author: PELL, Circuit Judge.

text:
    Stephen P. KUPIEC and John E. Cihocki, Plaintiffs-Appellees, v. REPUBLIC FEDERAL SAVINGS AND LOAN ASSOCIATION and Otto C. Martinek, Defendants-Appellants.
    No. 74-1835.
    United States Court of Appeals, Seventh Circuit.
    Argued Dec. 11, 1974.
    Decided March 4, 1975.

      Fredric G. Novy, James W. Ashley, Chicago, 111., for defendants-appellants.
    Mark Van Ausdal, Gerald J. Muller, Chicago, 111., for plaintiffs-appellees.
    Before FAIRCHILD, Chief Judge, and PELL and SPRECHER, Circuit Judges.
   PELL, Circuit Judge.

The issue presented in this appeal is whether the Federal Home Loan Bank Board’s Bylaw (g), as set forth in Regulation 544.6(g), 12 C.F.R. § 544.6(g), when adopted by a federal savings and loan association, is the sole and exclusive means of communication between members of the association, and, if so, whether the bylaw is unreasonable or infringes on the constitutional rights of the members.

The plaintiffs, Stephen Kupiec and John Cihocki, are members of the defendant Republic Federal Savings and Loan Association (Republic) by reason of being holders of savings accounts at Republic. 12 U.S.C. § 1464(b)(1). The defendant Republic is a federally chartered savings and loan association, organized and chartered under 12 U.S.C. § 1464 and having its office in Chicago, Illinois. The defendant Otto C. Martinek is president and chief executive officer of Republic.

The plaintiffs brought this action for injunctive and declaratory relief seeking access to the membership list of Republic. Jurisdiction was invoked under 28 U.S.C. § 1331 and § 1337.

In 1965 the Federal Home Loan Bank Board (the Board) promulgated Regulation 544.6(g), which set forth Bylaw (g) and authorized and preapproved the adoption of this permissive bylaw by federal savings and loan associations. Bylaw (g), the full text of which is set out as an appendix to this opinion, contains a procedure by which the members of an association can communicate with one another by mail concerning matters which may properly be considered at a meeting of the members. Prior to the filing of the instant action, the directors of Republic had adopted Bylaw (g).

The district judge denied the plaintiffs’ motion for a preliminary injunction on the ground that the plaintiffs should first attempt to comply with Bylaw (g) before seeking access to the membership list.

Subsequently, the plaintiffs filed a second amended complaint. In this complaint, the plaintiffs alleged that as well as being members of Republic they are also both members of the Southwest Community Congress (SCC), a not-for-profit corporation composed of community organizations operating in the area in which Republic has its office. According to the second amended complaint, the plaintiffs, in conjunction with other SCC members who are also members of Republic, will nominate two persons for director at the next annual meeting of Republic in March 1975. The plaintiffs seek such representation on the Republic board “in order that Republic Federal become more responsive to its immediate geographical area, particularly in terms of making loans available within that community.” The plaintiffs further alleged that they desire to solicit, through mailings and personal contact, the votes of other members of Republic. The plaintiffs, according to the complaint, investigated the possibility of utilizing the method of communication set forth in Bylaw (g) “but had to abandon said method because of excessive costs.”

In a hearing before the district judge, witnesses for the plaintiffs testified that not only would the procedure outlined in Bylaw (g) be too costly for SCO, but in addition, they could not effectively convey their message by using Bylaw (g). To be effective, according to these witnesses, they needed face-to-face conversations with Republic members as well as written communications.

On the basis of the second amended complaint, certain affidavits, and the hearing, the district court granted the plaintiffs’ motion for summary judgment and denied the defendants’ motion to dismiss the second amended complaint. The district court held that, under federal common law, the plaintiffs, as members of Republic, have a right to inspect and copy Republic’s membership list and that Bylaw (g) did not preempt this common law right. The defendants appeal.

Preemption

The Home Owners’ Loan Act of 1933, 12 U.S.C. § 1461 et seq., establishes the Federal Home Loan Bank Board and provides that the Board “is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as ‘Federal Savings and Loan Associations’, and to issue charters therefor .. . .” 12 U.S.C. § 1464(a). Pursuant to this authority, the Board has promulgated comprehensive rules and regulations concerning the powers and operations of every federal savings and loan association “from its cradle to its corporate grave.” Meyers v. Beverly Hills Federal Savings & Loan Ass’n, 499 F.2d 1145, 1147 (9th Cir. 1974).

Bylaw (g) essentially provides that a member may communicate with other members by furnishing the association with a copy of the communication. The association then mails the communication to its members, unless the communication is “made for an improper purpose.” Prior to the promulgation of Bylaw (g), the federal laws and regulations were silent with respect to the right of a member of a federal savings and loan association to inspect and copy the association’s membership list and failed to provide any means by which a member could communicate with other members.

The district court relying on Murphy v. Colonial Federal Savings & Loan Ass’n, 388 F.2d 609 (2d Cir. 1967); Durnin v. Allentown Federal Savings & Loan Ass’n, 218 F.Supp. 716 (E.D.Pa.1963), and Ochs v. Washington Heights Federal Savings & Loan Ass’n, 17 N.Y.2d 82, 268 N.Y.S.2d 294, 215 N.E.2d 485 (1966), held that, under federal common law, a member of a federal savings and loan association had a right to inspect or copy a membership list in order to solicit votes of other members for the election of directors. The district court further held that Bylaw (g) did not supersede this federal common law right:

“The Court is unaware of any authority which states that the Federal Home Loan Bank Board’s Regulation 544.6(g) preempts the federal common law. If the Federal Home Loan Bank Board had wished to suggest that its new form bylaw provided the exclusive rights to members wishing to communicate with other members, when these rights were quite different and far narrower than the right of a ‘reasonable opportunity to ascertain the names and addresses of electors known to the management,’ as described in Murphy, 388 F.2d at 612, it simply would have stated so.” 384 F.Supp. at 1009.

A review of the wording, prior drafts, and Board interpretations of the bylaw convinces us that the district court erred in its conclusion.

After guaranteeing that “[e]very member shall have the right to communicate with other members in relation to any matter which may properly be considered at a meeting of members,” the bylaw proceeds to describe in detail only one means of communication — a mailing by the association of submitted written material. No indication is given in the bylaw that in addition to this carefully detailed procedure, the members retain the right to inspect and copy the membership list.

Additional evidence that Bylaw (g), when adopted by an association, was meant to provide the exclusive means of communication between members is found by comparing the first and final drafts of the bylaw. The first draft provided that in lieu of the mailing by the association, the association could “furnish or make available to the member a current list of the names and addresses of all members of the association.” 30 Fed.Reg. 8698 (1965). In the final draft of the bylaw however, this disclosure provision had been deleted.

Finally, on two separate occasions the Board has expressly stated that the bylaw was intended, when adopted, to supersede any common law right. When faced with a problem of statutory construction, great deference should be shown to the interpretation given the statute by the agency charged with its administration. “When the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order.” Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965).

In an opinion dated November 21, 1968, the Board stated:

“It was the purpose of the Board in authorizing this bylaw amendment to provide a fair, effective and orderly means of communication between members of a Federal savings and loan association. It was intended that such bylaw, if adopted by a Federal association, provide the sole authorized means by which a member of the association may communicate in writing with the membership. In particular, the bylaw is intended to provide for proxy solicitations by members, thus obviating any need which otherwise might exist for a membership list or for copying such information from the association’s records. Further, the bylaw provision enables the solicitation of proxies to be carried out without the risk of harm to the association which might be caused by members who seek the identity of other members under the guise of proxy solicitation, but with the intention of utilizing the information thus obtained for improper purposes.” (Emphasis added.)

Following the issuance of the district court’s opinion and order in this cause, the Board issued a formal interpretative Ruling reaffirming its 1968 opinion. After quoting from its 1968 opinion, the Board stated:

“The Board hereby reaffirms its November 21, 1968, opinion. It has been and still is the Board’s position that when a Federal savings and loan association has adopted the bylaw set forth in § 544.6(g), said bylaw provides the sole and exclusive means of communication between members of the association, and no member of such association is entitled to obtain, inspect or copy the membership list. The Board considers that the release or disclosure of the membership list, even though such list does not reflect the amount of savings of each member, could cause substantial harm to the association and/or its members, and would violate the privacy of the members. Further, the Board believes that individual members of the association have no need to obtain, inspect or copy the membership list, so long as the association is complying with bylaw (g). In this regard, it has been the Board’s experience that bylaw (g) provides a fair and effective means of proxy solicitation by members.” 39 Fed.Reg. 38636 (1974). (Emphasis added.)

In light of the plain words of the Board Ruling, there can no longer be any possible doubt that Bylaw (g), once adopted by an association, provides, with regard to the use of the association’s membership records, the only means of communication between members of the association and preempts any federal common law right to inspect the membership list.

The district court’s reliance on the Murphy, Durnin, and Ochs decisions was inapposite. All three of these cases arose before the Board authorized federal savings and loan associations to adopt Bylaw (g), and the associations involved had no procedure whereby a member could communicate with other members. The courts in these cases correctly recognized the inconsistency of giving the members of a federal savings and loan association the right to vote but providing no means of communication among members. As Judge Friendly noted in Murphy, due to the gap in the Board’s regulations, the court was required to “flesh out” the regulations by use of federal common law. 388 F.2d at 611. Since the decisions in the cases relied upon by the district court, however, the Board, by authorizing Bylaw (g), has “fleshed out” its regulations by providing a means whereby a member of an association can communicate with another member. The federal common law is, therefore, no longer applicable in this area. Illinois v. City of Milwaukee, 406 U.S. 91, 107, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972); Arizona v. California, 373 U.S. 546, 565, 83 S.Ct. 1468, 10 L.Ed.2d 542 (1963).

Reasonableness

The plaintiffs contend, however, that even if Bylaw (g) preempts the federal common law, the bylaw is unreasonable.

The need for some means of communication between the members of a federal savings and loan association is clear. The charter and bylaws prescribed by the Board (12 C.F.R. § 544) expressly provide for the participation of the members in the affairs of the association. All holders of savings accounts and all borrowers from the association are members of the association and are entitled to vote. Members may vote in person or by proxy. Annual meetings of the members are required; special meetings must be called on the written request of members holding in the aggregate at least one-tenth of the capital of the association. The directors of the association are elected by the members at the annual meetings. Moreover, at each annual meeting the officers are required to make a full report of the financial condition of the association and of its progress for the preceding year and outline a program for the succeeding year. Any amendment, addition, alteration, change or repeal of the association’s charter must be submitted to and approved by the members.

Republic contends that a savings and loan association is particularly sensitive to any change in management or any proxy fight, regardless of the outcome, in that any such change or proxy fight can lead to significant savings withdrawals. The mechanism set up for member participation, including the right to vote on directors, indicates, however, that the Federal Home Loan Bank Board has determined that the right of a member to participate in the association outweighs any risk of savings withdrawals due to proxy fights or changes in management. As the courts in Murphy, Ochs, and Durnin recognized, the rights of the association member are analogous to those of a corporate shareholder, and in order for these rights to be more than idle gestures, association members, like corporate shareholders, must have some means of communicating with one another.

Balanced against this interest in communication are certain concerns of the association and the other members. The association has a valid interest in protecting the membership list from commercial use. The public, as well as the members, moreover, has an interest in maintaining the ordinary business operations of the association, which may be disrupted if a significant number of members seeks to inspect and copy the membership list shortly before each annual meeting. Furthermore, the members of the association will have an interest in maintaining their privacy, particularly since deposits with a federal savings and loan association are essentially savings investments, as opposed to risk investments. Bylaw (g) was clearly an attempt to accommodate these interests and yet, at the same time, permit a fair and efficient means of communication for the members of the association.

The plaintiffs contend, however, that access to the membership list is nonetheless essential since their message can only be conveyed effectively through personal face-to-face conversation. We find this argument unpersuasive. The bylaw does not prohibit face-to-face contact. The plaintiffs could simply include in their written communication to their fellow members a notice of an informal meeting to discuss their views. Or the plaintiffs could include in the submitted material a request for a personal interview or a telephone number which the members could call for further information. In addition, the plaintiffs are, of course, free to advertise for meetings and solicit personal contacts by notices and pamphlets in the neighborhood. The plaintiffs’ witnesses, in fact, testified that they had already personally contacted other members of Republic through “block meetings.” The plaintiffs admittedly, under the bylaw, cannot, as they would like, use the membership list to go uninvited to the homes of their fellow members to communicate their views. The other members of the association may not, however, share this desire for such unsolicited face-to-face confrontations at their homes.

The plaintiffs also point out that, under most state statutes, corporate shareholders have the right to inspect the corporation’s shareholder list, for a proper purpose. As indicated earlier, we agree that the rights of the federal savings and loan association member are analogous to the right of the corporate shareholder. There are, however, significant differences between the institutions involved. The association member can withdraw, at will, his entire investment; the typical corporate shareholder, on the other hand, has no assurance that, on any particular date, he will be able to sell his stock for a profit or even the amount he paid for it. While not of great significance, another difference is found in obligations assumed by savings and loan associations for payment of interest, whereas corporate dividends will fluctuate with the profits earned by the corporation. In addition, a federal savings and loan association, unlike a corporation, is supervised and controlled by the government with respect to its creation, bylaws, officers, manner of doing business, investments, expenses, reserves, and accounting. Deposits in federal savings and loan associations, up to a maximum of $40,000, furthermore, are insured by the Federal Savings and Loan Insurance Corporation.

It is true that the members of the association may well, as- here, wish to communicate with one another about matters which relate to the association but are not within the scope of the federal regulation. However, given the federal regulation of the associations, the insurance of the deposits, and the savings, as opposed to risk, nature of the deposits, we cannot say that Bylaw (g) is unreasonable simply because it is slightly more restrictive than statutes dealing with corporations.

Bylaw (g), moreover, will apply evenly to all members of an association. The Board, in its 1968 opinion, expressly stated that association directors who seek to communicate with the members must also follow the procedure outlined in the bylaw:

“Mr. Hadge, as a director, has no greater communication rights than those afforded to the other members of the Association. . . There is no provision in the governing statute, the Home Owners’ Loan Act of 1933, as amended, or in the Board’s regulations which, directly or by implication, authorizes a director of a Federal association, which has adopted permissive bylaw (g), to communicate with members in a manner or by means other than that required by such bylaw.”

We also note that the Model Savings and Loan Act, Sections 11(a) and (b), prohibits access to the membership list absent “express action and authority of the board of directors” and provides instead for an association-mailing procedure much like that found in Bylaw (g). A substantial number of states have adopted the Model Act or similar legislation.

The plaintiffs argue, however, that the bylaw is unreasonable in that compliance would be too costly. The record indicates that the cost of mailing a communication to approximately half of the members of the association would be $1,153. The plaintiffs contend that this figure is unreasonable in light of the “costless face-to-face contact” which could be utilized if they had access to the membership list. See footnote 13, supra. Even assuming arguendo that the cost of mailing will exceed the cost of face-to-face contact, this court has noted that “the fact that a government regulation may cause economic hardship to a party does not make such regulation unreasonable.” H & H Tire Co. v. United States Dep’t of Transp., 471 F.2d 350, 354 (7th Cir. 1972).

We conclude that Bylaw (g) provides a reasonable, fair, and efficient means of communication for members of a federal savings and loan association. It permits communication and proxy solicitation, with only a slight restriction on the methods utilized by the requesting member, and yet, at the same time, avoids the risk of harm to the association and the invasion of privacy which might accompany the disclosure of the membership list.

Constitutionality

The plaintiffs’ final contention is that the bylaw infringes on their First Amendment rights in that it prevents face-to-face communication. The Supreme Court, the plaintiffs note, has recognized that there may be “particular qualities inherent in sustained, face-to-face debate, discussion and questioning.” Kleindienst v. Mandel, 408 U.S. 753, 765, 92 S.Ct. 2576, 2583, 33 L.Ed.2d 683 (1972).

However, as explained earlier, Bylaw (g) does not prohibit face-to-face conversations. At most, it restricts direct, unsolicited visits to the members’ homes. In Breard v. Alexandria, 341 U.S. 622, 642, 71 S.Ct. 920, 932, 95 L.Ed. 1233 (1951), the Court upheld, against a First Amendment attack, a city ordinance forbidding door-to-door solicitation without the request or invitation of the homeowner. The Court in Breard noted: “Freedom of speech or press does not mean that one can talk or distribute where, when and how one chooses. Rights other than those of the advocates are involved.”

“[A] government regulation is sufficiently justified if it is within the constitutional power of the Government; if it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest.” United States v. O’Brien, 391 U.S. 367, 377, 88 S.Ct. 1673, 1679, 20 L.Ed.2d 672 (1968).

The plaintiffs here do not challenge the constitutional power of the Government to issue Bylaw (g). We have found, moreover, that the bylaw does serve a substantial governmental interest. Furthermore, the restriction on the plaintiffs’ First Amendment rights, we have concluded, is relatively slight and certainly no greater than necessary to protect the governmental interests.

The bylaw does provide that the association need not send out the material of the requesting member if the request is “made for an improper purpose.” The plaintiffs do not contend that a requirement of proper purpose is an unconstitutional limitation on their First Amendment rights. Assuming the existence of a common law right to inspect the membership list, such a right would, in fact, be similarly qualified by a requirement that it be exercised in good faith and for a proper purpose. Murphy, supra, 388 F.2d at 612 n. 2; Durnin, supra, 218 F.Supp. at 718; Ochs, supra, 268 N.Y.S.2d at 298, 215 N.E.2d at 489; 2 Hornstein, Corporation Law & Practice § 611 (1959); Annot., 15 A.L.R.2d 11 (1951). Generally, a purpose has been deemed “proper” if it concerns “the welfare of the corporation or the welfare of the shareholder qua shareholder. A purpose is improper if adverse to the interest of the corporation or unrelated to the applicant’s interests as a shareholder.” Hornstein, supra at § 612. Under Bylaw (g), moreover, an “improper purpose” cannot be ascribed to any matter which “may properly be considered at a meeting of members.” The desire of a member to become a director is, therefore, clearly a proper purpose. See Ochs, supra, 268 N.Y.S.2d at 298, 215 N.E.2d at 489.

Provided the requesting member has such a proper purpose (and has submitted the informational data required under the bylaw), the association must, under Bylaw (g), mail the requesting member’s communication to the other members of the association. The bylaw does not provide any grounds, other than improper purpose, as a justification for an association’s refusal to mail the communication, provided the informational data is supplied. Should the association apply the bylaw improperly, the requesting member can, of course, seek appropriate relief.

We conclude that, given the valid governmental interest at stake and the relatively slight and incidental restriction of the plaintiffs’ alleged First Amendment freedoms, Bylaw (g) is constitutional.

The judgment of the district court is reversed with directions that the defendants’ motion to dismiss the second amended complaint be granted.

Reversed and remanded.

APPENDIX

Bylaw (g)

“(g) Communications with Members. Every member of the association shall have the right to inspect the records of the association which pertain solely to his own accounts. Every member shall have the right to communicate with other members in relation to any matter which may properly be considered at a meeting of members. The association may not defeat such right by a redemption of the member’s savings account in the association. Any member requesting a communication with other members as provided herein shall, not less than 30 days prior to the date of an annual meeting and not less than 10 days prior to the date of a special meeting, furnish the association with the following information, in writing and subscribed by him: (1) His full name and address; (2) the nature and extent of his interest in the association at the time his application is made; (3) a statement of the reasons for and purposes of the communication which he desires to make with other members; (4) a copy of such communication; and (5) the date of the annual or special meeting of the members of the association at which the matter will be presented for consideration. Upon receipt of such request, unless made for an improper purpose, the association shall, within 10 days of receipt in the case of an annual meeting and within 3 days of receipt in the case of a special meeting, notify the member either (i) of the number of the association’s members and of the estimated amount of the association’s reasonable costs and expenses of mailing the communication to its members, or (ii) of its determination not to honor the request because the latter fails to comply with the provisions of this section. After receipt of such amount and sufficient copies of the member’s communication, the association shall mail the same to all its members by a class of mail specified by the requesting member within 7 days of receipt of such amount and copies in the case of an annual meeting and at the earliest practicable date prior to the meeting in the case of a special meeting (or, in either case, such later date as the requesting member may specify).”

      . The reference to “the sole and exclusive means of communication between members of the association” is not quite apt but it is a shorthand reference to the limitation proposed by Bylaw (g) on the use of the membership records of the association in connection with communication. As will be indicated hereinafter, there is no stricture upon any member of the association communicating with any other member or members known to the communicator to be a member or members.

      . Kupiec v. Republic Federal Savings and Loan Ass’n, 373 F.Supp. 1382 (N.D.Ill.1974).

      . In their original complaint, the plaintiffs had requested that Republic provide them with a list of its membership. In their amended complaint, the plaintiffs sought only to inspect and copy the membership list.

      . Kupiec v. Republic Federal Savings and Loan Ass’n, 384 F.Supp. 1008 (N.D.Ill.1974).

      . “Banking is one of the longest regulated and most closely supervised of public callings.” Fahey v. Mallonee, 332 U.S. 245, 250, 67 S.ct. 1552, 1554, 91 L.Ed. 2030 (1947).

      . The United States League of Savings Associations, in its amicus brief, and Republic, implicitly, dispute the district court’s holding that there is a federal common law right to inspect the membership list. However, given our conclusion on the question of preemption, we need not determine the matter of what the federal common law is in this area.

      . Similarly, in Durnin, the court noted that “more would be required than silence of the regulations to overcome the general ‘common law’ right of a member of a corporation to inspect and copy the membership list.” 218 F.Supp. at 719. (Emphasis added.)

      . Under Rule 14a-7 of the Securities and Exchange Commission, 17 C.F.R. § 240.14a-7, the corporate management has the option of either mailing communications of requesting shareholders or “in lieu thereof” furnishing a shareholder list. Section 28(a) of the Securities Exchange Act of 1934, 15 U.S.C.
      § 78bb(a), provides inter alia:
      “The rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity . . . At least one federal court has held that where the state statute provides for shareholder inspection of "the shareholder list, the federal rule does not preempt the shareholder’s right under the state statute. Wood, Walker & Co. v. Evans, 300 F.Supp. 171 (D.Colo.1969), aff’d, 461 F.2d 852 (10th Cir. 1972); II L. Loss, Securities Regulations 890 n. 143 (2d ed. 1961). No section comparable to § 28 of the Securities Exchange Act exists in the Home Owners’ Loan Act of 1933.

      . Each holder of a savings account is permitted to cast one vote for each $100, or fraction thereof, of the withdrawal value of his account. A borrowing member is permitted, as a borrower, to cast one vote. No member may cast more than 50 votes. A majority of all votes cast at any meeting of members determines any question. The right to vote is determined by a specified closing date. 12 C.F.R. § 544.

      . “While the [member of the federal savings and loan association] does not possess the far-reaching powers guaranteed the [corporate shareholder] by statute, their basic rights and duties are quite similar, if not identical.” Ochs, supra, 268 N.Y.S.2d at 297, 215 N.E.2d at 488.

      . Republic has approximately 24,000 members.

      . The Board itself indicated that it was, through Bylaw (g), attempting to balance the various interests involved. In its 1968 opinion, the Board stated:
      “[T]he bylaw provision enables the solicitation of proxies to be carred out without the risk of harm to the association which might be caused by members who seek the identity of other members under the guise of proxy solicitation, but with the intention of utilizing the information thus obtained for improper purposes.”
      The bylaw was, however, merely permissive. The board apparently believes that where an association does not adopt the bylaw, state law will control. Prather, Savings Accounts 84 (4th ed. 1970). See footnote 16, infra.

      . We also find, although not resolving the question on this basis, the plaintiffs’ argument somewhat incredible. Our incredulity arises from the fact that while the plaintiffs claim inability to pay approximately $1000 for the purpose of direct mailing pursuant to Bylaw (g), they somehow are going to muster enough person-power and time for face-to-face contact with a substantial proportion of some 24,000 members. If the plaintiffs merely wanted to copy the list for the purpose of mailing invitations to face-to-face meetings, the mailing could be accomplished by utilization of Bylaw (g).

      . According to the plaintiffs, one half of the members of Republic live in one postal zip-code area.

      . The incumbent director may have an advantage over the challenger in that the proxy committee, in the majority of cases, probably votes the revocable proxies of the members in favor of the incumbent. Further, incumbent directors have a built-in advantage over challengers in the day-to-day contact exercised by presumably friendly management with members. Also, we are not unmindful that advertisements in various forms may feature the identity and other background information regarding incumbent directors. The plaintiffs, however, do not challenge these incumbent advantages in this appeal but limit themselves to seeking access to the membership list. Moreover, while arguments can persuasively be made for benefits flowing from continuity of good management, we do not rest our decision upon any theory of a vested right of management to continue in office.

      . E. g„ Alaska Stat. §§ 06.30.115-06.30.130; Ariz.Rev.Stat.Ann. § 6-421; Fla.Stat.Ann. § 665.111; Ill.Rev.Stat. Ch. 32, § 748; Idaho Code Ann. § 26-1829; Iowa Code Ann. § 534.5; Mich.Stat.Ann. §§ 23.540(231), 23.-540(232), M.C.L.A. §§ 489.631, 489.632; Minn. Stat.Ann. § 51A.11; Miss.Code Ann. § 81-11-5; N.J.Stat.Ann. §§ 17:12B-117-17:12B-120; Ore.Rev.Stat. § 722.303; Pa.Stat. Title 15, § 5513; S.D.Code Ann. §§ 52-9-9 and 52-9-10; Utah Code Ann. § 7-13-45; Va.Code Ann. § 6.1-195.46.

      . Since the plaintiffs never submitted material to Republic pursuant to Bylaw (g), there is, of course, no allegation that Republic applied the bylaw in an improper or unconstitutional manner.

      . We need not decide at this time which party has the burden of showing a proper or improper purpose, when that fact is disputed.

      . In reaching our decision we had some question with regard to the requirement that “a copy of such communication be submitted” when the requirement was considered in juxtaposition with the provision that the association should process the member’s request “unless made for an improper purpose.” This conceivably contains overtones of both reasonableness and First Amendment questions. If, however, a copy of the communication were not submitted in advance there would be no way in which it could be ascertained in advance that the mailing was not for an improper purpose, e. g., the sale of merchandise. Further, as a practical answer we have no question that a copy of any communication sent generally to the members would lodge in the hands of the incumbent board, who were also members, within hours after the delivery of the mailing.
      We must assume that the association cannot properly reject the procedures provided for in Bylaw (g) simply because they do not like statements in the communication if in fact the communication is “in relation to any matter which may be properly considered at a meeting of members.”
      If either the association or a member believes that the proxy material of the other side is false or misleading (as opposed to being submitted for an improper purpose), appropriate relief should be sought under 12 C.F.R. § 569.4, which provides, inter alia:

      “No solicitation of a proxy shall be made by meáns of any statement, form of proxy, notice of meeting, or other communication, written or oral, which:
      * * * * * * “(c)(1) Contains any statement that is false or misleading with respect to any material fact, or (2) omits to state any material fact (i) necessary in order to make the statements therein not false or misleading or (ii) necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter that has subsequently become false or misleading.”

        The constitutionality of this regulation is not in dispute here. With regard to the constitutionality of the proxy rules of the Securities and Exchange Commission, see SEC v. May, 229 F.2d 123 (2d Cir. 1956); Note, Freedom of Expression in a Commercial Context, 78 Harv. L.Rev. 1191, 1205-06 (1965); Note, Securities and Exchange Commission Regulation of Proxy Contests, 69 Harv.L.Rev. 1462, 1472-73 (1956). Cf. Donaldson v. Read Magazine, Inc., 333 U.S. 178, 190, 68 S.Ct. 591, 92 L.Ed. 628 (1948).


source: Caselaw Access Project

author: THORNBERRY, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America et al., Plaintiffs-Appellees, v. Herman DIAMOND, Defendant-Appellant.
    No. 74-2273.
    United States Court of Appeals, Fifth Circuit.
    April 24, 1975.
    Rehearing Denied May 29, 1975.

      Herman Diamond, pro se.
    R. Jackson B. Smith, Jr., U. S. Atty., Lamar C. Walter, Asst. U. S. Atty., Augusta, Ga., Patricia T. Barmeyer, Asst. Atty. Gen., Arthur K. Bolton, Atty. Gen., Atlanta, Ga., Wallace H. Johnson, George R. Hyde, John J. Zimmerman, Attys., Dept, of Justice, Washington, D. C., for plaintiffs-appellees.
    Before BELL, THORNBERRY and GEE, Circuit Judges:
   THORNBERRY, Circuit Judge:

This is an appeal from the district court’s granting of a permanent injunction forbidding appellant Diamond “from engaging in or permitting, suffering, or causing, directly or indirectly, any fill or construction operations” on certain salt water tidal marshlands owned by Diamond. Appellant argues that the injunction must be vacated on four separate grounds: (1) the Secretary of the Army or his designate did not request the bringing of this suit, as required by statute; (2) the District Engineer’s granting of a dock permit to appellant in 1965 established a harbor line, and filling shoreward of this line is expressly permitted if begun — as appellant’s operations were — before 1970; (3) the marsh in question is not part of a navigable waterway and thus falls outside the jurisdiction of the Corps of Engineers; and (4) appellant’s property is above the mean high tide line, and the Corps of Engineers has no authority landward of this line. Finding no error in the findings and conclusions of the district court, we affirm.

(1) 33 U.S.C. § 413 makes it the “duty of United States attorneys to vigorously prosecute all offenders against . [sections 401, 403, 404, 406, 407, 408, 409, 411, 549, 686, and 687 of this title] whenever requested to do so by the Secretary of the Army or by any of the officials hereinafter designated . ,.” (emphasis added). The government brought suit against Mr. Diamond pursuant to 33 U.S.C. §§ 403 and 407. Appellant argues that no person authorized by § 413 requested proceedings against him. It is clear, however, that the United States Attorney’s duty to prevent violations of the law justifies his taking action against illegal fill operations regardless of who brings the violation to his attention. United States v. Interlake Steel Corp., N.D.Ill.1969, 297 F.Supp. 912. See also United States v. Rohm & Haas, 5 Cir. 1974, 500 F.2d 167, 174; Connecticut Action Now, Inc. v. Roberts Plating Co., 2 Cir. 1972, 457 F.2d 81, 87, & n. 11.

(2) In 1965 appellant sought and obtained a permit to build a walkway and dock on his property. Up until 1970, riparian owners with open pile structures (docks) could fill shoreward from the dock without a permit, as long as their dock marked the boundary of a designated harbor line. In 1970 the applicable regulation was amended to require a permit for this type of filling, but the new regulation specifically exempted fill operations begun prior to its effective date. 33 C.F.R. § 209.150. Appellant contends that the District Engineer’s approval of his dock in 1965 constituted a de facto designation of a harbor line. Hence, he argues, because he began his fill operations before 1970, he needs no permit.

The government responds that the Regulations provide a specific procedure for designating harbor lines, and no such lines have ever been established around Diamond’s property. Intervenor, State of Georgia, also contends that Diamond is not a riparian owner. The district judge found that “[t]he grant of the permit in 1965 as to the dock facility did not constitute establishment of any harbor line” (App. at 53) and cited United States v. Stoeco Homes, Inc., D.N.J.1973, 359 F.Supp. 672. We note that the relevant portion of the district court opinion in Stoeco Homes was disapproved on appeal. United States v. Stoeco Homes, 3 Cir. 1974, 498 F.2d 597, 602-04. The Third Circuit stated in dicta that 33 C.F.R. § 209.150, which as noted permits continuance of fill operations directed shoreward of existing harbor lines and begun prior to the effective date of the new Regulation, “appears to refer to actual harbor lines established by any authority.” 498 F.2d at 604. The court also noted that the district court failed to mention the new Regulation and that the evidence tended to show the government had in fact designated harbor lines in the area involved in that case.

In the case before us the district judge considered the effect of 33 C.F.R. § 209.-150(b)(2). He held that the evidence showed that harbor lines are designated only in accordance with formal procedures and that no harbor lines have been established in the area of Diamond’s property. These conclusions have not been shown to be incorrect. We see nothing in § 209.150 suggesting that the Regulation is concerned with any harbor lines but those established in accordance with the procedure set out in § 209.-150(c) and its predecessors. Thus, appellant gained no right to fill the marsh by obtaining the dock permit.

(3) Appellant also contends that Richardson Creek, the body of water adjoining his land, is not navigable and thus that the Corps of Engineers has no jurisdiction over it. The district court found as a fact that “Richardson Creek is navigable within the meaning of the Rivers and Harbors Act of 1899 (33 U.S.C. §§ 403, 407) and the Regulations promulgated pursuant thereto” (App. at 46). Appellant’s main argument here is that Richardson Creek is not navigable because it has no interstate or foreign commerce and is not always navigable in fact. These two tests, however, are not necessarily controlling on legal navigability. See United States v. Holland, M.D.Fla.1974, 373 F.Supp. 665, 668 — 70; United States v. Lewis, S.D.Ga.1973, 355 F.Supp. 1132, 1136-39; United States v. Underwood, M.D.Fla.1972, 344 F.Supp. 486, 489-93; cf. United States v. Stoeco Homes, Inc., supra, 498 F.2d at 610 (“In tidal waters the test, in our view, remains what it was before 1851, the ebb and flow of the tide”). But see United States v. American Cyanamid Co., S.D.N.Y.1973, 354 F.Supp. 1202, 1204-05, aff’d 2 Cir. 1973, 480 F.2d 1132. The district court credited testimony tending to show that Richardson Creek is navigable in fact. Because this finding is not clearly erroneous, Fed.R.Civ.P. 52(a), further inquiry by this court into navigability is precluded.

(4) “[T]he Corps has no power landward of . [the mean high tide line] to regulate . . . [the landowner’s] conduct or force reconstruction of the topography as it existed before he began work.” United States v. Joseph G. Moretti, Inc., 5 Cir. 1973, 478 F.2d 418, 428 — 29; cf. United States v. Holland, supra, at 670. United States v. Lewis, supra, at 1136-37, 1139-40. Appellant here claims that the district judge clearly erred in accepting testimony by one government witness and finding as a fact that “the area filled in by Mr. Diamond would have been inundated at mean high water had not the same been filled” (App. at 49). This contention challenges a factual determination by the trial court that can be overturned only for the plainest sort of error. Fed.R. Civ.P. 52(a). No such error appears here.

Affirmed.


author: WEICK, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Jess FARMER, Defendant-Appellant.
    No. 74-1754.
    United States Court of Appeals, Sixth Circuit.
    March 18, 1975.

      Stuart L. Lyon, Kaplan & Lyon, Louisville, Ky., for defendant-appellant.
    George J. Long, U. S. Atty., James H. Barr, Louisville, Ky., for plaintiff-appellee.
    Before PHILLIPS, Chief Circuit Judge, WEICK, Circuit Judge, and MILES, District Judge.

       The Honorable Wendell A. Miles, Judge, United States District Court for the Western District of Michigan, sitting by designation.

   WEICK, Circuit Judge.

Appellant Farmer has appealed from an order of the District Court revoking his probation. On December 17, 1973, Farmer had pleaded guilty to an indictment charging him with conspiracy to conduct an illegal gambling business, in violation of 18 U.S.C. §§ 371 and 1955. He was sentenced to one year and a day imprisonment, but execution of the sentence was suspended and he was placed on probation for a period of three years. A special condition of his probation was that he not engage in illegal gambling activities.

Farmer was represented by retained counsel at the time of his guilty plea and sentence.

Less than two months after Farmer had been placed on probation, namely on February 7, 1974, the Chief Probation Officer filed with the District Court a petition to revoke Farmer’s probation. The petition set forth a violation of the conditions of his probation. Summons on the petition was issued and served upon Farmer requiring him to appear at a preliminary hearing to determine whether there was probable cause that he had violated the conditions of his probation, and whether his probation should be revoked.

The revocation petition alleged that Special Agents of the Federal Bureau of Investigation had obtained a warrant to search the premises located at 3843 South Fourth Street, Louisville, Kentucky, and the person of the defendant Farmer; that upon the execution of the search warrant on January 10, 1974, the Agents found certain specified paraphernalia which was normally and commonly associated with wagering upon horse races and sporting events. The petition further alleged that the owner of the premises, Louis George Paul, advised the Special Agents of the FBI that Farmer had been operating a “book” at that location during the previous seven months.

At the preliminary hearing held on March 7, 1974 before a United States Magistrate, Farmer appeared and was again represented by retained counsel. Farmer’s supervising probation officer testified that he had fully advised Farmer of the conditions of his probation. The Chief Probation Officer testified that the petition for revocation was based upon information received from the Special Agent of the FBI as a result of the search of Farmer and the premises described in the petition for revocation.

Special Agent John Morello testified as to his search of the defendant and of the premises. Morello found $1,885.91 in cash on the person of Farmer and found gambling paraphernalia consisting of daily sporting news referred to as “finger sheets” and entries of horses and race tracks. The material was examined by the FBI laboratory, which concluded that the items contained recordings of wagering. It showed specifically $800 of wagers placed at various race tracks earlier in January, 1974.

Morello also testified as to his conversation with Louis Paul; that Paul informed him that he (Paul) had rented the premises to Farmer for $50 per month, and that Farmer had used the property for the purpose of operating a “hand book.”

The defendant did not testify at the hearing, and he offered no evidence. His attorney did request permission to contest the sufficiency of the affidavit filed with the Magistrate, upon which affidavit the search warrants were issued, but the request was denied.

The Magistrate found that there was probable cause that Farmer had engaged in illegal gambling activities in violation of the condition of his probation, and he ordered Farmer to appear before the District Court for a final revocation hearing.

At the final hearing before the District Judge the defendant appeared with his retained counsel. The evidence consisted of transcripts of the sworn testimony of the various witnesses, the transcripts having theretofore been stipulated as Exhibits 1 through 11.

The defendant did not testify at the hearing. His counsel made various motions, including a motion to suppress all evidence obtained by virtue of the search warrant, the evidence adduced at the preliminary hearing, and to disqualify the presiding Judge and to substitute another Judge to hear the probation revocation proceeding. All of these motions were denied.

It was the contention of Farmer that the search was illegal, and that therefore his rights under the Fourth Amendment to the Constitution had been violated. He relied on Gagnon v. Scarpelli, 411 U.S. 778, 93 S.Ct. 1756, 36 L.Ed.2d 656 (1973); Morrissey v. Brewer, 408 U.S. 471, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972); and Mempa v. Rhay, 389 U.S. 128, 88 S.Ct. 254, 19 L.Ed.2d 336 (1967).

These cases are authority for the proposition that a defendant is entitled to a hearing in probation and parole revocation proceedings as a matter of due process of law, and in some cases, to the appointment of counsel. However, the inquiry at such hearings is a narrow one. As well stated by Chief Justice Burger in Morrissey v. Brewer, supra, 408 U.S. at 489, 92 S.Ct. at 2604:

We emphasize there is no thought to equate this second stage of parole revocation to a criminal prosecution in any sense. It is a narrow inquiry; the process should be flexible enough to consider evidence including letters, affidavits, and other material that would not be admissible in an adversary criminal trial.

Thus it is clear that at such hearings the defendant is not endowed with all of the rights which he possessed prior to conviction.

It would appear that Farmer has trifled with the Court and has abused the confidence reposed in him by the District Judge when he was placed on probation on condition that he would not engage in illegal gambling activity. The fact is that he continued in the same illegal gambling activity in which he had been engaged prior to his conviction.

It is significant that Farmer did not take the witness stand to deny that he had engaged in illegal activity while he was on probation.

This case does not involve harassment by the police so that an exclusion rule should be invoked to prevent recurrence. Other Circuits have not applied the Fourth Amendment in revocation proceedings. See, e. g., United States v. Brown, 488 F.2d 94 (5th Cir. 1973); United States v. Hill, 447 F.2d 817 (7th Cir. 1971). In our opinion these cases were correctly decided.

Reliance on Morrissey v. Brewer, supra, to disqualify the Judge, who favored Farmer with probation, is misplaced. The decision in Morrissey stands for no such outrageous proposition. It must be remembered that Farmer was sentenced at the time he entered his guilty plea. The sentence was suspended only because he was placed on probation.

In our opinion the District Judge did not abuse his discretion in revoking probation.

Affirmed.


author: MULLIGAN, Circuit Judge:

text:
    USAchem, INC., Plaintiff-Appellant, v. Howard A. GOLDSTEIN and Howard A. Goldstein d/b/a Goldseal Associates, Defendant-Appellee.
    No. 187, Dockets 74-1201, 74-1223.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 8, 1975.
    Decided Feb. 14, 1975.

      Douglas S. Gates, Rochester, N. Y. (Harris, Beach & Wilcox, Rochester, N. Y., Henry W. Williams, Jr., Rochester, N. Y., of counsel), for plaintiff-appellant.
    Warren Rosenbaum, Rochester, N. Y. (Shapiro & Rosenbaum, Rochester, N. Y., on the brief), for defendant-appellee.
    Before MEDINA, MANSFIELD and MULLIGAN, Circuit Judges.
   MULLIGAN, Circuit Judge:

Unfortunately for the parties and the federal courts, Howard A. Goldstein and National Chemsearch Corp. of New York entered into a contract on April 19, 1963 whereby Goldstein became employed as a salesman of what the company somewhat elegantly describes as “chemical specialties” and what Goldstein more realistically refers to as “janitorial supplies.” Chemsearch was thereafter totally acquired by USAchem (Chem), a nationwide distributor of soaps, detergents, disinfectants, insecticides and comparable building maintenance and sanitary supplies. The business is highly competitive, with Chem employing about 1,000 salesmen throughout the United States and controlling about 1% or less of the national market. The “Sales Representative’s Agreement” entered into by Gold-stein assigned as his territory three upstate New York counties (Steuben, Yates and Ontario), plus seven municipalities in a fourth county (Monroe). A fifth county (Genesee) was added by letter amendment on December 26, 1963. The company reserved the right to do business in the assigned territory under various trade-names and to employ other representatives therein. The agreement further provided that during his term of employment and for 18 months after its termination for any reason, Goldstein would not himself or with others sell comparable products in the area or solicit or divert the company’s customers in the assigned territory. The contract further provided that

the term of each such covenant so violated shall be automatically extended for a period of eighteen (18) months from the date on which Representative permanently ceases such violation or for a period of eighteen (18) months from the date of the entry by a court of competent jurisdiction of a final order or judgment enforcing such covenants), whichever period is later.

The agreement was terminable by either party without notice. Goldstein was to be paid commissions in accordance with a Commission Schedule, and advances against commissions earned and to be earned would be made by the company in such amounts as the company determined. The agreement further provided that it “shall be construed under and governed by the laws of the State of Texas.” Both Chem and its predecessor were Texas corporations. The agreement was signed in New York and the work was to be performed in New York.

Goldstein, after a short training period, proceeded to vend janitorial supplies in upper New York State to the apparent satisfaction of Chem until Friday, August 25, 1972 when he advised the company that he was quitting. On or about August 1, 1972, he had filed a certificate of doing business under the name “Gold Seal Associates,” which, on Tuesday, August 29, 1972, made its first three sales of comparable chemical supplies to former Chem customers in the assigned territory.

Not until December 11, 1972 did Chem take action against Goldstein by commencing a diversity suit in the United States District Court for the Western District of New York. In the first cause of action Chem alleged breach of the restrictive covenant causing irreparable damage to its business and good will, and unfair competition. In a second cause of action Chem sought to recover advances in excess of earned commissions. Chem also sought a preliminary injunction and a final injunction prohibiting the defendant from competing with Chem for an 18-month period from the date of a final order of the court, plus an accounting, compensatory damages including the advances with interest, punitive damages in the sum of $25,000, and the costs of the suit.

The defendant’s amended answer filed on February 15, 1973 pleaded particular and general denials as well as affirmative defenses, including the illegality of the restrictive agreement, breach by Chem of the contract, interference by Chem with Goldstein by operating competing businesses in the assigned area, and finally the invalidity of the contract because of unconseionability. The defendant also counterclaimed, alleging that Chem had converted funds owed to Goldstein by reason of his participation in profit-sharing and stock participation plans.

On February 22, 1973, Chem moved the district court for a preliminary injunction restraining Goldstein from competing, soliciting orders or divulging confidential information. Goldstein made a cross-motion, by notice of motion dated March 5, 1973, to dismiss the complaint because of failure to establish the $10,-000 jurisdictional amount required by 28 U.S.C. § 1332(a). Both motions were argued on March 12, 1973 before the Hon. Harold P. Burke, United States District Judge, who denied both motions on July 31, 1973. In his findings Judge Burke stated that the plaintiff had failed to show the irreparable damage necessary for a preliminary injunction and concluded that damages and an injunction after trial would constitute adequate protection. The defendant’s motion to dismiss was denied without any comment. Plaintiff did not bother to appeal and the case proceeded to trial on the merits before a jury on December 11 and 12, 1973.

After both sides had rested, Judge Burke made the following rulings as a matter of law from the bench:

1) Denied the renewed motion of the defendant to dismiss because of failure to establish the jurisdictional amount;

2) Dismissed the claim of plaintiff for punitive damages;

3) Granted the plaintiff’s claim for a recovery of unearned advances. (Judgment for $3,336 with interest at 6% was entered on January 11, 1974);

4) Granted • the plaintiff’s motion to dismiss the defendant’s counterclaim;

5) Charged the jury that as a matter of law the contract was valid and that the provisions relating to post-employment competition were valid both as to time and territorial restrictions and that Gold-stein was violating them.

Judge Burke submitted two written questions to the jury to be answered in writing. The questions were as follows:

(1) Has the plaintiff sustained damages by loss of profits by reason of sales made by the defendant within his former contract assigned territory?
(2) If your answer to Question 1 is yes, how much in dollar damages has the plaintiff sustained by loss of profits by reason of sales made by the defendant within his former contract assigned territory, between the dates August 29, 1972, and November 27, 1973?

Plaintiff’s counsel stated that he took no exceptions to the charge and had no requests for any additional charge.

The jury returned the written finding that Chem had suffered no damages. In his findings and judgment of January 10, 1974, Judge Burke stated: “Based upon that finding by the jury, I find that there is no reasonable probability that the plaintiff will sustain damages during a period of eighteen months following the entry of this judgment.” He further found that there was “no reasonable probability that the defendant will in the future divulge to others or use for his own benefit any confidential information acquired during the course of his employment relating to sales, processes, or formulas.” He therefore denied plaintiff’s application for an injunction in all respects.

Chem appeals from the judgment below as well as the denial of its motion for preliminary injunctive relief, and Goldstein cross-appeals from the dismissal of the counterclaim, the denial of his motion to dismiss the complaint for want of the jurisdictional amount, and the granting of judgment against him for $3,336 in advances paid to him by Chem.

I

The substantial and core issue presented to this court is the validity of the restrictive covenant in the sales representation agreement. A threshold question is whether the contract is governed by the law of New York or Texas. Chem is no stranger to the federal courts and the precise contract and the choice of law provision it contains have been before other tribunals. We need not reach the question since we find no significant difference between the two jurisdictions in their approach to the question of employee restrictions. Reasonable limitations of time and space upon the right to compete are not the sole criteria to be examined. Thus, in Grace v. Orkin Exterminating Co., 255 S.W.2d 279, 284 (Tex.Civ.App.1953), the court stated:

Covenants in favor of the former employer, restricting competition by a former employee after the employment has terminated, which lasted for a reasonable time and which operated over a reasonable area, have been specifically enforced by injunction in cases where the goodwill of the employer’s customers had attached to the employee during the latter’s employment and the employee thus had acquired during his employment a special influence with the customer which gave him an advantage over the employer in competition for the customer’s business.

(Emphasis added).

The New York cases have taken an unsympathetic view of post-employment restrictions; we have recently explored this view in Bradford v. New York Times Co., 501 F.2d 51 (2d Cir. 1974), a decision which escaped the notice of both parties to this appeal.

In Purchasing Associates, Inc. v. Weitz, 13 N.Y.2d 267, 272, 246 N.Y.S.2d 600, 604, 196 N.E.2d 245, 248 (1963), the New York Court of Appeals stated that a covenant barring an employee from competing with his former employer is

not only subject to the overriding limitation of “reasonableness” but is enforced only to the extent necessary to prevent the employee’s use or disclosure of his former employer’s trade secrets, processes or formulae [citing cases] or his solicitation of, or disclosure of any information concerning, the other’s customers. ... If, however, the employee’s services are deemed “special, unique or extraordinary”, then, the covenant may be enforced by injunctive relief, if “reasonable,” even though the employment did not involve the possession of trade secrets or confidential customer lists.

There is no doubt that Goldstein, the purveyor of janitorial supplies, was not performing any special, unique or extraordinary services. Compare Bradford v. New York Times Co., supra, 501 F.2d at 58 n. 4. There is no showing either that he possessed any “trade secrets.” Leo Silfen, Inc. v. Cream, 29 N.Y.2d 387, 328 N.Y.S.2d 423, 278 N.E.2d 636 (1972) dealt with a former employee who was engaged in the same business as Gold-stein except at a managerial level and who opened a competing business after he had been discharged. The restrictive covenant in that case only applied if the employee terminated the relationship. Hence, the question before the court was whether the so-called confidential customer lists entrusted to the employee constituted trade secrets which would be protected even in the absence of a restrictive covenant. Judge Breitel, writing for a unanimous court in a thorough review of the authorities, held that where the customers are readily ascertainable outside the employer’s business, as prospective users or consumers of the employer’s services or products, trade secret protection would not attach and no injunction against solicitation of former customers would issue. See Clark Paper & Mfg. Co. v. Stenacher, 236 N.Y. 312, 318, 140 N.E. 708, 710 (1923); Grace v. Orkin Exterminating Co., supra, 255 S.W.2d at 284. The evidence in the case at hand indicates clearly that there was no magic in determining the customers of Chem’s products— they were all listed in classified telephone directories and were readily ascertainable. However, the court in Leo Silfen was careful to note that “[i]n the absence of express agreement to that effect between the parties, or a demonstration that a customer list has the several attributes of a trade secret, courts, without more, should not enjoin an ex-employee from engaging in fair and open competition with his former employer.” 29 N.Y.2d at 395, 328 N.Y.S.2d at 430, 278 N.E.2d at 641 (emphasis supplied). See also Annot., 28 A.L.R.3d 7 (1969).

We conclude that under either Texas or New York law the covenant here was valid to the extent that it precluded Goldstein from soliciting former customers with whom he had done business in his assigned territory. However, insofar as the covenant would preclude him from otherwise competing, it was overly broad and therefore not enforceable. Both states permit the court to enforce the covenant to the extent that it is valid. Karpinski v. Ingrasci, 28 N.Y.2d 45, 51, 320 N.Y.S.2d 1, 6, 268 N.E.2d 751, 754 (1971); Orkin Exterminating Co. v. Veal, 355 S.W.2d 831 (Tex.Civ.App.1962). There is no question on the record before us that Goldstein did solicit former customers immediately after his resignation from Chem. There is evidence that in the first fifteen months of his independent operations Goldstein obtained 81% of his business from former clients. At the same time, the record reveals that Chem had a replacement in the field by October, 1972, who, within a year, had managed to reach a level of sales almost equal to Goldstein’s past records at Chem. This evidence undoubtedly influenced the decision of the jury that Chem had suffered no damages.

Having determined that the covenant was of some validity and that it was breached, we are compelled to conclude nonetheless that Chem is entitled to no relief. Strangely, Chem here complains of the denial of the preliminary injunction on July 31, 1973, even though it took no appeal at that time when it claimed to be suffering irreparable damage. Although Goldstein started a competing business late in August, 1972, Chem did not commence this action until December 11, 1972 and did not move for preliminary relief until February 22, 1973, some six months later. In a Texas case involving a six-month employee restriction, plaintiff delayed two months after competition commenced before seeking relief and, on appeal, the court noted that some eight months had by then elapsed since the initiation of the damaging competition. The court, in affirming the denial of preliminary relief below, noted the lack of diligence of the employer. SCM Corp. v. Triplett Co., 399 S.W.2d 583, 588 (Tex.Civ.App.1966).

We are now asked some 28 months after Goldstein began to compete to grant “preliminary” relief, a request which appears to us to be completely frivolous. The argument that we should now grant an 18-month injunction running from the time of judgment here, as provided in the agreement, is equally untenable. As we have indicated, such an injunction could only be granted with respect to Goldstein’s solicitation of former customers of Chem. That solicitation commenced more than two years ago; whatever special influence Gold-stein was able to bring to bear on former clients has long since been exercised, Grace v. Orkin Exterminating Co., supra, 255 S.W.2d at 288. There was evidence that Chem through its new representative would attempt to and did woo back some old customers, and, on the record before us, there is no showing that Chem is now suffering any irreparable harm which would justify equitable relief at this stage of the proceedings. On the contrary, an injunction now would, in effect, constitute an act of retribution or vengeance that would simply penalize Goldstein for his duplicity, a result which hardly comports with the general policy of limiting employee restrictions which have no purpose but to deprive the employee of his livelihood without any reasonable possibility of protecting the employer, who has in this instance failed to act with the promptness one would anticipate. Cui bonoi

II

We do not believe that the court below erred in dismissing defendant’s counterclaim against Chem which was based upon its alleged conversion of Goldstein’s interest in the employee’s profit-sharing plan, which, after nine years’ employment, vested him with 45% of his Individual Account (45% of $6,560). Section 12.3 of the plan provided for a forfeiture of all amounts remaining in his account if he competed directly or indirectly with his employer. There is no doubt that Goldstein did solicit customers in violation of the covenant and that, under such an agreement, the forfeiture constitutes a valid liquidated damages clause which is enforceable. Bradford v. New York Times Co., supra, 501 F.2d at 57. The liquidated damages clause having been enforced, it would also follow that plaintiff’s claim for final injunctive relief must fail. Diamond Match Co. v. Roeber, 106 N.Y. 473, 13 N.E. 419 (1887).

Chem now seeks to set aside the judgment below denying damages although it took no exception to the charge below and made no requests to charge. On appeal Chem still urges that its damages are incalculable and that it is therefore solely seeking injunctive relief, which we have held to be inappropriate.

Ill

On his cross-appeal Goldstein claims that the court below committed error in its unexplained determination that Chem was entitled to a judgment of some $3,336 plus interest representing the excess of advances over earned commissions during June, July and August, 1972. There is authority both in New York and Texas that, in the absence of an agreement, express or implied, to repay unearned advances, an employer cannot recover them from his employee. However, none of the cases cited reflects the facts developed on this trial. While we find no express agreement to repay advances, the contract did require Gold-stein to “devote his entire time and attention exclusively to the business and interests of the Company.” It appears in the testimony below that Goldstein became ill in the spring of 1972, although the nature of his illness was not established. It further appears that, in July, as Goldstein testified, he was contacting several other suppliers of competing materials with a view to making another arrangement. On or about August 1st, he had filed a certificate to do business and, within four days after giving notice to his former employer, he was able to conclude several orders with former customers. We think it is a fair inference that during the spring and summer of 1972, Goldstein was accepting advances from Chem, not in the expectation of deducting them from commissions he would earn in selling for Chem’s account, but rather for his own purposes. We conclude that, when a contract requires a salesman to devote his full time to the business of his employer, it can be fairly implied that he would repay unearned advances during any period when he was not simply idle but was in fact mounting a campaign against his employer. Cf. Harry R. Defier Corp. v. Kleeman, 19 A.D.2d 396, 243 N.Y.S.2d 930 (4th Dep’t 1963), aff’d on the opinion below, 19 N.Y.2d 694, 278 N.Y.S.2d 883, 225 N.E.2d 569 (1967); Johnson v. Quayle & Son Corp., 236 App.Div. 351, 257 N.Y.S. 874 (1st Dep’t 1932); Schwed v. E. N. Kennedy, Inc., 220 App.Div. 189, 221 N.Y.S. 179 (1st Dep’t 1927); Kupfer v. Holtzmann, 88 N.Y.S. 362 (App.T.1904); Pictorial Films, Inc. v. Salzburg, 106 N.Y.S.2d 626 (Sup.Ct.1951). A contrary holding would encourage a breach of the trust and confidence of the employer. See Leo Silfen, Inc. v. Cream, supra, 29 N.Y.2d at 391-92, 328 N.Y.S.2d at 427, 278 N.E.2d at 639.

Defendant’s further argument that the complaint should be dismissed because the plaintiff failed to establish the $10,000 jurisdictional minimum for diversity actions is not persuasive. At the time the motion to dismiss was made, the court below had, in view of the sales volumes involved, every expectation that damages could exceed the jurisdictional amount; the fact that the jury, having the benefit of the evidence indicating the mitigation effected by Goldstein’s replacement, returned a verdict for defendant is irrelevant. The determination of the court must be considered in light of the facts known at the time the pretrial motion was made and not retroactively. 1 J. Moore, Federal Practice 1 0.91 [3], at 831, 10.92 [1], at 835 (2d ed. 1974).

Although we have limited the validity of the restrictive covenant and to that extent disagree with the court below, we conclude that the district judge was correct in denying the appellant injunctive relief, granting the appellant recovery of the advances, denying the appellee’s motion to dismiss and dismissing the appellee’s counterclaim. Accordingly, we affirm the judgment below.

Affirmed. No costs.

      . Goldstein was sent to Cape Cod for a week to receive instruction from another of the company’s salesmen. On his return, he received instruction for four days from Harold Kimmel, the sales manager. Goldstein then went into the field on his own. He received visits from Kimmel 30 days and 60 days later, and thereafter only intermittently. Chem repeatedly emphasizes in its brief that it gives 18 months of training to its employees before it considers them to be fully productive salesmen.

      . Goldstein has abandoned his claim regarding the stock participation plan, so that we shall be concerned only with his rights in the funds produced by the profit-sharing plan.

      . National Chemsearch Corp. v. Hanker, 309 F.Supp. 1278, 1280 (D.D.C.1970) (applying Texas law); Certified Laboratories v. Rubinson, 303 F.Supp. 1014, 1022 (E.D.Pa.1969) (applying Pennsylvania law); National Chemsearch Corp. v. Bogatin, 233 F.Supp. 802, 808, 809 n. 15 (E.D.Pa.1964), vacated on other grounds, 349 F.2d 363 (3d Cir. 1965) (finding Texas law to be controlling but stating that it made no difference since the contract there was valid under both Texas and Pennsylvania law).

      . The appellant Chem makes much out of the fact that it takes effort and expense on its part to train its salesmen. However, the fact that a former employee was trained by the employer is not a basis for granting an injunction enforcing a restrictive covenant. Clark Paper & Mfg. Co. v. Stenacher, 236 N.Y. 312, 140 N.E. 708 (1923); Kidde Sales & Service, Inc. v. Peairson, 493 S.W.2d 326, 330 (Tex.Civ.App.1973).

      . Purchasing Associates, Inc. v. Weitz, supra, 13 N.Y.2d at 272, 246 N.Y.S.2d at 604, 196 N.E.2d at 248; Kidde Sales & Service, Inc. v. Peairson, 493 S.W.2d 326, 329-30 (Tex.Civ.App.1973).

      . Northwestern Mut. Life Ins. Co. v. Mooney, 108 N.Y. 118, 15 N.E. 303 (1888); Nationwide Mut. Ins. Co. v. Timon, 9 A.D.2d 1018, 194 N.Y.S.2d 429 (4th Dep’t 1959) (per curiam); Kleinfeld v. Roburn Agencies, Inc., 270 App.Div. 509, 60 N.Y.S.2d 485 (1st Dep’t 1946); Carter v. Bradlee, 245 App.Div. 49, 280 N.Y.S. 368 (1st Dep’t 1935), aff’d, 269 N.Y. 664, 200 N.E. 48 (1936); Pease Piano Co. v. Taylor, 197 App.Div. 468, 189 N.Y.S. 425 (1st Dep’t), aff’d, 232 N.Y. 504, 134 N.E. 548 (1921); Denton v. Berset, 212 S.W.2d 196 (Tex.Civ.App.1948); Reynolds v. Wood, 65 S.W.2d 1114 (Tex.Civ.App.1933); Annot., 32 A.L.R.3d 802 (1970).


author: GIBSON, Chief Judge.

text:
    Marvin L. HARBER, Appellant, v. The OHIO NATIONAL LIFE INSURANCE COMPANY, Appellee.
    No. 74-1637.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 9, 1975.
    Decided Feb. 26, 1975.

      Paul H. Schramm, St. Louis, Mo., for appellant.
    John P. Emde, St. Louis, Mo., for appellee.
    Before GIBSON, Chief Judge, HEA-NEY, and ROSS, Circuit Judges.
   GIBSON, Chief Judge.

Marvin L. Harber appeals from a judgment entered by the District Court in favor of defendant, The Ohio National Life Insurance Company, in this damage action for breach of a General Agent’s contract and for tortious interference with contractual relations.

Harber, with ten years insurance selling experience, sought in 1968 to move into agency management. In August, 1969, after unsuccessfully applying to General American Life Insurance Company, he was appointed St. Louis General Agent for Ohio National. He was compensated on a supplemental basis for establishing his own agency using the company’s prearranged Three-Man Model plan (under which he would recruit and train three new agents a year for five years, retaining at least one per year).

During pre-contract negotiations with Ohio National, Harber carefully explained his intention to continue selling in the St. Louis black community and to recruit black and Caucasian producing agents. Ohio National agreed that during the ten years prior to 1969 he had achieved satisfactory results. In 1969 he was selling policies primarily on annual and semi-annual premium payment terms, many using automatic bank collection (ABC) devices for premium payment, a type of business that interested Ohio National because it insured high client “persistency.”

The General Agent’s contract was signed August 16, 1969. Harber’s first recruit as a producing agent was Jack Nelson, a black man, who started on January 1, 1970, and operated successfully until he resigned in August of 1970; his second was Patrick Heaney, a white man, whose services were terminated by Harber as unsatisfactory. Garfield W. Boon, another black man and a novice in the insurance business, started in June 1970, after some delay in obtaining his Missouri license.

When Boon began to submit applications for insurance during late June and July 1970, the home office called into question the “quality” of his business. The company had achieved one of the highest persistency ratios in the industry — 88% — by emphasizing the importance of an applicant’s occupation, income, place of residence and social conditions in projecting persistency. Five of Boon’s eleven- applicants were unemployed and resided in public housing projects where the Retail Credit Company’s inspectors refused to tread for reasons of personal safety. The company, however, issued policies to all of Boon’s applicants because they appeared to be of good moral character. It does not follow, however, that the quality of Boon’s business was up to company standards or that his persistency rating would be favorable. In fact, the company viewed his business as substandard.

On July 23, 1970, the company’s Regional Agency Manager, William Witte, discussed with Harber the fact that Boon’s applications were all drawn on monthly or quarterly premium modes by low income clients, some unemployed. He recited other disturbing factors as well which indicated bad risks from the company’s point of view. Consequently, Witte ordered Harber to restrict Boon to selling semi-annual or annual premium policies, prohibiting monthly or quarterly payment unless by ABC draft, and to require Boon to mail a “persistency rater” to the home office as well as to the General Agent with each application. Additionally, Boon was required to submit cash payments with each application and was prohibited from offering c.o.d. policies.

While there was conflicting evidence concerning whether Harber disagreed as to the wisdom of imposing the restrictions, he and the company realized that the new rules would likely curtail Boon’s chances of succeeding as an insurance salesman. For that reason Harber reluctantly informed Boon in writing on July 24 that by order of the home office he (Harber) was no longer authorized to accept applications under liberal payment terms. Boon accepted the restrictions with what Harber described as a “rather philosophical” reaction. During the month of August, however, Boon encountered serious difficulty operating under the restrictions; he sold insurance to only one of approximately 160 prospects.

On August 3, 1970, Harber approached General American Life Insurance Company to discuss a possible association with it in light of the management experience he had acquired since his prior inquiry in 1969. Soon thereafter, effective August 15, 1970, he was appointed General Agent for General American, and on August 17 he voluntarily terminated his Ohio National agency contract, leaving Boon without supervision and Ohio National without a St. Louis general agent. Harber accomplished the termination lawfully under the terms of his contract.

Harber’s remaining producing agent, Jack Nelson, resigned August 17, 1970, after only seven months in the agency because he considered Ohio National’s restrictions upon Boon to have been unfair and harsh and he feared the same would be imposed upon him. Finally, on August 31, 1970, Boon resigned as well and went to work for Harber with General American. Harber filed suit against defendant Ohio National in November, 1971.

This diversity case was tried to the court, without a jury, with the court finding: (1) that Ohio National committed no material breach of its general agency contract with Harber, and (2) that, in addition to Harber’s lack of standing to assert Boon’s claim, any intentional interference which Ohio National may have committed with Harber’s contractual or business relationships was not actionable because fully justified.

I. The Contract Claim.

Harber argues that the trial court’s conclusion that Ohio National committed no material breach of its contract with him is clearly erroneous. In his view Ohio National had no right to impose the restrictions, and by doing so it breached its contract with Harber by creating chaos in his agency and involving him in an “insidious and deceptive,” racially motivated scheme to eliminate Boon and thereby prevent Harber from performing his own contractual obligations.

He argues that the essence of his August, 1969, agreement with Ohio National contemplated sales in the high risk, low income sections of the St. Louis black community, using liberal payment terms with an aim toward later upgrading to a better class of insurance business. Because such liberal terms were contemplated as essential in Harber’s market, he argues, the company breached the contract when it imposed more restrictive terms upon Boon without publishing them as new uniform company regulations.

The contract in question is a standard printed form prepared by the defendant. Along with various supplemental agreements, it authorized Harber to operate as an independent contractor and to recruit producing agents as independent contractors for the home office, not as Harber’s employees. In some key respects the general and producing agents’ contracts were effectively identical. One such provision in Harber’s and Boon’s contracts reads in part:

V. COMPANY RULES — RELATIONSHIP
The General Agent [or Producing Agent] shall observe and conform to such rules and regulations as the Company, from time to time, shall publish relating to its underwriting practices, the acceptance of risks, and the delivery of policies, or otherwise relating to the general conduct of business.

In denying Harber’s claim, the District Court concluded that Section V of the general agent’s contract afforded the defendant sufficient contractual authority to impose the premium restrictions unilaterally on Harber’s producing agent, Boon.

On the issues raised, the contract is free from ambiguity, and its proper construction will be undertaken by the court as a question of law. Petticrew v. Petticrew, 98 Ohio App. 260, 129 N.E.2d 194, 199 (1953), appeal dismissed, 161 Ohio St. 118, 117 N.E.2d 706 (1954); Monnett v. Monnett, 46 Ohio St. 30, 17 N.E. 659, 660, 663 (1888). The contract is not rendered ambiguous merely by reason of the fact that its operation will work a hardship on one of the parties and corresponding advantage on the other. Ullmann v. May, 147 Ohio St. 468, 72 N.E.2d 63, 67-68 (1947).

On this record it is difficult to tell who suffered the most hardship. The company sought entry into the St. Louis area for multi-racial insurance business. It obtained some eleven months operation, relatively few policies, some of which were substandard viewed from an insurance underwriting perspective, and lost its general Agent, Harber, an experienced insurance man. Harber lawfully terminated the General Agent’s contract after gaining the year’s experience necessary for him to be considered as a General Agent for General American Life Insurance Company. He lined up his General American connection before terminating with the defendant company.

After reviewing the extensive record and briefs in the case, we think the trial court properly interpreted the contract in accordance with the parties’ intent as gathered from the language they employed in the written instrument and supplemental materials. Monnett v. Monnett, supra 17 N.E. at 663; Gillen-Crow Pharmacies, Inc. v. Mandzak, 8 Ohio Misc. 47, 220 N.E.2d 852, 861 (1964), aff’d, 5 Ohio St.2d 201, 215 N.E.2d 377 (1966); Cleveland Trust Co. v. Hickox, 32 Ohio App. 69, 167 N.E. 592 (1929). Harber’s contention that liberal premium payment terms and low persistency underwriting were specifically agreed to by the defendant in its contract lacks support in the record.

Harber’s allegation of racial bias and discrimination in Boon’s company-imposed restrictions appears clearly unwarranted and supplies no basis for the lawsuit. The company wanted business from the black citizens of St. Louis. It knew Harber and his producing agents would be soliciting black business. It was satisfied with the business generated by Harber and Jack Nelson, but not with Boon’s, and it gave Boon a chance to upgrade his business. It was, however, free to cancel Boon’s contract with or without cause. Harber is basically rearguing his factual theory and has failed to show the District Court’s factual findings to be clearly erroneous as required by Rule 52(a), Fed.R.Civ.P.

II. The Tort Claim.

In his tort claim Harber argues that the company’s scheme to oust Boon by imposing restrictions upon him was a tortious interference with Harber’s general agency contract and likewise an interference into Harber’s business relations with his producing agents. The District Court found that Harber lacked standing to vindicate Boon’s contract rights as a producing agent; that the defendant’s conduct fell short of actionable interference with Harber’s business relationships; and that the restrictions imposed upon Boon, founded upon proper contractual authority, were justified for legitimate business reasons.

Although Harber’s complaint may have stated a cause of action for tortious interference (Harber by contract being entitled to an override on business produced by Boon), Downey v. United Weather Proofing, Inc., 363 Mo. 852, 253 S.W.2d 976, 980-81 (1953), the absence of justification for the defendant’s conduct is an essential element in such a claim for relief under Missouri law. Cady v. Hartford Accident & Indemnity Co., 439 S.W.2d 483, 485 (Mo.1969). The District Court’s conclusion that Ohio National was justified in imposing the restrictions was a factual finding that cannot be set aside by this court unless clearly erroneous. Rule 52(a), Fed.R. Civ.P.

With that principle in mind, and without addressing the other possible defects in Harber’s tort claim, we believe the factual material in the record, interpreted most favorably to Ohio National, amply supports the District Court’s conclusion that the defendant’s conduct was justified and thus not actionable by Harber. There was adequate evidence from which the District Court could and did find that the defendant’s restrictions were prompted by reasonable insurance underwriting principles.

Additionally, Harber argues that the defendant’s bad faith intention merely to oust Boon for reasons of racial prejudice, not to upgrade Boon’s performance, should preclude it from justifying its tortious conduct. He failed, however, to convince the trier of fact that bad faith or discrimination of any unlawful nature was involved. Agent Boon evidently wrote inferior business and the defendant lawfully responded by restricting Boon’s future actions in soliciting business.

In light of the fact that the defendant could have lawfully terminated Boon for any reason or no reason under the terms of his contract, its practice of building a case against him because of his minority race may have been overly cautious at best and unnecessary. But in view of the complexity of today’s laws regulating employment discrimination and the conduct of companies in the highly regulated insurance industry, this court must recognize that a company has a right to be cautious.

The judgment of the District Court is affirmed.

      . The Honorable H. Kenneth Wangelin, United States District Judge for the Eastern and Western Districts of Missouri, filed a memorandum opinion July 12, 1974. See 390 F.Supp. 678 (W.D.Mo.1974).

      . “Persistency” is a concept employed in the insurance industry to quantify the percentage of an agent’s clients who continue their insurance in force for at least 13 months. Ohio National has had success in concentrating on persistency predictions when deciding whether to underwrite tendered applications for insurance.

      . Because of an incident reported in Boon’s employment record, the State of Missouri required Ohio National to assume responsibility for his future conduct as an agent, which the company readily agreed to do.

      . In his July 24, 1970, letter to Regional Manager Witte in the home office after informing Boon of the restrictions, Harber stated in part:
      * * * Frankly, I was extremely surprised at Garfield Boon’s rather philosophical attitude on the decision which I had to take regarding the mode of premium of his policies * * *.
      Garfield feels that the Company’s decision to restrict his policies to the Annual, SemiAnnual and/or ABC forms of remittances will help him immeasurably in upgrading his prospecting. As a matter of fact to quote Garfield, he says “my thinking is right along with theirs and the evidence is in the type of activity I have had this week” * * *
      ****** * * * However, there is little doubt in my mind that his growth will be severely stunted because of the decision to not accept quarterly business and I am not attempting in any way to ask for any appeal of this decision at this time.

      . Clause XIII B of Harber’s Ohio National general agent’s contract reads:
      B. Termination by Notice. This Contract may be terminated with or without cause by either party hereto upon written notice to the other party. Boon’s and Nelson’s Ohio National producing agent’s contracts contained identical provisions.

      . Harber’s contentions are clearly undermined by his own admissions in general agency quarterly objectives which he signed as part of his agency plans in 1969 and early 1970. To achieve 90% persistency his agents were told that they “should” follow a policy of accepting no monthly or c.o.d. business and encouraging ABC plans. Such restrictions, with the exception of quarterly business, were substantially similar to those imposed on Boon and are recognized as desirable and necessary underwriting practices. In addition to conforming to Harber’s present practice, they were later used by Boon as well during his subsequent production for another company in 1972 when he sold 176 policies with less than 10% in the monthly premium mode.

      . Section II A of Harber’s contract reads:
      A. Recruiting, Training and Supervision. The General Agent shall recruit and recommend persons for appointment by the Company as Agents within his agency and territory and shall properly train and supervise such Agents in the performance of their duties.

      . The court rejected, as untenable in the context of the contract and the circumstances of the case, Harber’s proposed construction of Section V’s term “publish” as requiring Ohio National to make the restrictions more “generally known.”
      As an indication that the restrictions were indeed disseminated beyond Harber’s agency, the court noted that in March 1970, Ohio National had placed restrictions on monthly premium business to increase persistency in its' Pacific Coast Region. Thus, substantially similar restrictions were placed on other agents of the company prior to those placed on Boon.

      . In Section XII H the parties agreed that the contract is to be construed according to Ohio law.

      . Both the general and producing agents’ contracts state in clause XII F:
      F. Entire Contract. This Contract represents the entire agreement between the parties hereto. No modification * * * shall be binding * * * unless made in writing and signed by * * * the Company * * *.
      Harber does not contend that the parole evidence rule is inapplicable to the instant case.

      . Producing Agent’s Contract clause XIII B, note 5, supra.

      . See generally Restatement of Torts § 766 (1939); Smith v. American Guild of Variety Artists, 349 F.2d 975, 980-81 (8th Cir. 1965), vacated and remanded on other grounds, 384 U.S. 30, 86 S.Ct. 1283, 16 L.Ed.2d 332 (1966) (Minn. law).

      . See also American Surety Co. v. Schottenbauer, 257 F.2d 6, 11-12 (8th Cir. 1958); Restatement of Torts § 767 (1939); 1 F. Harper & F. James, Jr., The Law of Torts § 6.12 (1956); W. Prosser, The Law of Torts § 123 (3d ed. 1964).

      . The court noted, for example, a passage from Ohio National’s Field Underwriter’s Manual:

      GENERAL UNDERWRITING RULES

        Questionable Classes of Business Economic and social conditions and personal habits have a significant effect on both mortality and morbidity rates of life and health insurance among policyholders as well as on expense and lapse rates of policies.

        General. Individuals and families living in slum neighborhoods, under congested and overcrowded conditions, in unhealthy and undesirable surroundings, with low or uncertain income, under circumstances, where there is high incidence of tuberculosis, influenza, pneumonia, syphilis, or other communicable disease, where infant and maternal mortality is high, in neighborhoods where homicide, accident, and crime rates are high, and in squalid home surroundings even in a desirable community, produce mortality and persistency results which do not meet our Company standards. Persons in these environmental situations should not be solicited.

      (Emphasis in original.)

      . The July 27, 1970, out-of-context statement by the defendant’s Vice-President Warnemunde, upon which Harber relies, loses its discriminatory significance when read in the entire context of Wamemunde’s letter.