author: HEANEY, Circuit Judge. MATTHES, Senior Circuit Judge

text:
    NATIONAL FOOTBALL LEAGUE PLAYERS ASSOCIATION, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, and National Football League Management, Council, Intervenor.
    No. 73-1512.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 14, 1974.
    Decided Sept. 3, 1974.
    Rehearing Denied Nov. 7, 1974.
    Matthes, Senior Circuit Judge, concurred and filed opinion.
    Edward M. Glennon, Minneapolis, Minn., for petitioner.
    John D. Burgoyne, Atty., N.L.R.B., Washington, D. C., for respondent.
    Theodore W. Kheel, Battle, Fowler, Lidstone, Jaffin, Pierce & Kheel, New York City, for intervenor.
    Before MATTHES, Senior Circuit Judge, HEANEY, Circuit Judge, and SMITH, Senior District Judge.

       TALBOT SMITH, Senior District Judge, Eastern District of Michigan, sitting by designation.

   HEANEY, Circuit Judge.

The National Football League Player’s Association [Union] petitions this Court to review an order of the National Labor Relations Board dismissing a complaint against the Employers, consisting of the National Football League [Owners] and the National Football League Management Council [Council]. The complaint alleged that Employers violated § 8(a)(5) and (1) of the National Labor Relations Act, 29 U.S.C. § 151 et seq., by unilaterally establishing a rule that “any player leaving the bench area while a fight is in progress on the field will be fined $200.” The Board’s decision and order is reported at 203 N.L.R.B. No. 165 (1973).

We emphasize at the outset that the wisdom of the rule is not at issue here. The sole question before us is whether the Board erred in dismissing the complaint on the ground that the rule was adopted and promulgated by the Commissioner of the NFL rather than by the Employers. A brief discussion of the facts is necessary to an understanding of the issue.

On January 22, 1971, the Union was certified by the NLRB as the exclusive bargaining representative for the professional football players employed by the NFL and its member clubs. A collective bargaining agreement was signed by the Union, Council’s predecessor (see, n. 1, supra) and each of the member clubs on June 17, 1971, effective February 1, 1970. The Agreement expired on January 31, 1974.

In early 1971, the NFL Commissioner, Pete Rozelle, discussed with his staff the problem of injuries to players through violence on the football field. He directed a member of the NFL staff to discuss this problem with the competition committee (consisting of four Owners or their representatives) to deal with the effect of proposed changes in policy on the competitive aspects of football. The committee recommended that a rule be established to fine players who left the bench during a fight on the field. At the March 25th meeting of the Owners, the Commissioner explained the proposal to the clubs. The Owners then adopted a rule which read :

Any player leaving the bench area while a fight is in progress on the field will be fined $200.

Rozelle subsequently fined thirty-four players for leaving the bench while a fight was in progress during the Minnesota-San Diego exhibition game on August 4, 1971, fifty-eight players for doing the same thing during the Atlanta-San Francisco game on August 15th, and fourteen players for identical conduct during the Chicago-New Orleans game on October 10th.

On September 30th, the Union’s Executive Director, Edward Garvey, wrote to the Commissioner requesting “ information with respect to the fines imposed as a result of the Minnesota-San Diego incident. On October 18th, Garvey again wrote to the Commissioner. He appealed the imposition of the fines on players who had left the bench during the Minnesota-San Diego and Atlanta-San Francisco games. He did so on the grounds that the players had not been notified of the new rule and that the rule imposing the fines was violative of the Collective Bargaining Agreement, which provided that:

* * * any change in current practices affecting employment conditions of the players shall be negotiated in good faith.

Commissioner Rozelle replied to the two letters on October 21st. He wrote:

While still considering your letter of September 30 regarding player fines I am now in receipt of your October 18 letter on the same subject.
The action taken as the result of the player fights was done so under a resolution passed by the member clubs last March. It reads:
“Any player leaving the bench area while a fight is in progress on the field will be fined $200.”
* * *x- * * *
It has been the long-standing policy of this office to most certainly accord any disciplined players the right of appeal to the Commissioner, either through writing or hearing, but I have serious doubts whether the [Union] has jurisdiction in the area of player fines for misconduct during the course of a game. Therefore, I believe I must request written argument from the [Union] and the [Council] on this issue before I can entertain any grievance initiated by the [Union]. (Emphasis added.)

The Union responded as follows:

* * * [T]he Collective Bargaining Agreement makes it clear that the [Union] may appeal any grievance that it so desires. Article XII, Section (d) states:
“Any such fine and amount thereof, however, may be made the subject of a grievance in accordance with the provisions of Article X hereof.”
Article X relates to the non-injury grievance procedure, and Step 1 states:
“Any NFL player or the [Union] may present a written grievance to any member club or to the League itself within sixty days . . . ”
I completely reject any suggestion that we could not have jurisdiction in this matter, given the clear language of the Collective Bargaining Agreement. * * *

It also raised a series of questions going to the merits of the issue.

On December 29, 1971, Garvey wrote to Commissioner Rozelle stating that he was withdrawing the entire matter from the Commissioner’s hands and that he was asking the Council to begin negotiations on the matter. He stated that he understood Rozelle’s position to be that he was simply implementing a decision of the Owners and that, therefore, the matter was not properly before him.

On February 1, 1972, the Council’s Executive Director wrote to Garvey as follows:

We take the position that [the Commissioner] was acting under the powers vested in him as Commissioner under the Collective Bargaining Agreement which incorporates by reference both the NFL Constitution and ByLaws and the Standard Player Contract.
In the absence of language to the contrary, we contend that he has the authority to fine a player and it is reviewable as provided for in the Constitution and By-Laws and the Standard Player Contract. They provide for the right of hearing before the Commissioner.

The Union filed an unfair labor practice charge with the Board on December 10, 1971, alleging that the Employers’ unilateral adoption of the rule was a refusal to bargain. Amended charges were filed on February 11 and May 10, 1972. The General Counsel of the N.L. R.B. issued a complaint on May 12, 1972. It alleged that the Employers violated § 8(a)(5) of the Act by unilaterally promulgating and implementing a new rule providing for an automatic $200.00 fine against any player leaving the bench area during a fight or altercation on the football field during the game.

The Employers denied the Union’s allegations, taking the position that the fines were Commissioner fines rather than Owner fines and that the Employers had not violated § 8(a)(5) because they had not instituted the rule change. They contended, alternatively, that the action was taken more than six months prior to the filing of the charges by the Union and hence was'barred by § 10(b) of the Act, and that the Collective Bargaining Agreement contained grievance and arbitration mechanisms for resolution of the issue and that the Board should stay its hand in deference to those mechanisms.

The administrative law judge found: (1) that the rule was an Owners’ fine rather than a Commissioner’s fine; (2) that the statute of limitations did not start to run until late August of 1971 when the Executive Director of the Union first learned of the fines and that, therefore, the charges were not barred by § 10(b) of the Act; and (3) that deferral to arbitration was not appropriate because there was no merit to the Employers’ position and because the policy considerations underlying the deferral rule would not be satisfied by a procedure where “the arbitrator [Commissioner Rozelle] was determining the merits of his own conduct.”

The Employers filed exceptions to the administrative law judge’s decision.

The Board agreed that deferral would be inappropriate for the reason that the Commissioner was not a disinterested party and thus the purpose of the Act would not be served by having him resolve the dispute. It went on to state:

As to the merits of the bench-fine issue, the General Counsel and the Union concede that the Commissioner has, and always has had, the authority to impose fines for conduct detrimental to football with or without the approval of the owners. This fact leads us to conclude that nothing of substance was changed by the owners’ action at their March 25 meeting. Since it is conceded that the Commissioner had the authority to impose the rule in issue, and indeed was the moving force in securing an adoption of the rule by the owners, we do not perceive any meaningful or substantial unilateral conduct arising out of the meeting of the owners. Thus, if the owners had not met on March 25 and the Commissioner had levied the fines without prior consultation, there would be no dispute as to the propriety of his conduct. What the General Counsel and Charging Party are asking us to find is that by approving the resolution, the Respondent unilaterally altered the terms and conditions of employment. We believe any such holding would exalt form over substance, in that mere approval of a rule initiated by the Commissioner adds nothing of substance when the facts show that such approval was neither required nor that it partook of any substantive difference over what the Commissioner could have done without such approval. We therefore find that Respondent’s conduct on March 25 did not constitute a violation of Section 8(a)(5) and (1) and we shall accordingly dismiss that portion of the complaint. (Emphasis added.)

We understand the Board to have made the following findings: (1) that the Union conceded that the Commissioner had a right to adopt the bench-fine rule; (2) that the bench-fine rule had in fact been promulgated by the Commissioner rather than the Owners and that the Owners engaged in no meaningful or substantial conduct with respect to its adoption or promulgation; and (3) that, as a matter of law, there is no substantive difference between the Commissioner’s imposing individual fines for conduct detrimental to the game after notice and hearing and promulgating the bench-fine rule — thus, promulgation of the rule was within the authority of the Commissioner.

(1) The record does not support the Board’s finding that the Union conceded that the Commissioner had the right under the Collective Bargaining Agreement to adopt and promulgate the bench-fine rule; to the contrary, the Union denied that he had such a right. The Union agreed only that the Commissioner had a right pursuant to the Agreement to fine a player for conduct detrimental to the League or professional football after notice and hearing. The distinction is a meaningful one to the Union and also to us. If the Commissioner’s power is limited in the manner the Union suggests, each player who has been notified that he is being charged with conduct detrimental, to the game can at the hearing attempt to prove that the conduct in question is not, in fact, detrimental and to prove that he did not engage in the proscribed conduct. The questions raised in footnote 2, for example, would have to be answered by the Commissioner.

(2) Nor does the record support the Board’s finding that the bench rule was adopted by the Commissioner without meaningful or substantial conduct on the part of the Owners.

(a) The Commissioner stated in his letter of October 21, 1971, that the action was taken pursuant to a resolution passed by the member clubs. He was not called by the Employers to qualify that statement. Thus, it is fair to say that the Commissioner viewed the rule as one adopted and promulgated by the Owners and the individual fines as being levied pursuant to that rule.

(b) The Commissioner did discuss with his staff “his feeling that from now on if a player left the bench area during a fight, he felt he would have to fine him.” But, he was obviously concerned about the reaction of the Owners to such a course of action and instead of announcing that such would be his policy or simply imposing a fine when an occasion occurred, he asked a member of the staff of the NFL to discuss the matter with the competition committee of the League — a committee in which only management is represented. When that committee indicated its approval, the Commissioner still wasn’t satisfied. He had the committee bring a recommended resolution to the Owners for their approval. It was only when Owners voted twenty-four to two that the rule should be put into effect that the commissioner had a press release sent out indicating that the bench-fine rule was now in effect.

(c) At no time prior to the press release did the Commissioner discuss the problem of players leaving the bench during fights with the Union. If, as the Employers contend, the Commissioner is the agent of both the Employers and the Union, and promulgated the rule as their agent, one must assume a serious breach of ethics by the Commissioner if he talked to only one of his principals. And, no one suggests that the Commissioner is an unethical man.

To summarize, every fact and inference supports the administrative law judge’s conclusion that the rule was adopted and promulgated by the Owners.

(3) Finally, the Board held that because the Commissioner had the power to promulgate the bench-fine rule, he exercised that power. The premise is doubtful, see, n. 3, supra, and the conclusion a non sequitur. While the Board is permitted to draw inferences from the facts in the record and while we are required to accept such inferences when supported by facts, we are not required to adopt inferences or conclusions that are totally lacking in factual support.

We hold that the Employers, by unilaterally promulgating and implementing a rule providing for an automatic fine to be levied against any player who leaves the bench area while a fight or an altercation is in progress on the football field, have engaged in unfair labor practices within the meaning of Section 8(a)(5) and (1) of the Act.

We remand to the Board with instructions to it to adopt a remedy consistent with this opinion.

MATTHES, Senior Circuit Judge

(concurring):

In declining to adopt the Administrative Judge’s findings that the owners had “instituted the bench-fine rule unilaterally,” the Board focused upon the authority of the Commissioner “to impose fines for conduct detrimental to football with or without the consent of the owners.” From this premise, the Board reasoned that

[t]his fact leads us to conclude that nothing of substance was changed by the owners’ action at their March '25 meeting * * *. Thus, if the owners had not met on March 25 and the Commissioner had levied the fines without prior consultation, there would be no dispute as to the propriety of his conduct. What the General Counsel and Charging Party are asking us to find is that by approving the resolution, the Respondent unilaterally altered the terms and conditions of employment. We believe any such holding would exalt form over substance, in that mere approval of a rule initiated by the Commissioner adds nothing of. substance when the facts show that such approval was neither required nor that it partook of any substantive difference over what the Commissioner could have done without such approval.

I am bothered because the Commissioner departed from his apparent normal course followed in imposing fines “without the consent of the owners.”

A considered analysis of the whole record convinces me that the Commissioner was concerned, and properly so, over the increasing possibility of unnecessary injury to players, and perhaps spectators, as a result of fights on the field. In his expertise, the Commissioner concluded an automatic fine should be imposed upon all players leaving the bench during an altercation on the field. And according to the position now assumed by the Commissioner and the Board, the Commissioner was fully authorized under the Constitution to take just such action. But apparently the Commissioner was also concerned about the impact such action would have upon the competitive aspects of the game; thus, he was motivated to refer the problem to his Competition Committee and then to the owners, pursuant to the requirements of the League Constitution.

The Committee pursued its task, contacted the owners, and the subject rule was submitted at the March 25 meeting of the owners. The full minutes of that meeting are not before us. The scanty record reads in pertinent part:

Any player leaving the bench area while a fight is in progress on the field will be fined $200.

Approved by a vote of 24 Yes, 2 No. Thus, it is readily apparent that the rule was adopted by 24 of the 26 owners, and we can assume they acted responsibly only after full consideration of the proposal.

This did not end the matter. In his letter of October 21, 1971, the Commissioner seized upon the action of the owners at the March 25 meeting by informing Edward R. Garvey, the Executive Director of the NFL Players Association, as follows:

Dear Ed:
While still considering your letter of September 30 regarding player fines I am now in receipt of your October 18 letter on the same subject.
The action taken as the result of the player fights was done so under a resolution passed by the member clubs last March. It reads:
“Any player leaving the bench area while a fight is in progress on the field will be fined $200.”

This record leaves me with the firm impression that the actions of the owners and the Commissioner in the consideration and adoption of the subject rule belies the Board’s belated conclusion that the owners’ participation in causing the rule to be adopted constituted nothing more than idle and meaningless conduct. Rather, the inference is inescapable that the Commissioner and the owners themselves considered the manner of promulgating the rule to be highly significant. Perhaps Commissioner Rozelle sought to insulate himself from the expected criticism of the players by ascribing responsibility for the rule to the owners. Or the Commissioner and owners may have believed that enactment of the rule by the owners would lend greater weight to the Commissioner’s action when he sought to enforce the rule against offending players. In any event, the conduct of the owners and the statements of the Commissioner seem at variance with the Board’s characterization of the vote by the owners as meaningless.

In the final analysis, this, like many labor cases, involves important fact questions and it is our responsibility as the reviewing court to determine if the Board’s findings and decision are supported by substantial evidence on the record considered as a whole. I am not convinced that this test has been met.

I therefore agree that the action should be remanded for an appropriate remedy.

      . The League consists of twenty-six member clubs. The Council is an unincorporated organization designated by the dubs as their collective bargaining representative, and was formerly known as the National Football League Players Relations Association [NFLPRA]. Hereinafter, the NFLPRA is referred to as the Council.

      . Some of tlie questions posed by Garvey were:
      * * * [D]id the League determine the players who had left the bench while a fight was in progress on the field? If so, how did the League make this determination? Since the ball changed hands in both instances, is a player on the offensive or defensive team who would normally take the field under these circumstances, subject to a fine? Did the League study the films or did the League simply impose the fine on the clubs and ask the clubs to make the determination of who was to be fined and who was not to be fined?

      . It is not necessary for us to decide this issue in this proceeding; suffice it to say that the Union’s position is not without merit. Section 8.13(A) of the By-Laws of the League provide:
      Whenever the Commissioner, after notice and hearing, decides that * * * any player * * * has been or is guilty of conduct detrimental to * * * professional football, then the Commissioner shall have complete authority to: (1) Suspend and/or fine such person in an amount not in excess of five thousand dollars ($5,000) * * *
      Section II of the Standard Player Contract for the National Football League provides:
      Player acknowledges the right and power of the Commissioner * * * to fine and suspend * * * any player * * * who is guilty of any conduct detrimental to the welfare of the League or of professional football. * * *
      Article II, Section 2, of the Collective Bargaining Agreement provides:
      The provisions of this Agreement * * * supersede any conflicting provisions now existing or which shall exist during the life of this Agreement in the NFL Constitution and Bylaws, the Standard Player Contract, * * * and any other document affecting the wages, hours, or working conditions of NFL players.
      Article III, Section 1, of the Agreement provides :
      * * * The Standard Player Contract shall govern the relationship between the clubs and the players, except that this Agreement shall govern if any terms of the Standard Player Contract conflict with the terms of this Agreement. * * *
      Article II, Section 3, of the Agreement provides that “disputes over the meaning, interpretation or proper application of the terms of this Agreement” will be determined by unanimous decisions of a joint committee on contract interpretation, and Article X provides that non-injury grievances will be resolved by a two-step grievance procedure culminating in submission to the Commissioner.
      An addendum to the Agreement states that any changes in current practices affecting employment conditions of the players shall be negotiated in good faith.
      It seems clear from the above that whether the Commissioner is an agent of the Employers, the joint agent of the Union and the Employers, or an independent third party, he has no authority to make changes in practices which affect employment conditions of the players. It also seems clear that when lie acts in the capacity of an arbiter, lie must act in an impartial manner within the authority given to him by the Collective Bargaining Agreement, and that he must decide matters presented to him on the basis of the evidence submitted by the parties.


source: Caselaw Access Project

author: PELL, Circuit Judge.

license: Public Domain

text:
    Robert K. BURNS et al., Plaintiffs-Appellants, v. Stuart R. PADDOCK, Jr., et al., Defendants-Appellees.
    No. 73-1243.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 25, 1974.
    Decided Sept. 5, 1974.
    Rehearing Denied Oct. 4, 1974.

      Edward L. S. Arkema, Robert Plotkin, Chicago, 111., for plaintiffs-appellants.
    Edward L. Foote, Chicago, 111., for def endants-appellees.
    Before PELL, STEVENS, and SPRECHER, Circuit Judges.
   PELL, Circuit Judge.

Plaintiffs-appellants John R. Malone and George M. Hilgendorf appeal from the district court’s dismissal of their first amended complaint (hereinafter designated complaint) and denial of their motion for a preliminary injunction.

The action arises from plaintiffs’ purchase of a minority interest in the Paddock corporation, a close corporation engaged in the business of publishing community newspapers. The defendant Stuart R. Paddock, Jr., Robert Y. Paddock, and Margie Flanders (Paddock) are brothers and sister. During the period in question, the Paddocks were directors and the majority shareholders in .the Paddock corporation. Defendant Andrew Lamb was not associated with the corporation at the time of plaintiffs’ purchases but later became an officer and director of the company.

The complaint contained five counts, each proposing an alternative theory of liability. Count I was based on section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)), Rule 10b-5 of the Securities Exchange Commission (17 C.F.R. § 240.10b-5), and section 17 of the Securities Act of 1933 (15 U.S.C. § 77q) Counts II and III were based on the same federal statutes and rule as Count I plus the Illinois common law. Counts IV and V were based on the Delaware and the Illinois common law. Jurisdiction was based on section 22(a) of the Securities Act of 1933 (15 U.S.C. § 77v(a)), section 27 of the Securities Exchange Act of 1934 (15 U.S.C. § 78aa), and the doctrine of pendent jurisdiction. The plaintiffs sought damages as well as declaratory and injunctive relief.

The district court dismissed the complaint for failure to state a claim upon which relief could be granted. At the same time the district court denied the plaintiffs’ petition for a preliminary injunction. The plaintiffs appeal from these orders.

We note at the outset that, on a motion to dismiss, the allegations in the complaint must, of course, be taken as true with any reasonable inferences drawn in favor of the pleader. “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 5. Ct. 99, 102, 2 L.Ed.2d 80 (1957).

COUNT I.

Count I alleges that the defendants violated the federal securities fraud statutes and rules by inducing Malone and Hilgendorf to purchase securities in the Paddock corporation by means of promises which defendants did not intend to fulfill. In 1971, the Paddock corporation, according to the complaint, was in a “desperate” financial condition. Malone and Hilgendorf were, at that time, officers and directors of the company but not shareholders. During 1971, they and a number of their friends purchased securities in the company. The Paddock family, however, retained the majority interest (53%) of the voting stock.

The complaint alleges that, in making their investments, the plaintiffs relied upon certain oral promises made to them by defendant Stuart Paddock, Jr., who was then president of the company. The alleged promises were:

“(a) That for a period of ten years, control of the Company would be placed in the Minority Investors through the device of a voting trust agreement establishing a voting trust in which was to be placed all of the Paddocks’ stock and which would be effectively controlled by Minority Investors.
(b) That no one would be permitted to become a director of the Company unless he owned at least one percent of the Company’s stock.
(c) That the plaintiffs would occupy certain important offices and positions with the Company and play important roles in the management of the Company.
(d) That experienced outside professional management would be brought into the Company.
(e) That the Company would form, participate in and vigorously promote a group advertising sales operation known as ‘super group,’ to which other publishers would be invited to join.”

The plaintiffs allege in their complaint that they would not have made the purchases of Paddock securities if these promises had not been made. They also allege that Stuart Paddock, Jr. made these promises with the intention of breaching them. The other defendants, according to the complaint, although it is asserted on information and belief, either authorized the promises or ratified them after they were made, all with the intention of not fulfilling them. All of the promises, it is alleged, have, in fact, been breached. Finally, the plaintiffs allege that the defendants conspired to induce the plaintiffs to invest in the company, intending then to oppress the plaintiffs in a minority position until the plaintiffs agreed to sell their securities to the Paddocks at a price below the actual value of the securities.

The condition of the Paddock corporation has, the plaintiffs admit, vastly improved since they made their investments. The company has, nonetheless, allegedly lost a large amount of profits due to the defendants’ failure to fulfill the promises.

Rule 10b-5 prohibits, inter alia, the employment of “any device, scheme, or artifice to defraud” in connection with the purchase or sale of any security. The district court dismissed count I on the ground that “broken promises do not rise to the level of fraud or a violation of Rule 10b-5.” This was a misstatement of the law.

Where a promise is made with the intention of not keeping it, there is a scheme or artifice to defraud. Durland v. United States, 161 U.S. 306, 313, 16 S.Ct. 508, 40 L.Ed. 709 (1896). This court has specifically adopted the rule that a promise made with a deceptive intent violates the securities acts.

“The law has been long established that a scheme to defraud may consist of suggestions and promises as to the future, when not made in good faith but with deceptive intent.” United States v. Herr, 338 F.2d 607, 610 (7th Cir. 1964), cert. denied, 382 U.S. 999, 86 S.Ct. 563, 15 L.Ed.2d 487 (1966).

See also, Robinson v. Cupples Container Co., 316 F.Supp. 1362, 1366 (N.D.Cal.1970); 1 A. Bromberg, Securities Law: Fraud § 4.2, at 72 (1973).

In the present case, Malone and Hilgendorf alleged, in their complaint, that the defendants never had any intention of fulfilling the promises made to plaintiffs. They further alleged that they relied on the promises in making their investments. Such assertions were, under the circumstances, sufficient to allege actionable fraud under the federal securities laws.

The defendants contend, however, that the dismissal of the complaint can be justified on other grounds. The complaint affirmatively establishes, the defendants argue, both a lack of reliance and a lack of damages.

We turn first to the question of reliance. The defendants’ argument with respect to reliance is comprised of, essentially, two steps. First, the defendants argue that the only promise which this court need consider is the one concerning the voting trust. This is the crucial promise, it is argued, since the group controlling the voting trust would also control the performance of the other four promises. Second, the defendants contend that the facts stated in the complaint affirmatively establish that Malone and Hilgendorf did not rely on the promise that the minority investors would control the voting trust.

We disagree with both parts of the defendants’ argument concerning the plaintiffs’ reliance. First, we reject the contention that, in determining whether the plaintiffs relied on the five promises, we need only consider the promise concerning the voting trust. Initially, we note that the last three of the remaining four promises would be implemented by the board of directors not those voting the shares. While it may be ordinarily assumed that directors elected under circumstances such as the present ones will be puppetarily responsive to the will of those who placed them in office, this result does not always necessarily follow. Further, as many corporate directors are now aware there are fiduciary obligations imposed on board members, violation of which will result in exposure to individual liability. In any event, it could be anticipated that during certain time periods, e. g., when positions on the board became vacant by death or resignation, the' board would not necessarily be responsive to the will of the voting trust.

Moreover, even assuming that minority control of the voting trust would, in most circumstances, be sufficient to guarantee fulfillment of the other four promises, these other four promises could, nevertheless, have been fulfilled by the defendants without giving the minority investors control of the voting trust. The defendants do not question the plaintiffs’ allegation that they relied on these four promises.

Even assuming, arguendo, that the voting trust promise is the only relevant promise, we do not find that the complaint affirmatively establishes a lack of reliance on this promise. The facts regarding the voting trust, as disclosed by the complaint, are as follows. The trust agreement, which provided for five trustees, was signed prior to the actual investment by plaintiffs. The five persons originally designated to be trustees were: defendants Stuart Paddock, Jr. and Robert Paddock; plaintiff Malone; and minority investors Fred Goss and Norman Isaacs. However before the plaintiffs purchased the securities, Goss and Isaacs decided not to invest in the company. Defendant Flanders and plaintiff Hil-gendorf were designated as trustees in place of Goss and Isaacs. The plaintiffs purchased the securities, according to the complaint, “on the basis that two of the trustees, plaintiffs Malone and Hil-gendorf would be able on behalf of the Minority Investors, to control the voting' of the stock held in the voting trust, because of a clear split in the family between Stuart R. Paddock, Jr., on the one side and his brother and sister on the other.”

The defendants contend that since the plaintiffs knew, when they invested, that three of the five trustees were Paddocks, the plaintiffs could not have relied, in making their investments, on Stuart Paddock, Jr.’s promise that the minority investors would control the voting trust.

We find this argument unpersuasive. The plaintiffs may be able to prove at trial that Stuart Paddock, Jr., in making his promise, indicated that he himself would vote with the majority trustees if this proved necessary to insure minority control of the voting trust. If so, the plaintiffs could have continued to rely on Stuart Paddock Jr.’s promise of minority control even though three Paddocks were trustees — since if Stuart Paddock, Jr. voted with the plaintiffs, the minority investors would control the voting trust. Thus, taking the facts in the light most favorable to the plaintiffs and construing all reasonable inferences in th'eir 'favor, we conclude that with respect to the issue of reliance, the plaintiffs have alleged facts sufficient to withstand a motion to dismiss.

We turn next to the defendants’ contention that the dismissal of the complaint can be justified on the ground that the plaintiffs have failed to allege any legally recognizable damages. The defendants point out that, according to the complaint, the company has prospered since the plaintiffs invested.

The plaintiffs allege, in their complaint, monetary damages in the amount of $50,000. At no time, however, do they explain how they arrived at this figure. Proving such damages may turn out to be very difficult if not impossible. Speculation on the difficulties of proof should not, however, figure in the disposition of a motion to dismiss. The plaintiffs should, under the doctrine of Conley v. Gibson, supra, be given an opportunity to specify the items they claim as damages.

COUNTS II AND III.

Counts II and III refer to certain activities occurring after Malone and Hil-gendorf acquired their securities in the Paddock corporation. These activities allegedly violated the fraud provisions of the federal securities laws and the Illinois common law.

In count II, the plaintiffs allege that, subsequent to their investments, another corporation made an offer to purchase all of the securities of the Paddock company. Stuart Paddock, Jr., then president of the Paddock company, allegedly agreed with the minority investors to be a member of a team of stockholders which was to deal with the other corporation in connection with the offer. This was done, according to the complaint, “with a view toward causing the offer to be as favorable as possible to the stockholders.” However, instead of acting toward this objective, Stuart Paddock, Jr. allegedly “denigrated” the value of the Paddock company in his discussions witfi representatives of the other corporation. As a result, the potential purchaser first reduced the amount of its offer and, eventually, withdrew the offer entirely: The plaintiffs again allege that these actions were part of a conspiracy amongst the defendants whereby the defendants intended to lock the minority investors into a “defenseless” minority position until the minority agreed to sell their securities to the Paddocks at a price below their actual value.

Count III alleges that the plaintiffs have been negotiating with another corporation (not the corporation involved in count II) for the purpose of arranging a sale of the stock of the minority investors. The complaint further alleges that the Paddocks, through an unnamed representative, have threatened to do anything in their power to prevent such a sale by the Minority Investors.” This representative of the Paddocks allegedly indicated that the proposed sale is not legally permissible and that the Paddocks will take extrajudicial steps to interfere with and prevent the sale. Finally, the plaintiffs allege that all of the defendants’ acts and threats are without legal justification and are part of the same conspiracy referred to in counts I and II.

Counts II and III defy easy analysis in a securities law context because their lack of specificity makes them susceptible of various interpretations. The plaintiffs claim that these counts state causes of action under Rule 10b-5, but the plaintiffs fail to specify the elements essential to such an action. At best, the court is forced to infer crucial matters from ambiguous assertions. Nevertheless on a motion to dismiss, any doubts must, of course, be resolved in favor of the pleader. Jung v. K. & D. Mining Co., 260 F.2d 607, 608 (7th Cir. 1958).

A. Fraud Allegations.

A major problem, in both counts II and III, is the plaintiffs’ failure to allege with specificity, the misrepresentations or fraudulent practices involved. Count II

In count II, this problem is compounded by the fact that there are two areas in which the misrepresentation or fraud could have occurred: (1) in the discussions between Stuart Paddock, Jr. and the potential buyer; and (2) in any promise made by Stuart Paddock, Jr. to the plaintiffs. The plaintiffs fail to specify at which of these occasions the fraud, if any occurred.

If the plaintiffs are relying on the first alternative, that is, Paddock’s statements to the potential purchaser, a number of further problems arise. First, the complaint alleges that, at the meeting, Paddock “denigrated” the value of the Paddock company. Plaintiffs at no time specify what they mean by “denigrate”; this term does not necessarily connote a misrepresentation of fact. Second, even if we assume the interpretation of “denigrate” most favorable to plaintiffs, i. e., that Paddock made misrepresentations of fact, there is, nevertheless, no indication in the complaint of whether and how such misrepresentations were material. Third, the complaint does not state whether the plaintiffs were present at the meeting between Paddock and the potential buyer and had an opportunity to correct the misrepresentations. Finally, there is an additional problem that Paddock addressed his statements regarding the company to the potential purchaser, not to the plaintiffs; it was the potential purchaser, not the plaintiffs, who relied on any misrepresentation (with the plaintiffs in the role of “third-party victim”).

The plaintiffs may, on the other hand, be alleging that the fraud in count II arose out of a promise made by Stuart Paddock, Jr. to the plaintiffs. While the complaint does not directly state that such a promise was made, it does indicate that Paddock was to work “with a view toward causing the offer to be as favorable as possible to the stockholders.” If a promise was made with the intention of not keeping it, there would be fraud under Rule 10b-5. United States v. Herr, supra. The plaintiffs, moreover, would clearly be the parties to whom the fraud was addressed in this situation. There still remains, however, the problem of showing that this promise was breached. The breach presumably occurred when Paddock “denigrated” the value of the company. But, here again, we are faced with the questions: what do plaintiffs mean by “denigrate” ; if there were misrepresentations of fact, were these material; and did plaintiffs knowingly sit by and allow Paddock to make the misrepresentations.

Count III

Count III is also ambiguous with respect to whether any fraud occurred. The complaint alleges that the Paddocks, through a representative, have “threatened to do anything in their power to prevent” the sale by the minority investors and that these threats “are without any legal justification.” There is, however, no direct allegation of a misrepresentation of fact or of fraudulent or manipulative practices; nor is there a description of the specific nature of the “threats” directed at the plaintiffs. In addition, in count III, as in count II, there is a failure to indicate the materiality of any misrepresentations to the potential sale.

B. Sale Allegations.

The other major area of ambiguity in counts II and III relates to the requirement in Rule 10b-5 that the fraud be “in connection with the purchase or sale of any security.” In both counts II and III, the complaint is unclear upon which of two possible sales the plaintiffs are relying: (1) the sale of the minority interest to the plaintiffs by the defendants (the allegations concerning this sale are incorporated by reference); or (2) the potential sales of all of the Paddock stock (count II) and the minority interest (count III). If the plaintiffs are relying on the first alternative, the court is faced with the situation of a fraud occurring some time after the sale. If, on the other hand, the plaintiffs are relying on the second alternative, the question arises as to whether a potential sale is a sale for the purposes of Rule 10b-5. Because of the uncertainties of just what may come forth by way of proof under the ambiguous allegations, we decline to launch into a virtually unexplored area of the law in what, at least now, would be a gratuitous advisory opinion.

If the motion to dismiss had not been sustained, the factual situation would presumably have been spelled out sufficiently, either by summary judgment procedures or during a trial, to permit us to determine whether or not the plaintiffs had made a case. We cannot say, given the present exposition of counts II and III, that it appears beyond doubt that the plaintiffs can prove no facts sufficient to support a claim for relief under Rule 10b-5 or the state common law. Upon remand the plaintiffs should be allowed to amend their complaint, particularly with regard to counts II and III, so as to place before the district court pleadings reflecting whether there is a basis for relief, i. e., insofar as the federal claim is concerned, whether plaintiffs “suffered an injury as a result of deceptive practices touching” a sales situation within the ambit of the statute. Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 12-13, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971).

COUNTS IV AND V.

Counts IV and V, based on Illinois and Delaware common law, were before the district court under the doctrine of pendent jurisdiction. Both of these counts arise, essentially, from the breach of promises alleged in count I. Basically the same evidence which would be necessary to prove count I would be necessary to prove counts IV and V.

The district court, after finding no federal cause of action, dismissed these pendent claims. We would find no error in the dismissal of the pendent claims if the federal claims had been properly dismissed. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). The district court, however, also commented in its decision and order that even if count I had been allowed to stand, counts III, IV and V were not proper matters to inject into a federal controversy and he would have dismissed these counts in any event. We agree with the defendants that these remarks were not necessary to the district court’s decision.

While the remarks were not more than obiter dicta and agreeing with the district eoui't that under Gibbs the matter of entertaining a pendent jurisdiction case is ordinarily discretionary, we deem it necessary to reverse the order of dismissal as to these counts also for a proper analysis of the issue under the guidelines laid down in Gibbs. We have no pi'oper basis for determining whether a dismissal of the pendent jurisdiction claims would be an abuse of discretion as the matter now stands.

PRELIMINARY INJUNCTION.

Malone and Hilgendorf also appeal from the district court’s denial of their motion for a preliminary injunction. Basically, the plaintiffs sought, in their petition for a preliminary injunction, to have the district court ox’der the defendants to fulfill the five promises alleged in count I.

A preliminary injunction is proper only where there is a showing that: (1) plaintiffs have no adequate remedy at law and will be irreparably harmed if the injunction does not issue; (2) the balance of hardships tilts towards plaintiffs; and (3) plaintiffs have at least a reasonable likelihood of success on the merits. Milsen Co. v. Southland Corp., 454 F.2d 363, 367 (7th Cir. 1971).

Considering the amorphous character of the case as it is before us, it seems quite clear that plaintiffs have not met their burden of establishing the foregoing requisites for injunctive relief. In any event, we are not persuaded that the district court erred in denying a preliminary injunction which here, of course, would have been basically mandatory in nature.

We have considered other contentions raised by the parties and either deem them to be without merit or not necessai'y for resolution at this juncture.

For the x-easons set out in this opinion, the judgment of dismissal of the five counts is reversed with the cause being remanded for further proceedings consistent with this opinion and the order denying a preliminary injunction is affirmed.

Affirmed in part; reversed and remanded in part.

On Petition for Rehearing

This matter is before the court on the petition of the defendant-appellee, Andrew Lamb, only, for rehearing.

Upon consideration thereof, we agree with Lamb that he was not associated with the corporation at the time of the plaintiffs’ stock purchases. However’ as stated in the opinion, “we cannot say, given the present exposition of counts II and III that it appears beyond doubt that the plaintiff can prove no facts sufficient to support a claim for relief under Rule 10b-5.” The allegations of these counts encompass a period of time when Lamb apparently was associated with the alleged activities. Whether he was an aider or abettor of or otherwise facilitated a i.Ob-5 fraud may, as he contends, not be demonstrable on further amendment of the complaint. We merely held that the'plaintiffs on remand ax’e not foreclosed from supplementing the allegations relative to Lamb as well as to the other defendants.

Accordingly, the petition for rehearing is denied.

      . Robert K. Burns was also listed as a plaintiff in the first amended complaint. He has, however, not appealed from the district court’s decision although his investment in the stock involved in this litigation was $637,500 as contrasted with a total of $282,500 for the two appellants.

      . According to the complaint, the Paddock corporation is a Delaware corporation having its headquarters and principal place of business in Illinois.

      . We are somewhat uncertain as to whether plaintiffs’ complaint should be characterized as inartful since it might well be thought of as artful. It certainly exceeds what is thought of as notice pleading. In some instances the averments proceed into details which, while commendably candid, are prima facie inconsistent with the arguments advanced on appeal. The relief sought is stated at the end of count V and is partially hazy in its matching relationship to the various counts. No count is complete within itself but each is dependent upon reference-incorporated allegations from another count or other counts. Thus, it is stated, albeit non-speeifically, in count I, paragraph 18, that “[defendants’ conduct complained of herein includes their unlawful acts alleged in counts II, III and IV hereof, which are incorporated herein by reference.” Counts II, III, IV, and V “repeat and reallege paragraphs 1 through 17 of Count I.” We will set forth the basis or theory of each count, insofar as they can be disentwined, as the subject has been treated by the parties.

      . Section 10(b) of the Securities Exchange Act of 1934 provides :
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails,, or of any facility of any national securities exchange—
      * s¡: * * ❖
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”
      Rule 10b-5 provides:
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange.
      (a) ' To employ any device, scheme, or artifice to defraud,
      (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
      in connection with the purchase or sale of any security.”
      Section 17 of the Securities Act of 1933 provides:
      “(a) It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly—
      (1) to employ any device, scheme, or artifice to defraud, or
      (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.
      (b) It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communications which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.
      (c) The exemptions i>rovided in section 77c of this title shall not ajiply to the provisions of this section.”

      . Plaintiffs contend that the district court dismissed the complaint on the ground that the first three counts did not confer federal jurisdiction. Such a ruling, it is argued, was erroneous under the doctrine of Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), since the federal claims in plaintiffs’ complaint were neither frivolous nor a mere matter of form. The district court’s decision and order makes clear, however, that the basis for dismissing the complaint was a failure to state a claim upon which relief could be granted, not a lack of federal jurisdiction'.

      . The Paddocks breached the second alleged promise by making defendant Lamb a director even though Lamb did not own any stock in the company.

      . We have more difficulty, as may the plaintiffs on a trial, in discerning a basis of liability on the part of the defendants other than Stuart Paddock, Jr. According to the trust agreement, in the event of a vacancy in the trustee contingent, the first replacement trustee would have been the defendant Flanders, presumably allied with the Paddocks’ interest. Thus there was no particular assurance to the plaintiffs at the time the agreement was executed that the minority control would actually continue as originally set up. The time period of Stuart’s defection from the family is not alleged with specificity and it is not clear whether it supposedly existed' at the time the first trust agreement was executed. However, the crucial time for our purposes is the time of the purchase of the stock. To prevail against the remaining defendants, it appears plaintiffs will have to demonstrate that at the time of the purchase, Stuart made the false representation as to his voting and that the others either by approval or ratification joined in the representation knowing at the time that it was false. While this requires a broad reading of the allegations of the complaint, as we have indicated all reasonable inferences are in favor of the pleader on a motion to dismiss.

      . The defendants also stress, with respect to the reliance issue, the fact that the plaintiffs were insiders at the time of their investments. In determining whether there has been a violation of the federal securities fraud provisions, a court should, of course, consider the “actual and normal business acumen” of the plaintiff. Kohler v. Kohler Co., 319 F.2d 634, 641-642 (7th Cir. 1963). See also, Myzel v. Fields, 386 F.2d 718, 736 (8th Cir. 1967), cert. denied, 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1143 (1968). In the present case, however, the plaintiffs would not have been aided by their positions as insiders in knowing that the defendants did not intend to fulfill their promises.

      . We do not read the plaintiffs’ complaint as conveying quite the same meaning as do the defendants. The actual allegation in the complaint is that “[a]s a result of the money contributed to and obtained for the Company by the plaintiffs, and also due to many other efforts by the plaintiffs, the condition of the Company has vastly improved.” It further appears from the complaint that as a result of the purchases by the plaintiffs and their friends of securities of the corporation, presumably treasury stock, $1,600,000 was received by the company. Also the minority investors signed as guarantors “of certain large financial obligations of the Company.” Such a substantial sum of money plus a backup of company obligations would be bound to bring about a vast improvement in a company which allegedly was on its last legs at the time of the transfusion. A vast improvement does not necessarily indicate that the plaintiff’s stock in which they had invested had the value it would have had if it were to have the perquisites normally adhering to majority control of share voting. The answer is not to be found without evidence,

      . With respect to the types of damages recoverable, see Madigan, Inc. v. Goodman, 498 F.2d 233 (7th Cir. 1974).

      . At least three interpretations are conceivable : (a) that Paddock defamed the company and in so doing knowingly misrepresented the facts; (b) that Paddock presented all the facts but emjjliasized the negative, but truthful, facts; (c) that Paddock stated Ms honestly-held, but pessimistic, opinion as to the company’s outlook.

      . See Reed v. Riddle Airlines, 266 F.2d 314 (5th Cir. 1959).

      . See Mutual Shares Corp. v. Genesco, Inc., 384 F.2d 540 (2d Cir. 1967), where the complaint indicated the nature of the alleged manipulative practices.

      . In Eason v. General Motors Acceptance Corp., 490 F.2d 654 (7th Cir. 1973), cert. denied 416 U.S. 960, 94 S.Ct. 1979, 40 L.Ed.2d 312, this court held that a person need not be a purchaser or seller in order to bring an action under Rule 10b-5. Bason did not, however, dispense with the requirement in 10b-5 that there be a sale of a security.

      . Cf. Manor Drug Stores v. Blue Chip Stamps, 492 F.2d 136 (9th Cir. 1973).

      . Aside from the federal securities law, there may be pendent jurisdiction questions presented by counts II and III and much of what we say hereinafter as to counts IV and V would be applicable to II and III.

      . The defendants contend that the dismissal of the complaint should be affirmed at least as to Andrew Lamb. Although Lamb was not associated with the company at the time of plaintiffs’ purchases, he joined the company shortly thereafter. The complaint alleges that Lamb ratified the false promises made by Stuart Paddock, Jr. and accepted the fruits of the fraud. In addition, the plaintiffs allege that Lamb was a co-conspirator with the Paddocks. The dismissal of Lamb cannot be sustained.

      . Count IV is based on both Illinois and Delaware common law; count V is based on Illinois common law.

      . No preliminary injunction was requested with respect to the defendants’ actions alleged in counts II and III (the motion for a preliminary injunction being filed prior to the addition of the present counts II and III to the complaint).


author: JAMESON, District Judge: HAYS, Circuit Judge

text:
    Howard KLARMAN, Petitioner and Third-Party Plaintiff-Appellee, v. Rose SANTINI, as Administratrix of the Estate of Aldo Santini, Deceased and the State of Connecticut, Claimants-Appellants, v. TOWN OF WESTPORT and Frederick Kellogg, Jr., Third-Party Defendants-Appellants-Appellees.
    Nos. 900, 901 and 999, Dockets 73-2757, 73-2808 and 73-2738.
    United States Court of Appeals, Second Circuit.
    Argued April 24, 1974.
    Decided Sept. 3, 1974.
    Certiorari Denied Jan. 13, 1975.
    See 95 S.Ct. 785.
    Hays, Circuit Judge, dissented and filed opinion.

      Chester A. Hahn, New York City (Schine, Julianelle, Karp, Gerety & Bo-zelko, Bridgeport, Conn., and Robert K. Killian, Atty. Gen. of the State of Connecticut, on the brief), for claimants-appellants.
    Dion W. Moore, Bridgeport, Conn. (Frederick L. Comley, Pullman, Com-ley, Bradley & Reeves, Bridgeport, Conn., on the brief), for petitioner and third-party plaintiff-appellee.
    Joseph T. Stearns, New York City (Robert K. Marzik, Stratford, Conn., Haight, Gardner, Poor & Havens, New York City, on the brief, Hollis M. Walker, Jr., New York City, of counsel) for third-party defendants-appellants-appellees.
    Before LUMBARD and HAYS, Circuit Judges, and JAMESON, District Judge.

       Senior District Judge of the District of Montana, sitting by designation.

   JAMESON, District Judge:

Rose Santini, as administratrix of the Estate of Aldo Santini, Deceased, and The State of Connecticut have appealed from a judgment denying them recovery of damages from Howard Klarman, Town of Westport and Frederick Kellogg, Jr., as the result of a boating accident on the navigable waters of the Saugatuck River in Connecticut on July 26, 1964, in which Aldo Santini was fatally injured. The Town of Westport and Kellogg have appealed from the denial of their indemnity claim against Klarman for counsel fees and expenses.

The Accident

At about 4:30 P.M. on July 26, 1964 Klarman and several guests boarded the 28-foot Fling at Westport Harbor for a sail on Long-Island Sound. Under power the Fling headed south along the main channel of the Saugatuck River. Near Buoy No. 13 off Bluff Point, it ran aground on the mud or sand bottom while being piloted by Klarman’s brother-in-law. Klarman attempted unsuccessfully to back out of the strand by using the Fling’s engine. A private motor cruiser was hailed and also tried unsuccessfully to free the Fling by towing from her bow.

At about 4:45 P.M. the Marine I arrived on the scene. The Marine I, a 26-foot launch powered by a 125 horsepower engine, was owned by the Town of Westport and operated as a patrol boat by its Police Department. It was under the command of Kellogg, a member of Westport Police Department.

Aldo Santini was aboard the Marine I as a volunteer member of the Westport Civil Defense, receiving on-the-job training as an auxiliary police officer. This was his first and only time aboard the Marine I. Kellogg testified that Santini was not “more or less permanently attached” to the Marine I, that the sole reason for his presence on the launch was to receive on-the-job training, and that he was not really “supposed to do anything”. Kellogg normally operated the Marine I by himself, the only exception being when an auxiliary policeman was assigned to accompany him on patrol.

Klarman hailed Kellogg for assistance. Prior to rendering aid, Kellogg prepared and had Klarman sign an agreement by which he accepted “full responsibility” for being towed and promised “to pay for all damages which may occur”.

Thereafter, a line approximately 28 feet in length and one-half inch in diameter, with a bowline knot at one end and a back splice at the other, was passed from the Fling to the Marine I. The bowline knot was placed over the Samson post in the bow of the Fling, and the other end was secured by Santini to a towing bar in the stern of the Marine I. The Marine I then attempted unsuccessfully to free the Fling by pulling for 15 to 20 seconds forward and to port at approximately a 45 degree angle to the bow of the Fling.

A second attempt, from the stern, was also unsuccessful. Klarman testified that he placed the bowline knot on a cleat at the Fling’s stern, and ran the line through a chock on the starboard side of the taffrail. Klarman then handed the other end of the rope to the Marine I, and again it was secured by Santini to the towbar. The Marine I commenced towing at a 40 degree angle to the Fling’s port stern. Klarman noticed that the chock had loosened due to the stress of the tow, and accordingly called a halt to the second attempt.

On the third attempt Klarman secured the bowline knot by doubling it on the port-side Merriman winch, located near the stern of the Fling at the after-end of the cockpit. Klarman testified that the winch was primarily used to sheet the Genova sail and for mooring, but that on one prior occasion, in the summer of 1962, it was used as the point of attachment during a towing operation when the Fling had run “aground in Watch Hill and [was] hauled off a ledge from the stern”.

The other end of the line remained fastened to the Marine I, and towing was resumed in an almost broadside direction. During this operation the winch tore loose from its pedestal and struck Santini in the head, knocking him overboard. Santini was rescued and taken to Nor-walk Hospital, where he died on August 1, 1964.

Proceedings in District Court

Klarman, owner of the Fling, filed a petition in admiralty seeking exoneration from or limitation of liability. Rose Santini, as administratrix of her husband’s estate, answered the petition and filed a claim against Klarman, contending that the death of her husband was due to Klarman’s negligence and that he had the requisite privity and knowledge. The State of Connecticut also appeared as a claimant, seeking reimbursement for compensation benefits paid to the deceased’s family under the Connecticut Workmen’s Compensation Act.

Klarman was granted leave to implead the Town of Westport, owner of the Marine I, the other vessel involved in the accident, and Frederick Kellogg, Jr., commanding officer of the Marine I. Petition of Klarman, 270 F.Supp. 1001 (D.Conn.1967). Klarman’s third-party complaint alleged on behalf of Mrs. San-tini (1) a claim against the Town of Westport under the Jones Act, 46 U.S.C. § 688 and the unseaworthiness of Marine I; and (2) a claim against Kellogg based upon his alleged negligence. On his own behalf Klarman claimed that he was entitled to indemnity or contribution for any damages which Mrs. Santini might recover against him.

At the trial Mrs. Santini moved to amend her answer to the limitation petition to assert a wrongful death action under Moragne v. States Marine Lines, 398 U.S. 375, 90 S.Ct. 1772, 26 L.Ed.2d 339 (1970), and to amend Klarman’s third-party' complaint so that the claims stated on her behalf would be in her own name and right. The Town of Westport moved to amend its third-party answer to include a counterclaim against Klar-man for indemnity. Both motions were granted at the close of the trial.

As the district court stated, under a “complex limitation proceeding in admiralty”, Mrs. Santini in effect was “suing Klarman, Westport and Kellogg as tortfeasors for the wrongful death of her husband”, claiming he was killed as a result of their negligence “and/or the unseaworthiness of the Fling and/or Marine I”. The principal areas of dispute in the non-jury trial concerned the propriety of the tow employed and the fitness and adequacy of the Merriam winch, its fastenings, and the towrope. On these issues the court heard testimony from Klai’man, Kellogg and five experts —three on behalf of Klarman (Blumen-stock, Atkins and Raymond), one on behalf of Kellogg and the Town of West-port (Love) and one on behalf of Santini (Prosser). The testimony of these witnesses was conflicting.

Following the trial, the district court in a detailed and well considered opinion based on its findings of fact concluded that:

(1) Aldo Santini was not a “seaman” within the contemplation of the Jones Act;

(2) the defendants Kellogg, Klarman, and Town of Westport were not negligent;

(3) the Marine I was not unsea-worthy ;

(4) the Fling was unseaworthy;

(5) Santini was not within the class of persons protected by Klarman’s warranty to provide a seaworthy vessel. The court therefore denied recovery to Mrs. Santini and The State of Connecticut and dismissed Klarman’s third party complaint.

Kellogg and the Town of Westport moved to amend the findings to provide for recovery of attorney fees and expenses from Klarman. Prior to the court’s decision on this motion, Kellogg and the Town of Westport filed their notice of appeal. The district court noted that “such appeal ousts this Court from any jurisdiction to further consider third-party defendants’ motion”, but issued a brief memorandum indicating that it “would have denied the motion”.

Mrs. Santini and The State of Connecticut have appealed from that portion of the judgment denying them relief against Klarman, Kellogg and the' Town of Westport. Kellogg and the Town of Westport have cross-appealed from the portion of the judgment which in effect denied them indemnity from Klarman for attorney’s fees and expenses.

Appeal of Mrs. Santini and The State of Connecticut

At the outset we note that many of the issues on this appeal involve the district court’s resolution of disputed issues of fact. It is well settled that “In reviewing a judgment of a trial court, sitting without a jury in admiralty, the Court of Appeals may not set aside the judgment below unless it is clearly erroneous”, and that “A finding is clearly erroneous when, ‘although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed’ * * McAllister v. United States, 348 U.S. 19, 20, 75 S.Ct. 6, 8, 99 L.Ed. 20 (1954). Although this court adheres to the rule that findings with respect to negligence and seaworthiness, as distinguished from the evidentiary facts upon which they are based, are not entitled to the benefit of the “clearly erroneous” rule, we have held that “such findings are entitled to great weight and will ordinarily stand unless the lower court manifests an incorrect conception of the applicable law”. In re Marine Sulphur Queen, 460 F.2d 89, 97-98 (2 Cir. 1972).

Jones Act Claim

The district court’s denial of recovery under the Jones Act rests upon its conclusion that Aldo Santini was not a “seaman” within the meaning of the Act. As the court recognized, requirements for a Jones Act seaman are that “the vessel must be in navigation, there must be a more or less permanent connection with the ship, and the worker must be aboard naturally and primarily as an aid to navigation”. Harney v. William M. Moore Building Corporation, 359 F.2d 649, 654 (2 Cir. 1966). While these requirements have not been interpreted strictly, they are not meaningless. Although the connection with the vessel “may be less than permanent, * * * it cannot be temporary or transitory”. Bullis v. Twentieth Century Fox Film Corporation, 474 F.2d 392, 394 (9 Cir. 1973). Although “aid to navigation” has been read “very broadly”, Harney, supra, 359 F.2d at 654, it is nevertheless required that an alleged seaman “perform services upon ships and [be] exposed to the unique hazards of work upon the sea”. Mahra-mas v. American Export Isbrandtsen Lines, Inc., 475 F.2d 165, 170 (2 Cir. 1973).

The court concluded that Santini was not a seaman since his connection with the Marine I was temporary and he was not assigned to specific duties; that “he was for all practical purposes really an observer and not a seaman”. Accordingly the court held that his widow had no claim under the Jones Act, “even assuming that the Town of Westport was his employer”.

Upon a review of the evidence we cannot say that the conclusion of the district court was legally erroneous or not supported by substantial evidence. Prior to the date of the accident Santini had never been aboard the Marine I, and there was no evidence that he would have been reassigned to the launch. It is true, as Mrs. Santini argues, that her husband was under the control of Kellogg, and that Kellogg testified that Santini had “assisted in general” on the Marine I, had made fast the lines during docking, and had retrieved and secured the towlines to the Marine I during the first and second attempts to free the Fling. On the other hand, Kellogg also testified that Santini was not “supposed to do anything”, and that his sole purpose aboard the vessel was to receive on-the-job training in civil defense, that is, as Kellogg put it, “He was assigned to be given instructions in the operation of the boat.” Although conflicting inferences may be drawn with respect to San-tini’s role on the Marine I, we cannot say that the district court erred in concluding, as it did, that Santini was ouot a seaman within the meaning of the Jones Act.

Negligence of Kellogg and XJnsea-worthiness of Marine I

Appellants specify 12 acts of alleged negligence by Kellogg and contend that “Kellogg rendered the police launch unseaworthy by seeking to tow the Fling free with the conditions which then and there existed and which were activated by his own action”. The trial court held that Kellogg’s “conduct in attempting to free the Fling was in all respects proper, and that he exercised reasonable care and good seamanship in doing what he did to relieve the stranded sloop”. Our review of the evidence reveals little or no proof in support of many of the alleged acts of negligence. With respect to the remaining allegations, the evidence was conflicting. We, therefore, cannot say that the court’s findings in favor of Kellogg and the Town of Westport were not without substantial evidentiary support or were clearly erroneous.

Our conclusion that the district court was justified in finding that Kellogg’s conduct was proper also disposes of appellants’ contention that Kellogg’s actions rendered the Marine I unseaworthy. Appellants suggest also that the inadequacy of the fastenings of the Fling’s winch rendered the Marine I unseaworthy. It is clear, however, that the warranty of seaworthiness is owed by the shipowner only with respect to his “vessel or its appurtenant appliances”, Seas Shipping Co. v. Sieracki, 328 U.S. 85, 90, 66 S.Ct. 872, 90 L.Ed. 1099 (1946), and of course the winch was not an appliance of the Marine I. See also Mosley v. Cia. Mar. Adra, S.A., 314 F.2d 223, 228 (2 Cir. 1963).

Klarman’s Negligence

The district court stated that, “The negligence charged to Klarman is a grapeshot of allegations but very little proof.” We cannot say that his findings that “Klarman’s conduct was not negligent in any respect” and that “he acted in the manner of a reasonably prudent owner of a sloop that was grounded” are clearly erroneous.

Although the court held that the winch fastenings were inadequate, Klar-man testified that he had no knowledge of the nature of the winch’s fastenings. It was undisputed that the screws which secured the winch could only be examined following a removal of the winch drum. Klarman testified that he had never removed the drum, and there was no convincing evidence that he should have done so. In addition, Klarman’s testimony was uncontradieted that prior to the accident there was no external sign of any weakness in the winch fastenings, and that on one prior occasion the winch had been successfully used to tow the Fling off a sand bar.

It is true, as appellants argue, that there was expert testimony that the winch should not have been used as the sole point of contact for the towrope. On the other hand, there was also testimony from Raymond and Blumenstock that the port winch alone was a suitable object upon which to fasten the towline. The district court resolved “the conflict between the experts” in Klarman’s favor, and we are unable to perceive any error in its having done so.

Unseaworthiness of the Fling

The district court found the Fling unseaworthy because of the inadequacy of the screws which secured the port winch. The court concluded, however, that Santini was not within the class of persons protected by Klarman’s warranty to provide a seaworthy vessel.- We agree.

The leading case with respect to the scope of the class of persons protected by a- shipowner’s warranty of seaworthiness, is Seas Shipping Co. v. Sieracki, supra. There the Court extended the warranty of seaworthiness, traditionally owed to crew members, to a stevedore who was injured while aboard and loading the ship. The Court reasoned that the stevedore was in effect a seaman “because he [was] doing a seaman’s work and incurring a seaman’s hazards”. 328 U.S. at 99, 66 S.Ct. at 880.

Although Santini was not a member of the Fling’s crew, it is argued that in receiving and securing the towline to the Marine I he was performing work for the Fling traditionally done by seamen, and that accordingly he became as to the Fling a “Sieracki Seaman”.

Appellant’s contention finds some support in Grigsby v. Coastal Marine Service of Texas, Inc., 412 F.2d 1011 (5 Cir. 1969), cert. dismissed, 396 U.S. 1033, 90 S.Ct. 612, 24 L.Ed.2d 531 (1970), and Nikiforow v. Rittenhouse, 277 F.Supp. 608 (E.D.Pa.1967). In Grigsby the warranty of seaworthiness was extended to a land-based guard who died while attempting to effect a rescue aboard a sea-going barge. The court stated:

“His impulsive action in the best tradition of the sea gave him this highly preferred status. Since in doing these humane acts, he was doing that which a seaman responding to the call of the sea would have done, he was, in a very real sense and in the Sieracki-sense, doing the work of a seaman. He can accordingly claim the rights of a vicarious seaman including that of the warranty of seaworthiness.” 412 F.2d at 1022.

Nikiforow involved a situation factually similar in many respects to this case. There it was held that the defendant shipowner’s warranty of seaworthiness extended to the plaintiff, a member of the crew of a Coast Guard cutter who was blinded when a stanchion post of defendant’s vessel broke loose during an attempt to tow it off a sand bar. The court reasoned that under Sieracki the plaintiff was entitled to the warranty of seaworthiness, since he was performing a service for defendant’s vessel “that traditionally would have been done by the crew of defendant’s vessel”, but which “under modern division of labor * * * is performed by members of the Coast Guard, especially in situations involving pleasure craft in inland waters”. 277 F.Supp. at 611.

The district court declined to accept the reasoning of Grigsby and Nikiforow, stating that it did not “believe the Supreme Court * * * would adopt such an extension of the concept of liability without fault”. In addition, the court distinguished those cases on the ground that no act of rescue could be attributed to Santini, who was merely “a spectator and a victim”.

While not determinative of this action, it is noted that subsequent to the decisions in Grigsby and Nikiforow, Congress eliminated the longshoreman’s claim for unseaworthiness and the action over the shipowner. The 1972 amendments to the Longshoremen’s and Harbor Worker’s Compensation Act, 33 U.S.C. § 901 et seq., provide that a longshoreman’s personal injury action against a shipowner is limited to claims based upon negligence and that the “liability of the vessel * * * shall not be based upon the warranty of seaworthiness or a breach thereof * * 33 U.S.C. § 905(b).

The legislative history of the 1972 amendments indicate Congressional dissatisfaction with the extension of the warranty of seaworthiness initiated by the decision in Sieracki. The Report of the House Education and Labor Committee noted

“that the seaworthiness concept was developed by the courts to protect seamen from the extreme hazards incident to their employment which frequently requires long sea voyages and duties of obedience to orders not generally required of other workers. The rationale which justifies holding the vessel absolutely liable to seamen if the vessel is unsea-worthy does not apply with equal force to longshoremen and other non-seamen working on board a vessel while it is in port.
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“The purpose of the amendments is to place an employee injured aboard a vessel in the same position he would be if he were injured in non-maritime employment ashore, insofar as bringing a third party damage action is concerned, and not to endow him with any special maritime theory of liability or cause of action under whatever judicial nomenclature it may be called, such as ‘unseaworthiness’, ‘nondelegable duty’, or the like.” H. R.Rep.No.92-1441, 92nd Cong., 2d Sess. (1972), U.S. Code Cong. & Admin.News, p. 4703.

It is clear that Congress is not in accord with the extension of the warranty of seaworthiness represented by Sieracki and its progeny. This affords an additional reason why the Sieracki rule should not be extended further in line with Grigsby and Nikiforow.

In addition, we agree with the district court that Grigsby and Nikiforow are distinguishable. As noted supra, Grigs-by involved an affirmative act of rescue, whereas here Santini merely received and secured the towlines to ' the Marine I. Santini was not a member of the crew of the Marine I, as was the plaintiff in Nikiforow. As discussed supra with respect to the Jones Act claim, Santini was on the Marine I for the purposes of observing what the police were doing and learning the reasons therefor, and he was not required or duty-bound to perform any services in connection with the operation of the launch.

Cross Appeal of Kellogg and Town of Westport

Kellogg and the Town of Westport have cross-appealed, contending that the district court erred in refusing to grant them attorney’s fees and expenses incurred in the defense of this action. As noted supra, the court declined to rule on this claim due to the fact that Kellogg and the Town of Westport filed their notice of appeal prior to the motion to amend the findings to include an award of fees and expenses. The court did, however, indicate that it would have denied the motion, principally on the grounds that (1) Kellogg and the Town of Westport failed to request attorney’s fees “if they are successful in dismissing the third-party complaint”; and (2) the agreement which Klarman signed, promising “to pay for all damages which may incur”, was simply “an agreement for indemnification for damages incurred in a negligent rescue”.

We agree with appellants that their failure to specifically request attorney’s fees and expenses in the event of dismissal of the third-party complaint does not in itself prevent their recovery. Rule 54 of the Federal Rules of Civil Procedure provides that “every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party had not demanded such relief in his pleadings”. See Paliaga v. Lukenbach Steamship Company, 301 F.2d 403, 410 (2 Cir. 1962).

We are satisfied, however, that the district court’s interpretation of the agreement signed by Klarman is correct. The cases cited by Kellogg and the Town of Westport deal either with express warranties, made in a strictly commercial setting, to indemnify and hold harmless the party claiming fees, or with the breach of a stevedore’s implied warranty to perform contracted-for services in a workmanlike manner, none of which have any application to the facts of this case.

Affirmed.

HAYS, Circuit Judge

(dissenting):

I dissent.

Santini was clearly a “seaman” within the meaning of the Jones Act, 46 U.S.C. .§ 688 (1970). The majority holds the contrary on the grounds that he was an “observer” who “was not really supposed to do anything” and that “there was no evidence that he would have been reassigned to the launch.” It is uncontro-' verted in the record, and the majority recognizes, that Santini was aboard the launch to receive on-the-job training in the operation of the launch as part of a formal program for volunteers. Even if his duty was merely to observe the operation of the launch, he must be considered a seaman. There is no reason to believe that a trainee does not become a seaman for purposes of the Jones Act until his training period has ended. Moreover, Santini took an active part in the efforts to dislodge The Fling. He performed the tasks which would ordinarily have been performed by any seaman aboard a launch like Marine I. This court has recognized the broad definition given to the term “seaman.” Mahramas v. American Export Isbrandtsen Lines, Inc., 475 F.2d 165, 170 (2d Cir. 1973). In Mahramas we adhered to the test established in Gerradin v. United Fruit Co., 60 F.2d 927 (2d Cir.), cert. denied, 287 U.S. 642, 53 S.Ct. 92, 77 L.Ed. 556 (1932), that seaman includes anyone engaged to serve in any capacity on board.

Klarman owed Santini a duty to provide a seaworthy vessel. Seas Shipping Co. v. Sieracki, 328 U.S. 85, 66 S.Ct. 872, 90 L.Ed.2d 1099 (1946). Sieracki held that the duty of seaworthiness extends .not only to those directly employed by the shipowner but to all who “perform the ship’s service . . . with his consent or by his arrangement.” 328 U.S. at 95, 66 S.Ct. at 877.

The Longshoremen’s and Harbor Workers’ Compensation Act, as amended, 33 U.S.C. § 901-950 (1970 & Supp. II 1972), is irrelevant here not merely because the 1972 amendments were enacted after the accident in question but, more important, because Santini would not have come within the coverage of the act as provided in section 903(a).

I would reverse the decision of the district court and remand the case for determination of damages.

      . Santini had been a member of the auxiliary police force since 1954 and received no compensation for his services.

      . The line was owned and selected by Klar-man. He testified that it was regularly used as “a mooring line” and that it had been used in the earlier unsuccessful towing attempt by the private cruiser. Kellogg testified that “As a rule we accepted lines from other vessels. We did not use our own lines.' This was a verbal hand-me-down rule by the department.”

      . Kellogg, on the other hand, testified that Klarman. used the starboard winch near the stern of the Fling, rather than the cleat.

      . Under 46 U.S.C. § 183(a) the liability of the owner of a vessel for any act done without his privity or knowledge shall not exceed the amount or value of the interest of the owner in the vessel. By stipulation the value of the Fling was fixed at $7,500.

      . This case, which was decided after the filing of Santini’s answer, held that a longshoreman’s wife could maintain an action under federal maritime law based ui)on unseaworthiness, for the wrongful death of her husband within state territorial waters.

      . As the court recognized, the Jones Act applies only between employees and their employers. Mahramas v. American Export Isbrandtsen Lines, Inc., 475 F.2d 165, 170 (2 Cir. 1973).

      . Since the district court found that Kellogg was not negligent, it was unnecessary to consider the effect of the fellow servant rule, the Connecticut Workmen’s Compensation Act, Conn.Gen.Stat. §§ 31-284 and 31-293a, or the Longshoremen’s and Harbor Workers’ Compensation Act, 33 U.S.C. § 901 et seq.

      . Although Prosser testified that the winch should liave been bolted, and that the bolts would be visible from an inside-tlie-boat inspection of the winch pedestal, the other four experts agreed that wood screws were an adequate and proper means of securing the winch.

      . The court noted that “once a ship ran aground, the officers and crew had a duty to attempt everything within their means to free the vessel, whether by attempting to tow the ship free by manning the long boats, or by carrying out anchors and attempting to pull the vessel off the obstruction”. 277 F.Supp. at 611.

      . The amendments also provided for an increase in compensation benefits, thus affording an additional reason for eliminating the longshoreman’s claim for unseaworthiness. Mrs. Santini of course is not receiving compensation under the Longshoremen’s and Harbor "Workers’ Compensation Act, but is receiving compensation benefits from the State of Connecticut under its Workmen’s Compensation Act.

      . As the district court said, “Wliat act of rescue can be attributed to him? What humane act was Santini doing in responding to the call of the sea? What service was he performing for Klarman’s sloop, the Fling? .The most we can say is that Santini was a spectator and a victim.”

      . See, e. g., California Tanker Co. v. Todd Shipyards Corp., 339 F.2d 426 (2 Cir. 1964), and Moses-Ecco Company v. Roscoe-Ajax Corporation, 115 U.S.App.D.C. 366, 320 F.2d 685, 690 (1963).

      . See Williams v. Pennsylvania Railroad Company, 313 F.2d 203, 212-213 (2 Cir. 1963). As we pointed out in Falletta v. Costa Armatori, 476 F.2d 316, 317 at n. 1 (2 Cir. 1973), the 1972 amendments to the Longshoremen’s and Harbor Workers’ Compensation Act also eliminated stevedore indemnity to the shipowner, based upon a breach of the warranty of workmanlike service. The limitation of the shipowner’s liability to his own negligence obviates the need for indemnity from the stevedore, and thus the amendments provide that the stevedore-employer shall not be held liable to a shipowner for damages paid by the latter to longshoremen, and that warranties to the contrary shall be void. 33 U.S.C. § 905(b).