text:
    The GUARDIANS ASSOCIATION OF the NEW YORK CITY POLICE DEPARTMENT, INC., The Hispanic Society of the New York City Police Department, Inc., et al., Plaintiffs-Appellants, v. CIVIL SERVICE COMMISSION OF the CITY OF NEW YORK et al., Defendants-Appellees, and Patrolmen’s Benevolent Association et al., Intervenors-Defendants-Appellees.
    No. 241, Docket 73-2083.
    United States Court of Appeals, Second Circuit.
    Argued Sept. 14, 1973.
    Decided Nov. 21, 1973.

      Christopher Crowley, New York City (Jack, Greenberg, Elizabeth B. Du Bois, and Kenneth Kimerling, New York City, of counsel), for plaintiffs-appellants.

      Paula J. Omansky, New York City (Norman Redlich, Corp. Counsel, City of New York, and Frances E. Loren, New York City, of counsel), for defendants-appellees.
    Phillips, Nizer, Benjamin, Krim & Ballon, New York City (Stuart Linnick, New York City, of counsel), and Kaye, Scholer, Fierman, Hays & Handler, New York City (Seymour Goldstein, New York City, of counsel), for intervenors-defend-ants-appellees.
    Before LUMBARD, FRIENDLY and FEINBERG, Circuit Judges.
   FRIENDLY, Circuit Judge:

Like Vulcan Society v. Civil Service Comm’n, this day decided, this action was brought in the District Court for the Southern District of New York under the Civil Rights Act, 42 U.S.C. § 1983 and its jurisdictional implementation, 28 U.S.C. § 1343(3). Plaintiffs here are two organizations representing black and Hispanic members of the New York City Police Department, several minority policemen who have unsuccessfully sought promotion, and several minority applicants who have been denied appointment to the force. The defendants are the Civil Service Commission of the City of New York, the City’s Department of Personnel, the Police Department, individual civil service commissioners, and former Police Commissioner Murphy, hereafter referred to as the municipal defendants. Three police benevolent associations and various non-minority individuals awaiting promotion or appointment to the Department were permitted to intervene on the side of defendants. As in Vulcan Society, plaintiffs alleged that existing entry level and promotional examinations had a racially disproportionate impact, were improperly prepared, and were not job-related.

When the action was commenced on March 3, 1972, New York City was not hiring new policemen nor planning any new examinations. Since there appeared to be no urgency, it was agreed that the City would have the New York City Rand Institute (Rand) conduct a survey of the two most recent entry examinations, the second of which was held in 1970, to determine their racial impact. This agreement was conditioned on plaintiffs’ undertaking not to seek in-junctive relief while the Rand study was underway and the job freeze remained in effect. In January 1973 the freeze was lifted, and the City resumed hiring policemen from the eligibility lists; interim results of the Rand survey became available shortly thereafter. At about the same time, the City announced plans for a new patrolman’s examination, to be given before January 1,1974.

Late in March, plaintiffs moved for a preliminary injunction against continued appointments from current eligibility lists and against the use of inadequate methods to prepare any future examinations. Before decision, the final version of the Rand Report became available and was submitted to the district court. The Report confirmed plaintiffs’ contention that the entry examinations had had a racially disproportionate impact. Plaintiffs also submitted affidavits and the results of discovery tending to show that the past examinations were not job-related and that the new one might not cure the defects.

As to the past examinations, the municipal defendants did not answer on the merits, but argued that the eligibility lists from those tests would soon be exhausted and that the public interest required that new policemen continue to be appointed. As to the new examination, the defendants alleged that it would be prepared in compliance with the requirements of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e to 2000e-17, now applicable to municipalities by virtue of 86 Stat. 103 (1972), and in accordance with the Equal Employment Opportunity Commission’s Guidelines on Employee Selection Procedures, 29 C.F.R. §§ 1607.1-1607.14.

On July 16, 1973, Judge Ryan denied the motion for a temporary injunction in a- short opinion. He assumed that plaintiffs had made the showing of racially disproportionate impact needed to put upon the municipal defendants the burden of establishing the job-relatedness of the past examinations. Despite the defendants’ failure to present any evidence on the subject, he thought that resolution of this factual issue should await trial on the merits. What was decisive for him was that “It affirmatively appears that all on existing lists/ including minorities, will be appointed at the latest by early fall of 1973, and at that time, the existing lists will be depleted.” ' Judge Ryan also denied the plaintiffs’ request for injunctive relief as to future examinations, finding that in view of the City’s- efforts to cure the alleged flaws in its past tests, there was “clearly no basis for injunctive relief at this time.”

Plaintiffs promptly appealed. They sought from a judge of this court an injunction pending appeal and an expedited appeal. The former request was denied ; the latter granted. We heard the appeal on September 14, 1973, but, because of its close relationship with that in Vulcan Society, determined to consider and decide the two cases together;

Defendants’ argument that a preliminary injunction cannot be issued because they have not yet had an eviden-tiary hearing on the merits is misconceived. Although normally a court should hold some form of evidentiary hearing prior to issuing a preliminary injunction when there is a dispute eoncerning the facts, see SEC v. Frank, 388 F.2d 486, 490-493 (2 Cir. 1968); 7 Moore, Federal Practice ¶ 65.04 [3], a defendant cannot block issuance of an injunction simply by refusing to submit evidence on contested fact issues. To be sure, very little may suffice; an affidavit of a competent expert would ordinarily be enough to call for an evidentiary hearing, such as Judge Weinfeld conducted in Vulcan Society, even on an application for interlocutory relief. See Cerruti, Inc. v. McCrory Corp., 438 F.2d 281, 284 (2 Cir. 1971); Carter-Wallace Pharmacal Co. v. Davis-Edwards Pharmacal Co., 443 F.2d 867, 872 n.5 (2 Cir. 1971). But here there was none.

Although we reject this basis for denying relief, we affirm the order of the district court on a different ground. Judge Ryan was confronted with a condition, not a theory. In contrast to Vulcan Society, where many blacks and Hispanics who passed the examination might be denied appointment because of their low grades in the absence of interim relief, here it appeared that all who passed the examinations were assured of rather speedy appointment. There would have been little use in the court’s devoting days of much needed time to umpiring a battle of experts concerning the job-relatedness of examinations whose lists were expected to be approaching exhaustion.

An affidavit by Police Commissioner Cawley submitted in response to a request made by us at oral argument shows that the judge’s expectations were well-founded. Existing lists will have been exhausted before this opinion is filed. Although a new examination will be held on December 15, 1973, the earliest possible date of appointments therefrom is June 1974. Meanwhile the only available sources of new policemen will be lists of the New York City Transit Authority and the New York City Housing Authority police, which the Civil Service Commission has made available, and even these may not be adequate. While the affidavit does not disclose the ethnic composition of the eligibles remaining on these lists, it appears that 59% of the “protective service workers” employed by the Housing Authority and 27% of the Transit Authority patrolmen are blacks or Hispanics. In view of all this we cannot say that the refusal to grant a temporary injunction against appointments from the old examination lists was an abuse of discretion.

The remaining issue is whether the court erred in not making directions with respect to the new examination. The affidavit of plaintiffs’ expert alleged that defendants’ admissions in discovery showed that they had not made proper job evaluations for the new examinations; that the new examination was being prepared on the basis of “rational validation” rather than predictive or concurrent validation; and that the former is not acceptable under the EEOC Guidelines. The court dismissed this by saying that “When these new tests are promulgated, opportunity will be afforded plaintiffs to assert any objection they have.” Plaintiffs counter that it would be better to settle such matters before rather than after. Sharing the views expressed by Judge Coffin on a similar problem in Castro v. Beecher, 459 F.2d 725, 737-738 (1 Cir. 1972), we think the district court would have done well to direct that the municipal defendants should disclose the proposed examination to plaintiffs’ counsel and expert, under an appropriate protective order, and afford them an opportunity to advance constructive criticisms, which the defendants should have carefully considered, without obligation to accept. We made that suggestion at argument. Although the time may now be too late, we think it desirable to instruct the district court to make such a direction now.

The order is affirmed with the instructions indicated above. The mandate shall issue forthwith. No costs.

      . In Griggs v. Duke Power Co., 401 U.S. 424, 433-434, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), the Supreme Court noted that the EEOC’s Guidelines interpreting the Act according to the mandate of 42 U.S.C. § 2000e-12(a) were “entitled to great deference.” However, Griggs does not require “compliance by every employer with each technical form of validation procedure set out in [the Guidelines].” United States v. Georgia Power Co., 474 F.2d 906, 913 (5 Cir. 1973). If the EEOC’s interpretations go beyond congressional intent, the Guidelines must give way. See Espinoza v. Farah Manufacturing Co., 414 U.S. 86, 92-97, 94 S. Ct. 334, 38 L.Ed.2d 287 (1973).

      . Although plaintiffs had not requested it, the district court commented that summary judgment would not be proper without an evidentiary hearing. As a matter of principle, we cannot approve the intimation that under F.R.Civ.P. 56(e) defendants who are required to sustain the job-relatedness of examinations but fail to present any justifying material are nevertheless entitled to a trial. See Dressler v. MV Sandpiper, 331 F.2d 130 (2 Cir. 1964) ; 6 Moore, Federal Practice ¶ 56.22 [2] (1972).

      . As to this, see our opinion in Vulcan Society v. Civil Service Comm’n, 490 F.2d 387. Plaintiffs’ attack on the defendants’ proposed validation method provides a perfect illustration of the pitfalls of judicial embroilment in the nomenclature of employment testing. The plaintiffs place great weight on their claim that “rational validation” is not among the methods of validation that enjoy professional acceptability. Yet it appears that at least among some experts “rational validation” is a generic term for “content” and “construct” validation, methods that are expressly approved in the EEOC Guidelines when establishing criterion-related validity through predictive or concurrent validation is not feasible. 29 C.F.R. § 1607.5(a). See Note, Employment Testing: The Aftermath of Griggs v. Duke Power Company, 72 Colum.L.Rev. 900, 913 (1972). See also Developments in the Law, Employment Discrimination and Title VII of the Civil Rights Act of 1964, 84 Harv.L.Rev. 1109, 1121-22 (1971) ; Johnson, A Second Look at Griggs v. Duke Power Company: Ruminations on Job Testing, Discrimination, and the Role of the Federal Courts, 58 Va.L. Rev. 844, 858-64 (1972).


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    Fred BRAMBLETT, Plaintiff-Appellant, v. William R. DESOBRY et al., Defendants-Appellees.
    No. 73-1391.
    United States Court of Appeals, Sixth Circuit.
    Argued Oct. 2, 1973.
    Decided Jan. 8, 1974.

      Jon E. Rickert, Elizabethtown, Ky., for plaintiff-appellant.
    William T. Pizzi, Sp. Asst. U. S. Atty., Newark, N. J., for defendants-appel-lees; George J. Long, U. S. Atty., on brief.
    Before McCREE and MILLER, Circuit Judges, and KRUPANSKY, District Judge.

       Tlie Honorable Robert B. Krupansky, United States District Judge for the Northern District of Ohio, sitting by designation.

   PER CURIAM.

This is an appeal from summary judgment for defendants in an action by Fred Bramblett against William R. De-sobry, Commanding General of Fort Knox, and Robert F. Froehlke, Secretary of the Army. The amended complaint alleged that General Desobry acted in an arbitrary, capricious, and unconstitutional manner in dismissing Bramblett on September 3, 1971, from his position as manager of the Fort Knox Rod and Gun Club, a nonappropriated fund activity. Bramblett sought reinstatement, injunctive relief, damages, and a declaratory judgment.

On January 19, 1973, appellees moved to dismiss the action and the court ordered the motion to be treated as one for summary judgment. On February 27, 1973, summary judgment was granted for the appellees on the grounds that the court lacked subject matter jurisdiction because of sovereign immunity. Bramblett appeals from that order.

A nonappropriated fund activity is initially created by government loans which are repaid out of profits earned by the activity. Such activities “are arms of the government deemed by it essential for the performance of governmental functions . . . and partake of whatever immunities it may have under the constitution and federal statutes.” Standard Oil Co. v. Johnson, 316 U.S. 481, 485, 62 S.Ct. 1168, 1170, 86 L.Ed. 1611 (1941). The Fort Knox Rod and Gun Club, a nonappropriated fund activity, is an instrumentality of the United States and is, accordingly, entitled to claim sovereign immunity in actions brought against it.

The, mere fact that appellant named only individuals as defendants does not preclude the defense of sovereign immunity. “The general rule is that a suit is against the sovereign if ‘the judgment sought would expend itself on the public treasury or domain, or interfere with the public administration,’ . . . or if the effect of the judgment would be ‘to restrain the Government from acting, or to compel it to act.’ ” Dugan v. Rank, 372 U.S. 609, 620, 83 S.Ct. 999, 1006, 10 L.Ed.2d 15 (1963); Land v. Dollar, 330 U.S. 731, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947) ; Larson v. Domestic and Foreign Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949). See also Hawaii v. Gordon, 373 U.S. 57, 83 S.Ct. 1052, 10 L.Ed.2d 191 (1963).

Government officials are personally immune from damage suits so long as they are acting within the scope of their duty, despite the effects of their actions. Spalding v. Vilas, 161 U.S. 483, 16 S.Ct. 631, 40 L.Ed. 780 (1895). There is an absolute privilege regardless of whether the appellee’s decision was made in an arbitrary and capricious manner as appellant alleges. In a case involving libel by a government officer, the United States Supreme Court held, “[t]he fact that the action here taken was within the outer perimeter of petitioner’s line of duty is enough to render the privilege applicable, despite the allegations of malice in the complaint.” Barr v. Matteo, 360 U.S. 564, 575, 79 S. Ct. 1335, 1341, 3 L.Ed.2d 1434 (1959). Here, the fact that General Desobry, as Commanding General of Fort Knox, had the power to fire appellant renders irrelevant the contentions that he abused his discretion and acted outside his authority. The general’s exercise of his power to dismiss employees is immune from personal damage suits.

Appellant’s contention that the Administrative Procedure Act (5 U.S.C. § 701 et seq.) confers jurisdiction upon the United States District Courts to review an abuse of discretion is also unfounded. “The United States, as sovereign, is immune from suit save as it consents to be sued, . . . and the terms of its consent to be su'fed in any court define that court’s jurisdiction to entertain the suit.” United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941); Hawaii v. Gordon, supra. The APA does not confer jurisdiction on the courts. Yahr v. Resor, 339 F.Supp. 964 (D.N.C.1972); Ove Gustavsson Contracting Co. v. Floete, 278 F.2d 912 (2d Cir. 1960). Cf. Washington v. Udall, 417 F.2d 1310, 1320 (9th Cir. 1969); Littell v. Morton, 445 F.2d 1207 (4th Cir. 1971).

There has been no waiver of sovereign immunity for a non appropriated fund activity such as the Fort Knox Rod and Gun Club. Although 28 U.S.C. § 1346(a), enacted as an amendment to the Tucker Act in 1970, expressly allows suits based on contracts with post exchanges, Congress deliberately withheld waiver of sovereign immunity for all other types of nonappropriated fund activities. Swiff-Train v. United States, 443 F.2d 1140 (5th Cir. 1971). Sovereign immunity likewise barred a mandamus action against a nonappropriated fund activity in Bowen v. Culotta, 294 F.Supp. 183 (D.Va.1968), where an employee sought reinstatement after being fired by her superior.

Appellant’s suit is barred by the doctrine of sovereign immunity. The order of the district court granting appellees’ motion for summary judgment is therefore affirmed.


author: FIELD, Circuit Judge:

text:
    STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a mutual insurance company organized and existing under the laws of the State of Illinois, Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation, et al., Appellees.
    No. 73-1496.
    United States Court of Appeals, Fourth Circuit.
    Argued Oct. 2, 1973.
    Decided Jan. 9, 1974.

      Jack A. Mann, Beekley, W. Va. (Lynch, Mann & Knapp, Beekley, W. Va., on brief), for appellant.
    Ben B. White, Jr., Princeton, W. Va., for appellees.
    Before HAYNSWORTH, Chief Judge, and RUSSELL and FIELD, Circuit Judges.
   FIELD, Circuit Judge:

This appeal involves a controversy relative to the rights and obligations of two insurance companies under their respective policies of automobile liability insurance. The factual background of the dispute is not an unfamiliar one.

A & T Pontiac-Buick, Inc., of Blue-field, West Virginia (A & T), delivered a 1967 Mustang automobile to Earnest P. Watkins, a prospective purchaser, on March 16, 1970, so that he might try it out to determine whether he would buy it. A few days later, on March 19th, Mrs. Watkins, at the direction of her husband, called the garage, advising them that Watkins did not desire to purchase the car and requesting that they send someone to get it. The garage had no one available to pick up the car on that day, and on the following day Watkins permitted his son to drive the automobile on personel business. While driving the car the younger Watkins lost control of the vehicle and wrecked it, killing one of his passengers and injuring two others. Claims were asserted by the injured passengers and by the administrator of the deceased passenger against the Watkins as well as A & T.

At the time of the accident State Farm Mutual Automobile Insurance Company (State Farm) had in effect a liability policy which covered Earnest P. Watkins, his wife, and his son as named insureds, the vehicle described in the policy being a 1969 Buick. By its terms the policy extended protection to the Watkins while using a nonowned automobile. A & T was covered by a garage liability policy issued by United States Fidelity and Guaranty Company (U.S.F. & G.), which policy contained an omnibus clause subject, however, to a limited coverage endorsement.

The district court was presented with two issues: (I) Was the vehicle being used by Watkins’ son in the automobile business at the time of the accident within the meaning of the exclusionary provision of State Farm’s policy; and (II) what effect should be given to the respective “other insurance” provisions of the State Farm and U.S.F. & G. policies.

I.

The State Farm policy contained a provision that its coverage did not apply to a non-owned automobile “while maintained or used by any person while such person is employed or otherwise engaged in an automobile business of the insured or of any other person or organization.” State Farm takes the position that since the Mustang was delivered to Earnest R. Watkins as a customer of an automobile dealer, it was a non-owned automobile which was being used in the automobile business at the time of the accident and the foregoing exclusionary provision would apply. Upon a review of the stipulated facts, the district court concluded that any dealer-customer relationship terminated at the time Mrs. Watkins advised A & T her husband did not intend to purchase the car, and that any subsequent use of the car by Watkins or his son was for their own personal convenience and in no way incidental to the automobile business. The district judge further concluded that since Watkins’ son was driving the vehicle with the permission of A & T, he was covered by the non-owned automobile provision of the State Farm policy.

While the stipulated facts support this conclusion of the district court, we are of the opinion that the plain language of the policy itself also requires such a result. The policy defines “Automobile Business” as “the business or occupation of selling, leasing, repairing, servicing, storing or parking of land motor yehicles or trailers.” The exclusionary provision by its terms applies only where the person for whom coverage is sought is himself employed or engaged in the automobile business within the definitional terms of the policy,, and as stated in Jamestown Mut. Ins. Co. v. Nationwide Mut. Ins. Co., 266 N.C. 430, 146 S.E.2d 410, 417 (1966), “[i]t would be a strained construction of the phrase ‘used in the automobile business’ to apply it to a prospective purchaser of a vehicle who is ‘trying it out’ to see if he likes it.” We think that the policy provision with respect to the use of a non-owned automobile, like the standard omnibus clause, should receive a liberal interpretation in favor of the insured to protect not only him but the general public as well. See Chatfield v. Farm Bureau Mut. Auto Ins. Co., 208 F.2d 250 (4 Cir. 1953), and Goforth v. Allstate Insurance Company, 220 F.Supp. 616 (W.D.N.C.1963), aff’d per curiam, 4 Cir., 327 F.2d 637. Since we conclude that young Watkins was not using the vehicle in the automobile business at the time of the accident, the exclusion does not apply.

II.

The second issue with respect to the question of the “other insurance” provisions of the policies presents a more troublesome problem.

The State Farm policy had a limit of liability of $20,000 for each person and $40,000 for each accident and contained a provision that the insurance thereunder with respect to non-owned automobiles “shall be excess over other collectible insurance.” The U.S.F. & G. policy was designed primarily to cover A & T in the conduct of its automobile sales and service business and contained limits of liability of $100,000 for each person and $300,000 for each occurrence. The policy, however, carried the following endorsement:

“LIMITED COVERAGE FOR CERTAIN INSUREDS
“In consideration of the reduced rate of premium made applicable to the Garage Liability Insurance,, it is agreed that garage customers are not Insureds with respect to the automobile hazard except in accordance with the following additional provisions:
1. If there is other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer and the limits of such insurance are sufficient to pay damages up to the amount of the applicable financial responsibility limit, no damages are collectible under this policy.
2. If there is other valid and collectible insurance available to the garage customer, whether primary, excess or contingent, and the limits of such insurance are insufficient to pay damages up to the amount of the applicable financial responsibility limit, then this insurance shall apply to the excess of damages up to such limit.
3. If there is no other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer, this insurance shall apply but the amount of damages payable under this policy shall not exceed the applicable financial responsibility limit.
4. As used in this endorsement:
‘applicable financial responsibility limit’ refers to the applicable limit of the financial responsibility law of the state where the automobile is principally garaged.
* * * »

Under West Virginia’s financial responsibility law the limits of the liability of U.S.F. & G. under this endorsement were $10,000 for each person and $20,000 for each accident.

Confronted with a conflict between the “excess clause” of the State Farm policy and the “escape clause” of the U. S.F. & G. policy, the district judge concluded that the escape clause of the U.S. F. & G. policy should prevail over the excess clause of the State Farm policy and accordingly that State Farm was the primary insurer. While West Virginia has no decisional or statutory law controlling on this issue, we are inclined to the opinion that the highest court of that state would reach a conclusion different from that of the district court.

With the expanded scope of coverage provided by automobile insurance policies, the problem of “other insurance” clauses has provided a fertile field for litigation. The three principal types of such clauses are (1) excess clauses, which limit the insurer’s liability to that in excess of any liability covered under other available insurance; (2) pro rata clauses, which limit the insurer’s liability to its pro rata share of the loss in the proportion that its policy limits bears to the aggregate of available liability coverage; and (3) escape clauses, which provide indemnity only in the event that other liability insurance is unavailable. While the books are replete with cases involving conflicts between various combinations of such clauses, it would appear that conflicts between one policy containing an escape clause and another containing an excess clause have generated more litigation than any other.

A review of the welter of cases in this area reveals that the courts have generally adopted one of three approaches. One line of cases has resolved the conflict by imposing liability on the insurer whose policy contains the escape clause, reasoning that the policy with the excess clause does not in fact provide other valid and collectible insurance within the meaning of the escape clause of the other policy. Other courts have taken precisely the opposite view, giving full effect to the escape clause and holding the insurer whose policy contains the excess clause primarily liable. These courts have taken the position that the existence of an excess policy is sufficient to relieve the policy with the escape clause from coverage. In some cases this latter result has been justified upon the basis that an escape clause couched in the language such as that in the U.S.F. & G. policy in the present case specifically excludes coverage where there is other insurance either “primary, excess or contingent.”

Finally, the third group of cases has held that the conflicting clauses should be disregarded as mutually repugnant and the loss pro rated according to the primary limits of liability of each policy. These cases candidly admit that the two clauses are irreconcilable, and that any attempt “ [t] o solve the problem by picking up one policy, and reading it with a result which would be opposite to that reached if the other policy were first in order, is at best a psuedo-solution in that it only aggravates a circular riddle.” The futility of attempting to find a solution within the language of the respective policies is stated in the oft-quoted concurring opinion of Judge Tate in State Farm Mutual Auto Ins. Co. v. Travelers Ins. Co., 184 So.2d 750, 753-754 (La.App.1966):

“In Lincombe, we correctly held it was impossible to reconcile the respective ‘excess’ and ‘escape’ clauses in the two policies. Indeed, there is actually no way by logic or word-sense to reconcile two such clauses, where each policy by itself can apply as a primary insurer, but where the clause in each policy nevertheless attempts to make its own liability secondary to that of any other policy issued by a similar primary insurer: For then the primary and (attempted) secondary liability of each policy chase the other through infinity, something like trying to answer the question: which came first, the chicken or the egg?”

In all deference, it appears to us that those courts which have permitted one of the litigants to emerge victorious in this “battle of semantics” have done little to advance the cause of effective insurance coverage and have merely encouraged the insurance companies to continue their duel of legal specificity. We agree with the statement of the court in Union Ins. Co. (Mutual) v. Iowa Hardware Mut. Ins. Co., 175 N.W. 2d 413, 417 (Iowa 1970), that “this case can be more equitably resolved by a return to settled principles which give dominant consideration to rights of the insured who should have coverage no less than if she had been protected by only one of the policies. This approach is predicated on the principle that policies should be construed liberally in favor of the rights of an insured, strictly against the insurer.”

While, as we have noted, the West Virginia Court has not had occasion to venture into these waters, it is our considered judgment that it would choose to associate itself with those courts which have decided the time has come to call a halt to the continuing draftsmanship battle by which insurers seek to “out-specific” one another in an attempt to shift the primary burden of a loss on to the other insurer involved. We believe such a choice is supported by the better reasoning and accords with the growing weight of authority. Gilkey v. Andrew Weir Insurance Company, 291 F.2d 132 (9 Cir. 1961); Oregon Auto. Ins. Co. v. United States Fidelity & Guar. Co., 195 F.2d 958 (9 Cir. 1952); United States Fidelity & Guar. Co. v. Liberty M. I. Co., Boston, 327 F.Supp. 462 (M.D.Pa. 1971); Union Ins. Co. (Mutual) v. Iowa Hardware Mut. Ins. Co., supra; Rocky Mountain Fire & Cas. Co. v. Allstate Ins. Co., 13 Ariz.App. 31, 474 P.2d 38 (1970); Hardware Dealers Mutual F. Ins. Co. v. Farmers Ins. Exch., 437 S. W.2d 390 (Tex.Civ.App.1969); Graves v. Traders & General Ins. Co., 252 La. 709, 214 So.2d 116 (1968); Lincombe v. State Farm Mutual Automobile Insurance Company, 166 So.2d 920 (La.App. 3d Cir. 1964).

Accordingly, we hold that the clauses in question are mutually repugnant and should be disregarded, and that the loss and expenses of litigation should be pro rated between the companies in proportion to their respective maximum policy limits. The decree of the district court is reversed and the case is remanded for further proceedings consistent with this opinion.

Reversed and remanded.

      . W.Va.Code § 17D-4-2.

      . 47 Tul.L.Rev. 1039, 1043.

      . Employers Liabil. Assur. Corp. Ltd. v. Fireman’s F. Ins. Gr., 104 U.S.App.D.C. 350, 262 F.2d 239 (1958) ; Zurich Gen. Accident & Liabil. Ins. Co. v. Clamor, 124 F.2d 717 (7 Cir. 1941).

      . Indiana Lumbermens Mutual Insurance Co. v. Mitchell, 409 F.2d 392 (7 Cir. 1969) ; Phoenix Ins. Co. v. Nationwide Mut. Ins. Co., 335 F.Supp. 671 (D.Mont.1972) ; Allstate Insurance Co. v. Shelby Mutual Ins. Co., 269 N.C. 341, 152 S.E.2d 436 (1967).

      . See 409 F.2d 392, 395, supra n. 4.

      . Union Ins. Co. (Mutual) v. Iowa Hardware Mut. Ins. Co., 175 N.W.2d 413, 417 (Iowa 1970).

      . In the instant case since State Farm’s applicable policy limits are $20,000/$40,000 and U.S.F. & G’s applicable policy limits are $10,000/$20,000, State Farm is responsible for two-thirds of the loss and U.S.F. & G. for one-third.


author: PER CURIAM. ROSS, Circuit Judge

text:
    UNITED STATES of America, Appellee, v. Samuel HUFFMAN, Appellant.
    No. 73-1654.
    United States Court of Appeals, Eighth Circuit.
    Submitted Dec. 14, 1973.
    Decided Dec. 18, 1973.
    Rehearing Denied Jan. 10, 1974.
    Samuel Huffman, pro se.
    Robert E. Johnson, U. S. Atty., and Sam Hugh Park, Asst. U. S. Atty., Fort Smith, Ark., on brief for appellee.
    Before GIBSON and ROSS, Circuit Judges, and SMITH, Senior District Judge.

       The Honorable Talbot Smith, Senior District Judge, Eastern District of Michigan, sitting by designation.

   PER CURIAM.

Samuel Huffman appeals from an order of the United States District Court for the Western District of Arkansas denying his motion under Rule 35, Fed.R. Crim.P., for vacation of his guilty plea and for a hearing to determine the vol-untariness of his plea. The Honorable Oren Harris, who accepted his guilty plea in the original proceedings, denied the motion without hearing and petitioner brings this appeal. The District Court apparently considered petitioner’s motion as one under 28 U.S.C. § 2255 to vacate his sentence and we will so consider it here.

The only question for our determination is whether a hearing was required upon petitioner’s motion. Both parties recognize Machibroda v. United States, 368 U.S. 487, 82 S.Ct. 510, 7 L.Ed.2d 473 (1962) and Fontaine v. United States, 411 U.S. 213, 93 S.Ct. 1461, 36 L.Ed.2d 169 (1973) as the controlling cases, their differences being limited to the application of the principles therein enunciated to the facts in this case.

Petitioner appeared in the District Court February 15, 1973, at which time he waived counsel and waived indictment, allowing' the Government to pro-eeed by. information. The record demonstrates that Chief Judge Harris took great pains to assure himself that these waivers were made knowingly and intelligently. Petitioner then pleaded guilty to the charge against him, transportation of a firearm in interstate commerce by a convicted felon in violation of . 18 U.S.C. § 922(g). The record in this regard demonstrates that Fed.R.Crim.P. 11 was fully complied with, the trial judge establishing beyond any doubt that the plea was made voluntarily, without any promise or threat, and with full understanding of the consequences. In fact, the record indicates that petitioner throughout the arraignment and plea hearing was anxious to get his guilty plea made and accepted by the court so that he would be sentenced as quickly as possible.

Petitioner was brought back before the court on March 6, 1973, for sentencing. The record of those proceedings reveals that petitioner is a man 52 years old, who since age 15 has been in continuous trouble with the law and has served many of his adult years in state penitentiaries. At the time of the offense in this case, he was on probation for the third time from a 1955 Pennsylvania second-degree murder conviction, being returned for parole violations the previous two times and with a warrant outstanding for violating this third parole. He was sentenced to a term of five years imprisonment which he is presently serving at Leavenworth Federal Penitentiary.

July 9, 1973, he filed the subject motion in which he alleges that his guilty plea was coerced because the U. S. Attorney and Probation Officer promised him probation in return for his plea of guilty and the waiver of indictment. He claims that the District Court erred in denying his motion without granting him an evidentiary hearing.

Fontaine establishes that in a § 2255 proceeding, compliance with Rule 11 does not act as an absolute bar to a subsequent collateral attack upon the volun-tariness of a guilty plea. The Court did recognize, however, that a defendant, where there has been compliance with Rule 11, may not ordinarily repudiate his statements to the sentencing judge. Fontaine, supra at 215, 93 S.Ct. 1461.

Petitioner admits the compliance with Rule 11 in the District Court. He relies upon Machibroda v. United States, supra, to support his argument that a hearing was required. In Machibroda it was stated:

This was not a case where the issues raised by the motion were conclusively determined either by the motion itself or by the “files and records” in the trial court. The factual allegations contained in the petitioner’s motion and affidavit, and put in issue by the affidavit, filed with the Government’s response, related primarily to purported occurrences outside the courtroom and upon which the record could, therefore, cast no real light. Nor were the circumstances alleged of a kind that the District Judge could completely resolve by drawing upon his own personal knowledge or recollection.

Machibroda v. United States, supra, 368 U.S. at 494-495, 82 S.Ct. at 514.

Before a district court may deny a motion under § 2255 without a hearing, the files and records of the case must conclusively show that the prisoner is entitled to no relief. 28 U.S.C. § 2255; Machibroda v. United States, supra at 494, 82 S.Ct. at 514. The difficulty with a claim like the petitioner’s is that his allegations were made regarding circumstances outside the record. Yet every allegation of circumstances outside the record does not establish the necessity for a hearing on the allegations, no matter “how vague, conclusory, or palpably incredible” they may be. “The language of the statute does not strip the district courts of all discretion to exercise their common sense.” Machibroda v. United States, supra at 495, 82 S.Ct. at 514.

The discussion of cases wherein a hearing has been required or of cases where the denial of a motion without a hearing was approved would be of little benefit. The controlling principles are to be found in Machibroda and Fontaine. Each case must be determined upon its own facts. Unlike Machibroda or Fon-taine, where the motion set forth detailed factual allegations of circumstances outside the record and knowledge of the trial judge, here no such showing is made by petitioner. The only allegation of petitioner that deserves comment in this regard is his contention that the probation officer offered him leniency in the hall outside the courtroom immediately before the proceedings if he would waive indictment and plead guilty. Knowledgeable offenders must know that probation officers in federal courts have no authority to grant probation and for an individual with the recidivous record of Huffman to expect even serious consideration of a plea for probation is incredible on its face. In determining this question, the trial court not only had the affidavit of the probation officer in response to petitioner’s motion, but his statement in open court during the Rule 11 proceedings as to the content of this conversation. In the circumstances of this case, this was adequate for the trial court to conclusively determine that petitioner was entitled to no relief upon the allegations in his motion.

The order of the district court denying petitioner’s motion is affirmed.

ROSS, Circuit Judge

(dissenting).

I respectfully dissent. Among other things, Huffman alleges that his guilty plea was induced by a promise of leniency, offered by a probation officer outside the courtroom. The records indicate that a conversation took place, although the substance of the conversation is in dispute. The probation officer, by way of affidavit, denies that he promised leniency. The only proper manner in which to resolve this credibility issue is by way of an evidentiary hearing. See, e. g., Fontaine v. United States, 411 U.S. 213, 93 S.Ct. 1461, 36 L.Ed.2d 169 (1973); Machibroda v. United States, 368 U.S. 487, 82 S.Ct. 510, 7 L.Ed.2d 473 (1962).

I would reverse and remand for an evi-dentiary hearing.

      . Tlie record reveals that the Probation Officer, Mr. Bell, did have a conversation in the hall with Petitioner before he pleaded guilty. Mr. Bell told the Court of this conversation during the proceedings. He stated:
      “[H]e indicated that he wanted to waive the indictment and enter a plea of guilty. He told me his family background is down near El Dorado, around Bernice, Louisiana, and we would have to request pre-sentence report from Shreveport. If I have an opportunity to talk to him, it may be that we can get a lot of the information.”
      The Probation Officer’s affidavit states:
      “That at no time during my interviews with Samuel Huffman did I ever make him any promise of leniency or other reward to induce him to enter a plea of guilty nor did I contact Samuel Huffman for the purpose of obtaining a probation report for the Court until after he had appeared in Court, waived his attorney, waived the indictment, and entered his plea of guilty.”


author: McCREE, Circuit Judge.

text:
    Bertha ARBER and Ann Arber Broek, Plaintiffs-Appellants, CrossAppellees, v. ESSEX WIRE CORPORATION and Walter F. Probst, Defendants-Appellees, Cross-Appellants.
    Nos. 72-2121, 72-2122.
    United States Court of Appeals, Sixth Circuit.
    Argued April 11, 1973.
    Decided Jan. 8, 1974.

      See also D.C., 342 F.Supp. 1162.

      Robert W. Jones, Cleveland, Ohio, for appellants-cross-appellees; Edward I. Stillman, Cleveland, Ohio, on brief.
    Fred H. Bartlit, Jr., Chicago, 111., for appellees-cross-appellants; H. Stephen Madsen, Frank T. Black, Cleveland, Ohio, Samuel A. Haubold, Charles E. Baxter, Chicago, 111., on brief.
    Before McCREE and KENT, Circuit Judges, and CECIL, Senior Circuit Judge.

       Judge Kent died on May 28, 1973 and did not participate in this decision.

   McCREE, Circuit Judge.

This is an appeal from a judgment for defendants in an action brought by appellants, Bertha Arber and Ann Arber Broek, her daughter, for rescission of a sale in 1961 of 525 shares of Essex Wire Corporation common stock to Essex. The complaint, filed November 9, 1966, charged that Essex, the purchaser, and Walter F. Probst, the president of Essex at the time of sale and the principal negotiator on behalf of Essex, failed to disclose material facts relating to the stock’s value in violation of state common law and of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and the Securities and Exchange Commission’s Rule 10b-5, promulgated thereunder. The district court held that the evidence at trial did not establish any violation of state law or of the federal securities law and, alternatively, that appellants’ claims for rescission were barred by laches. Appellants appeal fi’om an order of July 26, 1972, denying them a trial by jury and from the findings of fact and conclusions of law filed with the district court’s decision on August 23, 1972. We affirm.

Herman Arber, a long-time employee of Essex and a plant manager for Essex until his death in 1948, the deceased husband of Bertha Arber and the father of Ann Arber Broek, originally purchased all 525 shares of stock that were transferred to Essex in the 1961 sale. In his will, Herman Arber bequeathed a life interest in 500 shares to Bertha Ar-ber, with the remainder interest to Ann Arber (Broek), and 25 shares to Bertha Arber outright. In 1951, during a conversation with an attorney representing the Arbers in a transfer of their stock interests to a trust, Probst first inquired whether they might be interested in selling their stock to Essex for $100 per share. Subsequently, the attorney, on behalf of the Arbers, declined Essex’ offer, and told Probst that Bertha Arber had a high regard for the management of Essex and believed the investment in the corporation was sound.

In 1959, Probst telephoned the Arbers and indicated that he had heard that they were interested in selling their Essex stock. The Arbers responded that they had not considered selling, but would discuss the matter with Probst. A meeting was held during which Probst informed the Arbers that Essex was doing well, showed them financial statements, and again, on behalf of Essex, offered to purchase their stock, this time for $250 per share. The Arbers responded that they wanted to consult family members and would contact Probst if any interest in selling developed. At some time after this, Ralph Arber, the brother of Ann Arber Broek and a competent businessman who had worked for Essex at one time and later started his own business in competition with Essex, strongly advised Bertha Ar-ber not to sell the Essex stock.

Nevertheless, in early 1961 Ann Arber Broek contacted Probst and inquired whether Essex remained interested in purchasing its stock held by the Arbers. After this, a meeting was held between Probst and Broek, at which time Probst commented that Essex was continuing to do well and that the Arbers were fortunate in waiting because the price then being offered by Essex had risen from $250 per share to $350 per share. Broek replied that she wished to discuss the matter with other members of the family. Shortly thereafter, Broek telephoned Probst and informed him that after family discussion they had decided to accept Essex’ offer of $350 per share, or $187,350. Some time late in 1961 the transaction was completed.

In January 1965, Broek learned from a prospectus that Essex shares were being offered to the public at a price, after adjustment for a stock split, equivalent to more than $2,000 per share transferred in 1961. She testified, “. . .we didn’t do anything at first. My husband and I thought there was nothing that could be done.” After some months had gone by they talked to an attorney who was an old family friend and later commenced this action on November 9, 1966 with the filing of the complaint against Probst and Essex. During the period of approximately 22 months between the Broeks’ reading of the prospectus and the institution of this action, the value of the Essex stock appreciated by about sixty percent. The stock continued its meteoric rise and at the time of the trial in the district court, the price at which Essex was traded, according to appellants, was four times the price at which it had gone public in 1965.

Initially, after an evidentiary hearing in September 1970, the district court dismissed the federal claim on the grounds that the sale did not involve the use of the mails or other instrumentalities of interstate commerce. During trial, however, appellants offered newly discovered evidence on the jurisdictional issue, and the court, taking appellants’ motion under advisement, permitted evidence to be presented on the federal as well as on the state law claim.

On this appeal the following issues are presented: (1) whether the evidence presented at trial established a violation of Section 10(b) in connection with the sale transaction; (2) whether the evidence presented at trial established that the conduct of the defendants constituted common law fraud; (3) whether appellants were denied their right to trial by jury guaranteed by the Seventh Amendment to the Constitution of the United States; and (4) whether the evidence supported the district court’s conclusion that appellants’ claims for rescission were barred by laches.

After a review of the entire record, we conclude that the findings of fact of the trial judge are not clearly erroneous, Fed.R.Civ.P. 52(a), and we set forth below the findings that are critical to the resolution of the issues presented on appeal.

We consider, first, appellants’ claim under the federal securities law. The district court held that all allegedly undisclosed facts were either available to appellants or were not material. In addition, the court held that under federal as well as state law appellants must establish that if they had possessed the facts alleged to have been concealed, they would not have sold the stock; and the court found as a fact that appellants would not have relied on the facts they claim were undisclosed. On appeal, appellants urge that the court applied too restrictive a doctrine in determining materiality, and that proof of reliance is not required for a 10b-5 violation under federal law.

At the outset, we observe that underlying this provision of federal securities law is the Congressional judgment that full disclosure will help to ensure fair dealing in insider transactions. It is settled that Section 10(b) proscribes nondisclosure, as well as affirmative misrepresentation, of “material facts” affecting a stock’s value. Securities and Exchange Commission v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968). This prohibition applies not only to an officer buying for his own account but also to a closely-held corporation, such as Essex in 1961, dealing in its own securities. Kohler v. Kohler Co., 208 F.Supp. 808, 820 (E.D.Wis.1962), aff’d, 319 F.2d 634, 638 (7th Cir. 1963) ; Northern Trust Co. v. Essaness Theatres Corp., 103 F.Supp. 954 (N.D.Ill. 1952).

The district court held that the requisite “materiality” could be demonstrated only by a showing of nondisclosure of “special facts” such as mergers or sale of assets, not ascertainable from the books, which “greatly appreciate” stock value. We think this test is overly restrictive of the Congressional purpose and contrary to the general interpretation of Section 10(b) in the federal courts. Whether undisclosed facts are “material” does not depend upon whether they concern specific transactions. Nor is it necessary that the facts be of such a nature that they “greatly appreciate” the stock’s value. We adhere to the test stated by the Second Circuit Court of Appeals in the landmark Texas Gulf Sulphur decision: whether a reasonable man would have attached importance to the undisclosed facts in determining his choice of action in the particular transaction in question. 401 F.2d at 849. See also Northwest Paper Corp. v. Thompson, 421 F.2d 137, 138 (9th Cir. 1970); Securities and Exchange Commission v. Great American Industries, Inc., 407 F.2d 453, 459-460 (2d Cir. 1968), cert, denied, 395 U.S. 920, 89 S.Ct. 1770, 23 L.Ed.2d 237 (1969) ; List v. Fashion Park, Inc., 340 F.2d 457, 461-463 (2d Cir. 1965), cert, denied, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1966).

To apply this standard, it is necessary to identify what facts, if any, were not disclosed by defendants to the Arbers before Essex' purchase of the Arbers’ shares of stock and to assess the significance, from a reasonable person’s viewpoint in the context of the 1961 sale, of any nondisclosures. Appellants contend that defendants did not disclose the following facts: (1) the role of Essex management in controlling an “administered price;” (2) the personal interest of Probst and Essex management in the transaction; (3) the book value of the stock, which appellants allege, was more than double the amount offered; and (4) other material facts concerning the earnings and corporate activity and plans of Essex.

The crux of the first contention is that before Essex “went public” there was no competitive market for Essex shares, and the price at which the stock was sold by the Arbers, referred to by management as the “going price”, was in fact established by management. We observe, however, that appellants were aware that Essex was a closely-held corporation, that its stock was not widely traded, and that they were selling to Essex itself, or to Probst, its president. Appellants also knew that if Essex ever went public, the increased marketability of the shares would likely increase their value considerably. A reasonable inference, though not one completely clear from the record, is that appellants did know that the “going price” was set by management. Moreover, the district court expressly found that the going price “was arrived at after consideration of all relevant factors bearing on fairness, including the company’s strengths and weaknesses and at what price knowledgeable persons . . . would sell.” Indeed, the court found, on the basis of expert testimony, that the “going price” received by the Arbers was a “fair and reasonable” assessment of value at that time. This conclusion was reinforced by the stipulated existence of contemporaneous transactions between Essex and other sellers with extensive business experience and with knowledge of all available facts. They accepted the identical price received by the Arbers. In this context, we do not think that detailed knowledge of the precise mechanism for establishing the “going price” would have affected the choice of action of a reasonable person in the position of the Arbers.

The second contention, that of an undisclosed personal interest of Probst and Essex management in the transaction, hinges essentially on appellants’ assertion that there existed a concealed plan of Essex and Probst, a major shareholder, for Essex to repurchase its own shares at a price less than book value for the purpose of increasing the value of all outstanding shares. The district court expressly found that appellants failed to prove the existence of such a plan.

Appellants also claim that appellees did not disclose book value which was substantially greater than the offer price, and other financial data such as earnings per share. This information, however, was readily available to appellants who, although aware of its existence and availability, were simply uninterested. We hold that an insider has no affirmative duty to direct a seller’s attention to all routine data commonly found in the statements and books of the corporation, at least where that information is readily available; the outsider has knowledge that it is available and makes no inquiry; and the information thus available is not of an unusual or extraordinary nature.

Not only was this information available upon request but also, here, Probst informed plaintiffs that the company was doing well, and, perhaps more importantly, Ralph Arber provided them with his opinion of the company’s potential from his perspective as a past employee and present competitor of Essex. He believed that Essex had excellent prospects for the future and, in advising Bertha Arber not to sell, told her that Essex was a “helluva company” and a “gung-ho outfit”, that it was “going to go a long way” because of its competent and aggressive management, and that if the stock ever went public it would be very valuable.

Appellants argued, but did not prove, that at the time of the sale, management had definite plans reasonably certain to increase the value of the stock. We do not suggest that a fixed plan of future corporate activity may never be viewed as a material fact. Mere speculation, however, does not provide any basis for Section 10(b) liability. Certainly developments subsequent to the 1961 sale greatly increased the value of the Essex stock and no doubt the Arbers’ sale of their shares proved improvident by hindsight. But Section 10(b) does not require that an insider “confer upon outside investors the benefit of his superior financial or other expert analysis by disclosing his educated guesses or predictions.” Texas Gulf Sulphur Co., supra, 401 F.2d at 848. In short, the law mandates disclosure only of existing material facts. It does not require an insider to volunteer any economic forecast.

We hold that appellees did not fail, to disclose any material inside information. We do not find it necessary, therefore, to decide-whether the district court’s alternative finding that appellants would not have relied on any facts claimed to have been undisclosed is supported, and, if so, what its legal significance would be under Section 10(b).

We also hold that appellants have not proved their claim of violation of state law. The district court did not specifically decide whether Michigan law or Indiana law was controlling, for it held that appellants’ evidence was insufficient to establish fraud under the case law in either jurisdiction. We agree. Buckley v. Buckley, 230 Mich. 504, 202 N.W. 955 (1925); Bollstrom v. Duplex Power Car Co., 208 Mich. 15, 175 N.W. 492 (1919); Board of Commissioners of Tippecanoe County v. Reynolds, 44 Ind. 509, 15 Am.Rep. 245 (1873); Lebeis v. Rutzen, 289 Mich. 1, 286 N.W. 134 (1939). Neither state provides a broader cause of action in cases of nondisclosure than that provided by Section 10(b).

There remains to be considered appellants’ claim that they were denied their Seventh Amendment right to jury trial. The district court struck the jury demand, reasoning that “[ijnasmuch as plaintiffs pray for rescission of the sale of the shares of stock, the Court must conclude that equitable relief is sought.” Appellants rely upon Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959) and Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S. Ct. 894, 8 L.Ed.2d 44 (1962), for the proposition that where legal and equitable claims are asserted in a single action, the right to trial by jury of the issues presented in the legal claim cannot be denied just because their determination is also necessary in the determination of the equitable claims. And, appellants contend that in addition to their claim for rescission, admittedly equitable in nature, they requested alternative relief in the form of money damages, incidental damages for dividends and distributions attributable to the Essex stock, and punitive damages, all of which, appellants argue, are legal claims entitling them to trial by jury.

We agree with the general proposition that appellants derive from Beacon and Dairy Queen. But appellants’ contention that their complaint contained legal, and not merely equitable claims for relief must be examined in the context in which the jury demand was stricken. Before the demand was stricken, the district court had dismissed the federal 10b-5 claim for want of jurisdiction, 342 F.Supp. 1162, and appellants were proceeding solely under Ohio law, which required an election between legal and equitable proceedings. Frederickson v. Nye, 110 Ohio St. 459, 144 N.E. 299 (1924); Baird v. Howard, 51 Ohio St. 57, 36 N.E. 732 (1894). A federal court in a common law diversity action, the context of the suit at the time the jury demand was stricken, would enforce such an election. Berger v. State Farm Mutual Automobile Insurance Company, 291 F.2d 666 (10th Cir. 1961). See also Myzel v. Fields, 386 F.2d 718, 740 n.15, (8th Cir. 1967), cert, denied, 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1143 (1968). Therefore, we hold that the district court properly concluded that appellants had elected to proceed in equity and, accordingly, there was no right to a jury trial at the time the demand was stricken. Because appellants requested the equitable remedy of rescission and were bound by Ohio’s election of remedies doctrine, they could not simultaneously assert a claim for legal relief. For this reason, Beacon and Dairy Queen are simply inapposite here.

The conclusion that appellant had elected to proceed solely in equity is not in conflict with the third amended complaint. The complaint prayed for the rescission of the sale and delivery of the original shares to Arber and Broek, plus dividends and other distributions since 1960, and for punitive damages; in the alternative, it asked for a judgment equal to the difference between the amount paid for the stock and its current market value, plus dividends and distributions attributable to the stock, and punitive damages. It is evident that appellants’ alternative claim did not request a traditional measure of damages at law, which would be the difference between what was received by appellants and the fair market value of the shares of stock at the time of the sale. E.g., Ross v. Licht, 263 F.Supp. 395 (S. D.N.Y.1967). But cf. Myzel v. Fields, supra, 486 F.2d at 740-742. Instead, appellants requested the monetary equivalent of rescission, equal to the difference between the sale price and the current market value of the stock. This request, as well as the request for the monetary equivalent of dividends and distributions on the stock, is of an equitable nature. Finally, assuming but not deciding that the claim for punitive damages was permissible under Ohio law, we observe that many courts have awarded punitive damages in equity, as well as at law. 48 A.L.R.2d 947, 955 (1956).

But for the election under operation of state law and the fact that the federal claim had been stricken, we would regard the claim of abridgment of the right to trial by jury as presenting a substantial question, because, the test for whether a jury right exists under Beacon and Dairy Queen is not if the claim in question is “primarily” legal or equitable in nature, but whether the claim could have been brought at law. There is even the possibility that appellants’ Seventh Amendment claim might have been revived during the course of the trial, when the court, on the basis of “newly discovered evidence”, explored reconsideration of the federal 10b-5 claim, because at this stage of the proceedings, appellants were not bound to an election by operation of state law. If appellants had then reasserted their jury demand, the dispositive question would have been whether appellants’ alternative claims for monetary damages could have been brought at law.

For example, if the only remedy sought by appellants was rescission, it is clear there would be no right to jury trial. Richland v. Crandall, 259 F.Supp. 274, 276 n.l, (S.D.N.Y.1966). It is equally clear that a claim for compensatory damages would have given rise to a right to jury trial. Dasho v. Susquehanna Corporation, 461 F.2d 11 (7 Cir. 1972). As we have indicated above, however, appellants’ request for monetary damages is not for traditional compensatory damages because it sought an amount equal to the value of rescission. We observe that one court has held that relief similar to that sought by appellants here in their alternative claim, termed by the court as “recisional damages”, was a legal claim to which attached a right to trial by jury. Myzel v. Fields, supra, 386 F.2d, at 740-742. But we find it unnecessary to resolve here the question whether appellants’ claim for monetary relief could have been brought at law, because even if legal issues were raised in the 10b-5 claim, appellants’ contention that their Seventh Amendment rights were violated cannot prevail.

When new legal issues arise during the course of a non jury trial, they can certainly be determined by the court with the express or implied consent of the parties. Scholl v. Scholl, 80 U.S. App.D.C. 292, 152 F.2d 672 (1945); Fidelity and Deposit Co. v. Krout, 157 F.2d 912 (2d Cir. 1946); Smith v. Cushman Motor Works Co., 178 F.2d 953 (8th Cir. 1950). See generally 5 Moore’s Federal Practice § 38.41, 329 (1971). Here appellants’ counsel not only failed to suggest to the court that the revived federal claim raised new legal issues, but also appears to have agreed to trial by the judge alone of all issues on the 10b-5 claim.

This acquiescence is found in several colloquies between the court and appellants’ counsel. During trial, the court specifically asked counsel if he would be able to introduce evidence on the federal claim for the court’s consideration:

“THE COURT: All right, let’s just for a minute — and I realize it is late, but so we can proceed right on. I am inclined, gentlemen, in order that I can review the case in its proper perspective and also take another look at the jurisdictional question that we passed on previously, I am inclined to consider a reopening — to reconsider the action that was dismissed by this Court. And to the extent that it would be reopened, if counsel wish to introduce evidence, I would like to make a complete record and reexamine that question in light of all the evidence in this case. If the Court states to counsel that it would reconsider reopening — reinstating, rather — the cause of action that was dismissed, are you in a position to introduce your evidence and complete your eviden-tiary presentation based on that decision?
“MR. STILLMAN: Yes, we are, your Honor.”

And at the close of the evidence, the court made clear, again, that it desired to consider evidence and argument on the federal claim:

“Now, the matter of the Federal cause of action is still open. I have heard evidence on that matter. I would ask that in your briefs you address yourselves to that question as well, for after submission of the briefs and the arguments I may decide to reinstate that Federal cause of action and decide the merits on both causes of action, or in my final judgment I might reaffirm my original position and proceed to decide solely the State claim. So I would suggest that counsel address themselves to that as well.”

Since the court thus advised appellants’ counsel that it might reconsider its previous determination about federal jurisdiction and reinstate the federal claim, it was not further obligated, sua sponte, to impanel a jury. Appellants have not directed our attention to any objection to the court’s procedure concerning the federal claim, either at trial or in the post-trial briefs and we have found none. From all that appears, we conclude that any right to consideration by a jury of any legal claims that might have arisen during the trial was waived.

There is a further reason for rejecting appellants’ Seventh Amendment claim. Appellants’ proof, in our view, failed to raise issues of fact sufficient to go to the jury. Although the trial court made no such finding because it was not required to do so, we conclude from an examination of the record that reasonable men could not differ on the proposition that defendants did not fail to disclose any material inside information. Northwest Paper Corp. v. Thompson, 421 F.2d 137 (9th Cir. 1969). See also Whitsell v. Alexander, 229 F.2d 47, 49 (7th Cir. 1956).

Because our determinations on the foregoing issues are dispositive, we do not consider whether the district court correctly held that the 22 month delay between the date appellants learned from the prospectus that the Essex stock was “going public”, at a price greatly in excess of the amount received by appellants in the 1961 sale, and the date they instituted this action, during which time the value of the stock appreciated by sixty percent, constituted laches barring appellants’ claims for rescission. See Keyerleber v. Euclid Congregation of Jehovah’s Witnesses, 103 Ohio App. 423, 143 N.E.2d 313 (1957); Estate Counseling Service v. Merrill Lynch, Pierce, Fen-ner & Smith, Inc., 303 F.2d 527 (10th Cir. 1962); Baumel v. Rosen, 412 F.2d 571, 574 (4th Cir. 1969).

Judgment affirmed.

      . Bertha Arber died during the pendency oí this action and Ann Arber Broek, as her executrix, continued the action on Bertha Ar-ber’s behalf.

      . 15 U.S.C. § 78j provides in pertinent part:

        Manipulative and deceptive devices It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
      * * * *
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

      . Rule 10b-5, 17 C.F.R. § 240.10b-5, provides :
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange
      (1) to employ any device, scheme, or artifice to defraud,
      (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

      . Ralph Arber also testified that Probst discussed the potential sale of the Arbers’ stock with him in several conversations.

      . In their brief appellees set forth stipulated facts establishing both that the Arbers received the highest price paid up to the date of sale for their stock and that sellers with the most complete knowledge of Essex’ operations, the company’s own executives, made contemporaneous sales at the very same price:
      Number Price Of Per
      Sale Date Seller Purchaser Shares Share
      2/23/60 Roesler Egger & Co.* 100 $250
      6/07/60 Shea Mike & Co.* 6,000 $350
      12/23/60 A. F. International Kammer, Jr. Wire * 1,370 $350
      1/03/61 Holton Various Essex 950 $350
      Employees
      2/03/61 Taft Egger & Co.* 40 $350
      2/21/61 Holton Hirschman 50 $350
      3/28/61 Roesler Egger & Co.* 75 $350
      Arber________ 5/06/61____Arber _________Essex_____________525____$350
      Sale
      6/02/61 Holton Harrison 29 $350
      6/02/61 Holton N. C. Kennedy and M. E. Kennedy 150 $350
      7/20/61 Probst Egger & Co.* 72 $350
      2/12/62 Roesler Gunn & Co.* 75 $375
      9/27/62 Probst Various Essex 2,925 $400
      Employees
      * Nominees of Essex
      It is uncontroversted that each of the above sellers had full knowledge of all available facts regarding Essex. In addition to President Probst, the other sellers occupied the following positions:
      (a) Roesler was Essex’ Treasurer and chief financial officer in charge of preparing all financial statements and information. Mr. Roesler was thoroughly familiar with all details of stock purchases by Essex and was personally involved in virtually every transaction because as Treasurer he raised the money for each purchase.
      (b) Shea was a director and Vice-Chairman of the Board of Essex. In June of 1960, Mr. Shea sold his entire holdings in Essex — 6,000 shares — for the same $350 per share price received by the Arbers. (App. 47.)
      (c) Holton was the founder, Chairman of the Board and Chief Executive Officer of Essex and held the controlling stock ownership interest in the Company.
      (d) A. F. Kammer was a director and the son-in-law of Holton. Mr. Hammer received full financial information concerning Essex. (App. 47).
      (e) Taft, a prominent lawyer who was and still is the senior partner in the 50-lawyer Boston firm of Herrick, Smith, Donald, Farley and Ketchum, had been an independent outside director for many years. Mr. Taft was a corporation lawyer, and a trustee for other shareholders in Boston. He acquired none of his shares under any Essex stock purchase plan. As a director Mr. Taft received complete financial information. (App. 47.) Brief for appellees at 12-13.
      We observe that the officers and directors of Essex sold their stock both to Essex itself and to Essex employees and other individuals.

      . The cases relied upon by appellants, Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed. 2d 741 (1972), and Chasins v. Smith, Barney & Co., 438 F.2d 1167 (2d Cir. 1970), are inapposite here. In both of those cases the defendant acted as an agent for plaintiffs’ purchase or sale of stock while, at the same time, the defendants did not disclose that they were making a market in the stock for their own benefit. In Ute, for example, the Court expressly observed that the record revealed “a misstatement of a material fact, within the proscription of Rule 10b-5(2), namely, that the prevailing market price of the . . . shares was the figure at which [defendants’] purchases were made.” 406 U.S. at 152, 92 S.Ct. at 1471.

      . In Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), the United States Supreme Court held:
      Under the circumstances of this ease, involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in the making of this decision. See Mills v. Electric Auto-Lite Co., 396 U.S. 375,384 [90 S.Ct. 616, 621, 24 L.Ed.2d 593] (1970) ; SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (CA2 1968), cert, denied sub nom. Coates v. SEC, 394 U.S. 976 [89 S.Ct. 1454, 22 L.Ed.2d 756] (1969); 6 L. Loss, Securities Regulation 3876-3880 (1969 Supp. to 2d ed. of Vol. 3); A. Bromberg, Securities Law, Fraud — SEC Rule 10b-5, §§ 2.6 and 8.6 (1967). This obligation to disclose and this withholding of a material fact establish the requisite element of causation in fact. Chasins v. Smith, Barney & Co., 438 F.2d 1167, at 1172 [2 Cir.].
      406 U.S. at 153-154 (emphasis added). This, of course, makes clear that the Record in a 10b-5 action for nondisclosure need not contain an affirmative demonstration of plaintiffs’ reliance. But we need not decide whether an affirmative showing by defendants that plaintiffs would not have relied might defeat an otherwise valid claim.

      . Since no effort was made to do so, we find it unnecessary to decide whether a jury demand could have been asserted without leave of the court. See Fed.R.Civ.P. 88.


author: CUMMINGS, Circuit Judge.

text:
    Armand R. GASBARRO, Plaintiff-Appellant, v. LEVER BROTHERS COMPANY et al., Defendants-Appellees.
    No. 73-1009.
    United States Court of Appeals, Seventh Circuit.
    Heard Oct. 30, 1973.
    Decided Dec. 21, 1973.

      Edwin A. Strugala, Chicago, Ill., Wilezynski, Wilczynski, Ciambrone, Karwoski & Petrarca, Chicago Heights, Ill., for plaintiff-appellant.
    Francis D. Morrissey, John T. Coleman, Thomas F. Tobin, Don H. Reuben, Steven P. Handler and Lawrence Gunnels, Chicago, Ill., for defendants-appellees.
    Before SWYGERT, Chief Judge, and CUMMINGS and STEVENS, Circuit Judges.
   CUMMINGS, Circuit Judge.

This diversity action is based on tor-tious interference with a physican-pa-tient relationship and on slander. Plaintiff is a podiatric physician practicing in Lansing, Illinois. Defendant Lever Brothers employs numerous persons at its Hammond, Indiana, plant. Defendant Kruglinski is its Personnel Manager there. Defendant Travelers Insurance Company is the insurer under a medical benefits policy insuring Lever Brothers’ employees. Under a union contract, Lever Brothers agreed to a medical benefits program for its employees. As a result, Lever Brothers arranged for the policy with Travelers. The insurer agreed to pay the “usual, reasonable and customary” cost of hospitalization and medical care, including foot surgery. Lever Brothers’ premium for the group benefit health insurance policy consisted of reimbursing Travelers for all benefit payments, plus a percentage overcharge. The cost to Lever Brothers would thus in part depend on the medical fees.

Count I, based on tortious interference with a business relationship, alleged that Kruglinski disparaged plaintiff at an August 11, 1970, meeting at Lever Brothers’ Hammond plant, attended by union representatives and others. Kruglinski told the group that plaintiff was not a member of the American Medical Association and charged Lever Brothers’ employees excessive fees. Kruglinski said that consequently the employees would have to pay the uninsured portion of the fees. Defendants assertedly advised Lever Brothers’ employees to seek care from members of the American Medical Association. Plaintiff sought $50,000 for defendants’ inducing Lever Brothers’ employees not to enter into physician-patient relationships with him. In Count IV, an additional $50,000 was sought as punitive damages for the same tort.

Count II, the defamation count, claimed that the statements that plaintiff’s charges were excessive were false and made recklessly or maliciously. Compensatory damages of $100,000 were sought, and in Count III, $50,000 punitive damages were claimed for the defamation. By virtue of summary judgment in its favor, Travelers was not involved in the trial of Count II.

Plaintiff admitted he had sometimes received complaints from insurance companies and patients about his fees. He still treats Lever Brothers’ employees, and his income has been increasing yearly. His counsel conceded he could not prove specific damages.

At the conclusion of the jury trial, the district court rendered an oral opinion in favor of defendants. As to Counts I and IY dealing with interference with business relationship, the court said there was insufficient evidence of actual damage or interference with the professional relationship to permit the case to go to the jury. The court held that in any event there was a conditional privilege and that the plaintiff had not adduced the requisite evidence of actual malice.

As to Counts II and III charging defamation, the court held that the case was governed by New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686, and Farnsworth v. Tribune Co., 43 Ill.2d 286, 253 N.E.2d 408 (1969). Farnsworth was cited for the proposition that “an osteopath is regarded as a public figure on whom a comment may be made under first amendment protection.” The district court found podiatrists indistinguishable from osteopaths. Since the kind of malice required to recover damages under the doctrine of those cases was not shown, a verdict was directed on the defamation Counts as well as on the business relationship Counts.

LI] Although Kruglinski’s allegedly false statements were made in Indiana, the parties have treated this diversity case as governed by Illinois law, because any injury to plaintiff was suffered in that state. In a tort action for interference with contract or other business relationships, or for defamation, if the alleged wrongful conduct is conditionally privileged, a plaintiff must show actual malice on the part of defendant in order to sustain his cause of action in Illinois. Arlington Heights National Bank v. Arlington Heights Federal Savings and Loan Ass’n, 37 Ill.2d 546, 551, 229 N.E. 2d 514 (1967); Lulay v. Peoria Journal-Star, Inc., 34 Ill.2d 112, 115, 214 N.E.2d 747 (1966); Zeinfeld v. Hayes Freight Lines, Inc., 41 Ill.2d 345, 349, 243 N.E.2d 217 (1969); Doremus v. Hennessy, 176 Ill. 608, 52 N.E. 924, 54 N.E. 524 (1898); Restatement of Torts, §§ 593-605, 766-770. Plaintiff’s principal brief in this Court recognizes the validity of this rule where a conditional privilege exists.

We agree with the district court that defendants’ conduct was conditionally privileged. As the district court pointed out at the conclusion of plain-' tiff’s case, defendants’ activities were “because of their desire to protect their employer’s legitimate interest in keeping the expenses of the health and welfare policy down, and what they did they did in defense of that interest and not through a desire to inflict harm upon the plaintiff.” The standards for a qualified or conditional privilege were defined as follows in Zeinfeld, supra, a defamation case:

“Where circumstances exist, or are reasonably believed by the defendant to exist, from which he has an interest or duty, or in good faith believes he has an interest or duty, to make a certain communication to another person having a corresponding interest or duty, and the defendant is so situated that he believes, in the discharge of his interest or duty or in the interests of society, that he should make the communication, and if he makes the communication in good faith, under those circumstances, believing the communication to be true, even though it may not be true, then the communication is qualifiedly or conditionally privileged, even though the defendant’s interest or duty be not necessarily a legal one but only moral or social and imperfect in character.” 41 Ill.2d at 349, 243 N.E. at 221.

The same conditional privilege standards were applied in Arlington Heights National Bank, supra, an interference with contract case.

The evidence revealed that Dr. Francis D. Kenney, Lever Brothers’ Hammond plant physician, had informed Kruglinski that plaintiff’s medical fees consistently appeared to run high. Therefore, Kruglinski talked to employee Mary Merola, who was scheduled for foot surgery to be performed by plaintiff. Kruglinski asked Mrs. Merola to have an orthopedic surgeon examine her in order to determine a fair professional fee. Later Kruglinski told a representative of Travelers and Lever Brothers’ Plant Manager that plaintiff proposed to charge her a $1,000 fee whereas Dr. Schneider, who had examined Mrs. Merola, proposed to charge only $400. At a subsequent monthly meeting with Lever Brothers’ union officials, the insurance and medical benefit program was discussed, and Kruglinski truthfully stated that plaintiff was not a member of the American Medical Association and added that he “charges atrocious or outrageous prices.”

This evidence presents no jury issue as to malice. Kruglinski’s statements were made in good faith, based on Dr. Kenney’s opinion and Dr. Schneider’s estimate. Kruglinski had no reason to doubt the opinion of two doctors. He was upholding Lever Brothers’ interest in minimizing the cost of the medical payments that it bore. Since the employee benefits were rendered pursuant to a union-management contract, and since in extreme cases employees would have to pay the excessive portion of the charge themselves, it was normal for such questions to be discussed at a meeting between union and management representatives. Thus there was no excessive publication.

If the issue were the truth of Kruglinski’s statements, there might have been a jury question. But the issue is whether Kruglinski acted maliciously. Since there is no evidence that he did, his qualified privilege could not have been overcome. The directed verdict was therefore proper as to all counts, for no contrary verdict based on this evidence could ever stand. Pedrick v. Peoria & Eastern R. R., 37 Ill.2d 494, 510, 229 N.E.2d 504 (1967).

This resolution of the issues makes it unnecessary to decide whether the rule of New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686, and Farnsworth v. Tribune Co., 43 Ill.2d 286, 253 N.E.2d 408 (1969), is applicable. For discussions of the applicability of the New York Times rule in somewhat related situations, see Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S. Ct. 1811, 29 L.Ed.2d 296, and Gertz v. Robert Welch, Inc., 471 F.2d 801 (7th Cir. 1972), certiorari granted, 410 U.S. 925, 93 S.Ct. 1355, 35 L.Ed.2d 585.

Judgment affirmed.

       Because of his lower fee, Mrs. Merola had Dr. Schneider operate on her feet.


author: CRAVEN, Circuit Judge:

text:
    WELLMAN INDUSTRIES, INC., Appellant, v. The NATIONAL LABOR RELATIONS BOARD et al., Appellees.
    No. 73-1581.
    United States Court of Appeals, Fourth Circuit.
    Argued Nov. 7, 1973.
    Decided Jan. 22, 1974.

      Jeffrey S. Dubin, Great Neck, N. Y. (Peter D. Hyman, Hyman, Morgan & Brown, Florence, S. C., and Mirkin, Barre, Saltzstein & Gordon, P. C., Great Neck, N. Y., on brief) for appellant.
    R. Bruce McLean, Atty., Washington, D. C. (Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, and Abigail Cooley, Asst. Gen. Counsel, NLRB, on brief) for appellees.
    Before BOREMAN, Senior Circuit Judge, and CRAVEN and FIELD, Circuit Judges.
   CRAVEN, Circuit Judge:

Wellman Industries, Inc., appeals from an order of the district court denying it access under the Freedom of Information Act, 5 U.S.C. § 552, to affidavits obtained by an NLRB investigator during his inquiry into Union objections to a representation election held at Well-man’s Johnsonville, South Carolina, facility. These affidavits, Wellman alleges, were the basis of an order by the Regional Director of the NLRB setting aside that election.

At a second election a majority of Wellman’s employees chose the Union as their bargaining representative, and the Union was so certified after objections by Wellman were dismissed and a Request for Review denied by the Regional Director. On September 26, 1972, the Union requested that Wellman bargain; that request was refused on October 4, 1972. The Board then issued a complaint charging the Company with refusal to bargain under Section 8(a)(5) of the National Labor Relations Act, 29 U. S.C. § 158(a)(5). The Company raised the defense of improper certification; whereupon General Counsel for the Board moved for summary judgment, and the matter was transferred to the Board in Washington, D. C., by order dated November 15, 1972. Wellman filed a statement in opposition to the motion for summary judgment, together with cross-motions seeking affidavits and memoranda under the FOIA. On May 30, 1973, the motion for summary judgment was denied by the Board and the case remanded to the Regional Director for a hearing on the question of newly-discovered evidence relating to the April 1972 (second) election.

On January 25, 1973, the Company filed the complaint in this case. Without specifically deciding whether exemptions 4 and 7 of the FOIA were applicable, the district court relied upon its equitable power not to issue an injunction where an adequate remedy at law was available and where such action would produce circuity of action, stating : “Foremost in the mind of the Court is the fact that the question of the Plaintiff’s rights under the Freedom of Information Act will be before the Circuit Court of Appeals in the very near future, whether this Court does or does not issue an injunction.” Wellman appeals, and we affirm, though not for the reasons given by the district judge.

The district court’s “balancing of the equities” approach to withholding injunctive relief under the FOIA is not without support, see General Services Administration v. Benson, 415 F.2d 878 (9th Cir. 1969); Consumers Union v. Veterans Administration, 301 F.Supp. 796 (S.D.N.Y.1969); Davis, Administrative Law Treatise § 3A.6, at 123-24 (1970 Supp.) (hereinafter cited as Davis). However, this court noted in Wellford v. Hardin, 444 F.2d 21 (4th Cir. 1971), that:

After considering voluminous testimony on both sides and balancing the public, private, and administrative interests, Congress decided that the best course was open access to the governmental process with a very few exceptions. It is not the province of the courts to restrict that legislative judgment under the guise of judicially balancing the same interests that Congress has considered.

444 F.2d at 24-25. Again, in Robles v. Environmental Protection Agency, 484 F.2d 843 (4th Cir. 1973), we said, in another context:

Equally unpersuasive is the argument that disclosure should be refused because it “would do more harm than good”. Such an argument has nothing to do with “personal privacy” but is rather an argument that courts, in disposing of actions under the Act, may exercise discretion to grant or deny equity relief. While such argument has received some limited support, the better reasoned authorities find no basis for this balancing of equities in the application of the Act; indeed, the very language of the Act seems to preclude its exercise.

484 F.2d at 847. We adhere to that viewpoint and hold that 5 U.S.C. § 552(c) means what it says: that the Act “does not authorize withholding of information or limit the availability of records to the public, except as specifically stated in this section.” (emphasis added.)

We must, therefore, look to the specific exemptions provided for in the Act. The Board suggests the affidavits are protected from disclosure as within two exemptions: (1) “trade secrets and commercial or financial information‘obtained from a person and privileged or confidential;” and (2) “investigatory files compiled for law enforcement purposes except to the extent available by law to a party other than an agency; . ” We think the affidavits are clearly within the second exemption and thus need not decide whether they also fall within the former. See generally, Consumers Union v. Veterans Administration, 301 F.Supp. 796, 802 (S.D.N.Y. 1969); Davis, supra at § 3A.19.

Wellman argues that while the investigatory files exemption applies to information obtained after an unfair labor practice complaint has been filed, it does not protect material obtained in Board investigations of representation election irregularities prior to the filing of an unfair labor practice charge since no enforcement proceedings were contemplated and the entire process was nonadver-sary in nature. But see Evans v. Department of Transportation, 446 F.2d 821 (5th Cir. 1971). While it is true that the cases cited by the Board uphold non-disclosure under exemption 7 only with regard to files assembled after an unfair labor practice complaint was filed by the Board, Clement Bros., Inc. v. NLRB, 282 F.Supp. 540 (N.D.Ga.1968); Barceloneta Shoe Corp. v. Compton, 271 F.Supp. 591 (D.P.R.1970), we believe appellant urges too narrow a view of “law enforcement purposes.”

Congress has given the Board wide discretion in the enforcement of rights guaranteed by Section 7 of the National Labor Relations Act, 29 U.S.C. § 157. Under Section 9 of the NLRA, 29 U.S.C. § 159, the Board is responsible for supervising elections, investigating election irregularities and certifying bargaining representatives. When an election investigation is undertaken, as in this case, there is no certainty that an unfair labor practice proceeding under Section 8 will follow. The election irregularities themselves may be sufficient to trigger an unfair labor practice complaint, see NLRB v. Gissel Packing Co., 395 U.S. 575, 89 S.Ct. 1918, 23 L. Ed.2d 547 (1969), or they may lead only (as here) to voiding the results of the election and the holding of a second election. In this latter case there is no direct review of such a determination, and in order to challenge the union’s certification the employer must refuse to bargain, triggering unfair labor practice proceedings under Section 8(a)(5), as Wellman has done. A.F.L. v. NLRB, 308 U.S. 401, 407-409, 60 S.Ct. 300, 84 L.Ed. 347 (1940); Boire v. Greyhound Corp., 376 U.S. 473, 476-479, 84 S.Ct. 894, 11 L.Ed.2d 849 (1964). Whether or not resulting in an unfair labor practice charge, the Board’s purpose here was to protect and vindicate rights set out in Section 7. Though procedures vary, if aimed at enforcement of the NLRA we think they are “for law enforcement purposes.”

The legislative history of exemption 7 clearly supports such an interpretation. The House Report states:

This exemption covers investigatory files related to enforcement of all kinds of laws, labor and securities laws as well as criminal laws. This would include files prepared in connection with related Government litigation and adjudicative proceedings. S. 1160 is not intended to give a private party indirectly any earlier or greater access to investigatory files than he would have directly in such litigation or proceedings.

H.R.Rep.No.1497, 89th Cong.2d Sess. 11 (1966), U.S.Code Cong. & Admin.News 1966, p. 2428 (emphasis added). The Senate Report, in not so broad terms, indicates that:

These [investigatory files] are the files prepared by Government agencies to prosecute law violators. Their disclosure of such files, except to the extent they are available by law to a private party, could harm the Government’s ease in court.

S.Rep.No.813, 89th Cong., 1st Sess. 9 (1965). While the Senate’s use of the term “law violators” might be construed to mean transgressions of the criminal law, it can also easily be accommodated to the House statement without doing damage to the statutory language. See Clement Bros., Inc. v. NLRB, 282 F. Supp. 540 (N.D.Ga.1968); Barceloneta Shoe Corp. v. Compton, 271 F.Supp. 591 (D.P.R.1970).

The practical reasons favoring application of exemption 7 have already been sufficiently exposited by this court and numerous others. We said in Intertype Co. v. NLRB, 401 F.2d 41 (4th Cir. 1968, cert, denied 393 U.S. 1049, 89 S.Ct. 686, 21 L.Ed.2d 1691 (1969), a case almost precisely identical with the case at bar, but decided prior to the effective date of the FOIA, relying on the language of NLRB v. National Survey Service, Inc., 361 F.2d 199, 206 (7th Cir. 1966) , that:

If an employee knows that statements made by him will be revealed to an employer, he is less likely, for fear of reprisal, to make an uninhibited and non-evasive statement.

401 F.2d at 45. See also Intertype Co. v. Penello, 269 F.Supp. 573 (W.D.Va. 1967) . This same concern has continued to be echoed by courts since the enactment of the FOIA. See, e. g., Frankel v. SEC, 460 F.2d 813, 817-818 (2d Cir.), cert, denied 409 U.S. 889, 93 S.Ct. 125, 34 L.Ed.2d 46 (1972); Evans v. Department of Transportation, 446 F.2d 821, 823-824 (5th Cir. 1971); Clement Bros., Inc. v. NLRB, 282 F.Supp. 540, 542 (N. D.Ga.1968). We have also stated our agreement with the proposition so clearly set out in the legislative history that exemption of investigatory files is necessary in order to prevent premature disclosure of an investigation so that the Board can present its strongest case in court. Wellford v. Hardin, 444 F.2d 21 (4th Cir. 1971).

Wellman is not without protection from arbitrary action by the Board. See NLRB v. Poinsett Lumber and Mfg. Co., 221 F.2d 121 (4th Cir. 1955); W. T. Grant Co. v. NLRB, 337 F.2d 447 (7th Cir. 1964); NLRB v. Vapor Blast Mfg. Co., 287 F.2d 402 (7th Cir.), cert, denied 368 U.S. 823, 82 S.Ct. 42, 7 L. Ed.2d 28 (1961). But there is no showing of arbitrary action in this case; therefore, the Company must await a final order of the Board and, if aggrieved, pursue its right of review in this court under Section 10(e) or (f) of the NLRA, 29 U.S.C. § 160(e) and (f).

Affirmed.

      . The district court’s order referred to the Board’s argument that exceptions 4 and 7 exempted tire affidavits from disclosure under the FOIA as “rather weak” and went on to state:
      As to exception 7, it must be remembered that this is not information originally contained in “investigatory files compiled for law enforcement purposes”. The statements and affidavits were. taken in connection with the certification election, a non-adversary proceeding, and before any
      complaint was brought by the Board for an unfair labor practice.

      . The district judge stated in his order:
      In considering whether or not to issue an injunction, this Court must consider all of the facts before it, the purposes and needs of the parties, the burdens involved, the importance of the information and the reasons for non-disclosure.

      . These exemptions are contained in 5 U.S.C. § 552(b) (4) and (7) and are commonly referred to as exemptions 4 and 7.

      . See also Frankel v. Securities and Exchange Comm’n, 460 F.2d 813 (2d Cir.), cert, denied, 409 U.S. 889, 93 S.Ct. 125, 34 L.Ed.2d 146 (1972) ; cf. Bristol-Myers Co. v. FTC, 138 U.S.App.D.C. 22, 424 F.2d 935, 939-940, cert, denied 400 U.S. 824, 91 S.Ct. 46, 27 L.Ed.2d 52 (1970).

      . The weight which we attribute to the legislative history of exemption 7 is considerably greater than that attributable to the legislative history of exemption 4 for reasons set out by Davis, supra, at § 3A.19 and § 3A.22.