author: PER CURIAM.

text:
    UNITED STATES of America, Appellee, v. Eugene W. THOMPSON, Defendant-Appellant.
    No. 72-1225.
    United States Court of Appeals, First Circuit.
    Argued June 4, 1973.
    Decided July 3, 1973.

      John M. Russell, Jr., Boston, Mass., for appellant.
    Terry Philip Segal, Asst. U. S. Atty., with whom James N. Gabriel, U. S. Atty., was on brief, for appellee.
    Before COFFIN, Chief Judge, Mc-ENTEE and CAMPBELL, Circuit Judges.
   PER CURIAM.

Appellant, convicted in a jury trial of conspiring to distribute and of distributing narcotics, claims that he established his defense of entrapment as a matter of law and was entitled to a judgment of acquittal. Thirty-five years of age at the time of trial, he testified that he had been addicted to drugs since he was twelve years old, had served up to seven years in prison for nonnarcotics offenses, had engaged in the narcotics traffic in Boston in 1970, but had, through a methadone program, conquered his addiction in late 1970 or early 1971 and was no longer dealing in drugs when he returned to Boston at the end of the summer in 1971.

According to appellant’s testimony, it was then that, after a series of repeated urgings from an old acquaintance, Bobby Clements, with whom he had engaged in drug transactions, he became involved in the three substantial sales of heroin to government agents which led to his conviction. The agents at trial described several transactions and conversations with appellant in which he had shown considerable knowledge about dealing in drugs and had discussed his interest in selling even large quantities of heroin. Clements, then working in cooperation with drug enforcement officials, served as the informer and introduced appellant to his government buyers. He was not produced at trial, the government having lost track of him.

Such a posture of a case poses a dilemma for resolution of an entrapment issue to be decided under the traditional rule reaffirmed in United States v. Russell, 411 U.S. 423, 93 S.Ct. 1637, 36 L.Ed.2d 366 (1973). All of the direct testimony as to inducement is likely to come from a defendant. The only other possible witness to events at this stage is apt to be the absent informer. In such circumstances we can foresee cases where the government’s failure to produce its informer-inducer will be fatal to its case. This is not such a case, since even on appellant’s testimony we cannot say entrapment was established as a matter of law.

Appellant described some six specific conversations with Clements over a period of five or six days, resulting in appellant’s undertaking to sell heroin. In the first reunion between appellant and Clements at a bar, Clements inquired if appellant wanted to “blow a coke” and if he was selling. Appellant said he was not a user and was doing well enough in “9 to 5” jobs. Appellant left, giving Clements his phone number, saying that Clements might give him a few pointers on playing drums. Three or four days later, they again met briefly at the same bar, there being no conversation relating to drugs. After a couple more days Clements called appellant to say that he knew some people with money who were “interested”, presumably in buying drugs. Appellant said he was not in the business and told Clements not to call about such matters. The same evening Clements made another call, to the same effect, receiving the same answer.

A day later Clements became more specific, saying that appellant could make four or five thousand dollars. At this point appellant, who needed money, said he would consider the matter, but also said he did not think he would get involved. Later that day, however, appellant met Clements at the bar, talked with him about showing a sample to the prospective buyer, and subsequently procured a sample, through a dealer with whom he had done business. Appellant’s top profit in his earlier trafficking had been $500 or $550 for one sale. As he put it, when he faced a chance to make six to eight times as much, “I couldn’t resist it because I needed it.”

The government would have us take the position that this evidence of inducement is insufficient to shift the burden to it to disprove entrapment, citing our language in Kadis v. United States, 373 F.2d 370, 374 (1st Cir. 1967) that “a showing [of inducement] is not made simply by evidence of a solicitation. There must be some evidence tending to show unreadiness.” Here, however, there were both more than “a solicitation” and some evidence tending to show unreadiness.

The government alternatively argues that it carried its burden as to predisposition. It points to appellant’s past prison record and past, but recent, experience in dealing in narcotics, and his activities in planning and executing the sale of over 23 ounces of heroin on the three occasions involved in this suit, receiving $6200 for the first two and negotiating the third for $12,000. While we do not say that such evidence is irrelevant, we observe that to the extent reliance is solely placed on past involvement in factually unconnected crimes as proof of predisposition, a truly reformed former addict and dealer always has two strikes against him. See Sherman v. United States, 356 U.S. 369, 375-376, 78 S.Ct. 819, 2 L.Ed.2d 848 (1958). And to the extent reliance is placed on the evidence surrounding the drug transactions at issue, proof of predisposition often loses its identity, being merged with and satisfied by proof of distribution and sale.

The government, however, make a final point which we think is decisive. It points to the readiness exhibited by appellant, on his own testimony, in deciding to return to selling narcotics when he realized the amount of money to be made. We view the four earlier conversations between appellant and Clements as containing three exceedingly low pressure solicitations on the part of Clements. The case on predisposition is not in a posture substantially different from that which would exist had appellant been asked the first time if he were interested in making three to five thousand dollars and had, after some consideration, acceded. It is apparent that what persuaded appellant was not the repetition of Clements’ urgings or of any appeals to sympathy, cf. Sherman supra, 356 U.S. at 375, 78 S.Ct. 819, but the prospect of a large profit. We do not say that accession to inducement when profit is involved is always evidence of predisposition. Obviously, when vast sums are offered, even prompt agreement might not be adverse evidence. Similarly, acceptance of an offer of lesser amounts by a complete novice would not be contrary to the entrapment defense. It is simply that in the context of past involvement posed here, the evidence of rather prompt acceptance after the first real offer of large money could be taken by the jury as an indication of the willingness of a former dealer to get back in the business once the figures were high enough.

We therefore hold that there was sufficient evidence to enable the jury to conclude beyond a reasonable doubt that appellant was not entrapped. There was no error in denying his motion for acquittal.

Affirmed.

       This response belied appellant’s actual circumstances, for, as he also testified, his sign business was not doing well and he was in need of money.


source: Caselaw Access Project

author: FEINBERG, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. Robert JONES, Jr., Defendant-Appellant.
    No. 994, Docket 73-1285.
    United States Court of Appeals, Second Circuit.
    Argued June 21, 1973.
    Decided July 3, 1973.
    Stuart R. Shaw, New York City (Leavy, Shaw & Horne, New York City, on the brief), for defendant-appellant.
    Jeffrey Harris, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty., for the S. D. N. Y., John W. Nields, Jr., Asst. U. S. Atty., on the brief), for appellee.
    Before FRIENDLY, FEINBERG and MANSFIELD, Circuit Judges.
   FEINBERG, Circuit Judge:

Robert Jones, Jr., appeals from a judgment of conviction in the United States District Court for the Southern District of New York after a trial before Marvin E. Frankel, J., and a jury, on a charge of violating 18 U.S.C.'§ 922(a)(3) by transporting into New York, his state of residence, two firearms obtained outside the state. Although the applicable penalty section authorizes a fine of $5,000 and imprisonment for five years, Judge Frankel took into account Jones’s youth, his lack of prior criminal record and his military service, and treated Jones as a young adult offender, suspending imposition of sentence and placing him on probation for three years. Jones argues on appeal principally that he could not have been guilty as charged because he was not a resident of New York when he brought the guns into the state, that the form he signed when he purchased the guns forced him to incriminate himself and that the statute he allegedly violated was not intended to, and could not constitutionally, apply to him.

We turn first to the argument regarding place of residence. The statute makes it unlawful, with exceptions irrelevant here, for a person “to transport into . . . the State where he resides . . . any firearm purchased . . . outside that State, . ” The following facts are not in dispute: When Jones was discharged from the Army in April 1971 on the West Coast, he went to his uncle’s home in Bessemer, Alabama. On May 20, he bought two revolvers in a pawn shop in Alabama and filled out a Form 4473, Firearms Transaction Record, as required by law. Shortly thereafter, he received a telephone call from his mother asking him to come to New York City to help support his family. Within a few days, Jones gathered his possessions, including the guns, boarded a bus, and went to New York. Jones maintains that he was a resident of Alabama when he transported the guns into New York and that any contrary finding was clearly erroneous or the result of improper instructions to the jury. However, Jones was a resident of New York when he went into service in May 1969, and there was testimony that he had characterized the trip to Alabama after his Army discharge as “a visit to his uncle.” From this, the jury could have found that Jones never became a resident of Alabama and, while there, was still a resident of New York. Moreover, the instructions to the jury, fairly read in light of the argument of counsel, properly framed the central issue as whether Jones had ever become a resident of Alabama, and there were no objections to the charge. The jury obviously answered that question in the negative.

Appellant’s other arguments do not require extended discussion. Jones claims that he was “forced to incriminate himself” by signing Form 4473, but he does not tell us why this is so. See generally Desimone v. United States, 423 F.2d 576 (2d Cir.), cert. denied, 400 U.S. 842, 91 S.Ct. 84, 27 L.Ed.2d 77 (1970). Relying on United States v. Hedgecoe, 420 F.2d 458 (4th Cir. 1970), Jones also contends that his conviction must be set aside because the form did not give him adequate notice of the offense with which he was later charged. But Hedgecoe merely allowed a defendant to withdraw a plea of guilty to a charge of knowingly deceiving a gun dealer by signing a Form 4473 with a false statement on it, 18 U. S.C. § 922(a)(6), because defendant allegedly had not known what he was signing. There is no comparable element of scienter required under 18 U.S. C. § 922(a)(3), the applicable statute here. See, e. g., United States v. Ruisi, 460 F.2d 153, 156 (2d Cir.), cert. denied, 409 U.S. 914, 93 S.Ct. 234, 34 L.Ed.2d 176 (1972). Similarly, the claim that this section did not, and could not, apply to appellant because he had always been a law-abiding citizen is close to frivolous. It is true that the Omnibus Crime Control and Safe Streets Act of 1968, Pub.L.No.90-351, 82 Stat. 197, of which section 922(a)(3) is a part, contains a congressional declaration of purpose not to place “undue . . . Federal restrictions ... on law-abiding citizens with respect to” various lawful uses of firearms, 82 Stat. 197, 226. However, the Act carries out that legislative purpose principally by permitting intrastate sale of firearms subject only to certain limited exceptions for specified categories of buyers and weapons, 18 U. S.C. §§ 922(b)(1) — (4), (c), and by permitting interstate shipment of firearms between licensed dealers, importers and manufacturers, 18 U.S.C. § 922(a). Moreover, Jones fails to identify any provision that could be interpreted as excepting him from the general restrictions imposed by the Act. Appellant’s remaining claims do not require discussion.

Judgment affirmed.

      . 18 U.S.C. § 924(a).

      . See 18 U.S.C. §§ 4209, 5010(a).

      . There is no need, therefore, to consider the more intricate question whether Jones could have violated the statute had he become a resident of Alabama, on the theory that after his mother’s call he decided to transfer his residence to New York.

      . It is also worth noting that government witnesses testified that Jones had told them he realized that his purchase or possession of the guns had been illegal.


author: AINSWORTH, Circuit Judge:

text:
    Francis Xavier KILDAY, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
    No. 73-1418
    Summary Calendar.

    June 20, 1973.
    United States Court of Appeals, Fifth Circuit.
    Francis Xavier Kilday, pro se.
    John L. Briggs, U. S. Atty., Jacksonville, Fla., for respondent-appellee.
    Before WISDOM, AINSWORTH and CLARK, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   AINSWORTH, Circuit Judge:

Francis Xavier Kilday petitions under 28 U.S.C. § 2255 for vacation of a 10-year sentence imposed after a jury found him guilty of theft from a federally insured bank in violation of 18 U.S.C. §§ 371, 2113(b), 2314, aff’d, 5 Cir., 1971, 444 F.2d 220. Petitioner contends that the Argentina police interrogated him and searched his belongings without advising him of his constitutional rights enumerated in Miranda v. State of Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). The district court dismissed the petition for the stated reason that the “well-known Miranda warnings have no application when a suspect is being interrogated by a foreign police officer.” We affirm.

Sometime during the night of January 8, 1969, $363,051.13 disappeared from the vaults of the Barnett Bank Facility at the United States Naval Air Station in Jacksonville, Florida. Kilday, formerly an employee of the Bank Facility, was apprehended in Argentina in February of 1969 by police in that country and was questioned at the police station by Angel Pelligrini, Chief of Interpol. Mr. Finnegan from the American Consulate was present as an interpreter. Kilday stated that his luggage contained no money and personally opened a suitcase with a screwdriver to allow an inspection. In the suitcase was approximately $16,700 which linked him to the theft. At the trial, Pelligrini, now Police Commissioner of the Republic of Argentina, testified to Kilday’s statements to him that the suitcase did not contain money, and also that Kilday in fact opened the suitcase with a screwdriver at which time the money was discovered.

Based on the Fifth Amendment right against self-incrimination, Miranda held that the prosecution may not use evidence stemming from custodial interrogation unless the use of procedural safeguards has been demonstrated. Prior to questioning a person must be warned that he has a right to remain silent, that any statement he makes may be used as evidence against him, and that he has the right to the presence of an attorney during interrogation. 384 U.S. at 444, 86 S.Ct. at 1612. But the United States Constitution cannot compel such specific, affirmative action by foreign sovereigns, so the policy of deterring so-called “third degree” police tactics, which underlies the Miranda exclusionary rule, is inapposite to this case. See United States v. Welch, 2 Cir., 1972, 455 F.2d 211; United States v. Chavarria, 9 Cir., 1971, 443 F.2d 904. Here the statements were not coerced, as revealed by testimony at the original trial which we have scrutinized. The evidence was therefore admissible. See United States v. Nagelberg, 2 Cir., 1970, 434 F.2d 585, 587 n. 1. See generally Bram v. United States, 168 U.S. 532, 542-543, 18 S.Ct. 183, 187, 42 L.Ed. 568 (1897); United States v. Dopf, 5 Cir., 1970, 434 F.2d 205, 207; Birdsell v. United States, 5 Cir., 1965, 346 F.2d 775, 782.

Affirmed.

      . Kilday alleges that his brother planted the money to frame him, but the jury has already rejected that story.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Charlie Thomas DODSON, Defendant-Appellant.
    No. 73-1433
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    July 16, 1973.

      John Kirby, Atlanta, Ga., court appointed, for defendant-appellant.
    John W. Stokes, Jr., U. S. Atty., William P. Gaffney, Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Bule 18, 5 Cir., Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409.

   PER CURIAM:

Charlie Thomas Dodson was indicted in one count of a four count indictment which charged that he and another, aided and abetted by each other, did unlawfully distribute about 3.46 grams of heroin hydrochloride, a schedule I narcotic drug controlled substance in violation of Title 21, United States Code, Section 841(a) (1). His conviction by a jury trial was essentially based upon the testimony of two undercover narcotics agents, the sum substance of which indicated that Dodson had actively participated in bringing about an illegal sale of heroin. Further testimony elicited upon cross examination of one of the narcotics agents, revealed that within the three days preceding the illegal sale, the agent had twice been in contact with Dodson’s partner in the crime. The latter revelation formed the basis of appellant’s asserted defense of entrapment.

Appellant contends on appeal that (i) the Court erred in not granting motion for judgment of acquittal on the ground that entrapment had been shown to exist as a matter of law and (ii) the evidence was insufficient as a matter of law to sustain a conviction. We disagree on both points.

Entrapment as a defense occurs only when criminal conduct is the product of the creative activity of government officials or those private citizens acting under government direction. The criminal design must be implanted by them in the mind of an otherwise innocent person, creating in him the disposition to commit the crime. Sherman v. United States, 1958, 356 U.S. 369, 78 S.Ct. 819, 2 L.Ed.2d 848; United States v. Groessel, 5 Cir., 1971, 440 F.2d 602. In United States v. Russell, 1973, 411 U.S. 423, 93 S.Ct. 1637, 36 L.Ed.2d 366, the Supreme Court recently reaffirmed the traditional view of the entrapment defense as focusing on the intent or predisposition of the defendant to commit the crime rather than on the government’s role in instigating the offense. That officers or employees of the government afford opportunities for the commission of the offense does not defeat the prosecution where the accused is ready and willing to commit it. Sherman v. United States, supra; Sorrells v. United States, 1932, 287 U.S. 435, 53 S. Ct. 210, 77 L.Ed. 413; United States v. Banks, 5 Cir., 1973, 475 F.2d 1367.

That the jury could conclude that appellant displayed a ready and willing disposition to participate in the distribution is self evident. It is uncontested that Dodson associated himself with the scheme by driving the vehicle to a location where the illegal sale of heroin could be accomplished. He was seated in the car when his partner asked the undercover narcotics agent if he wanted to buy some heroin.

Appellant’s argument of “mere presence and knowledge”, contended to be insufficient as a matter of law to overcome a presumption of innocence, breaks down completely in light of the undisputed testimony that in mid-completion of the illegal sale between the narcotics agents and Dodson’s partner, the latter returned to , the vehicle where he handed Dodson a short bundle (two glassine bags short of the standard fifteen bag-bundle comprising a half-load) in exchange for a full bundle. Clearly, this action goes far beyond mere presence at the scene of the crime. Likewise, there is no hint that appellant did not wish to associate himself fully with the distribution and sale. There it ends.

Affirmed.

      . Dodson’s co-indictoe, Gary Dixon, was tried separately.

      . The unconflicting testimony of the narcotics agents established that upon the arrival of the vehicle which Dodson was driving from 10 to 15 feet alongside of the government vehicle, it was Dodson’s partner who initiated the transaction by motioning to the agents for one of them to come over.

      . Although we conclude that appellant displayed a ready and willing disposition to participate in the distribution, we would also point out that under the facts of this case appellant lacks the requisite standing to raise the issue of entrapment. The evidence clearly shows that he had no contact with the government agents and that his dealing were entirely with his co-indictee. United States v. Castanon, 9 Cir., 1972, 453 F.2d 932; Carbajal-Portillo v. United States, 9 Cir., 1968, 396 F.2d 944.


text:
    Grady Wigfall MARTIN, Plaintiff-Appellant, v. James ROSE, Warden, Defendant-Appellee.
    No. 72-2227.
    United States Court of Appeals, Sixth Circuit.
    Argued June 5, 1973.
    Decided July 18, 1973.
    Certiorari Denied Oct. 9, 1973.
    See 94 S.Ct. 86.

      Jerry H. Summers (Court Appointed), Chattanooga, Tenn., on brief, for appellant.
    Bart Durham, Asst. Atty. Gen., Nashville, Tenn., David M. Pack, Atty. Gen., on brief, for appellee.
    Before PHILLIPS, Chief Judge, PECK, Circuit Judge, and MOYNAHAN , District Judge.

       Honorable Bernard T. Moynalian, Jr., Chief Judge of the United States District Court for the Eastern District of Kentucky, sitting by designation.

   PER CURIAM.

In January 1969, appellant was tried before a jury in the United States District Court for the Eastern District oi Tennessee and found not guilty of robbing a Chattanooga bank in 1968, in violation of 18 U.S.C. §§ 2 and 2113(a) & (d). Thereafter in May 1969, the appellant was indicted by the Grand Jury for Hamilton County, Tennessee, for the same robbery in violation of Tennessee Code Annotated (T.C.A.) 39-3902. Appellant filed a motion to dismiss on the basis that he was being placed in double jeopardy. The motion was denied and appellant was found guilty by a jury of the bank robbery. A sentence of 30 years was imposed. The conviction was affirmed by the Tennessee Court of Appeals and a petition for writ of certiorari was denied by the Tennessee Supreme Court. A petition for habeas corpus relief was then filed in the District Court, which denied the petition. The Court, however, granted the certificate of probable cause and this action followed.

There has been no application for relief under the Tennessee post-conviction relief statute, T.C.A. 40-3801 et seq. However, since the only allegation presented in this habeas corpus action has already been presented to the state supreme court upon direct appeal, application for relief under the Tennessee statute is not considered a requisite. Irvin v. Dowd, 359 U.S. 394, 79 S.Ct. 825, 3 L.Ed.2d 900 (1959); Brown v. Allen, 344 U.S. 433, 73 S.Ct. 397, 97 L.Ed. 469 (1952).

Appellant’s sole allegation is that his state prosecution is constitutionally infirm as violative of the Double Jeopardy Clause of the Fifth Amendment to the Constitution of the United States.

The appeal is controlled by Bartkus v. Illinois, 359 U.S. 121, 79 S.Ct. 676, 3 L.Ed.2d 684 (1959). Similar to this case, Bartkus involved an acquittal on a federal charge of bank robbery which was followed by a state conviction for the same robbery. The Supreme Court found that such successive federal and state prosecutions based upon the same acts do not violate the Double Jeopardy Clause. And in a case announced the same day as Bartkus, the sequence of the prosecutions was reversed and the Supreme Court held that the Fifth Amendment does not bar a federal conviction which follows a state conviction for the same act. Abbate v. United States, 359 U.S. 187, 79 S.Ct. 666, 3 L.Ed.2d 729 (1959).

Appellant urges that Bartkus no longer has continuing validity, particularly in view of recent Supreme Court decisions in such cases as Benton v. Maryland, 395 U.S. 784, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1968); Waller v. Florida, 397 U.S. 387, 90 S.Ct. 1184, 25 L.Ed.2d 435 (1970); and Ashe v. Swenson, 397 U.S. 436, 90 S.Ct. 1189, 25 L. Ed.2d 469 (1970). Benton held that the Fifth Amendment’s guarantee that no person shall be twice put in jeopardy for the same offense is binding on the states through the Fourteenth Amendment. In characterizing the double jeopardy prohibition as a basic right to be applied to the states, the Court rejected the fundamental fairness standard of Palko v. Connecticut, 302 U.S. 319, 58 S.Ct. 149, 82 L.Ed. 288 (1937), which was heavily relied upon in the Bartkus decision. We do not, however, read Benton as rejecting the result of Bartkus( Waller unanimously held that a municipality is not a separate sovereign but merely a creature of the state and consequently successive state and municipal convictions based on the same acts are barred by the Double Jeopardy Clause. Since the instant case involves federal and state prosecutions, it is distinguishable. Ashe involved successive state prosecutions and held that the rule of collateral estoppel is an essential part of the Constitution’s prohibition against double jeopardy. The Court said:

“ ‘Collateral estoppel’ . . . means simply that when a[n] (sic) issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit.” 397 U.S. at 443, 90 S.Ct. at 1194.

Since the successive federal and state prosecutions of this case do not involve the same parties or their privies, we cannot apply the rule of collateral estoppel.

Although it appears that the dual sovereignty doctrine, which allows a single offense to be punished by two separate sovereigns, reached a high-water mark in the Bartkus case and has experienced some erosion through the subsequent years , we find that the Federal courts still recognize and affirm the continuing validity of Bartkus.See, e. g., United States v. Jackson, 470 F.2d 684, 689 (5th Cir. 1972); United States v. Canty, 153 U.S.App.D.C. 103, 469 F.2d 114, 128 n. 20 (1972); United States v. Crosson, 462 F.2d 96, 103 (9th Cir. 1972); Goldsmith v. Cheney, 447 F.2d 624, 628 n. 3 (10th Cir. 1971); United States v. Smith, 446 F.2d 200, 202-203 (4th Cir. 1971); United States v. Synnes, 438 F.2d 764, 773 (8th Cir. 1971).

The judgment of the District Court is affirmed.

      . See, e. g., Elkins v. United States, 364 U.S. 206, 80 S.Ct. 1437, 4 L.Ed.2d 1669 (1960) ; Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081 (1961) ; Murphy v. Waterfront Commission, 378 U.S. 52, 84 S.Ct. 1594, 12 L.Ed.2d 678 (1964).

      . We note further that the United States Supreme Court has recently denied certiorari in several cases questioning the application of the dual sovereignty doctrine to consecutive federal and state proseeutions. Bechtel v. New Jersey, cert. denied, 404 U.S. 831, 92 S.Ct. 72, 30 L.Ed. 2d 61 (1971) ; Colonial Pipeline Co. v. New Jersey, cert. denied, 404 U.S. 831, 92 S.Ct. 72, 30 L.Ed.2d 61 (1971) ; Feldman v. New Jersey, cert. denied, 404 U.S. 865, 92 S.Ct. 76, 30 L.Ed.2d 109 (1971) ; Jacks v. New Jersey, cert. denied, 404 U.S. 865, 92 S.Ct. 76, 30 L.Ed.2d 109 (1971) ; Leuty v. New Jersey, cert. denied, 404 U.S. 865, 92 S.Ct. 77, 30 L.Ed. 2d 109 (1971).


text:
    Ronald J. THOMAS, #C-7242, Appellant, v. Joseph R. BRIERLEY, Supt., S. C. I. P., and Charles Wehrle, Deputy Supt., et al.
    No. 72-1870.
    United States Court of Appeals, Third Circuit.
    Submitted May 18, 1973.
    Decided June 29, 1973.

      Ronald J. Thomas, pro se.
    Donetta W. Ambrose, Asst. Atty. Gen., J. Shane Creamer, Atty. Gen., Harrisburg, Pa., for appellees.
    Before VAN DUSEN, GIBBONS and ROSENN, Circuit Judges.
   OPINION OF THE COURT

PER CURIAM:

This action challenges an August 3, 1972, district court decree dismissing an in forma pauperis action as frivolous pursuant to 28 U.S.C. § 1915(d).

The Complaint alleges a violation of 42 U.S.C. § 1983, resulting from the denial in July 1972 to plaintiff, a state prisoner, of the privilege to visit with a friend, to whom he had sent the required visiting pass “granted any inmate in the Pennsylvania institutional system.” It is alleged that “it is [plaintiff’s] belief” that such denial was “directed at him in an effort to harass and discourage the [named] visitor from ever attempting to .visit him.” Subsequently, petitioner received “no visits.” Finally, the Complaint alleges that “the action by the officials was merely the unwarranted result of the way they the officials subject the Black inmate and his family to harassment and degradation.”

Such allegations must be liberally construed. Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 618 (1972); United States ex rel. Tyrrell v. Speaker, 471 F.2d 1197 (3d Cir. 1973). A refusal to allow a prisoner visitors because of his race would violate the equal protection clause of the Fourteenth Amendment. See, e. g., Rowland v. Wolf, 336 F.Supp. 257 (D.Neb.1971). And it is conceivable that the denial of visitation privileges without a reasonable justification might amount to cruel and unusual punishment. See Almond v. Kent, 459 F.2d 200, 204 (4th Cir. 1972); United States ex rel. Raymond v. Rundle, 276 F.Supp. 637 (E.D.Pa.1967); Hollen, Emerging Prisoners’ Rights, 33 Ohio St.L.J. 1, 64-68 (1972). At the minimum, the district court should direct service on the defendants and require the filing of a motion or a responsive pleading to the Complaint. See Haines v. Kerner, supra.

For the foregoing reasons, the district court order of August 3, 1972, will be vacated and the case remanded for proceedings consistent with this opinion.

      . “Every person who, under color of any regulation, custom, or usage, of any State or Territory, subjects, or causes to be subjected, any citizen . to the deprivation of any rights [or] privileges . . . secured by the Constitution and laws, shall be liable in an action at law, suit in equity . . . for redress.”


text:
    FLORIDA EDUCATION ASSOCIATION, INC., et al., Plaintiffs, Hilda Flowers, Plaintiff-Appellee, v. Wilson C. ATKINSON et al., Defendants, School Board of Broward County, Florida, formerly known as the Broward County Board of Public Instruction, Defendant-Appellant.
    No. 72-2976.
    United States Court of Appeals, Fifth Circuit.
    July 16, 1973.
    Edward Marko, Fort Lauderdale, Fla., for defendant-appellant.
    Richard H. Frank, Tampa, Fla., for Florida Education Ass’n, Inc. and others.
    J. Leonard Fleet, Jerome M. Rosenblum, Hollywood, Fla., for Hilda Flowers.
    Before GOLDBERG, CLARK, and RONEY, Circuit Judges.
   PER CURIAM:

In February 1968, Florida teachers struck the state’s public school systems. After the strike the school board of Broward County refused to reinstate seventy-four teachers. The “Broward 74” brought a class action against the School Board to compel reinstatement with back pay for the period of the strike and lockout. This suit was settled by a stipulation entered into between the Board and the class action plaintiffs which was approved by the district court pursuant to F.R.Civ.P. 23(e) on June 28, 1971. The settlement provides that the School Board “unconditionally offers each and every member of the ‘Broward 74’ reemployment to the same or substantially equivalent employment status each member occupied on the day prior to the state-wide teacher walkout.” The settlement further provides that each teacher accepting the offer of reemployment “shall be granted all intervening pay step increases . . . ” For their part of the settlement, the members of the class agreed to dismiss with prejudice any other claims against the School Board.

Pursuant to the settlement, Ms. Hilda Flowers, one of the “Broward 74,” applied for reinstatement. Her request was rejected by the School Board on the ground that she had reached her seventieth birthday between the date of strike and date of settlement and therefore under Florida law could not obtain a current teaching certificate required for employment in the public schools. Fla. Stat. § 231.02 and § 231.14, F.S.A. Ms. Flowers then brought the present action to compel the Board to reinstate her as a teacher in accordance with the settlement or in the alternative, to grant her increased retirement benefits as if she had been continuously employed from February 1968 to the date of her seventieth birthday.

The court, without oral argument and without making specific findings relevant to Ms. Flowers’ motion, denied her request for reinstatement as a teacher but granted the alternative relief of augmented retirement benefits to be paid retroactively from the date of her seventieth birthday.

The School Board appeals. The present record is inadequate to evaluate the merits of the contentions made on appeal. Therefore, without intimating any ruling on such merits, we remand with directions to the district court to make specific findings regarding the proper construction of the settlement agreement as applied to retirement benefits. These findings should be based upon the well-settled rule that the construction and enforcement of settlement agreements are governed by principles of local law applicable to contracts generally. See e. g., Plymouth Mutual Life Ins. Co. v. Illinois Mid-Continent Life Ins. Co., 378 F.2d 389 (3rd Cir. 1967); Homestake-Sapin Partners v. United States, 375 F.2d 507, 511 (10th Cir. 1967); Cf. Mass. Casualty Ins. Co. v. Forman, 469 F.2d 259, 261 (5th Cir. 1972). A court may not add terms to a settlement which were not in the contemplation of the parties. Southwest E&T Suppliers, Inc. v. American Enka Corp., 463 F.2d 1165, 1166 (5th Cir. 1972).

There are three primary issues which must be clarified by specific findings. First, the court shall set out the basis for its determination to award Ms. Flowers increased retirement benefits, in lieu of reinstatement. The stipulation, which purports to settle all claims of the “Broward 74,” guarantees unconditional reinstatement with pay step increases to all members of the class. On the other hand, it makes no express provision for payment of increased retirement benefits to teachers such as Ms. Flowers who may have become disqualified for reemployment by age during the interim. The manner in which the court resolves this conflict must be made explicit.

Second, if the further proceedings required by our first step confirm the district court’s original determination that Ms. Flowers is entitled to increased retirement benefits under the settlement, the court must clarify its order by specifying whether “higher retirement benefits” due to Ms. Flowers include (a) those attributable to increases in the general level of retirement payment implemented by legislative or administrative action prior to the date of her seventieth birthday and/or (b) those attributable to the additional seniority which Ms. Flowers would have accrued had she remained continuously employed until that date. The court should also determine whether, under the terms of the settlement, Ms. Flowers incurred an obligation by accepting the stipulation to make a contribution to the state retirement fund equal in amount to that which would have been withheld from her salary by her employer during the period between the date of the strike and her retirement. See Fla.Stat. § 238.09, F.S.A.

Third, assuming the court adheres to its retirement benefits award to Ms. Flowers, the potential rights of other class members must be adjudicated. It has become apparent on appeal that there is substantial disagreement among the parties as to whether the increased retirement benefits awarded to Ms. Flowers are applicable to other members of the “Broward 74” who accepted reinstatement. While the determination of the proper seniority basis for retirement payments is an immediate problem only in her case, upon eventual retirement each reinstated teacher may claim benefits based on seniority which would have been accrued between the beginning of the strike in Feburary 1968 and the settlement in June 1971. In the interest of uniform adjudication of future class action claims for augmented retirement benefits, the court must rule on this matter. The district court should give proper notice to the plaintiff class in the underlying litigation, and may hold any additional hearings which it may determine are necessary to enable it to make specific findings as to the applicability of its interpretation of the settlement agreement to Ms. Flowers and all other teachers accepting reinstatement with the Broward County School System.

Remanded with direction.


text:
    In the Matter of Larry Eugene Bennett. Larry Eugene BENNETT, Appellant, v. W. T. GRANT COMPANY, Appellee.
    No. 72-2361.
    United States Court of Appeals, Fourth Circuit.
    Argued April 3, 1973.
    Decided July 9, 1973.

      Alexander P. Smith, Norfolk, Va., (Smith, Power & Owens, Norfolk, Va., on brief), for appellant.
    Eugene Forrest Gordman, Norfolk, Va., for appellee.
    Before HAYNSWORTH, Chief Judge, and BUTZNER and FIELD, Circuit Judges.
   PER CURIAM:

Larry Eugene Bennett appeals from the action of the district court affirming an order of the Referee in Bankruptcy declaring his indebtedness to W. T. Grant Company to be non-dischargeable in bankruptcy under Section 17(a)(2) of the Bankruptcy Act, as amended, 11 U.S.C. § 35(a)(2), by reason of his “willful and malicious conversion of the property” of Grant.

The facts are undisputed. Prior to his bankruptcy Bennett purchased a refrigerator, a washer and a dryer from Grant by conditional sales contracts under which Grant retained title to the property. Thereafter Bennett decided to purchase a mobile home which was equipped with such appliances and so advised Grant and requested that it repossess the items and reduce the amount of his payments. Grant declined this request and Bennett then delivered the appliances to the mobile home dealer and received a credit for them to be applied on the purchase of the mobile home. The amount of such credit or allowance does not appear in the record.

Section 17(a)(2) excludes from discharge, inter alia, any debts which are liabilities “for willful and malicious conversion of property of another.” While it is true that every act of conversion is not necessarily “willful and malicious” within the meaning of the statute, see Davis v. Aetna Acceptance Co., 293 U.S. 328, 55 S.Ct. 151, 79 L.Ed. 393 (1934), nevertheless if the act of conversion is done deliberately and intentionally in knowing disregard of the rights of another, it falls within the statutory exclusion even though there may be an absence of special malice. McIntyre v. Kavanaugh, 242 U.S. 138, 37 S.Ct. 38, 61 L.Ed. 205 (1916), Collier on Bankruptcy, Vol. 1A ¶ 17.09 at 1599 (14th ed.). The evidence clearly supports the finding of the Referee that Bennett’s act was a willful and malicious conversion of Grant’s property and the district court’s affirmance was correct.

While Bennett’s conduct warranted the finding of the Referee, we think the circumstances of this case called for some investigation of Grant’s conduct subsequent to Bennett’s disposition of the property. Under the Uniform Commercial Code as adopted in Virginia, the appliances were “consumers’ goods” and as such they continued to be subject to Grant’s security interest in the hands of the mobile home dealer. If Grant acquired knowledge of the transaction at a time when it could have asserted its security interest in the property and failed to take reasonable steps to protect its security, the indebtedness secured thereby should be discharged. It should be borne in mind that while bankruptcy is a specialized system of jurisprudence, a bankruptcy court is basically a court of equity and in a case such as this should be guided by equitable principles. See Young v. Higbee Co., 324 U.S. 204, 65 S.Ct. 594, 89 L.Ed. 890 (1945); Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939).

Accordingly, we remand this ease to the district court with directions that the Referee conduct a further hearing to develop evidence on this point.

Remanded.

      . Va.Code Ann. § 8.9-307(2).

      . Va.Code Ann. § 8.9-109(1).


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Lester KALMANSON and Barbara Kalmanson, Defendants-Appellants.
    No. 71-3609.
    United States Court of Appeals, Fifth Circuit.
    July 12, 1973.
    Rehearing Denied Aug. 1, 1973.
    Chester Bedell, C. Harris Dittmar, Jacksonville, Fla., for defendants-appellants.
    John L. Briggs, U. S. Atty., Jacksonville, Fla., Charles J. Muller, Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Atty., Tax Div., Dept, of Justice, Washington, D. C., for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge, and TUTTLE and INGRAHAM, Circuit Judges.
   PER CURIAM:

Lester and Barbara Kalmanson were charged in a three-count indictment with willful evasion of income taxes for the years 1964, 1965 and 1966. After a jury trial, verdicts were returned finding the Kalmansons guilty only as to the count relating to the tax year 1966.

The Kalmansons timely pursued this appeal raising numerous allegations of error. We have carefully reviewed the record and have determined that the convictions must be affirmed.

The appellants questioned the sufficiency of the evidence to support the jury’s finding of guilt. The evidence in the present case, when viewed in a light most favorable to the government, is more than ample to support the verdict of the jury. Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1942).

Assigned errors relating to portions of the court’s instructions to the jury are likewise without merit. The court’s charge to the jury must be considered as a whole. United States v. Williams, 473 F.2d 507 (5th Cir., 1973); Tillman v. United States, 406 F.2d 930 (5th Cir., 1969). The instructions in the present case, when so viewed, were not erroneous.

Appellants claim that the trial court erred when toward the end of the second day of deliberation it requested the jury to reexamine its views in order to reach a unanimous result if it could do so without any member yielding a conscientious conviction. The charge, as given, tracked the wording of the standards recommended by the American Bar Association. American Bar Association, Standards Relating to Trial' by Jury, § 5.4 (Approved Draft 1968). There was no error. United States v. Bailey, 480 F.2d 518 (5th Cir., 1973) (en banc).

Having carefully considered appellants’ remaining contentions and finding them to be without merit, we affirm the judgment of the district court.

Affirmed.


text:
    Harold W. CRUMP, Plaintiff-Appellee, v. CLARK EQUIPMENT COMPANY, Defendant-Appellant, The Travelers Life Insurance Company, Intervenor-Appellee.
    No. 73-1029.
    United States Court of Appeals, Fifth Circuit.
    July 5, 1973.
    Rehearing Denied July 26, 1973.

      Geo. A. Weller, Beaumont, Tex., for defendant-appellant.
    March H. Coffield, Joe H. Tonahill, Jasper, Tex., for plaintiff-appellee.
    John G. Bissell, Pike Powers, Jr., Beaumont, Tex., for intervenor-appellee.
    Before JOHN R. BROWN, Chief Judge, and COLEMAN and DYER, Circuit Judges.
   PER CURIAM:

This is a Texas diversity products-liability case in which Crump, an employee of Texaco, sued Clark Equipment Company for injuries sustained when the ladder leading up the side of a hystertype equipment mover failed as Crump was ascending the ladder to get to the operator’s elevated seat. By appropriate special questions, F.R.Civ.P. 49(a), the jury found the cause of the unladderworthiness was a defective weld which had existed from the time of its manufacture some nine years earlier and which had not been brought about solely by conditions of operation by Texaco.

Although the evidence was not overwhelming, we think it was sufficient, both in its direct and circumstantial form, to furnish an adequate basis for conclusions from competent metallurgical experts on the origin and duration of the defective weld, and the operational relationship between those earlier occurrences and the failure nine years later. In a one-time occurrence under circumstances that pose no new problems or critical legal issues as Texas looks upon products-liability, no good would be served by any delineation of facts which were so well and hard fought out before the jury who were properly instructed, and who returned an articulate verdict with the precision so well made possible by F.R.Civ.P. 49(a). The other points urged reflect either no error (such as on the burden of proof) or any substantial harm.

Once again the jury resolved it. There it should, and does, end.

Affirmed.


text:
    AG PRO, INC., Plaintiff-Appellant, v. Bernard A. SAKRAIDA, Defendant-Appellee.
    No. 72-1108.
    United States Court of Appeals, Fifth Circuit.
    June 25, 1973.
    Rehearing Denied July 13, 1973.

      J. Pierre Kolisch, Portland, Ore., Frank Hunter, El Paso, Tex., for plaintiff-appellant.
    J. F. Hulse, El Paso, Tex., for defendant-appellee.
   ON PETITION FOR REHEARING

Before RIVES, WISDOM and RONEY, Circuit Judges.

PER CURIAM:

In his petition for rehearing, Defendant-Appellee Sakraida seeks a remand of the issue of patent validity based on newly discovered evidence. His request is the substantial equivalent of a motion under Rule 60(b) (2), F.R.Civ.P., requesting relief from a final judgment because of newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b), F.R.Civ.P. See Bros. Incorporated v. W. E. Grace Manufacturing Co., 5th Cir. 1963, 320 F.2d 594, 607. In Ferrell v. Trailmobile, Inc., 5th Cir. 1955, 223 F.2d 697, 699, this Circuit adopted the following view of the District of Columbia Circuit, expressed in Smith v. Pollin, 1952, 90 U.S.App.D.C. 178, 194 F.2d 349, 350:

“that, when an appellant in a civil case wishes to make a motion for a new trial on the ground of newly discovered evidence while his appeal is still pending, the proper procedure is for him to file his motion in the District Court. If that court indicates that it will grant the motion, the appellant should then make a motion in this court for a remand of the case in order that the District Court may grant the motion for new trial.”

We think that procedure should be employed in this case, but with such modifications as are needed to fit the peculiar circumstances of the case. The movant, Sakraida, is the appellee. This Court, on February 5, 1973, reversed the judgment in his favor and found the patent valid. However, the mandate has not been issued, because Sakraida filed a timely petition for rehearing, attacking that decision on several grounds.

Thus the appeal is now pending on Sakraida’s petition for rehearing. Unless our present decision is changed on rehearing, the mandate of this Court, when ultimately issued, will permit such further proceedings as may be appropriate for a determination of the issue of infringement. As has been recognized by the district court, validity of the patent should be determined before ruling is made on infringement. Exercising our broad authority under 28 U.S.C. § 2106 to “require such further proceedings to be had as may be just under the circumstances,” we would unravel the procedural tangle to “secure the just, speedy and inexpensive determination of * * ” this action.

Accordingly, the case is remanded to the District Court with directions to enter a judgment holding the patent valid, subject, however, to that Court’s consideration of a motion under Rule 60(b) (2), F.R.Civ.P., to be filed in the District Court by the defendant Sakraida on the issue of patent validity based on newly discovered evidence. The District Court will hear and determine said motion before proceeding on the issue of infringement. The District Court will then certify to this Court the entire reeord, including its opinion and order and the testimony taken on the new trial issue. Thereafter, the parties will be given opportunity to file supplemental briefs and this Court will enter its decision determining the issue of patent validity based on newly discovered evidence, and directing the entry of a judgment either holding the patent to be invalid or holding the patent to be valid, and remanding the case for a determination of the issue of infringement and for such further proceedings as may be appropriate, consistent with this opinion.

So ordered.

      . The grounds, other than the claim of newly discovered evdence, we find to be without merit.

      . If the mandate had issued, a different procedure would govern the district court’s consideration of a Rule 60(b) (2) motion. See Moore’s Federal Practice (2nd ed.) § 60.30 [2], p. 426; Barron & Iloltzoff, Federal Practice & Procedure (Wright ed.), § 1332, p. 437.

      . See Rule 1, F.R.Civ.P.


author: DURFEE, Senior Judge.

text:
    FARMERS AND MERCHANTS MUTUAL FIRE INSURANCE COMPANY, Plaintiff, v. Calvin PULLIAM, Defendant, White Motor Corporation, Defendant-Appellee, and Reliance Mutual of America, Inc., Defendant-Appellant, E. Ray Price & Co., Inc., Third-Party Defendant-Appellant, E. Ray Price d/b/a E. Ray Price Company, Third-Party Defendant.
    No. 72-1595.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted March 29, 1973.
    Decided July 13, 1973.
    Richard R. Bailey, Oklahoma City, Okl., for appellants.
    Norman E. Reynolds, Oklahoma City, Okl., for appellee.

      Before BREITENSTEIN, Circuit Judge, DURFEE, Senior Judge, United States Court of Claims, and DOYLE, Circuit Judge.

       DURFEE, Senior Judge of the United States Court of Claims, sitting by designation.

   DURFEE, Senior Judge.

Defendant-appellee, White Motor Corporation (hereafter White), obtained judgment against defendant-appellant, Reliance Mutual of America, Inc. (hereafter Reliance), and third party defendant-appellant, E. Ray Price & Co., Inc. (hereafter Price, Inc.), in the sum of $8,583.00, together with interest thereon at the rate of ten percent per annum from October 23, 1969, until paid. The principal award was in the amount of an unpaid draft which was one of two checks given White in compromise and settlement of a pending lawsuit involving a loss arising under an insurance policy. Further judgment against Reliance and Price, Inc. was also had for $2,145.00 as attorney’s fees for the benefit of White’s attorney, Norman E. Reynolds. We affirm the judgment.

In 1966 Calvin Pulliam purchased a new truck-tractor from White, executing a conditional sales contract which required that Pulliam obtain comprehensive insurance coverage on the vehicle with White as loss payee. Pulliam obtained the required coverage from an Oklahoma City insurer, E. Ray Price, d/b/a E. Ray Price Company (hereafter Price) who underwrote the coverage during the policy year ending November 11, 1967. Appellant Price, Inc. is successor to Price, having taken the assets and assumed the liabilities.

Prior to the termination of the aforementioned policy, Pulliam’s local insurance agent contacted Price who agreed to see that a renewal policy was issued in the amount of $18,000.00. The cover note renewal policy sent directly to White, the loss payee, named Reliance as the insurer as well as “other participating companies’’ which were unnamed. Reliance, acting through Price, obtained reinsurance of its coverage on Pulliam’s vehicle from Farmers and Merchants Mutual Fire Insurance Company (hereafter F & M). F & M was a Missouri county mutual insurance company which was not authorized to insure or reinsure in Oklahoma the coverage involved here. White had nothing to do with the selection of F & M as a reinsurer and was not advised that Reliance had reinsured a portion of the policy. White relied exclusively on the $18,000.00 insurance coverage acquired from Reliance.

Oklahoma laws hold liable to an insured persons who place coverage with an insurance company unauthorized to cover the risk. 36 O.S. §§ 109, 711, and 1101. The district court found that Price and Reliance knew or should have known that F & M was not authorized to write reinsurance for Reliance on the policy issued by Reliance to Pulliam.

The insured truck was totally destroyed on July 5, 1968 while the renewal policy was in full forcé and effect. In October 1968 F & M commenced a declaratory judgment action in order to determine liability under the renewal policy. Pulliam along with Reliance, as primary insurance carrier, and White, as loss payee, were joined as defendants. White filed counter and cross-claims. After a pre-trial conference a settlement was effected in October 1969 by Reliance and F & M jointly with White whereby White was to be paid $13,000.-00. Two drafts were furnished at the time of final payment, representing a division of the loss between Reliance and F & M. Reliance and F & M had worked out the division of loss for their own convenience. White had not agreed to or participated in the division. One draft in the amount of $8,583.00 showing F & M as drawer was deposited by White but was dishonored. The other $4,417.00 draft showing Reliance as drawer was deposited by White and did clear.

White diligently attempted to collect the $8,583.00 unpaid draft without success and then sought judgment against both Reliance and F & M for the balance of the settlement amount. Judgment was properly obtained against F & M. Reliance moved to dismiss and for summary judgment and White filed a cross-motion for summary judgment.

At the initial hearing in August 1970 on these motions the issue was raised whether E. Ray Price was acting as the agent of Reliance or Price in obtaining reinsurance from F & M. White was granted leave to join, and did join, Price and Price, Inc. as third party defendants.

The district court made findings and conclusions,* ruling in favor of White on three different theories; enforcement of the original insurance obligation; breach of the settlement agreement; and enforcement of the unpaid check. We need only deal with the last mentioned ground for the judgment against Reliance and Price, Inc. in order to affirm.

The district court ruled that for purposes of liability to White, Reliance and Price were indistinguishable. Reliance had the same president, E. Ray Price, as Price. Reliance and Price used the same offices and the same employees. The cover note issued by Price on Pulliam’s truck for Reliance was issued from the office jointly used by Price and Reliance. Mail that was received by either entity bore a stamp showing the date of receipt and containing the names of both companies. Reliance and Price used only one file for the Pulliam coverage. Stationery was interchanged between the two companies. The district court concluded;

Reliance and Price are effectively one and the same in regard to the liability to White in that they had only one joint file. E. Ray Price acted for each contemporaneously and without distinguishing his principal; the employees of each acted contemporaneously and without distinguishing the principal; and the companies were operated together for a common purpose without reasonable division of purpose and responsibility.

The district court further found and concluded:

Since under the pre-trial order Reliance stipulated that Reliance and F & M stand in the same relative position as to all other parties save and except as their obligations are governed by contracts or dealings between them, and since the cover note specifically describes Reliance and other participating companies as “the company”, Reliance is estopped to assert a distinction between itself and F & M not having offered sufficient proof of contracts or dealings between them to the contrary.

Taken together, these findings and conclusions established that Reliance and Price were estopped from distinguishing themselves from F & M, against which the court had already entered judgment for $8,583.00 as drawer of the unpaid settlement check.

Appellants have failed to raise any error with respect to the foregoing findings and conclusions. We therefore consider claims of error with respect to them as waived. Legg v. Rock Prod. Mfg. Corp., 309 F.2d 172, 173 (10th Cir. 1962); Maher v. Cities Serv. Pipe Line Co., 286 F.2d 313, 314 (10th Cir. 1960). These uncontested findings and conclusions alone serve as ground for affirmance.

Having found Reliance and Price in effect liable as drawers of the unpaid settlement draft, the district court could award interest and attorney’s fees to White. 12A O.S. § 3-122, 12 O.S. § 936.

Appellants argue that the controversy between the parties was settled when Reliance’s check to White for $4,417.00 bearing the legend “In full settlement and release of all claims against Reliance Mutual of America, Inc. and E. Ray Price Co. * * * ” cleared the bank. Such a contention is directly opposed by the uncontested findings and conclusions of the district court that Reliance and Price were estopped to distinguish themselves from the drawer of the unpaid $8,583.00 check.

Appellants have raised a statute of limitations argument but it comes too late. A statute of limitations is a defense which must be affirmatively pleaded. F.R.Civ.P. 8(c). The defense was not pleaded and an attempt to amend the pleadings to include the defense at the commencement of trial was properly rejected as filed too late and without leave of court. F.R.C.P. 15(a). Moreover, the action was commenced within the applicable period governing .written instruments. 12 O.S. § 95.

Finally, appellant Price, Inc. complains that it was improperly joined as a third party defendant: The granting of leave of a defendant to prosecute a third party proceeding under F.R.C.P. 14 rests in the sound discretion of the trial court. United States v. Accord, 209 F.2d 709, 714 (10th Cir. 1954). We find no abuse of discretion. We further find no merit to appellants' claim that they were “faced with a brand new law suit” through amendments allowed to White’s cross-complaint alleging failure to pay the full settlement amount.

Affirmed.

      . V.A.M.S. §§ 380.550, 380.570, 380.490 (5), 380.520, and 380.479 RSMO 1969.

      . An issue exists whether F & M’s participation was by way of reinsurance or a direct policy. The district court deemed Reliance and Price, Inc. liable for placing coverage with F & M whether direct insurance or reinsurance was involved. We need not reach this issue in order to affirm.


author: VAN PELT, Senior District Judge.

text:
    SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellant, v. FIRST AMERICAN BANK AND TRUST COMPANY et al., Defendants-Appellees.
    Nos. 72-1306, 72-1313 (cross appeals).
    United States Court of Appeals, Eighth Circuit.
    Submitted Nov. 14, 1972.
    Decided June 25, 1973.

      Thomas Boyle and Walter P. North, Attys., S. E. C., Washington, D. C., for S. E. C.
    Frederick E. Saefke, Jr., Bismarck, N. D., for First American Bank & Trust Co.
    Before MATTHES, Chief Judge, MEHAFFY, Circuit Judge, and VAN PELT, Senior District Judge.

       Senior District Judge for the District of Nebraska sitting by designation.

   VAN PELT, Senior District Judge.

This case involves cross appeals from the judgment and order of the United States District Court for the District of North Dakota denying in all but one respect the request of plaintiff SEC for injunctive relief restraining defendants from violating the anti-fraud provisions of § 17(a) of the Securities Act of 1933. The defendants included First American Bank & Trust Company [First American], Bismarck Investment Corp., which controlled First American, Robert M. Hart [Hart], First American’s president and controlling shareholder, Robert Campbell, vice president of First American, and Larry Sanders, the secretary of First American.

First American has been involved in a series of legal actions of which this litigation is merely one part. This particular action was commenced on July 7, 1971. Due to the pendency of an action in the state court, the federal district court [Davies, J.], granted defendants’ request for a continuance. However, on January 21, 1972, the SEC renewed its motion for preliminary injunction, and on March 24, 1972, the federal district court [Van Sickle, J.] issued the order which is the subject of these appeals.

The basis of the SEC’s allegations is a brochure distributed by First American entitled “Questions and Answers.” Although on several occasions First American has argued that it is a trust company and thus only bound by North Dakota laws concerning such companies and not those concerning banking institutions, it calls itself a “banking institution,” and also compares its services with those of any other bank.

Safety of investment is assured by claims that its funds are invested “carefully and conservatively ... by highly experienced management,” and that there is semi-annual examination and supervision by the State Banking Examiner. The brochure contains statements asserting that “North Dakota laws insure the safety of deposits, trusts and contingent liabilities. Additionally, First American is bonded and insured by major insurance companies.” However, the deposits of First American are not insured by a governmental agency or private corporation, and the only other insurance is employee bonding insurance and casualty insurance on First American’s furniture. Included in the brochure is the statement that “earnings are guaranteed” although no third party does guarantee the earnings.

The SEC also argued that the brochure omitted material facts, for although it contains a statement to the effect that “[s]emi-annual examinations and supervision by the State Banking Examiner” assure the safety of investments, it fails to point out that the Examiner had issued several highly critical reports concerning the financial condition of First American and certain of its business practices.

The principal types of “securities” involved were capital notes, certificates of investment, and savings accounts. At the time this action was heard First American had ceased selling or offering for sale the capital notes or the certificates of investment and had removed from its brochure the statements that interest was guaranteed and that deposits were insured by the state of North Dakota.

The lower court made the following findings after a hearing: (1) The statement that “First American is bonded and insured by major insurance companies” is misleading because “[t]o a layman, given the manner or presentation, it would more reasonably mean the funds were protected by something akin to the FDIC.” (2) The statement that North Dakota law insures the safety of deposits is true in light of N.D.Cent. Code §§ 6-05-04, -05, and -27 (1959). (3) The statements that First American is a safe place to invest, that management was skilled, and that funds were invested wisely and conservatively were clearly “puffing.” (4) The statement that supervision by the Examiner assured adherence to state regulations was not shown to be false. (5) The statement that earnings and interest were “guaranteed” was false in that it implied a thii'd party commitment; however, “on the basis of the evidence presented, the false statement was not material since persons to whom that item was material would normally inquire and discover the correct interpretation of the term,” that is, that First American meant “promise.” (6) As to nondisclosure, there was no proof that the items to be disclosed were material. (7) The plaintiff failed to prove insolvency.

The court then held:
“We have carefully reviewed the entire record and the evidence adduced at the hearing and conclude that the plaintiff has failed to show a clear and immediate risk to the investor, including the uninformed, ignorant and gullible.
“Petition for a temporary restraining order is denied, except that defendant is restrained from implying in its advertising that it is bonded and insured for the protection of the depositors.”

Section 17(a) of the Act reads as follows: '

“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.”

It is not disputed that First American did offer to sell or in fact did sell through the use of the facilities of interstate commerce, capital notes, certificates of investment, and passbook savings accounts. It is equally clear that for purposes of the Securities Act, these items are “securities.” The parties disagree as to the proper characterization of the various statements in the brochure or any alleged omission therefrom.

We shall first consider the statements alleged by the SEC to be misrepresentations of material facts. The statements comparing First American to a bank and calling it a “banking institution” were correctly held by the lower court not to involve misrepresentations, since under North Dakota law First American was considered a “banking institution” and could provide a wide range of services similar to those of a bank.

The lower court granted limited relief pursuant to its holding that the statement that “First American is bonded and insured by major insurance companies” was misleading. It is claimed that this is in some respects a true representation in that First American had been issued bonds, such as fidelity bonds, and certain types of insurance. However, a statement which is literally true, if susceptible to quite another interpretation by the reasonable investor (in this case, for example, the interpretation that the deposits were insured by the FDIC) may properly, under § 17(a), be considered a material misrepresentation. Here the finding that the statement was misleading was proper in view of the context in which the statement was made.

The remaining statements involve, among other things, the concept of materiality. The 1933 Act contains a definition of materiality in a slightly different context: “The term ‘material’ when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters as to which an average prudent investor ought reasonably to be informed before purchasing the security registered.”

The case law concerning security regulation reflects a similar concept of materiality, generally with a definition taken from common law concepts. As expressed in the Restatement of Torts, a fact is material “if its existence or non-existence is a matter to which a reasonable man would attach importance in determining his choice of action in the transaction in question.” This is an objective test and there apparently is no need for a showing, at least insofar as materiality is concerned, that any particular investor relied to his detriment on a misrepresentation, or, in the case of an omission, would have acted differently if there had been no omission.

In its complaint the SEC alleged that' the following statements in the brochure violated § 17(a):

“First American Bank & Trust Company provides a convenient and safe place for North Dakotans to keep their savings, make investments and handle their trust affairs ....
All funds are invested carefully and conservatively in securities backed by the full faith and credit of the United States, and in leases, loans, and other assets prescribed by law ....
First American’s sound progressive operating policies are established by its Board of Directors, comprised of outstanding leaders in the community, and are administered by highly experienced management . . . . ”

In each instance the lower court held that the statements did not violate the statute because they were clearly recognizable as “puffing.”

Generally, we can agree with this characterization, although the lower court’s holding in regard to the claim that the funds are invested “carefully and conservatively,” in view of the subsequent holdings of insolvency, may be one the trial court would alter if the issue should again be properly presented.

In B. Fennekohl & Co., 41 SEC 210, 216 (1962), the Commission stated that

“The concept of ‘puffing’ is derived from the doctrine of caveat em/ptor and arises primarily in the sale of tangibles where it appears that examination by the purchaser may offset exaggerated statements and expressions of opinions by the salesman. It can have little application to the merchandising of securities.”

In the same vein, the Supreme Court reminds us that theories which support common law fraud doctrines and which “developed around transactions involving land and other tangible items of wealth must be adapted to the merchandise in issue.” SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194, 84 S.Ct. 275, 284, 11 L.Ed.2d 237 (1963). This viewpoint in regard to securities regulation was reiterated in Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), where the Court noted:

“The Court has said that the 1934 Act and its companion legislative enactments embrace a ‘fundamental purpose ... to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus achieve a high standard of business ethics in the securities industry.' ”

However, if this were the only finding complained of we would not reverse and would let the trial court’s conclusion of “puffing” stand.

In regard to the use of the phrase “guaranteed interest,” the lower court held that although the manner in which the defendants used the phrase falsely implied a third party commitment, the statement was not material “since persons to whom that item was material would normally inquire and discover the correct interpretation of the term.” Thus, there are two questions of fact here, whether the phrase falsely implies a third party commitment and whether the fact is material. As to these questions, we are bound by the substantial evidence rule. However, it is apparent from the holding below that the court’s finding was based at least in part on a misapprehension of the concept of materiality, and on this issue we are not so bound. The holding can be interpreted in three ways: (1) the SEC failed to prove detrimental reliance on the part of any paticular investor; (2) the original misrepresentation was or would be cured by the investors’ later inquiries; (3) the misrepresentation was not, in fact, one involving a material fact. Only the last interpretation is consistent with a contemporary understanding of “materiality” in § 17(a). In view of the fact that materiality is normally a question of fact to be determined by the court below in the first instance, we reverse and remand for reconsideration of the factual question.

In considering the SEC’s non-disclosure allegations, the trial court raised two questions: (1) Whether First American had a duty of disclosure; (2) whether the facts allegedly not disclosed were material.

It would seem beyond dispute that the defendants had an affirmative duty under the Act to disclose material facts about the “securities” in question, because the defendants were actively engaged in the promotion and sale of these securities. The question of materiality is more difficult. The standard in omission or non-disclosure cases should be whether a reasonable man in the position of an investor might well decide not to purchase the security if the fact or facts were disclosed. Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970). In its opinion, the lower court, in holding that, if there was a failure to disclose, the facts involved were not material, stated: “Where is the evidence that a failure to disclose materially affected the conduct of the investor? We conclude that if there was a failure to disclose, its materiality is not proved.” This holding indicates that the lower court injected into the analysis of materiality the issue of reliance. The question of reliance simply has no part in the consideration of whether the materiality standard of § 17(a) has been met, and so as to this holding also we reverse and remand to the lower court for reconsideration of the factual question.

The final question to which we must turn our attention is the propriety of injunctive relief. As we have seen, the lower court denied the requested relief except in regard to the claim in the brochure that First American was bonded and insured for the protection of depositors.

The Commission has the authority to bring an action for injunctive relief against violation of the Securities Act pursuant to § 20(b) of the Act:

“Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this subchapter, or of any rule or regulation prescribed under authority thereof, it may in its discretion, bring an action in any district court of the United States ... to enjoin such acts or practices, and upon a proper showing a permanent or temporary injunction or restraining order shall be granted without bond.”

Since the authority to secure an injunction is granted by statute, the “proper showing” of need would be based on the requirements of the statute and not with reference to the normal requirements for injunctive relief. Once a prima facie case is presented that past violations have occurred, it becomes necessary for the lower court to determine the likelihood of future violations. Injunctive relief may be proper even if there has been no showing that any particular investor has been harmed, and the very existence of improper conduct in the past raises an inference that such conduct will continue in the future even though the improper conduct has been discontinued. This inference is even stronger when the wrongdoers insist that their actions are legitimate and do not violate the Act. Therefore, we hold that the relief granted by the trial court was proper. It only remains on a rehearing to determine, in event the case is not mooted, whether the scope of relief should be broadened.

The action is affirmed in part and reversed in part, and remanded.

      . 48 Stat. 74, as amended, § 17(a), 15 U. S.C. § 77q (1970) :
      “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 wex-e 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.”

      . The SEC also alleged that First American was insolvent and requested the appointment of a receiver; this relief was denied and the court found that First American was solvent. Although such relief is available in the proper circumstances, SEC v. Bennett & Co., 207 F. Supp. 919 (D.C.1962) ; III L.Loss, Securities Regulation 1508-14 (2d ed. 1961), the SEC does not advance the argument on appeal.

      . In the state court, the State Securities Commission and the State Bank Examiner commenced an action against First American for a permanent injunction restraining it from continuing certain alleged practices. This action was twice the subject of appeals to the North Dakota Supreme Court on preliminary matters. State ex rel. Holloway v. First American Bank & Trust, 186 N.W.2d 573 (N.D. 1971), and 197 N.W.2d 14 (N.D. 1972). In addition, on June 28, 1971, the Examiner issued two orders requiring the bank to relinquish possession of its books, records and other property and to comply with certain listed directives or to show cause why a receiver should not be appointed. The State Supreme Court held that the Examiner could only issue orders to preserve the status quo during the pendency of a hearing before the State Banking Board (although he could make a finding of insolvency) and could not require compliance by First American with his ox-ders or require First American to show cause why a receiver should not be appointed. Only the Board had this power. First American Bank & Trust Co. v. Ellwein, 198 N.W.2d 84 (N.D.1972).
      Subsequently, on May 26, 1972, the State Banking Board authorized the Examiner to commence a proceeding before the Board. First American brought an action in federal court to restrain this heax-ing. This coux't reversed the lower court’s dismissal on the merits and held abstention to be the proper course, in view of the pending state court proceedings. First American Bank & Trust Co. v. Ellwein, 474 F.2d 933 (8th Cir., 1973). This court noted in that opinion that as of December 11, 1972, the Board had heard the matter, declared First American insolvent, and ordered the appointment of a receiver. These orders have been stayed by a state district court.

        Counsel for appellants now claims in a showing- made since this opinion was first drafted that the Internal Revenue Service lias made determinations from which it can or should be determined that First American is solvent.
      Because a further hearing will be necessary in this case, unless it has become moot, and since the question of solvency also has been raised in manners above suggested, we would suggest that the trial court consider whether, in order to make a fair and final determination for the protection of the investors, stockholders and the public, the pleadings could be amended to permit a further hearing on insolvency. The request for a receiver is a continuing one.
      We agree with the doctrine of abstention. We held up this opinion in hopes that the state court action might moot this point of the controversy. Nevertheless, we recognize that justice delayed is justice denied. It is for this reason we have reminded the trial court of its power to fashion adequate relief in this ease, if it is still necessary rather than continue with hearings and appeals in other courts.

      . At the hearing the SEC’s proof was somewhat limited in that it relied almost entirely on materials developed by tire State Banking Examiner.

      . This argument has appeared in both state and federal litigation. For example, in this action First American argued, and the lower court agreed, that N.D. Cent. Code § 6-07-3(1) (1959), which prescribes one rule for solvency determinations for banks, does not apply to trust companies, and that the proper measure is that for corporations operated for profit, that is, inability to pay debts as they come due in the usual course of business, N.D. Cent. Code § 10-19-02(14) (1959). At other times First American has argued that it need not comply with statutes requiring banks to take corrective action when their capital is impaired or statutes requiring banks to obtain the Examiner’s approval before issuing capital notes.

      . It should be noted that under North Dakota law First American could properly call itself a “banking institution.” Nelson v. Dakota Bankers Trust Co., 132 N. W.2d 903 (N.D.1965).

      . Critical reports were issued in 1970 and 1971. The first 1971 report was approved by the State Banking Board, and the Examiner thereafter issued the orders finding First American insolvent and directing it to relinquish its records to the Examiner; these orders were the subject of the North Dakota Supreme Court’s opinion that the Board had not observed due process in its deliberation and that the Examiner had no authority to issue such orders without full consideration by the Board. See note 1, supra. The second 1971 report showed that the position of First American liad deteriorated even further.
      As an example of the critical nature of these reports, one such report contained the following assertions : (1) First American’s capital was impaired (2) since its capital was impaired, its outstanding loans were not in compliance with applicable North Dakota law; (3) a large percentage of its loans were substandard, doubtful or uncollectible, and a number of these loans had been made to the president and controlling stockholder or persons or corporations affiliated with him;
      (4) $352,591 of $3,140,722 in assets were doubtful because they represented future payments on equipment being leased from the bank; (5) $219,590 of its asserted $631,697 in net worth was unacceptable because it represented capital notes — 7% promissory notes of First American that it had purchased for its trust accounts— that had not been issued in compliance with applicable banking laws; (6) First American does not follow accepted accounting principles, for example, by having no reserve for losses ; (7) First American is insolvent in the bankruptcy sense.

      . In his reports the Examiner asserted that First American could not include the capital notes in its capital structure, because prior approval of the Examiner was not obtained as required by the banking law, N.D. Cent. Code § 6-03-41 (1959). However, at the time N.D. Cent. Code § 6-05-34 (1959) did not require trust companies to gain such prior approval.

      . The court noted:
      “Both parties admit, and the evidence shows, that there has been wide general discussion on each stage of the proceedings by newspapers of general circulation in the area. To establish failure to disclose in this case, we must assume that the defendant had an affirmative duty to assure the scope of disclosure. But there is another problem also. What is adequate disclosure? Is the newsworthiness standard applied by the reporters the proper standard for the defendant? Where is the evidence that a failure to disclose materially affected the conduct of the investor? We conclude that if there was a failure to disclose, its materiality is not proved.”

      . See note 2, supra. The Court had several additional comments. It criticized the bank’s undisclosed practice of treating future lease and interest payments as current income but also criticized the Exam-i iner’s classification of certain leases and loans as doubtful assets. It also noted that the undisclosed practice of leasing and making loans to defendant Hart and his associates deserved special scrutiny, but found in all cases that the terms of these arrangements were reasonable and thus they were acceptable.

      . Securities Act of 1933, 48 Stat. 74, as amended, § 17(a), 15 U.S.C. § 77q (1970).

      . 15 U.S.C. § 77b(1) (1970). This section of the Act provides, in part, that the term “security” means “any note . [or] evidence of indebtedness. . . .” See Lehigh Valley Co. v. Central Nat’l Bank, 409 F.2d 989 (5th Cir. 1969).

      . See note 4, supra. It is true that by suggesting that it is a bank, First American might convey the impression that investors are protected by North Dakota banking laws. Under different circumstances such an argument might have merit. Of. notes 35-16, infra, and accompanying text.

      . See III L.Loss, Securities Regulation 1431-35 (2d ed. 1961).

      . The lower court made no express finding as to which subsection of § 17(a) was operative. We affirm on the basis that the statement was a material misrepresentation of fact, § 17(a) (2).
      At the same point in the brochure the statement is made that “North Dakota laws insure the safety of deposits. .” The lower court held that the statement was true because §§ 6-05-04 and -05 of the North Dakota Century Code require a security deposit, and § 6-05-27 provides for an increase of that deposit at the request of the State Banking Examiner when it is “insufficient to insure the safety of its deposit, trust, and contingent liabilities.” The SEC argues that only trust beneficiaries have a right of action against the deposit, relying on § 6-05-04.1 (Supp. 1971) : “[The deposit is held] for the benefit of any person making any transfer or deposit of money or property in the state of North Dakota to or with any trust company and who shall suffer loss or damage because of the breach of any trust committed by such trust company.” The State Banking Examiner also takes this position. There is no definitive state court construction of the statute, but in view of the statutory scheme the lower court’s construction is a possible one. We are not certain that the state court would so construe it and the trial court did not so predict. Such an interpretation, of course, calls for a broad reading of the word “trust” in § 6-05-04.1 and might be more plausible to the educated than to a non-educated small investor. In this day of insurance by government created agencies of deposits and of savings and loan accounts the statement that North Dakota laws insure the safety of deposits could well have been read to be an actual misrepresentation. In protecting the public, the SEO has properly raised the correctness of the statement. This panel, differing from the trial judge, would have held it a misrepresentation.

      . 17 C.F.R.. § 240.405 (1973).

      . § 538(2). See Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) ; SEC v. Texas Gulf Sulphur, 401 F.2d 833 (2d Cir. 1968) ; Myzel v. Fields, 386 F.2d 718 (8th Cir. 1967), cert. denied, 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1143 (1968).

      . Generally the test is objective, although in certain instances subjective considerations have been injected into the analysis by the courts. 2 A. Bromberg, Securities Law § 8.3 (1967).

      . Cf. Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) ; Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970) ; List v. Fashion Park, Inc., 340 F.2d 457 (2d Cir.), cert. denied, sub nom. List v. Lerner, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965) ; Otis & Co. v. SEC, 106 F.2d 579 (6th Cir. 1939).

      . Professor Loss believes that “there is no longer much room for judicial predilection in drawing the line between misrepresen- • tation and ‘puffing;’ for the ‘puffing’ concept in the securities context has all but gone the way of the dodo.” VI L. Loss, Securities Regulation 8541 (Supp. 1969).

      . The evidence presented by both plaintiff and defendants as to the meaning of the term “guarantee” consisted of those parts of a dictionary definition which served their own purposes.

      . Cf. Cannon v. Travelers Indemnity Co., 314 F.2d 657 (8th Cir. 1963) ; VI L. Loss, Securities Regulation 3534 (Supp. 1969). But see SEC v. Texas Gulf Sulphur, 401 F.2d 833, 849 n. 11 (2d Cir. 1968), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1963).

      . Jennings v. McCall Corp., 320 F.2d 64 (8th Cir. 1963).

      . See notes 17-19 supra, and accompanying text.

      . We intimate no views on whether there was a misrepresentation or, if so, whether it involved a material fact.

      . Cf. Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) ; Trussell v. United Underwriters, Ltd., 228 F.Supp. 757 (D. Colo.1964).

      . The question of reliance becomes an issue when one is considering private actions under, for example, SEO Rule 10b-5. Of. Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) ; III L. Loss, Securities Regulation 1438, 1765-66 (2d ed. 1961).

      . Securities Act of 1933, 48 Stat. 86, as amended, § 20, 15 U.S.C. § 77t (1970).

      . SEC v. Pearson, 426 F.2d 1339 (10th Cir. 1970) ; III L. Loss, Securities Regulation 1975-79 (2d ed. 1961).

      . SEC v. Bennett & Co., 207 F.Supp. 919 (S.D.N.Y. 1962).

      . Ill L. Loss, Securities Regulation 1979 (2d ed. 1961).

      . Hecht v. Bowles, 321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754 (1944).

      . SEC v. Keller Corp., 323 F.2d 397 (7th Cir. 1963).


author: ALDISERT, Circuit Judge.

text:
    Frances Sharp LICHTENSTEIN v. Maurice LICHTENSTEIN, Appellant, and Darby Farms, Inc.
    No. 72-1924.
    United States Court of Appeals, Third Circuit.
    Submitted Under Third Circuit Rule 12(6) May 24, 1973.
    Decided June 29, 1973.

      Jay D. Barsky, Silver & Bar sky, Philadelphia, Pa., for appellant.
    S. Regen Ginsburg and Lewis Kates; Kates, Livesey & Edelstein, Philadelphia, Pa., for appellee.
    Before ALDISERT, Circuit Judge, and STAPLETON, District Judge.
   OPINION OF THE COURT

ALDISERT, Circuit Judge.

The question presented is whether appellant, the losing party in extensive litigation, has demonstrated bad faith, vexation, or wanton or oppressive conduct, warranting the imposition upon him of the prevailing party’s counsel fees.

In 1967, Frances Sharp Lichtenstein instituted an action based on diversity of citizenship against her husband, Maurice Lichtenstein, and Darby Farms, Inc., a corporation of which her husband was principal officer and director. Mrs. Lichtenstein, the owner of stock in Darby Farms, claimed that her husband misused corporate funds, and sought an accounting and restitution.

In 1968, the district court approved a settlement agreement which provided for the appointment of a certified public accountant to audit the books of Darby Farms to determine whether Mr. Lichtenstein had misused any funds. The agreement stated that the findings of the accountant “shall be conclusive and binding on all parties,” and that if the áccountant should find that funds were due Darby Farms, Mr. Lichtenstein was to pay a designated escrow agent any deficiency between the amount found owing by the accountant and funds then on deposit with the escrow agent.

The accountant determined that $47,-331.44 was owing to Darby Farms. When Mr. Lichtenstein refused to pay any portion of this amount, Mrs. Lichtenstein instituted contempt proceedings against her husband. Over Mr. Lichtenstein’s defense that he had a right to except to the audit, the court, adjudged him in contempt, but added that he could purge himself by paying the deficit.

This court reversed because the settlement agreement lacked the required specificity on which to base a civil contempt. Lichtenstein v. Lichtenstein, 425 F.2d 1111, 1113 (3d Cir. 1970). We remanded for the district court to determine the intentions of the parties with regard to the appealability of the accountant’s audit. On remand, the district court decided that the findings of the accountant were binding and conclusive, and that the settlement agreement did not include a right to appeal or except to the audit. Lichtenstein v. Lichtenstein, 321 F.Supp. 152, 154 (E.D.Pa.1970). On appeal, this court affirmed the finding that the agreement did not permit “judicial appeals” from the findings of the accountant, but observed that the husband might take exceptions to those findings. We concluded, however, that Mr. Lichtenstein’s repeated failure to meet with the accountant constituted a waiver of the right to except. Also, this court determined that the district court erred in using a revalued figure in calculating the award to corporate defendant Darby, and modified the calculation accordingly. Lichtenstein v. Lichtenstein, 454 F.2d 69 (3d Cir. 1972).

On April 6, 1972, after Mr. Lichtenstein satisfied the judgment, attorneys for Mrs. Lichtenstein and Darby filed in the district court a rule to show cause why Mr. Lichtenstein should not be held responsible for counsel fees and costs. The district court ordered Mr. Lichtenstein to pay to Mrs. Lichtenstein “as costs, the sum of $913.02; to pay to Lewis Kates, Esquire as costs, reasonable counsel fees in the amount of $12,820, and to pay to S. Regen Ginsburg, Esquire as costs, reasonable counsel fees in the amount of $5,530.” Lichtenstein v. Lichtenstein, 55 F.R.D. 535 (E.D.Pa. 1972). This is the order now under review.

At the outset, we note our agreement with the applicable law as stated by the district court:

Attorney’s fees are not ordinarily taxable as costs and are awarded only in extraordinary cases. Bernstein v. Brenner, 320 F.Supp. 1080 (D.C.D.C. 1970). However, the power to award such fees is within the equity discretion of a district court, Vaughan v. Atkinson, 369 U.S. 527, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962), and where a losing party has brought an action or raised a defense in bad faith, vexatiously, wantonly or for oppressive reasons an award of counsel fees to the other party is appropriate. Moore’s Federal Practice § 54.77(2) p. 1348; 6 Moore p. 1352, citing Rolax v. Atlantic Coast Line R. Co., 186 F.2d 473, 481 (4 Cir. 1951).

55 F.R.D., supra, at 537. See also Hall v. Cole, 412 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702 (1973).

What we disagree with, however, and find clearly erroneous, Krasnov v. Dinan, 465 F.2d 1298 (3d Cir. 1972), is the district court’s finding “that the record . . . amply demonstrates that defendant’s activities in causing plaintiff to seek to enforce the settlement in Court and his defense to plaintiff’s action were inconsistent with good faith on his part.” 55 F.R.D. at 537.

The history of this litigation indicates that appeals to this court were not frivolous. Although appellant has evidenced a somewhat litigious and contentious nature, we are not persuaded that the record may be said to support a finding that he “brought an action or raised a defense in bad faith, vexatiously, wantonly or for oppressive reasons.” Hence, an award of counsel fees was inappropriate in this case.

Although it is true that appellant refused to remit the deficiency as found by the accountant, he did so because he believed the accountant erred in his procedure, and appellant claimed he had a right to appeal or except to the accountant’s findings. Appellee argues that the assertion of such a right is frivolous because the district court found that the language of the settlement agreement “meant that no appeals or exceptions could be taken from the certified audit. .” 321 F.Supp. at 156. This conclusion overlooks the fact that on appeal this court expressly did not accept the district court’s finding as it related to exceptions. “[T]his does not mean that the husband could not take exceptions to the findings , of the accountant.” 454 F.2d at 71. We found that the actions of the accountant and both parties demonstrated “reasonably clearly that both sides interpreted the agreement to mean that the accountant might hear exceptions from his determinations prior to their being made final.” 454 F.2d at 72. Admittedly, we found a waiver of that right here, but nevertheless, when the husband finally sought to assert that right he was acting under a plausible, and ultimately accurate construction of the agreement.

Similarly, appellant can hardly be said to have appealed his contempt citation in “bad faith,” especially since this court determined that the order which provided the basis for the contempt finding was vague and ambiguous.

Finally, in Hall v. Cole, supra, the Supreme Court observed recently that “[i]n this class of cases, the underlying rationale of ‘fee-shifting’ is, of course, punitive, and the essential element in triggering the award of fees is therefore the existence of ‘bad faith’ on the part of the unsuccessful litigant.” 412 U.S. 1 at 5, 93 S.Ct. 1943 at 1946. Here, where-this court recognized appellant’s right under the agreement to except to the accountant’s findings, and also determined that appellant was wrongfully held in civil contempt because the agreement was vague and ambiguous, it can hardly be said that appellant acted in bad faith in pursuing these appeals.

The judgment of the district court will be reversed.

      . Although appellant invites us to apply the law of Pennsylvania, rather than federal law, to this case, because our research discloses no difference between the law of the two jurisdictions in this area, we decline to explore this “conflicts” issue. See Bata v. Central-Penn National Bank of Philadelphia, 448 Pa. 355, 293 A.2d 343, 352-353 (1972). See also Brocker v. Brocker, 429 Pa. 513, 521, 241 A.2d 336, 339 (1968).

      . Indeed, when this matter was before the district court on remand for a determination as to whether the agreement was intended to preclude appeals and exceptions to the accountant’s findings, the court observed that the settlement agreement was written “in a hurry,” and, as a result, was “ambiguous” and “unevenly drafted.” 321 F.Supp. 154-155.