author: LUMBARD, Circuit Judge:

text:
    Royal STEUBING et al., Plaintiffs-Appellees, v. Claude S. BRINEGAR, Secretary of Department of Transportation, and Raymond T. Schuler, Commissioner of New York State Department of Transportation, Albany, New York, Defendants-Appellants, Thom Shagla et al., and County of Chautauqua, Intervenors.
    Nos. 278, 336, Dockets 74-1911, 74-2162.
    United States Court of Appeals, Second Circuit.
    Argued Oct. 31, 1974.
    Decided Feb. 13, 1975.

      Richard J. Lippes, Buffalo, N. Y. (Sargent & Lippes, Buffalo, N. Y., on the brief), for plaintiffs-appellees.
    Eva R. Datz, Dept, of Justice, Washington, D. C. (Edmund B. Clark, Dept, of Justice, Washington, D. C., Wallace H. Johnson, Asst. Atty. Gen., John T. Elfvin, U. S. Atty., Buffalo, N. Y., C. Donald O’Connor, Asst. U. S. Atty., Buffalo, N. Y., on the brief), for Claude S. Brine-gar, defendant-appellant.
    Douglas S. Dales, Jr., Asst. Atty. Gen. (Louis J. Lefkowitz, Atty. Gen. of N. Y., Ruth Kessler Toch, Sol. Gen., on the brief), for Raymond T. Schuler, defendant-appellant.
    Norman J. Landau, New York City (Paul D. Rheingold, New York City, on the brief), for Thom Shagla et al. and County of Chautauqua, intervenors.
    Debevoise, Plimpton, Lyons & Gates, New York City, on the brief of amicus curiae, The Environmental Defense Fund.
    Before LUMBARD, MOORE and MANSFIELD, Circuit Judges.
   LUMBARD, Circuit Judge:

This is an appeal from the entry of a preliminary injunction on May 20, 1974, by Chief Judge Curtin in the Western District, against Claude S. Brinegar, Secretary of the United States Department of Transportation, and Raymond T. Schuler, Commissioner of the New York State Department of Transportation, enjoining construction of a federally-funded expressway bridge over Lake Chautauqua in Western New York pending preparation and filing of an Environmental Impact Statement (EIS) pursuant to section 102(2)(C) of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. § 4332(2)(C). Steubing v. Brinegar, 375 F.Supp. 1158 (W.D. N.Y.1974). Appellants do not seriously contend that NEPA was complied with. Instead they argue that the issuance of the injunction pending compliance was improper because plaintiffs delayed in bringing the action, because the bridge and adjacent highway sections are allegedly at advanced stages of planning or construction, with substantial sums having been spent thereon, and because delay would result in substantially increased costs. We affirm.

I. Background.

The proposed bridge over Lake Chautauqua is intended to be part of the Southern Tier Expressway, first autho- i rized by the State of New York in 1962 to run 250 miles from the state line near Erie, Pennsylvania, east to the Broome-Tioga County Line near Binghamton, New York. “Section 5” is a 35-mile section in Chautauqua County at the western end of the highway, with Section 5C consisting of a 2.5-mile segment running from the town of Stow east across Lake Chautauqua to Bemus Point. Lake Chautauqua itself is over eighteen miles long and shaped like an “L”. The bridge, over four-fifths of a mile long and estimated to cost over $29 million, is designed to cross the lake at its narrow midpoint, near where the southern half of the lake swings to the east. East of the bridge and Bemus Point the expressway will run north of and roughly parallel to the lower half of the lake and just north of the town of Jamestown which is located at the southeastern end of the lake. An alternative route running south of the lake from Jamestown was rejected early even though it was only five miles longer. Apparently one reason for that rejection was that an expressway from Jamestown to Bemus Point was going to be built for local traffic, even if there were no bridge. Thus extending that section across the lake and including it as part of the Southern Tier Expressway would require that fewer total miles of highway be built. Moreover, it would provide a crossing for local residents, where only a ferry now runs. The Southern Tier Expressway, whether across or around Lake Chautauqua, was considered important to the economic growth of this part of the state. Indeed in 1967 the Southern Tier Expressway was designated for inclusion in the Appalachian Regional Development Act Highway Program, which was intended to promote economic growth in areas found by Congress to be underdeveloped.

Federal involvement in the proposed Lake Chautauqua Bridge project began prior to the effective date of NEPA (January 1, 1970), but the basic facts found below leave no question but that an EIS should have been prepared in accordance with section 102(2)(C). Section 102 requires that federal agencies implement NEPA to the “fullest extent possible.” As of January 1, 1970, the United States Bureau of Public Roads (USBPR) had approved the concept and the location of the bridge, and may have approved its design, but no federal money had been committed to the construction of the bridge as then designed and tentatively located. No construction contracts had been let, as not even the right of way for the approaches had been acquired. In addition, adjacent sections of the expressway were largely unbuilt, with the rights of way only recently acquired, and an alternative route south of the lake remained a viable possibility. In these circumstances subsequent decisions by the USBPR and its successor, the Federal Highway Administration (FHWA) approving final plans and committing federal funds for construction of the bridge, constituted major federal actions requiring preparation of an EIS. See, e. g., Monroe County Conservation Council, Inc. v. Volpe, 472 F.2d 693 (2d Cir. 1972); Arlington Coalition on Transportation v. Volpe, 458 F.2d 1323 (4th Cir.), cert. denied, 409 U.S. 1000, 93 S.Ct. 312, 34 L.Ed.2d 261 (1972). An EIS might well have pointed out potential environmental savings well worth the cost involved in altering the design, location, or construction methods for the bridge, or even in rerouting the highway south of the lake and abandoning the plan for the bridge altogether.

Nevertheless, an EIS was not prepared. In March 1970, Plans, Specifications, and Estimates (P.S. & E.) approval was granted by the USBPR authorizing New York to acquire the rights of way for the approaches to the bridge. P.S. & E. approval marks the point at which the federal government finally commits funds for specified purposes. On May 24, 1972, the FHWA granted P.S. & E. approval for contracts to demolish buildings located on the approaches to the bridge. Demolition of approximately seventy buildings and relocation of twenty families were completed that August. On May 9, 1973, the FHWA granted P.S. & E. approval for construction of the bridge substructure, and a $14,700,000 contract was awarded to Raymond International, Inc. on July 9, 1973. Work commenced soon thereafter.

Plaintiffs brought this suit on November 23, 1973, charging, inter alia, that no EIS had been filed and seeking injunctive relief against further construction of the bridge substructure pending compliance with NEPA. Pursuant to the stipulation of the parties, the matter was referred to a special master, Magistrate Edmund F. Maxwell, for findings of fact with regard to the defense of laches and the equitable considerations relating to preliminary injunctive relief.

The special master found that as of December 14, 1973, the bridge substructure contract was only three percent complete. Although the final substructure was to consist of approximately 250 pilings, only one of five test pilings had been implanted in the lake bed. The work which had been done was largely preparatory, including the removal of trees and the stripping of some land along the approaches, as well as some dredging and channel relocation.

With regard to the other segments of highway in Section 5, the master found that they were at various stages of construction. Section 5B (10 miles long), immediately west of the bridge, had not yet received design or P.S. & E. approval (although the right of way had been acquired and some buildings removed), and an EIS was being prepared. Section 5A (10 miles long), which was west of 5B, was completed but for the paving. East of the bridge the right of way for Section 5D (Bemus Point to Jamestown — six miles) had been acquired, some buildings had been demolished, and a construction contract was in the process of being awarded. The master noted that there was testimony and evidence that if a bridge were not built, some or all of Sections 5A and 5B might be salvaged if an alternate route were found. Moreover, Section 5D would be used in any event.

The state alleged that as of the date of the hearing, January 14, 1974, it had spent $4.7 million on Section 5C. Of this money, the state had spent approximately $2.8 million prior to May 1973, the date of P.S. & E. approval for the bridge substructure; $1 million between that date and the institution of the lawsuit; and $1.9 million since that time. Moreover, the state alleged that the cost of shutting down construction for seven months would be $1.8 million, and the cost of cancelling the substructure contract and later reletting it (assuming a delay of over two years) would be $2.8 million. Substantial parts of these latter figures were due to anticipated inflation. At a post-hearing conference attended by all parties, the state indicated that the cost of any delay would be considerably lessened if the court permitted it to complete five test pilings. Apparently the state expected that it could determine from the test pilings the necessary specifications for the main pilings and then have them manufactured during any court-ordered delay.

The special master found that plaintiffs’ claim should not be barred because of their delay in bringing this action. He held first that laches should not be applied because of the nature of the suit, but if that defense were to be considered, then plaintiffs’ delay was most reasonably measured from May 1973, the date of P.S. & E. approval for the bridge substructure. Up to that point federal officials were not finally committed to funding the bridge substructure and could have delayed approval pending preparation and consideration of an EIS. Plaintiffs, he found, had not delayed unreasonably from that date. He also recommended that a preliminary injunction issue pending a trial on the merits. He found that the project was still at a stage where substantial environmental savings might result from preparation of an EIS. Given the agency’s apparent violation of NEPA, he recommended preliminary relief lest, by the time an EIS is prepared, the project reach a stage where irreparable environmental damage would have been done or where for economic reasons it would be infeasible to alter the project in light of the EIS. The master did recommend, however, that the state be allowed to complete the’ five test pilings prior to any work stoppage.

On May 20, 1974, having given the parties an additional opportunity to present evidence on the question of whether a preliminary injunction should issue and all of them having declined, the district court affirmed the special master’s findings on the issue of laches and held that a preliminary injunction should issue against further construction pending compliance with NEPA. However, the court permitted the state to complete the five test pilings. The parties also stipulated that the state would complete certain construction necessary to protect the work already performed, to reestablish local services, to protect surrounding real property, and to prevent environmental damage. This appeal followed.

II. Laches.

Appellants’ initial argument for reversal is that the delay of these plaintiffs in bringing this suit should have barred injunctive relief because of the doctrine of laches. In particular they claim that the district court erred in measuring plaintiffs’ delay from May 1973 rather than May 1972, the date of P.S. & E. approval for demolition of the buildings on the bridge approaches. We disagree.

To be sure, plaintiffs could have brought this suit earlier and thus reduced to some degree the costs which the state, the federal government and even private parties may incur as a result of delay pending preparation of an EIS. But we do not believe that any delay attributed here to the plaintiffs should bar injunctive relief. Plaintiffs are attempting to effect compliance by public officials with duties imposed by Congress under NEPA. Given the strong public interest in effecting such compliance, the primary question is not how much earlier plaintiffs should have sued, but whether injunctive relief pending compliance would still serve the public interest and the purposes of the Act. This is not to say that a plaintiff’s delay can have no effect on a determination of whether injunctive relief is appropriate. During delay construction may have proceeded to a point where any significant environmental damage has already been done. Alternatively, construction may have gone so far that for economic reasons it would be impracticable or impossible to alter much of the basic plan. However the policy behind NEPA that federal agencies implement the act to the “fullest extent possible” means that plaintiffs’ delay in bringing a suit should not prevent a court from enjoining construction pending compliance if it appears that such a stay would best serve the public interest.

Moreover, we cannot disagree with the conclusion of the special master that May 1973 was the appropriate date from which to measure plaintiffs’ delay. The special master found that there was no question but that plaintiffs were long aware of the fact that a bridge was contemplated and were, or should have been, aware in the summer of 1972 that buildings were being demolished in contemplation of construction. But it was not until the summer of 1973 that preparations for the bridge began in earnest, with the stripping of land and the removal of trees along the approaches, and with some dredging, channel relocation, and construction of the first test piling. Such positive developments are usually required to galvanize opposition to a project such as this bridge and to motivate a group of citizens to hire a lawyer to see if there is a legal basis for challenging all, or part of, the proposed construction. 1 — 291 Why? Association v. Burns, 372 F.Supp. 223, 237 (D.Conn. 1974). Such citizen groups play a key role in policing agency compliance with NEPA.

The plaintiffs had a right to assume that federal officials would comply with applicable law. To be sure plaintiff Steubing had been told by state officials in March 1972 that no EIS was being prepared and that none was required by applicable law. But as a layman, he must not be penalized too greatly for relying in the first instance on this representation and instead seeking legislative action, which proved unsuccessful. In weighing the equities in relation to a defense of laches, the special master quite appropriately considered that federal highway officials were put on notice by court decisions in 1972 that they could not continue to justify their failure to prepare an EIS merely on the ground that design approval occurred prior to the effective date of NEPA. On April 16, 1973, federal officials, urging the state to act promptly, wrote:

“As you are aware, the procedures of PPM 90 — 1 have recently been challenged, and there is a very good possibility that Environmental Impact Statements may be required prior to P.S. & E. approvals for all projects in, the near future.”

However, the federal officials chose to take no steps toward the formulation of an EIS.

' [4] Finally, the special master quite properly took into account the fact that plaintiff was representing the public interest in securing compliance with NEPA and that because the bridge was such a large project and in such an early stage of construction, the possible environmental savings resulting from requiring an EIS seemed to outweigh the detriment defendants and third parties might suffer as a result of any delay on the part of plaintiffs in bringing this action.

We thus affirm the district court’s approval of the finding of the special master that the plaintiffs’ alleged delay in bringing the suit should not be determinative of whether preliminary injunctive relief was appropriate.

III. Preliminary Injunctive Relief.

Appellants argue that the issuance of injunctive relief was not warranted in the circumstances of this case.

The district court correctly found that plaintiffs had established a probability of success on the merits in showing that NEPA had not been complied with. The project had been at a sufficiently early stage of completion in January 1970 that there was no justification whatsoever for not filing an impact statement. Monroe County Conservation Council, Inc. v. Volpe, supra; Arlington Coalition on Transportation v. Volpe, supra. Appellants point out that two state reports, required under applicable law prior to NEPA, had been “approved” by the FHWA in 1971 and 1973, and dealt to some degree with the environmental problems expected to be encountered from construction of the bridge. In addition, one public hearing, dealing with the location of the bridge (although not its design), had been held in Í965. But this hardly constitutes substantial compliance with NEPA. As the master and the district court noted, the responsible federal agency has a “primary and nondelegable responsibility” to make its own comprehensive and objective evaluation of the environmental impact of a project constituting a major federal action. Conservation Society of Southern Vermont, Inc. v. Secretary of Transportation, 508 F.2d 927 (2d Cir. 1974); Greene County Planning Board v. FPC, 455 F.2d 412 (2d Cir.), cert. denied, 409 U.S. 849, 93 S.Ct. 56, 34 L.Ed.2d 90 (1972). In addition, the responsible federal agency is required by section 102 to consult with other federal agencies relative to the environmental impact of such a project, but there is no evidence that that was done here. The limited hearing in 1965 and the two reports prepared by the state after design and location approval had been obtained from the USBPR cannot be considered a suitable substitute for the statement which the statute requires the responsible federal agency to prepare.

The record also supports the finding of the district court that there was an adequate showing of probable irreparable injury. The substructure contract was only three percent complete. Only one test piling had been driven, yet the final structure would contain 250 such pilings and stretch over four-fifths of a mile of water. Construction of the bridge would leave a lasting imprint on Lake Chautauqua, which is one of western New York’s largest and most beautiful lakes. The state did take steps it thought would minimize the disruption to the environment that the actual construction process would cause, once the state Department of Conservation expressed fears that the bridge (especially the construction process) would disrupt the ecology of the lake and adversely affect the recreational, esthetic, and economic resources of the immediate and surrounding area. But given that the bridge is at such a very early stage of construction, we believe that the district court was justified in concluding that substantial environmental damage could or would result from the bridge, and that construction should not proceed without a more comprehensive environmental study and a more careful consideration of the alternatives still open. Without preliminary injunctive relief construction might well reach the stage of completion where for economic and other reasons it would be impossible to turn back or alter the project in light of what an EIS revealed, and thus the environment might thereby be irreparably damaged.

Finally, despite the substantial additional costs which would be caused by court-ordered delay, we find no error in the conclusions of the district court and the special master that the public interest would be best served by the preliminary injunction. First, many of the costs cited by appellants are predicated on the assumption that the bridge will not be built. That, however, is not the issue in this case. The EIS is directed not only at consideration of alternative routes, but at ameliorating environmental harm if the bridge is in fact built. Funds already spent and construction already done will still be factors when the agencies consider whether changes should be made in light of what the EIS reveals. Second, compliance with NEPA invariably results in delay and concomitant cost increases, and Congress has implicitly decided that these costs must be discounted. Moreover, in this case any additional costs resulting from delay now rather than before P.S. & E. approval are largely self imposed because the defendants were aware in 1972, long before this suit was brought, that an EIS might well be required for this project, yet they chose not to prepare any such statement.

Accordingly, the order of the district court is affirmed.

      . § 4332. Cooperation of agencies; reports; availability of information; recommendations; international and national coordination of efforts.
      The Congress authorizes and directs that, to the fullest extent possible: (1) the policies, regulations, and public laws of the United States shall be interpreted and administered in accordance with the policies set forth in this chapter, and (2) all agencies of the Federal Government shall—
      (C) include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on—
      (i) the environmental impact of the proposed action,
      (ii) any adverse environmental effects which cannot be avoided should the proposal be implemented,
      (iii) alternatives to the proposed action, (iv) the relationship between local short-term uses of man’s environment and the maintenance and enhancement of long-term productivity, and
      (v) any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented.
      Prior to making any detailed statement, the responsible Federal official shall consult with and obtain the comments of any Federal agency which has jurisdiction by law or special expertise with respect to any environmental impact involved. Copies of such statement and the comments and views of the appropriate Federal, State, and local agencies, which are authorized to develop and enforce environmental standards, shall be made available to the President, the Council on Environmental Quality and to the public as provided by section 552 of Title 5, and shall accompany the proposal through the existing agency review processes

      . N.Y. Highway Law § 340-c (McKinney’s Consol.Laws, c. 25, Supp.1973).

      . The need for such a highway must have been met in part by the completion of 1-80 across northern Pennsylvania 1972.

      . Appellants claim design approval occurred on October 31, 1968 or October 7, 1969. However, the special master stated that there was some question whether it might have occurred as late as February 1, 1971.

      . It should also be noted that Pennsylvania had not yet undertaken the planning and construction of a connecting link between the western end of the Southern Tier Expressway at the New York-Pennsylvania line and a major highway in Pennsylvania.

      . In their decision not to prepare an EIS, appellants apparently relied upon PPM 90-1 (FHWA Guidelines for Implementing Section 102(2)(C) of the National Environmental Policy Act of 1969 [and other acts], August 24, 1971), as well as interim guidelines promulgated in November 1970, which suggested that no EIS was required where design approval occurred prior to January 1, 1970. However, Congress provided that NEPA be implemented to the “fullest extent possible,” and these agency guidelines do not excuse the failure of the USBPR and the FHWA to prepare an EIS in this case, even assuming that design approval occurred in 1968 or 1969. See Arlington Coalition on Transportation v. Volpe, supra, 458 F.2d at 1332. See also 1-291 Why? Association v. Burns, 372 F.Supp. 223, 235-36 (D.Conn.1974); Committee to Stop Route 7 v. Volpe, 346 F.Supp. 731, 735-39 (D.Conn.1972); Conservation Society of Southern Vermont, Inc. v. Volpe, 343 F.Supp. 761, 765-768 (D.Vt.1972). Contra, Robins-wood Community Club v. Volpe, 506 F.2d 1366 (9th Cir., 1974), 4 Env.L.Rptr. 20378, pet. for reh. denied (Dec. 23, 1974). .

      . Monroe County Conservation Council, Inc. v. Volpe, supra, 472 F.2d at 699.

      . Plaintiffs also alleged that the defendants had failed to comply with the requirements of the Federal Highway Act, 23 U.S.C. §§ 101 et seq., the Clean Air Amendments of 1970, 42 U.S.C. §§ 1857 et seq., and the Department of Transportation Act, 49 U.S.C. §§ 1651 et seq. In ordering preliminary relief based on NEPA, the special master and the district court did not consider these other claims.

      . Section 5A had been built wholly with State funds.

      . On appeal, this court permitted a group of local residents and the County of Chautauqua to intervene on the side of appellants. The Environmental Defense Fund filed an amicus brief in support of the district court’s action.

      . See, e. g., Arlington Coalition on Transportation v. Volpe, supra, 458 F.2d at 1329-34.

      . See Monroe County Conservation Council, Inc. v. Volpe, supra; Arlington Coalition on Transportation v. Volpe, supra; Committee to Stop Route 7 v. Volpe, supra; Conservation Society of Southern Vermont, Inc. v. Volpe, supra.

      . Appellants argue that the district judge erred when he said that he would not consider “the total highway project.” However, we feel that his decision was entirely appropriate in the circumstances of this case. Monroe County Conservation Council, Inc. v. Volpe, supra, 472 F.2d at 698-99. Consideration of the other sections of the highway could not minimize the environmental impact the bridge will have. During any delay in construction of the bridge traffic can still go around the lake, or across it on the ferry when the lake is not frozen. Moreover, the special master found that construction on section 5B had not yet begun, that section 5D would be used even if the bridge was not built, and that sections 5A and 5B could be salvaged even if an alternate route were eventually selected.

      . The situation in this case can be contrasted to that in Conservation Society of Southern Vermont, Inc. v. Secretary of Transportation, supra, where this court upheld the denial of an injunction against further construction of the Sleeper’s River interchange in St. Johnsbury, Vermont, even though an inadequate EIS had been filed. In that case the district court had found that the interchange was at an advanced stage of construction, that the alternative proposals for the interchange were “impossible to realistically implement because of adverse terrain,” that the affected resource was not so “environmentally unique” as to require any “special consideration,” and that “extensive and thoughtful evaluation” had been given to mitigating the adverse environmental consequences of the project. In addition, without the interchange St. Johnsbury would have an intolerably heavy traffic burden, and the area would have a higher unemployment rate. The court also took note of Vermont’s extremely short construction season. See also Greene County Planning Board v. FPC, supra, 455 F.2d at 424-25 (power lines 80% complete).

      . Greene County Planning Bd. v. FPC, 455 F.2d 412, 422-23 (2d Cir.), cert. denied, 409 U.S. 849, 93 S.Ct. 56, 34 L.Ed.2d 90 (1972); Calvert Cliffs’ Coordinating Comm. v. AEC, 146 U.S.App.D.C. 33, 449 F.2d 1109, 1122 (1971). Another direct result of NEPAcaused delays that Congress undoubtedly was aware of, is that the jobs created by a construction project might be interrupted and that the initial employment of some persons might be postponed.

      . Appellants also argue that the court erred in failing to consider that private parties had made investments on the assumption that the bridge would be built. For example, a school was constructed west of the lake in 1970, as was the new work headquarters of a local utility. Since these projects were completed prior to the completion of the bridge, its existence must not have been absolutely vital to the projects. In any event, these private expenditures were made subject to the risk that the bridge might not ever be completed as a result of state or federal decisions. We agree with the special master that any such costs were outweighed by public interest considerations.


source: Caselaw Access Project

author: HOLLOWAY, Circuit Judge. HILL, Circuit Judge

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Bruce Loren LATIMER, Defendant-Appellant.
    No. 74-1270.
    United States Court of Appeals, Tenth Circuit.
    Argued Nov. 11, 1974.
    Decided Feb. 21, 1975.
    Rehearing Denied April 14, 1975.

      Michael M. Hunter, Asst. U. S. Atty., Salt Lake City, Utah (C. Nelson Day, U. S. Atty., Salt Lake City, Utah, on the brief), for plaintiff-appellee.
    Dean R. Mitchell, Salt Lake City, Utah, for defendant-appellant.
    Before MURRAH, HILL and HOLLOWAY, Circuit Judges.

      . Just before the commencement of trial, appellant’s counsel moved unsuccessfully to dismiss on the ground of denial of a speedy trial. He asserted that this statement of readiness for trial had been made at the arraignment. (Tr. 5). This assertion was not questioned by the trial judge, who apparently had also presided at the arraignment, and was not controverted by the prosecution at the presentation of the motion, nor is it challenged on appeal. We therefore accept the representation in the consideration of this issue although the transcript of the arraignment is not before us.

   HOLLOWAY, Circuit Judge.

Appellant Latimer appeals his conviction for robbery of a federally insured bank in violation of 18 U.S.C.A. § 2113(a). He was also charged with a § 2113(d) offense of putting in jeopardy the life of a teller but was acquitted of that charge. He presents a number of claims of error. On this record we must uphold the contention that Government counsel made improper and prejudicial comments outside the record during argument, and accordingly reverse and remand for a new trial.

It is convenient to detail the facts briefly in discussing the first issue raised by appellant — the claim of denial of a speedy trial — to which we turn.

1. The speedy trial issue

Appellant’s initial contention is that he was denied his Sixth Amendment right to a speedy trial. He says that delay from arrest to arraignment and from arraignment to trial was unreasonable; that he had requested a speedy trial; that he was prejudiced by impairment of the witnesses’ ability to recollect and that, in sum, under the test set out in Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101, we must hold that his constitutional right to a speedy trial was denied. We treat this claim first because, if we find merit in it, the case must be dismissed. Strunk v. United States, 412 U.S. 434, 93 S.Ct. 2260, 37 L.Ed.2d 56.

The facts briefly are as follows. The South State Street Branch of the First Security Bank of Utah in Salt Lake City was robbed of about $1200 on April 2, 1973. The robber wore a stocking cap pulled down over his hair and ears. Appellant was arrested later that day and charged with the offense. No money or weapons were found on appellant when he was arrested.

A preliminary hearing was held on April 12, 1973, and appellant was arraigned on July 26. At the arraignment, indictment was waived and appellant pleaded not guilty to the two count information charging the § 2113(a) and (d) offenses. Apparently at that time appellant’s counsel stated, in response to the court’s inquiry, that he would be ready to try the case within two weeks. Trial was scheduled on the October 1973 calendar. However, for reasons not shown in the record the case was reset and trial was ultimately held on March 12, 1974.

The record contains no motion or other indication of an objection to the delay in trial. Nor, on the other hand, does it reveal any evidence of acquiescence in the delay.

At trial two eyewitnesses identified appellant as the robber. One, however, had not identified him when shown mugshots or at a line-up the day after the robbery, although she did identify him a week later at the preliminary hearing. However, this witness was unable to recall, on cross-examination at trial, that at the preliminary hearing she admitted that some Government employee or police officer had told her that they had had complaints about the defendant before. Another eyewitness, the assistant manager of the bank, at trial could not remember some circumstances about the robbery or his statement to the police about it. These and similar circumstances are pointed to as showing prejudice to the appellant.

The Sixth Amendment guarantee has been the subject of several major opinions by the Supreme Court in recent years. See Klopfer v. North Carolina, 386 U.S. 213, 87 S.Ct. 988, 18 L.Ed.2d 1; United States v. Marion, 404 U.S. 307, 92 S.Ct. 455, 30 L.Ed.2d 468; Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101; Strunk v. United States, 412 U.S. 434, 93 S.Ct. 2260, 37 L.Ed.2d 56. The Court has also promulgated an amendment to the Federal Rules of Criminal Procedure, Rule 50(b), requiring plans of the district courts to further the prompt disposition of criminal cases. And most recently Congress has shown its concern for the guarantee by enacting the Speedy Trial Act of 1974, establishing statutory time limits for processing criminal proceedings. Pub.L.No. 93— 619 (January 3, 1975). The statute is, of course, not applicable in deciding this appeal. Reliance here is placed on the constitutional guarantee alone and we must resolve the issue under the decisions of the Supreme Court applying it.

The Supreme Court has adopted a balancing test to resolve speedy trial questions, in which the conduct of both the prosecution and the defendant are weighed. Barker v. Wingo, supra, 407 U.S. at 530, 92 S.Ct. 2182. The Court identified four factors which must be considered: the length of delay, the reason for the delay, the defendant’s assertion of his right, and prejudice to the defendant. Id. at 530, 92 S.Ct. 2182; see United States v. Spoonhunter, 476 F.2d 1050, 1057 (10th Cir.). The factor of prejudice, in turn, is to be assessed in the light of three interests that the speedy trial right is designed to protect — to prevent oppressive pretrial incarceration; to minimize anxiety and concern of the accused; and to limit the possibility that the defense will be impaired, this last interest being the most important. Barker, supra at 532, 92 S.Ct. 2182. In applying this balancing test we must bear in mind that the primary burden is placed on the courts and prosecutors to assure that cases are brought to trial; the defendant has no duty to bring himself to trial. Id. at 529, 527, 92 S.Ct. 2182.

The first factor — the amount of delay — is a “triggering mechanism” under the Barker test. Id. at 530, 92 S.Ct. 2182. Until there is some delay which is potentially prejudicial, there is no need for inquiry into the other factors. In our ease the delay provokes an inquiry into all the factors and the peculiar circumstances involved. The delay was about 3V2 months from arrest to arraignment, where indictment was waived. It was then about months more until trial on IVIarch 12, 1974. The delay is regrettable and exceeded the standards established in the Rule 50(b) plan, unless an extension was justified. Further, the offense does not involve a serious, complex charge that might justify more toleration for delay. Barker, supra at 531, 92 S.Ct. 2182. Thus the delay factor here raises a substantial and serious question, provoking inquiry into the circumstances and the other factors that must be weighed.

The reason for the delay is not shown by our record. The Government brief asserts the October trial was rescheduled due to the heavy calendar, with neither party requesting or objecting to the postponement. However, as noted above, at the February 4, 1974, calendar call defense counsel did state he was ready for trial. Unintentional delays caused by overcrowded dockets are to be weighed less heavily than intentional delay, but must nevertheless be considered since the ultimate responsiblity for such circumstances must rest with the Government rather than with the defendant. Strunk v. United States, 412 U.S. 434, 436, 93 S.Ct. 2260, 37 L.Ed.2d 56. Still, there was action by the court in setting and calling calendars, and thus we are not inclined to weigh this factor too heavily against the Government, although the showing as to the reason for the delay is not comforting.

We have stated what the record shows as to appellant’s assertion of his right — counsel’s statement at arraignment in July, 1973, that he would be ready for trial within two weeks, and the statement on February 4, 1974, at the calendar call that he was ready for trial. There is, however, in our record no other motion or objection to the delay and rescheduling of trial. We may weigh the frequency and force of the objections. Barker, supra, 407 U.S. at 529, 92 S.Ct. 2182. Here there clearly was no waiver of the speedy trial right, but the frequency and force of the objections revealed in our record are not strong.

Potential prejudice is the remaining factor to weigh under Barker. Here there was no oppressive pretrial incarceration. Release on bail was allowed a few days after arrest, we are advised. The factor of anxiety and concern is present and undesirable. As to the possibility of impairment of the defense, no absence or loss of witnesses and no substantial showing of loss of witnesses’ memories are demonstrated, and we are not persuaded that any significant prejudice occurred. See United States ex rel. Walker v. Henderson, 492 F.2d 1311, 1315-16 (2d Cir.), cert. denied, 417 U.S. 972, 94 S.Ct. 3179, 41 L.Ed.2d 1144; but see United States v. Butler, 426 F.2d 1275, 1277 (1st Cir.), cert. denied, 401 U.S. 978, 91 S.Ct. 1207, 28 L.Ed.2d 328. And in these circumstances we decline to apply any rule calling for dismissal based on a reasonable possibility of prejudice, as appellant urges, in addition to his claim of actual prejudice.

In sum, while appellant’s claim of denial of speedy trial is substantial and the case is close, we conclude that no denial of appellant’s constitutional right is demonstrated.

2. The Government’s closing argument

Second, we turn to appellant’s claim of misconduct by Government counsel during final summation in “testifying as to evidence which had not been admitted or proven at trial,” thus denying him a fair trial in violation of due process.

At trial two tellers who observed the robbery testified that they had activated the bank’s alarm and camera system during the robbery. However, no pictures taken by the camera were introduced by the Government, and no explanation was given as to why the film was not produced. In final argument appellant’s counsel pointed to this omission and argued the inference that the film was not produced because it did not identify appellant.

In rebuttal argument Government counsel replied by stating that the film was not offered because the camera malfunctioned; that the films did not show anything; that they didn’t show anybody robbing the bank; and that in fact they showed an FBI agent who arrived quite awhile after the incident. Objection by appellant’s counsel was made at the outset of such argument, renewed and overruled by the court.

The Government says the argument was responsive to remarks by appellant’s counsel; that prohibiting response to the adverse inference would have been improper; and that admissibility of the films was questionable because of the mal-functioning of the camera.

We must disagree with the Government’s argument. We start with the fact that appellant’s counsel argued a proper inference. The proof had shown operation of the camera and there was no offer of film or explanation for its non-production. Argument of the unfavorable inference was clearly proper. See Golden State Bottling Co. v. NLRB, 414 U.S. 168, 174, 94 S.Ct. 414, 38 L.Ed.2d 388; International Union (UAW) v. NLRB, 459 F.2d 1329, 1335-39 (D.C.Cir.); II Wigmore, Evidence §§ 285, 291 (3d ed. 1940); McCormick, Evidence § 272 (2d ed. 1972). Thus appellant’s counsel made proper argument, and it cannot serve as any justification for improper response by Government counsel on any theory that there is wide latitude for response in argument. We have recently made it clear that even if improper argument is made by defense counsel, the door is not thereby opened to similar conduct by the prosecution. United States v. Ludwig, 508 F.2d 140 (10th Cir.) (No. 74-1046, filed Dee. 27, 1974).

The argument by Government counsel violated two fundamental rules. First the argument went outside the record and made statements as to facts not proven as to the malfunctioning of the camera and that the film showed the FBI agent after the incident. This was clearly improper. United States v. Peak, 498 F.2d 1337, 1339 (6th Cir.); Reichert v. United States, 359 F.2d 278, 281-82 (D.C.Cir.); Marks v. United States, 260 F.2d 377, 383 (10th Cir.), cert. denied, 358 U.S. 929, 79 S.Ct. 315, 3 L.Ed.2d 302; and see United States v. Perez, 493 F.2d 1339, 1343 (10th Cir.); VI Wigmore, Evidence §§ 1806, 1807 (3d ed. 1940). Second, the statement put the personal knowledge and belief of the prosecuting attorney on the scales, which is also clearly improper. Berger v. United States, 295 U.S. 78, 88, 55 S.Ct. 629, 79 L.Ed. 1314; United States v. Bettenhausen, 499 F.2d 1223, 1233 (10th Cir.); United States v. Martinez, 487 F.2d 973, 977 (10th Cir.). The defense objections were good and should have been sustained. We must hold that the improper and prejudicial argument calls for a new trial. United States v. Ludwig, 508 F.2d 140 (10th Cir.) (No. 74-1046, Dec. 27, 1974); United States v. Peak, supra; Reichert v. United States, supra.

We have noted the several additional arguments made by appellant. We mention only that concerning the giving of an alibi instruction, which was unrequested and not called for by the evidence. We assume, however, that this and other problems discussed by appellant may be avoided on retrial.

Accordingly the judgment is reversed and the case remanded for a new trial.

HILL, Circuit Judge

(dissenting).

I am compelled to respectfully dissent. My distinguished brothers have chosen to upset the conviction for what seems to me to be a trivial error in the trial of the case. Defense counsel in his jury argument invited the occurrence relied upon by the majority. He participated in both the preliminary hearing before the magistrate and the trial under review. On both occasions he heard evidence to the effect one of the witnesses had activated the camera inside the bank. No photographs from this camera were offered by the prosecution. Certainly the defense counsel knew the reason such evidence was not offered. It is undisputed that the camera malfunctioned. Under these circumstances defense counsel was clearly “out of bounds” when he referred to the camera and asked the jury to draw an inference favorable to his client. There is ample undisputed eye witness identification testimony in the record together with an admission from the defendant that he was in the vicinity of the bank that was robbed about the same time as the robbery took place. In this setting the prosecutor should be permitted to set the record straight. Even better procedure would have been for the trial judge to advise the jury as to the true facts. In any event I fail to find any error prejudicial to the defendant justifying a new trial. This court has many times reiterated that a criminal defendant is entitled to a fair trial which does not necessarily mean a perfect trial. Viewing all of the evidence I must conclude appellant had a fair trial.

      . The trial court’s docket sheet states that on January 7, 1974, notice was mailed for calling of calendar and jury trial commencing January 9; that on January 22 notice was mailed for calling of calendar and jury trial commencing on February 4 — “(Calendar mailed 1/7/74)”; that on February 4 the case came on for calling of calendar and jury trial on February 4. This entry states: “Counsel indicated its readiness for trial. This matter to be tried in the sequence as calendared.”
      The docket next shows that jury trial was held on March 12, 1974; that a verdict of guilty was returned; that a presentence report was to be made by the probation officer, with imposition of sentence pending.
      On March 20 the matter came on before the court on defendant’s motion for judgment of acquittal, which was denied, and imposition of sentence was set for March 25. On March 25 defendant was sentenced to 10 years’ imprisonment, the sentence to be consecutive with time already owing for probation violation.

      . The 50(b) Plan for the District of Utah, approved December 14, 1972, established inter alia, a 90-day limit for trial after a plea of not guilty for persons not in custody, subject to extension for various reasons. The Rule is not relied on here and our record does not indicate whether any exception to the time limit was or could have been properly invoked for the continuance of trial, but we note the Rule as a measure of reasonableness of delay and of the court’s duty to promptly dispose of criminal cases.

      . Brief for Appellant at 9-12.

      . Appellant’s counsel stated in his argument, Tr. 87:
      And another little bit of evidence that is lacking, the two tellers — the two eye-witnesses — each one of them testified that they activated the camera inside the bank. Now, I ask you, ladies and gentlemen of the jury, Why didn’t the Government produce those films?
      Again, I suggest that logic compels you to draw the inference that the reason they didn’t produce the film is because it doesn’t identify the defendant.
      Now, for example, why do they have those in the banks? Because they are very effective.
      * 5k * * *
      I submit that the Government’ didn’t show you that evidence because it didn’t help them, one bit.

      . The pertinent portion of the argument in the record follows, Tr. 94-96:
      Secondly, as to the films, the cameras were triggered in error; pictures on the films, we didn’t have them into evidence; why didn’t we offer them into evidence? Because the camera mal-functioned.
      [Appellant’s counsel]: Your Honor, I am going to object; he had these films, here; and, if, in fact, they showed the camera mal-functioned, he could have introduced them in evidence.
      [Government’s counsel]: . . . [A]s I said, the reason the films weren’t introduced, they didn’t show anything; they didn’t show anybody robbing the bank.
      [Appellant’s counsel]: I will renew my objection.
      THE COURT: Overruled.
      [Government’s counsel]: That is why the Government didn’t introduce the films; didn’t show anybody robbing the bank. In point of fact, it photographed Mr. James Martin of the FBI, an agent who got there quite a while after the incident.

      . It is true that such adverse inferences are open to explanation by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure, and that the party is entitled to explain the non-production. See II Wigmore, Evidence § 285 (3d ed. 1940); McCormick, Evidence § 272 at 657 n. 31 (2d ed. 1972). However, such explanation may not be accomplished in the manner attempted here. The nonproduction of evidence which a party would normally be expected to produce may be explained by the testimony of other witnesses, properly sworn and subject to cross-examination, or by the introduction of other evidence at trial. See Case v. New York Central R. Co., 329 F.2d 936 (2d Cir.); United States v. McCaskill, 481 F.2d 855 (8th Cir.).


author: SPRECHER, Circuit Judge.

text:
    Michelle K. TOMERA, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. Arthur T. GALT, Jr., et al., Defendants-Appellees.
    No. 73-2037.
    United States Court of Appeals, Seventh Circuit.
    Argued Sept. 20, 1974.
    Decided Feb. 5, 1975.

      William M. Ward, Chicago, 111., for plaintiff-appellant.
    Wayland B. Cedarquist, Mitchell Edelson, Jr., Gary M. Elden and William D. Maddux, Edward J. DeGrange, Chicago, 111., for defendants-appellees.
    Before CASTLE, Senior Circuit Judge, and FAIRCHILD and SPRECHER, Circuit Judges.
   SPRECHER, Circuit Judge.

The plaintiff, Michelle K. Tornera, appeals the dismissal of her complaint brought pursuant to section 10(b) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 10b-5 against the defendants, Arthur T. Galt, Jr., Alfred Rodriquez, D. Wendell Fentress, Joseph Wahrer, Justin Weinshenk, Walter Glass, Newton Turcot, Margaret M. Horsting, Eleanor W. Horsting, William Horsting, Astir Mexicana, S.A., La Nueva Candemena, S.A., and Astir Mexicana, Inc. The defendants carry on silver mining operations in Ocampo, Chihuahua, Mexico. Tornera, an investor in the enterprise, commenced this suit on January 26, 1973, as an independent class action for securities fraud. Her case, however, was immediately consolidated with two other pending actions brought by Clarence Mohr, Max Ries and Harold Cohn, suing individually and as a class, against the same defendants for similar violations. The defendants moved for summary disposition of all three actions and the district court, concluding that the actions were time barred, entered summary judgment in their favor. Tornera alone appeals. We reverse.

I

In September 1967, Arthur T. Galt, Alfred Rodriquez, D. Wendell Fentress, Joseph Wahrer, Justin Weinshenk, Walter Glass, Newton Turcot, and Margaret and Eleanor Horsting agreed to promote a Mexican mining business. As a first step, the group leased silver mine claims in Ocampo, Chihuahua. These leases were held under the name of La Nueva Candemena, S.A. (Candemena), a Mexican corporation the promoters organized for this purpose. The defendants also formed another Mexican corporation, Astir Mexicana, S.A. (Astir, S.A.) and an Illinois corporation, Astir Mexicana, Inc. (Astir, Inc.) to construct a mill, road and other mine facilities. These three corporations were staffed by the following appointments: Alfred Rodriquez as president of Astir, S.A. and Astir, Inc. and as technical director of Candemena, D. Wendell Fentress as vice president and chairman of the board of Astir, S.A., William Horsting as secretary of Astir, S.A. and Astir, Inc., and Arthur Galt as treasurer of Astir, S.A. Rodriquez, Fen-tress and Horsting constituted the board of directors of Astir, S.A.

The defendants estimated the initial cost for their mining enterprise at slightly more than one million dollars. Since they were only able to raise $70,000 from among themselves, they obtained a $400,000 loan from the Southern Arizona Bank, and approached several prospective investors for the rest. Among these were James B. Dooley, Dr. Wayne Slaughter, William Nott, Arnold Liebling, Clarence Mohr, Max Ries, Harold Cohn and the appellant Michelle Tornera.

Clarence Mohr was the largest investor contributing $160,000 during 1969. In return, he received 201 shares of Candemena and Astir, S.A. stock and interest bearing notes totalling approximately $70,000. He was also appointed secretary-treasurer and a board member of Astir, S.A. On August 13, 1968, Max Ries and Harold Cohn contributed $55,-000 for which they received 98 shares of Astir, S.A. stock and $45,000 worth of interest bearing notes. On September 26, 1969, Michelle Tornera contributed $57,000 for which she received 80 shares of Astir, S.A. and Candemena stock and notes totalling $47,000. None of the securities which the defendants offered the new investors was registered.

In October 1969, Clarence Mohr, then acting secretary-treasurer of Astir, S.A. grew concerned with the health of the Mexican corporations. The validity of the Candemena leases was in doubt, the mine and mill permits were not forthcoming, and the Southern Arizona Bank sought payment of its loan. On a number of occasions Mohr pressed Rodriquez and Fentress for Spanish and English copies of Astir, S.A. and Candemena’s charters, leases, contracts and the minutes of their directors’ and shareholders’ meetings. He also earnestly asked for the record of their financial dealings. Rodriquez and Fentress repeatedly refused his requests.

Mohr countered by filing two suits, one state and one federal. In January 1970, Mohr filed suit in the Circuit Court of Cook County against the defendants named in this suit. He alleged corporate mismanagement. On October 31, 1972, he filed in the district court for the Northern District of Illinois his complaint in two counts for securities fraud. The first count alleged violations of section 10(b) and rule 10b-5. The second alleged violation of section 13 of the Illinois Securities Law of 1953. Several months later Max Ries and Harold Cohn intervened adopting Mohr’s complaint. The defendants without answering moved to dismiss both Mohr’s and the intervenors’ complaints. On January 26, 1973, while these motions were pending, Michelle Tornera filed her complaint which restated substantially Mohr’s averments. Her action was consolidated with the actions of Mohr, Cohn and Ries.

The district court dismissed both counts against all the defendants. The victory, however, was not complete for Rodriquez, Weinshenk and William Horsting. As to these defendants, the court allowed the plaintiffs to file an amended complaint realleging more specifically the first count. The court directed that the amended complaint set forth the dates the securities were purchased and the defendants’ intent at the time of the sale. As instructed the plaintiffs filed an amended complaint setting forth the sale dates and amplifying their account of defendants’ violations of rule 10b-5. Tornera stated that she purchased her stock on September 26, 1969, and received her stock certificates and notes on February 1, 1970. Additionally, she clarified the nature of the joint venture scheme and described the role each of the defendants played in it.

Upon defendants’ renewed request for dismissal, the district court granted Fen-tress’ summary judgment against Mohr and dismissed the claims of the other plaintiffs including Tornera. The reasons were twofold: (1) The plaintiffs’ first amended complaint did not comply with Rule 9(b) Fed.R.Civ.P. since their fraud claims lacked particularity; and (2) plaintiffs Ries, Cohn, and Tomera’s claims were time barred since they were filed more than three years after commission of the fraud. These grounds for dismissal are the issues of this appeal.

II

Tomera’s first amended complaint states a sufficient claim for securities fraud. The defendants contend that Tornera did not plead facts of sufficient particularity to state a rule 10b-5 cause of action and so did not comply with rule 9(b), Fed.R.Civ.P. The district court, in full agreement, especially disapproved of plaintiff’s failure to allege “legally sufficient intent on the part of the plaintiff.” (Decision on Defendants’ Motions, Nos. 72 C 2746 and 73 C 234, September 12, 1973).

Rule 9(b) governs the pleading of section 10(b) and rule 10b-5 claims. Schaefer v. First National Bank of Lincolnwood, No. 73-2128, 509 F.2d 1287 (7th Cir., 1975); Carroll v. First National Bank, 413 F.2d 353 (7th Cir. 1969); Jackson v. Alexander, 465 F.2d 1389 (10th Cir. 1972). It reads in full:

Fraud, Mistake, Condition of the Mind. In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.

Rule 9 must be read together with rules 8(a)(2), 8(e)(1) and 8(f), Fed.R. Civ.P. Buckley v. Altheimer, 2 F.R.D. 285 (D.C.Ill.1942); C. Wright, Law of Federal Courts 282 (2d ed. 1970). Rule 8 requires that a plaintiff give through his pleadings notice to defendant of the nature of his claims. Cf. Appendix of Forms, Fed.R.Civ.P., Forms 6, 9 and 11. It urges the plaintiff to make known his claims simply and concisely in short, plain statements. With these principles in mind, the purpose of rule 9 becomes clear. Rule 9 lists the actions in which slightly more is needed for notice. In a fraud action, a plaintiff need also state “with particularity” the circumstances constituting the fraud. Tornera has done so.

Among the fraudulent schemes constituting a violation of rule 10b-5 is selling securities either by omitting to disclose material facts or by making false statements. Tomera’s first amended complaint relates with particularity such a scheme. She states that on September 26, 1969, Alfred Rodriquez, then president of Astir, S.A. and technical director of Candemena, sold her several notes and 80 shares of unregistered stock in the mining companies he promoted. She further alleges defendant informed her that these three companies held valid mine leases in Mexico, were carrying on silver mining operations and processing the ore, and planned to use the funds she invested to further develop the mine property and facilities. In fact none of this vital information was true. These averments describing the bare bones of the fraudulent scheme coupled with Tomera’s allegations that defendants used the mails and other instruments of transportation in interstate commerce state a sufficient rule 10b-5 claim.

Tornera named besides Rodriquez, other individual defendants whd allegedly were joint venturers with him, and three corporate defendants in whose name they all did business. A joint venture agreement which was signed by nearly all defendants and which contained their plan to organize Astir, S.A. and Candemena was attached to the complaint and set out more than enough details of defendant’s common purpose and their control over the defendant corporations. Cf. Carroll v. First National Bank, supra.

Rule 10b-5 claimants need not plead nor prove scienter. It was error for the district court to require Tornera to plead it. In Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123 (7th Cir. 1972), this circuit was faced with the problem of determining the correct limitations period for 10b-5 claims. The choice lay between either Illinois Blue Sky securities fraud, or the state common law fraud, statute of limitations. Congress did not provide a limitations period for 10b-5 claims. Using the resemblance test, the court found the Blue Sky statute closest because neither it nor rule 10b-5 required proof of scienter. The court said:

Neither Section 137.12 [the Illinois Blue Sky statute] nor 10b-5 contains the defense that one “did not know and in the exercise of reasonable care could not have known” of the misrepresentation which is contained in Section 12(2) of the federal statute (15 U.S.C. § 777(2)) and at common law. The liability under 10b-5 and Section 137.12 is stricter; their remedies should have a greater deterence against fraud.

Id. at 127.

Cf. also Dasho v. Susquehanna Corporation, 461 F.2d 11, n. 45 (7th Cir.) Swanson v. American Consumers Industries, Inc., 475 F.2d 516, 525 (7th Cir. 1973) (concurring opinion). Parrent relied on Vanderboom v. Sexton, 422 F.2d 1233 (8th Cir. 1970) and the oft cited Ellis v. Carter, 291 F.2d 270 (9th Cir. 1961). Both held without reservation that scienter is not an element of proof on a rule 10b-5 claim. Of course evidence of bad faith may be pleaded for, if established, it would affect the remedy to be applied. Swanson, supra, 475 F.2d at 525.

Tornera need not aver defendant’s scienter. Her first amended complaint notified defendants of the nature of her claims, a rule 10b-5 securities fraud, and it alleged the details, a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants. This is enough. More information can be gathered through discovery. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

Ill

The district court, applying Illinois’ three year Blue Sky limitations period concluded erroneously that Tomera’s claims were stale. Tornera purchased the unregistered stock September 26, 1969 and filed her original complaint January 26, 1973, allegedly four months too late. The district court believed, and the defendants urge here, that the equitable tolling doctrine does not apply since the plaintiff did not sufficiently allege fraudulent concealment. The district court was in error.

Clearly, the federal doctrine of equitable tolling applies in 10b-5 actions. Parrent, supra; Bromberg, Securities Law § 2.5(1) (1973). Inasmuch as section 10(b) does not provide a limitations period, federal courts, as a practice, adopt from the forum state the limitations period of the state law most closely resembling rule 10b-5. Trussell v. United Underwriters, Ltd., 228 F.Supp. 757 (D.Colo. 1964); Charney v. Thomas, 372 F.2d 97 (6th Cir. 1967); Vanderboom, supra. This is the full extent of state law influence. Determining the point at which the statutory period commences is a matter governed by federal common law. Campbell v. Haverhill, 155 U.S. 610, 15 S.Ct. 217, 39 L.Ed. 280 (1895); Holmberg v. Armbrecht, 327 U.S. 392, 66 S.Ct. 582, 90 L.Ed. 743 (1945); Note, Federal Statutes Without Limitations Provisions, 53 Colum.L.Rev. 68 (1953); Note, Fraudulent Concealment as Tolling the Antitrust Statute of Limitations, 36 Ford.L. Rev. 328 (1967). Thus when federal courts find fraudulent concealment, they will suspend the running of the state limitations period. They have often done so in 10b-5 actions. Schaefer v. First National Bank of Lincolnwood, No. 73-2128, 509 F.2d 1287 (7th Cir. 1975); Hochfelder v. Midwest Stock Exchange, 503 F.2d 364 (7th Cir. 1974); Hochfelder v. Ernst & Ernst, 503 F.2d 1100 (7th Cir. 1974).

Securities fraud claimants properly avail themselves of the equitable tolling doctrine by alleging the defendant’s fraudulent concealment. Schaefer v. First National Bank of Lincolnwood, supra. Tornera has done just this. Her first amended complaint alleges generally defendants’ continuing scheme to defraud Astir and Candemena investors. She states:

[D]uring the period commencing on or about January 1, 1968 and continuing to the present, the defendants herein engaged in a continuing scheme and artífice to defraud investors, including plaintiffs, in connection with the purchase, solicitation, offer and sale of the unregistered securities as aforesaid, in further violation of Section 10-b [10(b)] of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission promulgated thereunder. (First amended complaint, para. 8.)

This statement is sufficient to avoid summary disposition on a statute of limitations challenge. Tornera, however, pled further details which once proved at trial would establish defendants’ fraudulent concealment and toll the limitations period.

At least two types of fraudulent behavior toll a statutory period. Bailey v. Glover, 21 Wall. 342, 22 L.Ed. 636 (1875). In the first type, the most common, the fraud goes undiscovered even though the defendant after commission of the wrong does nothing to conceal it and the plaintiff has diligently inquired into its circumstances. The plaintiffs’ due diligence is essential here. Morgan v. Koch, 419 F.2d 993 (7th Cir. 1969); Developments in the Law — Statutes of Limitations, 63 Harv.L.Rev. 1177 (1950). In the second type, the fraud goes undiscovered because the defendant has taken positive steps after commission of the fraud to keep it concealed. Keithley v. Mutual Life Ins. Co., 271 Ill. 584, 111 N.E. 503 (1916); Miller v. Powers, 119 Ind. 79, 21 N.E. 455 (1888); Stanley v. Stanton, 36 Ind. 445 (1871); Krestich v. Stefanez, 243 Wis. 1, 9 N.W.2d 130 (1943); Dawson, Fraudulent Concealment and Statutes of Limitations, 31 Mich.L.Rev. 875 (1933). This type of fraudulent concealment tolls the limitations period until actual discovery by the plaintiff. The court in Smith v. Blachley, 198 Pa. 173, 47 A. 985 (1901), aptly stated:

The cases which hold that, where fraud is concealed, or, as sometimes added, conceals itself, the statute runs-only from discovery, practically repeals the statute pro tanto. Fraud is always concealed. If it was not no fraud would ever succeed. But, when it is accomplished and ended, the rights of the parties are fixed. The right of action is complete. If the plaintiff bestirs himself to inquire, he has ample time to investigate and bring his action. If both parties rest on their oars, the statute runs its regular course. But, if the wrongdoer adds to his original fraud affirmative efforts to divert or mislead or prevent discovery, then he gives to his original act a continuing character, by virtue of which he deprives it of the protection of the statute until discovery.

Id. at 987.

Tomera’s complaint avers this second type of concealment. Briefly, she alleges that the defendants did not keep records of the funds invested in their mining companies nor how these funds were disbursed. They refused to make available even to Mohr, the secretary and treasurer of Astir, S.A., the charters of Astir, S.A. and Candemena, the leases held by Candemena, the Mexican mill and mine permits, any agreements between Astir, S.A. and Candemena, and the minutes of their stockholders’ and directors’ meetings. They refused to answer any inquiries about the ownership of the mine sites, the mining and processing operations, the companies customers and supplies and the repayment of the Arizona National Bank loan. Whether the plaintiff personally inquired into the. business affairs of the two Mexican corporations is unimportant. The defendants’ conduct is reason enough to toll the limitations period.

The fundamental purpose of section 10(b) and rule 10b-5 is to achieve a high standard of business ethics. This purpose is taken seriously and is broadly construed. Cf Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1971); SEC v. Capital Gains Research Bureau, 375 U.S. 180, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963). Summarily extinguishing rule 10b-5 claims during pleadings on statute of limitations grounds does not work to this end. Limitations issues ordinarily require factual determinations and are best left to trial.

Accordingly, we reverse the judgment of dismissal.

      . Section 10(b), 15 U.S.C. § 78j(b), provides:
      It shall be unlawful for any person . [t]o 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 1 Ob-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,
      (a) To employ any device, scheme, or artifice to defraud,
      (b) To make any untrue statement of a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

      . Ill.Rev.Stat. c. 121½, Sec. 137.13.


author: WILLIAM E. MILLER, Circuit Judge.

text:
    Peggy Sue O’NEILL and David O’Neill, Individually and as husband and wife, Plaintiffs-Appellants, v. Vartkes KILEDJIAN, Defendant-Appellee.
    No. 74-1983.
    United States Court of Appeals, Sixth Circuit.
    Feb. 24, 1975.

      Walter Buford, Memphis, Tenn., for plaintiffs-appellants.
    Garvin M. Gentry, Memphis, Tenn., for defendant-appellee.
    Before PECK, MILLER and LIVELY, Circuit Judges.
   WILLIAM E. MILLER, Circuit Judge.

This medical malpractice case was tried in federal court at Memphis, jurisdiction having been invoked on the basis of diversity of citizenship. Peggy Sue O’Neill and her husband charged the defendant, Dr. Vartkes Kiledjian, with negligence in his treatment of Mrs. O’Neill. Specifically, it was alleged that complications followed the total removal by the defendant of the remainder of her thyroid gland in September 1972. Essentially, the plaintiffs alleged that the defendant was negligent, first, in his diagnosis and treatment of the condition, and secondly, in the surgical procedure to remove the gland. At the conclusion of the evidence, the jury returned a $100,000 verdict in favor of Mrs. O’Neill and a $25,000 verdict on her husband’s claim for loss of services and consortium.

On defendant’s motion, the district judge granted a new trial. Plaintiffs moved the court to reconsider its decision, claiming that they had no funds for another trial and could not offer any additional proof of negligence. The district court then entered a judgment for defendant notwithstanding the verdict.

Peggy Sue O’Neill had had a history of medical difficulties relating to the functioning of her thyroid gland. In 1966 she suffered from Graves Disease, a condition caused by an overactive thyroid gland. In an effort to correct this problem, approximately 95% of her thyroid was removed by surgery. The operation left her with a small portion of the gland on each side of her neck. Five years later, in 1971, she again was afflicted with a hyperactive thyroid condition. On this occasion, she sought care from the clinic at St. Joseph Hospital in Memphis. A second operation was performed, and the thyroid remaining on the right side was removed. Within a year of this operation and soon after she had given birth to a child, plaintiff was again hospitalized at St. Joseph Hospital because of a thyroid problem. On September 20, 1972, the defendant, then the chief surgical resident at the hospital, operated to remove the portion of the thyroid remaining on the left side of the neck. Shortly thereafter, Mrs. O’Neill went into hypocalcemic shock, an infrequent complication of thyroid surgery.

The parathyroid glands, located adjacent to the thyroid, regulate the amount of calcium in the blood stream. An abnormally low amount of calcium in the blood, or hypocalcemia, is caused by hypoparathyroidism resulting from damage to or removal of all of an individual’s parathyroid glands. Because of their small size and their location, these glands are difficult to identify during surgery. According to the pathology report, made after the operation, the mass removed by Dr. Kiledjian contained no parathyroid tissue. Nevertheless, it is undisputed that after the surgery all such glands had either been removed or had ceased to function. The plaintiff’s condition has been diagnosed as a permanent one requiring daily medication.

The case is presently before us to review the correctness of the district court’s action in entering judgment n. o. v. for the defendant.

On a motion for judgment n. o. v. as on a motion for a directed verdict, the district court must determine whether there was sufficient evidence presented to raise a material issue of fact for the jury. 9 C. Wright <fe A. Miller, Federal Practice and Procedure, Sec. 2521, at 537 (1971). The determination is one of law to be made in the first instance by the district court. See Appleman v. United States, 338 F.2d 729, 730 (7th Cir. 1964), cert. denied, 380 U.S. 956, 85 S.Ct. 1090, 13 L.Ed.2d 972 (1965); 9 Wright & Miller, Sec. 2524, at 541 (1971). The standard for measuring the legal sufficiency of the evidence is the same both on a motion for a directed verdict and on a motion for judgment n. o. v. Moran v. Raymond Corp., 484 F.2d 1008, 1014 (7th Cir. 1973), cert. denied, 415 U.S. 932, 94 S.Ct. 1445, 39 L.Ed.2d 490 (1974); cf. Minton v. Southern Ry. Co., 368 F.2d 719, 720 (6th Cir. 1966). Furthermore, the standard remains the same when the trial court’s decision is reviewed on appeal. See Calloway v. Central Charge Service, 142 U.S.App.D.C. 259, 440 F.2d 287, 289 n.2 (1971); 9 Wright & Miller, Sec. 2524, at 542 (1971).

M “The law is well settled in this circuit and elsewhere that in a diversity case, the trial judge is bound by state law as to the sufficiency of evidence.” Chumbler v. McClure, 505 F.2d 489, 491 (6th Cir. 1974); accord Moskowitz v. Peariso, 458 F.2d 240, 244 (6th Cir. 1972). The Tennessee law was stated in Poe v. Atlantic Coast Line Railroad Co., 205 Tenn. 276, 284, 326 S.W.2d 461, 464 (1958). It required the court

to look to all the evidence, to take as true the evidence for the plaintiff, to discard all countervailing evidence, to take the strongest legitimate view of the evidence for the plaintiff, to allow all reasonable inferences from it in his favor; and if then there is any dispute as to any material determinative evidence, or any doubt as to the conclusion to be drawn from the whole evidence, the motion for a directed verdict must be denied.

According to the district court, the plaintiff’s single theory of negligence was predicated upon two assumptions: “1) That the defendant was negligent in not first treating and observing plaintiff before undertaking a repeated thyroid surgery; and 2) That the defendant was negligent in the surgical procedure undertaken, resulting in the condition known as hypoparathyroidism or tetany.” The lower court concluded that there was no proof that the defendant performed the operation in a negligent manner. We have reviewed the record and concur in this conclusion. All the expert witnesses agreed that the parathyroid glands were difficult to identify and to isolate and that they could be damaged or even removed inadvertently in performing thyroid surgery. Other proof on this point consisted of statistical data indicating that the occurrence of hypoparathyroidism after thyroid surgery was rare. Yet proof that a particular surgical result was unusual would not alone be sufficient to establish negligence. At best, it would relegate the question of causation to the realm of speculation or conjecture.

The more troublesome question concerns the defendant’s decision to treat Mrs. O’Neill’s illness by means of a thyroidectomy. Apparently the district court reasoned that as a matter of substantive state law the defendant could not be held liable for the unfortunate consequences of his decision to operate. It is a well-established rule in Tennessee that a doctor will not be held responsible for the exercise of his professional judgment in the selection of one method of treatment over another when both alternatives have the support of a considerable body of competent medical opinion in the community. Gresham v. Ford, 192 Tenn. 310, 241 S.W.2d 408 (1951).

Yet while this statement of the law is correct “it must be predicated upon the assumption that the physician has used ordinary care and skill in making the examination of the patient and in arriving at a diagnosis of his condition.” Methodist Hospital v. Ball, 50 Tenn.App. 460, 487, 362 S.W.2d 475, 487, cert. denied (1961); accord Haskins v. Howard, 159 Tenn. 86, 16 S.W.2d 20 (1929); Burnett v. Layman, 133 Tenn. 323, 181 S.W. 157 (1915); see Campbell v. Oliva, 424 F.2d 1244 (6th Cir. 1970). The crucial question in the present case is therefore whether Dr. Kiledjian used due care in diagnosing the plaintiff’s condition and not whether he was entitled to choose one of two or more approved methods of treatment. All of the experts agreed that at the time of the 1972 operation, Mrs. O’Neill had a swollen, hyperactive thyroid gland. The critical problem was whether the enlarged mass was malignant or benign.

There is material evidence that a total thyroidectomy should be performed only when the gland is cancerous. After reading Mrs. O’Neill’s medical files, plaintiff’s expert concluded that there was no indication of cancer. He thought that it was probable that the swelling was due to Mrs. O’Neill’s pregnancy and consequently that she should have been treated by medication and kept under observation for several months. If her condition persisted, his opinion was that it should then be treated with radioactive iodine.

On the other hand, the defendant testified, as did other local medical experts whose testimony was offered by the defendant, that the plaintiff’s symptoms were indicative of cancer. Various tests conducted before the operation, although not showing conclusively the presence of cancer, were not incompatible with the possibility that it existed. The defendant’s expert witnesses conceded, however, that nowhere in the medical record was any mention made that a malignancy was suspected.

It is true that the plaintiffs’ medical expert and the experts testifying for the defendant have suggested alternative methods of treatment. The difference between the methods suggested by the two sets of experts is to be explained upon the ground that they made different diagnoses as to Mrs. O’Neill’s condition. Because there was no positive evidence of cancer, the plaintiffs’ expert was of the opinion that a conservative “wait and see” approach was indicated. In contrast, the defendant who believed that the gland was malignant decided that the only proper treatment was removal of the thyroid gland. Although there is evidence from which a jury could conclude that the defendant used ordinary care and skill in arriving at a diagnosis of a malignant thyroid requiring removal, we are of the opinion that the record also reflects substantial evidence from which a jury could reasonably find that the defendant in diagnosing the thyroid as malignant failed to use ordinary care and skill.

Accordingly, the order of the district court granting defendant’s motion for judgment n. o. v. is hereby reversed, and the verdict of the jury in favor of the plaintiffs is hereby reinstated. The action is remanded to the district court for entry of judgment on the jury’s verdict.

      . It should be noted that Dr. Kiledjian, the defendant in this case, assisted in the 1971 operation.

      . Although an individual normally has four parathyroid glands, a person needs only one such gland to regulate the calcium flow into the bloodstream. Since prior to the 1972 operation the plaintiff had not experienced hypocalcemia, it was assumed at trial that she had at least one healthy parathyroid gland before the last surgery.

      . Plaintiffs’ sole medical expert was a Philadelphia practitioner. The district court nevertheless permitted him to testify as an expert, in view of evidence of a general uniformity of practices and procedures in urban communities concerning the medical problems involved. The weight of his testimony was of course left to the jury. See McCay v. Mitchell, 62 Tenn.App. 424, 463 S.W.2d 710, cert. denied (1971).