author: GEE, Circuit Judge:

text:
    Dennis V. VOHS, Plaintiff-Appellant, v. Ronald W. DICKSON, Defendant-Appellee. Elizabeth N. WHITAKER, II, Plaintiff-Appellant, v. Ronald W. DICKSON, Defendant-Appellee.
    No. 73-1498.
    United States Court of Appeals, Fifth Circuit.
    June 7, 1974.
    See also, D.C., 321 F.Supp. 814.

      Fred L. Somers, Jr., Atlanta, Ga., for plaintiffs-appellants.
    Richard R. Cheatham, Atlanta, Ga., for defendant-appellee.
    Before GODBOLD, DYER and GEE, Circuit Judges.
   GEE, Circuit Judge:

Appellants Vohs and Whitaker brought suit in the United States District Court in the Northern District of Georgia, complaining that appellee Dickson violated both state and federal securities laws in his sale of stock to them. In a well-reasoned opinion, the district court found that the plaintiffs were entitled to no relief. We agree and affirm.

The case was tried upon the following stipulation of facts, from which we have edited only the few portions irrelevant to this appeal:

“1.
“Management Science America, Inc. (‘MSA’) is a Georgia corporation which was at all times relevant, engaged directly and through various subsidiaries in computer and data processing systems design on a consulting basis, in the design and marketing. of computer software packages and in the operation of computer and data processing centers in twelve (12) states, the District of Columbia and in England. The principal offices and executive offices of MSA are located in Atlanta, Georgia. During the period from November, 1968 through May, 1969, MSA employed in the range of 300 to 700 people in various aspects of its operations.
***** *
“MSA did not file a registration statement with the Securities and Exchange Commission either registering itself as a company or its securities, nor was a registration statement filed with the Commissioner of Securities for the State of Georgia by MSA. Certain exemption applications were filed on behalf of MSA for exemption from registration pursuant to the Georgia Securities Act of 1957, as amended, with the Georgia Commissioner of Securities.
“2.
“Defendant, Ronald W. Dickson, is a 1955 Phi Beta Kappa, magna cum laude graduate of Duke University (B.A. in Economics), and on August 1, 1966 was employed as the 15th employee by MSA. MSA was a pretty close knit group and most everybody knew everybody else. Dickson was interviewed for the job with MSA by Tom Newberry, then President of MSA and Jean Mori, another MSA officer. Dickson was hired as a data processing consultant in Charlotte, North Carolina, which involved the programming of computers and systems analysis work. Dickson was given the title of associate in 1966. This involved no increase in his responsibilities or authority. The sequence of titles in MSA was Associate, Senior Associate and then Vice President or some other officer. Dickson continued to live and work in the Charlotte, North Carolina area until he was terminated by MSA in October, 1969. During his employment by MSA,- Dickson did not attend meetings of the officers or Board of Directors of MSA or periodic planning or other meetings of account managers (except for a single monthly meeting occurring in the Fall of 1968 at which bills were prepared) and served on none of MSA’s management committees. Dickson attended the annual meeting of MSA stockholders in April, 1969.
“During his tenure with MSA, Dickson reported to several different persons including the following: Matt Maddin, Vice President in charge of Midwest Operations, John Locklear in charge of the Charlotte, North Carolina office; Ronald J. LaChance, Secretary-Treasurer and Fred Pattison, Senior Associate in charge of Banking Software Packaging.
“One of Dickson’s responsibilities encompassed project management of the development of a financial information and control system. Dickson reported to Fred Pattison in this project. The plaintiff, Vohs, reported directly to the defendant, Dickson, and the plaintiff Whitaker, reported to the defendant, Vohs.
“3.
“Plaintiff Elizabeth N. Whitaker is a graduate of Duke University. Upon her graduation she was employed for five years by the Wachovia Bank in Winston-Salem, North Carolina where she was assistant to the budget director, the administrator of employee benefits, and where she also worked on a management information system. From November, 1967 until February, 1969, Miss Whitaker was employed as a cost accountant by the First National Bank in Atlanta. In February, 1969, on the recommendation of the defendant Dickson, (who had first met Miss Whitaker when they were both working at Wachovia), Miss Whitaker was employed by MSA as a project engineer to design a financial information and control system. In this capacity, Miss Whitaker’s immediate superior was Dennis Vohs, the other plaintiff in these actions.
“4.
“Miss Whitaker’s brother, John Whitaker, is a graduate of the Harvard Business School and was and is the president of Strategy, Inc., a corporation which operates both as a securities broker and as a hedge fund in purchasing and selling new issues and unregistered stock in small but growing companies, of which MSA was one, for its own account and in the case of MSA stock for certain persons who purchased the MSA stock from Strategy, Inc. Including her equity interest in Strategy, Inc., Miss Whitaker had approximately $200,000 in personal stockholdings during the period involved in this action.
“5.
“Plaintiff, Dennis Vohs, is a graduate of Georgia Institute of Technology and worked for IBM as a Systems Engineer during the two years preceding his employment in September, 1968, by MSA. Vohs was initially employed by MSA in Atlanta in September, 1968 as a Data Processing Specialist, and in February, 1969, was promoted to the position of Data Processing Consultant. During April and May, 1969, Vohs was the project leader of a group involved in the development of a data processing program for the Trust Company of Georgia, reporting to the defendant, Dickson, who was the Project Manager.
“6.
“In November of 1967, prior to Miss Whitaker’s and Mr. Vohs’ employment by MSA, MSA granted options to its employees to purchase a-limited number of shares of its $1.00 common stock at $56.00 per share. Dickson was given an option to purchase 30 shares and did so on December 8, 1967. In connection with this purchase, Dickson executed an investment letter and an affidavit stating his intention to purchase such shares for investment and hold them for a period of at least 12 months. Dickson also executed a stockholders’ agreement giving MSA the right to purchase the shares should Dickson leáve its employ.
“7.
“On or about February 20, 1968, the defendant Dickson purchased 500 shares at a purchase price of $2.50 per share.
“8.
“Subsequently, the common stock of MSA was split 100 for 1 and 3,000 shares of $0.01 per value common stock were issued to Dickson in exchange for the 30 shares originally purchased by him. On June 29, 1968, the stockholders of MSA authorized certain officers and key personnel to purchase for cash, up to 2,200 shares at $5.00 per share between July 15, 1968 and August 1, 1968. On August 1, 1968, Dickson was allowed to purchase an additional 500 shares of the new one-cent par value stock at a price of $5.00 per share pursuant to Stock Option Plan adopted in 1965 for MSA employees. Dickson also executed an investment letter and affidavit in connection with this purchase.
“9.
“On September 27, 1968, MSA applied for and received from Ben W. Fortson, Jr., Secretary of State, an exemption under § 6(j) of the Georgia Securities Act covering its prior sales of stock to certain named employees, including the 30 shares sold to Dickson on December 8, 1967, but not including the 500 shares purchased by Dickson on February 20, 1968, nor the 500 shares purchased by Dickson on August 1, 1968.
“10.
“On September 30, 1968, MSA sold 140,000 shares of its common stock in an unregistered private placement at $12.00 per share through The Robinson-Humphrey Company, Inc., as agent. This private placement was part of a proposed stock offering first announced to all MSA stockholders on July 24, 1968 by Thomas L. Newberry, then President of MSA. The proposed financing consisted of the private placement and a $5,000,000 public offering of MSA stock in January or February, 1969. Some of the MSA stock to be publicly offered would be reserved for employees of MSA.
“11.
“In December of 1968, in a memorandum circulated from LaChance, MSA announced to its employees that it was still MSA’s intention to have a public offering of MSA common stock during early 1969. Most likely the offering will take place in April or May, 1969.
“12.
“At some time late in 1968 or early 1969, prior to her employment by MSA, Miss Whitaker had been told by Mr. Dickson that he thought that MSA stock was a good buy. Mr. Dickson did not then offer to sell Miss Whitaker any stock or suggest that she might be able to buy some, but said that he would recommend that her name be placed on a list of potential stockholders maintained by Ron LaChance, the Secretary-Treasurer of MSA, who would be given preference in the proposed public offering of MSA stock. At the time of her employment by MSA, Miss Whitaker asked whether she would be given the opportunity to purchase stock in MSA and was told that options were given to key employees.
“13.
“During the period from September, 1968, through May of 1969, there was a considerable amount of discussion on the price of the stock when it went public. According to Mr. Vohs, ‘Everybody thought the company was going to be successful, rumor-wise, and that was, you know, the type of information, the conjectures as to what the price of the stock would be when it went public and things of that nature.’ Miss Whitaker described the level of the conversation among the MSA employees about the anticipated public offering as ‘medium conversation,’ but testified that she does not recall any discussion about the possible price at which the stock might be sold to the public.
“14.
“On December 18, 1968, Dennis Vohs was granted an option to purchase 100 shares of MSA common stock at $21.00 per share which was recited in the option agreement as being ‘the fair market value per share of the stock on the date the option was granted.’ This option could not be exercised for 2 years. On March 8, 1969, Vohs was granted a second option to purchase an additional 300 shares at $25.00 per share, the recited fair market value on that date. Like the first, this option could not be exercised by Vohs for a two-year period. MSA did not grant Miss Whitaker any options to purchase its stock.
“15.
“During March and April of 1969, Miss Whitaker discussed her desire to purchase MSA stock with Dennis Vohs and with Fred Pattison who was the superior to Mr. Dickson, Miss Whitaker and Mr. Vohs reported. Mr. Pattison was optimistic about the future prospects of the company and told Miss Whitaker that if he could not get stock from the company through options, he was interested in purchasing some from another source. Miss Whitaker, informed by Vohs that Vohs had talked with La-Chance about MSA stock, agreed with Vohs and Pattison to undertake a joint effort to find someone who would be willing to sell MSA stock to herself, Vohs and Pattison. In March of 1969, Miss Whitaker learned from LaChance that a public offering of MSA stock would not be made in the Spring of 1969. LaChance told Miss Whitaker that part of the reason why MSA would not go public in the Spring of 1969 was confidential, but that part of it had to do with the fact that MSA had not met Robinson-Humphrey’s guidelines.
“16.
“Miss Whitaker then initiated discussions with Mr. Dickson regarding the purchase of MSA stock and asked Mr. Dickson to help her find someone who would sell her MSA stock.
“17.
“Mr. Dickson (who then owned 4,000 shares or approximately 0.2% of MSA’s 1,645,000 outstanding shares) was not interested in selling his own stock in MSA and did not solicit any sales. At Miss Whitaker’s request, he called several fellow employees and asked them if they wanted to sell their stock in MSA. Dickson called Jim Standard in New Jersey, Paul Friedman in California, and Reid Henson and Richard Ward in Atlanta. All declined to sell and expressed the belief that the stock was going up considerably in value and that it would be unwise to sell at that time. Dickson reported to Miss Whitaker his inability to locate anyone who would be willing to sell the stock.
“18.
“In late March, 1969, Miss Whitaker called Ronald J. LaChance and asked whether he knew of anyone who would sell her stock in MSA. Mr. LaChance indicated that he would get back in touch with Miss Whitaker and did so around April 10, 1969, but Mr. La-Chance did not know of anyone at that time who wished to sell MSA stock.
“19.
“Ronald J. LaChance was at all times relevant the Secretary-Treasurer of MSA. In his capacity as secretary Mr. LaChance was the transfer agent of MSA stock, and records of ownership of shares in MSA were maintained under his supervision. Prior to April, 1969, Mr. Dickson had worked with Mr. La-Chance on one or more computer application projects for clients of MSA including in excess of 10 trips to Elkin, North Carolina beginning in the spring • of 1969, but they did not visit in each other’s homes.
“20.
“Early in April, Miss Whitaker asked Dickson about the financial status of the company and as to whether purchasers of MSA stock were required to sign an investment letter. Mr. Dickson stated that he did not know the answers to her questions and recommended that she talk to the Secretary-Treasurer of the company, Mr. LaChance, and to the Vice President of Finance, Mr. Hudson. According to Miss Whitaker:
Well, Mr. Dickson, being in Charlotte, said he did not know the financial status of the company and for me to get that type of information from Mr. LaChance.
“Dickson took Miss Whitaker over to Mr. LaChanee’s office and introduced her to LaChance, to whom she had previously spoken on the telephone but whom she had not previously met. After introducing Miss Whitaker to Mr. LaChance, Dickson then left. At this initial meeting, Miss Whitaker again asked LaChance if he knew anyone who would sell MSA stock to her. LaChance replied that he did not.
“21.
“During the first conference with LaChance, Miss Whitaker asked for, but was refused a copy of the 1968 MSA Annual Report on the ground that the information was confidential. Following the first conference with LaChance, Miss Whitaker asked Dickson to give her a copy of the 1968 MSA Annual Report which Dickson testified was the only financial information regarding MSA which Dickson had. Following the first meeting with LaChance, Dickson gave Miss Whitaker a copy of the 1968 Annual Report which she had requested. Neither Dickson nor LaChance ever explained to Miss Whitaker the 1968 Annual Report of MSA nor did Miss Whitaker ask that either of them do so. Miss Whitaker states that the footnotes to her were very vague as to the true status of the company. Miss Whitaker, in turn, mailed a copy of the report to her brother, John Whitaker. At Miss Whitaker’s request, Mr. Dickson also provided Miss Whitaker with a copy of an opinion letter dated April 8, 1969, which Mr. Dickson had received from . an attorney . . . regarding Dickson’s right to sell his shares in MSA without registration and to have the shares transferred on the books of the company.
“22.
“At least a week following the first meeting between Miss Whitaker and LaChance, but still in April, Miss Whitaker and Mr. Vohs went to LaChance’s office for a second time and asked for financial information about MSA. Mr. Dickson was not present at this meeting. A large portion of the conversation related to the transfer of the stock and their- ability to buy it.
“23.
“On several occasions during April and early May, 1969, Miss Whitaker sought the advice of her brother, John Whitaker, whom she believed to be experienced and knowledgeable in the securities field. Miss Whitaker discussed MSA’s 1968 Annual Report with her brother on at least one occasion, particularly the revenue figures and certain footnotes to the financial statements which she did not understand.
“24.
“In the initial stage of her discussions with Mr. Dickson, Miss Whitaker did not advise Dickson that Vohs and Patti-son were also interested in purchasing MSA stock. Between April 22 and April 29, 1969, following her second meeting with Mr. LaChance (which Mr. Vohs also attended), Miss Whitaker discussed a possible sale of MSA stock by Dickson on several occasions and Miss Whitaker gave Mr. Dickson a copy of an opinion letter she had obtained (at Mr. La-Chance’s suggestion), from her family’s lawyer, . . . dated April 21, 1969, regarding the legality of a purchase of MSA stock by Miss Whitaker. Dickson stated that [this] letter was used by him as the ‘final thing that influenced [his] decision about the correctness and legality of this sale.’ But Dickson was still reluctant to sell any of his MSA stock and initially offered to sell Miss Whitaker only 1,000 shares at $30.00 per share. At this point, Miss Whitaker disclosed that Mr. Vohs was also interested in purchasing a portion of Mr. Dickson’s shares and asked Mr. Dickson if he was willing to sell any more. Dickson was reluctant to sell and did not reply immediately, but after thinking about it, finally agreed to sell Miss Whitaker 3,000 shares of his MSA stock at $30.00 per share.
“It was tentatively agreed between Miss Whitaker, Mr. Vohs and Mr. Patti-son that Miss Whitaker would take 1,500 shares, Mr. Pattison 1,000 and Mr. Vohs 500. Vohs and Pattison also indicated that if Miss Whitaker could get more stock at $30.00 per share, they would purchase it. At this point, Miss Whitaker had still made all the arrangements and had had all the dealings with Mr. Dickson, who had not discussed the sale with either Mr. Vohs or Mr. Patti-son. Dickson first learned of Vohs’ interest about April 20-24, 1969 when Miss Whitaker asked Mr. Dickson if he had any objections to Mr. Vohs’ taking 500 shares of the 3,000 shares of MSA stock which she had agreed to purchase from Dickson and Dickson stated that he did not.
“25.
“Dickson presented his Certificate No. 229 for 3,000 shares of MSA stock to Ron LaChance for reissue into smaller denominations on May 1, 1969. Shortly after reaching an agreement with Miss Whitaker, Mr. Dickson obtained from Mr. LaChance, specimen contracts and several weeks later forwarded them on May 5, 1969 to Miss Whitaker who in turn mailed them to her family’s lawyer. [The lawyer] prepared new contracts and forwarded them to Miss Whitaker.
“26.
“The first contact between Mr. Vohs and Mr. Dickson regarding MSA stock occurred in early May when Dickson called Vohs to arrange a closing date. Since Mr. Vohs, Mr. Dickson and Miss Whitaker were scheduled to work together in Charlotte the next week, it was agreed that the sale would be closed at Mr. Dickson’s office in Charlotte on May 7, 1969.
“27.
“On May 5, 1969, John Whitaker met with Ronald LaChance at the office of the latter in Atlanta, and orally agreed to purchase 2,500 shares of MSA stock from Mr. LaChance on behalf of Strategy, Inc. at $33.33 per share. This was the first contact between Mr. LaChance and Mr. Whitaker at which MSA was discussed. Following this meeting, Miss Whitaker again discussed MSA with her brother.
“28.
“On May 7, 1969, Mr. Dickson, Mr. Vohs and Miss Whitaker met at Mr. Dickson's office in Charlotte, North Carolina to close the transaction. Miss Whitaker brought the documents which had been prepared by her brother’s lawyer [the ‘family’ lawyer]. These contracts were executed without modification by Miss Whitaker, Mr. Vohs and Mr. Dickson, and Mr. Dickson delivered the certificates and copies of the MSA Annual Report to the purchasers but a copy of the By-Laws was not furnished at this time by Dickson although called for in the contract. Mr. Dickson did not apply to the Georgia Commissioner of Securities for any exemption of the sale to Miss Whitaker and Mr. Vohs from registration.....
“29.
“At the time of the closing, there was a conversation between Mr. Dickson, Miss Whitaker and Mr. Vohs as to whether Mr. Dickson might be able to locate someone who would be willing to sell Miss Whitaker and Mr. Vohs an additional 1,500 shares of MSA stock. Several weeks later, Miss Whitaker prepared a statement requested by Dickson agreeing to purchase an additional 1,000 shares of MSA stock through Mr. Dickson at a price of $33.33 per share before May 31, 1969 and forwarded the same to Mr. Dickson. Mr. Vohs prepared a similar statement requested by Dickson agreeing to purchase 500 shares of MSA stock at $33.33 per share prior to May 31, 1969 as requested by Mr. Dickson.
“30.
“Mr. Vohs and Miss Whitaker subsequently found, through Fred Pattison, that they could purchase MSA stock from Robert Jones at $25.00 per share. After talking to Mr. Jones, Miss Whitaker and Mr. Vohs agreed to purchase the additional 1,500 shares from him at $25.00 per share. Vohs thereafter refused to purchase the shares through Mr. Dickson.
“31.
“At Miss Whitaker’s request, however, Mr. Dickson arranged for the purchase of 500 shares of MSA stock by Miss Whitaker’s mother from another MSA employee, Bill Booth, at $33.33 per share, and this transaction was completed in a meeting between Miss Whitaker and Mr. Booth in June, 1969, with Dickson being the contact man.
******
“33.
“At no time during the negotiations which led to the sale of MSA stock on May 7, 1969, did Mr. Dickson directly make any untrue, false or misleading statement to Miss Whitaker or Mr. Vohs in connection with the sale of MSA stock which is the subject of this litigation, nor did anyone else do so with his knowledge. Mr. Dickson testified, in essence, that he did not withhold or omit any relevant information regarding MSA or its securities which was known to him at the time of the sale of the securities to the plaintiffs. Miss Whitaker and Mr. Vohs testified that they did not know whether this was true or not.
“34.
“In December, 1969, Dickson sold 1,000 shares of MSA common stock to a Douglas Jackson, then residing in Charlotte, North Carolina, ”to clear out his holdings in MSA since ‘the stock was going down considerably and it was appropriate to take a loss.’ Following the sale to Jackson, Dickson owned no other stock of MSA, the sale to Jackson having comprised the last 1,000 shares of the MSA stock owned by Dickson. Dickson did not apply to the Georgia Commissioner of Securities for any exemption from registration of the sale to Mr. Jackson.
“35.
“The parties have not stipulated any facts relating to the authority or knowledge of Mr. LaChance or of any statements which he may or may not have made to Miss Whitaker or Mr. Vohs, since there is or may be material disagreement among the parties as to some or all of these issues. These issues need not be reached if the Court holds that LaChance was not Dickson’s agent in connection with the matters involved in this litigation. If, however, the Court holds that LaChance was Dickson’s agent in connection with LaChance’s meetings with Miss Whitaker and Mr. Vohs (or concludes that - testimony is necessary in order for the court to determine the agency issue), the issues of fact relating to such meetings will have to be tried separately by the Court.
“36.
“The defendant stipulates that the means or instrumentalities of interstate commerce were used in connection with the subject matter of these complaints and does not insist upon his defenses based upon the absence of any use of interstate commerce or the mails.”

Since our evaluation of the legal issues is substantially in harmony with that of the district judge, we have drawn extensively from his opinion in composing ours which follows.

I.

DEFENDANT’S SALE DID NOT VIOLATE GEORGIA SECURITIES LAW.

Appellants assert that Dickson violated the Georgia 2“Blue Sky Law” in effect at the time of the transaction, Ga. Code Ann. § 97-101 et seq.

The MSA stock involved in the sale was not registered. Sales of unregistered securities are generally unlawful under § 97-104 of the Georgia Code. Sales in violation of the state securities act are voidable at the election of the purchaser under § 97-114. Not all sales of unregistered securities, however, actually violate Georgia’s law. Specifically, Dickson seeks shelter under § 97-107(c) of the Georgia Code, which provides an exemption for “An isolated transaction in which any securities are sold by or for the account of the owner of such securities ... if such transaction is not one of repeated and successive transactions of a like character, and if such owner or his representative is not the issuer or underwriter of such securities.” Dickson did own the stock he sold to Miss Whitaker and Mr. Vohs. Thus whether or not his sale qualifies for the Georgia “isolated transaction” exemption depends on whether it was “one of repeated and successive transactions of a like character” and whether Dickson was an “issuer” or “underwriter” of the stock. These are all terms of art for whose construction we turn to Georgia law.

A. The sale was not “one of repeated and successive transactions of like character.”

After the judgment below, the Georgia Court of Appeals handed down a decision in the related case of Arnold v. Mixon, 127 Ga.App. 549, 194 S.E.2d 307 (1972), which has clarified the state’s construction of the isolated-transaction exemption. That opinion jibes with, and indeed cites as authority, the district court’s handling of the issue in our case. The facts of the two controversies are significantly similar. The Arnold case involved a sale of 1,500 MSA shares by Mixon to two fellow MSA employees, Arnold and Sharp. This sale had been negotiated with Mixon by Sharp, who then let his friend Arnold in on the deal. On April 25, 1969, Mixon transferred 1,000 MSA shares to Sharp. The closing with Arnold for the other 500 shares was delayed pending Arnold’s arranging financing and occurred on May 6, 1969. Mixon’s only other sale of MSA stock was 1,300 shares to Strategy, Inc. (John Whitaker’s company), approximately two months following the Sharp-Arnold sale.

The Georgia Court of Appeals held:

The evidence shows conclusively that the separate transfer by sale by Mixon of 1,000 shares of MSA stock to Sharp on April 15, 1969 and of 500 of MSA stock to Arnold on May 26, 1969, were but results of one transaction in which a sale resulted to two people, the delay in the consummation .of the sale to Arnold being occasioned by Arnold’s delay in making financial arrangements to consummate the sale. While there were successive sales, there were no successive transactions. [Citing the district court decision in the instant case.] (emphasis added)

194 S.E.2d at 308-309.

The court went on to hold that the sale by Mixon to Strategy, Inc., which fell within a separate exemption for sales to businesses engaged principally in buying securities, could not be said to be a successive transaction of a like character with the Arnold-Sharp sale.

Applying this analysis to the instant case, it is clear that Dickson’s sale to Whitaker and Vohs must be viewed as a single transaction. As in Arnold v. Mixon, Dickson’s sale was negotiated entirely by one of the purchasers, Miss Whitaker, with Vohs’ interest being disclosed only after an agreement by Dickson to sell MSA stock to Miss Whitaker had been reached. While there were two purchasers, there was but a single negotiation and, unlike the transaction in Arnold v. Mixon, a single closing.

Appellants would have us view Dickson’s efforts, before and after the sale, to help them contact other persons who might sell them MSA stock as repeated and successive transactions of like character with his May 7, 1969, sale to them. Whether or not Dickson’s solicitations in aid of Miss Whitaker’s desire to purchase stock from others could be treated as “transactions,” we do not consider the conduct to be of “like character” with his own sale to plaintiffs. As found by the trial court, his efforts to aid appellants in locating stock and his own sale of stock were not successive acts in a single plan of stock distribution. The same must be said of Dickson’s arrangement, at Miss Whitaker’s request, for purchase of 500 shares of MSA stock by her mother from another MSA employee. All such conduct looks much more like a well-meant response to her persistent entreaties for help in finding available stock than any distributive plan on his part.

Dickson’s only other sale of MSA stock was that of his remaining 1,000 shares to one Douglas Jackson approximately eight months after his sale to Whitaker and Vohs. We find this sale to be detached from the sale to plaintiffs. It not only occurred after a significant lapse of time but appears to have been motivated by entirely different factors — primarily a declining market value for the shares — from his sale to appellants.

B. Dickson was not an “issuer” of the stock.

Georgia Code § 97-102(j) provides: “ ‘Issuer’ shall mean any person issuing any securities sold or offered for sale to any person in this State.” Giving the words in this definition the usual significance attached to them in the trade, as Georgia Code § 102-102 requires, it seems that the issuer of the MSA shares purchased by appellants was not Dickson but MSA, which put the shares into circulation initially.

Appellants have argued that Georgia’s definition of issuer is a meaningless tautology and press the court to apply the definition appearing in 15 U. S.C. § 77b(11). This definition is statutory and peculiar to the federal securities law and regulatory plan. We see no occasion or warrant for reading it into the Georgia Code. Moreover, even if the 15 U.S.C. § 77b(ll) definition of issuer were accepted by the court, we do not think Dickson would be an issuer. There is absolutely no indication that he was controlled by MSA regarding his stock sales or otherwise acting in- concert with the company in respect to its securities.

C. Dickson was not an “underwriter” of the MSA shares.

“Underwriter” was not defined by statute in Georgia prior to the comprehensive 1973 revision nor have Georgia courts construed the term. The Georgia Securities Act of 1973 defines underwriter along essentially federal lines (aside from an exception for securities held one year or more). This new definition must be viewed in the context of a code no longer employing an isolated transaction exemption. The old Act, which controls our case, was not in need of an expansive definition of underwriter to cover entirely an area which was already partially covered by other language in the isolated-transaction provision. Moreover, when the Georgia legislature enacted the forerunner of this provision in 1920, it is inconceivable that it could have intended to incorporate the novel definition of underwriter contained in the federal Securities Act of 1933. The fact that a definition is newly included in a revision modelled after the federal Act is persuasive that the usual, more limited, meaning of underwriter is applicable to the old Georgia Act.

The term “underwriter” reasonably refers to those investment institutions only which as a business assume the market risk of public stock offerings, most typically by purchasing all or a portion of an issuer’s issue of stock at a fixed price and then reselling it to the public. This construction is consistent with the requirement of Georgia Code § 102-102 that words be given their usual significance in the trade, and by it Dickson was not an underwriter.

Even were we to yield to plaintiffs’ entreaties to read the federal definition of underwriter into the Georgia Act, it would be of no avail to them. Under 15 U.S.C. § 77b(ll), “The term ‘underwriter’ means any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security. . ” The word “distribution” as used in this definition is considered to be synonymous with “public offering.” 1 Loss, Securities Regulation 551 (1961). Since Dickson sold for his own account, not for the issuer, he was an underwriter only if he purchased “with a view to” a public offering of MSA stock.

Whether or not Dickson purchased with a view to a public offering is a question of fact which the district court answered in the negative after considering all of the circumstances. Of course, there are some guidelines which assisted the court making its finding. See SEC Releases Nos. 33-4552 (November 6, 1962) and 5523 (January 11, 1972). The longer the period of retention by the owner before his sale, the more persuasive would be the argument that the resale is not at variance with an original non-distributive intent. An “investment letter,” whereby the owner records his own assertion of what was in his mind when he took the securities, may be probative. An unforeseen change of circumstances since the date of purchase may be evidence that a distribution was not originally contemplated. The nature of the purchaser’s past investment and trading practices and the character and scope of his business may be ineonsist-ent with his buying securities for resale to the public.

Dickson was not in the securities business. When he purchased his MSA stock he was an MSA employee. It was only natural that he should want to buy stock in the company he worked for and hold it for investment. At the time he purchased the bulk of his stock (later split into 3,000 shares), ownership of MSA stock was tied to employment, and Dickson was required to offer the stock back to the company if he left its employ. His 1,000 additional shares of stock were acquired in smaller amounts through MSA’s employee stock purchase program. If we assume that all of the stock sold to the plaintiffs was the original stock purchased by Dickson on December 8, 1967 (which appears to be the case), he held the stock for nearly one and a half years before selling to the plaintiffs on May 7, 1969. Moreover, upon purchasing shares ultimately comprising 3,500 of his total 4,000 shares, he executed letters declaring his intention to purchase solely for purposes of investment rather than distribution. Whatever the worth of such declarations standing alone, they are supported by the facts surrounding these purchases and sales. Dickson’s sale of stock to Whitaker and Vohs was not solicited by him. Miss Whitaker, a fellow employee, approached Dickson about a possible sale and at first he refused. Only later did he change his mind and decide to sell 3,000 shares, retaining 1,000.

These and other circumstances amply support the lower court’s finding that the defendant took the stock with an intent only to invest in the company for which he worked, but later changed his mind after repeated urgings by Miss Whitaker to enter into a sale that would result in a large profit for him. So understood, his view was not to a public offering.

D. Dickson’s sale to plaintiffs were not voidable as violative of Georgia’s securities law.

Plaintiffs submit one final argument for rescission pursuant to the Georgia Securities Act. They allege that the MSA stock which they purchased from defendant had been issued to defendant by MSA in a manner not conforming to Georgia’s registration requirements. This unlawful issue, - they maintain, “tainted” the stock and gave defendant a right of rescission which they, as assignees of the stock, now possess. We cannot accept this argument. Georgia Code § 97-114, effective at the time, provides that the purchaser of stock at an unlawful sale may void the sale if he chooses. Assuming MSA’s stock issue to defendant was unlawful, he did not choose to rescind the transaction. There was absolutely no evidence that he had knowledge, either actual or constructive, that the securities were sold to him in an unlawful manner. He could by no stretch of the imagination be deemed MSA’s agent in passing the stock on to plaintiffs. He chose to keep it, trusting that it was lawfully issued, until Miss Whitaker persuaded him to sell. In his hands it was “untainted” stock, and his purchasers had no ground to complain under Georgia law because of any irregularities that might have accompanied its issue.

II.

DEFENDANT’S SALE DID NOT VIOLATE FEDERAL SECURITIES LAW.

Plaintiffs contend that defendant violated the anti-fraud provisions of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder when he sold MSA stock to them. These provisions make it unlawful for any person to fail to disclose a material fact or to misrepresent a material fact in connection with a sale of securities. Plaintiffs do not contend Dickson actually misrepresented any facts concerning MSA or MSA stock. They do make some assertions that he failed to disclose material facts which he actually knew. But they most seriously maintain that he failed to disclose material facts which in the exercise of due care he could have known. Specifically, the “facts” which plaintiffs contend were undisclosed are: (a) cancellation of the proposed public offering of MSA stock, (b) various financial data concerning MSA, and (c) the terms under which they were required to take and hold the securities.

In essence, Dickson responds that he did not know anything not known to plaintiffs, that he was in no position, and had no obligation, to know any more, and that plaintiffs did not reasonably rely on him in making their decision to purchase.

These defenses Dickson casts in terms of the standards set out in City National Bank v. Vanderboom, 422 F.2d 221 (8th Cir. 1970), and incorporated by, this court in Clement A. Evans & Company v. McAlpine, 434 F.2d 100 (5th Cir. 1970):

We think this two-step test breaks down as follows: (1) . . . With regard to nondisclosures, the issue becomes whether a reasonable investor, in light of the facts existing at the time of the nondisclosure and in the exercise of due care, would have been entitled to receive full disclosure from the party charged and would have acted differently had the alleged nondisclosure not occurred. (2) If the plaintiff satisfies this ‘in connection with’ step, it then becomes necessary to determine whether the defendant’s misrepresentation or nondisclosure was made with scienter or from a lack of due diligence.

434 F.2d at 103.

In other words, if we conclude that a material fact was not disclosed, the critical issues are those of the reliance of the plaintiffs and the scienter of the defendant. But these are terms of art which we hesitate to use without noting their peculiar meanings in the context of a securities fraud case.

In Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), the Supreme Court stated that “. . . positive proof of reliance is not a prerequisite to recovery.” However, as we explained in Simon v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880 (5th Cir. 1973), this language must be confined to making proof of specific reliance on particular omissions unnecessary when the circumstances indicate that the plaintiff placed some general reliance upon the defendant’s disclosing material information.

Concerning the requirement of scienter, we have very recently stated in Smallwood v. Pearl Brewing Company, 489 F.2d 579 (5th Cir. 1974), and again in Sargent v. Genesco, Inc., 492 F.2d 750 (5th Cir. 1974), that some culpability beyond mere negligence is required for liability under 10b-5. We approve the explanation of this concept furnished by the Second Circuit in Cohen v. Franchard Corporation, 478 F.2d 115 (2d Cir. 1973):

We uniformly have held that a party cannot be held liable in a private suit for damages under Rule 10b-5 for mere negligent conduct. . Although it is unnecessary to prove the specific fraudulent intent essential to a claim of common law fraud, it must be established that the defendant was to some extent cognizant of the misstatement or omission. The standard for determining liability under Rule 10b-5 essentially is whether plaintiff has established that defendant either knew the material facts that were misstated or omitted and should have realized their significance, or failed or refused to ascertain and disclose such facts when they were readily available to him and he had reasonable grounds to believe that they existed. ... It is not enough for plaintiff to show that defendant failed to detect certain material facts when he had no reason to suspect their existence.

478 F.2d at 123.

Applying the preceding expressions of law to the facts can prove quite difficult in a close case. But, upon scrutinizing each of the “facts” which plaintiffs contend were undisclosed, we find that this is not such a case.

A. The cancellation of the proposed public offering of MSA stock.

A material fact is one which would cause a reasonable investor to have acted differently in respect to a securities transaction. Securities and Exchange Commission v. Texas Gulf Sulphur Company, 401 F.2d 833 (2d Cir. 1968). Oftentimes, cancellation of a proposed public issue might be material. In this case, however, plaintiff Whitaker knew months before she bought the MSA stock from defendant that the proposed public issue set for the spring of 1969 had been cancelled. Moreover, there is evidence that a public offering for fall of 1969 was still being considered by MSA and its underwriter at the time of defendant’s sale. No evidence was presented that defendant, or anyone else for that matter, was in a position to suspect otherwise at that time. In this posture, no “fact” of cancellation existed which could have been disclosed by Dickson.

B. Various financial data concerning MSA.

Plaintiffs contend that defendant knew, or had access to, information which revealed MSA’s unfavorable financial situation and which he was obligated to disclose and/or interpret for them prior to sale. Such information they allege, could have come from any of three sources: (1) his position as a “key” employee, (2) his relationship with Ronald LaChance, the secretary/treasurer, or (3) his access, as a shareholder, to MSA’s books and records. We agree with the district court that none of these circumstances provided Dickson with material information which he should have known and disclosed to plaintiffs.

Whitaker and Vohs failed to show that Dickson’s position with MSA, relative to their own, was such that he should have discovered facts which they were not in an equal position to discover or that he was cognizant of any omissions. True, he was Mr. Vohs’ superior, just as Mr. Vohs was Miss Whitaker’s superior. But this fact alone does not indicate that he had greater access to material information. Whether or not Dickson is labeled a “manager,” as the trial judge was unwilling to do, the plaintiffs offered no evidence that his position slightly higher on the corporate ladder made “inside” information available to him. There is no indication that his designation as a “key” employee for purposes of allowing him to purchase limited amounts of company stock carried any access to special information with the title. We note that plaintiffs attached no significance to the fact that Mr. Fred Pattison, their co-venturer in attempting to locate any available MSA stock, was Dickson’s superior or to the fact that Vohs was granted options to purchase company stock. In this light, it seems that Dickson had access to no more financial information, through his employment position, than did the coventurers.

LaChance, as secretary/treasurer of the corporation, was the person most likely to be familiar with its financial condition. Plaintiffs advance two theories charging Dickson with LaChanee’s knowledge. The first we may term “liability by association”: that, since Dickson worked closely with LaChance on certain computer projects, this circumstance gives rise to the inference that Dickson had access to material inside information. The district court rejected this inference, and we are presented no facts which compel a finding to the contrary. Something more substantial than a working relationship with an “insider” is required to make another an “insider” under 10b-5.

Second, plaintiffs allege that LaChance in his conversations with them misrepresented and failed to disclose material facts. They contend that, in doing so, LaChance was acting as defendant’s agent. We find more than ample justification for the district court’s refusal to hold that such an agency existed. To have found otherwise, it would have had to hold that defendant’s suggestion that Miss Whitaker talk to the officers of MSA most directly involved in the financial aspects of the business to obtain information that he did not possess was sufficient to make their actions his. Much more than this seemingly well-meant referral is necessary to create an agency relationship and consequent vicarious responsibility.

Plaintiffs, too, were charged with a duty of reasonable investigation. Clement A. Evans & Company v. McAlpine, 434 F.2d 100 (5th Cir. 1970). This obligation they appear to have satisfied. They repeatedly met with La-Chance for the purpose of discussing MSA, its stock and financial condition. Miss Whitaker was in apparent continuous communication with her brother, who was in the securities business, concerning the advisability of the purchase. He reviewed with her the financial data contained in MSA’s 1968 Annual Report, which Dickson had provided at her request after LaChance’s refusal to do so.

The problem seems to have been that all of plaintiffs’ investigation failed to disclose MSA’s tenuous position. Now they complain that Dickson did not analyze and explain to them the footnotes and other financial information in the 1968 Report — the significance of which John Whitaker, an expert, failed to perceive. We are no more inclined than was the district court to impose this obligation on the defendant. Moreover, it is plain that the plaintiffs did not attempt to place such a burden on him prior to this litigation. The record presents a picture of aggressive purchasers who took it upon themselves to ascertain the status of the company and its stock, not persons who passively relied on the knowledge and advice of their seller.

The plaintiffs stress, that defendant as an MSA shareholder of over six months standing at the time of the sale could, pursuant to Georgia Code § . 22-613, have demanded to inspect MSA’s books and records. This right the plaintiffs did not have at the time. However, this court refuses to hold that any duty of due care defendant owed plaintiffs extended so far as to require him, prior to the sale, to comb the corporate books for facts which might have affected plaintiffs’ decision to buy MSA stock. In so holding, we are persuaded by the philosophy behind the federal security-fraud legislation. Approval of the plaintiffs’ position would subject virtually every stockholder of a corporation to its penalties if the sale did not pan out for the purchaser. In short, an ordinary employee-stockholder is not chargeable with constructive knowledge of financial matters he might have discovered by an expert review of company books.

Finally, plaintiffs ask, “Was this a runaway shop?” This broad question is left unanswered. They point to circumstances, revealed in depositions, which in some measure support such an inference: LaChance left MSA in the summer of 1969, and Dickson in the fall, to go to work for a new company apparently composed to some extent of previous employees of MSA. The answer to the more specific, relevant question, “Did Dickson know that this was a runaway shop at the time of the sale?” is necessarily subsumed within the district judge’s express finding that he did not fail to disclose any material fact which he knew. Sheer speculation provides no basis for us to find the district judge in clear error and we decline to do so.

C. The terms under which plaintiffs were required to take and, hold the securities.

Plaintiffs’ arguments on this point are somewhat unclear. It is difficult to tell whether they complain of defendant’s failure to advise them of the consequences of Georgia registration requirements or those of federal registration requirements. We assume that they are disturbed by his failure in both respects, but conclude that in neither did he act improperly.

The Georgia “6(j)” exemption, Georgia Code § 97 — 107(j), in effect at the time, exempted from registration sales of securities by or on behalf of an issuer to less than 25 persons, provided, inter alia, each purchaser filed an affidavit avowing an intention to purchase for investment and not resell for 12 months. Plaintiffs assert that MSA obtained a 6 (j) exemption only for the transaction in which defendant acquired his first 3,000 shares. Whether or not these were the 3,000 shares transferred to plaintiffs, and whether or not they were aware of MSA’s having obtained the 6(j) exemption for at least part of the stock which passed to them, are of absolutely no consequence.

6 (j) applies only to issuers and their agents. Each subsequent seller must find his own exemption from Georgia registration requirements. Under the then-existing Georgia Act, all non-exempt sales of securities had to be registered no matter who was the seller. It made no difference to the purchaser how the seller acquired his stock, for none of the exemptions from registration depended on the seller’s acquisition. As discussed in Part I, Dickson’s sale to them was exempt as an “isolated transaction.” Whitaker and Vohs would have to comply with Georgia law if they sold the stock in Georgia notwithstanding how they acquired it or how Dickson acquired it. No restrictions resulted from the 6(j) exemption, and none needed to be disclosed.

Dickson was not required to tell them that they had to take with non-distributive intent in order to qualify for an exemption in Georgia. In fact, such advice would have been a misstatement of Georgia law as it then existed. And he certainly was not required to have predicted the exemption for those not “underwriters,” in the federal sense of the word, under § 97-109 (c) of the Georgia Securities Act of 1973.

Plaintiffs also contend that defendant violated Rule 10b-5 when he failed to advise them that the stock — which had been issued to him in a transaction not registered under the Securities Act of 1933 — must be purchased with non-distributive intent in order for them to escape federal registration requirements upon a subsequent resale.

At the threshold, we note that it is not at all clear that the stocks sold to plaintiffs actually had to be taken with non-distributive intent. Only for the sake of argument do we assume that this conclusion of law on the part of plaintiffs is correct.

Federal law makes it fraudulent to misrepresent or omit material facts in respect to a sale of securities. Here plaintiffs knew at the time of the sale that the stock involved had been issued in an unregistered transaction and again was not registered in passing to them. Before the sale plaintiff Whitaker, acting for Mr. Vohs as well as herself, asked Dickson if an “investment” letter was necessary to purchase MSA stock lawfully. Dickson told her he did not know the answer to that question. Subsequently, but still before plaintiffs purchased the stock, Miss Whitaker sought and obtained from her own lawyer an opinion on whether her purchase of MSA stock issued in an unregistered transaction' required an “investment” letter. His answer was no. Seemingly, plaintiffs’ current position is that this opinion of law was incorrect to the extent it indicated that the MSA stock did not have to be purchased with non-distributive intent.

The important point about the question in this case is that whether or not plaintiffs had to take the stock with non-distributive intent is not a mater of fact — material or otherwise; it is a matter of law. Rule 10b-5 cannot be construed to require a prospective seller of securities to give his prospective buyers legal advice on technical matters arising under the federal securities law. If the buyer is aware of the material facts — e. g., that the stock he is to buy was issued in an unregistered transaction — he should be as aware of the legal consequences of those facts as his seller. Here it is plain that plaintiffs knew as much as defendant about the facts relating to the legal need for taking with non-distributive intent.

Plaintiffs point out that the Securities and Exchange Commission, in Release No. 5223 (January 11, 1972), has ruled long after the sale in question that, in connection with a “private placement” of securities, the seller must inform his purchasers fully as to the circumstances under which they are required to take and hold the securities and the limitations upon their resale. Without passing upon the correctness of this ruling in another context, we do not read it as conflicting with our opinion herein. The SEC is justifiably concerned with the position of those who purchase unregistered stock at private offerings when they later desire to resell it. This, however, has not been shown to have been a “private offering” toward which that concern is directed. If it was a private offering the character of which had to be preserved in order to avoid subsequent registration, this legal conclusion was not grasped by the parties or their counsel — and it escapes us. Under such circumstances, Dickson was not required to risk legal advice which might well have been erroneous. A different conclusion might be called for where an issuer is himself seeking the benefits of a private offering, but neglects to advise his purchasers of the effect of his plans upon them. This is far from our situation.

CONCLUSION

In summary we restate that Dickson’s sale to plaintiffs was an “isolated transaction” exempt from Georgia registration requirements. As to the fraud claim, it simply was not proven; skeletal circumstances suspicious to plaintiffs are far from sufficient cause for us to hold that the district judge was clearly erroneous in his factfindings. And in his conclusions of law based thereon he was uniformly correct.

This appears to have been a very unfortunate situation in which Miss Whitaker and Mr. Vohs made every reasonable effort to ascertain in advance the wisdom of their rather sizeable investment — only to have their judgment proven wrong. If the collapse of MSA could have been forecast by anyone at the time, on which subject we will not hazard a guess, there was no showing that Mr. Dickson was in a position to do so. In this light, we cannot shift the consequences back to the one who got out at a very opportune time.

Affirmed.

      . No claim was brought under the federal registration requirements of the Securities Act of 1933,15 TJ.S.C. § 77a et seq.

      . We note that as of this writing, but long after trial, Georgia has 'replaced the law which forms the basis of this decision with the “Georgia Securities Act of 1973,” Ga. Code Ann. § 97-101 et seq. All citations herein to the Georgia Code are to the sections as existing prior to the 1973 Act.

      . Title 15, § 77b (11) defines the term underwriter in the Federal Securities Act of 1933. It does provide in part, however, that “As used in this paragraph [defining “underwriter”] the term ‘issuer’ shall include, in addition to an issuer, any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer.” This “control” clause was apparently added to deal with difficulties encountered with secondary public offerings because of the drafters’ deliberate rejection of the “isolated transaction” exemption usually contained in state securities acts. See Landis, The Legislative History of the Securities Act of 1933, 28 Geo.Wash.L.Rev. 29, 37-38 (1955).
      The basic federal definition of issuer, which appears in 15 U.S.C. § 77b(4), is identical to Georgia’s definition in her 1973 Act; and both are substantially the same as, and no more tautological than, the earlier Georgia definition which applies to our case.

      . Because of its dissatisfaction with the uncertainty in evaluating these factors, the SEC has recently promulgated Rule 144 setting out specific conditions under which unregistered securities may be resold publicly without fear of violating federal law. However, with respect to securities such as Dickson’s which were acquired prior to the effective date of the new Rule, April 15, 1972, the SEO continues to consider “change in circumstances” along with other relevant factors in issuing “no action” letters. We, therefore, review the circumstances surrounding this transaction free of any shift in SEO viewpoint. See SEC Release No. 5223 (January 11, 1972).

      . 15 U.S.C. § 78j.

      . 17 C.F.R. § 240.10b-5.

      . Dickson, too, obtained a letter from Ms lawyer — which did not deal with the question of the purchasers’ necessary intent, but stated that he was not required to, file a registration statement with the SEO in conjunction with the transfer to them. Plaintiffs do not contest, and we do not consider, the correctness of that opinion.


source: Caselaw Access Project

author: INGRAHAM, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Mike GENTILE and George Marquart, Defendants-Appellants.
    No. 73-2181.
    United States Court of Appeals, Fifth Circuit.
    June 7, 1974.

      Stephen K. Johnson, Gainesville, Fla. (Court-appointed), for Gentile.
    Carol Wild Scott, Gainesville, Fla. (Court-appointed), for Marquart.
    Catherine Wings Slocum, Palmetto, Fla., for defendants-appellants.
    Robert L. Crongeyer, Jr., Asst. U. S. Atty., William H. Stafford, Jr., U. S. Atty., Pensacola, Fla., for plaintiff-ap-pellee.
    Before GODBOLD, SIMPSON and INGRAHAM, Circuit Judges.
   INGRAHAM, Circuit Judge:

Mike Gentile and George Marquart were jointly tried and convicted under a three count indictment for distribution and conspiracy to distribute certain proscribed substances in violation of 21 U. S.C. § 841(a)(1). 2On appeal Gentile argues that, because this was a multiple defendant trial, the unrelated offense alleged in Count 3 of the indictment charging only Marquart was improperly joined under Rule 8(b) with Counts 1 and 2, that even if there was proper joinder under 8(b) the trial court abused its discretion in denying a severance under Rule 14, and that the.trial court improperly refused to compel the • prosecution to disclose where a confidential informer, the identity of whom was known, could be located. While Mar-quart, like Gentile, argues that the prosecution should have been compelled to disclose the location of the informer, he also argues that the court should have granted his motion for new trial. The motion for new trial is based on the prosecution’s alleged suppression of an informer’s testimony in violation of Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), and related cases, or alternately on the discovery of new evidence, the informer’s testimony. Concluding that the unrelated offense charged in Count 3 was misjoined with the first two counts in a multiple defendant trial, we reverse Gentile’s conviction, but finding the other contentions meritless, we affirm as to Mar-quart.

While the testimony introduced at trial was conflicting in many particulars, the events giving rise to this ease, viewed most favorably to the government, can generally be reconstructed as follows. ***On October 23, 1972, Susan Jensen Parker, a confidential government informer, picked up Marquart while he was hitchhiking in Gainesville, Florida. According to Parker’s testimony at trial, a conversation ensued between them in which Marquart stated that he was on his way to the library to make a contact for the purchase of a quantity of cocaine. He asked Parker if she was interested in purchasing any, and she replied that she was not, but she knew some persons that would be interested and would therefore accompany him to complete the transaction. After going to several places in an attempt to locate persons who sell drugs, Marquart and Parker went to 116 N.W. 9th Street, the residence of defendant Gentile and Nanny Crocker, a woman who shared the house with Gentile, but the two apparently were not romantically involved. Parker testified that, although she did not smoke marijuana, Marquart, Gentile and Crocker did so while all four of them discussed the possibility of obtaining various illegal drugs. It appears that, while no narcotics were currently available, there was a possibility that drugs could be obtained later in the day, and according to Parker’s testimony Gentile and Marquart were to get back together then.

Marquart and Parker left Gentile’s place and went to Parker’s motel room, where they met with Parker’s husband, Deke Jensen, also a confidential informer, and Danny Lane, a government agent. Again, the possibility of obtaining narcotics appears to have been the primary topic of conversation. Thereafter, Marquart, Parker, Jensen and Lane left the motel room by car, supposedly to meet with Gentile. On the way they stopped to get gasoline and noticed Gentile walking by the station. Marquart got out of the car and, accompanied by Gentile, walked around to the back of the station. When they returned, all five persons drove, under the directions of both Gentile and Marquart, to 406 N.E. 1st Avenue. Both Gentile and Marquart got out of the car and, although the testimony is conflicting as to whether only Marquart or both of them went inside, when they returned Mar-quart had ten tablets of what was thought to be THC, but on analysis turned out to be PCP, which is also a federally proscribed substance.

On November 11, 1972, Lane was notified that Marquart had made arrangements for a sale of LSD. Lane testified that he and Marquart went to the house where Gentile and Crocker lived and there purchased the LSD. Significantly, only Marquart went inside to obtain the drug, and Lane testified that he did not know from whom the purchase was actually made or whether Gentile was even at home at the time of the purchase. Gentile testified' that, not only was he not at the residence when the sale occurred, he had nothing to do with' the narcotics, and Marquart testified that he purchased the LSD from Crocker. There is no evidence that Crocker conducted the transaction on Gentile’s behalf. Subsequently, Marquart allegedly made an additional sale of LSD on November 14.

Based on these three transactions, the defendants were charged in a four count indictment. Specifically, Count 1 charged Gentile and Marquart with conspiring to distribute a controlled substance, the overt acts being the sale of PCP on October 23, 1972. Count 2 charged both defendants with the actual distribution of the PCP, Count 3 charged only Marquart with the distribution of LSD on November 11, 1972, and Count 4 charged Marquart with the distribution of LSD on November 14. Prior to trial Gentile moved for severance of Counts 3 and 4 on the basis of misjoinder under 8(b), or for severance of defendants or offenses under Rule 14, and the trial court granted the motion as to Count 4 but not 3. Proceeding to trial on the first three counts, the jury found the defendants guilty as charged.

We turn first to Gentile’s argument that the trial court improperly refused to either sever Count 3 from the trial below, or sever the defendants for trial. Because the offense in the third count of the indictment, in which only Mar-quart was charged, is so unrelated to the offenses charged in Counts 1 and 2, in which both defendants were charged, he argues that joinder of his and Mar-quart’s trials under all three counts seriously prejudiced him. While recognizing that all defendants jointly tried need not be named in each and every count of the indictment, Gentile urges that the jury might have determined his guilt based merely on his association with Marquart or evidence that was admitted at trial against Marquart under Count 3.

Rule 8(b) outlines the standard governing permissible joinder of multiple defendants, providing that various defendants may be tried simultaneously “if they are alleged to have participated in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses.” F.R. Crim.P. 8(b). The purpose of the rule is, in the interest of convenience and expediency, to encourage joint trials while at the same time limiting as much as possible the admission at trial of prejudicial evidence against a defendant. Moore, Federal Practice, ff 8.06 [2], at 8-36 (1965).

Since the substantive offense covered by Count 2 of the indictment is plainly not the “same act or transaction” as that alleged in Count 3, our initial concern is whether these two offenses constitute a series of events within the meaning of the rule. Whether or not separate offenses are part of a “series of acts or transactions” under 8(b) depends in turn on the relatedness of the facts underlying each offense. King v. United States, 355 F.2d 700 (1st Cir., 1966); Haggard v. United States, 369 F.2d 968 (8th Cir., 1966); C. Wright, Federal Practice and Procedure, § 144, at 232 (1969). While criminal acts of several defendants may be similar in nature, these acts cannot be properly joined in a multiple defendant trial if different facts and circumstances must be established to support the alleged violations. But when the facts underlying each offense are so closely connected that proof of such facts is necessary to establish each offense, joinder of defendants and offenses is proper. For example, if one person is charged with theft of goods in interstate commerce and a second person is charged with receiving goods that were stolen in interstate commerce, the two offenders may be joined for trial because the facts that must be established to support a violation of each offense are basically the same. They form a series of acts or transactions. See Kitchell v. United States, 354 F.2d 715 (1st Cir., 1965), cert. den., 384 U.S. 1011, 86 S.Ct. 1970, 16 L.Ed.2d 1032 (1966); Moore, Federal Practice, j[ 8.06[2], 8-32 (1965). In this situation joinder of both offenses for trial fulfills the purpose underlying the rule because it avoids duplication of time and effort of both the prosecution and the courts and minimizes the prejudice to the defendants. The government has to prove and the court must listen to the evidence supporting the offenses only once, and the defendants are not prejudiced because essentially the same proof must be established with regard to each defendant whether or not they are jointly or severally tried. Moore, Federal Practice, fí 8.06 [1] (1965).

This analysis illustrates that the criminal activity charged against Mar-quart in Count 3 of the indictment was not part of a “series of acts or transactions” under 8(b). The proof required to establish the sale of PCP on October 23, as alleged in Count 2, is entirely different from the proof required to establish the sale of LSD on November 11, as alleged in Count 3. The two transactions occurred almost three weeks apart, the sales took place at different locations, the transactions’involved different drugs, and the sources from whom Mar-quart procured the drugs were different. Moreover, severance of Count 3 would not frustrate the purpose of the rule because neither the prosecution nor the court would be significantly inconvenienced by a separate trial on this count, since each of them would be established only once based on different evidence. Severance of Count 3 would have fully protected Gentile from prejudicial evidence admitted to prove Marquart’s guilt under Count 3.

Interestingly, this analysis is apparently in line with the district court’s conclusion with regard to the fourth count of the indictment, alleging the sale by Marquart of LSD on November 14, because it granted Gentile’s motion to sever this count, but yet declined to sever Count 3. We are unable to understand why the court concluded that the transaction alleged in Count 3 was sufficiently related to Counts 1 and 2 while Count 4 was not so related. Indeed, the only discernable connection present with Count 3 and absent with Count 4, and which was apparently relied on by the district court, was Gentile’s residency at the house where Marquart obtained and sold the LSD, the offense alleged in the third count. But the facts are undisputed that another person lived in the house with Gentile who could just as easily have sold the drugs and that Gentile was not seen at this location by the informer when the transaction occurred. Gentile’s testimony that he was not at home at the time of sale and that he had nothing to do with the LSD is uneontrovert-ed. And according to Marquart’s testimony, also uneontroverted and specifically corroborating Gentile’s testimony, he purchased the LSD from Crocker. Furthermore, there is no evidence demonstrating that Gentile and Crocker were lovers, that Crocker sold the LSD on behalf of Gentile in his absence, or that they were incapable of conducting their own affairs apart from interference by the other while residing in the house. While Gentile and Crocker lived in the same house, they lived in separate bedrooms and each prepared his or her own meals. The evidence in this record supports the conclusion that Crocker could have been dealing in drugs while Gentile was not. Gentile’s mere residency in the house where the LSD was procured and sold, as alleged in Count 3, is not a sufficient link to Counts 1 and 2 to satisfy the series requirement of Rule 8(b).

This conclusion is firmly supported by our recent decision in United States v. Bova, 493 F.2d 33 (5th Cir., 1974). In Bova two defendants were jointly tried under a four count indictment for violating the narcotic laws. Bova and a co-defendant, Coccuzza, were jointly indicted under the first two counts for possession and distribution of heroin on or about August 31, 1972. Only the co-defendant Coccuzza was charged in the third and fourth counts for similar narcotics offenses that occurred eight days later. We held in Bova that these two transactions did not make up a series of events and consequently Counts 3 and 4, charging only Coccuzza, were improperly joined with Counts 1 and 2, charging both Bova and Coccuzza. Likewise, the transaction in the case at hand occurring on October 23rd involving both Gentile and Marquart is not sufficiently related to the November 11th transaction involving only Marquart to make out a series of acts or transactions within the contemplation of 8(b).

The government, however, urges that, even assuming these two transactions are not a series of transactions as required by 8(b), the conspiracy alleged in Count 1 sufficiently ties these two separate events together so as to make joinder proper. While it is true that the alleged existence of a conspiracy will frequently permit joinder of offenses when it would otherwise be impermissible, United States v. Banks, 465 F.2d 1235 (5th Cir., 1972), the conspiracy allegation in the instant case does not remedy the discrepancy. For a conspiracy to properly tie separate events together so as to permit joinder of defendants, the substantive offenses alleged in the indictment must fall within the scope of the conspiracy. Gordon v. United States, 438 F.2d 858 (5th Cir., 1971); James v. United States, 416 F.2d 467 (5th Cir., 1969); United States v. Spector, 326 F.2d 345 (7th Cir., 1963). But the only overt acts alleged in the conspiracy count in the instant case concerned the distribution of PCP on October 23, the substantive offense alleged in the second count. No overt acts are set forth in the conspiracy count relating to Marquart’s distribution of LSD on November 11, the third count of the indictment.

Moreover, while the indictment alleges that the conspiracy existed from October 23rd until the date of the indictment in December, the record does not disclose the existence of an enduring conspiracy organized for the continuous distribution of narcotics over such a period of time. Instead, the record supports the existence of a conspiracy only for the time it took to arrange and complete the sale of PCP to government agents as alleged in Count 2. Rather than demonstrating a continuing relationship between Marquart and Gentile, the record supports nothing more than the conclusion that their relationship culminated with the sale of PCP on October 23. Marquart’s subsequent sale of LSD on November 11 was an individualized narcotics transaction concerning a different type of drug, occurring at a different place and obtained from a different source. Consequently we conclude that Marquart’s sale, of LSD on November 11th does not fall within the scope of the conspiracy as established from the testimony introduced at trial.

Having reached this conclusion, we must now determine whether this failure of proof renders the initial joinder of offenses improper. The Supreme Court in Schaffer v. United States, 362 U.S. 511, 80 S.Ct. 945, 4 L.Ed.2d 921 (1960), recognized that, even though initial joinder of offenses prior to trial was based solely on the alleged existence of a conspiracy, the subsequent failure to prove the conspiracy at trial did not constitute misjoinder. In Schaffer seven defendants were jointly tried under a four count indictment alleging three substantive offenses and a conspiracy to commit the alleged offenses. At the close of the government’s case the trial court dismissed the conspiracy count, but refused to dismiss the substantive counts based on misjoinder under 8(b). Since the trial court concluded that the defendants suffered no prejudice from the joint trial, the case was submitted to the jury and the defendants were found guilty.

On appeal the Supreme Court affirmed. Since the initial joinder was proper under 8(b), even though based solely on the unproved conspiracy, the Court viewed retrospectively the proceedings in the district court only to see if the court fulfilled its continuing duty under Rule 14 to sever the defendants or offenses should prejudice appear. The Court specifically refrained from establishing “a hard-and-fast' formula that, when a conspiracy count fails, joinder is error as a matter of law.” Since “no prejudice resulted from the joint trial,” the convictions on the substantive counts were upheld.

In view of the principles enunciated in Schaffer, we turn to the instant case to see if prejudice has resulted, The government’s asserted connection between both defendants’ sale of PCP on October 23rd and Marquart’s sale of LSD on November 11th revolved around Gentile’s residency in the house where the LSD was obtained and sold to government agent Lane. The obvious impact this evidence must have had on the jury was to demonstrate the continuing relationship between Marquart and Gentile in support of the alleged conspiracy. But such an impression is simply factually insupportable. The uncontroverted evidence established that Gentile had nothing to do with the sale of LSD on November 11 and that the drug was procured from Gentile’s housemate. While Gentile argued in the district court that he was not involved in the sale of PCP on October 23, or the conspiracy to commit that offense, the evidence of his residency at the house where Marquart’s sale of LSD took place, which would have been inadmissible if the district court had either severed defendants or the offense alleged in Count 3, tended to inaccurately demonstrate to the jury a continuing relationship that was inconsistent with Gentile’s denial of even being involved in the offenses alleged in Counts 1 and 2. Even though there was no factually demonstrable connection between Marquart and Gentile with regard to Marquart’s sale of LSD on November 11, a connection between them was inaccurately conveyed to the jury that plainly might have influenced its determination of guilt concerning the offenses alleged in Counts 1 and 2. Sufficient prejudice appeared during the course of the trial from a failure to connect Gentile to the offense alleged in Count 3 that, when Gentile renewed his motion to sever at the conclusion of the government’s case, the trial court abused its discretion in not granting the motion pursuant to its “continuing duty at all stages of the trial to grant a severance if prejudice does appear.” Schaffer v. United States, supra, at 516; United States v. Johnson, 478 F.2d 1129 (5th Cir., 1973).

The defendants next argue that the government unlawfully suppressed evidence favorable to the defense by refusing to disclose that a confidential informer, Dwight Englebeck Jensen, was inclined to testify favorably for them. Since this person was present when the alleged sale of PCP took place and had knowledge of the circumstances and conversations surrounding the narcotics transaction, he more than anyone else could establish whether or not Marquart was entrapped. The government’s failure to call this man as a witness, defendants argue, could only mean that the government did not want his testimony, favorable to the defendants, disclosed. Alternately, they argue that the discovery of new evidence, Jensen’s favorable testimony, after the defendants’ trial is sufficient to warrant a new trial.

Prior to defendants’ first trial, which ended in a mistrial, the trial court denied a motion requesting the disclosure of names and addresses of persons who were involved in the alleged transactions and any potential government witnesses. But during trial, defense counsel on cross-examination of the only government witness revealed that she had learned of the identity of the two confidential informers, Deke and Sue Jensen, who had participated in the events giving rise to the alleged offenses. The defense called neither of these persons as witnesses in the first trial, presumably because they could not be located. During closing arguments Marquart informed his counsel that one of the informers, Deke Jensen, had entered the courtroom, but, as Jensen later testified, he was told by the government that he was no longer needed and therefore left before closing argument was concluded.

After the first trial ended in a mistrial and while the second trial was pending, the defendants moved for disclosure of the full names and addresses of the confidential informers. The Assistant United States Attorney replied by affidavit that he was familiar with the testimony of these two persons and that such testimony “does not constitute evidence ‘favorable’ ” to the defendants. Concluding that the informers were sufficiently involved in the events as to enable them to testify concerning crucial conversations and that the defendants already knew the identities anyway, the trial court partially granted the motion, requiring the government to disclose the informers’ full names. Although the court denied the request for disclosure of the informants’ addresses, it indicated that the informers would be made available at trial if so desired by the defense. The full names of the informers were disclosed as Sue Jensen Parker and Dwight Englebeck Jensen, but no request was made prior to trial on behalf of the defendants to require the presence of either informer.

At defendants’ second trial Sue Parker, in addition to Daniel Lane, was called to testify on behalf of the government. Only during this second trial was it revealed that Dwight Jensen was currently incarcerated in the Duval County jail for writing checks without sufficient funds. When his whereabouts were discovered the defendants asked that a subpoena be issued requiring his presence at the trial, but the trial court •denied the request as an “eleventh hour tactic by the defense.” Even though each defendant took the stand and strenuously asserted his innocence, the jury found them guilty based on the testimony of Lane and Parker.

After the second trial, defense counsel met with the informer Dwight Jensen while he was in the Duval County jail. Counsel filed an affidavit stating that in this conversation Jensen told her that Marquart had been entrapped, that he did not think Marquart should have been prosecuted, and that it was because of these sentiments that the government refrained from calling him as a witness.

Feeling that if the truth of these averments was established the defendant might be entitled to a new trial, the trial court conducted a post-trial eviden-tiary hearing. At the hearing Dwight Jensen, among others, testified and denied that he had ever made such statements to Marquart’s counsel. The trial court denied the motion for new trial.

After the evidentiary hearing, Mar-quart’s counsel again met with Jensen and, unknown to Jensen, recorded the conversation that took place. Contending that Jensen’s recorded testimony was favorable to the defendant, that this testimony was unlawfully suppressed by the prosecution and that its subsequent discovery mandated a new trial, counsel again moved for a new trial. The trial court listened to the tape in the presence of defendant Marquart and his counsel and denied the motion for new trial. It is in this posture that the case is before this court.

It is plain under Brady v. Maryland, supra, that the prosecution must disclose to the accused evidence favorable and material to his defense, but on this record we are unable to conclude that the prosecution unlawfully suppressed any evidence. Jensen testified under oath at the post-trial evidentiary hearing, and his testimony revealed nothing favorable to the defendants or inconsistent with the government’s case against Marquart. Furthermore, Jensen’s supervisor, Robert M. Ginley, testified that Jensen had never expressed any reservations about Marquart’s involvement or guilt with regard to the offenses for which he was tried below. Although Jensen stated, according to Ginley, some reservation about Mar-quart’s involvement in another offense apart from those charged here, we agree with the district court that such information would have no bearing on this case. Since the evidence revealed at the post-trial hearing was not favorable to the defendants, it cannot be plausibly argued that such evidence was suppressed in violation of Brady.

We have listened closely to the tape recording of the conversation between Marquart’s counsel and Jensen made after the evidentiary hearing, but are still not persuaded that Brady has been violated. Jensen mentions in the recorded conversation that he thought Marquart “deserved a break,” but nothing on the tape demonstrates that Jensen himself thought Marquart was entrapped or that he would relate facts and circumstances to show Marquart was entrapped. Jensen suggests that his testimony “might go more than . . . [he] had gone” had the questions asked at the hearing been phrased differently, and that his testimony might be “more helpful” to the defendants after his personal difficulties with law enforcement agencies were ultimately resolved. But at most this testimony is ambiguous. Indeed it is difficult to attribute much if any significance to such casual statements made while he was bound by no oath, and when previously confronted with specific questions concerning the possibility of Marquart’s entrapment, the revealed nothing helpful to defendants.

With regard to Marquart’s contention that he is entitled to a new trial based on newly discovered evidence, we do not believe he has satisfied the applicable criteria. As Judge Wisdom noted in United States v. Jacquillon, 469 F.2d 380 (5th Cir., 1972):

“In order to justify a new trial, the rule is that the evidence must in fact be newly discovered and that the mov-ant must have exercised due diligence in discovering the evidence. It must not be merely cumulative or impeaching. Furthermore, the new evidence must be material and be such that it would probably produce an acquittal in a new trial.”

Id. at 388. We are simply unable to say that Jensen’s testimony as disclosed in the record of the post-trial hearing and the tape recording would probably convince a jury of Marquart’s innocence.

The district court’s judgment as to Marquart is affirmed, but as to Gentile, the judgment is reversed and remanded for a new trial.

      . Section 841(a)(1) provides in part as follows :
      “(a) Except as authorized by this sub-chapter, it shall be unlawful for any person knowingly or intentionally—
      (1) to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance.”

      . Rule 8(b) providing for joinder of multiple defendants provides as follows :
      “Two or more defendants may be charged in the same indictment or information if they are alleged to have participated in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses. Such defendants may be charged in one or more counts together or separately and all of the defendants need not be charged in each count.”
      It is well established that the more lenient standard of 8(a) providing for joinder of multiple offenses when only one defendant is tried is not applicable to a multiple defendant trial. United States v. Bova, 493 F.2d 33 (5th Cir., 1974); C. Wright, Federal Practice and Procedure, § 144 (1969).

      . Rule 14 provides as follows:
      “If it appears that a defendant or the government is prejudiced by a joinder of offenses or of defendants in an indictment or information or by such joinder for trial together, the court may order an election or separate trials of counts, grant a severance of defendants or provide whatever other relief justice requires. In ruling on a motion by a defendant for severance the court may order the attorney for the government to deliver to the court for inspection in camera any statements or confessions made by the defendants which the government intends to introduce in evidence at the trial.

      . Four principal witnesses appeared and testified at trial. Susan Jensen Parker, a confidential informer, and Daniel Lane, a government agent, testified on behalf of the prosecution. Both Gentile and Marquart took the stand and testified as to their innocence. In addition to these four principal witnesses, several character witnesses testified for the defendants.

      . While Gentile and Crocker lived in the same house together, they apparently lived in separate bedrooms, prepared their own meals and managed his or her affairs apart from the other.

      . Gentile denied that he smoked any marijuana. He testified that, while these persons were in the living of his house smoking marijuana, he was preparing a meal and getting cleaned up after a day’s work for a construction company.

      . Gentile testified that the directions to this , location were given only by Marquart, but Parker said that both defendants gave directions.

      . Gentile testified tbat, since be was riding in the front seat next to the door in a two-door automobile, he had to get out of the ear to let Marquart out of the backseat. But while he got out of the car, he testified that he did not go inside the house where the PCP was obtained. Marquart also testified that Gentile did not go inside. While Parker testified that she saw Gentile go inside the house, Lane stated that he did not know if he went inside or not. His view of Gentile was obscured when Gentile walked behind some shrubbery located in front of the house.

      . The defendants also complain that the trial court improperly refused to require the prosecution to disclose the addresses of the informers. Relying on United States v. Escobedo, 430 F.2d 603 (7th Cir., 1970), the district court refused to require disclosure of the addresses because the defendants had sufficient information to subpoena the informants for trial. While the government is not required to actually produce the informer at trial, once the identity is revealed, we think the better practice is to require disclosure of the last known residence of the informer or to provide reasonable assistance in locating him. United States v. Ortega, 471 F.2d 1350 (2nd Cir., 1972). But in view of counsel’s failure to subpoena Jensen until the middle of the second trial, coupled with the ultimate disclosure of Jensen’s testimony at the post-trial evidentiary hearing, which did not prove favorable to defendants, the court’s failure to require disclosure of the informants’ addresses is not reversible error.


author: JAMES M. CARTER, Circuit Judge:

text:
    Estelle E. CATON, Plaintiff-Appellant, v. UNITED STATES of America et al., Defendant-Appellee.
    No. 72-2367.
    United States Court of Appeals, Ninth Circuit.
    April 1, 1974.

      James V. Parziale (argued) San Diego, Cal., for plaintiff-appellant.
    Peter Bowie, Asst. U. S. Atty. (argued), Harry D. Steward, U. S. Atty., Sheldon Deutsch, Asst. U. S. Atty., San Diego, Cal., for defendant-ap-pellee.
    Before CARTER and WRIGHT, Circuit Judges, and LUCAS, District Judge.

       Honorable Malcolm M. Lucas, United States District Judge, Central District of California, sitting by designation.

   OPINION

JAMES M. CARTER, Circuit Judge:

This is an appeal from a summary judgment for the United States in an action under the Tort Claims Act.

Plaintiff sustained an injury from a trip and fell on government premises on October 4, 1969. On September 2, 1970, her attorney, by letter, advised the insurance carrier for the Navy Unappropriated Fund Activity, the Commonwealth Adjustment Bureau, of doctors’ bills of $287.00 and loss of earnings of $1,200, and that plaintiff was still undergoing treatment.

On June 9, 1971, within the two-year limitation of 28 U.S.C. § 2401(b), plaintiff filed an administrative claim on Standard Form 95, and in the box on the form providing for the “Amount of Claim” for “Personal Injury” wrote “Unknown at this time.” On October 1, 1971, plaintiff commenced her action in the district court for general damages, alleged to be the sum of $25,000, and for medical expense and loss of earnings when ascertained.

The government filed a motion to dismiss and in the alternative a motion for summary judgment. The court granted summary judgment and did not act on the motion to dismiss. We treat the ruling as a dismissal for'lack of jurisdiction and affirm.

28 U.S.C. § 2672 reads in part:

“The head of each Federal agency or his designee, in accordance with regulations prescribed by the Attorney General, may consider, ascertain, adjust, determine, compromise, and settle any claim for money damages against the United States for injury or loss of property or personal injury or death caused by the negligent or wrongful act or omission of any employee of the agency while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred: Provided, That any award, compromise, or settlement in excess of $25,000 shall be effected only with the prior written approval of the Attorney General or his designee.”

28 U.S.C. § 2675(a) provides that:

“An action shall not be instituted upon a claim against the United States for money damages for personal injury . . . , unless the claimant shall have first presented the claim to the appropriate Federal agency and his claim shall have been finally denied by the agency in writing and sent by certified or registered mail . . . v . ”

28 C.F.R. § 14.2(a) provides that:

“Fdr purposes of Section 2672 of Title 28 ... a claim shall be deemed to have been presented when a Federal agency receives ... an executed Standard Form 95 or other written notification of an incident, accompanied by a claim for money damages, in a, sum certain . . . .”
(Emphasis supplied).

Avril v. United States (9 Cir. 1972) 461 F.2d 1090 controls this case. There the action was dismissed because the claimant failed to file its agency claim in a sum certain; the agency claim was held a nullity; there was thus no jurisdiction in the federal court, for the claimant had technically failed to “have first presented the claim to the appropriate Federal agency” as required by § 2675(a). In accord is Bialowas v. United States (3 Cir. 1971) 443 F.2d 1047, 1050.

Where a claim was not filed within the statutory limits, an action filed thereafter should be dismissed for lack of jurisdiction. Jordan v. United States (E.D.Pa.1971) 333 F.Supp. 987. Jordan cites Bialowas, supra, and sets forth the basis of such a dismissal.

“ ‘As a sovereign, the United States is immune from suit save as it consents to be sued. The terms of its consent to be sued in any court define the court’s jurisdiction to entertain the suit. United States v. Sherwood, 312 U.S. 584, 61 S.Ct. 767, 85 L.Ed. 1058 (1941).’ Bialowas v. United States, 443 F.2d 1047, 1048-1049 (3 Cir. 1971). The United States has not consented to be sued once the time period prescribed by 28 U.S.C. § 2401 has run. This Court, then, lacks jurisdiction if plaintiff’s claim is barred by that section.”

But see Muldez v. United States (E.D. Va.1971) 326 F.Supp. 692, where the court granted “the defendant’s motion for summary'judgment and dismiss [ed] the action for lack of jurisdiction.”

Plaintiff’s contention that 28 C.F.R. § 14.2(a) applies only for purposes of 28 U.S.C. § 2672 and not for purposes of § 2675(a), was rejected in Avril, supra.

Plaintiff’s contention that 28 C.F.R. § 14.2(a) is in excess of the authority granted the Attorney General in 28 U. S.C. § 2672 to prescribe the regulations, is also without merit. We hold that there was a rational basis for the regulation and that it was necessary in order to enable the heads of Federal agencies and the Attorney General to carry out their respective duties in connection with processing and attempting to settle claims under the Tort Claims Act. Bialowas, supra, 443 F.2d p. 1050.

The original limit in 28 U.S.C. § 2672 of a claim subject to administrative settlement was $1,000. A 1959 amendment (P.L. 86-238) raised the limit to $2,500.

A 1966 amendment (P.L. 89-506, 80 Stat. 306) eliminated the $2,500 ceiling for administrative settlement of claims and authorized the head of each Federal agency or his designee to settle claims under the Tort Claims Act. It provided, however, “That any award, compromise, or settlement in excess of $25,000 shall be effected only with the prior written approval of the Attorney General or his designee.”

The 1966 amendment to 28 U.S.C. § 2672 clarified paragraph three thereof by providing that “Any award, compromise, or settlement in an amount of $2,500 or less made pursuant to this section shall be paid by the head of the Federal agency concerned out of appropriations available to that agency. .” See' U.S.Code Congressional and Administrative News, 1966, Vol. 2, p. 2523.

Thus after the 1966 amendment “an amount certain” in the claim was not needed to identify the claim as one subject to administrative settlement by the agency, except that the prior written approval of the Attorney General or his designee was required when the claim exceeded $25,000. There still remained the need for the claim to state “a sum certain” to identify the claim which might require Attorney General approval and to identify the claim which, if settled for $25,000 or less, would be paid out of available appropriations.

Secondly, such identification was needed in connection with insurance coverage that might exist, as it did here, for the governmental agency activity.

Finally, the requirement of the inclusion of “a sum certain” in the claim must be read with the language of 28 U.S.C. § 2675(b): “Action under this section shall not be instituted for any sum in excess of the amount of the claim presented to the federal agency, except where the increased amount is based upon newly discovered evidence not reasonably discoverable at the time of presenting the claim to the federal agency, or upon allegation and proof of intervening facts, relating to the amount of the claim.” (Emphasis added). It is apparent that without the inclusion of “a sum certain” in the claim to the agency, the above provisions of 28 U.S. C. § 2675(b) would be meaningless.

We conclude C.F.R. § 14.2(a) requiring “a sum certain” to be stated in the claim was a valid regulation under the power granted the Attorney General in 28 U.S.C. § 2672. The plaintiff failed to comply with this regulation, for the claim presented to the agency was not in a sum certain. The agency claim was therefore no claim at all. The plaintiff thus failed to meet the jurisdictional requirement in § 2675(a) that the federal courts may not entertain a claim which has not first been presented to the appropriate agency.

A dismissal of the action was required for another reason. 28 U.S.C. § 2675(a) provides, as set forth above, that no action shall be instituted “unless the claimant shall have first presented the claim to the appropriate Federal agency and his claim shall have been finally denied by the agency in writing .” (Emphasis added).

Section 2675(a) further provides, “The failure of an agency to make final disposition of a claim within six months after it is filed shall, at the option of the claimant any time thereafter, be deemed a final denial of the claim for the purposes of this section . . . . ”

28 U.S.C. § 2401(b) provides:

“A tort claim against the United States shall be forever barred unless it is presented in writing to the appropriate Federal agency within two years after such claim accrues or unless action is begun within six months after the date of mailing, by certified or registered mail, of notice of final denial of the claim by the agency to which it was presented.” (As amended July 18, 1966, Pub.L. 89-506, § 7, 80 Stat. 307).

The statutory procedure is clear. The claim must be filed with the agency within two years after the claim accrues. 28 U.S.C. § 2401(b). The agency has six months to make an administrative determination on th‘e claim and if it fails to so act, the claimant may at his option thereafter treat the failure as a final denial of the claim. 28 U.S.C. § 2675(a). After an agency denial, the claimant has six months to file an action in the federal courts. 28 U.S.C. § 2401(b). But the claimant may not commence his court action until either (1) the agency makes a final denial within the six months’ period, or (2) six months transpires after the claim is filed with the agency, and the claimant then treats the agency failure to act as a final denial of the claim. 28 U.S.C. § 2675(a).

Here the injury occurred on October 4, 1969. Within the two-year statutory period the plaintiff filed a claim on June 9, 1971. But the court action was commenced October 1, 1971, before the agency had made á final determination and before the six months’ period allowed the agency had expired. There was thus no statutory authority to file the action on October 1, 1971, and no jurisdiction in the court to entertain the claim. Bialowas v. United States, supra, 443 F.2d pp. 1048-1049.

The district court should have dismissed the claim for lack of jurisdiction. The court’s action in granting summary judgment was erroneous, but we treat its action as a dismissal for lack of jurisdiction.

The judgment is affirmed.