author: PELL, Circuit Judge.

text:
    Virginia STEVENS, Plaintiff-Appellant, v. Rayfield CAREY et al., Defendants-Appellees.
    No. 72-1871.
    United States Court of Appeals, Seventh Circuit.
    Argued June 7, 1973.
    Decided Aug. 8, 1973.

      Irving L. Fink, Ronald E. Elberger, Ind. Civil Liberties Union, Indianapolis, Ind., for plaintiff-appellant.
    Ross P. Walker, Indianapolis, Ind., for appellee.
    Before PELL and SPRECHER, Circuit Judges, and CAMPBELL, Senior District Judge.

       Senior District Judge AVilliam J. Campbell of the Northern District of Illinois is sitting by designation.

   PELL, Circuit Judge.

This appeal presents the important and novel issue of whether a federal district court had subject matter jurisdiction over an action by a federal employee against the federally-recognized union that allegedly expelled her from membership. The district court concluded there was no such jurisdiction and dismissed the action.

I.

Plaintiff Virginia Stevens is a classified civil service employee at Fort Benjamin Harrison, Indianapolis, Indiana. Her employer is the Department of Defense. The defendant Smith was sued individually. He also, along with three other named defendants, was sued as a member and representative of the American Federation of Government Employees (AFL-CIO) and Lodge No. 1411 of said Federation. The union was alleged to be the sole bargaining agent for employees of plaintiff’s classification at Fort Harrison. In her complaint, Mrs. Stevens alleged that the defendants had deprived her of her right to participate in union affairs by excluding her from union membership and from the Local’s Executive Committee; that they had denied her due process in disciplinary proceedings ; and that the union had failed to maintain fiscal integrity. These actions supposedly violated 29 U.S.C. § 411(a)(2), Executive Order 10988 of January 17, 1962 [3 C.F.R. E.O. 10988 (1959-1963 Comp.)], and the Executive Memorandum of May 21, 1963 [3 C.F.R. at 848 (1959-1963 Comp.)]. plaintiff further alleged that the union had expelled her in retaliation for her exercise of her First Amendment right to freedom of expression and that the procedures the union had followed in accomplishing this expulsion had denied plaintiff her Fifth Amendment right to due process. Mrs. Stevens sought $100,000 as damages and “all other proper relief,” including presumably reinstatement in the union.

Plaintiff originally had claimed jurisdiction under section 412 of the Labor Management Reporting and Disclosure Act of 1959, 29 U.S.C. § 401 et seq. (Landrum-Griffin Act). However, plaintiff subsequently conceded to the district court and acknowledges on this appeal that section 412 does not confer jurisdiction over her action. Section 402(e) of the Act, which defines “employer,” expressly excludes the United States; consequently, jurisdiction over actions by employees of the federal government against their unions does not lie under section 412.

After failing to secure jurisdiction under the Act, plaintiff invoked 28 U.S. C. § 1331, which provides in pertinent part: “The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy . arises under the Constitution, laws, or treaties of the United States.” The parties and the court then agreed that the court would decide whether section 1331 was applicable and that if the court determined that the provision conferred jurisdiction, plaintiff would immediately be reinstated as a union member. It was further stipulated that if the court found it had jurisdiction and that Mrs. Stevens might be entitled to damages, a trial would be held oh the issue of damages only, provided the parties failed to reach agreement by negotiation.

However, as we stated above, the district court concluded that it did not have subject matter jurisdiction. Therefore, the other issues did not have to be resolved, and the action was dismissed.

II.

On this appeal, plaintiff offers two arguments .to support the applicability of 28 U.S.C. § 1331(a): (1) Executive Orders, like congressional enactments, have the force and effect of “laws of the United States”; and (2) because the plaintiff’s action involves matters “peculiarly federal in nature,” a federal court would be justified in fashioning appropriate governing principles for a federal cause of action.

For her first argument, plaintiff relies on Executive Order 10988, issued by President Kennedy on January 17, 1962. At the time of the passage of the Landrum-Griffin Act, federal employees had no rights of collective bargaining, and E.O. 10988 was designed to remedy this situation. Pursuant to this Exécu-tive Order, the President later issued a memorandum which recognized that federal employees needed protection of their democratic rights within their unions and which required that those unions maintain democratic procedures and practices.

The plaintiff contends that all Executive Orders confer jurisdiction under 28 U.S.C. § 1331 and that her action therefore should not have been dismissed on the jurisdictional ground. She cites several cases which purportedly state that controversies involving Executive Orders arise “under the laws of the United States,” see, e. g., Farkas v. Texas Instrument, Inc., 375 F.2d 629 (5th Cir. 1967), cert. denied, 389 U.S. 977, 88 S.Ct. 480, 19 L.Ed.2d 471, and Braden v. University of Pittsburgh, 343 F.Supp. 836 (W.D.Pa.1972). However, an analysis of the cases cited reflects the rationale that the Executive Orders involved were issued pursuant to statutory authority providing for presidential implementation and thereby have the force and effect of law. See also Farmer v. Philadelphia Electric Co., 329 F.2d 3, 4-8 (3d Cir. 1964). As we will note hereinafter, that rationale is not applicable in the case of the Executive Order here involved, even though the Order was not beyond the presidential power.

Even if statutory law-giving power were not involved in the cases upon which the plaintiff relies, it is to be noted they provide scant support for her position. The complaints involved in those cases were dismissed on the basis that no cause of action was stated as the Orders did not contemplate a private civil action as a permissible method of enforcing the Orders. See, e. g., Far-kas, supra, 375 F.2d at 632-633.

Executive Order 10988, in any event, “was a project of the Executive, and not of the Congress. . . . The President . . . was under no obligation to issue the Order; and his action in doing so was simply in furtherance of a personal policy of trying to enhance the attractiveness and efficiency of federal employment. The President did not undertake to create any role for the judiciary in the implementation of this policy. The question of his power to do so aside, he was, at least in this matter of determining representational rights, emulating the example of Congress, which has shown a marked disinclination to intrude equity courts into this process.” Manhattan-Bronx Postal Union v. Gronouski, 121 U.S.App.D.C. 321, 350 F.2d 451, 452, 456 (1965), cert. denied, 382 U.S. 978, 86 S.Ct. 548, 15 L.Ed.2d 469 (1966) (footnote omitted).

As the district court in the present case correctly noted, the presidential pronouncements were limited in scope:

“In sum, the Order did not expressly or by implication attempt to provide for judicial resolution of internal disputes arising out of governmental employee unions. Instead, as is made clear by the subsequent Memorandum, resolution of disputes was primarily to be accomplished by the most informal methods, only supplemented by the procedures outlined in the Memorandum. Compliance of the union with the rights of individual union members was to be enforced by the threat of withdrawal of recognition, if in the agency’s discretion that became necessary.”

Thus, the very documents that granted plaintiff her union rights, irrespective of their status as “laws of the United States,” did not suggest that union members might vindicate those rights by private suits in the federal courts. To the contrary, they contemplated an administrative remedy, withdrawal of recognition.

Plaintiff’s second argument has much appeal. A federal court would seem to be the appropriate forum for the vindication of a federal employee’s claims against a union which the federal government has designated as exclusive bargaining agent. Despite its surface allure, the argument must fail. Congress has not granted the federal courts jurisdiction over such matters, ánd we have no authority to fashion our own subject matter jurisdiction here. In all the cases upon which plaintiff relies— Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957); Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943); and National Ass’n of Gov’t Employees v. White, 135 U.S.App.D.C. 290, 418 F.2d 1126, 1129 (1969)— subject matter jurisdiction was clearly otherwise present.

Executive Order 10988 did not contemplate a judicial remedy. The Lan-drum-Griffin Act expressly excludes the United States as an “employer” for purposes of the Act. Under these circumstances, plaintiff may not redress her grievances in the federal courts. It is for Congress, not the judiciary, to rectify what plaintiff charges is an “anomalous” situation.

Affirmed.

      . Executive Order 10988 and the May 21, 1963, Memorandum were revoked and replaced by Executive Order 11491 of October 29, 1969, 3 C.F.R. E.O. 11491 (1966-1970 Comp.).


source: Caselaw Access Project

author: CRAVEN, Circuit Judge: WIDENER, Circuit Judge

license: Public Domain

text:
    BARRUS CONSTRUCTION COMPANY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 72-1544.
    United States Court of Appeals, Fourth Circuit.
    Argued Dec. 6, 1972.
    Decided July 18, 1973.

      Fred W. Elarbee, Jr., Atlanta, Ga. (David M. Vaughan and Constangy & Prowell, Atlanta, Ga., on brief), for petitioner.
    Jonathan G. Axelrod, Atty., N. L. R. B. (Peter G. Nash, Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, and Leonard M. Wagman, Atty., N. L. R. B., on brief), for respondent.
    Before WINTER, CRAVEN and WIDENER, Circuit Judges.
   CRAVEN, Circuit Judge:

This is a petition by employer Barrus Construction Company challenging the National Labor Relations Board’s long established procedure of consolidating for a single hearing objections to a representation election and charges of unfair labor practices. We again approve the consolidation procedure and, on the facts of this case, enforce the order of the Board.

Following a victory by the International Union of Operating Engineers in a representation election conducted at the company’s plant in Kinston, North Carolina, the company filed timely objections to the election with the National Labor Relations Board. The union thereafter filed an unfair labor practices charge with the Board, alleging that employee Quinn had been wrongfully discharged by the company in violation of 29 U.S.C. § 158(a)(1) and (3). After a hearing at which the unfair labor practice charge and the objections to the representation election had been consolidated, the Trial Examiner validated the election and found that the company had unlawfully discharged Quinn. Pursuant to a complaint by the Regional Director alleging that the company refused to bargain with the union, the Board affirmed the Trial Examiner’s findings, certified the union as the exclusive collective bargaining representative, and ordered the company to bargain with the union.

The company has now petitioned this court, pursuant to 29 U.S.C. § 160, to review and set aside the order of the Board requiring that it bargain collectively with the union as the exclusive representative of the employees in the appropriate unit. The company challenges both the results of the election and the procedural validity of the hearing, contending primarily that its rights were prejudiced by the manner in which the hearing was consolidated and conducted. We affirm the findings of the Board and grant the Board’s cross-application for enforcement of its order.

On February 11, 1970, the union filed an election petition seeking to represent all hourly paid production and maintenance employees at the company’s asphalt paving facility in Kinston. A stipulation for certification upon consent election was executed by the parties on March 9, 1970, and an election by secret ballot was conducted on April 16, 1970. Of the 400 eligible voters, 396 actually cast ballots, with the union receiving 201 votes.

Almost immediately following the election, the company filed its objections to conduct affecting the outcome of the election. The company alleged (1) that at a meeting of company employees a union official named Snodgrass suggested putting kerosene in the lunch boxes of anti-union employees, (2) that employee Willie Quinn, a union advocate, formed a “violence club” to intimidate non-union employees, (3) that the union paid employees for their support and votes, and (4) that union officials misrepresented certain facts in replying to a company letter to employees.

The Regional Director of Region 11 of the NLRB investigated the company’s objections to the election and, in a report dated July 6, 1970, recommended that a hearing be held to resolve conflicting evidence regarding the issues raised by objections 1 and 2. He further recommended that objections 3 and 4 be overruled.

The company filed exceptions to the report, urging that the recommended hearing include evidence regarding not only objections 3 and 4, but also newly discovered evidence of other threats and violence. The Board overruled objection 4, but ordered the hearing expanded to include “both objection 3 and alleged threats of violence and retaliation.”

On May 26, 1970, while the Board was considering the company’s objections, the union filed its unfair labor practice charge, alleging that the company had wrongfully discharged employee Willie Quinn because of his support of the union.

The Regional Director then ordered the consolidation of the company’s case challenging the election and the union’s case challenging the discharge of Quinn “in order to effectuate the purposes of the Act and to avoid unnecessary costs and delay.” The company filed a motion to sever the proceedings, pursuant to 29 C.F.R. § 102.33(d) (1972), alleging a conflict' of interest in that the same attorney represented the Board in both cases. The Trial Examiner considered the conflict of interest “unlikely” and denied the motion to sever.

In a decision issued March 30, 1971, after a full hearing, the Trial Examiner found that the company’s objections to the election were without merit and that the company had unlawfully discharged Quinn. The company has taken two basic positions on appeal from the Board’s affirmance of these findings. It argues that the manner in which the consolidated hearing was conducted denied the company a fair opportunity to present its case, and it asserts that the election did not afford the employees a free and untrammeled choice.

The Hearing

In challenging the validity of the hearing, the company asserts that it was denied due process when the Trial Examiner (1) denied the motion to sever the consolidated hearing, (2) restricted the scope of the hearing to certain issues, and (3) refused to consider the testimony of a particular witness. We will consider each claim separately.

Initially, we note the standard by which we must assess the company’s due process claims. The standard is simply whether there has been a fair hearing. NLRB v. Indiana & Mich. Elect. Co., 318 U.S. 9, 28, 63 S.Ct. 394, 87 L.Ed. 579 (1943).

So long as the objecting party . is given the opportunity to be heard, to call and cross-examine those who are the source of Board evidence, and to present pertinent evidence of its own the hearing is fundamentally fair and satisfies the requirements of due process.

NLRB v. Bata Shoe Co., 377 F.2d 821, 826, 827 (4th Cir.), cert. denied, 389 U.S. 917, 88 S.Ct. 238, 19 L.Ed.2d 265 (1967). Accord, NLRB v. Poinsett Lumber & Mfg. Co., 221 F.2d 121, 123 (4th Cir. 1955) (“right to produce evidence or conduct cross-examination material to the issue”).

The company argues that consolidation • was improper here because a conflict of interest confronted the attorney who simultaneously undertook to represent the Board in the representation ease and the General Counsel in the unfair labor practice case. It is claimed that the attorney’s role regarding some of the issues relevant to the unfair labor practice case precluded his absolute neutrality in the representation case. The company asserts that the conflict of interest was particularly acute here because of the close connection of the facts underlying the consolidated cases. For example, the conduct of employee Quinn was at issue in each case. The union and the Board, in the unfair labor practice case, claimed that Quinn was wrongfully discharged because of his pro-union activity. The company, however, asserted that Quinn was discharged for threatening fellow employees, and this activity was one of the company’s main objections to the election. In this factual situation, the company suggests -that the attorney resisted the introduction of evidence tending to show questionable conduct by Quinn in order to enhance his chances of success in the unfair labor practice charge. This position of supposed advocacy, it is claimed, caused the attorney to breach his duty in the representation case to maintain neutrality as to the merits and to strive for admission of such evidence so as to insure as complete a record as possible.

Consolidation of an unfair labor practice case with a representation case in a single hearing is a Board practice well recognized by the courts. E. g., Bata Shoe, supra; NLRB v. Mark J. Gerry, Inc., 355 F.2d 727, 729 (9th Cir.), cert. denied, 385 U.S. 820, 87 S.Ct. 46, 17 L. Ed.2d 58 (1966); NLRB v. Dal-Tex Optical Co., 310 F.2d 58, 61 (5th Cir. 1962). Both long ago and recently we have repeatedly approved this practice, recognizing that it is “a customary and proper procedure that saves time and expense.” NLRB v. Dixie Shirt Co., 176 F.2d 969, 970 (4th Cir. 1949).

An alleged conflict of interest said to arise from the dual role played by the Board’s attorney in consolidated proceedings may be more apparent than real, NLRB v. Chelsea Clock Co., 411 F. 2d 189, 194 (1st Cir. 1969), and a denial of due process cannot be established by this theoretical conflict, at least where, as here, the company was adequately represented by competent counsel. See Lane v. NLRB, 186 F.2d 671, 675 (10th Cir.), cert. denied, 342 U.S. 813, 72 S.Ct. 26, 96 L.Ed. 614 (1951). Due process concerns itself with substance and not with form. NLRB v. Mackay Radio & T. Co., 304 U.S. 333, 351, 58 S.Ct. 904, 82 L.Ed. 1381 (1938). As Judge Widener points out, there were some 59 objections and motions to strike made during the hearing, with the Board’s attorney making 34 of them and joining in nine of the Union’s 17 objections. We think such participation insufficient to establish such a degree of partisanship that would destroy the fairness of the hearing. The company was given ample opportunity to produce evidence of its own and to cross-examine adverse witnesses. See Lane, supra. The company’s reliance on Chelsea Clock, supra, is misplaced. That court never reached the conflict of interest question. Moreover, the alleged conflict was both factually and theoretically dissimilar from that alleged here. We perceive no prejudice whatsoever to the company by reason of consolidation of the two hearings. ,

The company next claims that it was denied due process when the Trial Examiner limited the hearing to certain issues. In its decision on the company’s exceptions to the Regional Director’s report recommending a hearing, the Board directed that the Trial Examiner consider objections 1, 2, and 3 raised by the company to the election, as well as “alleged threats of violence and retaliation.” The Trial Examiner, however, construed the Board’s order as limiting the hearing to the specific issues raised by objections 1, 2, and 3.

The company argues that it had evidence of additional threats of violence which it was not allowed to prove because of the Trial Examiner’s restrictive view of the hearing. We believe the company was permitted to put into the record all the evidence which it had to support its position. The company stated in its Response to Notice to Show Cause on General Counsel’s Motion for Summary Judgment that the “additional evidence” purportedly excluded by the Trial Examiner would have consisted of the testimony of eight workmen. The record contains affidavits setting out the proposed testimony of all eight men; moreover, the record also contains the full testimony of two of these men, Gray and Goff. The company has adverted to the examination of these two men as the only two instances where the Trial Examiner applied his disputed ruling concerning the hearing’s scope. When the Union’s attorney objected to Gray’s testimony, the Trial Examiner permitted company counsel to proffer what the witness would have said. When a similar objection was raised as to Goff’s testimony, the Trial Examiner again permitted company counsel to continue unhampered hi's examination of the witness after being assured that the proffered testimony was being adduced in support of a numbered objection. The record was, consequently, full and complete for the Board’s examination.

The company further maintains that although the additional evidence may have gotten into the record, it was nevertheless denied due process because the Trial Examiner had already indicated that such evidence would not be considered. This argument misperceives the relative positions of the Trial Examiner and the Board as fact-finders. The ultimate trier of fact is the Board and not the Trial Examiner, who, arguably, took a more restrictive view of the scope of the hearing than was justified. In its decision certifying the union, the Board, after noting the company’s objection and assuming that the Trial Examiner’s view was erroneous, clearly stated that, “We have considered such [disputed] evidence and conclude it warrants no modification of the Trial Examiner’s results.” We find that there was a sufficient record upon which the Board could have adopted the company’s contentions if it had been so persuaded, and that any error concerning the scope of the hearing was nonprejudicial.

The final claim relating to the hearing is that the Trial Examiner’s refusal to consider the testimony of employee Horace Jones denied the company due process. As we understand the record, the company sought to prove that a union representative named Snodgrass spoke of putting kerosene in employees’ food to coerce union membership. The proof as to Snodgrass failed, but there was incidental mention of Dixon, also a union representative. When Dixon denied making any statement in which he referred to kerosene, the company, in the guise of rebuttal to Dixon, sought to shift its line of attack and to prove by Horace Jones’s testimony that Dixon made the threat. After hearing the testimony of Jones, the Trial Examiner ordered that it be stricken because it was not true rebuttal and was in violation of the Board’s own regulations.

Whether or not the Trial Examiner was correct in excluding the questioned evidence need not be decided, for it is clear that Jones’s testimony was included in the record upon which the Board, as ultimate trier of fact, based its decision. As in our discussion of the company’s objection to the scope of the hearing, we find the Board was presented with a sufficient record and that the company was given a fair opportunity to present its case.

The Election

In this appeal the company’s substantive challenge to the election is that the employees were not afforded a free and untrammeled choice because rumors of threats and violence created an atmosphere of fear on election day. Specifically, the company emphasizes the activity of employee Russell in circulating rumors concerning the “violence club,” whose supposed function was to intimidate non-union employees. Russell, incidentally, is claimed by each side to be a supporter of the other. The overall effect of this activity, it is asserted, was to create a coercive situation in which a free election was impossible.

The Trial Examiner heard testimony from a multitude of witnesses, including Russell, concerning both the violence club rumor and any other rumors or overt acts which might have affected the outcome of the election. He found that the company had not sustained its burden of proof, and he specifically noted that:

there was no “general atmosphere among voting employees of confusion and fear of reprisal for failing to vote for or support the Union” and nothing to deter such employees from exercising their free choice at the election.

The Board subsequently affirmed the decision of the Trial Examiner and certified the union, holding that the company’s “objections to the election held on April 16, 1970, are without merit.”

Our review of the election is controlled by a clearly enunciated standard: The Board’s findings must be upheld if supported by substantial evidence viewing the record as a whole. Universal Camera Corp. v. NLRB, 340, U.S. 474, 487-488, 71 S.Ct. 456, 95 L.Ed. 456 (1951). The company has a particularly heavy burden where, as here, its challenge is primarily upon the Trial Examiner’s credibility resolutions involving numerous witnesses for each side. NLRB v. Luisi Truck Lines, 384 F.2d 842, 846 (9th Cir. 1967).

The predominant source of the questioned rumors appears to have been Russell, who gave lengthy testimony at the consolidated hearing. The Trial Examiner had the chance to observe his demeanor, along with that of the other witnesses, many of whom gave sharply conflicting accounts. After finding that Russell did in fact spread rumors among several employees, the Trial Examiner determined that the election was a valid and free expression of the employees’ wishes. This finding is well within the standard we stated in Intertype Co. v. NLRB, 401 F.2d 41, 46 (4th Cir. 1968), cert. denied, 393 U.S. 1049, 89 S.Ct. 686, 21 L.Ed.2d 691 (1969):

evaluation of the probable effect of the comment, in light of the totality of circumstances surrounding the election, is a function of the Board. To hold that an improper comment by one not subject to the control of either party must necessarily invalidate a representation election would constitute an unreasonably strict standard that might well prevent the holding of a valid election. The test, as enunciated in the various circuits, is whether the rumor, even if improper, materially affected the election by precluding employees from exercising their own free choice. [Emphasis added]

We believe the Board acted well within its discretion in overruling the company’s objections concerning the election.

The petition to set aside the Board’s order will be

Denied.

The cross-application for enforcement will be

Granted.

WIDENER, Circuit Judge

(dissenting) :

The opinion of the majority is based upon the initial premise that this is a case “ . . . challenging the long established procedure of consolidating for a single hearing objections to a representation election and charges of unfair labor practices.”

It is further based, to a considerable extent, upon a finding by the majority that the conflict of interest arising from the admittedly “dual role” of the attorney for the government was “theoretical,” and that his dual participation was “insufficient to establish such a degree of partisanship that would destroy the fairness of the hearing.”

I must respectfully dissent both to the phrasing of the problem and the finding of such facts as to the conduct of the government’s attorney, which I submit are not supported by the record.

While the writing which follows will set out my conception of the legal setting of the case, I note here the record discloses that 59 objections to testimony and motions to strike were made during the hearing. The government’s attorney, who was obviously the leading counsel on that side of the dispute, lodged 34 objections to evidence, all to questions by the company’s attorney, and none to questions by the attorney for the union. The union lodged 17 objections to evidence, all to company questions. Only to one of these objections did the government’s attorney indicate that he felt the union’s position was not well taken. The attorney for the government joined in none of the company’s seven objections to evidence, and in 9 of the union’s 17 objections, 7 of which were overruled. Thus, so far as the opinion of the majority is based on the finding that the government’s attorney had only a theoretical conflict of interest, or that his degree of partisanship was insignificant, the record speaks to the contrary.

Some repetition of facts stated in the majority opinion is unavoidable. On April 22, 1970, the company filed four objections to the conduct of the election. They are: (1) an international union representative named Snodgrass told a gathering of 200-250 employees that union supporters should put kerosene in the lunch boxes of employees who would not join; (2) the employee Willie Quinn, a union advocate, held a meeting of seven other employees at which he informed them that they were to be the members of a violence club whose function it would be to intimidate any employee who would not join the union and stifle those actively opposing the union; (3) the union attempted to and did pay employees to advocate and vote for the union; (4) the union’s regional director, Dixon, told a gathering of employees that a letter from the company to all employees wrongfully represented that at other plants the union had lost representation elections and in the one plant where they had won, men lost their jobs, there was a strike, and negotiations were still not completed.

These objections were investigated by the Regional Director of region 11 of the NLRB. In a report dated July 6, 1970, the Regional Director recommended that a hearing be held to resolve conflicting evidence regarding the issues raised by objections 1 and 2, and he further recommended that objections 3 and 4 be overruled.

The company filed its objections and exceptions to the report of the Regional Director. In its order of September 22, 1970, the NLRB construed the objections and exceptions as follows:

“Thereafter, on August 11, 1970, the Employer filed timely exceptions to the Regional Director’s report, submitting that the Regional Director’s recommendation that objections 3 and 4 be overruled should be rejected and that an evidentiary hearing should be directed on all the Employer’s objections as well as on the evidence of objectionable conduct not specifically included in the formal objections.” [Emphasis added]

The order further directed a hearing using the following language:

“ . . . Objection 4 is hereby overruled. However, the Employer’s exceptions raise issues with respect to both Objection 3 and alleged threats of violence and retaliation which can best be resolved by a hearing. Accordingly,
It is Hereby Ordered that a hearing be held before a duly designated Hearing Officer for the purpose of receiving evidence to resolve the issues set forth above, as well as the issues raised by objections 1 and 2.” [Emphasis added]

The manner in which the Board construed the company’s objections and the language the Board used in directing a hearing become important in considering the company’s argument that in the subsequent hearing the hearing officer wrongfully limited the evidence to the specific objections numbered 1, 2 and 3, and refused to consider threats of violence and retaliation not specifically alleged in those objections.

The Regional Director then ordered that the company’s case challenging the election and the union’s ease challenging the discharge of employee Quinn be consolidated “in order to effectuate the purposes of the Act and to avoid unnecessary costs and delay.” The company filed a timely motion to sever the proceedings, 29 C.F.R. § 102.33(d), which was denied. In that motion, the company called attention of the Board to the fact that the same attorney was representing the Board in both eases and his conflicting interests.

I consider first the company’s argument that the hearing examiner wrongfully limited the scope of the hearing. The majority opinion disposes of this question by stating the belief that “ . . . the company was permitted to put into the record, all the evidence it had to support its position.” The record, however, does not support such belief, for who will ever know what evidence was not offered in the face of the clearly erroneous ruling of the examiner which limited the scope of the hearing.

To place this argument in its proper perspective, it should be pointed out that after the company filed its objections and exceptions to the election, but before the Regional Director had completed investigating such objections, the company submitted additional evidence of objectionable conduct which was not initially included in the objections filed by the company. The Regional Director’s report does not show that he considered such additional evidence. In language which we have already quoted, the Board specifically noted and sustained this objection. After taking cognizance of the objection, the Board directed that a hearing be held to resolve the issues raised by it. However, with the support of the attorney for the government, the hearing officer construed the order so as to limit the hearing to the specifics of objections 1, 2 and 3. I believe the Board’s order was a clear mandate for a hearing broader in scope than that conducted by the hearing officer. The Board contends that the company actually did get its evidence in, even though the trial examiner indicated that the scope of the hearing would be limited to the specifics of objections 1, 2 and 3. While it may be true that counsel was skillful enough to get some of his evidence before the examiner indirectly by bits and pieces, the ineffectiveness and prejudice of this method of introducing evidence through the back door is self evident.

This is especially true, as here, when the trier of fact has already indicated that such evidence will not be considered. I am of opinion that the trial examiner should have received the evidence of additional threats of violence in accordance with the Board’s order for a hearing. His action in not receiving such evidence is a clear violation of the order of the Board under which he acted.

Petitioner further contends that its rights were prejudiced by the consolidation of the cases below. In case number ll-CA-4257, the union charged that the company wrongfully discharged employee Quinn because of his support of the union. Case number ll-RC-3076 involved the company’s objections to the representation election. With regard to consolidation, the rules and regulations of the NLRB, 29 C.F.R. § 102.33, provide as follows:

“(a) Whenever the general counsel deems it necessary in order to effectuate the purposes of the act or to avoid unnecessary costs or delay, he may permit a charge to be filed with him in Washington, D. C., or may, at any time after a charge has been filed with a regional director pursuant to § 102.10, order that such charge and any proceeding which may have been initiated with respect thereto:
(1) Be transferred to and continued before him for the purpose of investigation or consolidation with any other proceeding which may have been instituted in a regional office or with him; or
(2) Be consolidated with any other proceeding which may have been instituted in the same region.”

The company does not attack all consolidation on its face; indeed, consolidation of cases is an approved practice of long standing. NLRB v. Dixie Shirt Co., 176 F.2d 969, 970 (4th Cir. 1949); 29 C.F. R. § 102.33(a)(2). As the company correctly points out, how,ever, consolidation is proper only where the rights of the parties will not be prejudiced thereby. See NLRB v. Chelsea Clock Co., 411 F. 2d 189 (1st Cir. 1969). Petitioner contends it was in fact prejudiced by the manner in which these consolidated cases were heard. Such prejudice, it is argued, resulted from the close relationship between the facts in each case and from the fact that the same lawyer represented the Board in both cases.

The Board’s rules and regulations describe a representation hearing as follows:

“§ 101.20 Formal Hearing
(c) . . . The hearing, which is nonadversary in character, is part of the investigation in which the primary interest of the Board’s agents is to insure that the record contains as full a statement of the pertinent facts as may be necessary for determination of the case. The parties are afforded full opportunity to present their respective positions and to produce the significant facts in support of their contentions.”

Thus, the attorney for the Board in the representation case had the duty to insure that the record was as complete as possible with regard to the facts pertaining to that case. The NLRB Field Manual, § 1142.4, directs that the Board’s counsel must exercise self restraint, be impartial, and display the appearance of impartiality.

Hearings on unfair labor charges are quite a different matter. Such a hearing is described by the Board’s rules and regulations, § 101.10:

“The Government’s case is conducted by an attorney attached to the Board’s regional office, who has the responsibility of presenting the evidence in support of the complaint.”

As counsel for the General Counsel in the unfair labor practice case, then, the attorney’s duty was that of every lawyer in an adversary trial — to advocate his position. Impartiality is cast aside.

The conflict of interest of the government’s attorney was particularly acute here because of the close connection between the facts underlying the consolidated cases. For example, the conduct of employee Quinn was at issue in each case. The union, and the Board in the unfair labor practice case, claimed that Quinn was wrongfully discharged because of his pro-union activity. One of the company’s main objections to the election was that Quinn had formed a violence club to intimidate anti-union employees. The company claimed Quinn was discharged for threatening fellow employees both before and after the election. To enhance his chances of success in the unfair labor practice charge, government counsel obviously would strive to resist the introduction of evidence tending to show any questionable conduct by Quinn. Yet, at the same time, it was his duty in the representation case to maintain neutrality as to the merits and to strive for the admission of such evidence because of his duty to insure as complete a record as possible. At the same time, the same government attorney would have to seek to introduce and exclude evidence of Quinn’s violent proclivities.

Throughout the hearing, counsel for the Board and counsel for the General Counsel (the same lawyer) played the advocate. He objected frequently to the company’s testimony as being repetitive, leading, hearsay and the like, which was in marked contrast to his almost entire absence of disagreement with the union’s every contention. At one point, he successfully urged the trial examiner to strike certain testimony because it was being brought out during the case in rebuttal instead of during the case in chief. "Such a position was wholly inconsistent with his duty to remain neutral and develop as complete a record as possible, as well as being inconsistent with the Board’s stated purpose of obtaining a full statement of pertinent facts in representation election hearings, 29 C.F.R. § 101.20. The ruling just referred to concerned activity of one Dixon. On direct examination, one of the company’s witnesses attributed a statement to Dixon, a union representative. Dixon denied making the statement. To rebut this, the company called another witness to identify Dixon as the speaker and incidentally repeat the statement. Relying upon the rule that such testimony should have been brought out during the company’s evidence in chief, the examiner struck the testimony at the instance of the government’s attorney. Leaving aside the propriety of such a ruling, even in an adversary proceeding, it is unquestionably erroneous in an investigatory, non-adversary proceeding. While I recognize that consolidation of representation election hearings with unfair labor practice hearings is frequently, or even usually, proper, and I do not say that the same lawyer may never represent the Board and the General Counsel in such proceedings, where, as here, the facts pertaining to both cases are closely related, and performance of duty in one role precludes its proper performance in another, I am of opinion that the same lawyer may not represent the government in both cases. The clear conflict of duty in a case such as this may dictate success on the one hand and failure on the other as its unavoidable consequence. Where the government’s attorney sacrifices his neutrality for the role of advocate, I believe the other side is deprived of opportunity for a fair chance to present its case.

The record establishes that the Board’s own rules were violated, under the facts here presented, by the assignment of the same attorney to represent the government in both cases where his duties necessarily conflicted; the government’s attorney played the role of advocate throughout; the government abandoned its neutral position in representation hearings; the trial examiner made at least one ruling on material evidence at the instance of the government’s attorney which was clearly erroneous; and the trial examiner violated the Board’s order as to the scope of the representation hearing.

To decide the representation issue on such a record would be manifestly unfair and legally unsound because of the procedural errors which were committed in making up the record.

The company claims the conduct of the hearing as above set forth is a violation of procedural due process. I do not find it necessary to reach the constitutional question. Although a hearing may satisfy the rudiments of due process, it is nevertheless subject to scrutiny. The Board, like any other agency, must abide by its own rules, regulations and established procedures. As stated by this court in NLRB v. Poinsett Lumber & Mfg. Co., 221 F.2d 121, 123 (4th Cir. 1955), (quoting NLRB v. Indiana & Mich. Elec. Co., 318 U.S. 9, 63 S.Ct. 394, 87 L.Ed. 579),

“The Act accords a great degree of finality to the Board’s findings of fact, and this court has been insistent that the admonition of the Act be strictly observed. But courts which are required upon a limited review to lend their enforcement powers to the •Board’s orders are granted some discretion to see that the hearings out of which the conclusive findings emanate do not shut off a party’s right to produce evidence or conduct cross-examination material to the issue. The statute demands respect for the judgment of the Board as to what the evidence proves. But the court is given discretion to see that before a party’s rights are foreclosed his ease has been fairly heard.”

If it appears that a case has not been fairly heard, this court has the discretion and, indeed, the duty to correct abuses apparent from the record. Such abuse may be corrected on remand. General Steel Products v. NLRB, 445 F.2d 1350 (4th Cir. 1971); NLRB v. Poin-sett Lumber & Mfg. Co., 221 F.2d 121 (4th Cir. 1955). I would remand this case to the Board with instructions that a new hearing on the objections to the election be conducted in accordance with the Board’s rules and in accordance with its order of September 22,1970.

      . The unlawful discharge of employee Quinn was not applied.

      . 29 C.F.R.. § 102.33 (1972) provides in part:
      (a) Whenever the general counsel deems it necessary in order to effectuate the purposes of the act or to avoid unnecessary costs or delay, he . may, at any time after a charge has been filed with a regional director pursuant to § 102.10, order that such charge and any proceeding which may have been initiated with respect thereto :
      (2) Be consolidated with any other proceeding which may have been instituted in the same region ....

      . An unfair labor charges hearing is described by the NLRB Statements of Procedure, 29 C.F.R. § 101.10(a) (1972), as follows:
      The Government’s case is conducted by an attorney attached to the Board’s regional office, who has the responsibility of presenting the evidence in support of the complaint.

      . The NLRB Field Manual, § 11424.4, states that the Board’s counsel in a representation hearing must exercise self-restraint, be impartial, and display the appearance of impartiality. The primary interest of the Board’s agents in this type of hearing is “to insure that the record contains as full a statement of the pertinent facts as may be necessary for determination of the case.” 29 C.F.R. § 101.20(c) (1972). In so doing, he may attack evidence introduced by either party. NLRB Field Manual, § 11424.4.

      . Actually, the witness was allowed to testify. In a discussion relating to the form the offer of proof should take, the Trial Examiner explained his view relative to the inclusion into the record of disputed evidence:
      Well, there is that choice, but there’s no reason why it cannot be done the other way, and at least we will have the testimony on record should the Board in its review of this case decide that my ruling [concerning the scope of the hearing] was incorrect.

      . The Board’s regulations require timely notice of what is proposed to be proved. 29 C.F.R. § 102.69(a) (1972) states that all objections to conduct affecting the results of an election to be filed within five days after the furnishing of the tally of the ballots. Here, the notice was not forthcoming for approximately seven months.

      . The following extract shows that all the evidence was taken into account:
      . . . I find in spite of inconsistencies and discrepancies in the testimony of many of the witnesses who testified, a gathering of some sort was held at Quinn’s home and that employee Russell advocated violence against Rouse and Gray but that that suggestion was not adopted by the others present at the gathering; that Russell, nonetheless, spread a rumor of violence among a few employees who after the election reported the threats to management without ascertaining the truth or falsity of such threats; and that there is insufficient evidence that the employees were frightened by these rumors of violence, at least until after the election. Accordingly, there was no “general atmosphere among voting employees of confusion and fear of reprisal for failing to vote for or support the Union” and nothing to deter such employees from exercising their free choice at the election. There is nothing in the record to indicate that any; employee was interfered with at the election poll. Even those to whom Russell repeated the alleged threats of violence on election day apparently cast their ballots freely and without hindrance. It is impossible to prevent irresponsible talk during an election campaign.

      . I do not imply any personal or professional criticism of the attorney. He was simply put into an impossible position by the rulings of the Board and the Examiner.

      . Obviously, one of these is a duplication.

      . Neither the record nor the majority opinion even suggest that the company acted in bad faith. In the absence of bad faith, in the face of a ruling limiting proof by the trier of fact, witnesses need not be called to make a formal offer of proof and “ . . . an appellate court must assume that the proof could have been made, and govern itself accordingly.” Scotland County v. Hill, 112 U.S. 183, 186, 5 S.Ct. 93, 95, 28 L.Ed. 692 (1884). [Emphasis added].
      The majority states that the company “. . . stated in its Response to Notice to Show Cause on General Counsel’s Motion for Summary Judgment that the ‘additional evidence’ purportedly excluded by the Trial Examiner would have consisted of the testimony of eight workmen.”
      Again, I am of opinion that the record does not support this finding. The record shows that the eight affidavits referred to in the majority opinion were filed with an exception to an earlier ruling by the Regional Director and were referred to by the company as having been so filed in the Response above spoken of by the majority. Far from stating that the eight affidavits set out the additional testimony, the Response, to the contrary, complained the “. . . Trial Examiner erred by refusing to allow Respondent to present witnesses and other relevant evidence as to ‘alleged threats of violence and retaliation’ . . . . ”
      Further, the Board, in its order of April 10, 1972, based its decision, at least in large part, on the astonishing statement that the company “. . .is not entitled to relitigate issues which were or could have been litigated in a prior representation hearing.” And this, in the face of sustaining, in the same order, the erroneous ruling by the Examiner restricting the scope of the hearing in clear violation of the Board’s previous order.
      On the same subject, the clear inference by the majority that the Board considered all the relevant additional evidence is not, in my opinion, supported by the record. The quotation on page 196 of the majority opinion is taken from a footnote in the opinion of the Board dated September 29, 1971, some seven months before the order of the Board granting summary judgment against the company. When read in context, it is seen the quotation should refer to only the testimony of two witnesses which was being commented upon at that point in the footnote. Even assuming the quotation to be susceptible to the meaning attributed to it by the majority, its conclusion is not supported by the record for the Trial Examiner had previously and erroneously restricted the scope of the hearing. No one will ever know from this record what evidence might have been introduced had the Board’s order of September 22, 1970 been complied with by the Trial Examiner.

      . W. G. Cosby Transfer & Storage v. Froehlke, 480 F.2d 498 (4th Cir., 1973) ; Brooks v. Clifford, 409 F.2d 700, 706 (4th Cir. 1969) ; United States v. Wilbur, 427 F.2d 947 (9th Cir. 1970) ; Smith v. Resor, 406 F.2d 141 (2nd Cir. 1969) ; Bonita, Inc. v. Wirtz, 125 U.S. App.D.C. 163, 369 F.2d 208 (1966) ; United States v. Orta, 305 F.Supp. 1073 (D.Puerto Rico 1969) ; Cf. Yellin v. United States, 374 U.S. 109, 83 S.Ct. 1828, 10 L.Ed.2d 778 (1963) ; Service v. Dulles, 354 U.S. 363, 77 S.Ct. 1152, 1 L.Ed. 2d 1403 (1957).


author: ROSENN, Circuit Judge.

text:
    UNITED STATES of America, Appellant, v. Robert Joseph BECK. UNITED STATES of America, Appellant, v. Robert William MURRAY.
    Nos. 73-1086, 73-1087.
    United States Court of Appeals, Third Circuit.
    Argued June 11, 1973.
    Decided Aug. 8, 1973.
    Certiorari Denied Jan., 7, 1974.
    See 94 S.Ct. 873.

      Carmen C. Nasuti, Asst. U. S. Atty., Philadelphia, Pa., for appellant.
    Edward H. Weis, Defender Association of Philadelphia, Philadelphia, Pa., for appellees.
    Before GIBBONS, ROSENN and WEIS, Circuit Judges.
   OPINION OF THE COURT

ROSENN, Circuit Judge.

This appeal poses, first, the important threshold question of whether this court has jurisdiction to hear an appeal by the Government in a criminal prosecution and, second, whether the border search standard should be applied to the stop and search in this case.

The district court, 354 F.Supp. 604, for the Eastern District of Pennsylvania entered an order dated December 12, 1972, reversing judgments of the United States magistrate convicting and sentencing Robert Murray and Robert Beck for theft in violation of 18 U.S.C. § 659. The case was tried on April 20, 1972, before United States Magistrate Naythons. The magistrate denied motions to suppress the evidence of the theft, and both defendants were adjudged guilty and sentenced to pay a fine of $100. They appealed the convictions, and the district court reversed on the ground that the evidence should have been suppressed. The district court remanded the case to magistrate Naythons for further proceedings consistent with its opinion.

We have concluded that we have jurisdiction and that the search was legal. We therefore reverse the order of the district court.

7. Jurisdiction

We recently reaffirmed the “well-settled rule that an appeal by the prosecution in a criminal ease is not favored and must be based upon express statutory authority.” Government of Virgin Islands v. Hamilton, 475 F.2d 529, 530 (3d Cir. 1973). The Government asserts as statutory authority for this appeal the Criminal Appeals Act, as amended in 1970, 18 U.S.C. § 3731, paragraph 2, providing:

An appeal by the United States shall lie to a court of appeals from a decision or order of a district court suppressing or excluding evidence or requiring the return of seized property in a criminal proceeding, not made after the defendant has been in jeopardy and before the verdict or finding on an indictment or information, if the United States Attorney certifies to the district court that the appeal is not taken for the purpose of delay and that the evidence is a substantial proof of a fact material in the proceeding.

This language on its face is enigmatic. It presents us with two interpretative questions: (1) What is the meaning of the clause “not made after the defendant has been in jeopardy and before the verdict or finding on an indictment or information”; (2) Was the order entered by the district court a “suppression order.”

The Senate report on the 1970 amendment to the Criminal Appeals Act discloses that Congress intended to permit a Government appeal from any suppression order not made during the course of the trial. The report states:

The amended Criminal Appeal [s] Act is intended to be liberally construed so as to effectuate its purpose of permitting the Government to appeal from dismissals of criminal prosecutions by district courts in all cases where the Constitution permits, and from all suppressions and exclusions of evidence in criminal proceedings, except those ordered during trial on an indictment or information.

Senate Report No. 91-1296, at 18. The only evident purpose in establishing the limited exception as to orders entered during trial was to prevent the suspension or interruption of ongoing trials. See Senate Report No. 91-1296, at pages 12-13, 36.

The clause in § 3731 “not made after the defendant has been in jeopardy and before the verdict or finding on an indictment or information” must be read against this legislative background. We therefore reject appellees’ contention in their brief that an appeal lies only when the suppression order is made “before the verdict or finding on an indictment or information.” Although the order in this case was entered after the magistrate’s finding of guilt, an appeal, nonetheless, will lie since it does not involve a suspension or interruption of an ongoing trial.

Nor do we find merit in appellees’ contention that the order of the district court was not a “suppression order” within the terms of the Act. Although section 3731 does not define “suppression order,” it does provide that “the provisions of this section shall be liberally construed to effectuate its purposes.” The Senate report, moreover, states specifically, “The phrase ‘suppressing or excluding evidence or requiring the return of seized property’ should be read broadly, not narrowly as a similar statutory term has been interpreted.” The district court’s decision did not, strictly speaking, “suppress” the evidence. The opinion states:

Because the evidence should have been suppressed for the reasons set forth above, we reverse the convictions and sentences of defendants and remand to the Magistrate’s Court for further proceedings consistent herewith.

The practical effect of the decision, however, is to suppress the evidence, since that is the only course left open to the magistrate.

Appellees argue that the decision appealed from is an order requiring a new trial before the magistrate. Conceding that the magistrate would be required to suppress the evidence at the new trial, they argue that the Government could then appeal the magistrate’s order suppressing the evidence and obtain a rehearing de novo before the district court under Rule 5 of the Federal Rules of Procedure for the Trial of Minor Offenses before U. S. Magistrates. Then, if the district court sustained the magistrate a second time, the Government could appeal to this court.

Appellees’ suggested procedure would exalt form over substance, waste valuable judicial time, and delay justice. The congressional mandate that a “suppression order” be liberally construed compels the conclusion that a district court decision requiring the suppression of evidence by a United States magistrate is an appealable order. Although it is unclear from the language of section 3731 whether Congress considered the unique relationship between magistrates and district courts, we think allowing jurisdiction over this appeal is in harmony with the congressional purpose to permit appeals except where an ongoing trial would be interrupted.

The first paragraph of section 3731 reinforces our conclusion that we possess jurisdiction. It provides:

In a criminal case an appeal by the United States shall lie to a court of appeals from a decision, judgment, or order of a district court dismissing an indictment or information as to any one or more counts, except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution.

This indicates that Congress desired to grant the Government the right to appeal in all cases where constitutionally permissible. Since the only reason given for a deviation from that principle as to suppression orders was the desire not to disrupt ongoing trials, we believe that Congress intended to authorize appeals from suppression orders whenever consistent with the double jeopardy clause, except when entered during a trial. The double jeopardy clause is no bar to this appeal, for it has been long settled that this constitutional guarantee imposes no limitations upon the power to retry a defendant who seeks and procures reversal of his conviction. See North Carolina v. Pearce, 395 U.S. 711, 720, 89 S.Ct. 2072, 23 L.Ed.2d 656 (1969).

Government of Virgin Islands v. Hamilton, 475 F.2d 529 (3d Cir. 1973), relied upon by appellees, is inapposite, for in that case the appeal was not from an order suppressing evidence but from an order reversing the conviction of the defendants because of insufficient evidence. This was in effect a judgment of acquittal. On the other hand, in the case sub judice we have merely an appeal from a suppression order, not a judgment of acquittal on the general issue of guilt. Therefore, section 3731 authorizes this appeal, although it was inapplicable to the Hamilton case.

II. Legality of the Search

The magistrate found that the search was a valid “border search” and, after trial, denied defendants’ motions to suppress the evidence found in their duffle bags and car. On appeal, the district court agreed that this was a “border search” but that proximity to the border area was only one factor to be considered in determining the reasonableness of the search. It concluded that this search was not “reasonable under the circumstances.” It stated that the test to be applied was whether “all the facts and circumstances established a reasonable basis for the officers to believe that contraband or goods subject to customs control were being introduced into the United States in a manner contrary to the customs laws.” It thus appears that the district court applied the normal probable cause test for the legality of a search rather than the less stringent border search standard.

The magnitude of the smuggling and theft problems on our extensive international borders and numerous international airports and seaports has led to the formulation of special, pragmatic standards for judging the legality of stops and searches in or around such border areas or international port facilities. Instead of the usual requirement of probable cause to believe that an individual possesses contraband or that he has committed a crime demanded by the Fourth Amendment, a customs officer need only have a reasonable suspicion of illegal activity. See United States v. Glaziou, 402 F.2d 8, 12 (2d Cir. 1968), cert. denied, 393 U.S. 1121, 89 S.Ct. 999, 22 L.Ed.2d 126 (1969); United States v. McGlone, 394 F.2d 75, 78 (4th Cir. 1968); Thomas v. United States, 372 F. 2d 252, 254 (5th Cir. 1967). “A customs officer has the unique power to stop a person at an international entry point to conduct a ‘border search’ without having a search warrant and even having probable cause to believe the person has committed a crime.” United States v. Glaziou, 402 F.2d at 12. Recognition of this diminished constitutional standard is reflected in 19 U.S.C. § 482, specifically authorizing customs officers to stop and search vehicles or persons in or on which they suspect there is merchandise illegally brought into the United States. It does not, of course, exempt border searches from the constitutional test of reasonableness. Thomas v. United States, 372 F.2d 252, 254 (5th Cir. 1967); United States v. Glaziou, 402 F.2d at 12.

Practical considerations dictate a certain amount of elasticity in describing the area within which the border search standard is constitutionally appropriate, a determination dependent upon the particular facts of each case. The area has not been limited to the actual confines of an international port or to the border itself. On the contrary, it has been expanded to “a reasonable extended geographic area in the immediate vicinity of any entry point.” See United States v. Glaziou, 402 F.2d at 13. The diminished standard, as the Supreme Court recently observed, “may in certain circumstances take place not only at the border itself, but at its functional equivalents as well. For example, searches at an established station near the border, at a point marking the confluence of two or more roads that extend from the border, might be functional equivalents of border searches.” Almeida-Sanchez v. United States, 413 U.S. 266, 93 S.Ct. 2535, 2539, 37 L.Ed.2d 596 (1973) (dictum).

We think the facts of this case testified to by the searching officers justify the application of the “border search” standard. The search was performed by customs officers in surveillance of an international port of entry to detect narcotics smuggling. Customs Agents Harrison and Friedrich were, on April 16, 1972, watching Pier 80 in Philadelphia with the aid of binoculars from a distance of 100 to 150 yards when at approximately 4:15 P.M. they observed defendants leaving the pier carrying large, blue canvas bags. Both defendants were identified as watchmen because of their gray helmets. They knew from past experience that dock workers, including watchmen, carried such bags to transport lunch boxes, helmets and other articles needed while on the job. Beck’s bag, however, appeared to them unduly heavy causing Beck’s arm to hang straight rather than swing, his “belly” to appear “overlarged,” and his body to lean to the right. They were observed entering an automobile in which Beck placed his bag on the floor and then, along with Murray, drove away from the pier. The agents pursued them immediately, stopping them one-half mile from the pier. Friedrich proceeded to open the trunk of the car, and Harrison asked Beck to open his bag in the back seat. Beck opened it and revealed fishing knives, fishing reels, dinnerware, and other merchandise. At that point, Murray asked the agents, “Can’t you give Mr. Beck a break?” The agents had no knowledge then that any goods had been stolen. Murray’s bag was also opened upon request of the officers, and it revealed similar contents, in addition to a tape recorder. A later investigation revealed that the goods had been stolen from a bonded locker on the pier. It was conceded that these 'goods were part of a foreign shipment to the port.

Under these circumstances, we believe that the agents had reasonable grounds to suspect the defendants of illegal activity and that the reasonable suspicion standard was appropriate. The search was made immediately after defendants’ departure from the pier and while they were still in the border area. Border searches much more removed in time and place have been approved. See, e.g., Rodriguez-Gonzalez v. United States, 378 F.2d 256 (9th Cir. 1967) (20 miles from border, 15 hours after crossing); Murgia v. United States, 285 F.2d 14 (9th Cir. 1960) miles); Thomas v. United States, 372 F.2d 252 (5th Cir. 1967) (6 blocks; 1½ hours).

Almeida-Sanchez v. United States, 413 U.S. 266, 93 S.Ct. 2535, 37 L.Ed.2d 596 (1973), in which the Supreme Court invalidated a border search, is distinguishable. There, the search of an automobile was conducted by a roving patrol “on a California road that lies at all points at least 20 miles north of the Mexican border.” 413 U.S. at 273, 93 S.Ct. at 2539. Almeida-Sanchez was in fact 25 miles north of the border when he was stopped. He had not been observed leaving a border area or engaging in any suspicious conduct; the search was purely by chance. The Court indicated that it was concerned with the effect permitting such searches would have on the rights of wholly innocent drivers. 413 U.S. 266, 93 S.Ct. 2535. This case lays bare no such evil because: (1) the search was conducted upon reasonable suspicion; (2) the persons subjected to the search had just left a port area; and (3) the search was conducted in close proximity to the port area.

The defendants are not immune from a border search because they were employees at the pier and not persons entering the country. Employees working in a border area are within the class of persons subject to a border search for contraband when leaving the area. United States v. Glaziou, 402 F.2d at 13; United States v. McGlone, 394 F.2d 75 (4th Cir. 1968). If employees were immune from its reach, they would be inviting, sitting targets for smugglers and thieves; and the effective enforcement of the customs laws, important to the economy and revenue of the country, would be transformed readily into shambles.

The order of the district court will be reversed and the'case remanded for the entry of judgments consistent with this opinion.

      . Tlie United States Attorney did certify, in his notice of appeal, that the appeal was not taken for the purpose of delay and that the evidence is substantial proof of a fact material in the proceeding,

      . S.Rep.No.91-1296, at 37 (citing as the improper, narrow reading, United States v. Greely, 134 U.S.App.D.C. 196, 413 F.2d 1103 (1969), which held that a denial of a Government motion to reopen a suppression hearing was not an “order, granting ... a motion to suppress evidence”).

      . See generally United States v. Pecora, No. 72-2173 (3d Cir., 1973), in which we interpreted this paragraph.
      Section III of S.Rep.No.1296, dealing with the general effect of the amendment of section 3731, notes that it will:
      afford the Government the right of appeal from the dismissal of a criminal prosecution in all cases where the decision rendered by the district judge does not result in an acquittal after jeopardy. As a result, review of a lower court dismissal will be precluded only where the double jeopardy clause of the Constitution mandates it.

      . 19 U.S.C. § 482 provides in pertinent part:
      Any of the officers or persons authorized to board or search vessels may stop, search, and examine, any vehicle, beast, or person, on which or whom he or they shall suspect there is merchandise which is subject to duty, or shall have been introduced into the United States in any manner contrary to law, . . . and to search any trunk or envelope, wherever found, in which he may have a reasonable cause to suspect there is merchandise which was imported contrary to law; .


author: PER CURIAM: KILKENNY, Circuit Judge

text:
    PACIFIC TRANSPORT COMPANY and Subsidiaries, Appellee-CrossAppellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellant-Cross-Appellee. PACIFIC ATLANTIC STEAMSHIP COMPANY, Appellee-Cross-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellant-Cross-Appellee (two cases). STATES STEAMSHIP COMPANY, etc., Appellee-Cross-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellant-Cross-Appellee (two cases). STATES STEAMSHIP COMPANY, Appellee-Cross-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellant-Cross-Appellee. PORTLAND STEVEDORING COMPANY, Appellee-Cross-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellant-Cross-Appellee (two cases). PACIFIC TRANSPORT LINES, INC., Appellee-Cross-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellant-Cross-Appellee. CALIFORNIA EASTERN LINES, INC., Appellee-Cross-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellant-Cross-Appellee (two cases). PACIFIC TRANSPORT COMPANY, and Subsidiaries, et al., Appellants-Cross-Appellees, v. COMMISSIONER OF INTERNAL REVENUE, Appellee-Cross-Appellant.
    Nos. 71-1754 to 71-1764, 71-1810.
    United States Court of Appeals, Ninth Circuit.
    Aug. 16, 1973.
    Rehearing Denied Sept. 10, 1973.

      Janet R. Spragens, Átty. (argued), Fred B. Ugast, Acting Asst. Atty. Gen., Scott P. Crampton, Acting Asst. Atty. Gen., Tax Div., Dept of Justice, K. Martin Worthy, IRS Chief Counsel, Meyer T. Rothwacks, Ernest J. Brown, Tax Div., Dept, of Justice, Washington, D. C., for appellant and appellant and ap-pellee in No. 71-1810.
    Valentine Brookes (argued), Richard A. Wilson, of Brookes, Maier & Wilson, San Francisco, Cal., for the appellees and appellants in No. 71-1810.
   OPINION

Before ELY and KILKENNY, Circuit Judges, and SKOPIL, District Judge.

PER CURIAM:

These appeals and cross-appeals are prosecuted from decisions of the tax court involving corporate income taxes for the tax year 1958 and certain tax periods in 1957. The taxpayers consist of a group of affiliated steamship companies. The deficiencies arise from the reduction of a net operating loss claimed by the group in 1959, a year not in issue, and carried back to taxable periods in 1957 and 1958, two open years.

Factual Background

The essential facts are not in dispute. In 1956, and prior years, Dant & Russell, Inc. [¶] & R], was a family owned corporation of the Dant family, with interests principally involved in the lumber and shipping areas. The shipping interests of the corporation were in the main managed by D. R. (Jack) Dant [Dant], who owned 19% of its capital stock. On July 10, 1956, D & R owned all of the capital stock of States Steamship Company, a Nevada corporation [Old States], and of Pacific Atlantic Steamship Company [Pacat]. Old States, in turn, owned all of the capital stock of Pacific Transport Lines, Inc., Portland Stevedoring Company and Quaker Line, Inc. Additionally, it controlled 43.66% of the stock of California Eastern Lines, Inc. Dant was the vice-president and general manager of Old States from 1950 to 1956.

The problems with which we are concerned on this appeal are centered on the purchase of the stock of Old States [July 11, 1956] and its subsequent liquidation [June 30, 1957] by a newly formed corporation named States Line, Inc. [New States]. New States was incorporated in Nevada on June 28, 1956, by Dant, who paid cash for all of its capital stock. New States then borrowed additional amounts from banks and other sources and with these funds purchased the stock of Old States. Dant’s overall plan was for New States to liquidate Old States and acquire its assets within two years as contemplated by Section 334(b)(2) of the Internal Revenue Code [26 U.S.C. § 334(b)(2)]. Old States was then continued as a wholly owned subsidiary of New States for slightly less than a year and then liquidated on June 30, 1957.

The purchase of Old States’ stock by New States was part of a larger transaction involving the sale of all of the stock of D & R to a third party, Blythe & Company [Blythe] followed by a resale of the steamship interests of the corporation back to Dant. Blythe’s negotiations to acquire the D & R stock commenced early in 1956, when Blythe entered into an option, purchase and escrow ageement with all of the stockholders of D & R, with the exception of Dant. The following June, Blythe and Dant signed what was known as a “pledge” agreement with the Bank of California in an effort to allow Blythe to acquire all of the stock of D & R and then sell to Dant the stock of Old States and Pacat. In line with this agreement, Blythe on July 10, 1956, acquired all of the stock of D & R and then caused that company to be dissolved. Blythe then caused Old States, whose stock it had acquired in the dissolution, to pay a dividend of $2,500,000.00. On the following July 11th, Blythe sold to Dant the stock of Pacat for $1,950,000.00 and New States, formed less than two weeks before by Dant, purchased all of the stock of Old States for- $11,050,000.00.

As an outgrowth of these transactions, Dant personally owned all of the capital stock of Pacat and New States. New States, in turn, owned all of the stock of Old States, which owned Portland Stevedoring Company, Pacific Transport Lines and California Eastern Lines. Consequently, the liquidation of Old States into New States occurred less than two years after New States had purchased the former’s stock and the transaction qualified under 26 U.S.C. § 334(b)(2). Likewise, the liquidation fell within the provisions of § 78.540, Revised Statutes of Nevada, which required New States to assume all of the liabilities of Old States.

All of the above transactions occurred subsequent to and were based upon, at least in part, the decision of the United States District Court for the District of Oregon, dated November 17, 1955, in which the court limited liability of Old States for the loss of cargo in connection with the loss on January 9, 1952, of the vessel S.S. PENNSYLVANIA, a cargo ship owned and operated by Old States, which was lost at sea in the Pacific with all of its cargo and crew. The litigation involving the loss of the lives of the members of the crew was settled by Old States prior to 1956. All parties appealed from the decision of the district court in connection with the loss of cargo. The decision of the district court was affirmed by the court of appeals in States Steamship v. United States, 9 Cir., 259 F.2d 458, on May 31, 1957. Worthy of comment is the fact that the judgment was affirmed approximately one month prior to the liquidation of Old States into New States on June 30, 1957. Then the eccentricities of the law threw the master plan into a tailspin. The parties filed petitions for rehearing. On November 15, 1957, the court of appeals did an about face, reversed its previous stand and held that Old States liability to shippers could not be limited. States Steamship Co. v. United States, 259 F.2d 458, 463. The problem faced by the court in exercising the feminine prerogative of changing its mind is exemplified by the closing paragraph on the second petition for rehearing, which we quote:

“In this effort to clarify our decision we believe we have at least somewhat improved upon the statements made in our November 15, 1957, opinion.”

Certiorari was denied, States Steamship Co. v. United States, 358 U.S. 933, 79 S.Ct. 316, 3 L.Ed.2d 305 (January 12, 1959), 359 U.S. 921, 79 S.Ct. 579, 3 L.Ed.2d 583 (February 24, 1959). On remand to the district court, the case was settled for $1,455,394.00.

While the appeal was pending, Dant had been advised by his attorneys that: “. . . While no law suit is a certainty . . .”, and that a large adverse judgment “. . . Must be reckoned with as a possibility. . . .”, the chances of an affirmance of the district court’s opinion by the court of appeals, so that Old States would not be liable for the cargo loss in excess of its insurance coverage, were about “. . .75 to 80%.” The tax court found that on the date of New States’ acquisition of Old States’ stock, the cargo loss liability was both contingent and remote and that the parties did not discount the stock purchase price to account for it.

While many other transactions occurred with and between the affiliated groups, we believe the above statement is sufficient for our purposes.

In their 1959 consolidated income tax returns, Pacific Transport Company and its wholly owned subsidiaries Pacat, New States, California Eastern Lines, Inc. and Portland Stevedoring Company, reported a net operating loss of $1,455,802.07. This loss was made up of $1,431,267.78 net operating loss claimed by New States, of which, in turn, the major component was $1,348,868.00 named as a deduction for payment of the judgment rendered against Old States. After the return was filed, three of the affiliated corporations claimed carrybacks, pursuant to §§ 172(a) and (b) of the Internal Revenue Code. Pacific Transport Company claimed carrybacks to September-December 1957, and to 1958. New States claimed a carryback to January-September, 1957. Pacat claimed a carryback to January-September, 1957. Upon the request of IRS, all of the parties executed the usual form, Consent Agreements, to extend the statute of limitations for assessment with respect to the taxable period from 1957 and 1958, here involved. Insofar as here relevant, the Commissioner determined that the cargo loss payment made by New States was not an allowable expense deduction, but should be added to New States’ basis in the assets of Old States, as an additional cost thereof. On the taxpayer’s petition for redetermination of the deficiency in the tax court, it was held that New States should be permitted a current deduction in 1959 for the cargo loss payment. It is from this decision that the Commissioner appeals.

Issue

Simply stated, the issue presented is whether a payment made by a parent corporation in discharge of a contested tort liability, first asserted against a subsidiary corporation and necessarily assumed by the parent corporation upon liquidation of the subsidiary, pursuant to the provisions of 26 U.S.C. §§ 332 and 334(b)(2), should have been capitalized and added to the parent’s basis in the assets acquired from the subsidiary as contended by appellant, or was currently deductible by the parent corporation, as contended by appellee.

Merits

While we entertain no doubt that the initiation and consummation of the transaction between Old States and New States was premised on Old States’ primary success in its litigation in connection with the loss of the S.S. PENNSYLVANIA, and that the parties, after the initial affirmance by this court, had reasonable grounds to believe that the chances of reversal were practically non-existent, nevertheless, appellees find themselves in the unfortunate position of facing up to the provisions of § 334(b)(2) and two recent Supreme Court decisions which speak on the problem under circumstances closely related to ours.

Decisively persuasive on the issue before us are Woodward v. Commissioner of Internal Revenue, 397 U.S. 572, 90 S.Ct. 1302, 25 L.Ed.2d 577 (1970), and United States v. Hilton Hotels, 397 U.S. 580, 90 S.Ct. 1307, 25 L.Ed.2d 585 (1970), two decisions which, although factually distinguishable, greatly clarify the law with reference to capital expenditures made in connection with the acquisition of property. Both cases were concerned with appraisal costs incurred in connection with the acquisition of capital stock. In both eases, the expenses were treated as capital expenditures to be added to the taxpayer’s cost basis in the stock.

In Woodward, the taxpayers owned and controlled the majority of the common stock of an Iowa company. In 1960, they voted to extend the charter indefinitely, but a minority dissented. Under Iowa law, majority stockholders [taxpayers] in these circumstances were required to purchase the minority interest. The value of those interests were appraised in a state court proceeding and the taxpayers purchased the interest at the price fixed by the court. Incurred in connection with the appraisal litigation were attorneys’, accountants’ and appraisement fees. It was the tax treatment of these payments which constituted the subject before the Supreme Court. It held that the payments were part of the cost of acquiring the dissenting shareholders’ stock and consequently should be capitalized.

In Hilton Hotels, the taxpayer was a corporation which owned approximately 90% of the shares of stock in the Waldorf-Astoria corporation. As in the present case, the taxpayer decided to merge that corporation into itself, distributing its stock in exchange for that of Waldorf-Astoria in a nontaxable transaction. A minority of the shareholders objected to the merger. Exercising its majority interest in the Waldorf-Astoria stock, the taxpayer voted to approve the merger. Appraisal proceedings were then instituted to place a value on the dissenting shareholders’ stock. Taxpayer in its return deducted the fees it paid its lawyers and for other professional services in connection with the appraisal proceeding. The Supreme Court held that such expenses were not deductible, but were part of the cost of acquiring the dissenters’ stock.

Like Woodward and Hilton, the present ease involves a question of whether a payment made in connection with the acquisition of property is currently deductible or whether it must be added to the taxpayer’s cost basis in the assets. Though the purchase price of Old States’ stock was not discounted for the cargo loss liability, there is no question but that the parties were aware of the contingent liability and that upon liquidation, the assets of Old States were taken subject to that liability. Our analysis of Woodward and Hilton reveals nothing which would permit an exception to capital gains treatment where taxpayers enter into bargains, proceed under a mistake of law, or fail to realize the substance or amount of the liability assumed.

The tax court in holding that intent was a relevant factor in determining whether the cargo loss payment was a capital, as distinguished from an ordinary expenditure relied principally upon Helvering v. Metropolitan Edison Co., 306 U.S. 522, 59 S.Ct. 634, 83 L.Ed. 957 (1939), and Eaton v. Commissioner of Internal Revenue, 81 F.2d 332 (C.A.9, 1935). Appellees utilize the same cases in their briefs and arguments before this court. All parties agree that the liquidation of Old States was governed by the provisions'of § 334(b)(2) of the 1954 Internal Revenue Code, the provisions of which were non-existent at the time of the Eaton and Metropolitan Edison decisions. That the Kimbell-Dia-mond philosophy is no longer controlling is stressed in the recent ninth circuit case of Boise Cascade Corp. v. United States, 288 F.Supp. 770 (D.Ida.1968), aff’d per curiam 429 F.2d 426 (C.A.9, 1970), in which we affirmed for the reasons stated in the opinion of the district court. There, as here, the taxpayer argued that if a corporation acquires the stock of another and liquidates the stock, the acquiring corporation’s intent governed the basis for the assets of the liquidated corporation. In rejecting this contention, the district court said:

“. . . Section 334(b)(2) was passed by Congress to eliminate a subjective intent test enunciated in Kimbell-Diamond Milling Co. v. Commissioner [of Internal Revenue] 14 T.C. 74 (1950), affirmed per curiam, 187 F.2d 718 (5th Cir.1951), certio-rari denied, 342 U.S. 827,.72 S.Ct. 50, 96 L.Ed. 626 (1951). . . .” [Page 774]

The opinion then goes on to emphasize that intent was the controlling factor of the Kimbell-Diamond decision. Again, we quote:

“. . . Section 334(b)(2) eliminated this intent test and much litigation was laid to rest. Taxpayer endeavors to offer another intent test in a § 334(b)(2) acquisition and liquidation problem. Congress eliminated one intent test which gave rise to considerable litigation and this court does not believe another intent case is justified in this case. The intent of the taxpayer at the time of acquiring the stock is not material to a determination of the question presented here.” [Page 774]

Needless to say, the tax court could not anticipate the affirmance in Boise Cascade. For that matter, it would seem the tax court was not aware of the district court decision since it is not cited in the tax court opinion.

In any event, the intent test utilized by the tax court was rejected by this circuit in Boise Cascade.

The fact that the liability was contingent and unliquidated at the time of acquisition by New States is of no significance. Holdcroft Transportation Co. v. Commissioner of Internal Revenue, 4 T.C.M. 508 (1945), aff’d 153 F.2d 323 (C.A.8, 1946). As well stated in Magruder v. Supplee, 316 U.S. 394, 398, 62 S.Ct. 1162, 86 L.Ed. 1555 (1942), the payment of a liability by a subsequent purchaser is not the discharge of a burden, which the law has placed upon him, but is actually as well as theoretically, a payment of the purchase price. Other cases in direct conflict with the decision of the tax court include Arrowsmith v. Commissioner of Internal Revenue, 344 U.S. 6, 73 S.Ct. 71, 97 L.Ed. 6 (1952); United States v. Skelly Oil Co., 394 U.S. 678, 684-685, 89 S.Ct. 1379, 22 L.Ed.2d 642 (1969).

The numerous other authorities cited by appellees and a number of others cited by appellants have received our attention. An analysis of these authorities would add nothing to the validity of our conclusions, nor would it be of any particular benefit to the judicial system.

Statute of Limitations

Appellees, as an alternative, assert that the government claims are barred by the statute of limitations. The deficiencies arise from the disallowance of a net operating loss claimed by taxpayers in 1959 and carried back to taxable periods in 1957 and 58. With respect to the latter, each taxpayer executed a form consenting to extend the statute of limitations. No consent form was signed for the tax year 1959. The consent forms were mailed to the Commissioner while the statute of limitations for the tax year 1959 was still open. Taxpayers argue that the bar of the statute with respect to the year 1959 prevents the Commissioner from determining the deficiencies for 1957 and 1958, which deficiencies arose as a result of the disallowance of a major part of the 1959 net operating loss. On this issue, we agree with the tax court that the taxable periods in 1957, and the taxable year 1958, were open tax periods as of February 26, 1965, the date on which the statutory notices of deficiencies were mailed in all of the cases. Consequently, the appellant was not barred from making .the determination of the tax deficiencies which resulted in the filing of the petitions in these cases. Additionally, appellees argue that since 1959 was a closed year, that the appellant is barred from making recomputations of the amount of income or loss, for 1959 of any of the affiliated corporations whose income or loss was reported in the 1959 consolidated return for the purpose of making determinations of the amount of any allowable net operating loss carrybacks from 1959. Their reliance on Edward G. Leuthesser, 18 T. C. 1112 (1952) is misplaced. Much more in point is State Farming Co., 40 T.C. 774 (1963), which considers a similar issue and holds against appellees’ contentions. Also in point is Phoenix Coal Co. v. Commissioner of Internal Revenue, 231 F.2d 420 (C.A.2, 1956); Commissioner of Internal Revenue v. Van Bergh, 209 F.2d 23 (C.A.2, 1954). In these circumstances, 26 U.S.C. § 6501 does not operate as a bar to the appellant’s. claims.

In view of our disposition of the main issue, we find it unnecessary to speak on other questions presented in the briefs.

The problems presented by appellees’ cross-appeal and the computations to be made on the remand should first have the attention of the tax court or the Commissioner.

Conclusion

If equitable principles were available in the decisional process construing tax law, we would not hesitate to utilize the general principles expressed in Lemon v. Kurtzman, 411 U.S. 192, 93 S.Ct. 1463, 36 L.Ed.2d 151 (1973). Unfortunately, this very worthwhile instrument of common law is not to be found in the chest of tools which we are required to use in the disposition of Internal Revenue cases. Even the question of intent has been removed from the area in which we are here confined.

The judgment of the tax court is vacated and the cause remanded for further proceedings in conformity with this opinion.

KILKENNY, Circuit Judge

(concurring) ;

It is with great hesitation and considerable reluctance that I join in the foregoing opinion. If logical support could be found in the adjudicated authorities, I would introduce into tax law, under circumstances such as these, a principle of equity which would not permit the revenue gathering branch of our government to take advantage of a taxpayer’s well intentioned reliance on the action of another branch. Unfortunately, I am unable to apply to our facts the principles expressed in United States v. Lazy F. C. Ranch, 481 F.2d 985 (C.A.9, 1973).

       The Honorable Otto R. Skopil, Jr., United States District Judge for the District of Oregon, sitting by designation.

      . In Woodward and Hilton, the dissenters’ stock; in this case, the assets of Old States.