author: PELL, Circuit Judge.

text:
    Luther HAYNES and Lenita Haynes, Plaintiffs-Appellants, v. LOGAN FURNITURE MART, INC., an Illinois corporation, Defendant-Appellee.
    No. 73-1793.
    United States Court of Appeals, Seventh Circuit.
    Argued April 15, 1974.
    Decided Oct. 2, 1974.
    Rehearing and Rehearing En Banc Denied Oct. 31, 1974.

      James O. Latturner, Marthe C. Pur-mal, Joel Stein, Chicago, 111., for plaintiffs-appellants.
    Joseph M. Solon, Chicago, 111., for defendant-appellee.
    Before CUMMINGS, PELL and SPRECHER, Circuit Judges.
   PELL, Circuit Judge.

This is an action for damages brought by Luther Haynes and his wife, Lenita Haynes, alleging that a form retail installment contract of Logan Furniture Mart, Inc. (Logan) which was used by Logan in its installment sales during the period July 1 — December 31, 1969, and one of which the plaintiffs had executed on July 24, 1969, violated numerous requirements of Regulation Z, 12 C.F.R. § 226, promulgated by the Federal Reserve Board pursuant to § 1604 of the Commercial Credit Protection Act, 15 U.S.C. § 1601 et seq., commonly known as the Truth in Lending Act. The district court denied the plaintiffs’ motion to proceed as a class action, ruling that while the prerequisites of subdivision (a) of Rule 23, Fed.R.Civ.P., were satisfied, the suit was not of a type which could be maintained as a class action under subdivision (b) of that rule.

The district court then held, notwithstanding the fact that the Logan form contract failed to comply with at least nine applicable provisions of Regulation Z, Logan was not liable because of its reliance on the opinion of its legal counsel that the contract complied with the pertinent aspects of the regulation. On this appeal the plaintiffs stressed three particular violations, to which Logan by way of concession responded that these violations were established by the court’s order and required no further argument.

I

A suit may be maintained as a class action if in addition to satisfying the requisites of subdivision (a) of Rule 23, Fed.R.Civ.P.,* the action is of a type in which common questions of law or fact predominate and for which a class action is superior to other available means for adjudicating the controversy. In denying the motion to proceed as a class action, the court below ruled that:

“a class action on this type of claim with liquidated or double damages and attorneys’ fees is neither a fair nor an efficient method of adjudicating the controversy, particularly before the validity and interpretation of the controlling statute and regulations have become better tested and settled.”

While it is true that trial courts are generally afforded great latitude in determining the fairest and most efficient mode of adjudication when such judgments are predicated on careful factual examination, e.g., City of New York v. International Pipe and Ceramics Corp., 410 F.2d 295, 300 (2d Cir. 1969), the trial court’s decision to deny class action status in this case was posited on the legal theory that the procedural device of class actions is incompatible with the substantive ends to which the Truth in Lending Act is addressed. We cannot agree.

The Truth in Lending Act, as this appellation strongly suggests, was a legislative response to a public need to be fairly and honestly apprised of the actual cost of using someone else’s money. The Act also, of course, serves the purpose of introducing uniformity among the methods which have been previously employed for the purported objective of stating interest rates. Borrowers and consumers are now hopefully enabled to compare credit terms and to avoid the uninformed and/or misinformed use of credit. If they are to be paying a maximum allowable rate they at least will be doing so on a choice basis predicated on knowledge of what they are doing.

In contrast with the statute’s obvious purposes, the modes of enforcement embodied in the Act suggest a complex, somewhat confusing scheme. The Act incorporates both the Senate’s reliance on private enforcement, including federal jurisdiction without regard to a minimal amount and an individual incentive to litigation in the form of statutory damages of twice the finance charges imposed in the transaction at issue but not less than $100, plus attorneys’ fees and court costs, as well as the House provision for federal administrative enforcement of the Act. However, neither branch of the legislature apparently considered the possibility of class actions in Truth-in-Lending cases. Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336, 343-344 (10th Cir. 1973). More particularly, “Congress never foresaw the problem class actions would present: Multiplication of the individual minimum recovery of $100 by the number of members of a large class makes potential liability astronomical.” Note, Class Actions Under the Truth in Lending Act, 83 Yale L.J. 1410, 1411 (1974) (citation omitted).

The seminal case on denial of class action status is Ratner v. Chemical Bank New York Trust Co., 54 F.R.D. 412 (S.D.N.Y.1972). The plaintiff in Ratner alleged that the bank had violated the Act’s disclosure requirement by failing to show the annual percentage rate on a bank credit card monthly statement, even though no finance charge had been imposed and no interest rate had yet been applied. The alleged class was comprised of 130,000 cardholders, and under the terms of the statute, the bank’s potential liability was at least thirteen million dollars. The court rested its holding that a class action was not the superior method for fairly and efficiently adjudicating the controversy on two grounds. First, the court found that the incentive of a class action was unnecessary to enforce the Act because the statute contemplated enforcement by a species of private attorney general and the statutory minimum recovery guaranteed the viability of individual actions and obviated the need for the incentive of a class action to enforce the Act. Second, the aggregate potential liability presented the spectre of a “horrendous, possibly annihilating punishment” for a mere “technical” violation. 54 F.R.D. at 416.

Relying on the reasoning in Ratner, Logan argues that the Truth in Lending Act’s provision of incentives for individual litigation necessarily precludes the use of class actions in such cases. See, Goldman v. First National Bank, (N.D.Ohio 1973) (unpublished or-111.1972); Roth v. Community National Bank, (N.D.Ohio 1973) (unpublished order). First, as a matter of legislative intent, it is not at all clear that Congress meant to bar the use of class actions 'in cases brought under the Act. Nothing in the legislative history of the Act or the Act itself expressly or impliedly prohibits the use of the class action. See generally, Note, 83 Yale L.J. 1410 (1974). Class actions have been extensively used in antitrust and securities litigation without specific legislative authorization, and Congress was certainly cognizant of the fact that class actions were a part of the existing body of law when the Truth in Lending statute was enacted. We thus concur with the Tenth Circuit’s pronouncement in a recent Truth in Lending case, factually similar to Ratner, in which class action status was denied: “To find any congressional intent to preclude . treatment of such cases under Rule 23 would be a work of clairvoyance and not of construction or interpretation.” Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336, 343-344 (10th Cir. 1973). Second, the argument that the incentive for individual litigation precludes class action litigation assumes that the incentive solely relates to consumer motivation to sue rather than to creditor compliance with the Act. To the contrary, the purpose of enacting the statutory minimum damage provision was as much to induce creditor compliance with the Act as to provide incentives for private litigants. Note, 83 Yale L.J. at 1416. Therefore, “ [c] reditors disregarding their responsibilities under the Act and causing damages to members of a class however limited or extensive should have no assurance that their accumulated responsibility cannot be enforced through this means.” Wilcox v. Commerce Bank of Kansas City, supra at 348. Third, while procedural fairness with respect to protecting defendants from crushing damages predicated on the statutory minimum recovery is an important consideration in detei’mining the superiority of the class action mode of adjudication, it is at least equally important to prevent violators of the Act from limiting recovery to a few individuals where actual, wide-spread noncompliance is found to exist.

On balance, class actions might very well be superior to individual suits, because while the former would compel correction of disclosure errors and full collection of damages, the latter would result only in correction of errors, for collection damages would be sharply restricted by the short statute of limitations (16 U.S.C. § 1640(e)), the inability of the poor or uninformed to enforce their rights, and the improbability that large numbers of class members would possess the initiative to litigate individually. See generally, Note, 83 Yale L.J. at 1415-1418.

Further, no particular perceptiveness of modern society is needed for an awareness of a fact of life lying in the virtually perpetual monthly payment program of many families. As balances owing decline new purchases occur. The individual if aware at all of his claim under the Act is bound to have some reluctance to sue in his own name the supplier with whom he continues to do business and one who could be in a position to visit harsh remedies on the buyer in the event of a subsequent default.

Therefore, “ . . .we cannot agree that under all the circumstances the class action device necessarily would be incompatible with Truth in Lending cases. Where overriding reasons for preclusion are not present, there seems no reason why the use of this procedural device may not be appropriate and desirable . . . .” Wilcox v. Commerce Bank of Kansas City, supra at 347-348.

In evaluating the appropriateness and desirability of class action status in this particular case, we deem it highly sigñificant that here, unlike Rat-ner and Wilcox, actual damages were alleged. See, Ratner v. Chemical Bank New York Trust Co., supra, 54 F.R.D., at 416 n. 7. In the installment sales transactions at issue, Logan Furniture Mart had in fact imposed a finance charge and applied an interest rate. Moreover, because of the nature of the merchandise sold, it is highly likely that the statutory penalty of twice the finance charge would approximate or exceed the statutory minimum recovery in a predominate number of the transactions, as is the case in the Haynes transaction. We note, too, that a class action in this case, involving approximately 2500 purchasers, would be inherently more manageable than the class of 180,000 members proposed in Wilcox or the class of 130,000 members suggested in Ratner Finally, notice to class members would present little difficulty since consumers are identifiable from the company’s installment sales contracts. Under these circumstances, we conclude, notwithstanding several district court opinions to the contrary, that the class action is the superior means of adjudicating the present total controversy and, since it was apparently conceded in the trial court that common questions of law and fact predominate, that it was an abuse of discretion for the trial court to hold otherwise.

II

Though the trial court determined that Logan Furniture Mart’s form retail installment contract failed to comply with numerous provisions of Regulation Z, the court found that the furniture company’s “principal but not exclusive” reliance on the advice of counsel exculpated it from liability under § 1640(c) of the Act. The trial court reasoned that such reliance on counsel demonstrated that the violations were not “intentional” but resulted from “bona fide error notwithstanding reasonable procedures to avoid the error,” within the meaning of § 1640(c). The plaintiffs contend that the court’s interpretation of the statute involves an unduly restrictive interpretation of the element of intent while expanding the scope of the term “error” beyond that envisioned by Congress. We agree.

Section 1640(c) provides:
“A creditor may not be held liable in any action brought under this section for a violation of this part if the creditor shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.”

In reaching its conclusion, the district court necessarily reasoned that intent, as employed in § 1640(c), is directed to the violation of the law itself rather than to acts which constitute violations of the law. In Ratner v. Chemical Bank New York Trust Co., 329 F. Supp. 270, 281 (S.D.N.Y.1971), a case in which the defendant similarly contended that an error of law was not intentional within the meaning of § 1640(c), the court stated:

“It is undisputed that defendant carefully, deliberately — intentionally— omitted the disclosure in question. That defendant . . . mistook the law does not make its action any less intentional.”

The rationale for this result was expressed in Buford v. American Finance Co., 333 F.Supp. 1243, 1248 (N.D.Ga.1971), where the same argument respecting intent was also raised. The court wrote, “If consumers would be required to prove that creditors were determined to violate the Act in order to prevail, the civil remedy would be a hollow one.” See also, Owens v. Modern Loan Co., (W.D.Ky.1972) (unpublished order). That these courts’ interpretation of intent in § 1640(c) is correct is buttressed by the contextual placement of the section within the Act. The argument that intention in that section relates to violations of the law (i. e., intent to break the law), Welmaker v. W. T. Grant Co., 365 F.Supp. 531, 544 (N.D.Ga.1972), necessarily equates the term with a knowing and willful violation. That, however, is the standard required for establishing criminal liability under the Act, 15 U.S.C. § 1611, and § 1640(e) is by its term directed only to the lesser finding of civil liability. We therefore conclude that “intentional,” within the meaning of § 1640(c), describes voluntary, deliberate acts and omissions, including those of the defendant.

Moreover, both the language and the legislative history of the section indicate that exculpation was for matters in the nature of clerical errors and that the “provision is wholly inapposite to deal with errors of law like defendant’s though made in entire ‘good faith.’ ” Ratner v. Chemical Bank New York Trust Co., supra, 329 F.Supp. at 281-282. We note that a defendant seeking absolution under this section is required to show not merely that his acts or omissions were unintentional, but also that due care was taken to create “procedures to avoid any such error.” This obvious reference to internal controls in a law mandating the presentation of many exact figures and percentages unique to each transaction plainly suggests that the scope of the section was intended to encompass basically only clerical errors. Furthermore, the provision was only included in the Senate’s bill after complaints were raised that such an act would, in effect, impose strict liability, because clerical and mathematical errors would inevitably result as a consequence of the complexity of annual rate computations. See, Hearings on S. 5. Before the Subcomm. on Financial Institutions of the Senate Comm. on Banking and Currency, 90th Cong., 1st Sess. 64ff., 226, 374, 426-427, 529, 584, 698 (1967); Ratner v. Chemical Bank New York Trust Co., supra at 281 n. 17. We find, therefore, that § 1640(c) offers no shelter from liability for the defendant, whose error whether in good faith or not was judgmental with respect to legal requirements of the Act and not clerical in nature.

Accordingly, we reverse the judgment of the district court and remand for further proceedings in accordance with this opinion.

Reversed and remanded.

      . The trial court found that the defendant “failed to make the specific disclosures required by subparagraphs (b)(2), (b)(3), (e) (2), (c)(3), (c)(5), (c)(7), and (o) (8) (ii) of 12 C.F.R. § 226.8.” The trial court further found that the computation of any unearned finance charge in the event of prepayment was not identified, a violation of Section 226.8 (b) (7).
      In addition, no disclosure was made that insurance coverage was not required and no affirmative statement was obtained from the purchasers that they desired such insurance, as required by Section 226.4(a) (5).

      . Rule 23(a), Fed.R.Civ.P., provides:
      “Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) tlie class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common t.o tlie (lass, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.”

      . As a theoretical matter, a class action could also be maintained if the requirements of either Rule 23 (b) (1) or (b) (2) were satisfied.
      This portion of the rule provides that: “[a]n action may be maintained as a class action if tlie prerequisites of subdivision (a) are satisfied, and in addition:
      (1) the prosecution of separate actions by or against individual members of the class would create a risk of
      (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or
      (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or
      (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to' the class as a whole. . . . ”
      With respect to Rule 23(b)(1), the trial court in this case ruled: “The determination of the case at bar will not establish incompatible standards of conduct for the defendant, since it has been in substantial compliance with Regulation Z since January 1, 1970 [, . . and ] will not impair the ability of other purchasers to protect their interest by filing their own complaints . ” On this appeal, Logan took the position that it had “admittedly” complied since January 1, 1970. The plaintiffs challenge the correctness of this statement, and presumably the court’s finding to that effect, by pointing out that later contracts had been challenged in litigation. We need not, however, determine this matter or the applicability of Rule 23(b)(1) because of the basis on which we decide the ultimate issue of the propriety of the class action. Rule 23(b)(2) is patently inapposite, for it pertains only to situations in which money damages are not the relief sought, unlike the instant case. La Mar v. H. & B. Novelty & Loan Co., 489 F.2d 461 (9th Cir. 1973).

      . Relying on Rodriguez v. Family Publications Service, Inc., 57 F.R.D. 189 (C.D.Cal. 1972), the defendant argues here apparently for the first, time that the finding of commonality of questions of law and fact is negatived by the possibility that some purchases were made for commercial rather than personal purposes and that counterclaims will be filed with respect to delinquent accounts. While we need not decide these points at this time, there is no indication that the commercial users of credit at this retail home furnishings establishment are other than minimal -in the overall picture. Cf., Katz v. Carte Blanche Corporation, 496 F.2d 747, 762 (3d Cir. 1974). Such commercial purchases would frequently be readily identified by the listing of the name of the business as the purchaser in the contract. Even if it is necessary to review the contracts individually to eliminate business purchases, as was pointed out in Beard v. King Appliance Co., 61 F.R.D. 434, 438 (E.D.Va.1973), “such a task would be neither herculean, inhibiting, nor for that matter unique.” Furthermore, litigation respecting individual counterclaim's if successful, would only reduce damage awards; it would not affect a finding of liability. In a similar contex, the Heard court commented, “The Court finds that the possibility of subsequent individual suits for actual damages . . . does not substantially detract from the predominance of class issues . . . .” Id. at 438-439.

      . There was apparently uneontroverted evidence to the effect that counsel of the furniture company refused to advise his client, respecting the Act’s requirement of disclosure that the purchase of insurance is voluntary, a requirement, which the company violated. There is further evidence suggesting that counsel did not advise his client, that it could, as it did, substitute disclosure of a table of the maximum allowable finance charges under Illinois law for disclosure of the annual percentage rate required by the Act.

      . As Judge Frankel points out in his opinion in Ratner v. Chemical Bank New York Trust Co., supra at 281 n. 17 :
      “The House bill originally required proof of a ‘knowing’ violation to establish civil liability. This was omitted in the final House version, apparently in response to objections by the Justice Department that to require proof of ‘specific knowledge’ might ‘frustrate prospective plaintiffs, and thereby weaken the enforcement provisions of the act.’ Hearings on H.R. 11601. Before the Suhcomm. on Consumer Affairs of the House Comm. on Banking and Currency, 90th Cong., 1st Hess., pt. 1, 903 (1967).”

      . Because of our holding that § 1040(c) is inapplicable to errors of law committed by the defendant, we need not consider the yuestion of whether the defendant sustained its burden of proof in showing that such errors were o.ommitted in good faith.


source: Caselaw Access Project

author: ROSS, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. John D. McGREGOR et al., Appellants.
    No. 74-1347.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 11, 1974.
    Decided Oct. 7, 1974.

      Jack S. Nordby, St. Paul, Minn., for appellants.
    Thorwald Anderson, Asst. U. S. Atty., Minneapolis, Minn., for appellee.
    Before LAY, ROSS and WEBSTER, Circuit Judges.
   ROSS, Circuit Judge.

John D. McGregor, Robert Fletcher, and Fountain Agency, Inc. were each charged in a twenty-six count indictment with the use of the mail for the purpose of executing a scheme to defraud in violation of 18 U.S.C. § 1341. Specifically, the indictment alleged that the defendants, acting as agents for Northland Insurance Co., caused notification of insurance policy cancellations to be sent to Northland for the purpose of obtaining premium refunds from Northland. However, the defendants’ customers, whose policies were cancelled, were never informed of the cancellation. From a verdict finding them guilty of all twenty-six counts, McGregor, Fletcher and Fountain appeal contending that the court erred in denying their motion for transfer to another district and that the evidence was insufficient to establish that they acted with intent to defraud.

During the relevant time period, Fountain Agency, Inc., an insurance agency incorporated in Louisiana, was primarily involved in selling automobile collision insurance, generally on vehicles newly purchased by high risk drivers. The policies were often written by the auto dealer himself acting as Fountain’s subagent and financed together with the purchase price of the auto through finance companies such as General Motors Acceptance Corporation. Fountain, itself, was not the insurer, but merely the agent for several insurance companies, chief among which was Northland Insurance Co., a licensed insurance company in Minnesota.

Fountain had negotiated a retrospective contract with Northland, under the terms of which Fountain earned 80% of the premium and Northland earned 20%. The total premium, however, was forwarded to Northland; the 80% was credited to Fountain’s account at North-land and used as a fund out of which all claims by Fountain’s insureds were paid. After claims adjustment, if the losses did not exceed the agent’s earned premium pool, Northland would refund a pro rata amount of earned premium to Fountain.

These retrospective contracts added to cash flow problems already suffered by Fountain. Not only did Fountain experience a need for revenues to pay operating expenses but it also negotiated collateral contracts with subagents who sold policies under which the subagent, usually the automobile dealer, could retain 20% of the face value of the insurance premium as a commission for the sale of the insurance policy. Fountain thus committed 120% of the premium at the outset.

After it was realized that expanding its business under retrospective contracts did nothing to remedy the cash flow problems, McGregor consulted with other insurance agencies who were also experiencing the same difficulties with retrospective contracts. After consulting with these other agencies and with an employee of the Louisiana Insurance Commission, McGregor determined to undertake a program of cancelling policies without notifying or forwarding refunds to the insured.

Under the plan, notices of cancellation were prepared on arbitrarily selected policies, the originals of which notices were sent to Northland. Copies were prepared for the policyholder and lien-holder, but were not sent. Rather, they mailed other documents to the policyholder and the lienholder by registered mail. Certificates of mailing were obtained for these mailings and sent to Northland with the original of the notice of cancellation as false proof that notices of cancellation had been sent to the policyholder and the lienholder. Northland then refunded to Fountain the prorated unearned portion of the premium on the cancelled policy. In effect, these policies were cancelled to the insuror, but not to the policyholders or lienholders who could still hold North-land primarily liable on the policy since they never received notices of cancellation.

During the periods of cancellation, Fountain paid claims against the can-celled policies out of the refunded premiums. As the cash flow situation improved, Fountain began to rewrite the previously cancelled policies with North-land. Names of the policyholders on the reissued policies were changed slightly so that, as McGregor testified, the computer would not reject the policy application. None of the cancelled premiums were ever refunded to the policyholders. Fountain employees were under instructions to conceal records of these cancellations from Northland representatives. Northland was never reimbursed for its prorata loss of its 20% premium nor for its potential liability under the policy during the period of cancellation. When delays began to develop in Fountain’s ability to pay claims against the can-celled policies and complaints were directed to Northland, the plan came to light.

Motion for Transfer.

The Constitution provides that “The Trial of all Crimes . . . shall be held ip the State where the said Crimes shall have been Committed.” U.S.Const. art. Ill, § 2. The sixth amendment carries a like command. However, Fed.R.Crim.P. 21(b) permits a transfer:

For the convenience of parties and witnesses, and in the interest of justice, the court upon motion of the defendant may transfer the proceeding as to him or any one or more of the counts thereof to another district.

This Court has held that the grant of transfer under that rule is a matter of the discretion of the district judge. United States v. Phillips, 433 F.2d 1364 (8th Cir. 1970), cert. denied, 401 U.S. 917, 91 S.Ct. 900, 27 L.Ed.2d 819 (1971). In reviewing the district court’s exercise of discretion in these matters, we are guided by the enumeration of factors which were considered in Platt v. Minnesota Mining & Manufacturing Co., 376 U.S. 240, 243-244, 84 S.Ct. 769, 771, 11 L.Ed.2d 674 (1964):

(1) location of corporate defendant;
(2) location of possible witnesses;
(3) location of events likely to be in issue; (4) location of documents and records likely to be involved; (5) disruption of defendant’s business unless the case is transferred; (6) expense to the parties; (7) location of counsel; (8) relative accessibility of place of trial; (9) docket condition of each district or division involved; and (10) any other special elements which might affect the transfer.

Concerning those factors, the Supreme Court stated that the main office or “home” of the defendant has no independent significance in determining whether transfer to that district would be “in the interest of justice,” although it may be considered with reference to such factors as the convenience of records, officers, personnel and counsel. Id. at 245-246, 84 S.Ct. 769.

18 U.S.C. § 3237(a) provides in part:

Any offense involving the use of the mails ... is a continuing offense and, except as otherwise expressly provided by enactment of Congress, may be inquired of and prosecuted in any district from, through, or into which such . . . mail matter moves.

The Supreme Court and other circuits have accordingly held that the government may elect to bring the prosecution in the district where the letter was mailed or where it was delivered. Salinger v. Loisel, 265 U.S. 224, 233-234, 44 S.Ct. 519, 68 L.Ed. 989 (1924); Benson v. Henkel, 198 U.S. 1, 15, 25 S.Ct. 569, 49 L.Ed. 919 (1905); United States v. Sorce, 308 F.2d 299, 300 (4th Cir. 1962), cert. denied, 377 U.S. 957, 84 S.Ct. 1635, 12 L.Ed.2d 500 (1964); Kreuter v. United States, 218 F.2d 532, 534 (5th Cir.), cert. denied, 349 U.S. 932, 75 S.Ct. 777, 99 L.Ed. 1262 (1955); Holdsworth v. United States, 179 F.2d 933, 936 (1st Cir. 1950); Kaufman v. United States, 163 F.2d 404, 411 (6th Cir. 1947), cert. denied, 333 U.S. 857, 68 S.Ct. 726, 92 L.Ed. 1137 (1948); Gates v. United States, 122 F.2d 571, 577 (10th Cir.), cert. denied, 314 U.S. 698, 62 S.Ct. 478, 86 L.Ed. 558 (1941); Johnson v. United States, 59 F.2d 42, 45 (9th Cir.), cert. denied, 287 U.S. 631, 53 S.Ct. 83, 77 L.Ed. 547 (1932). Venue for this crime, then, properly existed in Minnesota, the location of the addressee of the fraudulent mail. To determine whether the appellants were entitled to a transfer from the district for trial, the factors announced in Platt come into play. Here the party defrauded was an insurance company based in Minnesota. The chief government witness was the vice president of Northland. Other North-land witnesses and the postal inspectors involved were from Minnesota. Most of the documents entered into evidence during the trial came from Northland’s office. These factors buttress the trial court’s denial of the motion for transfer. The appellants have failed to demonstrate, as required by United States v. Phillips, supra, 433 F.2d at 1368, that some substantial right.has actually been affected. The motion was properly denied.

Sufficiency of Evidence.

We have recently reiterated the essential elements of a violation of 18 U.S.C. § 1341:

“(1) a scheme conceived by appellant for the purpose of defrauding . by means of false pretenses, representations or promises, and (2) use of the United States mails in furtherance of the scheme.” “Scheme” to defraud within the purview of this section involves some connotation of planning and pattern. Thus, intent to defraud is an essential element. It may be inferred by all the facts and circumstances surrounding a transaction. [Additionally] ... to bring the scheme within the ambit of the mail fraud statute, the mails must be used for the purpose of executing the scheme, . . . must be employed before the scheme reaches fruition, . . . yet, need not be contemplated as an essential element of the scheme.

United States v. Nance, 502 F.2d 615, 618 (8th Cir. 1974). The appellants concede that there is no doubt here that the mails were in fact employed and that this use of the mails was an integral part of the activity which the government alleged to be fraudulent. They do, however, contend that the first requisite was not met on this record. They maintain that because McGregor consulted the Louisiana Insurance Commission, because he received advice from other agencies undergoing similar difficulties, and because Fountain paid all claims against the cancelled policies during the periods of cancellation, they did not have the requisite intent to defraud.

In reviewing the sufficiency of the evidence, we note that the verdict must be sustained if there is substantial evidence, taking the view most favorable to the' government to support it. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942). United States v. Madden, 482 F.2d 850, 851 (8th Cir. 1973). The district court made clear in its instructions to the jury that specific intent to defraud was essential to a finding of guilt. Given the proper instructions of the district court and the scope of review, we find that there was sufficient evidence of covert conduct which could permit the jury to determine that the appellents acted with the requisite intent to deceive both Northland and the policyholders. Policyholders were never informed of the cancellation. Office personnel were instructed to conceal the cancellation practice from Northland representatives. At the outset the substitution of other documents for the cancellation notices was effectuated by McGregor in the privacy of a closed office without informing office personnel of the procedure. North-land was never reimbursed for its potential risk during the period of cancellation. Names were altered on reissued policies so that a computer would not detect the prior cancellations. Fountain, while paying claims against cancelled policies acted as an insurance company, an enterprise for which it was not licensed and could not meet capitalization requirements. Given this evidence, resolved in the light most favorable to the verdict, it is clear that the jury, as properly instructed, found that the appellants had specific intent to defraud.

For the reasons hereinbefore expressed, the judgment of conviction is affirmed.


author: DONALD RUSSELL, Circuit Judge:

text:
    Alva Owen HAWKINS, Appellant, v. Honorable Joseph R. MOSS, Chief Justice, et al., Appellees.
    No. 73-1601.
    United States Court of Appeals, Fourth Circuit.
    Argued May 1, 1974.
    Decided Sept. 18, 1974.

      Neil Bradley, Atlanta, Ga. (Laughlin McDonald, Morris Brown, Emily Cars-sow, Atlanta, Ga., P. King Holmes and H. Christopher Coates, Columbia, S. C., on brief), for appellant.
    Ellison D. Smith, IV, Asst. Atty. Gen., (Daniel R. McLeod, Atty. Gen., and Donald V. Myers, Asst. Atty. Gen., on brief), for appellees.
    Before HAYNSWORTH, Chief Judge, and RUSSELL and WIDENER, Circuit Judges.
   DONALD RUSSELL, Circuit Judge:

The plaintiff, a lawyer admitted to practice in the Courts of New Jersey, has, according to his complaint, established a residence in South Carolina (though retaining a desk in a law office in New Jersey) and he seeks to gain admission to the Bar of South Carolina without submitting to the normal requirement of taking an examination in order to demonstrate his legal competency or proficiency. He bases his claim for exemption from such examination on Rule 10 of the Rules for the Examination and Admission of Persons to Practice Law in South Carolina, as promulgated by the Supreme Court of South Carolina and outstanding at the time he filed his application. This Rule grants an exemption from the normal examination requirement for attorneys licensed to practice in another State. One difficulty in plaintiff’s endeavor to avail himself of this exemption is, however, that Rule 10 is a reciprocity provision, the application of which in favor of any applicant is expressly conditioned upon the grant of “reciprocity on substantially equal terms to attorneys licensed in this State” by the State in which the applicant is licensed. New Jersey, the only State in which plaintiff has gained admission to the Bar, does not grant reciprocal rights to attorneys licensed by the Supreme Court of South Carolina. It is, however, plaintiff’s contention that such a reciprocity limitation or condition incorporated in the Rule is unconstitutional and he seeks a declaratory judgment to that effect, predicating federal jurisdiction on Sections 1343(3) and (4), 2201, 2281 and 2284, 28 U.S.C. In seeking such a declaratory judgment, he petitioned the District Court to request the convening of a 3-judge court under Sections 2281 et seq., 28 U.S.C. The District Court held that plaintiff’s complaint posed no substantial federal issue, refused the request for the convening of a 3-judge court and dismissed the action. The plaintiff has appealed. We affirm.

At the outset it must be recognized that plaintiff’s admission to the Bar of New Jersey does not per se confer on him any absolute right to be admitted to the practice of law in South Carolina. The power of the courts ofx each state to establish their own rules of qualification for the practice of law within their jurisdiction, subject only to the requirements of the due process or equal protection clauses of the Fourteenth Amendment, is beyond controversy ; in fact, it is a power in the exercise of which the state has “a substantial interest.” It necessarily follows that licenses to practice law, granted by the courts of one state, have no extraterritorial effect or value and can vest no right in the holder to practice law in another state. To acquire a right to practice in another state one must satisfy the requirements for qualification established by that state. It thus matters not what examinations the applicant has undergone in the state where he is presently licensed; he is still compelled to satisfy reasonable standards for competency and character as fixed by the new state in which he seeks the right to practice unless, under some provision of that state’s court rules or statutes, those requirements are excused or dispensed with. To be specific, the fact that the plaintiff has undergone successfully a written examination, on his professional competency in New Jersey will not excuse him from compliance with a requirement that he establish his competency by a written examination conducted under the directions of the Courts of South Carolina, before he may qualify for admission to the Bar of South Carolina. So much the plaintiff concedes.

As already indicated, the single point of difference between the parties, as presented by this appeal, arises in connection with the application of Rule 10. It is the gravamen of the plaintiff’s complaint that Rule 10 discriminates illegally or “invidiously” against persons licensed by states not granting reciprocal rights to attorneys admitted to prac-. tice by the Supreme Court of South Carolina and is, accordingly, violative of the equal protection clause of the Fourteenth Amendment. Arguing from that premise, the plaintiff contends that he is entitled to the exemption from examination given by the Rule, even though New Jersey, the only state in which he is admitted to practice, denies such exemption to attorneys licensed by South Carolina who may seek authority to practice law in New Jersey. In substance, the plaintiff challenges the constitutional validity of conditioning the exemption from written examination granted by Rule 10 on reciprocity and asks a judicial determination that reciprocal professional licensing rules and statutes as adopted by the vast majority of the states infringe the constitutional rights of individuals licensed by states not according reciprocity.

State reciprocity statutes or regulations such as Rule 10 are not unusual. In fact, they have been adopted by the vast majority of the states and apply particularly in the field of professional licensing. They represent a state’s undertaking to secure for its citizens an advantage by offering that advantage to citizens of any other state on condition that the other state make a similar grant. To secure for her citizens the reciprocal rights and advantages obtained under such statutes or rules is manifestly a legitimate interest and goal on the part of a state just as it is a legitimate interest of one nation to secure reciprocal property rights for its citizens in other nations. It is true, as the plaintiff argues, these statutes and rules treat differently those individuals admitted to practice their profession in states extending reciprocal rights and those from states not so granting those rights. But the mere fact that they “affect some groups of citizens differently than others” or that they “result in ‘incidental individual inequality’ ” will not render such statutes or rules invalid. Martin v. Walton (1961) 368 U.S. 25, 26, 82 S.Ct. 1, 7 L.Ed.2d 5, reh. den. 368 U.S. 945, 82 S.Ct. 376, 7 L.Ed.2d 341. It is a familiar rule of constitutional law that a statute or rule promulgated under state authority will be found to violate equal protection only when it results in discrimination against a certain class and the classification is not rationally related to any legitimate state policy or interest. McGowan v. Maryland (1961) 366 U.S. 420, 425-426, 81 S.Ct. 1101, 6 L.Ed.2d 393; San Antonio School District v. Rodriguez (1973), 411 U.S. 1, 40, 93 S.Ct. 1278, 36 L.Ed.2d 16, reh. den. 411 U.S. 959, 93 S.Ct. 1919, 36 L.Ed.2d 418; Sams v. Ohio Valley General Hospital Association (4th Cir. 1969) 413 F.2d 826; Brown v. Supreme Court of Virginia, supra (359 F.Supp. at 554-555). Reciprocal statutes or regulations, it has been uniformly held, are designed to meet a legitimate state goal and are related to a legitimate state interest. For this reason, they have been found invulnerable to constitutional attack on equal protection grounds. Illustrative of this conclusion are Goldsmith v. Clabaugh (1925), 55 App.D.C. 346, 6 F.2d 94, cert. den. 269 U.S. 554, 46 S.Ct. 18, 70 L.Ed. 408 (accountants); Fales v. Commission on Licensure to Prac. Heal. Art, supra (275 A.2d at 240) (doctors); O’Dell v. Ohio State Medical Board (1970) 22 Ohio Misc. 138, 259 N.E.2d 167 (chiropractors); Mercer v. Hemmings (1967) Fla., 194 So.2d 579 (accountants); Spindel v. Jamison, supra (103 S.E.2d 205) (professional engineers); People v. Griswold (1914) 213 N.Y. 92, 106 N.E. 929 (dentists); Bloom v. Mo. Board of Architects, Professional Engineers and Land Surveyors (1972) Mo.App., 474 S.W.2d 861 (architects); State v. Perkins (1934) 138 Kan. 899, 28 P.2d 765 (lawyers). And, In Re Griffiths (1973) 413 U.S. 717, 733, 93 S.Ct. 2851, 2861, 37 L.Ed.2d 910, Chief Justice Burger, though dissenting on other grounds, used language that would seem conclusive on the validity of Rule 10’s reciprocal provision as applied to attorneys. He observed that “ * * * the States may well move to adopt, by statute or rule of court, a reciprocal proviso, familiar in other contexts; under such a reciprocal treatment of applicants a State would admit to the practice of law the nationals of such other countries as admit American citizens to practice. I find nothing in the core holding of Zschernig v. Miller, 389 U.S. 429 [88 S.Ct. 664, 19 L.Ed.2d 683] (1968), to foreclose state adoption of such reciprocal provisions. See Clark v. Allen, 331 U.S. 503 [67 S.Ct. 1431, 91 L.Ed. 1633] (1947).” In the light of this comment, backed up as it is by the unbroken line of authority on the point, it cannot be successfully argued that reciprocal professional licensing statutes or rules, enacted or promulgated under proper state authority, offend the equal protection clause.

In his argument in this Court, the plaintiff has gone beyond his “equal protection” contention and asserts that the Rule denies him rights guaranteed him under the “privileges and immunities” section of Article IY of the Constitution and of the first clause of the Fourteenth Amendment. The “privileges and immunities” provision of the Fourteenth Amendment provides no constitutional base for an attack on the Rule. The right of federal citizenship as reflected in the “right to travel” and as protected by this provision is not.to be construed to mean that a citizen carries with him from state to state an absolute right of comity to practice, not a “common occupation”, but a profession, which is properly subject to state regulation, in any state to which he travels, though this is essentially what the plaintiff, in the exposition of this contention, posits. The exercise by a state of power to regulate reasonably the practice of law within its jurisdiction and to require of any applicant, whether a resident or a migrant, that he demonstrate sufficient proficiency in the law as a prerequisite to a license to practice, is, as we have seen perfectly permissible and represents no violation of this provision of the Fourteenth Amendment. Kovrak v. Ginsburg, et al., Members of the Committee on Unauthorized Practice of the Law, (1958) 392 Pa. 143, 139 A.2d 889, app. dis. 358 U.S. 52, 79 S.Ct. 95, 3 L.Ed.2d 46; West Virginia State Bar v. Earley, supra (109 S.E.2d 420); State v. Rosenkrans (1910) 30 R.I. 374, 75 A. 491, aff. 225 U.S. 698, 32 S.Ct. 840, 56 L.Ed. 1263. That regulations dealing with qualifications to practice a profession such as law or medicine are without what has been described as the “parameters of the Shapiro penalty analysis” follows, at least inferentially, from the language of the court in Memorial Hospital v. Maricopa County (1974) 415 U.S. 250, 259, 94 S.Ct. 1076, 39 L.Ed.2d 306, a case relied on by the appellant in argument in this Court. In that case, the Court made it clear that every state requirement that impinges to some extent on the right to travel is not “per se unconstitutional”. (Page 256, 94 S.Ct. 1076) And, to give point to that language, the Court again cautioned, as it had done in Shapiro, “that it meant to ‘imply no view of the validity of waiting-period or residence requirements determining eligibility [inter alia] to obtain a license to practice a profession, to hunt or fish, and so forth.’ ” (Page 259, n. 13, 94 S.Ct. page 1082). What is true of a residence requirement, as applied to the licensing of an applicant for the practice of a profession, is even more so of a requirement for the establishment of professional competency via a written examination. Indeed, the validity of the residence requirement has often been sustained only as an incident to the procedure for determining the competency of a migrant seeking professional licensing in a state. Nor is there anything in Edwards v. California (1941) 314 U.S. 160, 62 S.Ct. 164, 86 L.Ed. 119, cited by the appellant in his brief, that lends any support to this phase of appellant’s argument. The issue in that case was the validity of a statute which made it a criminal offense to bring or assist in bringing into the state an indigent. Such a statute manifestly placed a penalty on the right of a citizen to travel from state to state, imposed solely on account of his poverty. No state could condition the actual right to travel on a citizen’s wealth. But here there is no condition on the appellant’s actual right to travel; the only condition relates to his right to practice a constitutionally regulated profession within the state. The State had a perfect constitutional right to require of the appellant that he demonstrate his proficiency in the law by an examination ; that it exempts from that requirement some applicants for reciprocity reasons which serve a legitimate “substantial” or “important” state interest does not operate to relieve the appellant of so demonstrating his proficiency.

The argument that Article IV, § 2 denies to the state any right to enforce a rule such as Rule 10 is equally without merit.' The basic thrust of that section is to prevent “a state from discriminating against citizens of other states in favor of its own”, Hague v. C. I. O. (1939) 307 U.S. 496, 511, 59 S.Ct. 954, 962, 83 L.Ed. 1423. So long, then, as the State does not subject the migrant attorney, seeking the right to practice in the State, to no more onerous requirements than those imposed on its own -citizens seeking such right, it cannot be said that the State has violated the section. The obligation, from compliance with which the plaintiff seeks by this action to be excused, is exactly the same obligation imposed indiscriminately by the State, through its Supreme Court, upon its own citizens in the same position as the plaintiff. As we have already pointed out, it is a requirement that is perfectly permissible. The only exception to this requirement, allowed by the Supreme Court of South Carolina, is in favor of that applicant, who, satisfying the other conditions of Rule 10, has been admitted to the practice in a state which grants to attorneys licensed in South Carolina reciprocal rights. Thus, whether he be a life-long citizen of South Carolina or an individual who, like the plaintiff, has just moved to South Carolina, his rights under Rule 10 are identical. Of course, it may be argued that, since Rule 10 requires normally at least five (5) years of active practice (which would in the circumstances have been necessarily outside South Carolina), the Rule confers a preference on the migrant attorney, a preference which one who has been a life-long citizen of South Carolina could not avail himself of. But simply because the plaintiff cannot qualify for this preference but must qualify on the same terms as the life-long citizen of So.uth Carolina gives him no right to complain. This was made plain by the Court in the Fales base:

“ * * * The right to practice is not a privilege or immunity of a citizen which is protected by the Constitution, since that secures to citizens of other states only the privileges which citizens of the state may have, and not the privileges which the citizens of the other state may have in their home state. People v. Griswold, supra. [213 N.Y. 92, 106 N.E. 929 (1914)] Therefore, the license creates no vested right which other states are bound to recognize. State v. Crombie, 107 Minn. 171, 119 N.W. 660 (1909); see Aitchison v. United States, supra [D.C.Mun.App., 98 A.2d 791,. 793 (1953)]. And owing to its regulatory power over well-defined activities of its citizens, a state can make the extent of limitations and restrictions imposed upon such an activity dependent upon the attitude and actions of sister states with regard to analogous activities of their citizens.” (275 A.2d at 240).

Naturally enough, the plaintiff wishes to secure an exemption from the examination requirement and complains of the hardship involved in being forced to take such an examination. His position, however, is no different from that of the South Carolina attorney who wishes to move to New Jersey. The latter, in order to qualify in New Jersey, must submit to a written examination. But the hardship encountered by the plaintiff or by the South Carolina attorney moving to New Jersey will not be obviated by striking down reciprocity legislation. The hardship will only be alleviated by the adoption of reciprocity provisions in connection with professional licensing procedures in those few states which, like New Jersey, continue to deny the privilege. And that end will be promoted, not by voiding, but by upholding, the constitutionality of reciprocal legislation as promoting a legitimate public goal. Were the constitutional validity of reciprocal legislation doubtful, this circumstance would weigh heavily in favor of validity. Fortunately, however, for the reasons already assigned, the validity of such legislation is not doubtful.

For the reasons stated, we affirm the conclusion of the District Court that Rule 10, as applied to the appellant, was a valid exercise of powers on the part of the Supreme Court of South Carolina.

Affirmed.

      . After this action was filed, the Supreme Court of South Carolina repealed Rule 10, thus adopting the rule of New Jersey which authorizes no exemption from the requirement of a written examination. By reason of this repeal, the defendants urged dismissal of the action as moot. The plaintiff, on the other hand, contended that such repeal could not affect his rights which had “vested” under the Rule as it existed when he applied for and was denied exemption. Cf., however, Dantzler v. Callison (1956) 230 S. C. 75, 94-95, 94 S.E.2d 177, app. dismissed 325 U.S. 939, 77 S.Ct. 263, 1 L.Ed.2d 235; State v. Austin (1956) 246 Minn. 514, 75 N. W.2d 780, 784. In Dantzler, the Court held that rules of admission to practice a profession in a State might be changed or modified “without subjecting the action to the charge of interfering with contract or vested rights.” However, it seems that even after the repeal of Rule 10, some applicants had their applications processed under that Rule. Such action, it is thought, undermined the claim of mootness.

      . “Rule 10
      “Any attorney admitted to practice law in the highest court of the District of Columbia or in the highest court of another state in which the standard of admission is substantially equivalent to the standard of this State, who has been actively engaged for at least five (5) years next preceding filing of his application, either in the practice of law or, during said period has been a judge of a court of record or teacher of law, may be admitted to the Bar of South Carolina, without examination, upon satisfactory proof that he is a citizen of the United States and an actual resident of this State and intends to practice or teach law therein, is at least 26 years of age, and a person of good moral character. Application, accompanied by a fee of $125.00, shall be filed with the Clerk of the Supreme Court on such form as the Committee on Character and Fitness shall prescribe and there shall be filed therewith (a) a certificate of the Clerk of the highest court of the District of Columbia or of the state in which he has practiced showing the date of his admission and his present standing, (b) a letter or certificate of a Judge of a court of record in which the applicant has practiced certifying to his character and standing, and (c) affidavits of three attorneys of this State attesting to his good moral character. The Clerk shall refer such application to the Committee on Character and Fitness who shall make the necessary investigation to determine whether the applicant meets the requirement herein specified. As a part of such investigation, the Committee shall obtain a report from the National Conference of Bar Examiners as to the applicant’s moral character and professional standing. If the applicant is favorably recommended by'the Committee he may, in the discretion of the Court, be admitted to the Bar of this State upon the payment of a further fee of $10.00 to the Clerk of the Supreme Court and taking the oath prescribed by Rule 7.
      “The fee of $125.00 above mentioned shall not be refunded in the event the application is withdrawn or rejected. Thirty dollars of said amount shall be retained by the Clerk of Court as part of his compensation and the remaining $95.00 and the fee of $10.00 paid upon admission shall be placed in the separate fund kept by him for the purpose of paying the expenses incurred by the Committee on Character and Fitness.
      “Attorneys from states not extending reciprocity on substantially equal terms to attorneys licensed in this State shall not be admitted under this rule.”

      . We find it unnecessary to consider whether the complaint raised such a substantial constitutional issue as to call for the convening of a 3-judge court. After its repeal Rule 10 could not have application to anyone but the appellant and hence at the time the action was filed Rule 10 was not a rule of statewide application, the challenge to which would require the convening of a 3-judge court. See Moody v. Flowers (1967) 387 U.S. 97, 101, 87 S.Ct. 1544, 18 L.Ed.2d 643. Apart from the issue of the propriety of convening a 3-judge court, the District Court found the Rule as it formerly existed and as applied solely to the appellant valid and it is that conclusion which is the subject of review here.

      . The defendants raised other objections to the right of the plaintiff to the benefit of the exemption provided by Rule 10. Thus, the Rule is only applicable to one “who has been actively engaged for at least five (5) years next preceding filing of his application, either in the practice of law or, during said period has been a judge of a court of record or teacher of law * * Prior to 1969, plaintiff was employed as an attorney at the Picatinny Arsenal, Dover, New Jersey. He retired in that year and liad desk space in the law offices of Gersten and Chase, Newton, New Jersey. From his deposition, his presence in the office may have been irregular, and the range of his practice was not clearly developed. Whether he was “actively engaged” in the practice of law for five years prior to his application in 1971 was put in issue by the defendants, both in their administrative denial of plaintiff’s claim to an exemption and in their answer and was unresolved by the District Court, which considered the validity of the reciprocal provision of the Rule conclusive. This was an issue that could only be resolved after a factual hearing.

      . Law Students Research Council v. Wadmond (1971) 401 U.S. 154, 159-160, 91 S.Ct. 720, 27 L.Ed.2d 749; Sperry v. Florida (1963) 373 U.S. 379, 383, 83 S.Ct. 1322, 10 L.Ed.2d 428; Konigsberg v. State Bar (1961) 366 U.S. 36, 40-1, 81 S.Ct. 997, 6 L.Ed.2d 105; Brown v. Supreme Court of Virginia (3-judge ct. D.C.Va.1973) 359 F.Supp. 549, 555, aff. 414 U.S. 1034, 94 S.Ct. 534, 38 L.Ed.2d 327; West Virginia State Bar v. Bostic (D.C.W.Va.1972) 351 F.Supp. 1118, 1121; Mackay v. Nesbett (D.C.Alaska 1968) 285 F.Supp. 498, 503, aff. 9 Cir., 412 F.2d 846, cert. den. 396 U.S. 960, 90 S.Ct. 435, 24 L.Ed.2d 425, reh. den. 397 U.S. 1004, 90 S.Ct. 1111, 25 L.Ed.2d 417; West Virginia State Bar v. Earley (1959) 144 W.Va. 504, 109 S.E.2d 420, 430-431 (cited with approval in Sperry).

      . Sperry v. Florida, supra (373 U.S. at 383, 83 S.Ct. 1322); Cohen v. Hurley (1961) 366 U.S. 117, 123, 81 S.Ct. 954, 6 L.Ed.2d 156, reh. den. 374 U.S. 857, 85 S.Ct. 1860, 10 L.Ed.2d 1083; State v. Perkins. (1934) 138 Kan. 899, 28 P.2d 765, 767; In Re Opinion of the Justices (1932) 279 Mass. 607, 180 N.E. 725, 727, 81 A.L.R. 1059; In Re Roel (1957) 3 N.Y.2d 224, 165 N.Y.S.2d 31, 144 N.E.2d 24, 29; Application of Stone (1957) 77 Wyo. 1, 305 P.2d 777, 781, cert. den. 352 U.S. 1026, 77 S.Ct. 593, 1 L.Ed.2d 598; Ex Parte Perkins (1954) 224 La. 1034, 71 So.2d 558, 559; In Re Avery’s Petition (1961) 44 Haw. 597, 358 P.2d 709, 710; Application of Steelman (Alaska 1969) 448 P.2d 817, 819; cf., Chudoff v. McGranery (3d Cir. 1950) 179 F.2d 869, 872.

      . It will be noted that Rule 10 does not establish a requirement that must be satisfied in order for the applicant to qualify for professional licensing or as a condition of his right to take the bar examination, itself, as in Keenan v. Board of Law Examiners of State of N. C. (3-judge ct. D.C.N.C.1970) 317 F.Supp. 1350. Other provisions of the Rules of Admission fix those requirements, one of which, relevant to this controversy, imposes the obligation on the applicant to establish his legal proficiency by a written examination. This latter requirement is concededly a perfectly valid requirement. Rule 10, on the other hand, is an exemption provision, which excuses certain applicants meeting specified conditions from that examination requirement. The constitutional validity of the exemption thereby granted turns on whether it violates the equal protection clause of the Fourteenth Amendment or the “privileges and immunities” clause of Article IV.

      . So far as admissions to the Bar are concerned, only ten states, it seems, refuse to recognize reciprocity. Brown v. Supreme Court of Virginia, supra (359 F.Supp. at 553).

      . Starr, Reciprocal and Retaliatory Legislation in the American States, 31 Minn.L.Rev. 371, 372 (1937) :
      “One state enacts legislation to be operative on behalf of the citizens or officials of another state upon condition that the other state enacts like or corresponding legislation. Reciprocal legislation is thus conditional or contingent legislation, since it depends for its full effect upon an event beyond the control of the enacting legislature, that is, the passage of a similar act by a foreign legislature.”
      Spindel v. Jamison (1958) 199 Va. 954, 103 S.E.2d 205, 208, defines reciprocity legislation thus:
      “ * * Reciprocity denotes mutuality, or the relationship existing between states when each gives the citizens of the other certain favors or privileges that its own citizens enjoy at the hands of the other state.”

        See, also, Fales v. Commission on Licensure to Prac. Heal. Art (D.C.Ct. App. 1971) 275 A.2d 238, 240:
      “Reciprocity has been used extensively in the area of the professions. This is because states are under no obligation to recognize licenses for professions issued by other states since these licenses issued by one state are not extraterritorial; and no rule of comity requires a state to grant such licenses merely because a person has been admitted to practice in another state.”

      . See, Zschernig v. Miller (1968) 389 U.S. 429, 88 S.Ct. 664, 19 L.Ed.2d 683, reh. den. 390 U.S. 974, 88 S.Ct. 1018, 19 L.Ed.2d 1196; Lenhoff, Reciprocity: The Legal Aspects of a Perennial Idea, 49 N.W. Law R. 619 (1954).

      . In Sams, supra, the Court said :
      “Illustrative of this doctrine are the holdings that if there is a rational basis therefor, separate treatment of professionals even of the same calling is permissible.” (413 F.2d at 829)
      The appellant, as did the appellant in Lombardi v. Tauro (1st Cir. 1972) 470 F.2d 798, 800-801, n. 4, cert. den. 412 U.S. 919, 93 S. Ct. 2734, 37 L.Ed.2d 145, argues that the pursuit of one’s chosen profession is a fundamental right and that the Rule involved here must pass the “compelling state interest” test. We agree with the reasoning in Lombardi that such test is not applicable in this context. That reasoning, it would seem, has received added support in the decision of the court in Rodriguez, supra. And it was, as Lombardi emphasizes, the test as stated in Schware v. Board of Bar Examiners (1957) 353 U.S. 232, 77 S.Ct. 752, 1 L.Ed.2d 796.
      Incidentally, the claim of the applicant in Lombardi, it would appear, was stronger than that of the plaintiff here. In that case, the Massachusetts Supreme Judicial Court, in fixing the standards for admission to its Bar, required that, to qualify to take the examination for admission, the applicant must show that he is a graduate of a qualified law school. The jdaintiff had successfully completed all course requirements for graduation at a qualified law school but that school refused to award him a diploma because his pre-legal education, though meeting the requirements for admission to the Bar under the court’s standards, did not satisfy the degree requirements of the law school. The Supreme Judicial Court applied strictly its rule and denied the applicant the right to take the Bar examination. This ruling was sustained against constitutional attack in Lombardi.

      . See Brown v. Supreme Court of Virginia, supra (359 F.Supp. at 557) :
      “* * * comity or reciprocity is essentially a state discretionary function in determining who should practice a given profession.”

      . The result of any contrary conclusion can be easily foreseen. Indeed, the action of the South Carolina Supreme Court, faced with the threat of this action, is typical of the reaction that often would follow the invalidation of reciprocity legislation. When this action was begun, the South Carolina Supreme Court, as we have already noted, abrogated Rule 10, thereby imposing on all attorneys previously admitted to practice in another state the requirement of a written examination on their legal competency. Reciprocal legislation which will avoid this hardship for experienced attorneys seeking to move into another state to practice is appealing, even though the infrequent applicant from a state which denies reciprocity may be denied the benefits of such legislation. It is hoped that, with this finding that Rule 10 is without constitutional infirmity, the South Carolina Supreme Court may be prompted to reinstate Rule 10.

      . Suffling v. Bondurant (D.C.N.M.1972) 339 F.Supp. 257, 259, aff. 409 U.S. 1020, 93 S.Ct. 460, 34 L.Ed.2d 312; Webster v. Wofford (D.C.Ga.1970) 321 F.Supp. 1259, 1262.

      . See, In Re Griffiths, supra (413 U.S. at 722, n. 9, 93 S.Ct. 2851, 37 L.Ed.2d 910).

      . See, for instance, Doe v. Bolton (1973) 410 U.S. 179, 200, 93 S.Ct. 739, 751, 35 L.Ed.2d 201, where the residence provision of the Georgia abortion statute was found violative of the “privileges and immunities” provisions of Article IV because it discriminated against non-residents by confining “to its own residents the general medical care available within its borders.” In short, it was the preference given the State’s own residents that rendered these provisions of the statute void under Article IV, § 2.
      Similarly, in Memorial Hospital v. Marico-pa County, supra, the denial of medical supplies essential to life was denied to the migrant who had not lived within the county for at least a year but did not apply to those who had lived more than a year in such county. There was accordingly a clear distinction made between the migrant and the local citizen. In this ease, however, the migrant is subjected to no different treatment from that extended to the long-time resident. The only distinction is that between classes of migrants — a distinction made to serve a legitimate state interest. See, In Re Griffiths, supra (413 U.S. at 721-722, 93 S.Ct. 2851); Fales v. Commission on Licensure to Prac. Heal. Art, supra (275 A.2d at 240).

      . See, also, Chatkin v. University of Illinois (1952) 411 Ill. 105, 103 N.E.2d 498, 502-503.


author: JAMESON, District Judge:

text:
    DILLINGHAM CORPORATION, a Hawaiian corporation, Plaintiff-Appellee, v. EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WISCONSIN, a corporation, Defendant-Appellant.
    No. 73-1244.
    United States Court of Appeals, Ninth Circuit.
    Sept. 25, 1974.

      Ray Mize, Mize, Kriesien, Fewless, Chaney & Kelley, Portland, Or., for defendant-appellant.
    Patrie J. Doherty, McMurry & Nichols, Portland, Or., for plaintiff-appel-lee.
    Before KILKENNY and SNEED, Circuit Judges, and JAMESON, District Judge.

       Honorable W. J. Jameson, United States Senior District Judge for the District of Montana, ' sitting by designation.

   OPINION

JAMESON, District Judge:

Plaintiff-appellee Dillingham Corporation (Dillingham), brought this diversity action for indemnity against defendant-appellant, Employers Mutual Liability Insurance Company of Wisconsin (Employers), for damages and attorney fees incurred in the defense and settlement of an action brought by William Simpson, an employee of Albina Engine & Machine Works (Albina), a division of appellee, against Matson Navigation Company (Matson), in which Dillingham was im-pleaded. The case was submitted to the district court on stipulated facts and exhibits. The court found in favor of ap-pellee, and judgment was entered against appellant for the amount of the settlement, with interest, costs and attorney fees.

Insurance Policies Issued to Dillingham

Employers issued an insurance policy to Dillingham for the period July 1, 1968 to July 1, 1969. Coverage A provided Workmen’s Compensation coverage. Coverage B provided Employer’s Liability coverage in the maximum amount of $50,000 as follows:.

“To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury by accident or disease, including death at any time resulting therefrom,
(a) sustained in the United States of America, its territories or possessions, or Canada by any employee of the insured arising out of and in the course of his employment by the insured >>

Exclusion (c) provides that this policy does not apply:

“under coverage B, to liability assumed by the insured under any contract or agreement, but this exclusion does not apply to a warranty that work performed by or on behalf of the insured will be done in a workmanlike manner . . . ”

Continental Insurance Company (Continental) insured Dillingham under a general liability policy for one year beginning January 1, 1969 in the maximum of $500,000. This policy provided, inter alia, the following coverage:

“To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay because of Bodily Injury, Personal Injury or Property Damage caused by or resulting from an occurrence as hereinafter defined.”

Exclusion (b) provides that the policy does not apply:

“(b) to bodily injury, sickness, disease or death of any employee of the Insured arising out of and in the course of his employment by the Insured, but this exclusion does not apply to
“(1) • • ■
“(2) liability of others assumed by the Insured under any contract or agreement other than an implied warranty or written warranty under a contract to provide service in a workmanlike manner.”

Thus the two policies “dovetail”: Employers provided coverage for claims arising out of a breach of express or implied warranty of workmanlike service; and Continental provided coverage for claims arising out of express hold harmless clauses and indemnity agreements.

Simpson Accident and Personal Injury Claim

On May 26, 1969, William Simpson, an employee of Albina, was injured while working aboard a vessel owned by Matson. On May 27, 1969 Albina notified Employers of the accident. Employers commenced compensation payments under coverage A on June 9, 1969.

On May 6, 1970 Simpson brought a third-party action against Matson for unseaworthiness and negligence. On June 19, 1970 Matson tendered the defense of the case to Albina. On June 22 Albina’s counsel wrote to Frank B. Hall & Co., insurance agent for Employers and Continental, requesting that Mat-son’s tender of the defense to Albina be forwarded to the appropriate underwriter. On June 24, 1970 Hall advised Albina's counsel that the coverage was with Continental because of a work order issued by Matson dated April 29, 1969.

Impleader of Dillingham

On September 8, 1970 Dillingham was impleaded in the action instituted by Simpson on Matson’s claim that it was entitled to indemnity for any liability it might have to Simpson on the basis of Albina's alleged breach of an express and implied warranty of workmanlike service. On November 17, 1970, Portland Stevedoring Company was implead-ed as a third party defendant. On November 30 Matson filed a third-party complaint against Dillingham, and Dil-lingham filed a third-party complaint against Portland Stevedoring Company.

On November 9, 1970 Employers gave Simpson’s lawyer notice of its subrogation claim and lien for compensation and medical payments made to Simpson.

Tender of Defense and Employers’ Rejection

It was later determined that the work order of April 29, 1969 covered work prior to May 26, 1969 and was for a different voyage. Another work order had been issued on June 10, 1969 covering the work aboard the Matson vessel between May 26 and May 30, 1969. A copy of this order was sent to Continental on January 21,1971.

On January 26, 1971 Dillingham’s counsel received from Continental a xerox copy of the June 10, 1969 work order. By letter dated February 11, 1971 Dillingham’s counsel advised Employers that Continental had erroneously accepted defense of the Simpson suit in the belief that the work had been undertaken pursuant to a written contract of indemnification, whereas in fact the order was dated “some 15 days after the accident.” The letter reads in part:

“The work was' therefore performed under an oral undertaking and included the implied warranty of workmanlike performance imposed by the Admiralty common law. This loss therefore falls within Coverage B of the Workmen’s Compensation policy in effect on May 25, 1969 issued by you? company in favor of Albina Engine & Machine Works.
“On behalf of Albina Engine & Machine Works and its underwriter Continental Insurance Co., we tender the defense of this case and request that you assume the defense and costs thereof, including court costs and attorneys fees, from the date of filing of the Third Party Complaint against Dillingham Corporation by Matson Navigation Co. For your reference we enclose a copy of William Simpson’s Complaint against Matson Navigation Company and Matson Navigation Company’s Third Party Complaint against Dillingham Corporation and Dillingham’s Third Party Complaint against Portland Stevedoring Co.”

On February 15 Dillingham’s counsel wrote a second letter to Employers enclosing copies of interrogatories. On February 22 they wrote a third letter requesting advice as to whether Employers wished them to continue with the defense of the case or turn the file over to new counsel. On February 23 Employers wrote as follows:

“This letter will acknowledge yours of February 11 and February 22, 1971.
We herein wish to advise that we are refusing your tender of defense in the above captioned matter. Towards any further claims along this line, we will raise the affirmative defense of estop-pel by laches.”

Settlement of Simpson Suit

On April 21, 1971 Dillingham’s counsel informed Employers by letter that a tentative settlement of the Simpson case for $28,156.44 had been reached. Contributions from Matson and Portland Stevedoring Company totaled $6,631.19, leaving a net cost to Dillingham of $21,525.15 plus attorney fees and costs. Employers was given an opportunity to object to the reasonableness of the settlement, but made no response. On August 6, 1971 counsel for Dillingham advised Employers that settlement had been effected and that Dillingham had paid $21,525.15 and incurred $3,000.04 in legal fees. Dillingham demanded indemnity from Employers. Employers made no response and this action was filed on August 18, 1971.

Proceedings in District Court

Pursuant to stipulation and order certain legal issues were decided prior to trial. On May 26, 1972 the district court entered an order that Employers was “limited, in defending this action, to the sole ground upon which it rejected plaintiff’s tender of defense, namely, es-toppel by laches.”

In an opinion filed November 17, 1972 the district court held that (1) Dillingham was not estopped by laches; (2) Continental was not the real party in interest; and (3) Employers and Continental insured different risks, and proration accordingly was not available.

Contentions of Appellant

Appellant contends that: (1) under the doctrine of relation back, the written order of June 10, 1969 was controlling; (2) Matson’s right of indemnity against appellee was covered under Continental’s policy; (3) appellant is not limited in its defense to estoppel by laches; (4) appellee was in fact guilty of laches; and (5) the two policies of insurance were repugnant, and Matson’s claim therefore was subject to proration.

We conclude that the district court was correct in limiting appellant’s defense to estoppel by laches and in holding that appellee was not guilty of lach-es and the insurance policies were not repugnant but covered different risks.

Limitation of Defenses

Under Oregon law when an insurer denies liability upon a specific ground, other grounds of forfeiture then within its knowledge are waived. “Good faith” requires an insurer to apprise the insured “fully of its position, and, failing to do this, * * * [the insurer]

is estopped from asserting any defense other than that brought to the notice of the plaintiff.” Ward v. Queen City Fire Insurance Co., 69 Or. 347, 138 P. 1067, 1069 (1914).

Employers does not dispute this general rule, but argues that it is not applicable. It contends that (1) its rejection of the defense was not limited or placed upon specific grounds and (2) in the pretrial order it raised defenses other than laches.

We cannot accept Employers’ contention that its letter of rejection applied only to any “future claim” which might be asserted with respect to the Simpson suit. Employers was fully aware of the accident and the nature of its coverage and that of Continental. Nevertheless, in “refusing the tender of defense”, it specified only “the affirmative defense of estoppel by laches”. Had Employers intended to rely upon its present contention that there was no coverage, it would have been very simple to include that defense in its rejection letter. In our opinion the only reasonable interpretation of that letter is that it constituted notice to Dillingham that Employers was rejecting the tender of the defense because it considered Dillingham barred by the doctrine of laches from ever asserting its claim against Employers.

The pretrial order containing appellant’s contentions with respect to other possible defenses upon which it would rely at the trial was not made until a year after Employers’ letter rejecting the tender of defense. Thus, a timely and full appraisal of its position was not made by Employers to Dillingham. Following Oregon law as expressed in Ward, we conclude, as did the trial court, that Employers is limited to the defense of estoppel by laches.

Estoppel by Laches

The Supreme Court of Oregon has outlined the four elements which must be established before laches will bar a claim: (1) full knowledge of all the facts by the claimant, (2) with a concurrent unreasonable delay, (3) resulting in such substantial prejudice or injury to the defendant (4) as to make enforcement of the claim inequitable. Willis v. Stager, 257 Or. 608, 481 P.2d 78, 83-84 (1971). To prevail in its defense of estoppel by laches, Employers had the burden of proving each of those elements. Hanns v. Hanns, 246 Or. 282, 423 P.2d 499, 511 (1967); McIver v. Norman, 187 Or. 516, 205 P.2d 137, 213 P.2d 144, 153 (1949). Employers has failed to sustain this burden of proof.

Thé trial court concluded that appellee did not have the full knowledge essential to the defense of laches. The court found that Dillingham reasonably believed that the work done by Simpson was performed pursuant to a written work order. Given the similarity between the work order of April 29, 1969 which was mistakenly thought to cover Simpson’s work and the work order of June 10, 1969, we conclude that there was substantial evidence to support the finding that Dillingham’s lack of knowledge was not a result of its own negligence or lack of diligence. Winn v. Shu-gart, 112 F.2d 617, 622 (10 Cir. 1940).

Laches does not start to run until the insured has “full knowledge of the facts.” Willis v. Stager, supra, 481 P.2d at 84. ’Dillingham did not have such knowledge until January, 1971. It tendered the defense to Employers less than one month later. This delay was not “unreasonable”. Even were the delay held to cover the five month period between the impleadings of Dillingham and the tender of defense to Employers, under these circumstances we would still conclude, as did the district court, that the delay was excusable.

The district court also resolved the question of “substantial prejudice or injury” against Employers. This too involved a factual determination. Again, we conclude that substantial evidence existed to support the court’s finding. Employers was aware of the injury sustained by Simpson. It was informed of the Simpson accident on May 27, 1969 and began making compensation payment under “Coverage A” of its policy on June 9, 1969. It knew that a potential claim existed under “Coverage B” in the absence of a valid work order agreement; yet it made no investigation of the accident.

Furthermore, Employers was tendered the defense of the action two and one-half months prior to the trial date. As the district court found, “a period of this length may well have been sufficient”, and in addition, “had a continuance been requested, it, in all likelihood, would have been granted”. We agree with the district court that Employers failed to establish substantial prejudice by the delay.

In summary, Employers failed to establish the essential elements of laches. The lower court correctly concluded that Dillingham’s claim was not barred by laches.

Repugnance of Policies — Proration

Having concluded that the appellant was limited to the defense of estoppel by laches and has failed to establish that defense, the only remaining issues requiring determination is Employers’ contention that, if found liable, it is entitled to prorata contribution from Continental. Employers relies on the holding in Lamb-Weston Inc. v. Oregon Auto Insurance Co., 219 Or. 110, 341 P. 2d 110, modified 219 Or. 130, 346 P.2d 643 (1959), that where two insurance policies cover the same loss and each policy contains a clause limiting the insurer’s liability if other insurance is available to pay for the loss, the clauses are repugnant and are to be rejected in toto. The loss is then to be prorated between the different insurers. The Lamb-Weston doctrine, however, is not applicable. While the Employers and Continental policies contain “other insurance” clauses, they do not cover the same loss. Rather they are mutually exclusive. Employers is therefore not entitled to contribution from Continental.

Attorneys’ Fe,es

Dillingham has applied for an award of $2,960.00 for attorneys’ fees incurred in this appeal if it should prevail. In open court, counsel for the parties agreed that the sum requested was reasonable. Pursuant to the Oregon attorney fee statute, ORS 743.114 which is applicable to appeals in this court (State Farm Mutual Automobile Insurance Co. v. Brewer, 406 F.2d 610, 615 (9 Cir. 1968), we grant appellee’s application for attorneys’ fees in the sum requested.

Affirmed, with allowance of costs and attorney fees in the amount of $2,960.00.

      . Employers made no investigation of the facts of the accident, although it knew the accident occurred aboard a vessel owned by Matson.

      . As noted infra, it was determined later that this work order was for work on a prior voyage and did not cover work performed on May 26, 1969.

      . The settlement was paid by Continental upon a written loan receipt from Dillingham.

      . The opinion constituted findings of fact and conclusions of law pursuant to F.R.Civ.P. 52(a).

      . In a diversity case, this court must follow the law of the state in which the complaint was filed. Franklin Supply Co. v. Tolman, 454 F.2d 1059, 1075 (9 Cir. 1972). Decisions of the Supreme Court of Oregon are therefore controlling here.

      . An affidavit of Albina’s employee in charge of ship repair recites that in June, 1970 he instructed his personnel to furnish Albina’s insurance broker any written work order issued by Matson covering work performed on May 26, 1969. The work order of April 29, 1969 was furnished because it was the “only work order issued prior to May 26, 1969” covering work on the vessel. They did not discover that this work order covered a prior voyage until shortly prior to January 21, 1971.

      . There is substantial evidence to support all of the findings of the district court, and we cannot say that any of them are clearly erroneous. Hellman v. Colonial Ins. Co., 475 F.2d 3061, 1062 (9 Cir. 3973).

      . Appellant cites numerous cases holding that undue delay in giving an insurer notice of a claim against the insured may constitute laches. None of those cases, however, mirror the factual situation involved here.