author: BARRETT, Circuit Judge. HOLLOWAY, Circuit Judge

text:
    ADOLPH COOKS COMPANY, Petitioner-Appellant, v. FEDERAL TRADE COMMISSION, Respondent-Appellee.
    No. 73-1567.
    United States Court of Appeals, Tenth Circuit.
    June 4, 1974.

      Leo N. Bradley, Golden, Colo. (Earl K. Madsen, Golden, Colo., on the brief), for petitioner-appellant.
    Robert E. Duncan, Washington, D. C. (Calvin J. Collier, Gen. Counsel, Gerald Harwood, Acting Asst. Gen. Counsel, W. Baldwin Ogden, Washington, D. C., on the brief), for respondent-appellee.
    Before HOLLOWAY and BARRETT, Circuit Judges, and DURFEE, Judge Court of Claims.

       Honorable James R. Durfee, sitting by designation.

   BARRETT, Circuit Judge.

Adolph Coors Company appeals an Order to Cease and Desist issued by the Federal Trade Commission. The FTC filed a complaint alleging that Coors was engaged in anticompetitive practices in violation of Section 5 of the Federal Trade Commission Act. An Initial Decision was issued by the Administrative Law Judge after hearings were conducted in Denver , extending over a period of thirty days. The Law Judge found that Coors had not violated the Act. He recommended that the complaint be dismissed. The FTC appealed the Initial Decision to the five-member Federal Trade Commission. The Commission substituted its findings for those of the Law Judge and found, as a matter of law, that Coors had violated Section 5 of the Act.

Adolph Coors Company, a Colorado corporation, is engaged in brewing, distribution and sale of beer, using the trade name of “Coors”. Coors has one brewery in Golden, Colorado, and distributes its beer in an eleven-state area. The beer is sold to the distributors who in turn sell to retailers. While Coors is the fourth largest beer brewer in the United States, it alone among the nation’s some 70 brewers is a “shipping” brewery, i. e., Coors ships all of the beer brewed at its single “regional” brewing plant at Golden, Colorado, F.O. B. to the various distributors in Arizona, California, Colorado, Idaho, Kansas, Nevada, New Mexico, Oklahoma, Texas (some counties only), Utah and Wyoming. In 1971 the average barrel of Coors beer traveled 961 miles to its market place.

The beer is made by the aseptic brewing process which requires refrigerated marketing. It is uncontroverted that Coors beer is substantially more expensive than any other beer consumed in the United States, and yet because of its popularity, Coors has climbed from the 49th largest brewery in 1948 to its number 4 position today. Coors maintains market leadership in total sales against all competitors except in its territory served in Texas. Because of the delicacy of the product, it is essential that the refrigeration controls and expeditious marketing techniques be strictly monitored. Once the beer is delivered to the distributors, this obligation is assumed by them under an agreement with Coors. It is the distributor who is required to protect the “integrity” of the Coors beer quality by guarding against a retailer’s failure to rotate the beer, and failure to insure proper refrigerated storage. Coors beer retained over 90 days must be destroyed.

Coors has 35 area representatives to help market the product. Each representative is assigned certain distributors to work with and to see that Coors’ Policy Manual is followed. The price Coors charges to its distributors is set by Coors. Coors suggests to its distributors and retailers the price at which to sell its beer.

Each distributor is assigned a territory in which to market Coors’ products. Coors may reduce the territory or add distributors to a particular territory. There are 166 independent distributors and one wholly owned subsidiary company.

In 1964 Coors eliminated sales to central warehouse accounts. Central warehouse accounts are either retailers such as large chain supermarkets who buy for redelivery to their own outlets, or independents who purchase for redelivery to nonaffiliated retail outlets or retailer warehouses.

Coors favors draught accounts. It has a draught policy in which tavern owners are given 30 days to discontinue handling other brands of light draught beer. If the owner-retailer continues to sell another brand of light draught beer, Coors discontinues its supply of light draught beer to the tavern.

The contract between Coors and the distributors enables Coors to cancel its contract for any breach by the distributor, with a five-day notice. Either Coors or the distributor may cancel the contract without cause with a 30-day notice.

Coors contends that: (1) it did not engage in wholesale or retail price fixing; (2) its vertically imposed territories are reasonable and legal; (3) it has no policy of requiring exclusive draught accounts; (4) it has the right to protect its quality product and not distribute its beer through central warehousing; (5) its contract termination rights are reasonable and legal; (6) the provisions of the Commission’s Order are not supported by substantial evidence, are not reasonable, and are in conflict with important public policies; (7) the FTC internal procedures have prejudiced its right to a fair hearing; and (8) this court must exercise its power and set aside the Commissioner’s Order.

I.

Coors contends that it did not engage in price fixing agreements with its distributors. Its practices are set out in the Coors Policy Manual which states as follows:

In order to maintain a successful wholesale or retail business, pricing integrity is essential. Pricing integrity will result in an adequate and equitable profit to both Distributor and retailer and is fair to the ultimate consumer.
It is the policy of the Adolph Coors Company to suggest, if it so chooses, to either the wholesaler or retailer level, suggested minimum pricing. We reserve the right to further that policy by simply refusing to deal with anyone who doesn’t adhere to said policy.
The Adolph Coors Company and its agents must only state the policy. They cannot make agreements, threaten, coerce, or intimidate wholesalers or retailers in any manner. They can enforce the policy only by reserving the right to refuse to deal with those who don’t adhere to the suggested prices.

Coors’ sales manager, Harvey Gorman, testified that the product is controlled by agreeing individually with each distributor. This policy is enforced by a provision in the contract between Coors and the distributor enabling Coors to terminate a distributorship in 30 days without cause. Since there are about 7,000 applicants for distributorships, any distributor who does not conform to Coors’ pricing policies could readily be replaced. Coors’ area representatives constantly obtain wholesale price information and send the information to the home office in Golden. The area representatives also resolve any conflicts between the prices proposed by a distributor and those suggested by Coors.

John Hemphill, a former Coors distributor, testified that he would only go so far in making a request to use his own prices, knowing that Coors could terminate him in 30 days. He also testified that a Coors’ area representative told him that the best thing for him to do is not to be a distributor if he could not agree to Coors’ policies on pricing and territories. The Law Judge had questioned Hemphill’s credibility because of a suit he has pending against Coors, but the Commissioners rejected this fact as bearing on the issue of credibility.

Jay Wagnon, a Coors’ distributor, testified that Coors insisted on controlling distributor price increases and that when he refused to adopt wholesale prices suggested by the Coors’ area representative he was summoned to Golden and requested to change his prices. He stated that Coors’ personnel told him to bring his prices in line with Coors’ recommendations or they could put another distributor in his area. He testified that he was afraid; that he had been threatened; and that he therefore conformed to the suggested prices. The Law Judge did not find Wagnon’s testimony credible. The Commissioners, on the other hand, found that his testimony was credible.

Jay Thurman, a former distributor, testified that he was given pricing sheets by the area representative which were to be followed. He was told that if the prices were changed, it would go through Mr. Straight, a Coors official, who, in turn, would determine if the changes were justified.

Peter Tinetti, a former distributor, testified that Coors sent him the prices at which to sell Coors beer.

The area representatives submitted reports to the Golden headquarters about agreements or understandings they had made with distributors on wholesale prices.

Price fixing is illegal per se under the Sherman Antitrust Act. 15 U.S.C.A. § 1; Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4-5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958); United States v. Socony-Vaeuum Oil Co., Inc., 310 U.S. 150, 218, 60 S.Ct. 811, 84 L.Ed. 1129 (1940). Price fixing is also illegal per se under Section 5 of the Federal Trade Commission Act. 15 U.S.C.A. § 45. Prices are fixed when they are agreed upon. United States v. Masonite Corporation, 316 U.S. 265, 276, 62 S.Ct. 1070, 86 L.Ed. 1461 (1942). The agreement to fix prices renders the conspiracy illegal. The agreement may be inferred or implied from the acts and conduct of the parties, as well as from surrounding circumstances. Pearl Brewing Co. v. Anheuser-Busch, Inc., 339 F.Supp. 945 (S.D.Tex.1972); National Macaroni Manufacturers Association v. Federal Trade Commission, 345 F.2d 421 (7th Cir. 1965).

. the test .... is whether the agreement, or conduct, interferes with the freedom of sellers or traders in such a manner as to prohibit or restrain their ability to sell in accordance with their own judgment, and not what particular effect the agreement or conduct, has on the actual prices.

339 F.Supp. 945 at 952.

The findings of the Commission must be accepted by this court if there is substantial evidence on the record considered as a whole to support them. Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951). The Commission’s overruling of the Law Judge’s findings on the credibility of two witnesses is not required to be supported by a very substantial preponderance of the evidence. Federal Communications Commission v. Allentown Broadcasting Corp., 349 U.S. 358, 75 S.Ct. 855, 99 L.Ed. 1147 (1955). And where there is a possibility of drawing two inconsistent inferences from the evidence, the Commission is not prevented from drawing one. National Labor Relations Board v. Nevada Consolidated Copper Corp., 316 U.S. 105, 62 S.Ct. 960, 86 L.Ed. 1305 (1942); National Macaroni, supra. If the inference is supported by substantial evidence, it cannot be set aside even though the court could draw a different inference. National Macaroni, supra.

The Commission must consider the initial decision of the Law Judge and the evidence in the record on which it was based. Cinderella Career and Finishing Schools, Inc. v. Federal Trade Commission, 138 U.S.App.D.C. 152, 425 F.2d 583 (1970). But the findings and conclusions of the Law Judge are not sacrosanct and are not necessarily binding on the Commission or the court; they are part of the record to be considered on appeal. OKC Corp. v. Federal Trade Commission, 455 F.2d 1159 (10th Cir. 1972). When the Law Judge and the Commission reach opposite results, the Law Judge’s findings should be considered on review and given such weight as they merit within reason and the light of judicial experience. But this does not modify the substantial evidence rule in any way. OKC Corp., supra.

There is substantial evidence from the record as a whole to support the Commission’s findings of price fixing agreements between Coors and its distributors.

Coors also challenges the Commission’s finding that Coors has a resale price maintenance program and that it has in some cases secured adherence to its suggested retail prices by unlawful means. There is substantial evidence to support the Commission’s finding.

Coors’ policy is to establish pricing integrity which means that a certain profit is allowed on each level of resale. Pricing integrity is not possible with price discounting. Coors implements pricing integrity by refusing to deal with anyone not adhering to its price suggestions. A Coors’ area representative threatned to refuse further sales to an offending retailer unless he would adhere to the prices suggested by Coors. Coors used its distributors to secure retailers’ adherence to suggested minimum prices. One area representative reported that a retailer was cut off by a distributor because the retailer was advertising Coors beer at cut prices. Another area representative reported that a distributor planned to take appropriate action against a retailer who refused to sell at suggested prices. A distributor reported that Coors beer was not delivered to a retailer who cut prices. An area representative reported that action would be taken against a retailer who refused to raise his prices to a profit level.

Mr. Letcher, a retailer, testified that he was selling Coors at special weekend prices and that he was warned by the Coors distributor to discontinue the practice. Letcher refused to cooperate and the distributor terminated deliveries to his store. The distributor told Letch-er that deliveries would be received if he would agree not to discount the beer, and that Letcher might lose the retail account if he continued to discount the beer. Letcher was also told by the distributor that Coors does not tolerate price cutting. Letcher sold his business. The distributor resumed deliveries to the new owners who agreed not to discount the beer. The distributor did not act independently in cutting off Letcher as Coors suggests, but cut him off in accordance with Coors’ pricing policies.

United States Supreme Court decisions hold that if a manufacturer advances beyond a simple refusal to deal and takes affirmative action to secure compliance with its prices, a combination in violation of Section 1 of the Sherman Antitrust Act and Section 5 of the Federal Trade Commission Act occurs. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960); Federal Trade Commission v. Beech-Nut Packing Company, 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307 (1922). Any trespass on the independence of a reseller or wholesaler to set his own prices is a violation of the Sherman Act. Pearl Brewing Co., supra. A seller may refuse to deal with one failing to adhere to its specified prices, United States v. Colgate & Company, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919), but where a concerted effort is used to interfere with the distributors’ pricing independence and to compel them to adhere to suggested prices, there is a violation of the Sherman Antitrust Act. A manufacturer may choose those to whom it will sell to as long as its conduct has no monopolistic purposes. Colorado Pump & Supply Company v. Febeo, Incorporated, 472 F.2d 637 (10th Cir. 1973), cert. denied 411 U.S. 987, 93 S.Ct. 2274, 36 L.Ed.2d 965 (1973).

The Commission found that:

[Coors] has pursued a policy of fixing, controlling and maintaining prices at which Coors beer is sold at both the wholesale and retail level, that in furtherance of this policy it has engaged in various acts and practices such as: suggested resale prices to both distributors and retailers, checking prices at which distributors and retailers sell Coors beer, advising distributors and retailers that it is contrary to Coors pricing policy for them to deviate from prices approved by respondent, threatening to terminate distributorships and threatening to force distributors to sell their businesses for refusing to adhere to suggested retail prices, entering into agreements and understandings with distributors as to the wholesale prices which the distributors will charge for Coors beer, joining with distributors in attempting to coerce retailers to refrain from selling Coors beer at prices below those approved by respondent, encouraging distributors to prevent retail price cutting by refusing to deliver Coors beer to price cutters, or to reduce the amount of beer delivered, and entering into agreements and understandings with retailers as to the retail prices or range of prices at which such retailers will sell Coors beer.

There is substantial evidence in the record to support the Commission’s findings.

II.

Coors alleges that its vertically imposed territories are reasonable and legal. The Commission held that Coors vigorously enforces its territorial restrictions and that it has engaged in unlawful price fixing which is:

[s]trong grounds for presuming that the most injurious effects of vertical territorial divisions may be operative, and, therefore, for holding the entire arrangement of territories with price fixing illegal per se.

The Coors’ distributor contract provides, in part, as follows:

While this agreement is in effect the Distributor will conduct the business of wholesale distribution of Coors Beer in the above territory only

In United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967), the United States brought an antitrust action against Arnold, Schwinn & Co., an association of Schwinn distributors and a Schwinn distributor, seeking a declaratory judgment to invalidate the distribution franchising system of its products. Schwinn bicycles are shipped directly to franchised retailers who agree to sell only to ultimate consumers. Schwinn also distributed its bicycles to franchised distributors who agreed not to resell to anyone outside their assigned territories. The Court held that:

Under the Sherman Act, it is unreasonable without more for a manufacturer to seek to restrict and confine areas or persons with whom an article may be traded after the manufacturer has parted with dominion over it. White Motor, [Co. v. United States, 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963)]; Dr. Miles [Medical Co. v. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502 (1911)]. Such restraints are so obviously destructive of competition that their mere existence is enough. If the manufacturer parts with dominion over his product or transfers risk of loss to another, he may not reserve control over its destiny or the conditions of its resale.
388 U.S. at 379.

The rule of law in Schwinn is clear and unequivocal.

Once the manufacturer has parted with title and risk, he has parted with dominion over the product, and his effort thereafter to restrict territory or persons to whom the product may be transferred — whether by explicit agreement or by silent combination or understanding with his vendee — is a per se violation of § 1 of the Sherman Act. 388 U.S. at 382.

See Federal Trade Commission v. Sperry & Hutchinson Co., 405 U.S. 233, 247, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972); United States v. Topeo Associates, Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972); Williams v. Independent News Co., Inc., 485 F.2d 1099 (3rd Cir. 1973); Warriner Hermetics, Inc. v. Copeland Refrigeration Corporation, 463 F.2d 1002 (5th Cir. 1972), cert. denied 409 U.S. 1086, 93 S.Ct. 688, 34 L.Ed.2d 673 (1972); Beverage Distributors, Inc. v. Olympia Brewing Co., 440 F.2d 21 (9th Cir. 1971), cert. denied 403 U.S. 906, 91 S.Ct. 2209, 29 L.Ed.2d 682 (1971); Fontana Aviation, Inc. v. Beech Aircraft Corporation, 432 F.2d 1080 (7th Cir. 1970), cert. denied 401 U.S. 923, 91 S.Ct. 872, 27 L.Ed.2d 826 (1971). Cf. Carter-Wallaee, Inc. v. United States, 449 F.2d 1374, 196 Ct.Cl. 35 (1971); Tripoli Company v. Wella Corporation, 425 F.2d 932 (3rd Cir. 1970), cert. denied 400 U.S. 831, 91 S.Ct. 62, 27 L.Ed.2d 62 (1970); LaFortune v. Ebie, 26 Cal. App.3d 72, 102 Cal.Rptr. 588 (Cal.Ct.App.1972).

Coors, a manufacturer, enters into an agreement with its distributors to distribute Coors beer in the assigned territory only. Coors maintains that the territorial restrictions are necessary to retain the quality and proper refrigerated handling of its beer, and that the territorial restrictions are legal. However, since Coors parts with title and risk to the product when it sells and delivers the beer to distributors, and thus has parted with dominion over the product, its further effort to restrict the territories or persons to whom the product can be transferred is a per se violation of Section 1 of the Sherman Act and Section 5 of the Federal Trade Commission Act. Coors may still condition its sales to distributors and others upon maintenance of procedures necessary to control the quality of the product.

Although we are compelled to follow the Schwinn per se rule rendering Coors’ territorial restrictions on resale illegal per se, we believe that the per se rule should yield to situations where a unique product requires territorial restrictions to remain in business. For example, speed of delivery, quality control of the product, refrigerated delivery, and condition of the Coors product at the time of delivery may justify restraints on trade that would be unreasonable when applied to marketing standardized products. La Fortune v. Ebie, supra. Perhaps the Supreme Court may see the wisdom of grafting an exception to the per se rule when a product is unique and where the manufacturer can justify its territorial restraints under the rule of reason. White Motor Co. v. United States, 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963).

The dissenters in Schwinn contended that the new per se rule cannot be justified, automatically invalidating vertical restraints in a distribution system based on sales to wholesalers and retailers.

the Court has, sua sponte created a bluntly indiscriminate and destructive weapon which can be used to dismantle a vast variety of distributional systems — competitive and anticompetitive, reasonable and unreasonable.
388 U.S. at 394.

Thus we are foreclosed from considering the reasonableness of the restriction or its business justification. We are cognizant of the unpredictability which is created in relationship to the Coors operation.

III.

Coors contends that it has no policy of requiring exclusive draught accounts. The Commission found that Coors combined with its distributors in the practice of encouraging and coercing retailers to sell Coors draught beer to the exclusion of light draught beer competitors in violation of Section 5 of the Federal Trade Commission Act.

Mr. Coors testified that exclusive draught accounts were desirable. Several distributors testified that the purpose of obtaining exclusive draught accounts is to encourage draught customers to buy beer to take home. To implement the policy, Coors threatened to terminate a retailer’s supply of Coors draught beer unless he eliminated competitive draught beers within 30 days. Coors’ distributors did, in fact, take out their Coors draught beer if the retailer did not comply with the policy.

Agreements foreclosing a competitor’s products are unlawful. Federal Trade Commission v. Brown Shoe Co., Inc., 384 U.S. 316, 86 S.Ct. 1501, 16 L.Ed.2d 587 (1966); Fashion Originators’ Guild of America, Inc. v. Federal Trade Commission, 312 U.S. 457, 668, 61 S.Ct. 703, 85 L.Ed. 949 (1941); Standard Fashion Company v. Magrane-Houston Company, 258 U.S. 346, 42 S.Ct. 360, 66 L.Ed. 653 (1922). The policy of pursuing an exclusive draught policy violates Section 5 of the Federal Trade Commission Act. There is substantial evidence in the record to support the Commission’s finding.

IV.

Coors asserts that it has the right to protect its quality product and not distribute its beer through central warehousing. The Commission held that Coors’ prohibition of central warehouse sales, or a requirement that wholesale prices to those accounts equal those to other retailers is a substantial restraint on the capacity of the distributor to resell to whomever he chooses and threatens the same anticompetitive results as other illegal restraints on alienation. Therefore, the Commission found that the practices are unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act.

The central warehouse method of distribution involves purchase by the warehouser of beer from the brewer or the distributor. The beer is delivered by the retailer to its outlets. This method of distribution could cut the price of the beer to the retailer and consumer. Coors eliminated sales to central warehouse accounts in 1964. The distributors viewed central warehousing as a threat to the integrity of their territorial restrictions. Coors alleges that sales to central warehousers affects the quality of its beer because of poor procedures used by the warehousers.

The Order imposed by the FTC does not prevent Coors’ distributors from conditioning its sales to central warehouse accounts on the maintenance of procedures necessary to the quality control of its products. The Order only enjoins Coors from requiring its distributors from refusing to sell to central warehouse accounts. The restriction by Coors, limiting those with whom the distributors may deal, amounts to a restriction on resale and violates the mandates of Schwinn and the Federal Trade Commission Act. There is substantial evidence in the record to support the FTC’s finding.

V.

Coors alleges that its contract termination rights are reasonable and legal and that its conduct in the rare instances of its use has been proper and legal in every respect. The Commission held that:

Whether or not any actual terminations of Coors distributors, or sales forced by threat of termination can be ascribed entirely, solely and unambiguously to the failure of the terminated or coerced distributor to participate in an antitrust violation, it is abundantly clear from the record in this case that Coors representatives have used the explicit or implicit threat or speedy termination is often successful in .efforts to force the acquiescence of its distributors in anti-competitive behavior.

The Coors distributor contract provides in part as follows:

This agreement and any supplements now or hereafter effective (whether fixing prices and terms to the Distributor, or otherwise) may be cancelled in entirety at any time by the Company for any breach by the Distributor on five (5) days’ written notice to the Distributor. This agreement and such supplements may be cancelled in entirety by either party without cause upon the giving of notice to that effect to the other party, in which event termination shall become effective thirty (30) days after delivery or the mailing of the written notice of cancellation, whichever first occurs. * * *

The Commission held that Coors used the threat of speedy termination to force its distributors into anti-competitive behavior. There is substantial evidence in the record to support the Commission’s holding.

Coors has the right to terminate distributors according to the contract provisions which the distributors have agreed to. Bushie v. Stenocord Corporation, 460 F.2d 116 (9th Cir. 1972). However, it may not use the contract termination provisions to force its distributors into anticompetitive behavior.

The Law Judge was correct in stating that the termination provisions of Coors and its distributors, based upon their contractual obligations, are a matter of private contract and are not subject to interference by third parties. The termination provisions are reasonable but may not be used by Coors to force any unlawful conduct. Therefore the Commission’s attempt to rewrite Coors’ contract termination provisions in paragraphs 12 and 13 of its Order must be set aside. The contract termination provisions do not violate Section 5 of the Federal Trade Commission Act.

VI.

Coors alleges that FTC internal procedures have prejudiced its right to a fair and impartial hearing. Coors asserts that Mr. Steinitz, a staff attorney of the FTC, performed investigative and prosecuting functions in preparing the case against Coors, and that he also participated in the review of the case as attorney-advisor to Commissioner Paul Rand Dixon in violation of 5 U.S.C.A. § 554(d) and 16 CFR 4.7(a).

Coors’ contention was not raised in the administrative proceeding and therefore is not properly before this court. Moog Industries, Inc. v. Federal Trade Commission, 355 U.S. 411, 78 S.Ct. 377, 2 L.Ed.2d 370 (1958). In any event, Coors’ contention has no merit because Mr. Steinitz, in an affidavit in the record, states that upon leaving FTC’s staff he did not discuss the merits of the Coors case with any of the Commissioners or the Commission’s tria'l staff. There was no error.

VII.

Coors alleges that the provisions of the Commission’s Order are not supported by substantial evidence, are not reasonable, are in conflict with important public policies, and must be rejected. It alleges that Paragraphs 4C, 5 and 7, if adopted, would force it to abandon its right to choose those it will authorize to serve as its distributors in its marketing area, eliminating its ability to obtain required market penetration for its survival. Coors states that Paragraph 6, a formula devised by the FTC for beer rationing, is too simplistic to work effectively for Coors.

The Order by the Commission is reasonably related to the violations by Coors. The Commission is vested with wide discretion in its choice of remedy to cope with unlawful practices, and its choice will not be disturbed unless it has no reasonable relation to the unlawful practices found. Federal Trade Commission v. Mandel Brothers, Inc., 359 U.S. 385, 79 S.Ct. 818, 3 L.Ed. 2d 893 (1959); Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608, 66 S.Ct. 758, 90 L.Ed. 888 (1946). Once the Government has borne its burden of establishing violations of the law, all doubts about the remedy are resolved in its favor. United States v. E. I. du Pont de Nemours & Co., 366 U.S. 316, 81 S.Ct. 1243, 6 L.Ed.2d 318 (1961).

We hold that paragraphs 1 through 11 of the FTC’s Order are enforced; paragraphs 12 and 13 of the FTC’s Order are set aside.

HOLLOWAY, Circuit Judge

(concurring in part and dissenting in part):

I fully concur in the well-reasoned opinion of the court in upholding paragraphs 1 through 11 of the Commission’s order and disagree only as to the setting aside of paragraphs 12 and 13.

It is true that paragraphs 12 and 13 require a substantial change in the contract provisions on termination of distributorships. However, the Commission has found that it is abundantly clear that Coors representatives have used the explicit or implicit threat of speedy termination in efforts to force acquiescence of its distributors in anti-competitive behavior. We are agreed that there is substantial evidence in the record to support the finding.

The Commission has wide discretion in its choice of a remedy deemed adequate to cope with unlawful practices in this area of trade and commerce. See Siegel Co. v. FTC, 327 U.S. 608, 611, 66 S.Ct. 758, 90 L.Ed. 888. The courts interfere only where there is no reasonable relation between the remedy and the violation. Atlantic Refining Co. v. FTC, 381 U.S. 357, 377, 85 S.Ct. 1498, 14 L.Ed.2d 443. And orders affecting contractual relationships have been upheld where unlawful practices involved similar subtle pressures and threats of termination of dealers’ leases. Id. at 374-375.

On this record and the findings made I would uphold as reasonable the Commission’s choice of a remedy to cope with the unlawful practices.

      . Section 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45, provides in part:
      (a) (1) Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are declared unlawful.
      * * * * *
      (6) The Commission is empowered and directed to prevent persons, partnerships, or corporations, .... from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce.

      . The Commissioners ordered that Coors cease and desist from :
      1. Entering into, maintaining or enforcing any contract, agreement, combination, understanding or course of conduct which has as its purpose or effect the fixing, maintaining, establishing or setting of the prices at which distributors sell Coors beer to retailers or the prices at which retailers sell Coors beer to consumers.
      2. Publishing, disseminating or providing any price list or other document indicating suggested or mandatory prices for the sale of Coors beer by any distributor to any retailer or any price list or other document indicating suggested or mandatory prices for the sale of Coors beer by any retailer to any consumer. * * *
      3. Publishing, disseminating or providing to any distributor or any retailer any information or suggestions concerning what Coors may believe to be an appropriate or proper mark-up or profit for Coors beer when the distributor sells to the retailer or when the retailer sells to the consumer or a mark-up or profit below which the distributor or retailer is advised not to sell Coors beer. * * *
      4. Refusing to sell beer to any Coors distributor or terminating or threatening to terminate any Coors distributor because:
      A. the distributor has in the past or might in the future sell Coors beer at prices, mark-ups, or profits different from those approved or recommended by respondent ;
      B. one or more of the distributor’s customers sold Coors beer or advertised Coors beer for sale at prices, markups, or profits different from those approved or recommended by respondent;
      C. the Coors distributor sold Coors beer to another distributor or to a retailer whose business is located outside of the territory granted to the distributor; or
      D. the Coors distributor distributes, has distributed, or proposes to distribute in the future the product of another brewer.
      5. Entering into, maintaining or enforcing any contract, agreement, combination, understanding or course of conduct to fix, establish, limit or restrict the territory in which or the persons to whom a distributor may sell Coors beer. * * *
      6. Allocating Coors beer among its distributors in times of beer shortage at the Coors brewery, by any means other than by allocating shares to distributors equal to their proportionate purchases of Coors beer from the brewery during the last three months before the allocation or when the distributor has not been in business for more than a year as a Coors distributor, on some other equitable basis.
      7. Refusing to deliver all of a distributor’s order because the distributor has made sales to customers outside of the territory granted the distributor or because the distributor or the distributor’s customer is selling Coors beer at prices, mark-ups or profits lower than those approved by respondent.
      8. Prohibiting its distributors from selling for central warehouse delivery; provided, however, that respondent can establish refrigeration standards for the central warehouse which are substantially similar to those established for distributors and can require its distributors to be responsible, directly or indirectly, for maintenance of such refrigeration standards and for rotation of Coors beer in the central warehouse and at the retail delivery locations where the beer is redelivered from the central warehouse, if respondent changes its container dating system so that the retailer and the consumer will recognize the date without reference to a code or measuring stick.
      9. Entering into, maintaining or enforcing any contract, agreement, combination, understanding or course of conduct with its distributor's which has as its purpose or effect requiring that retailers serve Coors draught beer as their only light-colored draught beer.
      10. Entering into, maintaining, or enforcing any contract, agreement or understanding, or taking any action or course of conduct with any of its distributors which has as its purpose or effect the requirement that the distributor eliminate, or refrain from obtaining and handling rival brands of beer in order to become or remain a Coors distributor.
      11. Hindering, suppressing or eliminating competition or attempting to hinder, suppress or eliminate competition between or among distributors or between or among retailers handling Coors beer.
      12. Cancelling any distributor agreement unless and until the respondent has pursued the following procedure:
      A. Cancellation With Cause
      (a) Respondent has given the distributor sixty days’ notice of respondent’s intention to cancel its agreement with the distributor; . . . .
      B. Cancellation Without Cause
      (a) Respondent has given the distributor one hundred and eighty days’ notice of respondent’s intention to cancel its agreement with the distributor;
      13. IT IS FURTHER ORDERED that respondent, within three (3) months from date this Order becomes final, shall provide for arbitration, in the city in which a distributor resides, by an independent and neutral arbitrator, to determine in the case of any announced termination, and upon the request of a distributor, whether or not said termination is made in good faith (in the case of termination without cause) or whether or not said termination is made in good faith and for material violation of one or more contract provisions which are relevant to the effective operation of the franchise (in the case of termination with cause). * * * *
      /s/ Charles A. Tobin Secretary
      ISSUED: July 24, 1973


source: Caselaw Access Project

author: MOORE, Circuit Judge:

license: Public Domain

text:
    Dietrich MEYERHOFER and Herbert Federman, Appellants-Appellees, Bernson, Hoeniger, Freitag & Abbey, Appellants, Stuart Charles Goldberg, Intervenor-Appellant, v. EMPIRE FIRE AND MARINE INSURANCE COMPANY et al., Appellees-Appellants, Faulkner, Dawkins & Sullivan Securities Corp., Defendant.
    Nos. 512-514, Dockets 73-2340, 73-2443, 73-2501.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 16, 1974.
    Decided June 10, 1974.

      Rogers M. Doering, New York City (Simpson, Thacher & Bartlett, and Cynthia M. Cohen, New York City, of counsel), for appellants and cross-appellees Dietrich Meyerhofer, Herbert Federman and Bernson, Hoeniger, Freitag & Abbey.
    Lawrence M. McKenna, New York City (Wormser, Kiely, Allesandroni, Ma-honey & McCann, New York City, of counsel), for intervenor-appellant Stuart Charles Goldberg.
    Anthony L. Tersigni, New York City (Aranow, Brodsky, Bohlinger, Benetar, Einhorn & Dann, George Berlstein and Kathryn E. Zenoff, New York City, of counsel), for appellees and cross-appellants Empire Fire and Marine Ins. Co., Gary O. Gross, Yale J. Kaplan, Robert A. Phillips, Francis J. Kratky, Nick Lalich, L. C. Swick and M. M. Jennings, Jr.
    Robert E. Meshel, New York City (D’Amato, Costello & Shea, George G. D’Amato, New York City, of counsel), for appellees and cross-appellants Sitomer, Sitomer & Porges, Alvin L. Sitomer, Stephen J. Sitomer and Robert E. Porges.
    The Securities and Exchange Commission, Lawrence E. Nerheim, Gen. Counsel, Theodore Sonde, Asst. Gen. Counsel and Theodore L. Freedman, Atty., Washington, D. C., as amicus curiae.
    Before MOORE, FRIENDLY and ANDERSON, Circuit Judges.
   MOORE, Circuit Judge:

This is an appeal by Dietrich Meyerhofer and Herbert F'ederman, plaintiffs, and their counsel, Bernson, Hoeniger, Freitag & Abbey, from an order of the United States District Court for the Southern District of New York, dated August 23, 1973, (a) dismissing without prejudice plaintiffs’ action against defendants, (b) enjoining and disqualifying plaintiffs’ counsel, Bernson, Hoeniger, Freitag & Abbey, and Stuart Charles Goldberg from acting as attorneys for plaintiffs in this action or in any future action against defendant Empire Fire and Marine Insurance Company (Empire) involving the same transactions, occurrences, events, allegations, facts or issues, and (c) enjoining Bern-son, Hoeniger, Freitag & Abbey and Stuart Charles Goldberg from disclosing confidential information regarding Empire to others. Intervenor Stuart Charles Goldberg also appeals from said order.

Defendants Empire, Gross, Kaplan, Phillips, Kratky, Lalich, Swick, Jennings, Jr., Sitomer, Sitomer & Porges, A. L. Sitomer, S. J. Sitomer and Robert E. Porges cross-appeal from the order insofar as that order failed to disqualify plaintiffs, Meyerhofer and Federman, from acting as class representatives of those who purchased the common stock of Empire, or to enjoin them from disclosing confidential information learned either from Bernson, Hoeniger, Freitag & Abbey or from Stuart Charles Goldberg.

The full import of the problems and issues presented on this appeal cannot be appreciated and analyzed without an initial statement of the facts out of which they arise.

Empire Fire and Marine Insurance Company on May 31, 1972, made a public offering of 500,000 shares of its stock, pursuant to a registration statement filed with the Securities and Exchange Commission (SEC) on March 28, 1972. The stock was offered at $16 a share. Empire’s attorney on the issue was the firm of Sitomer, Sitomer & Porges. Stuart Charles Goldberg was an attorney in the firm and had done some work on the issue.

Plaintiff Meyerhofer, on or about January 11, 1973, purchased 100 shares of Empire stock at $17 a share. He alleges that as of June 5, 1973, the market price of his stock was only $7 a share— hence, he has sustained an unrealized loss of $1,000. Am’d Compl. if 9a. Plaintiff Federman, on or about May 31, 1972, purchased 200 shares at $16 a share, 100 of which he sold for $1,363, sustaining a loss of some $237 on the stock sold and an unrealized loss of $900 on the stock retained.

On May 2, 1973, plaintiffs, represented by the firm of Bernson, Hoeniger, Freitag & Abbey (the Bernson firm), on behalf of themselves and all other purchasers of Empire common stock, brought this action alleging that the registration statement and the prospectus under which the Empire stock had been issued were materially false and misleading. Thereafter, an amended complaint, dated June 5, 1973, was served. The legal theories in both were identical, namely, violations of various sections of the Securities Act of 1933, the Securities Exchange Act of 1934, Rule 10b-5, and common law negligence, fraud and deceit. Damages for all members of the class or rescission were alternatively sought.

The lawsuit was apparently inspired by a Form 10-K which Empire filed with the SEC on or about April 12, 1973. This Form revealed that “The Registration Statement under the Securities Act of 1933 with respect to the public offering of the 500,000 shares of Common Stock did not disclose the proposed $200,000 payment to the law firm as well as certain other features of the compensation arrangements between the Company [Empire] and such law firm [defendant Sitomer, Sitomer and Porges].” Later that month Empire disseminated to its shareholders a proxy statement and annual report making similar disclosures.

The defendants named were Empire, officers and directors of Empire, the Sitomer firm and its three partners, A. L. Sitomer, S. J. Sitomer and R. E. Porges, Faulkner, Dawkins & Sullivan Securities Corp., the managing underwriter, Stuart Charles Goldberg, originally alleged to have been a partner of the Sitomer firm, and certain selling stockholders of Empire shares.

On May 2, 1973, the complaint was served on the Sitomer defendants and Faulkner. No service was made on Goldberg who was then no longer associated with the Sitomer firm. However, he was advised by telephone that he had been made a defendant. Goldberg inquired of the Bernson firm as to the nature of the charges against him and was informed generally as to the substance of the complaint and in particular the lack of disclosure of the finder’s fee arrangement. Thus informed, Goldberg requested an opportunity to prove his non-involvement in any such arrangement and his lack of knowledge thereof. At this stage there was unfolded the series of events which ultimately resulted in the motion and order thereon now before us on appeal.

Goldberg, after his graduation from Law School in 1966, had rather specialized experience in the securities field and had published various books and treatises on related subjects. He became associated with the Sitomer firm in November 1971. While there Goldberg worked on phases of various registration statements including Empire, although another associate was responsible for the Empire registration statement and prospectus. However, Goldberg expressed concern over what he regarded as excessive fees, the nondisclosure or inadequate disclosure thereof, and the extent to which they might include a “finder’s fee,” both as to Empire and other issues.

The Empire registration became effective on May 31, 1972. The excessive fee question had not been put to rest in Goldberg’s mind because in middle January 1973 it arose in connection with another registration (referred to as “Glacier”). Goldberg had worked on Glacier. Little purpose will be served by detailing the events during the critical period January 18 to 22, 1973, in which Goldberg and the Sitomer partners were debating the fee disclosure problem. In summary Goldberg insisted on a full and complete disclosure of fees in the Empire and Glacier offerings. The Sitomer partners apparently disagreed and Goldberg resigned from the firm on January 22, 1973.

On January 22, 1973, Goldberg appeared before the SEC and placed before it information subsequently embodied in his affidavit dated January 26,' 1973, which becomes crucial to the issues now to be considered.

Some three months later, upon being informed that he was to be included as a defendant in the impending action, Goldberg asked the Bernson firm for an opportunity to demonstrate that he had been unaware of the finder’s fee arrangement which, he said, Empire and the Sitomer firm had concealed from him all along. Goldberg met with members of the Bernson firm on at least two occasions. After consulting his own attorney, as well as William P. Sullivan, Special Counsel with the Securities and Exchange Commission, Division of Enforcement, Goldberg gave plaintiffs’ counsel a copy of the January 26th affidavit which he had authored more than three months earlier. He hoped that it would verify his nonparticipation in the finder’s fee omission and convince the Bernson firm that he should not be a defendant. The • Bernson firm was satisfied with Goldberg’s explanations and, upon their motion, granted by the court, he was dropped as a defendant. After receiving Goldberg’s affidavit, the Bern-son firm amended plaintiffs’ complaint. The amendments added more specific facts but did not change the theory or substance of the original complaint.

By motion dated June 7, 1973, the remaining defendants moved “pursuant to Canons 4 and 9 of the Code of Professional Responsibility, the Disciplinary Rules and Ethical Considerations applicable thereto, and the supervisory power of this Court” for the order of disqualification now on appeal.

By memorandum decision and order, the District Court ordered that the Bernson firm and Goldberg be barred from acting as counsel or participating with counsel for plaintiffs in this or any future action against Empire involving the transactions placed in issue in this lawsuit and from disclosing confidential information to others.

The complaint was dismissed without prejudice. The basis for the Court’s decision is the premise that Goldberg had obtained confidential information from his client Empire which, in breach of relevant ethical canons, he revealed to plaintiffs’ attorneys in their suit against Empire. The Court said its decision was compelled by “the broader obligations of Canons 4 and 9.”

There is no proof — not even a suggestion — that Goldberg had revealed any information, confidential or otherwise, that might have caused the instigation of the suit. To the contrary, it was not until after the suit was commenced that Goldberg learned that he was in jeopardy. The District Court recognized that the complaint had been based on Empire’s — not Goldberg’s — disclosures, but concluded because of this that Goldberg was under no further obligation “to reveal the information or to discuss the matter with plaintiffs’ counsel.”

Despite the breadth of paragraphs EC 4-4 and DR 4-101 (B), DR 4-101(C) recognizes that a lawyer may reveal confidences or secrets necessary to defend himself against “an accusation of wrongful conduct.” This is exactly what Goldberg had to face when, in their original complaint, plaintiffs named him as a defendant who wilfully violated the securities laws.

The charge, of knowing participation in the filing of a false and misleading registration statement, was a serious one. The complaint alleged violation of criminal statutes and civil liability computable at over four million dollars. The cost in money of simply defending such an action might be very substantial. The damage to his professional reputation which might be occasioned by the mere pendency of such a charge was an even greater cause for concern.

Under these circumstances Goldberg had the right to make an appropriate disclosure with respect to his role in the public offering. Concomitantly, he had the right to support his version of the facts with suitable evidence.

The problem arises from the fact that the method Goldberg used to accomplish this was to deliver to Mr. Abbey, a member of the Bernson firm, the thirty page affidavit, accompanied by sixteen exhibits, which he had submitted to the SEC. This document not only went into extensive detail concerning Goldberg’s efforts to cause the Sitomer firm to rectify the nondisclosure with respect to Empire but even more extensive detail concerning how these efforts had been precipitated by counsel for the underwriters having come upon evidence showing that a similar nondisclosure was contemplated with respect to Glacier and their insistence that full corrective measures should be taken. Although Goldberg’s description reflected seriously on his employer, the Sitomer firm and, also, in at least some degree, on Glacier, he was clearly in a situation of some urgency. Moreover, before he turned over the affidavit, he consulted both his own attorney and a distinguished practitioner of securities law, and he and Abbey made a joint telephone call to Mr. Sullivan of the SEC. Moreover, it is not clear that, in the context of this case, Canon 4 applies to anything except information gained from Empire. Finally, because of Goldberg’s apparent intimacy with the offering, the most effective way for him to substantiate his story was for him to disclose the SEC affidavit. It was the fact that he had written such an affidavit at an earlier date which demonstrated that his story was not simply fabricated in response to plaintiffs’ complaint.

The District Court held: “All that need be shown ... is that during the attorney-client relationship Goldberg had access to his client’s information relevant to the issues here.” See Ernie Industries, Inc. v. Patentex, Inc., 478 F.2d 562 (2d Cir. 1973). However, the irrebutable presumption of Emle Industries has no application to the instant circumstances because Goldberg never sought to “prosecute litigation,” either as a party, compare Richardson v. Hamilton International Corp., 62 F.R.D. 413 (E.D.Pa.1974), or as counsel for a plaintiff party. Compare T. C. Theatre Corporation v. Warner Brothers Pictures, 113 F.Supp. 265 (S.D.N.Y.1953). At most the record discloses that Goldberg might be called as a witness for the plaintiffs but that role does not invest him with the intimacy with the prosecution of the litigation which must exist for the Emle presumption to attach.

In addition to finding that Goldberg had violated Canon 4, the District Court found that the relationship between Goldberg and the Bernson firm violated Canon 9 of the Code of Professional Responsibility which provides that:

EC 9-6 Every lawyer [must] strive to avoid not only professional impropriety but also the appearance of impropriety.

The District Court reasoned that even though there was no evidence of bad faith on the part of either Goldberg or the Bernson firm, a shallow reading of the facts might lead a casual observer to conclude that there was an aura of complicity about their relationship. However, this provision should not be read so broadly as to eviscerate the right of self-defense conferred by DR4101(C)(4).

Nevertheless, Emle Industries, Inc. v. Patentex, Inc., supra, requires that a strict prophylactic rule be applied in these cases to ensure that a lawyer avoids representation of a party in a suit against a former client where there may be the appearance of a possible violation of confidence. To the extent that the District Court’s order prohibits Goldberg from representing the interests of these or any other plaintiffs in this or similar actions, we affirm that order. We also affirm so much of the District Court’s order as enjoins Goldberg from disclosing material information except on discovery or at trial.

The burden of the District Court’s order did not fall most harshly on Goldberg; rather its greatest impact has been felt by Bernson, Hoeniger, Freitag & Abbey, plaintiffs’ counsel, which was disqualified from participation in the case. The District Court based its holding, not on the fact that the Bernson firm showed bad faith when it received Goldberg’s affidavit, but rather on the fact that it was involved in a tainted association with Goldberg because his disclosures to them inadvertently violated Canons 4 and 9 of the Code of Professional Responsibility. Because there are no violations of either of these Canons in this case, we can find no basis to hold that the relationship between Goldberg and the Bernson firm was tainted. The District Court was apparently unpersuaded by appellees’ salvo of innuendo to the effect that Goldberg “struck a deal” with the Bernson firm or tried to do more than prove his innocence to them. Since its relationship with Goldberg was not tainted by violations of the Code of Professional Responsibility, there appears to be no warrant for its disqualification from participation in either this or similar actions. A fortiori there was no sound basis for disqualifying plaintiffs or dismissing the complaint.

Order dismissing action without prejudice and enjoining Bernson, Hoeniger, Freitag & Abbey from acting as counsel for plaintiffs herein reversed. Upon cross-appeal by Empire, Gross, Kaplan, Phillips, Kratky, Lalich, Swick and Jennings, Jr., and cross-appeal by Sitomer, Sitomer and Porges, A. L. Sitomer, S. J. Sitomer and R. E. Porges insofar as said orders failed to enjoin plaintiffs from disclosing confidential information regarding Empire and to disqualify plaintiffs from representing themselves or a similar class of Empire stockholders, appeals dismissed. To the extent that the orders appealed from prohibit Goldberg from acting as a party or as an attorney for a party in any action arising out of the facts herein alleged, or from disclosing material information except on discovery or at trial, they are affirmed.

      . Code of Professional Responsibility
      Canon 4
      A lawyer Should Preserve the Confidence and Secrets of a Client Ethical Considerations
      EC 4-1 Both the fiduciary relationship existing between lawyer and client and the proper functioning of the legal system require the preservation by the lawyer of confidences and secrets of one who has employed or sought to employ him.
      EC 4-4 The attorney-client privilege is more limited than the ethical obligation of a lawyer to guard the confidences and secrets of his client. The ethical precept, unlike the evidentiary privilege, exists without regard to the nature or source of information or the fact that others share the knowledge. A lawyer should endeavor to act in a manner which preserves the evidentiary privilege ....
      EC 4^5 A lawyer should not use information acquired in the course of the representation of a client to the disadvantage of the client and a lawyer should not use, except with the consent of his client after full disclosure, such information for his own purposes ....
      EC 4-6 The obligation of a lawyer to preserve the confidences and secrets of his client continues after the termination of his employment ....
      Disciplinary Rules
      DR 4-101 Preservation of Confidences and Secrets of a Client.
      (A) “Confidence” refers to information protected by the attorney-client privilege under applicable law, and “secret” refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.
      (B) Except when permitted under DR 4-101(0), a lawyer shall not knowingly:
      (1) Reveal a confidence or secret of his client.
      (2) Use a confidence or secret of his clienl to the disadvantage of the client.
      (3) Use a confidence or secret of his client for the advantage of himself or of a third person, unless the client consents after full disclosure.
      (C) A lawyer may reveal:
      (4) Confidences or secrets necessary to establish or collect his fee or to defend himself or his employees or associates against an accusation of wrongful conduct.
      Canon 9
      A Lawyer Should Avoid Even the Appearance of Professional Impropriety Ethical Considerations
      EC 9-1 Continuation of the American concept that we are to be governed by rules of law requires that the people have faith that justice can be obtained through our legal system. A lawyer should promote public confidence in our system and in the legal profession.
      EC 9-6 Every lawyer owes a solemn duty to uphold the integrity and honor of his profession: to encourage respect for the law and for the courts and the judges thereof; to observe the Code of Professional Responsibility; to act as a member of a learned profession, one dedicated to public service; to cooperate with his brother lawyers in supporting the organized bar through the devoting of his time, efforts, and financial support as his professional standing and ability reasonably permit; to conduct himself so as to reflect credit on the legal profession and to inspire the confidence, respect, and trust of his clients and of the public; and to strive to avoid not only professional impropriety but also the appearance of impropriety.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Tony Allen BAUTISTA, Defendant-Appellant.
    No. 73-2724.
    United States Court of Appeals, Ninth Circuit.
    June 6, 1974.

      Carl E. Larson, Asst. Public Defender (argued), E. Richard Walker, Federal Public Defender, Sacramento, Cal., for defendant-appellant.
    Brewster O. Morgan, Asst. U. S. Atty. (argued), Dwayne Keyes, U. S. Atty., Sacramento, Cal., for plaintiff-appellee.

       The Honorable William J. Lindberg, United States District Judge for the Western District of Washington, sitting by designation.

   OPINION

Before KOELSCH and SNEED, Circuit Judges, and LINDBERG, District Judge.

PER CURIAM:

Tony Allen Bautista appeals from the judgment convicting him of the violation of 50 U.S.C. App. § 462 — the knowing failure to comply with the local board’s order to report for induction into the Armed Forces of the United States.

So far as need be noticed, these are the facts:

Bautista duly sought a conscientious objector classification (I-O). His application and supporting documents contained statements sufficient to constitute entitlement, prima facie, to such classification. The Local Board, however, rejected his claim with the statement:

“Form 100 does not indicate registrant was a C.O. — registrant is an employee of State Government, which does not bear out his thoughts on C. 0.”

Bautista then appealed, but without success. The State Appeal Board, without giving any reason for its decision, likewise classified him 1-A.

Shortly afterward, upon being ordered to report for induction, Bautista refused. His file was then sent to State Headquai'ters for review preliminary to possible criminal prosecution. However, the Legal Division returned it to the Local Board, saying:

“We have carefully reviewed the file of this registrant, and we are of the opinion that it does not contain an adequate basis in fact for the local board’s refusal to classify the registrant in Class 1-0 in accordance with his claim of conscientious objection. In view of this, it is requested under Sec. 1625.3 of the regulations that this registrant’s classification be reopened and that he be classified anew.”

The Local Board complied with this “request”; but without securing any additional information, again classified Bautista 1-A. It stated: “The Board is not satisfied that the registrant’s conscience would continuously suffer from participation in the Armed Services. The registrant’s beliefs appear to be based on policy and pragmatism.”

Bautista did not again appeal; and when ordered to report anew, refused to do so.

At the ensuing trial, the district judge ruled that Bautista could not challenge the validity of the order to report because he, Bautista, had not sought administrative review of his 1-A classification by the Local Board. This was error.

The “reason” given initially by the Local Board for rejecting Bautista’s C.O. claim was legally insufficient — indeed the government does not rely upon it in this appeal. Suffice it to say that there is no inconsistency in opposition to war and work for the State of California as a junior clerk on a printing machine.

The “reason” given by the Local Board following the reopening that Bautista’s opposition to war was “based on policy and pragmatism” and not on deeply held “religious” beliefs which would cause his conscience continually to suffer, is the very language of Welsh v. United States, 398 U.S. 333, 90 S.Ct. 1792, 26 L.Ed.2d 308 (1970). However, as the Court there made clear, once a registrant makes a prima facie claim that his opposition to war rests upon religious principle, “it follows that his views cannot be [deemed] ‘essentially political, sociological, or philosophical’ ” —that is, “based on policy and pragmatism.” Before such a claim may be rejected, there must be something before the board to indicate that a registrant’s views are not religious. Here there is not; the Board’s determination lacks the requisite “basis in fact.” From the record.it appears that Bautista consistently asserted an objection to war because of a personal ethical belief in non-violence. That his beliefs also extend to what might be characterized as “sociological,” “political,” or “pragmatic” views concerning the efficacy of violence as a means of solving social problems is unimportant so long as he “deeply and sincerely holds beliefs that are purely ethical or moral in source and content but that nevertheless impose upon him a duty of conscience to refrain from participating in any war at any time . . . .” Welsh v. United States, supra, at p. 340.

The Board did not deny the claim on the ground that Bautista’s opposition to war was selective, nor did it find him insincere. However, the government now argues that we must examine the record to determine whether the denial can be supported for those unstated reasons. We disagree. Thompson v. United States, 474 F.2d 323 (9th Cir. 1973), the case relied upon by the government, stands for the limited proposition that the Board need not specify the factual support for the stated reason given in denying a claim and that we will search the record to determine whether such support is present. See 474 F.2d at 326 n. 14. However, unless we can ascertain with reasonable certainty an unstated reason for refusal of a claim, see United States v. Guaraldi, 468 F.2d 774, 777 (9th Cir. 1972), United States v. Kember, 437 F.2d 534, 536 (9th Cir. 1970), we cannot uphold a classification through a hypothetical inquiry into whether there was an alternative reason for the Board’s decision. To indulge such a practice would improperly substitute our judgment for that of the Board in a matter committed by the statutory scheme to the Board; here the Board may well have concluded that the evidence which might tend to support a finding of insincerity or selective opposition to war was insufficient to deny a C.O. classification and may have denied that classification solely on the ground stated. United States v. Cate, 477 F.2d 536 (9th Cir. 1973); United States v. Cordero, 439 F.2d 716 (9th Cir. 1971). Moreover, the proposition urged by the government would effectively undermine the purpose served by the rule of United States v. Haughton, 413 F.2d 736 (9th Cir. 1969) — the facilitation of judicial review of the administrative decision.

Because there was no basis in fact for the denial of the 1-0 classification, Bautista is entitled to a reversal unless he is barred from asserting his defense because he failed to appeal from the 1-A classification entered by the Local Board following the reopening at the instance of State Headquarters.

The question thus is, do “the interests underlying the exhaustion rule clearly outweigh the severe burden imposed upon the registrant if he is denied judicial review”? McKart v. United States, 395 U.S. 185, 197, 89 S.Ct. 1657, 1664, 23 L.Ed.2d 194 (1969); United States v. Hodgins, 485 F.2d 549, 552 (9th Cir. 1973); see McGee v. United States, 402 U.S. 479, 484, 91 S.Ct. 1565, 29 L.Ed.2d 47 (1971); Lockhart v. United States, 420 F.2d 1143 (9th Cir. 1970). “[Djiscrete analysis of the particular default” (McGee, supra, at 485) ascribed to Bautista mandates a negative answer to the question. This is not the case of a registrant who, by failing to appeal an initial classification, has prevented the administrative agency from developing facts necessary to determine the claim or from exercising its statutory discretion to determine the claim. Bautista did appeal; he did not request the subsequent reopening, nor did he provide additional information which necessitated a reopening. The Board relied entirely on facts already before it. “To require the registrant to seek rehearing on all occasions when the opportunity fortuitously presents itself, in our view places an undue burden on him without any compensating administrative advantages.” United States v. Hodgins, supra, at p. 552. Accord United States v. Holby, 477 F.2d 649 (2d Cir. 1973); United States v. Hayden, 445 F.2d 1365 (9th Cir. 1971); Glover v. United States, 286 F.2d 84 (8th Cir. 1961).

Nor will our result, by excusing the appeal of others similarly situated — A group presumably small — seriously impair the normal functioning of the Selective Service System. The agency in those instances will likewise be afforded ample opportunity to develop a record and correct mistakes on the first appeal.

Nor will it encourage deliberate “bypassing” of administrative opportunities for seeking correction of a doubtful classification. Faced by the likelihood of criminal sanctions, few registrants will deliberately forego available administrative channels which offer a hope for relief. McKart v. United States, 395 U.S. 185, 200, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969); McGee v. United States, 402 U.S. 479, 485, 91 S.Ct. 1565, 29 L.Ed.2d 47 (1971). Here, however, we believe that Bautista, having provided no additional information and relying upon the same claim previously rejected by the appeal board, could reasonably conclude that a repetitive appeal would be fruitless and was “amply justified . in feeling that nothing further could be accomplished by appellate procedure.” Glover v. United States, supra, at p. 90.

The judgment is reversed, and the cause is remanded with directions to dismiss the indictment.

      . Bautista’s letter, upon -which the government relies, contains no new information. It simply reiterates statements contained in documents already in his file.


author: WALLACE, Circuit Judge:

text:
    SHELLY & ANDERSON FURNITURE MANUFACTURING CO., INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 72-2859.
    United States Court of Appeals, Ninth Circuit.
    May 20, 1974.

      Don T. Hibner, Jr. (argued), Joseph M. Malinowski, Sheppard, Mullin, Richter & Hampton, Los Angeles, Cal., for petitioner.
    Alan Longman (argued), NLRB, Elliott H. Moore, Acting Asst. Gen. Counsel, NLRB, Washington, D. C., William M. Pate, Jr., Counsel for the Gen. Counsel, NLRB, Wilford W. Johansen, Director, Region 21, NLRB, Los Angeles, Cal., for respondent.
    Paul Crost, Brundage, Neyhart, Miller, Reigh & Pappy, Los Angeles, Cal., for charging party.
    Before KOELSCH and WALLACE, Circuit Judges, and TAYLOR,  District Judge.

       Honorable Fred M. Taylor, United States District Judge, Boise, Idaho, sitting by designation.

   OPINION

WALLACE, Circuit Judge:

Shelly & Anderson Furniture Manufacturing Co., Inc. (Company) petitioned this court to set aside an order of the National Labor Relations Board. 199 N.L.R.B. No. 31 (Sept. 22, 1972). The Board cross-petitioned for enforcement of its order. We deny the Company’s petition and enforce the order.

I. The Discharge of Belmont and Saldana

On February 12, 1971, the Company announced to its employees a cut of 20 to 40% in all piecework rates effective the following Monday, February 15. On Monday, employees Belmont and Saldana contacted the Upholsterers’ International Union of North America, Local 15, AFL-CIO (Union), secured union authorization cards and commenced organizational activities. They handed out the cards and arranged for several Union officals to speak with a group of employees on February 17. On February 18, the Union filed a petition for a representation election with the Board. At a Union preelection meeting held on February 24, both Belmont and Saldana made speeches advocating unionization.

Belmont had worked for the Company for 12 years and Saldana had been employed for over three years. Within three weeks after they began union organizational activities they were both discharged without prior warning. As reasons for the discharge, the Company attributes to Belmont and Saldana low production, too much talking and avoidance of low-rated piecework jobs.

The Company’s records demonstrate that during the week they were fired, Saldana’s production rate was his highest for the entire year and Belmont’s rate of production was above his average for the year. Two witnesses testified that neither Belmont nor Saldana talked more than other employees and that neither avoided the low-rated jobs.

The trial examiner discredited the Company’s witnesses and found that “[a] preponderance of the reliable, probative and substantial evidence in the entire record convinces me [that the Company’s] alleged reasons for discharging Belmont and Saldana were pretexts, and that its real reason was their Union activity . . . . ” While the examiner could have found otherwise, his findings are supported by substantial evidence contained in the record considered as a whole. 29 U.S.C. § 160(e); Universal Camera Corp. v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951); Marriott Corp. v. NLRB, 491 F.2d 367 (9th Cir. 1974); Famet, Inc. v. NLRB, 490 F.2d 293 (9th Cir. 1973).

II. The Protest Demonstration

The Union won the Board-conducted election and was certified as the employees’ bargaining representative on April 30, 1971. Bargaining sessions were conducted on May 25 and June 4 without any progress being made. On June 9, the employees unanimously voted to hold what they referred to as a protest demonstration for 10 or 15 minutes at the beginning of the work day of June 17, the date of the next scheduled bargaining session. The stated purpose of the demonstration was to protest what the employees interpreted as the Company’s dilatory bargaining tactics and to demonstrate employee solidarity. A written notice of the meeting was distributed to the employees on June 16 and also came to the attention of Robert Anderson, the Company’s president and owner. The notice emphasized that the demonstration was not to be a strike.

On June 17, at 7:30 a. m., instead of punching in on time and going to work, 34 employees attended the demonstration held on a vacant lot a short distance from the plant. In spite of the fact that it was not billed as a strike, the trial examiner concluded that the protest demonstration was a concerted activity that is protected under section 7 of the National Labor Relations Act (Act), 29 U.S.C. § 157. Although the question is a close one, we cannot overturn his conclusion.

In order to be protected under section 7 the concerted activity must satisfy the following elements:

(1) there must be a work-related complaint or grievance; (2) the concerted activity must further some group interest; (3) a specific remedy or result must be sought through such activity; and (4) the activity should not be unlawful or otherwise improper.

18B Business Organizations, Kheel, Labor Law § 10.02 [3], at 10-21 (1973). The protest demonstration clearly satisfies the first three elements. The whole purpose of the demonstration was to protest the Company’s alleged stalling in negotiating a contract with the Union. The meeting was designed to benefit all employees rather than any individual employee. The Union representatives made it clear that as a result of the demonstration they hoped the Company would earnestly negotiate the contract.

The fourth element, however, requires a more careful analysis. The courts have consistently held that employees are not entitled to the protection of section 7 when they engage in partial or intermittent work stoppages. See NLRB v. Insurance Agents’ Union, 361 U.S. 477, 492-494, 80 S.Ct. 419, 4 L.Ed.2d 454 (1960); Local 232, UAW v. Wisconsin Employment Relations Bd., 336 U.S. 245, 69 S.Ct. 516, 93 L.Ed. 651 (1949). The Company argues that under this line of cases, the demonstration should be unprotected. While it is true that concerted activities that unreasonably interfere with the employer without placing any commensurate economic burden on the employees are not protected, see First National Bank v. NLRB, 413 F.2d 921, 924 (8th Cir. 1969), concerted activities that are reasonable means of aiding the union’s objectives at the negotiating table are protected. Unprotected activities closest to the facts in this case have generally involved situations where the employees have reported for work and, while receiving their usual wages, have repeatedly and without warning engaged in work stoppages, slowdowns or sit-ins. Such actions disrupt production schedules and impede the employer from using replacement or temporary employees while the protesting employees continue to draw their wages. Thus, they are unprotected because they make it impractical for the employer to operate his business properly. Generally, in order to be protected the employee must choose either to be on the job and subject to the employer’s rules or to be off the job and bear the commensurate economic burden. NLRB v. Kohler Co., 220 F.2d 3, 11 (7th Cir. 1955); C. G. Conn, Ltd. v. NLRB, 108 F.2d 390, 397 (7th Cir. 1939).

The trial examiner found that the protest demonstration held on June 17 was a reasonable action to exert pressure on the Company to negotiate more earnestly with the Union. The demonstration was announced in advance. The employer knew its objective. Although it was held during a time when the employees should have been at work, they did not draw pay during the time because they were piecework employees and they did not disrupt or interfere with the employees who were not participating.

If the protest had been partial, intermittent or recurrent, the activity would not have been protected. See NLRB v. Tonkawa Refining Co., 452 F.2d 900, 902 (10th Cir. 1971). Because the employees were not entitled to pay for the lost time, the activity was not partial. NLRB v. Deaton Truck Line, Inc., 389 F.2d 163, 169 (5th Cir. 1968). The trial examiner found that this was to be a one-time protest. We cannot say that the finding is not supported by the record. Therefore, the employee activity could not be deemed to be intermittent or recurrent. Cf. NLRB v. BuzzaCardozo, 205 F.2d 889 (9th Cir. 1953), cert. denied, 346 U.S. 923, 74 S.Ct. 310, 98 L.Ed. 417 (1954).

Finally, the demonstration lasted only 10 to 15 minutes and would not have had a significant impact upon the operation of the business. By Anderson’s own admission, the demonstration did not severely disrupt his production schedule or otherwise necessitate any unusual action on the part of the Company. As the Supreme Court said in NLRB v. Washington Aluminum Co., 370 U.S. 9, 17, 82 S.Ct. 1099, 1104, 8 L.Ed.2d 298 (1962):

It is of course true that § 7 does not protect all concerted activities, but that aspect of the section is not involved in this case. The activities engaged in here do not fall within the normal categories of unprotected concerted activities such as those that are unlawful, violent or in breach of contract. Nor can they be brought under this Court’s more recent pronouncement which denied the protection of § 7 to activities characterized as “indefensible” because they were there found to show a disloyalty to the workers’ employer which this Court deemed unnecessary to carry on the workers’ legitimate concerted activities. The activities of these . employees cannot be classified as “indefensible” by any recognized standard of conduct.

(footnotes omitted.)

Based upon the factual findings of the trial examiner, the protest demonstration is more similar to protected concerted activities than it is to unprotected concerted activities. Compare NLRB v. Pepsi-Cola Bottling Co., 449 F.2d 824 (5th Cir. 1971), cert. denied, 407 U.S. 910, 92 S.Ct. 2434, 32 L.Ed.2d 683 (1972), and NLRB v. Local 1229, Electrical Workers, 346 U.S. 464, 74 S.Ct. 172, 98 L.Ed. 195 (1953), with Eleetromec Design & Development Co., Inc. v. NLRB, 409 F.2d 631 (9th Cir. 1969). We cannot justifiably conclude that the record as a whole fails to contain substantial evidence to support the finding that the protest demonstration was a protected concerted activity.

HI. The Lockout

While the demonstration was in progress, Anderson decided that all of the employees who had participated would be laid off for the rest of the day and ordered the gates to both of his plants closed and locked. At 7:45 a. m., 15 minutes after the demonstration began, the employees presented themselves at the gates and attempted to report for work. Gonzales, the Union’s business manager, reached the plant a few minutes before the main group of employees. He spoke with Anderson, telling him that the demonstration was to protest the Company’s stalling at the negotiation table, that he had told the employees to make up the lost time and that he hoped Anderson would not retaliate against the employees. Anderson responded: “You want a protest demonstration, you tell those people they can take the rest of the day and demonstrate.”

The Company argues that even if the demonstration was a protected concerted activity, the employees are not entitled to back wages because they never made an unconditional offer to return to work. Striking employees are generally required to make an unconditional application for reinstatement before they are entitled to receive back pay and an employer generally has no obligation to reinstate them until the application is made. G.P.D. Inc. v. NLRB, 406 F.2d 26, 32 (6th Cir. 1969), cert. denied, 401 U.S. 974, 91 S.Ct. 1193, 28 L.Ed.2d 323 (1971). The Company contends that there was no such application and that the actions of the employees must be construed in light of Gonzales’ statements to Anderson, which conditioned the offer to return to work upon the employees being allowed to make up the lost time. The trial examiner concluded that the employees had made an unconditional offer. That conclusion is supported by substantial evidence. Gonzales’ offer to make up the lost time can be interpreted as conciliatory and not conditional. He had told the employees to return to work arid to make up the lost time. He did not tell them to return to work only if they would be allowed to make up the lost time.

Even if the record did not substantiate the finding that the employees were unconditionally returning to work, where the employer is guilty of an unfair labor parctice, he is required to offer unconditionally to reinstate the employees, regardless of whether they have applied for reinstatement. See e. g., NLRB v. Southern Greyhound Lines, 426 F.2d 1299 (5th Cir. 1970); G.P.D. Inc. v. NLRB, 406 F.2d 26, 32 n.6 (6th Cir. 1969), cert. denied, 401 U.S. 974, 91 S.Ct. 1193, 28 L.Ed.2d 323 (1971). The reason for requiring an unconditional offer to return is that employees who have caused their own unemployment should be required to notify the employer that the work stoppage is over. In the present case Anderson knew that the work stoppage was announced to last only 15 minutes even before the demonstration began. It was obvious when the employees presented themselves at the gate that they wanted to work. Anderson admitted that his motive was to punish those employees who had participated in the demonstration and that the lockout was not caused by any economic or production necessities. There was substantial evidence in this case to sustain the trial examiner’s finding that this punitive lockout constituted an unfair labor practice in violation of section 8(a) (3) and (1) of the Act.

IV. Written Offer

The Union concluded that the lockout was an unfair labor practice by the Company. Picketing commenced immediately and continued for the remainder of the working day. That evening Anderson conferred with his labor consultant who advised him that in order to avoid charges of illegally soliciting strikers off the picket line, he should require the returning employees to sign written forms. The consultant suggested that he use the Company’s normal employment forms, but add the words, “This is an unconditional” along the top, so that the forms read: “This is an unconditional Application for Employment.” The Company followed this advice and when the employees presented themselves at the plant on the morning of June 18, offering to return to work, a demand was made that they sign the forms before they could be reinstated. The Union advised the employees not to sign. None of the employees met the Company’s demand and none were reinstated. Picketing resumed.

The Company could not condition reinstatement on the requirement that the employees sign an application for employment. They never ceased being employees. In NLRB v. Mackay Radio & Telegraph Co., 304 U.S. 333, 347, 58 S.Ct. 904, 911, 82 L.Ed. 1381 (1938), the Court stated:

The plain meaning of the Act is that if men strike in connection with a current labor dispute their action is not to be construed as a renunciation of the employment relation and they remain employes for the remedial purposes specified in the act.

On the following Monday, June 21, the employees presented themselves for work a third time and again offered to return to their jobs. The Company proceeded on the basis of new legal advice. This time reinstatement was conditioned upon the employees signing a form which read: “I the undersigned make an unconditional offer to return to my job. This is a voluntary offer.”

When employees are on strike, the employer may take reasonable steps at the time striking employees return to work so that he will not be accused subsequently of improperly luring the strikers off the picket line. Although a document signed by an employee would not vindicate an employer where the facts clearly established that the solicitation was an unfair labor practice, the employer should be allowed to require a signed statement to protect himself from subsequent false charges. However, the wording employed here leaves much to be desired. It was not the responsibility of the employees to make an unconditional offer to return to work; it was the duty of the employer to make an unconditional offer of reinstatement. G.P.D. Inc. v. NLRB, 406 F.2d 26, 32 n.6 (6th Cir. 1969), cert. denied, 401 U.S. 974, 91 S.Ct. 1193, 28 L.Ed.2d 323 (1971). See NLRB v. Southern Greyhound Lines, 426 F.2d 1299 (5th Cir. 1970). Cf. NLRB v. International Van Lines, 409 U.S. 48, 50-51, 93 S.Ct. 74, 34 L.Ed.2d 201 (1972). The form does not limit itself to the protection allowed. It purports to be an unconditional offer to return to work. The employees were not required to make such an offer as a condition precedent to reinstatement.

It is unfortunate that the ambiguity was not discussed, clarified and rectified. Here, agents of a national union were present to represent the employees. Perhaps questions could have led to any needed clarification. That the Union declined to do so and advised its members not to sign is regrettable. Four strikers did sign and were immediately put back on the job. The rest of the employees, many of whom could not even speak or read English, were caught in the middle.

Under these circumstances, we feel constrained to find that the Company’s second form required the employees to make an unconditional offer to return to work which the employees were not required to sign. Thus, the company failed to make an unconditional offer of reinstatement.

The Company’s petition to set aside the Board’s order is denied. The Board's cross-petition for enforcement is granted.

Enforced.


author: PER CURIAM.

text:
    Larry G. POTTER, Plaintiff-Appellant, v. John W. CLARK, Sheriff of the County of Vermilion, State of Illinois, Defendant-Appellee.
    No. 73-2135.
    United States Court of Appeals, Seventh Circuit.
    May 16, 1974.

      Larry G. Potter, pro se.
    Richard J. Doyle, State’s Atty., John R. McClory, First Asst. State’s Atty., Danville, 111., for defendant-appellee.
    Before SWYGERT, Chief Judge, and CUMMINGS and SPRECHER, Circuit Judges.
   PER CURIAM.

Plaintiff Larry G. Potter filed a complaint against John W. Clark, Sheriff of Vermilion County, Illinois for money damages, invoking jurisdiction under 42 U.S.C. § 1983. The complaint is predicated upon the alleged deprivation of rights resulting from the following: excessive bail pending trial; cruel and unusual punishment while in custody in lieu of bail; denial of procedural due process prior to being placed in isolation. The district court granted defendant’s motion to dismiss for failure to state a claim upon which relief could be granted. Plaintiff has appealed and we affirm after having considered the record, briefs and cases cited therein pursuant to F.R.App.P. 2.

The basic issue raised by plaintiff for our consideration is whether the trial court erred in dismissing his complaint for failure to state an actionable claim under 42 U.S.C. § 1983.

Our review of the record convinces us that the district court correctly dismissed the complaint.

Conspicuous by its absence from the complaint is any allegation of any act on the part of defendant toward the plaintiff. The only place where defendant was named was in the caption of the complaint. Moreover, no other person was named in the complaint. Where a complaint alleges no specific act or conduct on the part of the defendant and the complaint is silent as to the defendant except for his name appearing in the caption, the complaint is properly dismissed, even under the liberal construction to be given pro se complaints. Brzozowski v. Randall, 281 F.Supp. 306, 312 (E.D.Pa.1968).

Assuming, arguendo, that plaintiff’s allegations were properly addressed to defendant by virtue of his actions, we nevertheless find that the complaint was properly dismissed for failure to raise issues cognizable under 42 U.S.C. § 1983.

Plaintiff’s allegation regarding excessive bail was properly dismissed. Plaintiff cannot be heard to bring an action against defendant for excessive bail since defendant was not the one who had responsibility to set the bail. The bail was set by a state court judge and defendant, as County Sheriff, was merely following an order of the court.

Defendant’s allegations are insufficient to establish that he was subject to cruel and unusual punishment. Custody in lieu of bond while awaiting trial is not to be construed as punishment and one cannot be thus subject to cruel and unusual punishment. Johnson v. Glick, 481 F.2d 1028 (2d Cir. 1973). Here plaintiff was placed in isolation on four occasions totaling eight days as a result of his conduct in damaging prison security cameras. Moreover, plaintiff’s placement in isolation was of an administrative nature to preserve the security in jail and did not involve punishment.

Plaintiff’s complaint also failed to allege a deprivation of procedural due process in being removed from the general prison population without the following : a written copy of charges against him; a reported hearing before an impartial official; legal representation; and a written decision of a hearing officer prior to imposition of isolation. Here the confinement in isolation was not only brief, but did not carry with it the stigma of lost good time. Accordingly, we find that plaintiff was not entitled to the procedures requested. The action of placing plaintiff in isolation on four occasions totaling eight days was to suppress threats to prison security. Plaintiff, himself, recognizes that he was placed in segregated confinement for the purpose of maintaining security in the prison as a result of his damage to security cameras.

Finally, there is no merit in plaintiff’s allegation that his mental condition was neglected. This allegation was correctly dismissed since plaintiff admits that he saw two different psychiatrists and a physician during the eight days of his confinement in isolation.

For the reasons stated above, the judgment of the district court is affirmed.