records was issued for an appearance on January 29. The defendants moved for a protective order on February 7. The trial court granted an ex parte protective order the same day, excusing the defendants from appearing. Reasons for the order were not stated. The grounds of the motion, however, were that the deposition notice and subpoena were contrary to the trial court’s prior order denying an order for discovery. The motion was supported by exhibits from the earlier and this subsequent discovery proceeding seeking to show that they sought the same records and information.

To this point in early June, 1973, the proceedings in No. 73-1739, the suit involving the Rancho Lanes, Inc., bowling alley, were almost parallel. However here there was no claim of the privilege against self-incrimination as grounds for refusing discovery. In the Rancho Lanes case on June 7 the Department filed interrogatories. On June 8 notice was given the parties of a calendar call and trial on June 18. On that date objections to the Rancho Lanes case interrogatories were overruled and the defendants were ordered to answer, no date being specified or sought by the Department earlier than the 30-day deadline provided by 33(a), F.R.Civ.P.

As the majority opinion says, the record shows no motion for a continuance and no motion to shorten the time to answer the interrogatories. However the Department did make two substantial efforts to obtain discovery in the cases which resulted in adverse rulings. When the favorable ruling in the Rancho Lanes case came, on June 18, not much time remained before trial on June 27. And on that day when the defendants had not answered the interrogatories, the Department was obviously at a serious disadvantage by not having had access for so long to the main source of competent proof on the issues — the defendants’ records.

Despite the lack of further steps by counsel when the favorable ruling came on June 18, I feel that in view of the background of earlier discovery efforts and the posture at the June 27 hearing, the severity of dismissals with prejudice was not justified. While it is suggested that the Department could have sought relief earlier from the trial court’s adverse rulings on discovery, such orders are not generally reviewable by an extraordinary original action, see S. E. C. v. Stewart, 476 F.2d 755, 758 (2d Cir.); Paramount Film Distributing Corp. v. Civic Center Theatre, Inc., 333 F.2d 358, 360-361 (10th Cir.), nor by an attempted appeal under 28 U.S.C.A. § 1291, see Gosa v. Securities Investment Co., 449 F.2d 1330, 1332 n. 1 (5th Cir.); Borden Co. v. Sylk, 410 F.2d 843, 845 (3d Cir.); Natta v. Hogan, 392 F.2d 686, 689 (10th Cir.). And I do not believe the Department should be faulted for not pursuing the dubious route of a § 1292(b) appeal. See United States v. Salter, 421 F.2d 1393 (1st Cir.); Wright and Miller, Federal Practice and Procedure, § 2006, p. 31; but cf. Christian Echoes National Ministry, Inc. v. United States, 404 F.2d 1066 (10th Cir.). Rulings on discovery disputes may be challenged as errors on appeal from a final judgment. See e. g., Donnelly v. Parker, 486 F.2d 402, 409 (D.C.Cir.); Goldman v. Checker Taxi Co., 325 F.2d 853 (7th Cir.); Marshall v. Ford Motor Co., 446 F.2d 712 (10th Cir.); Wright and Miller, Federal Practice and Procedure, § 2006, p. 34. And in this respect I am satisfied that the earlier rulings sustaining the broad objections to discovery, at least on the grounds relied on by defendants, were in error.

In view of all that went before and the situation when the cases were called, I feel the dismissals with prejudice were unjustified. They are,a harsh sanction, reserved for extreme cases. Meeker v. Rizley, 324 F.2d 269 (10th Cir.). The law favors hearing the litigant’s claim on its merits. Davis v. Operation Amigo, Inc., 378 F.2d 101, 103 (10th Cir.). And there was involved also the potential of frustration of the rights of others, employees allegedly entitled to the Act’s benefits.

For these reasons I would set aside the dismissals with prejudice and the findings and remand the cases for further proceedings.

      . At a later hearing, defendants’ counsel stated that the court had indicated the Department ought not to file suit without knowing what they were doing and without evidence of interstate commerce. In No. 73-1738 defendants had asserted broad grounds for refusing to produce the records. They said the Department lacked power to require production and examination of the records, and they also asserted their privilege against self-incrimination. These were the only grounds for opposing discovery before the court at the time the plaintiff’s motion for an order compelling discovery was denied, so far as our record shows.

      . The grounds asserted were that there was no jurisdiction and the privilege against self-incrimination. The jurisdictional argument begged the question and discovery could not be denied on a “fishing expedition” objection. See Goldman v. Checker Taxi Co., supra, 325 F.2d at 856. And without more the broad claim of the privilege against self-incrimination could not support denial of discovery. United States v. Roundtree, 420 F.2d 845, 852 (5th Cir.).
      It might be proper that certain restrictions be imposed by protective orders limiting discovery sought here to prevent abuse. However the earlier orders entered here were not apparently sought or granted for such a limited purpose but sustained a broad claim that discovery should not proceed at all. This was apparently the trial court’s view until the contrary order entered shortly before trial in No. 73-1739.

      . I believe that the general statements of the Department’s affidavits opposing summary judgment cannot be viewed as insubstantial in view of Brennan v. Dillon, 483 F.2d 1334 (10th Cir.). The trial court did not have the benefit of that decision, however, when the cases were dismissed.


author: WALLACE, Circuit Judge: ALFRED T. GOODWIN, CHAMBERS, Circuit Judge

text:
    In the Matter of Contempt Proceedings Against Grand Jury Witness James Frederick WEIR, Jr. UNITED STATES of America, Plaintiff-Appellee, v. James Frederick WEIR, Jr., Defendant-Appellant.
    No. 74-1439.
    United States Court of Appeals, Ninth Circuit.
    April 19, 1974.

      H. Peter Young (argued), Venice, Cal., for appellant.
    Elizabeth Meyer (argued), Dept, of Justice, Harry D. Steward, U. S. Atty., San Diego, Cal., for appellee.
    Before CHAMBERS, GOODWIN and WALLACE, Circuit Judges.
   OPINION

WALLACE, Circuit Judge:

Weir was cited for civil contempt for failing to answer questions before a grand jury subsequent to a grant of immunity. We affirm.

Weir alleged in his uncontradicted affidavit that he had been captured by Mexican officials in Mexico, had been threatened and tortured and, as a result, had confessed orally and in writing to being involved in a marijuana smuggling scheme. He also alleged that United States officials in Mexico were involved with the Mexican officials in that (1) while he was being interviewed by an agent of the “Federal Bureau of Narcotics,” Mexican officials threatened him and slapped his face; (2) that the American agent had a copy of his prior written confessions; (3) that this agent stated to Mexican officials that more money would be paid to secure those higher up than Weir; and (4) that he was advised by another United States official that his release might be arranged if he cooperated.

Weir was subsequently released and deported to the United States, whereupon he was arrested as a material witness, admitted to bail and subpoenaed to testify before the grand jury. He declined to answer questions, claiming his Fifth Amendment privilege, and was then granted use immunity, over his objection. Upon his return to the grand jury, he still refused to answer questions, which resulted in his being held in civil contempt and sentenced to be incarcerated until he purged himself by testifying.

Weir claims he has just cause not to answer the questions because they were based upon a coerced confession. We believe this avenue of attack was foreclosed by United States v. Calandra, 414 U.S. 338, 94 S.Ct. 613, 38 L.Ed.2d 561 (1974), in which the Court held that a grand jury witness may not complain that a grand jury inquiry was based upon materials secured by a search and seizure which violated the Fourth Amendment.

Weir claims Calandra is distinguishable because here we deal with the Fifth rather than the Fourth Amendment. In both instances, the alleged constitutional abridgment occurred prior to the grand jury proceeding. In both, the inquiry in the grand jury proceeding stemmed from the information which was allegedly secured in violation of the Constitution. To accept Weir’s claim, we would need to elevate the Fifth Amendment over the Fourth Amendment. This we cannot do without more authoritative direction. In Calandra, the Court did state, however, that “an indictment valid on its face is not subject to challenge on the ground that the grand jury acted . on the basis of information obtained in violation of a defendant’s Fifth Amendment privilege against self-incrimination.” Id. at 345, 94 S.Ct. at 618.

Weir next - contends, citing Rochin v. California, 342 U.S. 165, 72 S.Ct. 205, 96 L.Ed. 183 (1952), that the brutal treatment which produced incriminating statements should require the court, as a matter of due process, to allow him to assert his privilege. However, one can also conceive of brutality which could be inflicted in relation to Fourth Amendment violations and there is no hint in Calandra that such would obviate application of the Calandra rule.

If what Weir charges is true, it is reprehensible and revolting. But the alleged confessions are not being used to incriminate Weir. Because of the use immunity granted, he cannot incriminate himself by answering the questions. In the grand jury room there is no illegal coercion. He is now many miles away from and has a border between him and the Mexican officials whom he charges with torture. His only fear is a charge of perjury. If he now tells the truth, any charge of perjury based upon prior involuntary statements will result in Weir raising his defense to the alleged coerced confessions. There is no doubt that Weir may defend himself against the use of involuntary confessions, but this is hot the time to do so.

Weir next contends that the immunity granted is insufficient to protect him from prosecution in Mexico. The short answer is that the grand jury proceedings are secret, Fed.R.Crim.P. 6, and we cannot assume that the rule will be broken and the proceedings disclosed to the Mexican government.

Weir filed a motion pursuant to 18 U.S.C. § 3504 seeking disclosure of the results of electronic surveillance of himself and his attorneys. He charged that both his appearance before the grand jury and the questions asked him were the result of the electronic surveillance and that such surveillance was unlawful. In response, an affidavit by a Department of Justice attorney denied any electronic surveillance. The attorney stated that all national security electronic surveillance authorized by the Attorney General is conducted by the F.B. I. and that his inquiry of the F.B.I. and other agencies which conduct surveillance pursuant to Title III of the Omnibus Crime Control & Safe Streets Act of 1968 revealed that no surveillance occurred. We hold that the government’s denial of surveillance was adequate. Proving a negative is, at best, difficult and in our review, a practical, as distinguished from a technical, approach is dictated.

Affirmed.

ALFRED T. GOODWIN,

Circuit Judge (dissenting):

Although the full import of United States v. Calandra, 414 U.S. 338, 94 S.Ct. 613, 38 L.Ed.2d 561 (1974), is not yet evident, I do not believe that it requires us to hold that a witness before a grand jury can be held in civil contempt for refusing to answer questions which were the product of statements coerced from him through torture.

The record contains Weir’s uncontro-verted allegations that Mexican soldiers obtained statements from him after holding his head under water until he gagged and lapsed into unconsciousness, sticking knives into his legs, buttocks and neck, beating him until he was unconscious, and hanging him from a tree limb by a rope around his neck until he lost consciousness.

In Calandra the Supreme Court balanced the potential injury to the historic role and functions of the grand jury against the potential deterrent effect of the judicially created exclusionary rule of the Fourth Amendment. Here we have no mere hierarchical contest between the Fourth and Fifth Amendments as the majority asserts; rather, we have the government making use of evidence obtained in a manner that cannot be countenanced by a United States court.

I would permit a grand jury witness to refuse to answer questions based upon his confession, if he can show it was obtained through torture. In this way we would refuse to lend judicial sanction to conduct “too close to the rack and the screw to permit of constitutional differentiation.” Rochin v. California, 342 U.S. 165, 172, 72 S.Ct. 205, 210, 96 L.Ed. 183 (1952). Whereas the Supreme Court was willing to accept judicial entanglement with a technical violation of the Fourth Amendment as the price for the effective and expeditious discharge of the grand jury’s duties, I am far from convinced that it would be equally willing to pay the higher price of permitting a grand jury to exploit evidence obtained through conduct that “offends some principle of justice so rooted in the traditions and conscience of our people as to be ranked as fundamental.” Brown v. Mississippi, 297 U.S. 278, 285, 56 S.Ct. 461, 464, 80 L.Ed. 682 (1936).

Nearly nine months elapsed between Weir’s first appearance before the grand jury and the contempt adjudication, ample time for a hearing on the coerced confession issue, which Weir estimated would take at most a whole day. A hearing on the coerced confession issue could easily have been held without disrupting the grand jury proceedings any more than they already were delayed by other circumstances. The incremental delay which this hearing would have provided to the effective and expeditious discharge of the grand jury’s duties would seem a modest price to pay if in the final result we could put an early end to the use of a coerced confession in a federal court. I trust it is not too rhetorical to suggest that we may rue the day we permitted our own officers to accomplish through foreign proxies a kind of business that is not permitted on our own soil.

I would vacate the contempt judgment and remand for a hearing on Weir’s allegations.

CHAMBERS, Circuit Judge

(concurring in Circuit Judge WALLACE’S opinion):

It seems to me that Judge Wallace’s horse is not quite as black and Judge Goodwin’s horse is not quite as white as Judge Goodwin paints them with his streaking language.

All over the country there are efforts today to break down the use of the grand jury as an effective body. The method- used is that one keeps it sitting out on a side track while the crew leaves the train and goes off to fight one brush fire after another. One heckles the prosecutor about electronic eavesdropping. One complains that the prosecutor has not produced adequate proof that each of the million or more government employees who might have tapped a person’s telephone has not done so.

At a trial of a case out in the open air, if Weir were testifying as a witness I would look closely at his claims of torture in Mexico and whether there was any fruit of a poisoned tree and perhaps I would exclude testimony, founded on abuse, if there was abuse.

Weir has been granted immunity. He has been returned to this country, certainly by the intercession of American authorities. If the dissenter’s view prevails and there are barbarous practices across the border, it will do the likes of Weir no good. Next time our government officers will let another Weir just sit in the Mexican jail. Surely our government has not mistreated Weir since he crossed the border. I doubt that he was mistreated by any American agents before he came back.

I would not derail the grand jury with charges so easy to make and so hard to instantly disprove.


author: WILLIAM E. DOYLE, Circuit Judge.

text:
    JUNIOR CHAMBER OF COMMERCE OF ROCHESTER, INC., ROCHESTER, NEW YORK, et al., Plaintiffs-Appellants, v. The UNITED STATES JAYCEES, TULSA, OKLAHOMA, et al., Defendants. Appellees.
    No. 73-1560.
    United States Court of Appeals, Tenth Circuit.
    April 16, 1974.
    Judith R. Cohn, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa. (E. Gerald Riesenbach, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., on the brief), for plaintiffs-appellants Junior Chamber of Commerce of Philadelphia, Pennsylvania, Thomas S. Rittenhouse, Beverly Lynn Benson, Margaret M. Hippie and Roberta M. Schneider.
    Emmelyn Logan-Baldwin, Rochester, N. Y., for plaintiffs-appellants Junior Chamber of Commerce of Rochester, Inc., Janis Gaines, Jane Selman, Charles Wetmore, James T. Bruen, David Heilig-man, Thomas Banaszewski and- Sydnee Schwartz.
    Debra A. Millenson, Washington, D. C. , for plaintiff-appellant Joann Cleven-ger.
    Josephine L. Citrin, Portland, Maine, for appellant Joan H. Slyne.
    James E. Hautzinger and S. Chandler Visher, Dawson, Nagel, Sherman & Howard, Denver, Colo., local counsel to all plaintiffs-appellants.
    Robert J. Corber, Washington, D. C. (Gary D. Taylor, Denver, Colo., and Ronald S. Cooper and Kenneth I. Jonson II, Washington, D. C., of counsel, on the brief), for private defendants-appellees.
    Ann Belanger, Atty., Tax Div., Dept, of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Meyer Roth-wacks and Jonathan S. Cohen, Attys., Tax Div., Dept, of Justice, Washington,
    D. C., and Nathan G. Graham, U. S. Atty., of counsel, on the brief), for federal defendants-appellees.
    Before BREITENSTEIN, McWIL-LIAMS and DOYLE, Circuit Judges.
   WILLIAM E. DOYLE, Circuit Judge.

This is a sex discrimination case. Appellants seek review of a judgment of dismissal of the United States District Court for the Northern District of Oklahoma. The claim of the appellants in the District Court was that the United States Jaycees unconstitutionally excluded the Junior Chamber of Commerce of Rochester, New York and the individual appellants from affiliation and membership in the United States Jaycees. Similar claims are asserted by the Junior Chamber of Commerce of Philadelphia and of New Orleans, Louisiana, and individual members of those organizations. Appellants also asserted in District Court that certain named federal officers impermissibly support the United States Jaycees and various state and local Jaycee chapters by allowing them tax exemptions and by utilizing them to implement federal grants and programs.

The controversy was the result of the United States Jaycees’ bylaws limiting membership to males. On this account the Junior Chamber of Commerce of Rochester was expelled from the United States Jaycees because it had chosen to admit women as members. Individual members of the Rochester Jaycees were then prevented from becoming affiliated with the United States Jaycees and thereby lost certain opportunities to take part in the charitable work of the United States Jaycees, part of which involved the transmission of federal funds to the needy. Appellants allege that the United States Jaycees are violating the Fifth and Fourteenth Amendments to the United States Constitution and the Civil Rights Act, 42 U.S.C. § 1983, by prohibiting women from becoming members of the United States Jaycees and any state or local Jaycees organization.

Various federal statutes, including the Civil Rights Act of 1964 as amended by the Equal Employment Opportunity Act of 1972, are relied on to gain admittance to federal court for the purpose of asserting the alleged violation. According to the allegations of the amended complaint, the Jaycees and various state chapters thereof received substantial tax benefits under § 501(c)(3) and (c)(4) of the Internal Revenue Act and also various federal grants and contracts from OEO and other departments of the United States Government. It is alleged that the various Jaycee organizations use federal funds to sponsor HEW programs, including construction of housing projects and assistance to underprivileged children.

From all of this, it is the position of plaintiffs that the United States Jaycees is in practical effect an arm of the government and that therefore when it discriminates in its membership policies it is acting officially. On this basis appellants claim that their rights are subject to the protection of the Fifth and the Fourteenth Amendments to the Constitution of the United States and are violated by the Jaycees’ exclusionary membership policies.

The plaintiffs do not contend that they have any direct pecuniary interest in the funds which have been mentioned. An evidentiary hearing held by the District Court revealed that the United States Jaycees administer substantial grants on behalf of the government. A memorandum admitted into evidence showed that government funds distributed by the United States Jaycees amounted to approximately $985,000. However, the rights which the plaintiffs say were invaded were not monetary. Rather, they contend that they were deprived of leadership training and administrative experience.

The District Court ruled that the complaint failed to state a claim because the federal question was insubstantial. The court there noted that the plaintiffs had failed to allege any direct relationship between the discrimination against the plaintiffs and the distribution of government funds.

In support of their contentions that the discrimination is of constitutional dimension, the plaintiffs cite cases recognizing the invalidity of discrimination both in educational areas and in employment. See Frontiero v. Richardson, 411 U.S. 677, 93 S.Ct. 1764, 36 L.Ed.2d 583 (1973). In Frontiero there was a federal statute which differentiated between housing and medical benefits available to married male and female members of the armed forces. The Supreme Court condemned this as unconstitutional, citing Reed v. Reed, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225 (1971). Four members of the court held that classifications based upon sex were to be considered suspect. This shifted the burden to the government to establish the validity of such classifications and gave rise to the necessity for strict judicial scrutiny. In Reed the Supreme Court had ruled that an Idaho statute giving preference to males over females as administrators of estates was an unconstitutional violation of the equal protection clause.

There is no dispute about the invalidity of discrimination by the state or federal government based on sex and there is no dispute about the fact that the plaintiffs were excluded from membership in the organization purely on the basis of sex. Therefore, the only issue is whether the discrimination can by reason of the circumstances present, be considered official (state or federal) action. It must also be conceded that private discrimination does not give rise to a constitutional violation. See Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972).

The Supreme Court has held that entities which are ordinarily private but which perform governmental services cannot discriminate in carrying out their functions. Such agencies are subject to constitutional prohibitions. See, for example, Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961).

I.

We proceed to consider whether the plaintiffs have established a case under the Constitution and laws of the United States including 28 U.S.C. § 1331, which implements the “arising under” clause of Article III of the Constitution and authorizes suits arising under the Constitution and laws of the United States in which the amount in controversy exceeds $10,000.

The District Court did not dismiss the cause for lack of jurisdiction. It correctly entertained the action and then dismissed it because of plaintiffs’ failure to show a substantial federal question.

In Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), a suit against agents of the FBI seeking damages for violations of the Fourth and Fifth Amendments, it was alleged that there were unconstitutional arrests, searches and seizures. The district court and the court of appeals dismissed for want of jurisdiction. However, the Supreme Court reversed these holdings, stating- that the court must assume jurisdiction in order to decide whether the allegation stated a cause of .action on which the court could grant relief as well as to determine the issues of fact arising in the controversy. According to the Supreme Court, jurisdiction is not defeated by the possibility that the complaint does not state a claim for relief. This is a question of law which must be decided by the court after the parties have advanced beyond the threshold of the court. The Supreme Court concluded in Bell v. Hood that a federal court has jurisdiction to entertain an action under 28 U.S.C. § 1331 if the complaint asserts a reasonable claim seeking recovery directly under the Constitution or laws of the United States. Under the two exceptions to this rule, a suit may be dismissed for lack of jurisdiction only where the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous. 327 U.S. at 682, 66 S.Ct. 773.

Subsequently, in Bivens v. Six Unknown Named Agents of Fed. Bur. of Narc., 403 U.S. 388, 91 S.Ct. 1999, 29 L. Ed.2d 619 (1971), the Court went much further in delineating the scope of federal court jurisdiction arising under the Constitution and laws of the United States.

The Bivens Court proceeded to carve out a damage remedy in federal civil rights actions based on violation of the Fourth Amendment. This approach is in accord with Gully v. First Nat. Bank in Meridian, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936) and Smith v. Kansas City Title & Trust Co., 255 U.S. 180 at 199-200, 41 S.Ct. 243, 65 L.Ed. 577 (1921).

The Wright edition of Barron and Holtzoff, Yol. 1 at pp. 122-23, points out that whether there is a claim presenting a federal question and whether that claim is well founded when considered on its merits are two separate and distinct questions. The author goes on to say:

However, the [federal] question must be substantial and not frivolous or a mere matter of form. A claim is not substantial if it is obviously without merit, or foreclosed by prior authoritative decisions. A proposition settled by the Supreme Court no longer presents a federal question for jurisdictional purposes. At the same time, a claim properly based on federal law raises a federal question even though all parties may agree as to the legal principles involved and disagree only as to the facts of the particular case.

It is difficult to apply jurisdictional principles to the instant case, which is somewhat of a borderline situation in which the facts are of minimal assistance. In the final analysis the plaintiffs demand an enormous amount, that is, injunctive relief against high officials of the United States, which relief would interfere with the administration of the tax laws affecting the allowance of tax exemptions. Plaintiffs make these extreme demands even though the tax benefits extended are not directly related to the discrimination complained of. Thus it comes close to a situation in which there is at least some temptation to ground the decision on lack of jurisdiction. Since, however, it is more a matter of form and procedure to dismiss the cause out of hand, we choose to accept jurisdiction and then to consider whether plaintiffs present a meritorious claim under the Constitution and laws of the United States.

The dichotomy between the jurisdictional question and the question of considering the claim on the merits is far from clear in the instant case. However, in view of the fact that the plaintiffs offered evidence to show that the various statutes were applied in an unconstitutional way, it appears to us that the cause is not one in which there is a palpable deficiency in the area of jurisdiction. Accordingly, we determine whether there is a sufficient federal claim upon which relief can be granted.

II.

The first question is whether there is a violation of 42 U.S.C. § 1983 which gives a remedy to persons whose civil rights have been invaded by officers acting under color of state law. Although plaintiffs have invoked this provision, they have not emphasized the official state action approach. Rather, the thrust of their argument is that there has been a violation of their constitutional rights because of the close relationship of the Jaycees with the United States Government. Indeed, they have not set forth either in their amended complaint or in their briefs a clear-cut theory in support of their alleged § 1983 claim. From a search of the record it would appear that the § 1983 claim is predicated on the fact that in some instances, and particularly in connection with the Rochester Jaycees, federal funds have been awarded by the United States to state agencies, which in turn have made grants to the local Jaycees chapter for use in activities sponsored by the Jaycees, such as drug abuse and minority betterment programs.

We fail to see that there is present the essential state action. It is one thing to say that the private organization has state character where it induces, encourages or promotes private persons to accomplish what it is constitutionally forbidden to accomplish. Norwood v. Harrison, 413 U.S. 455, 93 S.Ct. 2804, 37 L.Ed.2d 723 (1973). We do not have such encouragement or promotion here. The Constitution applies if the private action complained of is in essence the action of the government. Burton v. Wilmington Parking Authority, swpra. The plaintiffs would have us rule that because the Jaycees are used by the state government to dispense funds on its behalf that all their conduct automatically becomes state action subject to a § 1983 suit regardless of whether there exists discrimination by the private entity in the dispensing of the funds. In effect, then, plaintiffs say that the state must, consistent with the Constitution, refrain from dealing with discriminators regardless of whether the discrimination is related to the alleged state action. We disagree.

Our court has adopted a more restricted view of what is state action on at least two occasions. In Ward v. St. Anthony’s Hospital, 476 F.2d 671 (10th Cir. 1973), we ruled that a hospital which had received some governmental funding as a small percentage (5%) of its total construction funds was not subject to civil rights actions against its hospital board even though the operation of the hospital was extensively regulated by the state. It was stressed that the acts complained of did not thereby serve to clothe the hospital with sufficient state authority so as to constitute state action. The opinion by Judge Hill also emphasized that the facts failed to establish that the State of Colorado had any part in the alleged deprivation. It was said that the regulation by the state existed only in order to assure quality medical services. Thus, none of the evidentiary matters there presented deprived the hospital of its private status or involved the state in the alleged violations of the Federal Constitution. Cf. the Civil Rights Cases, 109 U.S. 3, 3 S.Ct. 18, 27 L.Ed. 835 (1883).

Browns v. Mitchell, 409 F.2d 593 (10th Cir. 1969) also held that unrelated and collateral discriminatory policies of private organizations do not furnish the state action necessary to a civil rights suit. The plaintiffs in Browns sought to establish that the University of Denver, a private institution, had state character and was subject to the Constitution and laws of the United States because of a substantial state tax exemption which extended to property operated for profit. In rejecting this, the lack of connection between the tax exemption and the conduct complained of was emphasized.

The membership policy against which the attack has been leveled has no connection with the state activity of the United States Jaycees. Neither the complaint nor the record establishes or promises to establish the kind of state involvement essential to a civil rights action under § 1983.

III.

There are very few cases involving federal action as distinguished from state action, but similar distinctions between acts of the government subject to constitutional limitations and private actions to which the Constitution does not apply obtain. Thus, the state action cases in which the Supreme Court has enunciated the applicable legal criteria must be considered, and generally the rule which has been adopted as to the state action (that the state itself must have some connection with the discrimination) would apply.

In Burton v. Wilmington Parking Authority, supra, the Supreme Court condemned discrimination by a restaurant-lessee of a Delaware parking garage or authority, saying that its refusal to serve a black patron constituted state action. Similarly, in Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972), a black patron, who was a guest of a member of the Moose Lodge, was refused service at the club’s dining room and bar solely because of his race. The lower court found that the lodge’s membership and guest practices were discriminatory and constituted state action. It declared the state liquor license invalid as long as the club’s practices were continued. The Supreme Court adopted a narrower view, holding first that the plaintiff-appellee lacked standing to challenge the membership practices of the Moose Lodge, although he did have standing to litigate the validity of the refusal of the lodge to serve him. The Supreme Court then held that Pennsylvania’s regulation of liquor traffic was not sufficient to implicate Pennsylvania in the discriminatory guest practices which were employed by the Moose Lodge. The Court further determined that there was no evidence in the record that the regulation of the sale of liquor was intended “overtly or covertly to encourage discrimination.” We have concluded from this decision that there must be a sufficient nexus between the discrimination and the alleged state action in order to render the activity a constitutional violation.

An even more persuasive analogy is found in Walz v. Tax Commission of City of New York, 397 U.S. 664, 90 S.Ct. 1409, 25 L.Ed.2d 697 (1970). Here a real estate owner sought to enjoin the Tax Commission from granting exemptions to religious organizations for properties used solely for religious worship. The Supreme Court held that the New York state statute exempting from real property tax an association organized exclusively for religious purposes was not unconstitutional in that it did not itself attempt to establish, sponsor or support religion. The Supreme Court said that the religious clause of the First Amendment does not require absolute abstention by the state from extending any aid to religious organizations. The state may therefore determine that entities which foster moral or mental improvement are not to be inhibited in their activities by ad valorem taxes or the hazard of loss of their properties for non-payment. By so doing, the Court reasoned, the government is not thereby sponsoring religion. It is a less direct subsidy than a cash support. Therefore, the Supreme Court reasoned, when the government grants an exemption which does not actually involve the state with the activities of the beneficiary, “there is no genuine nexus between tax exemptions and establishment of religion.”

In the case at bar the exemption granted to the United States Jaycees would be even less subject to constitutional attack than would an exemption granted to a church, for in the latter case (the Walz case) the proscriptions of the First Amendment expressly require the separation of church and state.

We do not say that the relationship between the United States and the United States Jaycees is so remote that the actions of the Jaycees could never be attributed to the government. If, for example, the Jaycees administered the government’s funds in a discriminatory manner, a remedy for constitutional violation might well obtain. In our case, however, the question is whether the United States is obligated to see to it that the United States Jaycees’ conduct shall be exemplary quite apart from its administering of programs and governmental funds. No case has been cited which extends to this length. On the contrary, the criteria announced by the Supreme Court have tended to require that the alleged unconstitutional conduct relate specifically to governmental action.

IV.

This cause presents other problems which are argued in the briefs and to which we will briefly allude. Plaintiffs are seeking injunctions against high government officials first to prevent the making of grants for the use of the deprived and needy and, second, to void the tax exempt status of the United States Jay cees for collateral reasons not set forth in the statutes creating the grants or exemptions. These demands create practical as well as legal problems. Thus, the court is reluctant to interfere with the processes of government and, in effect, to write a tax statute which declares that government officials are obligated to withhold benefits to organizations which are general sinners regardless of whether the sins are committed in the disposition of the government’s funds.

One legal obstruction is the doctrine of Dugan v. Rank, 372 U.S. 609, 83 S.Ct. 999, 10 L.Ed.2d 15 (1963); Larson v. Domestic and Foreign Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949), and Land v. Dollar, 330 U.S. 731, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947), which say that when government officials are acting in accordance with the dictates and mandates of the law they are not subject to suit, that is, the suit is, in effect, against the government and the doctrine of sovereign immunity comes into play. Such suits also conflict with the prohibition against interfering with the taxing process. See the Anti-Injunction Act, 26 U.S.C. § 7421; Enochs v. Williams Packing Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962); State Railroad Tax Cases, 92 U.S. 575 (1875). See also 28 U.S.C. § 2201, Declaratory Judgment Act.

The Larson Court recognized two exceptions to the sovereign immunity doctrine which it had applied. First, the case in which the officer is acting beyond the law and, secondly, the situation in which he is acting unconstitutionally. The Court said in Larson that neither exception applied and that the granting of relief would be tantamount to an un-consented judgment against the government.

The decision of the Supreme Court in Land v. Dollar, supra, an action against members of the Maritime Commission to recover shares of stock delivered to the Commission as a pledge to secure a loan to the plaintiff’s corporation, followed the basic doctrine later enunciated in Larson. In Land v. Dollar, supra, the Supreme Court recognized the right of the district court to entertain the suit because potentially at least it involved invalid retention of private property.

Dugan v. Rank, supra (1963) sought an injunction against reclamation officers to prevent impounding water behind a dam. Here the Court said that neither of the exceptions noted in Larson were present.

In our case there is neither an unconstitutional act on the part of the officers involved nor an action beyond the scope of the authority granted. Accordingly, no basis is shown for departing from the Larson doctrine.

Finally, then, plaintiffs make tremendous and disproportionate demands which are beyond the realm in which the court can grant relief.

For the reasons stated, the action of the District Court dismissing the cause was correct and the same is hereby approved. The judgment of the District Court is affirmed.

      . Why the defendant Jaycees would so adamantly oppose members of the feminine sex in its organization is most difficult to understand. It may well be that they fear the competition. They may indeed be concerned as to the known propensity of members of the feminine sex to devote themselves to causes such as this. We are not, however, permitted to pursue this inquiry- — our mission being to ascertain whether the action complained of is sufficiently governmental to justify the federal courts’ entertaining and taking cognizance of the claims.

      . Furthermore, we regard the District Court as having correctly decided that plaintiffs’ constitutional challenge to several federal statutes is too insubstantial to require convocation of a three-judge district court under 28 U.S.C. § 2282.