author: TONE, Circuit Judge.

text:
    Eugene A. WAHL and Vibra Screw Feeders, Inc., Plaintiffs-Appellants and Cross-Appellees, v. CARRIER MANUFACTURING CO., INC., Defendant-Appellee and Cross-Appellant.
    Nos. 73-1998, 73-1999.
    United States Court of Appeals, Seventh Circuit.
    Argued Sept. 19, 1974.
    Decided Jan. 17, 1975.
    As Amended on Denial of Rehearing Feb. 25, 1975.

      Charles E. McKenney, New York City, for Wahl and Vibra Screw Feeders.
    Thomas F. McWilliams, Chicago, 111., for Carrier Mfg. Co.
    Before SPRECHER and TONE, Circuit Judges, and PERRY, Senior District Judge.

       The parts of the opinion dealing with interest were amended on February 25, 1975 as a result of the court’s consideration of defendant-appellee’s petition for rehearing and the answer thereto,

       Senior Judge J. Sam Perry of the Northern District of Illinois is sitting by designation.

   TONE, Circuit Judge.

This is the second appeal in this patent-infringement case. In the earlier appeal, this court affirmed the District Court’s judgment holding claims 14, 15 and 17 of U.S. Patent No. 2,800,252 valid and infringed and enjoining further infringement. Wahl v. Carrier Mfg. Co., 358 F.2d 1 (7th Cir. 1966). The present appeal presents issues relating to damages for infringement, attorney fees, interest, and, by reason of a cross-appeal, infringement by certain modified devices manufactured and sold by defendant and the allowance of costs.

Plaintiffs are Eugene A. Wahl, the inventor and owner, and Vibra Screw Feeders, Inc., the exclusive licensee in the United States. The patent, which is described in our earlier opinion (358 F.2d at 2), relates to an auger-type feeder for use in introducing the desired amount of dry materials into a product being compounded. Defendant, Carrier Manufacturing Company, Inc., is a manufacturer of machines that embody auger-type feeders held to infringe the patent.

Some time after the original complaint was filed, defendant modified its accused device and manufactured and sold modified versions of several different types. Only the original version was involved in the first trial, and therefore the judgment of infringement affirmed by this court covered only that version. While the appeal from that judgment was pending, defendant filed in the District Court a petition for clarification of the judgment, or, in the alternative, for a declaration that the modified versions did not infringe the patent. After this court’s affirmance of the original judgment, the District Court held a second trial on the issues raised by the petition and on October 16, 1968, entered a supplemental judgment determining that all of defendant’s modified versions infringed claim 14.

Following the entry of the supplemental judgment, from which defendant did not appeal within 30 days, the District Court referred the case to a master for an accounting to determine plaintiffs’ damages and costs. After trial before him, the master, in a report consisting of findings of fact and conclusions of law, to which both sides objected, recommended allowance of damages of $37,-743.03 and costs of $20,240.00. The District Court adopted the master’s findings and conclusions, allowed interest on the damages commencing with the date the master’s report was filed, denied treble damages and attorney fees, and entered judgment accordingly.

Plaintiffs appeal, urging that the damages allowed are inadequate, that attorney fees should have been awarded, and that interest should have been allowed from the end of each year in which damages were incurred. Defendant cross-appeals, urging that the modified devices do not infringe and that certain costs should not have been allowed. We affirm the judgment of the District Court in all respects except costs.

Appealability of the Supplemental Judgment of Infringement

Plaintiffs’ motion to dismiss the cross-appeal as untimely, denied by Judge Stevens as motion judge, is renewed. We adhere to Judge Stevens’s ruling. The time to appeal from the supplemental judgment began to run with the entry of final judgment in this case. Victor Talking Machine Co. v. George, 105 F.2d 697, 699 (3d Cir. 1939), cert. denied, 308 U.S. 611, 60 S.Ct. 176, 84 L.Ed. 511 (1939); Bingham Pump Co. v. Edwards, 118 F.2d 338, 339 (9th Cir. 1941), cert. denied, 314 U.S. 656, 62 S.Ct. 107, 86 L.Ed. 525 (1941).

Merits of Supplemental Judgment

Claim 14, held infringed by defendant’s revised structures, requires that the auger be deliberately and controllably vibrated during rotation. This was held to occur in defendant’s original accused device because, although the trough and tube were vibrated independently of the auger, and the auger was secured to the base, the rubber mounts on which the base rested permitted the base and thus the auger to vibrate. (358 F.2d at 5.) Defendant argues that its redesigned feeders do not infringe because they are bolted down, rather than being mounted on rubber feet, and therefore vibration of the auger is not permitted, and claim 14 is not infringed.

The District Court found, however, that in each of the revised structures the auger was deliberately and controllably vibrated, because the vibrator mounted on the feeder vibrated the entire structure even though it was bolted down. Thus the court found that the modified structures perform substantially the same function in substantially the same way, and the doctrine of equivalents applies. The finding of equivalence is a determination of fact (Hazel-tine Research v. Admiral Corp., 183 F.2d 953, 955 (7th Cir. 1950), cert. denied, 340 U.S. 896, 71 S.Ct. 239, 95 L.Ed. 650 (1950)) and is supported by sufficient evidence, which we need not detail. That finding is not clearly erroneous and therefore cannot be disturbed.

Damages for Infringement

The District Court confirmed the master’s finding that the damages proved to have resulted from defendant’s infringement, which occurred during the period 1963 to April 1969, were $37,-743.03. ' Plaintiffs argue that this amount is grossly inadequate.

First, it is contended that Vibra Screw could have increased its prices on the feeders it sold by 10 per cent if it had not been for defendant’s unlawful competition. Plaintiffs did not offer testimony of customers or other evidence, except testimony of Wahl himself, that customers would have been willing to pay more than they did for Vibra Screw’s feeders. In accepting the master’s finding on this point, the District Court stated:

“The master found that in spite of the defendant’s infringing efforts, Vibra Screw always maintained a dominant share of the sales of the patented feeders, and based on Vibra Screw’s pricings before, during and after infringement ended, defendant’s sales had little or no effect on Vibra Screw’s pricing of its feeders.”

The court held that these findings were supported by sufficient evidence and not clearly erroneous. (See Rule 53(e)(2), Fed.R.Civ.P.) We agree.

Next it is argued that if it had not been for defendant’s unlawful competition Vibra Screw would have reduced its advertising expense by $300,000. This argument is based upon evidence that the “industry norm” of expenditures for advertising in relation to total sales, as reported in the December 29, 1969 issue of Advertising Age, was about half that spent by Vibra Screw, and the testimony of plaintiff Wahl, the company’s president, that it spent twice the industry norm to combat defendant’s illicit feeder competition. There was, however, no effort to show how much of Vibra Screw’s advertising related to feeders and how much related to its products other than feeders. Moreover, during the years 1969 and 1970, when Vibra Screw had no competition from defendant, its advertising expenditures were greater in relation to sales than they were during the years defendant was a competitor. The master and the District Court could reasonably have concluded, as they did, that damages based on excessive advertising expenditures would be speculative.

Plaintiffs also argue that during the damage period Vibra Screw could have made and sold 212 additional feeders, which was the number of infringing feeders sold by defendant, if it had not been for defendant’s illicit competition, and that its profit on these additional feeders and on related goods and parts would have been 50 per cent. This argument rests upon the assumption that fixed costs would have remained the same and that there would have been no additional labor costs but only incremental costs of material and commissions in making and selling the 212 additional machines. The soundness of this assumption is undermined by the failure of plaintiffs’ accounting experts to make the detailed analysis of all the operations and costs of the company on a daily or weekly basis which would have been necessary to a determination of incremental costs. It is true that the master found that Vibra Screw could have assembled one extra feeder per week without hiring extra workers. But the performance of additional assembly work would presumably mean that other work would not be done, which would somehow be reflected in added costs. Also, if these 212 additional feeders had been built there would have been additional costs for inventory power, and maintenance and wear of equipment used in assembly. The significance of all these costs could only have been determined by making a cost study in depth. The rejection by the master and the District Court of plaintiffs’ incremental cost analysis is further supported by the operating figures for all of Vibra Screw’s operations from 1965 to 1969, which show that its sales nearly doubled while additional operating profits were only about 8 per cent of the increase in sales, and that in the years 1967, 1968, and 1970 Vibra Screw’s operating profits declined while its sales increased. We cannot say that the findings on this subject were clearly erroneous.

Plaintiffs also attack the finding that defendant’s profits on the infringing feeders it manufactured and sold were 1 per cent, arguing that on an incremental cost theory its profits were much greater and that its eagerness to get the business belied so small a profit. Again plaintiffs did not introduce the kind of evidence that would have been necessary to support an incremental cost approach. And we cannot say that defendant’s eagerness to remain in the market conclusively shows highly profitable operations during the damage period as opposed to hope for profits in the future.

It is also argued that the finding as to defendant’s profits is inconsistent with the finding that a reasonable royalty would be 10 per cent. That this does not follow is recognized by the patent statute, 35 U.S.C. § 284, which in providing that in no event shall damages be less than a reasonable royalty, recognizes that there can be a reasonable royalty even though the proof shows small actual damages or no actual damages at all. The statute makes a finding of a reasonable royalty necessary in all cases in which damages are to be allowed. It is not necessarily incongruous that damages based on lost profits and damages calculated by applying a reasonable royalty were about the same.

The findings of the Disctrict Court on the amount of plaintiffs’ damages are not clearly erroneous and therefore must be sustained.

Treble Damages and Attorney Fees

Plaintiffs also complain of the District Court’s refusal to treble the damages or allow attorney fees. They argue that defendant’s manufacture and sale, after entry of the original injunction, of the modified feeder ultimately held to infringe claim 14 was contemptuous and therefore, the District Court erred both in not “increasing the damages” under 35 U.S.C. § 284 and in not considering the case “exceptional” under 35 U.S.C. § 285. The District Court, noting in substance that the issue of patent-ability was close and that the infringement issues were fairly debatable and litigated in good faith, refused to increase the damages and ordered that each party bear its own attorney fees. The court’s ruling was consistent with our decisions under section 284, Union Carbide Corp. v. Graver Tank Mfg. Co., 282 F.2d 653, 675 (7th Cir. 1960), cert. denied, 365 U.S. 812, 81 S.Ct. 692, 5 L.Ed.2d 691 (1961), and section 285, Allen v. W. H. Brady Co., 508 F.2d 64, 67 (7th Cir. 1974).

Interest

The District Court allowed interest commencing on the date the master’s

report was filed. Plaintiffs’ argument that interest should run from the end of each year in which infringement occurred on the amount of damages incurred in that year is based on statements in the House and Senate Reports on prior versions of what became section 284, cited in Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476, 505-506, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964), to the effect that “interest from the time infringement occurred” is recoverable. H.R. Rep. No. 1587, 79th Cong., 2d Sess. 1-2 (1946); S.Rep. No. 1503, 79th Cong., 2d Sess. 2 (1946), U.S.Code Cong. Serv. p. 1387. The language in the bill which these statements describe was deleted, however, before the bill was enacted. See General Electric Co. v. Sciaky Bros., Inc., 415 F.2d 1068, 1077 (6th Cir. 1969). The argument that the language of the committee reports was nevertheless given sanction by the citation in the Aro case was rejected by the Second Circuit in Georgia-Pacific Corp. v. U. S. Plywood-Champion Papers Inc., 446 F.2d 295, 301 n. 7 (2d Cir. 1971), cert. denied, 404 U.S. 870, 92 S.Ct. 105, 30 L.Ed.2d 114 (1971). But cf. Marvel Specialty Co. v. Bell Hosiery Mills, Inc., 386 F.2d 287, 290 — 291 (4th Cir. 1967), cert. denied, 390 U.S. 1030, 88 S.Ct. 1409, 20 L.Ed.2d 286 (1968). We agree with the Second Circuit on this point. That court adopts the further view in the Georgia-Pacific case that the 1946 Amendment to the statute, which speaks of “interest ... as fixed by the court,” altered the rule of Duplate Corp. v. Triplex Safety Glass Co., 298 U.S. 448, 459, 56 S.Ct. 792, 80 L.Ed. 1274 (1936) to the extent of giving the District Court “its traditional discretionary power in equity”. 446 F.2d at 302. This circuit, however, has continued, after the 1946 Amendment, to apply the rule of Duplate that interest should run from the date damages are liquidated absent exceptional circumstances. Union Carbide Corp. v. Graver Tank & Mfg. Co., supra, 282 F.2d at 677. We defer to the law of the circuit and decline to disturb the District Court’s ruling on interest.

Costs

The order of reference to the master included a direction to determine the costs recoverable by plaintiffs. The master included in his report findings of costs in the amount of $20,240, and the District Court awarded costs in that amount. Neither side complains of the reference of the issue of costs to a master.

Under Rule 54(d), Fed.R.Civ.P., costs are to be allowed to the prevailing party except when otherwise provided by statute or unless the district court directs otherwise. 28 U.S.C. § 1920 provides for the taxing of costs:

A judge or clerk of any court of the United States may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and copies of papers necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title.
A bill of costs shall be filed in the case and, upon allowance, included in the judgment or decree.

28 U.S.C. § 1924 requires that before costs are taxed, they must be verified by an affidavit that states the items are correct and were necessarily incurred in the case.

The Supreme Court, construing Rule 54(d) in Farmer v. Arabian American Oil Co., 379 U.S. 227, 235, 85 S.Ct. 411, 416, 13 L.Ed.2d 248 (1964), stated:

“We do not read that Rule as giving district judges unrestrained discretion to tax costs to reimburse a winning litigant for every expense he has seen fit to incur in the conduct of his case. Items proposed by winning parties as costs should always be given careful scrutiny. Any other practice would be too great a movement in the direction of some systems of jurisprudence, that are willing, if not indeed anxious, to allow litigation costs so high as to discourage litigants from bringing lawsuits, no matter how meritorious they might in good faith believe their claims to be. Therefore, the discretion given district judges to tax costs should be sparingly exercised with reference to expenses not specifically allowed by statute. Such a restrained administration of the Rule is in harmony with our national policy of reducing insofar as possible the burdensome cost of litigation.”

Our difficulty with the assessment of costs begins with plaintiffs’ failure to file an affidavit of costs, as required by 28 U.S.C. § 1924. As a result of this omission and the failure to offer any authenticating testimony at the hearing before the master, there was no proper authentication of any items of costs.

In addition, it does not appear that the items proposed as costs were given “careful scrutiny,” or that the discretion to allow costs was “sparingly exercised with reference to expenses not specifically allowed by statute,” as required by Farmer. We therefore remand the case to the District Court with directions to redetermine the allowable costs in the light of the admonition of Farmer and in accordance with the additional standards set forth below.

At the hearing on costs before the master, plaintiffs offered as Exhibit 78 a group of bills from the New York law firm that represents them in this case dated during the period June 1, 1963 to April 1, 1970. These bills were admitted over objection despite the absence of any authentication and were the basis for the assessment of some $11,061 of the costs allowed. Some of the disbursements shown in the bills were made in connection with this litigation but others were made for other unrelated litigation. Plaintiffs, instead of identifying the case to which each disbursement related, prorated the disbursements on each bill among the various cases, based apparently on the proportion of legal services shown on the bill to have been rendered in each case. Thus, if, in the bill for a given month, services in this case were charged at $1,000 and in another case at $500, two-thirds of the disbursements would be charged to this case. This method of proving costs led to some absurd results. For example, one of the other cases for which services and disbursements were jointly billed was another patent infringement case between the same parties relating to a hopper patent, in which defendant prevailed. Wahl v. Carrier Mfg. Co., 452 F.2d 96 (7th Cir. 1971), cert. denied, 405 U.S. 990, 92 S.Ct. 1255, 31 L.Ed.2d 457 (1972). The bill of December 31, 1967 includes a disbursement, which related to the hopper case, of $874.50 paid to court reporter. A portion of this disbursement was charged to defendant, notwithstanding that it prevailed in the hopper case.

The assessment of costs based on the arbitrary allocation of disbursements made by plaintiffs was unwarranted. To be recoverable as a part of costs, a disbursement must be shown to have been made in connection with the case in which the costs are allowed. Such a showing is normally made by an affidavit under 28 U.S.C. § 1924. The affidavit may be based on the affiant’s knowledge or on business records available to him, but a mere oral assertion of the attorney for the prevailing party is manifestly inadequate.

Most of the bills contain a lump sum charge for “miscellaneous disbursements for” various described items including “copies of patents,” “postage,” “telephone calls,” “photoprints,” and “typing.” Typically the enumeration ends with “etc.” In the first place, such a listing in explanation of a single sum was an inadequate basis for allowing costs, because it shows neither the amount of the individual expenditures nor the cases in connection with which they were made. Secondly, costs are not allowable for many of the expenditures listed. While charges for copies of patents, file wrappers and photoprints reasonably necessary for use in the case are recoverable as costs (W. F. & John Barnes Co. v. International Harvester Co., 145 F.2d 915, 918-919 (7th Cir. 1944), cert. denied, 324 U.S. 850, 65 S.Ct. 687, 89 L.Ed. 1410 (1945); 6 J. Moore, Federal Practice ¶ 54.77[6], at 1737 (2d ed. 1974)), charges for telephone calls and, ordinarily, for postage are not (Lee National Corp. v. Kansas City Southern Industries, Inc., 50 F.R.D. 412, 413 (S.D. N.Y.1970); Department of Highways v. McWilliams Dredging Co., 10 F.R.D. 107, 108 (W.D.La.1951), aff’d, 187 F.2d 61 (5th Cir. 1951)). Typing charges, which are presumably incidental to attorneys’ services, are not taxable.

The bills in Exhibit 78 also contain disbursement items for other expenses of attorneys, including traveling expenses incurred in attending depositions, pretrial conferences, and trial, as well as expenses incurred in making investigations. These expenses are not recoverable as costs. Kiefel v. Las Vegas Hacienda, Inc., 404 F.2d 1163, 1170 (7th Cir. 1968), cert. denied, 395 U.S. 908, 89 S.Ct. 1750, 23 L.Ed.2d 221 (1969); 6 J. Moore, Federal Practice, supra, ¶ 54.-77[4], at 1725, and ¶ 54.77[8], at 1751.

The bills also include disbursements for legal services of local counsel. The District Court having specifically held that plaintiffs were not entitled to recover attorney fees, these expenditures were not recoverable as fees, and they were plainly not recoverable as costs.

The charges of the court reporter for transcripts of the trial and of depositions reasonably necessary for use in the case even though not used at trial are recoverable upon a proper showing as provided in 28 U.S.C. § 1924. E. g., Hope Basket Co. v. Product Advancement Co., 104 F.Supp. 444, 449 (W.D.Mich.1952); 6 J. Moore, Federal Practice, supra, ¶ 54.77[4], at 1720. This is true of charges for services of the official court reporter as well as those of a private reporter. Fleischer v. A.A.P. Inc., 36 F.R.D. 31, 36 (S.D.N.Y.1964).

Some $7,384 of the costs recovered by plaintiffs relates to the expenses of demonstration models, preparation of exhibits, stands, and equipment used to operate exhibits, and transportation of exhibits. The amounts of these items were determined by estimates, an unsatisfactory method of proving expenses and disbursements if invoices and other kinds of more reliable evidence are available. Estimates should be received only upon a showing that such other evidence is not available through no fault of the claimant.

Turning to the allowability of expenses of this kind as costs, this court has allowed costs for models and charts. W. F. & John Barnes Co. v. International Harvester Co., supra, 145 F.2d at 916, 918. Other circuits have refused to allow such costs for lack of statutory authority. Specialty Equipment & Mach. Corp. v. Zell Motor Car Co., 193 F.2d 515, 520-521 (4th Cir. 1952); Johns-Manville Corp. v. Cement Asbestos Products Co., 428 F.2d 1381, 1385 (5th Cir. 1970). While we do not overrule our prior decision in the Barnes case, which has been the law in this circuit for over 30 years, we must require district courts, in ruling on applications for allowance of expenditures for models and demonstration exhibits as costs, to heed the admonition of the Farmer case (379 U.S. at 235, 85 S.Ct. at 416) that “the discretion given district judges to tax costs should be sparingly exercised with reference to expenses not specifically allowed by statute.” Ordinarily, it will be best to follow Professor Moore’s suggestion that prior approval of the district court be obtained, if a party wishes to use an expensive model or exhibit, the expense of which he will seek to have taxed as costs. 6 J. Moore, Federal Practice, supra, ¶ 54.77[6], at 1739-1741. We shall not impose that requirement in a case already tried. It does not appear here, however, that in allowing exhibit and model expenses as costs the District Court sparingly exercised its discretion. These elements of costs should be reexamined on remand. We add that the expense of transporting exhibits is not a proper element of costs. Twentieth Century Fox Film Corp. v. Goldwyn, 328 F.2d 190, 224 (9th Cir. 1964), cert. denied, 379 U.S. 880, 85 S.Ct. 143, 13 L.Ed.2d 87 (1964).

The judgment of the District Court is affirmed in all respects except the award of costs. As to costs, the action is remanded to the District Court for further proceedings consistent with this opinion.

Affirmed in part; reversed and remanded in part.

      . The master, in rejecting plaintiffs’ argument, relied specifically on testimony of defendant’s accountant that some additional overhead and labor costs would necessarily be incurred in the production of the additional machines and the testimony of Vibra Screw’s chief engineer that the back-up man in the assembly shop had other duties to perform. The master’s analysis on this point is reasonable and supported by sufficient evidence.


source: Caselaw Access Project

author: JOHN R. BROWN, Chief Judge:

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellant, v. LYKES BROS. STEAMSHIP CO., INC., in personam, and SS MARJORIE LYKES, her engines, tackle, etc., in rem, Defendants-Appellees.
    No. 72-1633.
    United States Court of Appeals, Fifth Circuit.
    April 9, 1975.

      Anthony J. P. Farris, U. S. Atty., B. Stephen Rice, James Gough, Asst. U. S. Attys., Houston, Tex., Anthony W. Gross, Dept, of Justice, Admiralty & Shipping Section, Walter H. Fleischer, Ronald R. Glancz, Morton Hollander, Appellate Sec., Civ. Div., Dept, of Justice, Washington, D. C., for plaintiff-appellant.
    Kenneth D. Kuykendall, George W. Renaudin, Houston, Tex., for defendantsappellees.
    Before BROWN, Chief Judge, and WISDOM and AINSWORTH, Circuit Judges.
   JOHN R. BROWN, Chief Judge:

This appeal presents the troublesome and recurring and sometimes confusing problem of properly allocating the burden of proof between Shipper and Carrier in a suit for damages to perishable cargo. The United States (Shipper) brought suit to recover for damage to a shipment of whole wheat flour transported by Lykes (Carrier) from Houston, Texas, to Gdynia, Poland. Upon out-turn in Poland, the flour was totally infested by weevils — one of the species bears the name of confused flour beetle — and was rejected as unfit for human consumption. Damage to the cargo amounted to $21,751.78. The District Court in a non-jury trial found the Government failed to discharge its burden of proving the cargo was delivered to the defendant in actual good order and condition and thereupon dismissed the complaint. We conclude the District Court misconstrued Carrier’s obligation to Shipper. Therefore, we vacate and remand for further consideration not inconsistent with this opinion.

All Weevils On Board

In attempting to sustain its burden of proving the nine rail carloads of whole wheat flour (8,332 100-pound bags) were delivered to Carrier in good order and condition, the Government presented a detailed description of the milling and transportation processes. A clear understanding of that procedure is helpful to our review of the District Court’s factual findings as to the cause and origin of the weevil infestation.

The flour was milled by the Kimbell Diamond Milling Company in its Texas mills, three rail carloads at Graham, and six at Seguin. Under the standard practice, when the wheat arrived at the mills, it was initially placed either in a storage tank or an elevator, where it was fumigated. The grain was then run through a series of separators and screeners to remove foreign matter. Then it was milled and mechanically packed in cotton bags. While the flour was being bagged, Government inspectors took samples which were analyzed by local Department of Agriculture laboratories for evidence of filth or insect fragments. The Commodity Inspection Certificates issued by the laboratories for all nine carloads showed no findings of insect fragments or other filth.

The bagged flour was loaded into rail cars. The cars were sealed with masking tape, fumigated by introducing methyl bromide through a hole, which then was itself Government sealed. The Graham mill used 15 to 20 pounds of methyl bromide per rail car, the Seguin mill used 18 pounds. On direct examination, Dr. Henderson testified fumigation with 15 to 20 pounds of methyl bromide per car would be adequate to kill all stages of infestation in flour. But when pressed by defense counsel to state 15 to 20 pounds would kill 100% of each stage, Dr. Henderson equivocated by saying he did not want to give an exact answer because there are too many other factors affecting infestation, such as the seal on the doors and outside temperature.

James S. Cook, a defense witness, was not so equivocal. An entymologist and former employee of the Department of Agriculture Research Service, he testified a 15 to 18 pound dose of methyl bromide would kill insects in each stage, “but it is not adequate to kill all insects in all stages throughout the car.” Asked what conditions would be required to kill 100% of all stages of all insects, he described the necessity for almost ideal conditions and an average dose of 27 pounds per car.

Carrier’s Custody

The carloads of flour arrived at the Port of Houston on May 26, May 27, June 7, and June 8, 1965. Wharf receipts prepared by Carrier reflect that six of the nine carloads were found to be infested upon opening in Houston. Those cars were then fumigated a second time.

Prior to loading, SS MARJORIE LYKES was inspected by a member of the Houston Merchants Exchange and a certificate was issued stating the vessel’s holds were free of live infestation. On June 13 and 14 all the flour was loaded into the ship’s No. 4 lower hold. A clean bill of lading was issued by Carrier on June 14.

While still in Houston, 714 bags of milo (animal feed) were stowed in the No. 4 hold, directly on top of the flour cargo. Only large sheets of cardboard, separated the cargoes.

The District Court based its critical finding that the Government failed to “discharge its burden of demonstrating actual good order and condition of the cargo upon its arrival in Houston” on both the expert witnesses’ testimony and the infestation found in the rail cars. The Court found (i) there had not been a 100% kill, (ii) live eggs therefore infested the flour when delivered to Lykes, and (iii) they constituted an inherent vice in the cargo.

The Strike Delay

SS MARJORIE LYKES departed Houston at 0500 hours June 15, 1965 and arrived in Beaumont at 1900 hours that evening. Additional cargo was to be loaded in Beaumont, and later in other Gulf ports. At midnight on June 15, the Marine Engineers Beneficial Association declared a strike which prevented the ship from departing Beaumont. The strike lasted until August 28, 1965 and SS MARJORIE LYKES remained strike bound in Beaumont until September 8. Subsequently she loaded more Cargo in New Orleans and Mobile, and finally arrived in Gdynia, Poland October 13, 1965.

Discovery Of Infestation

While the SS MARJORIE LYKES was idle in Beaumont, a shore-based inspector was employed to check the ship’s mooring lines and cargo. The inspector, John Young, testified that he checked the vessel’s holds every 7 to 10 days during the strike. On August 19, 1965 he discovered the flour cargo in hold No. 4 was infested with live weevils. Young notified an official of Carrier on August 19, but no attempt to notify Shipper was made until August 26.

Even then, Carrier merely sent a letter, notifying Shipper of the discovery of weevil infestation and requesting instructions. Shipper did not respond, but Carrier decided to fumigate the shipment anyway. A second letter was sent on August 31 to notify Shipper of that decision. Finally, on September 6 the cargo was fumigated.

The District Court found Carrier’s care of the cargo was not free from negligence: From the testimony, the Court found Young actually entered hold No. 4 only once, on August 19, when he discovered the live weevil infestation. It was negligent of Carrier to fail to notify CARE, Inc. until 7 days had passed, and then only by letter through the regular mails. The Court found Carrier compounded its negligence by failing to fumigate the cargo until September 6, 18 days after the initial discovery of infestation.

Discharge Of The Flour In Poland

One day prior to departing Beaumont on September 8, 1965, a portion of the milo cargo was discharged from hold No. 4 due to dampness acquired during the vessel’s stay in Beaumont. When the flour cargo was discharged in Gdynia, from October 13 to 15, 1965, inspectors for both Carrier and Shipper examined the flour and found it was infested and unfit for human consumption. The entire cargo was rejected by Shipper and sold as animal fodder. The Shipper’s loss totaled $21,751.78.

District Court Findings Of Fact And Conclusions Of Law

The District Court made four critical findings of fact: (i) Shipper failed to establish the actual good order and condition of the cargo upon its arrival in Houston; (ii) there was insufficient evidence to show what part of the infestation, if any, occurred because of the milo’s proximity to the flour; (iii) Carrier adequately brought itself within the strike exception to liability provided in COGSA § 4(2)(j), 46 U.S.C.A. § 1304(2)(j); and (iv) the Carrier failed to demonstrate its freedom from negligence in caring for the cargo.

The District Court isolated Shipper’s failure to establish actual good order and condition of the cargo at the time of delivery to Carrier as the fatal element in its claim. It held Shipper’s failure to discharge that burden of proof defeated any prima facie case and, therefore, precluded any recovery.

Burden Of Proof

Modern disputes over ocean-going freight are governed by COGSA, 46 U.S.C.A. § 1300 et seq. A Shipper complaining of cargo-damage must prove delivery in good order and condition, and outturn by the vessel in damaged condition to make out a prima facie case. Zack Metal Co. v. S. S. Birmingham City, 2 Cir., 1962, 311 F.2d 334, 337, 1962 A.M.C. 925; Daido Line v. Thomas P. Gonzalez Corp., 9 Cir., 1962, 299 F.2d 669, 671, 1962 A.M.C. 1299. As an initial step in demonstrating good order and condition Shipper relied on the clean bill of lading issued by Carrier. But a clean bill of lading merely attests to apparent good condition of cargo, based on external inspection. In Compagnie de Navigation v. Mondial United Corp., 5 Cir., 1963, 316 F.2d 163, 170, 1963 A.M.C. 946, 951, we held, “[w]here because of the perishable or intrinsic nature of the commodity, the internal condition is not adequately revealed by external appearances, cargo may have a considerable burden of going further to prove actual condition.”

While standing by the clean bill of lading, Shipper admitted, indeed was forced to admit, due to the discovery of infestation in the rail ears at Houston that flour tends to become infested if not cared for properly. Although not admitting to any inherent vice or defect theory, the Government took this position in attempting to bolster its showing of good order and condition, contending that all flour will become infested if not fumigated at regular intervals. Therefore, the Government contends, the condition of the flour when delivered to Carrier was as good as could be required.

Although the record fully supports a finding that infestation is inherent in flour, in various stages of incubation and propagation, and that proper handling can contain it, we think the District Court meant to go further. We interpret its conclusion “that the Government has failed to demonstrate the actual good order and condition of the cargo upon its arrival in Houston . . .”, as supported by its statement that “there is strong evidence to indicate that the cargo was already infested at the time of its delivery to defendant. . . ”, to mean the flour was in such a condition that normal precautions would not be enough to preserve the cargo’s “as delivered” condition.

The case is, therefore, distinguishable from United States v. Central Gulf S. S. Corp., 5 Cir., 1972, 456 F.2d 1281, where the District Court found the flour cargo was in good condition and order.

We hold, therefore, the District Court correctly concluded Shipper failed to make out a prima facie case. However, we do not agree that ends the matter. It simply means Shipper cannot rely on the difference between the cargo’s condition when delivered to Carrier and that at outturn to discharge its burden of proof.

COGSA § 3(2), 46 U.S.C.A. § 1303(2) obligates Carrier to “properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.” There is nothing in the statute which relieves that obligation. COG-SA § 4, 46 U.S.C.A. § 1304, enumerates various instances in which carriers are not liable to their shippers, but none of them excuses the carrier from the duty imposed by § 3. Shipper’s failure to make out a prima facie case, however, imposes upon it the burden of proving any damage to the cargo resulted from a breach of that duty. Further, we affirm the District Court’s holding that Shipper was entitled to no more in the way of cargo-care than the shipper of any other ■load of flour. Cf. Aunt Mid, Inc. v. Fjell-Oranje Lines, 7 Cir., 1972, 458 F.2d 712.

The District Court did find “[Carrier] has failed to demonstrate its freedom from negligence in caring for the cargo.” And it found “defendant has sufficiently shown itself entitled to claim the strike exception of [COGSA § 4(2)(j)] 46 U.S.C. § 1304 [(2)(j)] . . .” Both findings are supported by the record, but we need to discuss their consequences because we hold, supra, failure of Shipper’s prima facie case does not warrant dismissing its complaint.

Two arguments cut against Carrier’s assertion that its eligibility for the strike clause exception totally relieves it of . liability in this case. First, the preamble to § 4(2) states “the ship shall [not] be responsible for loss or damage arising or resulting from — . . . ” strikes (emphasis added). Second, the proviso to § 4(2)(j) is “[t]hat nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier’s own acts . . . .” Taken together, we think it is clear the strike clause only relieves the carrier of its obligation to care for cargo to the extent the strike makes it unreasonably difficult to continue doing so. Schroeder Bros., Inc. v. The Saturnia, 2 Cir., 1955, 226 F.2d 147.

At a minimum, we think that continuing obligation includes, in the case of flour cargo during that time of year conducive to insect growth, the duty to inspect the cargo from time to time — unless, of course, the strike makes such inspection unreasonably difficult. The cost of inspection is slight — we do not believe it requires any special talent — yet the likelihood of a large loss is substantial, regardless of the flour’s condition when delivered to Carrier. In this case Shipper recognized that obligation and took some steps toward discharging it.

If in exercising this minimal care infestation is discovered, as it was in this case, a different problem arises. Complete resolution of it requires knowledge of facts the District Court did not believe itself required to have under its analysis. On a factual record the Court must find several things. First, it should determine what a reasonably prudent carrier in the exercise of its § 3(2) duty should do with respect to anticipating the likely existence of insects and the steps reasonably necessary to eliminate or alleviate damage therefrom. Second, it should determine whether an inspector, reasonably instructed as to what to look for, should have discovered the infestation earlier than Inspector Young did in this case. Third, the Court should determine in the light of a factual record what a reasonable, prudent carrier, discharging its § 3(2) duty, would have done once it knew of the infestation, and at the time it should have known of it. Fourth, Shipper is obligated to prove, by a preponderance of the evidence, what damage was actually caused beyond that which would have resulted from the defective condition existing in the flour at the time of its delivery to Carrier. The fourth inquiry should be made in the context of the rule stated by the District Court, and affirmed by us, that Carrier (assuming a strike-less voyage) was not obligated to provide onboard treatment beyond the normal stowage due a shipper with flour in actual “best-possible” condition who does not specify special treatment.

Neither should the District Court feel obligated to reconsider its ruling on Carrier’s eligibility for the strike exception. Thus, the fourth inquiry should include a determination of whether or not any reasonably feasible treatment would have saved the cargo,' given both the strike and the delivery-condition.

Without meaning to limit the District Court’s third inquiry on remand, by way of illustration we point out three alternatives Shipper faced had it been immediately advised of the infestation. It could have (i) ignored the situation, hoping to salvage enough of the cargo to make that the most economical alternative, (ii) fumigated the cargo, or (iii) unloaded the cargo and attempted to sell it immediately. Throughout the inquiry, the Court should keep in mind that Carrier’s decision is to be reviewed in light of the circumstances as they reasonably appeared at the time — not with the benefit of hindsight.

Vacated and remanded.

      . The flour under transport to Poland was for the use of CARE, Inc., a relief agency of the United States Government.

      . Dr. Lyman S. Henderson, Chief of the Stored Products Insect Research Branch of the Department of Agriculture’s Research Service, testified at the trial as to the various species of weevils which infest whole wheat flour and the different life stages in which they may be found. Some of the more prevalent beetle species that can infest common grain products, such as whole wheat flour, include the confused flour beetle, red flour beetle, saw tooth grain beetle, cigarette beetle and the lesser grain bore. All these varieties will be grouped under the common name “weevil” for our discussion. The lesser grain bore feeds both on the whole grain and on milled products. The other species prefer milled products, although they may be found in stored grain feeding on broken kernels and grain dust.
      Dr. Henderson stated the life cycle for the different species is very similar, all evolving within four weeks under good conditions. Good conditions include temperatures from about 80 to 90 degrees Fahrenheit and about 60% relative humidity. He also said many of the insects do very well at higher temperatures or humidities. He described the insect’s life cycle as follows:
      A The typical life cycle for this group of insects is that the adult lays eggs which hatch within, again a general matter of two or three days to a week. This will vary with temperature and moisture, humidity conditions.
      The larvae stage is next, what hatches out of the egg. They are very small at first. As they grow and become larger, they at periodic intervals shed their skins and molt. They become again larger. They run through a succession of these stages, four or five, maybe more.
      This, again, varies a little bit with the species, but within this group that we are speaking of and under favorable conditions, this larvae stage will last maybe two to three weeks.
      When the larvae is full grown, it transforms into pupa, p-u-p-a. It develops into a pupa which is a resting stage. It does not feed, is not active or mobile.
      It lasts for, again, three to five or six days, something like that.
      ******
      And when this is completed, then the adult form begins to take shape and when the process is through, the adult insect emerges.
      Q Is there any further growth as an adult? A No. Once an insect is an adult, it’s reached its full size.
      Dr. Henderson stated the confused flour beetle is the only one which does not fly. It spreads primarily by crawling or by being moved with the commodity or food material in which it is living. The red flour beetle, cigarette beetle and lesser grain bore are all strong fliers. These flying abilities make preventing infestation more difficult.

      . The Graham mill fumigated with cyanide gas, the Seguin mill with a phototoxin. At trial, Dr. Henderson (see note 2, supra) testified either method is an accepted mill procedure for destroying live infestation.

      . Additional samples are sent to the Department’s laboratory in Beltsville, Maryland. There was no report of contamination in either the Graham or Seguin cargoes.

      . Prior to loading, each rail car was thoroughly cleaned, coated with a contact spray and examined by mill personnel to ensure its good condition.

      . A This approaches an uneconomical level and this would mean that the car must be selected. Most standards that a flour mill can accept a car on for loading and shipping flour is not adequate for a 100 percent control.
      So, there are not very many cars adapted to this..
      Secondly, we would have to go to much — the cars would have to have — excuse me — the load would have to be palletized within the car to assure complete distribution; the gas would have to be introduced either as a hot gas or as a fine spray, possibly with fanning inside; it would have to be sealed far more extensively than it is now.
      The odds are it would actually have to be covered and enclosed within a nylon or vinyl coated gas-proof tarpon — I don’t know — the car would not be able to move from its location during the entire exposure period of not less than 24 or 45 hours.
      To assure ourselves this is proper, we would have to run an analysis within the car and watch this concentration as it builds up or as it dissipates from the car.
      Q How many pounds of methyl bromide would it take to insure this 100 percent kill, assuming all of these other conditions that you have mentioned?
      A We would have 'to be sure we maintained that concentration and I imagine we would have to start between five and eight pounds per thousand cubic feet, an average car contains approximately 4,000 cubic feet.
      We’re talking in the ranges of 20 to 30 pounds.
      Q Is there any way to be a little more precise with respect to how many pounds or can you just give the general ranges?
      A Because we are going after 100 percent control, if we are to compare it to other species of insects, we would have an average of about 27 pounds per car to obtain 100 percent kill throughout the load on all stages.

      . Asked about the possible consequences of this arrangement, Dr. Henderson responded in part:
      A Well, I think it’s rather traditional that all the people who have to do with this handling and movement of animal feed are paying less attention to critical insect control than are those who are involved with food products.
      There is a tendency to be a little more lax in your control measures with animal feeds and be a little bit neglectful.

      . Shipper does not dispute the District Court’s finding that no culpable act or omission by Carrier contributed to the outbreak of the strike.

      . The two inspectors’ reports, filed with the Polish Chamber of Foreign Trade, showed the cargo was contaminated with living insects. On discharge several of the bags were found to have been damaged by wetness and there was an odor of fermentation about the cargo. Baking the flour produced a bread which was bitter and had breaking gluten.

      . Our inference arises from the fact the supporting statement (quoted in the text) is in the context of a paragraph holding that, absent special instructions, Shipper is not entitied to special treatment. We discuss this rule further, p. 224, infra, but point it out now for its value as an interpretative aid.

      . In this respect it echoes the earlier Harter Act, 46 U.S.C.A. §§ 190-196.

      . This finding is supported by the record, regardless of which party ought to be charged with the burden of proof on the issue. Therefore, insofar as the District Court’s finding might be read, as containing a legal conclusion that Carrier was under such burden, we should not be understood as either rejecting or sustaining it.

      . See, United States v. Central Gulf S. S. Corp., 5 Cir., 1972, 456 F.2d 1281; and United States Shipping Board v. Texas Star Flour Mills, 5 Cir., 1926, 12 F.2d 9.

      . In connection with this option, it will, of course, be necessary to consider who would bear the burden of paying for any fumigation. There is the factor of whether the cost of fumigation should reasonably be placed on Carrier or Shipper. For the District Court’s guidance, without anticipating this decision, we think it appropriate to bear in mind that the fumigation we refer to is confined to that required by an event (strike delay) for which Carrier has a conditional relief from responsibility under COGSA § 4(2)(j).

      . We do not doubt that circumstances may arise when the master of a ship has not merely the authority but, under § 3(2) of COGSA, the duty to sell cargo that is at risk of further deterioration, communicating with the owner if that is feasible but still having both the authority and duty if it is not.
      Lekas & Drivas, Inc. v. Goulandris, 2 Cir., 1962, 306 F.2d 426.


author: CHOY, Circuit Judge:

text:
    PREMIUM SERVICE CORPORATION, Plaintiff-Appellant, v. The SPERRY & HUTCHINSON COMPANY, Defendant, George A. Scott, Appellee.
    No. 73-2217.
    United States Court of Appeals, Ninth Circuit.
    Feb. 6, 1975.

      John Bodner, Jr. (argued), Howrey, Simon, Baker & Murchison, Washington, D. C., for plaintiff-appellant.
    Michael L. Kirby (argued), Luce, Forward, Hamilton & Scripps, San Diego, Cal., for appellee.
    Alan R. Wentzel (argued), Casey, Lane & Mittendorf, New York City, for defendant.
    Before KOELSCH and CHOY, Circuit Judges, and MARKEY, United States Court of Customs and Patent Appeals.

       Honorable Howard T. Markey, Chief Judge, U.S. Court of Customs and Patent Appeals, sitting by designation.

   OPINION

CHOY, Circuit Judge:

Premium Service Corporation is engaged in antitrust litigation against the Sperry & Hutchinson Company (S&H) in the United States District Court for the District of Minnesota. S&H is charged with unlawfully monopolizing and attempting to monopolize segments of the trading stamp market. Premium Service is attémpting to show that, as part of this alleged scheme, S&H has offered one of its customers, Walker-Scott Corporation, millions of dollars in tie-in loans and other inducements. Walker-Scott operates a chain of department stores in Southern California. As part of its pre-trial discovery for the Minnesota litigation, Premium Service served a subpoena duces tecum on George A. Scott in San Diego, requiring production of documents pertaining to dealings between Walker-Scott and S&H. Scott is Chairman of the Board of Walker-Scott.

Scott submitted a motion to quash the subpoena to the district court for the Southern District of California. The court granted the motion in part, denying Premium Service’s demands for documents showing all payments from S&H to Walker-Scott, showing purchases of equity interests in Walker-Scott by S&H, and, very broadly, relating “in any way, to any dealing, transaction, agreement or understanding” between the parties. The court also quashed Premium Service’s subpoena of federal and state tax returns filed by Walker-Scott and by Scott as an individual from 1955 to 1972. The court further ordered that none of the documents which had been subpoenaed should be destroyed by Scott or by Walker-Scott. Premium Service appeals. We affirm.

Jurisdiction on Appeal

Scott argues at the outset that this court lacks jurisdiction over the appeal. We reject this contention. Our jurisdiction derives from 28 U.S.C. § 1291: “The courts of appeals shall have jurisdiction of appeals from all final decisions of the district courts of the United States . . . except where a direct review may be had in the Supreme Court.” Scott asserts that the district court’s order in this case is not a “final” decision. The Supreme Court has held that there exist marginal cases falling within a “twilight zone” of finality; whether orders emanating from this zone are appealable must be determined by balancing the “inconvenience and costs of piecemeal review” against “the danger of denying justice by delay.” Gillespie v. United States Steel Corp., 379 U.S. 148, 152-53, 85 S.Ct. 308, 311, 13 L.Ed.2d 199 (1964). See generally Comment, Requiem for the Final Judgment Rule, 45 Texas L.Rev. 292 (1966).

Even before announcing its expansive holding in Gillespie, the Court had firmly established the “collateral order rule” in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). In Cohen, the Court held that an order denying a motion to require the plaintiff to post security in a stockholder’s derivative action was appealable under section 1291. The language in Cohen is susceptible to codification in such a way as to produce a detailed test for finality. See, e. g., the three-prong test constructed by United States v. Cefaratti, 202 F.2d 13, 16 (D.C.Cir. 1952), cert. denied, 345 U.S. 907, 73 S.Ct. 646, 97 L.Ed. 1343 (1953). Regardless of how its holding is restated, however, the Court in Cohen applied common sense to the statutory language. Congress limited our jurisdiction to review of “final decisions” not in order to deny appeal arbitrarily to some parties on some issues, but to enable all stages of litigation to be reviewed in one proceeding. 337 U.S. at 546, 69 S.Ct. 1221. If the district court has said its last word on an issue, and if its decision is of a nature that it will not be subject to review on appeal from the final judgment of the main proceeding, then the courts will not suppose Congress to have precluded immediate appeal of that decision. Cohen suggested that immediate appeal is particularly warranted when delay would render an appeal meaningless.

In the case before us, if the district court had denied Scott’s motion to quash, Scott could have obtained review by electing to ignore the subpoena and appeal from the ensuing contempt citation. We would, therefore, lack jurisdiction to review the order denying the motion to quash. United States v. Ryan, 402 U.S. 530, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971); Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 299, 84 L.Ed. 783 (1940). Or, if the court granting Scott’s motion had been the same court in which the main action was being litigated, Premium Service could have sought review of the order when it appealed from the final judgment. Again, the order would lack finality. Louie v. Carnevale, 443 F.2d 912 (9th Cir. 1971). But these avenues for appeal are absent where a California district court grants a motion to quash a subpoena relating to litigation pending in a Minnesota court. The Minnesota court has no jurisdiction over Scott, and so Premium Service cannot challenge the California order when it appeals from the Minnesota final judgment. Nor will the California court conduct any further enforcement proceeding resulting in a “final” adjudication from which Premium Service could appeal. Congressional desire to avoid piecemeal appeal does not dictate that we foreclose Premium Service from all effective appellate review of an order having a potentially important impact on its conduct of the Minnesota litigation. Although the question is one of first impression in this circuit, the logic of Cohen and the unanimous opinion of those courts in other circuits which have confronted the issue prompt us to conclude that we have jurisdiction over this appeal.

Abuse of Discretion

A district court may quash a subpoena duces tecum, the results of which if finds “unreasonable and oppressive.” Fed.R.Civ.P. 45(b). We will reverse such an order to quash only for abuse of discretion. Fifth Avenue Peace Parade Comm. v. Gray, 480 F.2d 326 (2d Cir. 1973), cert. denied, 415 U.S. 948, 94 S.Ct. 1469, 39 L.Ed.2d 563 (1974); Baker v. F & F Investment, 470 F.2d 778 (2d Cir. 1972), cert. denied, 411 U.S. 966, 93 S.Ct. 2147, 36 L.Ed.2d 686 (1973); Brown v. Thompson, 430 F.2d 1214 (5th Cir. 1970); Swanner v. United States, 406 F.2d 716 (5th Cir. 1969). Such abuses must be unusual and exceptional; we will not merely substitute our judgment for that of the trial judge. Brown, supra, 430 F.2d at 1216. A judge abuses his discretion only when his decision is based on an erroneous conclusion of law or where the record contains no evidence on which he rationally could have based that decision. Cf. Song Jook Suh v. Rosenberg, 437 F.2d 1098 (9th Cir. 1971).

We find no such abuse in this case. Premium Service’s requests for documents were sweeping in nature, covering every paper touching on any relationship between S&H and Walker-Scott or Scott personally. Compliance would have required extensive sifting and analysis by Walker-Scott employees. Premium Service’s offer to do the sifting itself was unrealistic, as the court recognized; no company, having a choice, would permit another company to go on a fishing expedition through its records. The district court could reasonably have found, without abusing its discretion, that Premium Service’s need for these documents was not sufficient to outweigh the burden and invasion of corporate privacy which would have resulted to Scott and Walker-Scott, especially since they were not parties to the suit. See Hecht v. Pro-Football, Inc., 46 F.R.D. 605 (D.D.C. 1969).

Premium Service also subpoenaed Scott’s tax returns. Tax returns do not enjoy an absolute privilege from discovery. St. Regis Paper Co. v. United States, 368 U.S. 208, 219, 82 S.Ct. 289, 7 L.Ed.2d 240 (1961); Trans World Airlines, Inc. v. Hughes, 29 F.R.D. 523 (S.D. N.Y.1961), aff’d, 332 F.2d 602 (2d Cir. 1964), cert. dismissed, 380 U.S. 249, 85 S.Ct. 934, 13 L.Ed.2d 818 (1965). Nevertheless, a public policy against unnecessary public disclosure arises from the need, if the tax laws are to function properly, to encourage taxpayers to file complete and accurate returns. Federal Savings & Loan Ins. Corp. v. Krueger, 55 F.R.D. 512 (N.D.Ill.1972); Wiesenberger v. W. E. Hutton & Co., 35 F.R.D. 556 (S.D.N.Y.1964); cf. 26 U.S.C. §§ 6103, 7213(a). The district court, under the circumstances of this case, could reasonably have based its order to quash the subpoena of tax returns on the primacy of this policy.

Affirmed.

      . We do not decide whether Scott would be limited to this relief even though not a party to the main action. The Tenth Circuit held in Covey Oil Co. v. Continental Oil Co., 340 F.2d 993 (10th Cir.), cert. denied 380 U.S. 964, 85 S.Ct. 1110, 14 L.Ed.2d 155 (1965), that an order denying a non-party’s motion to quash would be appealable under some circumstances. Covey has been rejected explicitly in other circuits. Borden Co. v. Sylk, 410 F.2d 843 (3rd Cir. 1969); United States v. Anderson, 464 F.2d 1390 (D.C.Cir. 1972); United States v. Fried, 386 F.2d 691 (2d Cir. 1967). Whatever validity Covey may have in this circuit is limited to civil cases. See United States v. Ryan, 402 U.S. 530, 533, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971).

      . Martin v. Chandis Securities Co., 128 F.2d 731 (9th Cir. 1942), cited by Premium Service, does not control our decision in this case. In Martin, an Internal Revenue agent secured an ex parte court order for the production of the taxpayer’s books and records. The court later quashed its order, and we held that its order to quash was a “final” order from which we could hear an appeal. Martin belongs to a distinct line of decisions upholding the appealability of orders relating to subpoenas issued in aid of administrative proceedings. Reisman v. Caplin, 375 U.S. 440, 449, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964) (citing Martin); D. I. Operating Co. v. United States, 321 F.2d 586, 587 (9th Cir. 1963); Wilmot v. Doyle, 403 F.2d 811, 814 n. 5 (9th Cir. 1968).

      . Republic Gear Co. v. Borg-Warner Corp., 381 F.2d 551 (2d Cir. 1967); Westinghouse Electric Corp. v. City of Burlington, 351 F.2d 762 (D.C.Cir. 1965); Ochsner v. Millis, 382 F.2d 618 (6th Cir. 1967); Carter Products, Inc. v. Eversharp, Inc., 360 F.2d 868 (7th Cir. 1966); Horizons Titanium Corp. v. Norton Co., 290 F.2d 421 (1st Cir. 1961). The only decision to deny appeal under these circumstances has been Palmer v. Fisher, 228 F.2d 603 (7th Cir. 1955), cert. denied, 351 U.S. 965, 76 S.Ct. 1030, 100 L.Ed. 1485 (1956). Palmer’s reasoning was questioned in Horizons Titanium, and the decision was overruled by the Seventh Circuit in Carter Products.

      . Our use of the clearly erroneous test, based on Fed.R.Civ.P. 52(a), in Goodman v. United States, 369 F.2d 166 (9th Cir. 1966), resulted in our examining substantially the same considerations and arriving at the same result.

      . Westinghouse Electric Corp. v. City of Burlington, 351 F.2d 762 (D.C.Cir. 1965), superficially appears contrary to our decision. That decision may be distinguished by the district court’s erroneous reliance on the Government’s “informer privilege” and the paucity of the Government’s showing that the subpoenas were unreasonable and oppressive.


author: BARRETT, Circuit Judge. SETH, Circuit Judge

text:
    Little REDHOUSE, Brady Tah, on behalf of themselves and others similarly situated, Plaintiffs-Appellees, v. QUALITY FORD SALES, INC., a Utah Corporation, and Thomas E. Redd, Defendants-Appellants.
    No. 74-1190.
    United States Court of Appeals, Tenth Circuit.
    Argued Nov. 13, 1974.
    Decided Feb. 3, 1975.

      James Doyle, DNA People’s Legal Services, Chinle, Ariz. (Eric Swenson, DNA People’s Legal Services, Mexican Hat, Utah, on the brief), for plaintiffsappellees.
    Dean E. Conder, Salt Lake City, Utah (Arthur H. Nielsen, Salt Lake City, Utah, on the brief), for defendants-appellants.
    Before SETH, BARRETT and DOYLE, Circuit Judges.
   BARRETT, Circuit Judge.

Quality Ford Sales, Inc. (Quality Ford) and Thomas E. Redd (Redd), defendants below, appeal from an order granting plaintiffs’ motion for summary judgment and the judgment that plaintiffs’ cause of action be certified as a class action.

Appellees Little Redhouse (Redhouse) and Brady Tah (Tah), plaintiffs below, each purchased a pickup truck from Quality Ford. They thereafter sued defendants under the Federal Consumer Credit Protection Act, 15 U.S.C.A. § 1601 et seq. (hereinafter referred to as the “Truth in Lending Act” or the “Act”), and the Utah Uniform Consumer Credit Code (UUCCC) § 70B-1-101 et seq., U.C. A.1953, as amended, to recover statutory damages, attorney fees and costs, for defendants’ alleged failure to comply with the disclosure provisions of the two Acts. The pertinent facts are not in dispute.

Appellees are Indians residing on the Navajo Indian Reservation in Apache County, Arizona. Quality Ford is a Utah corporation engaged in the sale of motor vehicles, doing business' at Blanding, Utah, which is just north of the Navajo Reservation. Redd is the manager of Quality Ford and its principal owner.

On April 11, 1972, Redhouse purchased a 1966 Ford pickup truck from Quality Ford for $1,095.00. The sale was consummated with the help of an interpreter. The down payment due was $300.00. However, because Redhouse did not have the full $300.00, he was allowed to take delivery of the truck by paying $79.00 down and executing and delivering a short-term interest-free note for $221.00. The note was due in three weeks, i. e., the first part of May, 1972. Redhouse paid it in full on April 24, 1972. It was admitted by defendants’ counsel that the financial statements and forms used by defendants to accommodate the handling of Redhouse’s down payment and to consummate the sale were not in accordance with the Act or the UUCCC.

On May 30, 1972, Tah purchased a new 1972 Ford pickup truck from Quality Ford. The truck had a cash sales price of $3,695.00. The down payment due amounted to $1,062.00. Tah had only $800.00 for the down payment. However, she was permitted to take possession of the new truck by paying down $800.00 and executing and delivering a non-interest bearing 16-day note for the $262.00 balance due on the down payment. This sum was paid prior to its due date of June 15, 1972. It was admitted by plaintiffs’ counsel that the financing statement given to Tah met all the disclosure requirements of the Act and the UUCCC, except as to the disclosure relative to the down payment. As with Redhouse, Tah’s disclosure statement indicated that the full down payment had been actually received. There was no indication that a portion had been deferred. Full disclosure was accordingly not present on a single document as required by the Act in regard to either sale. However, full disclosure is present when all the forms used in each sale are considered in the aggregate. No evidence was offered indicating that the defendants were proceeding in bad faith in the sales transactions or attempting to purposefully defeat proper disclosure requirements.

Following the submission of briefs and oral arguments on plaintiffs’ motion for summary judgment and for the determination of a class action, the Trial Court ordered that the action be maintained as a class action pursuant to Rule 23(a) and 23(b)(3) Fed.R.Civ.P., 28 U.S.C.A., and entered judgment granting plaintiffs’ motion for summary judgment. In granting the motion for summary judgment, the Trial Court held, inter alia:

_ _ _ that plaintiffs’ motion for summary judgment is in all respects granted, _ _ _ _ that the plaintiff, Little Red-house, recover of the defendants, Quality Ford Sales, Inc. and Thomas E. Redd, jointly and severally, the sum of $394.80 with interest _ _ _ [and] costs of action and his reasonable attorneys’ fees _ _ _ _ Brady Tah, recover of the defendants, Quality Ford Sales, Inc. and Thomas E. Redd, jointly and severally, the sum of $2,000 _ _ _ [and] her costs of action, and reasonable attorneys’ fee as provided by law.

By so doing, the Trial Court awarded damages as authorized under both the Truth in Lending Act, and the UUCCC.

Appellants allege that the Trial Court erred in: (1) granting summary judgment; (2) determining that the suit may be maintained as a class action; (3) permitting recovery under both the Truth in Lending Act and the UUCCC; (4) holding that a single-payment, non-interest bearing note could not be included as part of the “cash down payment”; and (5) holding that Thomas E. Redd was individually liable under the Truth in Lending Act 'and the UUCCC.

I.

Appellants contend that the Trial Court erred in granting summary judgment and thereby taking the case from the jury when there were genuine issues of material fact in dispute which should have been resolved by the jury. Rule 56(c) Fed.R.Civ.P., 28 U.S.C.A. provides that summary judgment is to be granted only if the pleadings, depositions, interrogatories, admissions, together with any affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Summary judgment cannot be awarded when there exists a genuine issue as to a material fact. Adickes v. S. H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), White Motor Co. v. United States, 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963), United States v. Diebold, Incorporated, 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962), Ando v. Great Western Sugar Company, 475 F.2d 531 (10th Cir. 1973). And it is not properly awarded when an issue turns on credibility. Eagle v. Louisiana and Southern Life Insurance Company, 464 F.2d 607 (10th Cir. 1972). Summary judgment does not serve as a substitute for trial, nor can it be employed so as to require parties to litigate via affidavits. Smoot v. Chicago, Rock Island and Pacific Railroad Company, 378 F.2d 879 (10th Cir. 1967). It is considered a drastic relief to be applied with caution. Jones v. Nelson, 484 F.2d 1165 (10th Cir. 1973), Ando v. Great Western Sugar Company, supra. Pleadings, therefore, must be liberally construed in favor of the party opposing summary judgment. Harman v. Diversified Medical Investments Corporation, 488 F.2d 111 (10th Cir. 1973), Smoot v. Chicago, Rock Island and Pacific Railroad Company, supra. Appellate courts must consider factual inferences tending to show triable issues in a light most favorable to the existence of such issues. Dzenits v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 494 F.2d 168 (10th Cir. 1974).

By these standards, we must hold that the Trial Court erred in granting summary judgment. There was an unresolved question as to whether Red-house purchased his pickup for personal use or for business use (and therefore exempt from the Acts). The issue was especially pertinent because the Act does “not distinguish between full-time and part-time businesses.” Sapenter v. Dreyco, Incorporated, 326 F.Supp. 871 (E.D.La.1971), cert. denied 406 U.S. 920, 92 S.Ct. 1775, 32 L.Ed.2d 120 (1972). In answer to the acknowledgement that if the Redhouse truck was purchased for business it would be outside of the Act, the Trial Court noted:

It sounds to me as though you have an issue of fact on that.
We are going to have to leave that to the jury.

Notwithstanding the above observation, however, the Trial Court nevertheless granted summary judgment for Red-house, after erroneously excluding offered testimony of a conversation between Redd and Redhouse via an interpreter involving the very issue previously referred to.

The error in granting summary judgment to Redhouse was later compounded when the Trial Court observed from the bench in relation to Redhouse’s credibility:

I have had a lot of experience with these Navajos and Hopis, and I have never seen an occasion yet when I didn’t think they told the truth. This is an example of that.

The record discloses that the Trial Court’s impetus to grant summary judgment was not predicated on an unbiased reliance upon the facts presented. The record reflects that the Trial Court unequivocally stated that “prior injustices” to the American Indian mandated recovery for Redhouse and Tah. The Court said:

We are dealing here with Indians, native Americans, who do not understand our language. They do not know anything about the Federal Reserve Board. They do not know anything about the Truth in Lending Act. They do not know about the Utah Act that adopts the Congressional Act. They do not know anything about the way these Anglos, they call us, trade and deal.
The one thing they understand is that they get taken advantage of. They understand that in pretty good shape. We haven’t dealt with them fairly. We haven’t treated them right.
I think it behooves us in our business transactions with those people to go the last mile, and I am not going to draw any fine distinctions that will prevent that being done, so far as this court is concerned, because this is just the beginning of this.

The Trial Court cannot utilize the power of summary judgment to punish defendants-appellants Quality Ford and Redd for all “prior injustices” allegedly visited .upon American Indians. In view of the existence of genuine issues of material fact in the case at bar, the Trial Court’s personal assessment and determination of Redhouse’s complete credibility, and the Trial Court’s obvious prejudice against the defendants-appellants based upon a broad sweeping determination of “prior injustices”, with no evidence of direct relationship to this action, we must hold that the summary judgment granted was unwarranted, unsupported by the record, and a clear abuse of judicial discretion.

We reverse and set aside the summary judgment with respect to Tah. We reverse the summary judgment with respect to Redhouse, and remand for a complete determination of whether Red-house purchased his truck for commercial or personal use. Since the vehicle purchased herein was a truck, the presumption would be, absent contrary proof, that it was purchased for commercial use, and as such, the transaction would be exempt from the Act. This necessarily follows since an exemption from the Act arises whenever the vehicle usage is “predominantly” commercial and it need not be “entirely” commercial.

II.

Defendants contend that the Trial Court erred in determining that plaintiffs’ cause should proceed as a class action. We agree.

The Trial Court specified plaintiffs’ cause of action as a class action upon plaintiffs’ bald allegation that 80-90 others had “deferred payment violations” [improper disclosure of down payments] and “anybody involved in those transactions is allowed tó be a member of the class.” The ruling was obviously predicated in part on the Trial Court’s distaste for handling 80-90 individual suits together with the Court’s volunteered determination that the plaintiffs’ principal problem was the White man:

I don’t like the idea of inviting 80 or 90 people to file individual suits I have to handle.
* * * * * *
What I had in mind was that the paper work is what we are concerned with, and it isn’t necessary to have a jury determine what appears on the documents. This is a matter of law. The Court reads the documents.
It looks to me as though this isn’t just a class action between Americans who are college graduates and business people and knowledgeable, understanding the language — this involves these people down on the Reservation who have problems, and their principal problem is White people. That has always been the Indians’ problem, the White people. They were getting along pretty good on the North American Continent before we got around here, and they have gotten along pretty bad ever since, outrageous.

Under these circumstances the specification of the plaintiffs’ cause of action as a class action was unwarranted, unsupported by the record, and a clear abuse of judicial discretion. We noted in Esplín v. Hirschi, 402 F.2d 94 (10th Cir. 1968), cert. denied 394 U.S. 928, 89 S.Ct. 1194, 22 L.Ed.2d 459 (1969):

Before a class action can be established under (b)(3) it is necessary to find, first, “that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members,” and second, “that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.” 402 F.2d 94 at 98.

Nothing in this record evidences that a class action would be “superior” to other available methods for the adjudication of the controversy presented, and the burden is on the person requesting class action specification to establish that all the requirements therefor are met. Albertson’s, Inc. v. Amalgamated Sugar Company, 503 F.2d 459 (10th Cir. 1974), Rossin v. Southern Union Gas Company, 472 F.2d 707 (10th Cir. 1973). Significantly, while we noted in Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336 (10th Cir. 1973), that a class action might be proper under the Truth in Lending Act, we affirmed the denial of a class action because it had not been established that a class action would be superior to other available procedures. This holding was further buttressed in Stevens v. Rock Springs National Bank, 497 F.2d 307 (10th Cir. 1974), wherein we noted that “factual variations” would probably “affect the rights and liabilities of the parties” and that such variations “would be sufficient reason to deny the class action.” The same rationale is valid here.

A class action is not superior to other available procedures for the fair and efficient adjudication of cases under the Truth in Lending Act. Rodriguez v. Family Publications Service, Inc., 57 F.R.D. 189 (C.D.Cal.1972); Ratner v. Chemical Bank New York Trust Company, 54 F.R.D. 412 (S.D.N.Y.1972). Then, too, the legislative intent of the Act was to utilize “private attorneys general”. Young v. Trailwood Lakes, Inc., 61 F.R.D. 666 (E.D.Ky.1974); Turoff v. Union Oil Company of California, 61 F.R.D. 51 (N.D.Ohio 1973). The unwarranted utilization of class actions in actions brought under the Truth in Lending Act often penalizes the opposing party since class action specification is not dependent on the merits of a case. Miller v. Mackey International, Inc., 452 F.2d 424 (5th Cir. 1971); Bogosian v. Gulf Oil Corporation, 62 F.R.D. 124 (E.D.Pa.1973). See also Esplín v. Hirschi, supra.

Furthermore, class actions are not proper in cases such as the one at bar, where the action is predominantly for monetary damages. Richardson v. Hamilton International Corporation,. 62 F.R.D. 413 (E.D.Pa.1974). See also Eisen v. Carlisle & Jacquelin, 391 F.2d 555 (2nd Cir. 1968), reversed on other grounds 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974).

The Trial Court erred in specifying plaintiffs’ cause as a class action.

We find nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it. may be maintained as a class action. Indeed, such a procedure contravenes the Rule by allowing a representative plaintiff to secure the benefits of a class action without first satisfying the requirements for it. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, at 177, 94 S.Ct. 2140, at 2151, 40 L.Ed.2d 732 (1974).

III.

Appellants contend that the Trial Court erred in permitting recovery under both the Truth in Lending Act and the UUCCC. This point of view was initially recognized by the Trial Court:

Ordinarily we don’t allow a party plaintiff to recover twice. If he is compensated for his damages once, we don’t let him reap a reward.
_ At this point I think one recovery is all you are entitled to.

In reversing its position the Trial Court later noted:

I think I am going to allow the recovery under both. And you can have the Circuit tell you.
They are sort of a lawless bunch. They might let you off the hook on that.

Although a violation of the UUCCC also constitutes a violation of the Federal Act because the Utah Department of Financial Institutions, pursuant to its rule making authority, has incorporated Regulation Z into the state regulations, we hold that the Trial Court erred in awarding any damages. In light of the facts of this case the award of damages was improper.

In the case at bar even though there were certain acknowledged technical violations of the acts, no harm resulted or flowed from them and no damages of any kind were established. It is clear that the plaintiffs-appellees did not read their contracts prior to execution by their friends. Under those circumstances, any omission of information required by the Truth in Lending Act, Regulation Z, or the UUCCC could not have affected their decision to enter into the contracts, nor could it have induced their friends to execute the contracts for them. Rodriguez v. Family Publications Service, Inc., supra. This is the more compelling here in light of the fact that the plaintiffs initiated the negotiation' with Quality Ford and Redd to purchase their trucks. The sales contracts and other forms were voluntarily executed.

We recently held in Littlefield v. Walt Flanagan and Company, 498 F.2d 1133 (10th Cir. 1974), that the Truth in Lending Act is a remedial act which must be liberally construed to effect the intent of Congress. Even so, we specially held that the purpose of the Act is to assure that the consumer debtor is fully aware of the cost of his credit. Umdenstock v. American Mortgage & Investment Co. of Oklahoma City, 495 F.2d 589 (10th Cir. 1974), W. T. Grant Company v. Commissioner of Internal Revenue, 483 F.2d 1115 (2nd Cir. 1973), Wachtel v. West, 476 F.2d 1062 (6th Cir. 1973), cert. denied 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973). The Act is basically a disclosure act, Mourning v. Family Publications Service, Inc., 411 U.S. 356, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973); Burgess v. Charlottesville Savings and Loan Association, 477 F.2d 40 (4th Cir. 1973). As such its purpose is remedial and not punitive. Bostwick v. Cohen, 319 F.Supp. 875 (N.D.Ohio 1970). In this vein, although the Act should be strictly construed, it would not serve the cause of justice to enforce the Act so as to achieve a means of harassment, oppression, or unjust enrichment. Shields v.

Valley National Bank of Arizona, 56 F.R.D. 448 (D.C.Ariz.1971). As the Shields court noted:

At a time when large business firms in general appear to be a scapegoat for a great many of our Nation’s problems, the Court should not gratuitously add the final straw. The Truth-in-Lending Act has laudible purposes and should be strictly enforced by the Courts, but it should not be allowed to be used as means of oppression or harassment or unjust enrichment. An interpretation of the Act to allow class actions, such as sought by Mr. Shields, could be the means of curing an illness by killing the patient and in the process promoting unnecessary litigation mainly for the benefit of a few lawyers ready and willing to promote such cases. 56 F.R.D. 448 at 451.

The aforementioned authorities are common sensed and persuasive. No harm arose from the appellants’ technical violations of the Act and the UUCCC. The appellees were provided with complete disclosure via the documents utilized by appellants. On the totality of the facts and circumstances of this record, we hold that the damages were improperly assessed under the Acts and must be vacated. In so holding we are aware that the damages assessed herein are not of a compensatory nature, but have their genesis as a civil penalty, and that, accordingly, harm need not be shown.

IV.

Appellants contend that the Trial Court erred in holding that a single-payment non-interest bearing short-term note could not be included as part of the “cash down payment.” The Trial Court held, in effect, that each of the two sales involved here violated the Act because the recorded cash down payment figure set forth on the documents was inflated, since it did not acknowledge that portion which had been deferred. It is uncontested that appellants allowed appellees to take delivery and full possession of the vehicles, by crediting them with full down payments including the deferment of a portion thereof via the short-term non-interest bearing notes. The record reflects that this was an established accommodation that appellants regularly afforded their buyers.

Appellees rely on Gilbert v. Wood Acceptance Co., 486 F.2d 627 (7th Cir. 1973) and Bratta v. Caruso Car Co., 166 Cal.App.2d 661, 333 P.2d 807 (1958), as supportive of their contention that the recording of a purchase document reciting receipt of a higher down payment than that which was actually received violates the Act. We agree that these authorities are supportive of the proposition urged. However, we are persuaded that these decisions do not serve the cause of basic fairness and justice where, as here, full disclosure was afforded via the documents used and where, as here, no harm was done to the appellees, and where, as here, a damage award would not be required to make the plaintiffs whole, but would afford them an unjustifiable windfall.

We decline to adopt the rule adopted in Gilbert and Bratta. In cases where full disclosure is present, as here, we hold that it is proper to categorize deferred short-term non-interest bearing portions of a down payment, as reflected in the subject notes, as exempt from the strict reporting provisions of the Act.

In Umdenstock v. American Mortgage & Investment Co. of Oklahoma City, supra, we held that certain escrow accounts employed to pay taxes, assessments and insurance on mortgaged property are exempt under the Act, 15 U.S. C.A. § 1605(e)(3), because the annual percentage rate charged was based on the amount financed. By analogy we observe that the amount financed herein was the amount remaining due after the cash down payment was deducted. We cannot conclude, as did the Gilbert court, that Congress intended to impose fines on persons similarly business oriented as the appellants herein, who, in the extension of credit, defer a portion of a down payment, after having fully disclosed their credit terms.

No claim was advanced by plaintiffs-appellees — nor could it be advanced — that they were not fully aware that defendants-appellants were deferring a portion of their down payment, so that they could take delivery of the trucks. Under these circumstances, we hold that deferred down payments, arrived at in the normal course of every day, good faith established business procedure, are exempt from the strict reporting conditions of the Act and the UUCCC, when evidenced by the short-term, non-interest bearing nature of the notes utilized here. This result is consistent with the exemption from liability afforded creditors under Section 1640(c) of the Act, who, notwithstanding a good faith effort to comply and disclose, encounter a violation of the Act.

V.

Appellant Redd contends that the Trial Court erred in holding him individually liable under the Act and the UUCCC. We agree.

Under both Acts, liability attaches to any “creditor” who fails to comply with the disclosure provisions. Nothing in this record discloses other than that Redd was acting solely as the manager and principal owner of Quality Ford. The record is devoid of any evidence supportive of the theorization that Redd personally extended credit. We hold that the Trial Court erred in finding Redd individually liable.

The judgment is reversed with respect to plaintiff-appellee Brady Tah and defendant-appellant Thomas E. Redd. The judgment holding that the cause should proceed as a class action is reversed. The judgment is reversed with respect to plaintiff-appellee Little Redhouse and remanded for further proceedings consistent with this opinion.

SETH, Circuit Judge

(concurring specially):

I concur in the results reached by Judge Barrett in his opinion filed herein, but I would like to express somewhat different reasons.

In my view, the summary judgment entered by the trial judge must be set aside for the reason that its entry was contrary to Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732, in that the class action matter had not then been fully acted upon. See also Sarasota Oil Co. v. Greyhound Leasing & Financial Corp., 483 F.2d 450 (10th Cir.). Also, it should be set aside as to plaintiff Little Redhouse because a substantial factual issue remains unresolved. This was whether his purchase of the vehicle was exempt by the Act because it was for a commercial use. There is a conflict in the record as to statements on this subject made at the time of purchase. These several problems are sufficient to raise the fact issue. At the “hearing,” conflicting evidence was offered.

As to plaintiff Brady Tah, there was no actual issue of fact so raised, but in view of Eisen, the judgment as to her should be also set aside in order that the class action matter can be first decided.

As to the class action issue generally, the determination, to the limited extent it has been made, should be set aside and new and proper findings made by the trial court as to all the required elements. This also should be done in the sequence suggested by Eisen. The recent changes brought about by P.L. 93-495, since some portions are applicable to this case, must be considered by the trial court.

The matter of damages is in my opinion determined solely by the statute, and actual damages are not a consideration. Again, see the changes in section 408(a) brought about by P.L. 93-495 as to limitations on amounts.

The deferral of a portion of the down-payment without cost to the buyer does not in my opinion constitute a violation of the statutory requirements. The Act is intended to require a disclosure of the cost of the credit, and no such cost is involved as to this element. The note was accepted as downpayment together with whatever else was so received. This may be done under the Act.

I agree that the individual defendant, Thomas E. Redd, cannot be held liable under the Act.

There is an additional factor in the judgment of the trial court which should be considered. This is the matter of attorney fees awarded to plaintiffs. Such fees do not automatically follow a judgment without an inquiry into the question of whether there is in fact an attorney-client relationship giving rise to an understanding that the client owes a fee, or a contingent fee arrangement. Also when fees are allowed, they can only go to an individual or an organization permitted or authorized to receive such fees, including those publicly funded.

WILLIAM E. DOYLE, Circuit Judge (dissenting).

I respectfully dissent.

I.

THE LIABILITY QUESTION

In the case of Little Redhouse all disclosures were not made on one document as required by 12 C.F.R. § 226.8(a) and the UUCCC, but even considering all of the documents together the required disclosures were not made. In any event, there is good reason for requiring the disclosure to be on one document. It is difficult enough to fathom the transaction by looking at one document — it is impossible by referring to a number.

Redhouse paid $300.00 in cash and, in addition, he signed a note at time of closing in the amount of $221.00. The full deferred purchase price was not disclosed. As to his $221.00 note which was payable on or before May 5, it was not disclosed in the documents that no interest would have been chargeable if the money was paid by May 5. Otherwise, the interest would have been 18% per annum. This appeared in the note. Admittedly this Redhouse transaction was ambiguous and gave rise to a violation of the law.

Plaintiff Brady Tah purchased a new pickup truck for a cash price of $3695.00. A down payment of $1062.00 was required. She paid $800.00 cash and signed a note for the remainder. The Invoice Order indicates that the note was for $288.00, or $26.00 more than the remainder of the down payment. The amount outstanding on the note was more than twice the amount of any regularly scheduled payments. Hence, these amounts were improperly treated as part of the down payment. See 12 C.F.R. § 226.504. This confusion did not conform to the statutes.

It is not possible to tell for certain whether the documents as a whole in the case of Brady Tah show a full disclosure. In any event, the failure to disclose on one document is sufficient to constitute a violation, 12 C.F.R. § 226.8(a).

II.

THE GRANT OF SUMMARY JUDGMENT

There does not appear to be any genuine issue of fact. The only possible dispute pertains to whether it is a consumer credit transaction and this requires that the property which is the subject of the transaction be primarily for personal, family, household or agricultural purposes. The majority has ruled that there was a genuine issue of fact on this.

Redhouse submitted an affidavit that he intended to and did use the vehicle for personal, family and household needs. Defendant relied on an affidavit of a salesman which is not in the record but which is said to allege that Redhouse told the car salesman he wanted the truck for his work. Defendant Redd offered to testify to this statement, but this was excluded as hearsay because Redhouse does not speak English and the alleged statement was made through an interpreter who was not called as a witness. At trial Redhouse denied making such a statement.

It seems questionable that the Red-house out of court statement which depends on a correct translation from the Navajo language could be regarded as substantial evidence sufficient to create a dispute even had it been admitted in evidence, and perhaps it should have been received for whatever it was worth. (Why, however, should such a big thing be made of this issue? The statutes were designed to protect people who lack knowledge of financial matters. Also, it is easy enough to recognize judicially that the Indian people use trucks for every purpose.)

The only objective evidence which is countervailing is that Redhouse said that his occupation was carpenter. That statement does not mean that he used his truck in his work. He said at the trial that he used the truck to drive to and from work, but that did not raise an inference that it was not used for personal purposes. It is noteworthy also that this did not emerge as an issue in the pleadings.

III.

THE CLASS ACTION ISSUE

There is no persuasive reason why this cannot be treated as a class action under Rule 23(b)(8). Contrary to the statement in the majority opinion, damages are obtainable under a subsection (3) class action. However, the question is not before us on appeal in any event because a certificate has not been issued pursuant to 28 U.S.C. § 1292 by the trial court and the question is interlocutory. The class action certification, if it could be called such, is at this juncture incomplete. There have not been findings as to the criteria set up in Rule 23 for a class action. Therefore, this part of the cause ought to be remanded to complete the Rule 23 requirement if it is going to be a class action. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) is relied on by the majority opinion as precluding a decision on the merits prior to the certification of the class action. I do not so interpret Eisen. The Supreme Court in that case was preoccupied with the payment of notice costs and ruled that a preliminary trial on the merits could not precede determination of whether it was a class action. To hold that the judge must never take up any aspect of the merits of the case until the class action issue has been determined is beyond the scope of Eisen.

IV.

THE DAMAGE QUESTION

It was not necessary to establish that actual damages were suffered. 15 U.S.C. § 1640(a), UUCCC and U.C.A. § 70B-5-203 (1953 as amended) provide for liquidated damages and thus dispense with the need for proving actual damages.

V.

LIABILITY OF DEFENDANT REDD

Since it is questionable as to whether Mr. Redd was a creditor under the Act and the regulations, it would seem proper to excuse Mr. Redd from liability personally. Inasmuch as the Act does not identify employees or corporate agents as creditors, it follows that these individuals cannot be held responsible.

* * * * 4c *

Therefore, I would affirm the judgments in favor of Little Redhouse and Brady Tah as against Quality Ford Sales, Inc. Inasmuch as the class action aspect is not ripe, the propriety of the class action is not before us. This aspect ought to be remanded for further proceedings.

My basic objection is to the narrow view of liability taken by the majority.

      . This amount is assumed because the record does not actually disclose that $79.00 was paid down. It does indicate, however, that $300.00 was due, and that $221.00 was deferred.

      . These other forms included an “Invoice Order and Sales Agreement”, “Customer Statement”, and a note for Redhouse, and an “Invoice Order and Sales Agreement” and a complete disclosure statement in accordance with the Act and UUCCC for Tah.

      . Affirmed per curiam at 450 F.2d 941 (5th Cir. 1971) prior to the denial of certiorari.

      . There is some dispute as to whether the note, which is not in evidence, was for $288.00 or $262.00. Plaintiffs contend the note was treated improperly on the disclosure statement even if it was for $262.00.