text:
    Paul Harry KING, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
    No. 74-1517.
    United States Court of Appeals, Sixth Circuit.
    March 4, 1975.

      Paul Harry King, pro se.
    Eugene E. Siler, Jr., U. S. Atty., Lexington, Ky., James F. Cook, Robert M. Murphy, Asst. U. S. Attys., for respondent-appellee.
    Before PHILLIPS, Chief Judge, and PECK and LIVELY, Circuit Judges.
   ORDER

This appeal from the denial of a motion to vacate sentence under 28 U.S.C. § 2255 has been assigned to a panel of the court pursuant to Rule 3(e), Rules of the Sixth Circuit. The petitioner was convicted of four counts of mail fraud in violation of 18 U.S.C. § 1341 “as part of a scheme and artifice to defraud.” The proof at his trial revealed that petitioner mailed falsified applications for credit cards to various issuers of such cards and after receiving them, used the cards to obtain property and money. In this proceeding petitioner maintains that the decision in United States v. Maze, 468 F.2d 529 (6th Cir. 1972), aff’d, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), requires that his conviction be set aside.

In Maze, the defendant stole a credit card and obtained property and money with it. The only use of the mails occurred after he had obtained the credit when the creditor sent the charges through the mails to the issuer of the credit card for collection. This court and the Supreme Court held that Section 1341 does not reach every unauthorized use of a credit card where the only use of the mails is to complete the billing process. In petitioner’s case the mails were used as the first step in executing a “scheme or artifice” for obtaining money or property by false or fraudulent pretense, and the holding in Maze does not apply.

Upon consideration of the entire record, including the briefs of the parties, the court concludes that the questions on which decision of this cause depends are so unsubstantial as not to require further argument. Rule 8, Rules of the Sixth Circuit.

The judgment of the district court is affirmed.


source: Caselaw Access Project

author: WILLIAM P. GRAY, District Judge:

license: Public Domain

text:
    SIDA OF HAWAII, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 73-2817.
    United States Court of Appeals, Ninth Circuit.
    Feb. 24, 1975.

      Richard F. Liebman (argued), Honolulu, Hawaii, for petitioner.
    Allen H. Feldman, N. L. R. B. (argued), Washington, D. C., for respondent.
    Before KILKENNY and SNEED, Circuit Judges, and GRAY, District Judge.

       Honorable William P. Gray, United States District Judge for the Central District of California, sitting by designation.

   WILLIAM P. GRAY, District Judge:

SIDA of Hawaii, Inc. petitions for review of a decision and order of the National Labor Relations Board (the Board) requiring it to recognize and bargain with the certified representative of its “members,” whom the Board found to be “employees” within the meaning of § 2(3) of the National Labor Relations Act (the Act), 29 U.S.C. § 152(3) (1964). The Board makes cross-application for enforcement of its order. SIDA’s petition is based upon its contention that its members are independent contractors rather than employees. We agree with SIDA and accordingly deny enforcement of the Board’s order.

I. THE ORGANIZATION AND FUNCTIONS OF SIDA

SIDA styles itself as a self-governing “trade association” formed by independent taxicab owner-operators with the intent of preserving their independence while simultaneously providing a collective body able to compete with the larger taxi companies in bidding for the right to operate out of the Honolulu airport. SIDA insists that it was conceived strictly for the benefit of its drivers and that stock ownership is widespread among, and limited to, drivers, former drivers or their heirs.

SIDA maintains a skeleton corporate structure headed by a seven-person, nonsalaried Board of Directors, all of whom must be drivers. An Operations Committee composed of six drivers acts upon complaints from drivers and the general public and has the authority to suspend or terminate drivers found to have violated the Association’s regulations. The only salaried employees are a general manager who performs general administrative duties from his airport office, radio dispatchers who relay customer calls to the drivers, and line operators who regulate and maintain order in the cab queues at the airport.

Presumably, SIDA’s principal reason for existence is its contract with the State of Hawaii, under which it has the exclusive right to provide metered taxi service at the Honolulu International Airport. Other SIDA activities beyond the airport contract include: (1) the maintenance of contracts with several other commercial entities; (2) the provision of radio dispatchers, a service financed from a monthly stall rental fee paid by the drivers; (3) the selling of gasoline to the drivers at reduced rates; (4) the furnishing of business cards bearing SIDA’s seal, name, address and phone number, the cost of such cards being covered by the stall rental fee; (5) the purchase of advertisements in the Yellow Pages; and (6) the promulgation of rules and regulations which drivers must abide by and which are enforced by the above-mentioned Operations Committee.

Membership in SIDA is available on an equal basis to any qualified applicant, subject to approval by the general manager. Such approval is based upon ownership of a suitable vehicle, a valid operator’s license, and a personal appearance acceptable to the general manager. Upon such approval, an applicant becomes a member of SIDA by executing the Standard Independent Drivers Contract, the provisions of which are unilaterally established by the Board of Directors.

II. EMPLOYEE OR INDEPENDENT CONTRACTOR

Section 2(3) of the Act specifically provides that “[t]he term ‘employee’ shall not include any individual having the status of an independent contractor . . . .” It is well-established doctrine that determinations of whether an individual is an employee or an independent contractor are to be made by the application of common law agency principles to the total factual context of each case. NLRB v. United Insurance Co., 390 U.S. 254, 256, 88 S.Ct. 988, 19 L.Ed.2d 1083 (1968). Brown v. NLRB, 462 F.2d 699, 702 (9th Cir. 1972).

The application of agency principles to the facts is a proper subject for judicial review, but our review of the Board’s action is limited. This court recognizes that it may not displace the Board’s choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 95 L.Ed. 456 (1951). We conclude here, however, that the Board’s determination that the SIDA owner-operators are employees is a decision lacking substantial support in the record considered as a whole. As this court reaffirmed in Brown, we cannot uphold the Board where it has in its “application of the law to the facts overlooked accepted principles of the law of agency . . . .” 462 F.2d at 702, quoting Carnation Co. v. NLRB, 429 F.2d 1130, 1134 (9th Cir. 1970).

The essential ingredient of the agency test is the extent of control exercised by the “employer”. It “rests primarily upon the amount of supervision that the putative employer has a right to exercise over the individual, particularly regarding the details of the work”. Associated Independent Owner-Operators, Inc. v. NLRB, 407 F.2d 1383, 1385 (9th Cir. 1969). We noted in Brown, supra, that it is immaterial that a putative employer wishes to promote sales and adjust complaints, as such things are mutual goals common to employee and independent contractor relationships; on the other hand, “the means used and the respective controls in accomplishing these goals are . . . highly material to the determination of employee or contractor status.” 462 F.2d at 703.

As the authors of the Restatement of Agency 2d have written, the “important distinction is between service in which the actor’s physical activities and his time are surrendered to the control of the master, and service under an agreement to accomplish results or to use care and skill in accomplishing results. Those rendering service but retaining control over the manner of doing it are not servants.” Restatement of Agency 2d § 220, Comment e at 487-88.

In light of the above-mentioned general agency principles, we find that the following factors clearly establish the relative absence of actual control by SIDA, as an entity, and point up the independent contractor status of the drivers:

(1) The drivers make substantial personal investments in their taxicab activities. They purchase and maintain their own vehicles; obtain all necessary city and state permits; pay for their own health insurance, Social Security, unemployment benefits, and income taxes; maintain their own automobile insurance; and pay a monthly stall rental fee to SIDA in addition to a $0.50 trip fee for each trip out of the airport.

(2) The drivers are substantially independent in their operations. They are generally free to work or not work for SIDA when they choose; they may “moonlight” by working for other cab companies; they are free to make their own arrangements with clients and to develop their own goodwill; they are not limited to any particular area of operation (with the exception of three drivers who operate out of one shopping center); fares are determined not by SIDA, but by local meter ordinances and are collected and retained by the drivers; SIDA supervision is greatest at the airport, but is there limited to line operators charged only with maintaining order in the cab queues — otherwise, SIDA’s only tangible connection with the drivers is by radio; SIDA pays no compensation to the drivers, makes no withholding, Social Security, or unemployment insurance deductions on their behalf, and keeps no income records for them.

(3) The driver’s contract specifically provides that the relationship created is one of independent contractor.

We note further that the drivers do not in any practical sense render a service to SIDA for which they are compensated; rather, SIDA is merely an administrative creature which provides certain facilities and opportunities to the drivers for a price. SIDA does, however, hold itself out as a taxicab company, in that it is a signatory to several commercial contracts and uses its name in advertising. And certainly SIDA does maintain control over its drivers to the extent that the standard driver’s contract imposes certain performance requirements and subjects drivers to SIDA’s rules and regulations.

We are not persuaded, however, by the Board’s conclusion that the provisions of the driver’s contract and the rules and regulations (and the means of enforcing them) evidence SIDA’s substantial control over the drivers. By executing a contract with SIDA, the drivers do not submit themselves to SIDA’s control as employees, but merely agree to associate with SIDA and to comply with its procedures. We disagree with the Board’s contention that the rules and regulations are instruments of control for the benefit of SIDA as an entity; rather, they can more accurately be seen as being designed to enforce standards of conduct to which all of the drivers should adhere in order to promote the SIDA image for the mutual benefit of the Association and its drivers. Examples of such required conduct are that the drivers be neat and courteous, display the SIDA identification on their dome lights and uniforms, and follow the instructions of dispatchers and line operators.

Several of the Association’s regulations simply incorporate the requirements imposed on SIDA by its commercial contracts and certain state and local ordinances (e. g., presence of line operators at the airport, liability insurance requirements, and rules regarding the personal appearance of the drivers). The Board has itself noted that the fact that a putative employer incorporates into its regulations controls required by a government agency does not establish an employer-employee relationship. Portage Transfer Co., Inc., 204 NLRB No. 117 (1973). Reisch Trucking and Transportation Co., Inc., 143 NLRB 953 (1963). Furthermore, we do not find the incorporation of the requirements of the SIDAState of Hawaii contract to be inconsistent with an independent contractor relationship, in that such an incorporation benefits both parties by insuring continued operation under the contract.

The power of the Operations Committee to hear and act upon complaints does not constitute the type of control indicative of an employer-employee relationship. The majority of complaints come from the drivers themselves; the Committee is composed of drivers; and the prompt resolution of customer complaints benefits both parties. It appears evident that the Committee is primarily a self-regulatory mechanism, manned by drivers for the mutual benefit of drivers.

This court has previously endorsed the approach of the Restatement of Agency 2d § 220(2) in distinguishing employees from independent contractors. See Brown v. NLRB, supra, 462 F.2d at 705. An application of the criteria enumerated in § 220(2) to the SIDA owner-operators reaffirms our conclusion that an independent contractor relationship is here disclosed.

Our decision here is further supported by the specific holding in Brown, wherein this court reversed the Board’s finding that certain newspaper dealers were employees. In so concluding, the opinion reviewed the Board’s prior decisions and synthesized three determinative factors:

(1) The entrepreneurial aspects of the dealer’s business, including the right to control;

(2) The risk of loss and opportunity to profit; and

(3) The dealer’s proprietary interest in his dealership.

The Board has argued that Brown is inapplicable here because it was a newspaper dealers case and therefore factually distinguishable. On the contrary, we believe the rationale enunciated in Brown to be applicable to the general question of the employee-independent contractor distinction and thus supportive of the views herein expressed.

III. CONCLUSION

On the record before us, we find the SIDA owner-operators to be independent contractors rather than employees within the meaning of § 2(3) of the Act. Enforcement of the Board’s order is therefore denied. In light of this determination, we find it unnecessary to rule upon the question of whether the Board erred in excluding stockholder owner-operators from the bargaining unit.

      . In rejecting SIDA’s independent contractor arguments in the representation proceedings, the Acting Regional Director, whose findings were subsequently affirmed by the Board, stated:
      “In June, 1971, the Board concluded in a case involving the same Employer that a unit composed of dispatchers and taxicab drivers was appropriate. Sida of Hawaii, Inc., 191 NLRB No. 46. In the prior case the Board expressly held that the taxicab drivers were not independent contractors.
      In October, 1972, prior to the hearing in the instant case, the Employer enacted new rules and regulations, which are applicable to its drivers. The violation of these rules and regulations by a driver constitutes grounds for discharge. The new rules and regulations provide, inter alia, that (1) the driver must be clean and neat in appearance and dress; (2) the driver’s vehicle must be clean and in good mechanical condition; (3) the driver must not refuse short trips; (4) the driver must not play cards or gamble at hotels or at the airport; (5) the driver must obey the orders of dispatchers; (6) the driver must be courteous to passengers.
      The Employer’s current rules and regulations provide for effective control by the Employer over the day-to-day activities of the drivers.”
      In the prior SIDA decision, 191 NLRB No. 46, relied on by the Acting Regional Director, the Board had cited the following factors in support of its employee holding:
      “ . . . prospective drivers are interviewed and their police records are checked before they can drive for SIDA. (2) SIDA uniforms and name tags are required of all drivers. (3) All drivers must sign a contract with SIDA before being allowed to commence employment. (4) SIDA has the right to suspend or terminate any driver who fails to comply with the contract and with SIDA’s rules and regulations. (5) SIDA has the sole discretion to decide whether or not a driver should be reinstated, and, if so, under what conditions. (6) Strict regulations are placed upon the amount drivers can charge for various services and upon the personal appearance and conduct of drivers. (7) SIDA enforces rules concerning the appearance and mechanical condition of cabs. (8) SIDA advertises its cab operation in the yellow pages. (9) Complaints against drivers are investigated by SIDA, and, where appropriate, disciplinary action is taken.”

      . Restatement of Agency 2d § 220:
      “§ 220. Definition of Servant * * * * * *
      (2) In determining whether one acting for another is a servant or an independent contractor, the following matters of fact, among others, are considered:
      (a) the extent of control which, by the agreement, the master may exercise over the details of the work;
      (b) whether or not the one employed is engaged in a distinct occupation or business;
      (c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
      (d) the skill required in the particular occupation;
      (e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
      (f) the length of time for which the person is employed;
      (g) the method of payment, whether by the time or by the job;
      (h) whether or not the work is a part of the regular business of the employer;
      (i) whether or not the parties believe they are creating the relation of master and servant; and
      (j) whether the principal is or is not in business.”


author: BREITENSTEIN, Circuit Judge.

text:
    CARRIERS INSURANCE COMPANY, Plaintiff-Appellee, v. AMERICAN HOME ASSURANCE COMPANY, Defendant-Appellant, and Hartford Fire Insurance Company, Defendant-Appellee.
    No. 74-1330.
    United States Court of Appeals, Tenth Circuit.
    Argued Jan. 21, 1975.
    Decided March 4, 1975.
    Rehearing Denied April 4, 1975.

      Bill E. Fabian, Kansas City, Kan. (McAnany, Van Cleave & Phillips, Kansas City, Kan., on the brief), for plaintiff-appellee Carriers Ins. Co.
    David C. Trowbridge, Kansas City, Mo. (Donald F. Martin, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, Mo., and John J. Bukaty, Jr., Kansas City, Kan., on the brief), for defendant-appellant American Home Assurance Co.
    John T. Flannagan, Olathe, Kan. (Keith Martin and Payne & Jones, Olathe, Kan., on the brief), for defendant-appellee Hartford Fire Ins. Co.
    Before BREITENSTEIN, HILL and DOYLE, Circuit Judges.
   BREITENSTEIN, Circuit Judge.

In 1971 two youths were injured in a vehicular accident. The amount of recovery, determined after jury trial in federal court, is not attacked. In 1975 the insurance companies are still fighting over their respective liabilities. The action before us is for a declaratory judgment. Jurisdiction is based on diversity.

The 582-page record is confusing beyond belief. In the district court there was no trial and the matter was submitted on pretrial order, briefs, and oral argument. The record contains 16 exhibits without any showing how they got there. Included are a mass of papers which, so far as we can ascertain, have nothing to do with the issues. The record references in the briefs are unsatisfactory. Many hours of judicial time have been ill-spent in an effort to sort out the pertinent policy provisions. If it had not been that the fight between insurers delays payment to the injured, the court would have required an appendix, and rebriefing.

A sport van owned by Rudolph Chevrolet, Inc., DBA Rudolph Gold Key Auto Lease, of Phoenix, Arizona, and driven by Nicholas Glavas, an Arizona resident, collided at a Kansas intersection with a motorcycle. A negligence action in federal district court in Kansas against Rudolph and Glavas resulted in the dismissal of Rudolph and a judgment for $211,-025 against Glavas.

Four insurance companies are involved. Carriers Insurance Company brought a declaratory judgment action against Planet Insurance Company and Glavas. By amendment American Home Assurance Company and Hartford Fire Insurance Company were joined as defendants. The court held that Hartford was not liable. The order of liability of the others was determined to be (1) Carriers, (2) Planet, and (3) American Home.

Planet issued an automobile liability policy to Glavas as named insured and provided for coverage of non-owned automobiles. After district court judgment herein, Planet paid to the court registry $100,000, the limit of its policy. We are not concerned with its order of liability.

Carriers issued to Rudolph an automobile liability policy with limits of $10,-000/$20,000/$5,000. The policy contained an excess liability endorsement with $100,000/$300,000 limits. The district court imposed primary liability on Carriers under the policy provisions with the lesser limits. Carriers has not appealed and, accordingly, the district court judgment is conclusive on primary liability.

American Home issued to Rudolph and its rental agency as named insureds an umbrella liability policy. Hartford issued to Rudolph as named insured a comprehensive automobile and garage liability policy. These two policies will be discussed later.

A threshold question is the status of Glavas. Rudolph, the owner of the van, operated a garage and conducted a car-rental business. Rudolph furnished the van to Glavas for a vacation trip. There is evidence that neither Glavas nor anyone acting for him paid, or was obligated to pay, any rental charge for the use of the van. The pretrial order recited the contentions of Carriers and American Home that Glavas was a gratuitous bailee and stated that the case presented no question of fact. Although all parties had notice of the pretrial order and an opportunity to object thereto, no objection was made. Thereafter, Hartford argued that Glavas was a rentee or lessee. Hartford says that its failure to object to the pretrial order was the result of excusable inadvertence and mistake. We are not impressed. The trial court holding that Glavas was a gratuitous bailee is a reasonable inference from the record. For all purposes of this opinion, we treat Glavas as a gratuitous bailee.

The policies with which we are concerned may be an underwriter’s dream but are a court’s nightmare. They are filled with circumlocution stating inclusions and exclusions in fine print which is almost unreadable because of poor reproduction.

Carriers.

The Carriers excess endorsement covers the named insured, its partners and executives and members of their households, and its employees. Glavas does not fit in any of these categories. The endorsement does not cover him as a permissive user. Carriers is not liable under the excess endorsement.

American Home.

Rudolph was a named insured in the umbrella liability policy. The definitions found in the declaration portion say:

“the unqualified word ‘Insured’, wherever used in this policy, includes not only the Named Insured but also,
$ * * * * *
with respect to any automobile owned by the Named Insured * *, any person while using such automobile * * * provided the actual use of the automobile is with the permission of the Named Insured, except * * * (not applicable).”

Endorsement No. 2 says that the automobile liability coverage applies only to the named insured and not to a rentee or lessee. The endorsement does not purport to amend the declaration definition which provides that the term “insured” as used in the policy includes a permissive user such as Glavas.

Condition No. 7 of the declaration portion requires underlying insurance. An attached schedule of that insurance includes Aetna with a $1,000,000 limit and describes coverage as automobile liability. Endorsement No. 7 changes the schedule by fixing the Aetna limits at $100,000/$300,000/$25,000 and describing Aetna coverage as automobile liability (leased cars only). Endorsement No. 8 adds to the schedule Ranger Ins. Co. with $500,000 limits and describes coverage as automobile liability (short term rental fleet). Endorsement No. 9 further amends the schedule by deleting Ranger and adding Carriers Insurance Co. Nothing is said about the coverage of Carriers. We have noted that the Carriers policy with the lesser limits covers permissive users. The result is, and the trial court held, that the American Home policy is excess over the policy of Carriers with $10,000/$20,000/$5,000 limits.

The most charitable thing to be said for American Home is that its policy is ambiguous. The general rule is that an ambiguous insurance policy is to be construed in favor of the insured. Prime Drilling Co. v. Standard Accident Insurance Co., 10 Cir., 304 F.2d 221, 223; see also D.M.A.F.B. Federal Credit Union v. Employers Mutual Liability Insurance Company of Wisconsin, 96 Ariz. 399, 396 P.2d 20, 23.

All parties agree that we are concerned with Arizona law. Ownership and bailment were in that state and all of the policies were written there. Arizona law, A.R.S. § 28-324, requires the owner of a rented vehicle to have public liability insurance covering the operator against liability arising from negligence in the operation of the vehicle. Carriers says that the statute does not apply because Glavas was a gratuitous bailee. However, the Arizona Financial Responsibility Law, A.R.S. § 28-1170(B)(2), has an omnibus provision which says that a motor vehicle liability policy “shall insure the person named therein and any other person, as insured, using the motor vehicle * * * with the express or implied permission of the named insured.” The Arizona Supreme Court has said that the omnibus provision is part of every motor vehicle liability policy. See Jenkins v. Mayflower Insurance Exchange, 93 Ariz. 287, 380 P.2d 145, 148, and National Union Fire Insurance Company of Pittsburgh, Pa. v. Truck Insurance Exchange, 107 Ariz. 291, 486 P.2d 773, 776. The omnibus provision brings a gratuitous bailee within coverage.

American Home argues that Arizona law does not require excess coverage for a permissive user and, hence, the umbrella policy does not provide coverage for Glavas. The answer is that the Financial Responsibility Law permits excess coverage when there is an underlying policy such as here. See A.R.S. § 28-1170(G).

Next, American says that it had no intent to cover a permissive user with its umbrella policy and relies on affidavits of one of its underwriters and one of its brokers. We are not impressed by these self-serving, after-the-fact statements. Significantly, they are silent on whether American Home exacted an additional premium for its excess coverage over Carriers policy. Nothing is presented to show the intent of the insured.

Everything considered we are convinced that the American Home policy covers a permissive user such as Glavas. The order of American Home’s liability will be treated later.

Hartford.

Here we have a policy issued to Rudolph- and covering multiple risks. We are concerned with the garage liability portion which, with respect to the automobile hazard, covers

“any person while using, with the permission of the named insured, any automobile to which the insurance applies under the automobile hazard, provided his actual operation * * * is within the scope of such permission * * * >>

Automobile Hazard is defined to include

“the ownership, maintenance or use of any automobile owned by the named insured while furnished for the use of any person.”

Rudolph owned the van and permitted Glavas to use it. There is no contention that his use was not within the scope of the permission. Hence, Glavas was covered.

Hartford claims an exclusion under the garage liability portion of the policy which denies coverage of an automobile “while rented to others by the named insured.” The holding that Glavas was a gratuitous bailee makes the exclusion inapplicable.

The district court upheld Hartford’s contention that the garage liability portion of the policy did not cover Glavas. The court observed that the use of the van by Glavas for a two-week vacation trip to Kansas at the most “might foster some good will on behalf of Rudolph,” and said that this link was “tenuous and remote from actual garage operations as contemplated by the Hartford policy.” We do not agree. Nothing in the record permits a distinction between Rudolph and its rental agency. The definition of garage includes “automobile sales agency.” Garage operations are defined to mean “the ownership, maintenance or use of the premises for the purposes of a garage and all operations necessary or incidental thereto.” The link was neither tenuous nor remote. Rudolph operated an automobile sales agency and owned the van. Even if Rudolph furnished the van for good will purposes, its action in so doing was incidental to its garage business. The automobile hazard included in garage liability covered the permissive user of an owned car.

The statement in Dairyland Mutual Insurance Company v. Andersen, 102 Ariz. 515, 433 P.2d 963, 965, that the intention of the parties controls the construction and interpretation of insurance contracts does not help Hartford. The policy is confusing but not ambiguous. It must be construed according to its terms. See D.M.A.F.B. Federal Credit Union, 396 P.2d at 23, and Prickett v. Hawkeye-Security Insurance Company, 10 Cir., 282 F.2d 294, 301. An undisclosed intent of Hartford cannot prevail over policy terms. The pertinent provisions of the Hartford policy cover a permissive user of an automobile owned by Rudolph. Accordingly, Glavas is within the coverage by Hartford.

Order of Liability.

Planet has paid and Carriers has not appealed from the judgment imposing primary liability on it to the extent of its $10,000/$20,000/$5,000 policy provisions. The remaining question is the order of liability for American Home and Hartford.

The Hartford policy says:
“The insurance afforded by this policy is primary insurance, except when stated to apply in excess of or contingent upon the absence of other insurance.”

Counsel for Hartford do not claim, and we have not found, any applicable excess provision in its policy.

The American Home policy says:
“If other collectible insurance with any other insurer is available to the Insured covering a loss also covered hereunder, this insurance shall be in excess of, and shall not contribute with such other insurance.”

Other insurance is available under the Hartford policy. American Home is not liable until recovery under the Hartford policy is exhausted.

Coverage is afforded by all the policies mentioned except the Carriers excess endorsement. The order of liability is:

1— Under the Carriers policy with the $10,000/$20,000/$5,000 limits.

2— Under the Planet policy which has been paid to its limit.

3— Under the Hartford policy.

4— Under the American Home policy.

Reversed and remanded for further proceedings in accordance with this opinion. Each party shall bear its own costs. The mandate shall issue forthwith.


author: MULLIGAN, Circuit Judge:

text:
    SPANG INDUSTRIES, INC., FORT PITT BRIDGE DIVISION, a corporation, Plaintiff-Appellant, v. The AETNA CASUALTY AND SURETY CO., a corporation, Defendant-Appellee. TORRINGTON CONSTRUCTION CO., INC., Plaintiff-Appellee, v. SPANG INDUSTRIES, INC., FORT PITT BRIDGE DIVISION, a corporation, Defendant-Third-Party Plaintiff-Appellant, v. SYRACUSE RIGGING CO., INC., Third-Party Defendant.
    No. 193, Docket 74-1232.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 20, 1975.
    Decided Feb. 26, 1975.

      William T. Marsh, Butler, Pa. (McNamee, Lochner, Titus & Williams, Albany, N. Y., Earl H. Gallup, Jr., Albany, N. Y., on the brief), for plaintiff-appellant.
    Homer E. Peters, Albany, N. Y. (McClung, Peters & Simon, Albany, N. Y., Livingston T. Coulter, Albany, N. Y., of counsel), for defendants-appellees.
    Before WATERMAN, HAYS and MULLIGAN, Circuit Judges.
   MULLIGAN, Circuit Judge:

Torrington Construction Co., Inc. (Torrington), a Connecticut corporation, was the successful bidder with the New York State Department of Transportation for a highway reconstruction contract covering 4.47 miles of road in Washington County, New York. Before submitting its bid, Torrington received an oral quotation from Spang Industries, Inc., Fort ■Pitt Bridge Division (Fort Pitt), a Pennsylvania corporation, for the fabrication, furnishing and erection of some 240 tons of structural steel at a unit price of 27.5 cents per pound; the steel was to be utilized to construct a 270 foot long, double span bridge over the Battenkill River as part of the highway reconstruction. The quotation was confirmed in a letter from Fort Pitt to Torrington dated September 5, 1969, which stated in part: “Delivery to be mutually agreed upon.” On November 3, 1969, Torrington, in response to a request from Fort Pitt, advised that its requirements for delivery and erection of the steel would be late June, 1970. On November 12, 1969, Fort Pitt notified Torrington that it was tentatively scheduling delivery in accordance with these requirements. On January 7, 1970, Fort Pitt wrote to Torrington asking if the June, 1970 erection date was still valid; Torrington responded affirmatively on January 13, 1970. However, on January 29, 1970, Fort Pitt advised that it was engaged in an extensive expansion program and that “[d]ue to unforeseen delays caused by weather, deliveries from suppliers, etc., it is our opinion that the June date cannot be met.” On February 2, 1970, Torrington sent a letter requesting that Fort Pitt give a delivery date and, receiving no response, wrote again on May 12, 1970 requesting a written confirmation of the date of delivery and threatening to cancel out if the date was not reasonably close to the originally scheduled date. On May 20, 1970, Fort Pitt responded and promised that the structural steel would be shipped early in August, 1970.

Although some 25 tons of small steel parts were shipped on August 21, 1970, the first girders and other heavy structural steel were not shipped until August 24, 26, 27, 31 and September 2 and 4, 1970. Fort Pitt had subcontracted the unloading and erection of the steel to Syracuse Rigging Co. but neglected to advise it of the August 21st shipment. The steel began to arrive at the railhead in Shushan, New York about September 1st and the railroad demanded immediate unloading. Torrington was therefore compelled to do the unloading itself until Syracuse Rigging arrived on September 8, 1970. Not until September 16 was there enough steel delivered to the job site to permit Syracuse to commence erection. The work was completed on October 8, 1970 and the bridge was ready to receive its concrete deck on October 28, 1970. Because of contract specifications set by the State requiring that concrete be poured at temperatures of 40° Fahrenheit and above, Torrington had to get special permission from the State’s supervising engineer to pour the concrete on October 28, 1970, when the temperature was at 32°.

Since the job site was in northern New York near the Vermont border and the danger of freezing temperatures was imminent, the pouring of the concrete was performed on a crash basis in one day, until 1 a. m. the following morning, which entailed extra costs for Torrington in the form of overtime pay, extra equipment and the protection of the concrete during the pouring process.

In July, 1971, Fort Pitt instituted an action against Aetna Casualty and Surety Co., which had posted a general contractor’s labor and material bond, in the United States District Court for the Western District of Pennsylvania, seeking to recover the balance due on the subcontract, which at that point was $72,247.37 with interest. Thereafter in 1972 Torrington made two further payments totalling $48,983.92. That action was transferred pursuant to 28 U.S.C. § 1406(a) to the United States District Court for the Northern District of New York by order dated December 9, 1971. In the interim, Torrington had commenced suit in New York Supreme Court, Washington County, seeking damages in the sum of $23,290.81 alleged to be caused by Fort Pitt’s delay in furnishing the steel. Fort Pitt then removed the case to the United States District Court for the Northern District of New York (where the two cases were consolidated), and counterclaimed for the balance due on the contract. From May 29 to 31, 1973, the cases were tried without a jury before Hon. James S. Holden, Chief Judge of the United States District Court for the District of Vermont, who was sitting by designation. On September 12, 1973, Judge Holden filed his findings of fact and conclusions of law in which he held that Fort Pitt had breached its contract by its delayed delivery and that Torrington was entitled to damages in the amount of $7,653.57. He further held that Fort Pitt was entitled to recover from Torrington on the counterclaim the sum of $23,290.12, which was the balance due on its contract price plus interest, less the $7,653.57 damages sustained by Torrington. He directed that judgment be entered for Fort Pitt against Torrington and Aetna on their joint and several liability for $15,636.55 with interest from November 12, 1970.

Fort Pitt on this appeal does not take issue with any of the findings of fact of the court below but contends that the recovery by Torrington of its increased expenses constitutes special damages which were not reasonably within the contemplation of the parties when they entered into the contract.

I

While the damages awarded Torrington are relatively modest ($7,653.57) in comparison with the subcontract price ($132,274.37), Fort Pitt urges that an affirmance of the award will do violence to the rule of Hadley v. Baxendale, 156 Eng.Rep. 145 (Ex. 1854), and create a precedent which will have a severe impact on the business of all subcontractors and suppliers.

While it is evident that the function of the award of damages for a breach of contract is to put the plaintiff in the same position he would have been in had there been no breach, Hadley v. Baxendale limits the recovery to those injuries which the parties could reasonably have anticipated at the time the contract was entered into. If the damages suffered do not usually flow from the breach, then it must be established that the special circumstances giving rise to them should reasonably have been anticipated at the time the contract was made.

There can be no question but that Hadley v. Baxendale represents the law in New York and in the United- States generally. E. g., Hughes Tool Co. v. United Artists Corp., 279 App.Div. 417, 110 N.Y.S.2d 383 (1st Dep’t 1952), aff’d, 304 N.Y. 942, 110 N.E.2d 884 (1953); J. Calamari & J. Perillo, Contracts 329 (1970); C. McCormick, Damages § 138 (1935); 11 S. Williston, Contracts § 1356 (3d ed (W. Jaeger) 1968); Restatement of Contracts § 330 (1932). There is no dispute between the parties on this appeal as to the continuing viability of Hadley v. Baxendale and its formulation of the rule respecting special damages, and this court has no intention of challenging or questioning its principles, which Chief Judge Cardozo characterized to be, at least in some applications, “tantamount to a rule of property,” Kerr S. S. Co. v. Radio Corporation of America, 245 N.Y. 284, 291, 157 N.E. 140, 142 (1927).

The gist of Fort Pitt’s argument is that, when it entered into the subcontract to fabricate, furnish and erect the steel in September, 1969, it had received a copy of the specifications which indicated that the total work was to be completed by December 15, 1971. It could not reasonably have anticipated that Torrington would so expedite the work (which was accepted by the State on January 21, 1971) that steel delivery would be called for in 1970 rather than in 1971. Whatever knowledge Fort Pitt received after the contract was entered into, it argues, cannot expand its liability, since it is essential under Hadley v. Baxendale and its Yankee progeny that the notice of the facts which would give rise to special damages in case of breach be given at or before the time the contract was made. The principle urged cannot be disputed. Czarnikow-Rionda Co. v. Federal Sugar Refining Co., 255 N.Y. 33, 41, 173 N.E. 913, 915 (1930); 11 S. Williston, supra, § 1357; Restatement, supra, § 330. We do not, however, agree that any violence to the doctrine was done here.

Fort Pitt also knew from the same specifications that Torrington was to commence the work on October 1, 1969. The Fort Pitt letter of September 5, 1969, which constitutes the agreement between the parties, specifically provides: “Delivery to be mutually agreed upon.” On November 3, 1969, Torrington, responding to Fort Pitt’s inquiry, gave “late June 1970” as its required delivery date and, on November 12, 1969, Fort Pitt stated that it was tentatively scheduling delivery for that time. Thus, at the time when the parties, pursuant to their initial agreement, fixed the date for performance which is crucial here, Fort Pitt knew that a June, 1970 delivery was required. It would be a strained and unpalatable interpretation of Hadley v. Baxendale to now hold that, although the parties left to further agreement the time for delivery, the supplier could reasonably rely upon a 1971 delivery date rather than one the parties later fixed. The behavior of Fort Pitt was totally inconsistent with the posture it now assumes. In November, 1969, it did not quarrel with the date set or seek to avoid the contract. It was not until late January, 1970 that Fort Pitt advised Torrington that, due to unforeseen delays and its expansion program, it could not meet the June date. None of its reasons for late delivery was deemed excusable according to the findings below, and this conclusion is not challenged here. It was not until five months later, on May 20, 1970, after Torrington had threatened to cancel, that Fort Pitt set another date for delivery (early August, 1970) which it again failed to meet, as was found below and not disputed on this appeal.

We conclude that, when the parties enter into a contract which, by its terms, provides that the time of performance is to be fixed at a later date, the knowledge of the consequences of a failure to perform is to be imputed to the defaulting party as of the time the parties agreed upon the date of performance. This comports, in our view, with both, the logic and the spirit of Hadley v. Baxendale. Whether the agreement was initially valid despite its indefiniteness or only became valid when a material term was agreed upon is not relevant. At the time Fort Pitt did become committed to a delivery date, it was aware that a June, 1970 performance was required by virtue of its own acceptance. There was no unilateral distortion of the agreement rendering Fort Pitt liable to an extent not theretofore contemplated.

Having proceeded thus far, we do not think it follows automatically that Torrington is entitled to recover the damages it seeks here; further consideration of the facts before us is warranted. Fort Pitt maintains that, under the Hadley v. Baxendale rubric, the damages flowing from its conceded breach are “special” or “consequential” and were not reasonably to be contemplated by the parties. Since Torrington has not proved any “general” or “direct” damages, Fort Pitt urges that the contractor is entitled to nothing. We cannot agree. It is commonplace that parties to a contract normally address themselves to its performance and not to its breach or the consequences that will ensue if there is a default. See J. Calamari & J. Perillo, supra, at 331; C. McCormick, supra, at 580; 11 S. Williston, supra, at 295. As the New York Court of Appeals long ago stated:

[A] more precise statement of this rule is, that a party is liable for all the direct damages which both parties to the contract would have contemplated as flowing from its breach, if at the time they entered into it they had bestowed proper attention upon the subject, and had been fully informed of the facts. [This] may properly be called the fiction of law

Leonard v. New York, Albany & Buffalo Electro-Magnetic Telegraph Co., 41 N.Y. 544, 567 (1870).

It is also pertinent to note that the rule does not require that the direct damages must necessarily follow, but only that they are likely to follow; as Lord Justice Asquith commented in Victoria Laundry, Ltd. v. Newman Industries, Ltd., [1949] 2 K.B. 528, 540, are they “on the cards”? We' believe here that the damages sought to be recovered were also “in the cards.”

It must be taken as a reasonable assumption that, when the delivery date of June, 1970 was set, Torrington planned the bridge erection within a reasonable time thereafter. It is normal construction procedure that the erection of the steel girders would be followed by the installation of a poured concrete platform and whatever railings or superstructure the platform would require. Fort Pitt was an experienced bridge fabricator supplying contractors and the sequence of the work is hardly arcane. Moreover, any delay beyond June or August would assuredly have jeopardized the pouring of the concrete and have forced the postponement of the work until the spring. The work here, as was well known to Fort Pitt, was to be performed in northern New York near the Vermont border. The court below found that continuing freezing weather would have forced the pouring to be delayed until June, 1971. Had Torrington refused delivery or had it been compelled to delay the completion of the work until the spring of 1971, the potential damage claim would have been substantial. Instead, in1 a good faith effort to mitigate damages, Torrington embarked upon the crash program we have described. It appears to us that this eventuality should have reasonably been anticipated by Fort Pitt as it was experienced in the trade and was supplying bridge steel in northern climes on a project requiring a concrete roadway.

Torrington’s recovery under the circumstances is not substantial or cataclysmic from Fort Pitt’s point of view. It represents the expenses of unloading steel from the gondola due to Fort Pitt’s admitted failure to notify its erection subcontractor, Syracuse Rigging, that the steel had been shipped, plus the costs of premium time, extra equipment and the cost of protecting the work, all occasioned by the realities Torrington faced in the wake of Fort Pitt’s breach. In fact, Torrington’s original claim of $23,-290.81 was whittled down by the court below because of Torrington’s failure to establish that its supervisory costs, overhead and certain equipment costs were directly attributable to the delay in delivery of the steel.

Professor Williston has commented:

The true reason why notice to the defendant of the plaintiff’s special circumstances is important is because, just as a court of equity under circumstances of hardship arising after the formation of a contract may deny specific performance, so a court of law may deny damages for unusual consequences where the defendant was not aware when he entered into the contract how serious an injury would result from its breach.

11 S. Williston, supra, at 295 (footnote omitted) (emphasis added).

In this case, serious or catastrophic injury was avoided by prompt, effective and reasonable mitigation at modest cost. Had Torrington not acted, had it been forced to wait until the following spring to complete the entire job and then sued to recover the profits it would have made had there been performance by Fort Pitt according to the terms of its agreement, then we might well have an appropriate setting for a classical Hadley v. Baxendale controversy. As this case comes to us, it hardly presents that situation. We therefore affirm the judgment below permitting Torrington to offset its damages against the contract price.

II

The only other question raised on this appeal involves the computation of interest. The total contract price due to Fort Pitt was $132,274.73, payable 30 days from the date of invoice. The invoices rendered here required payment by Torrington on October 8, November 12 and December 30, 1970. Torrington made a partial payment of $60,000 on December 11, 1970 but refused to pay the balance. After Fort Pitt commenced suit against Aetna for the balance due plus interest, Torrington paid $20,000 on February 4, 1972 and $28,983.92 on September 7, 1972. There is no question but that under the law of New York Fort Pitt is entitled to interest for the sums due under the subcontract. N.Y.C.P.L.R. § 5001(a); United States v. Walsh, 240 F.Supp. 1019 (N.D.N.Y.1965). The court below, by order dated December 12, 1973, denied Fort Pitt’s motion to amend the judgment to reflect its entitlement to interest on late payments made in February and September, 1972, on the theory that this interest had not been demanded and that acceptance of partial payments without protest barred the interest award. Since interest was recoverable as a matter of law and since Fort Pitt had demanded interest in its counterclaim to Torrington’s complaint, the right to interest cannot be considered to have been waived. Crane v. Craig, 230 N.Y. 452, 130 N.E. 609 (1921), relied upon below, held that, where interest is not payable by the terms of the contract but is allowable as a mere incident to it, receipt of the principal bars a subsequent claim for interest since the debt is extinguished by the payment of the principal. But here the payment was partial and did not extinguish the debt. The proper rule, set forth by this court in Ohio Savings Bank & Trust Co. v. Willys Corp., 8 F.2d 463, 466-67 (1925) (relying upon, inter alia, New York cases), is that when partial payments have been made, the payment must be applied first to the interest then due, with the surplus discharging the principal pro tanto.

It seems to be conceded that the court below was in error in calculating the rate of interest at 7x/2% from November 12, 1970. By amendment of N.Y.C.P. L.R. § 5004 effective September 1, 1972, the rate was changed to 6%. Thus, the interest should be computed at these rates for the relevant periods.

We therefore remand this case to the district court to compute the interest in accordance with this opinion and further to enter amended and separate judgments against Torrington and Aetna.

Affirmed in part, reversed in part and remanded. No costs.

      . A third party action by Fort Pitt against Syracuse Rigging Co. was resolved by judgment for Syracuse with costs. No appeal from that judgment has been taken and it is not before this court,

      . The rule of Hadley v. Baxendale was stated by Alderson, B., as follows:
      Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i. e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.
      156 Eng.Rep. at 151.

      . A second fiction, added as an embellishment to Hadley v. Baxendale by Mr. Justice Holmes as federal common law in Globe Ref. Co. v. Landa Cotton Oil Co., 190 U.S. 540, 23 S.Ct. 754, 47 L.Ed. 1171 (1903), would require not only knowledge of the special circumstances but a tacit agreement on the part of the party sought to be charged to accept the liability imposed by the notice. This second test has generally been rejected by the courts and commentators. Krauss v. Greenbarg, 137 F.2d 569, 571 (3d Cir.), cert. denied, 320 U.S. 791, 64 S.Ct. 207, 88 L.Ed. 477 (1943); J. Calamari & J. Perillo, supra, at 331-32; 11 S. Williston, supra, § 1357.

      . The president of Fort Pitt testified that “[w]e are specialists in the field of welded girder bridges.” He also stated that Fort Pitt has a yearly capacity of 30,000 tons of bridge steel, or “over a hundred times the type of tonnage that is involved in this case.” In any given year it ships steel for between 25 to 30 major bridge projects, and sells in the District of Columbia and six states, including New York. The president further testified that, prior to the contract for the Battenkill Bridge, Fort Pitt had sold steel to Torrington on two separate occasions: in the spring of 1968 for the St. Lawrence County bridge and in February, 1969 for the Clinton County bridge.

      . There was testimony that the process of construction of the bridge over the Battenkill River was as follows: Torrington first placed a reinforced concrete pier approximately in the center of the River and then built abutments or additional piers on the edges of the River. The structural steel was then laid between the center pier and the abutment on each side. Later, the concrete deck, stone curbings and bridge rails were installed.

      . The contract specifications required that concrete be poured only when the temperature was at 40° Fahrenheit and above. The president of Fort Pitt testified at trial that, before his company quotes a price for steel to a general contractor, it obtains the state’s specifications on the job in question, and that that was done in this case.

      . It is well understood that expenses incurred in a reasonable effort, whether successful or not, to avoid harm that the defendant had reason to foresee as a probable result of the breach when the contract was made may be recovered as an item of damage flowing from the breach. Elias v. Wright, 276 F. 908, 910 (2d Cir. 1921); C. McCormick, supra, § 42; Restatement, supra, § 336(2).

      . In Hadley v. Baxendale a miller sought to recover the profits lost from the closing of the mill as a result of a carrier’s failure to make timely delivery of a broken crank shaft to an engineering firm where it was to be used as a model for a replacement. A recovery of those profits was disallowed on the ground that it was not reasonably foreseeable that profits would be lost as a result of the breach of the contract of carriage. Lord Justice Asquith pointed out in Victoria Laundry, Ltd. v. Newman Indus., Ltd., supra, that the headnote in Hadley v. Baxendale is misleading in stating that the clerk of the defendant carrier knew that the mill was stopped and that the broken shaft had to be delivered immediately. The Victoria court stated that the Court of Exchequer must have rejected this statement and decided to deny the loss of profits from the closing of the mill because the only knowledge possessed by the defendant was that the mill shaft was broken and that the plaintiffs were the millers. Otherwise, “the court must, one would suppose, have decided the case the other way round . . . .” [1949] 2 K.B. at 537. The misleading headnote, however, was considered to reflect the actual facts by at least two scholarly articles on the famous case. Bauer, Consequential Damages in Contract, 80 U.Penn.L. Rev. 687, 689 (1932); McCormick, Damages for Breach of Contract, 19 Minn.L.Rev. 497, 500 (1935).

      . Judgment was originally entered by the clerk, in conformity with the decision of the district court, against Torrington and Aetna. The judgment was later amended, and, in the order directing amendment, the court stated that Fort Pitt should recover from Torrington on its counterclaim the total amount due. A judgment to this effect was entered by the clerk. No mention was made in the order or the amended judgment of the obligation of Aetna. It is because of this confusion that we direct the entry of separate judgments against Torrington and Aetna.


author: PER CURIAM.

text:
    STATE OF OHIO ex rel. Hon. Fred WILLIAMS et al., Petitioner, v. Honorable Thomas D. LAMBROS, United States District Judge, et al., Respondents.
    No. 75-1052.
    United States Court of Appeals, Sixth Circuit.
    March 6, 1975.

      William E. Santen, William B. Singer, Santen, Santen & Hughes, Cincinnati, Ohio, for petitioner.
    Frederick M. Coleman, U. S. Atty., Cleveland, Ohio, for respondents.
    Before PHILLIPS, Chief Judge, and EDWARDS and LIVELY, Circuit Judges.
   PER CURIAM.

The petition for a writ of prohibition or mandamus asks this court to prohibit a three-judge district court from proceeding with a case now assigned to it in the Northern District of Ohio. Also we are asked to issue a writ of mandamus requiring the dismissal of that case for lack of venue, or the transfer of that case to a district court where venue is proper. The district court case is captioned Maria Nespeca v. Mahoning County Board of Elections et al., No. C 75-7-Y.

Named as respondents to the original petition in this court were six of the judges of the United States District Court for the Northern District of Ohio. Thereafter the petition was amended to include as a respondent the Honorable Paul C. Weick, Circuit Judge, who has been designated as a member of the three-judge panel to hear the case now pending in the District Court.

The defendants in the three-judge case are the Board of Elections of Mahoning County, Ohio, and the Attorney General and Secretary of State of Ohio. The complaint challenges the constitutionality of an Ohio statute redistricting the congressional districts of that State, signed by the then Governor of Ohio on January 10, 1975, known as House Bill 44. The complaint further seeks to enjoin the Secretary of State and election officials from conducting under that statute the next primary election for nomination of candidates for the United States Congress, scheduled for June 8, 1976, and the general election for such candidates scheduled for November 2, 1976.

After the filing of said complaint, District Judge Thomas D. Lambros, to whom the case was assigned, determined that the complaint raises substantial constitutional questions and that the matter is required to be heard by a three-judge district court in accordance with the provisions of 28 U.S.C. §§ .2281 and 2284. Pursuant to the certification and request of Judge Lambros, the Chief Judge of the Sixth Circuit, on January 20, 1975, designated a panel composed of Circuit Judge Weick and District Judges Lambros and Ben C. Green, all of whom are named as respondents in the petition for a writ of prohibition or mandamus.

The petition avers that House Bill 44 was never signed by the President of the State Senate, as required by the Constitution of the State of Ohio; that on or about January 13, 1975, a suit was filed in the Court of Common Pleas of Franklin County, Ohio, styled Michael J. Maloney v. James A. Rhodes et al., being case No. 75-CV — 01-148, seeking a declaration that the action of the then Governor in signing House Bill 44 was void and ineffective in the absence of the prior signature and certification of the President of the State Senate; and that as a matter of State law House Bill 44 has not become and is not the law of Ohio. Petitioner asserts that the validity of the statute is exclusively a question of State law, to be determined by the State courts of Ohio; that no federal question is presented requiring action by a three-judge federal court; and that the three-judge district court should not be permitted to take any action which will have the effect of usurping and preventing the exercise of the jurisdiction of the State courts of Ohio to determine the issues presented in the action filed in the Court of Common Pleas of Franklin County.

The question of congressional redistricting arises under Article I, § 2, Clause 1, of the Constitution of the United States. This is an issue of federal constitutional law within the jurisdiction of a three-judge district court. Wesberry v. Sanders, 376 U.S. 1, 84 S.Ct. 526, 11 L.Ed.2d 481 (1964). See also Wells v. Rockefeller, 394 U.S. 542, 89 S.Ct. 1234, 22 L.Ed.2d 535 (1969); Kirkpatrick v. Preisler, 394 U.S. 526, 89 S.Ct. 1225, 22 L.Ed.2d 519 (1969).

This court concludes that a three-judge district court has been properly convened. The questions of abstention, venue and jurisdiction raised by the petition for a writ of prohibition or mandamus should be addressed to the three-judge district court and not the United States Court of Appeals.

Accordingly, the application for a writ of prohibition or mandamus is denied and the petition is dismissed.


author: PHILLIPS, Chief Judge.

text:
    Lorenza SHORT and Mamie O. Short, Plaintiffs-Appellants, v. James G. MURPHY, Special Agent, Internal Revenue Service, et al., Defendants-Appellees.
    No. 73-2097.
    United States Court of Appeals, Sixth Circuit.
    March 5, 1975.

      Henry J. Rosenbaum, Polasky, Meisel & Rosenbaum, Saginaw, Mich., for plaintiffs-appellants.
    Ralph B. Guy, U. S. Atty., Detroit, Mich., James W. Russell, Asst. U. S. Atty., Detroit, William Friedlander, Scott Crampton, Asst. Atty. Gen., Meyer Rothwacks, Chief, Appellate Sec. Tax Div., Dept, of Justice, Washington, D. C., Michael L. Paup, Michael J. Roach, Tax. Div., Dept, of Justice, Washington, D. C., for defendants-appellees.
    Before PHILLIPS, Chief Judge, and LIVELY and ENGEL, Circuit Judges.
   PHILLIPS, Chief Judge.

The appellant taxpayers were under investigation for income tax evasion at the time they filed this action. The special IRS agent had invited counsel for the taxpayers to a formal conference and disclosed that the IRS had information indicating that taxpayers had attempted willfully to evade and defeat payment of their income taxes for the taxable years 1967 through 1970. The agent further had revealed at the conference that the IRS had reconstructed the taxpayers’ income by means of the net worth and expenditures method and that the understatements of income disclosed by the reconstruction amounted to approximately $215,000 for the four year period.

The taxpayers thereupon filed this action against the Special Agent and two of his superiors seeking a writ of mandamus and other relief requiring the IRS to disclose the details of the items included in the proposed net worth computation. The District Court dismissed the action for lack of jurisdiction and the taxpayers appeal. We affirm.

The principal legal issue is whether by its procedural rules, 26 C.F.R. § 601.-107(b)(2), hereinafter quoted, the IRS has imposed upon itself the mandatory obligation to disclose the information requested.

The taxpayers contend that the information disclosed by the Special Agent does not permit them to make an adequate response and that they are also entitled to know:

(1) The dollar amount of the opening net worth statement for each year involved and the identity of the specific items comprising such total;
(2) The dollar amount of the closing net worth statement for each year involved and the identity of the specific items comprising such total;
(3) A reasonably specific breakdown identifying the nature and amount of claimed expenditures for each year.

Throughout the course of the negotiations the taxpayers did not attempt to rebut or explain the alleged understatement of income. They subsequently were indicted in April 1974.

I.

At oral argument counsel for the Government suggested for the first time that this case should be dismissed as moot. An indictment was returned against the taxpayers on April 2, 1974, less than two weeks before the statute of limitations would have barred the charge involving the 1967 tax year. After indictment, the taxpayers filed motions before the District Court in the district where the indictment is pending, seeking to quash the indictment and moving for discovery and for a bill of particulars. The Government asserts that all of the relief requested in the present case is now the subject of pending motions before the District Court. Further, the investigation is now out of the hands of the IRS, having been referred to the Department of Justice for prosecution.

Although these considerations may raise a substantial issue as to mootness, each litigant has a continuing interest in this appeal because this court could grant at least part of the relief sought. The request for specific disclosures under § 601.107(b)(2) is a live, active and real controversy between the parties. Regardless of whether the requested information ultimately may be disclosed in the criminal proceedings, this court could order disclosure as a civil matter. For these reasons this is not a case, as in DeFunis v. Odegaard, 416 U.S. 312, 317, 94 S.Ct. 1704, 1706, 40 L.Ed.2d 164 (1974), where: “The controversy between the parties has thus clearly ceased to be ‘definite and concrete’ and no longer ‘touch[es] the legal relations of parties having adverse legal interests.’ Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41, 57 S.Ct. 461, 464, 81 L.Ed. 617 (1937).”

This case also presents a problem that doubtless will occur again and therefore “[bjecause avoidance of repetitious litigation serves the public interest, that inevitability counsels against mootness determinations, as here, not compelled by the record.” DeFunis v. Odegaard, supra, 416 U.S. at 350, 94 S.Ct. at 1722 (Brennan, J., dissenting). See Roe v. Wade, 410 U.S. 113, 125, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973); United States v. W. T. Grant Co., 345 U.S. 629, 632-33, 73 S.Ct. 894, 97 L.Ed. 1303 (1953).

II.

26 C.F.R. § 601.107(b)(2), establishes the following procedure for pre-indictment conferences:

Every person who may be the subject of a recommendation for prosecution shall be given an opportunity to explain his participation in the alleged criminal violation prior to the submission of the case to Regional Counsel, unless compelling reasons exist to the contrary. At this interview the principal will be informed, by a general oral statement, of the alleged fraudulent features of the case, to an extent consistent with protecting the Government’s interests and, at the same time, making available to the taxpayer sufficient facts and figures to acquaint him with the nature, basis and other essential elements of the proposed criminal charge against him.

One of the purposes of this rule is to give the taxpayer an opportunity to present rebutting facts and enable the IRS to sort out those cases which are not worthy of prosecution, thus avoiding unnecessary litigation for both the taxpayer and the Government. See Cleveland Trust Co. v. United States, 421 F.2d 475 (6th Cir.), cert. denied, 400 U.S. 819, 91 S.Ct. 35, 27 L.Ed.2d 46 (1970); Luhring v. Glotzbach, 304 F.2d 560, 564-65 (4th Cir. 1962); United States v. Goldstein, 342 F.Supp. 661, 665 (E.D.N.Y.1972).

Our examination of the language and purposes of Rule 601.107(b)(2) convinces us that in the present case the amount of information required by the Rule was disclosed to the taxpayers. The taxpayers were informed of the nature of the charge — potential criminal liability based on net worth reconstructions — and the facts and overall figures were stated in broad terms. The information provided by the Special Agent could provide a starting point for the taxpayers to rebut charges if erroneously made. For example the net worth difference might be explained by a cash hoard, or a nontaxable increase in net worth due to gifts, loans or inheritances. Such information is “peculiarly within the knowledge” of the taxpayer. Holland v. United States, 348 U.S. 121, 138, 75 S.Ct. 127, 99 L.Ed. 150 (1954).

This Rule was never meant to be an instrument for pre-trial discovery such as provided by Fed.R.Crim.P. 16, or the Jencks Act, 18 U.S.C. § 3500. Those rights accrue after indictment.

In the language of 26 C.F.R. § 601.-107(b)(2), the Special Agent informed the taxpayers in the present case:

[B]y a general oral statement of the alleged fraudulent features of the case to the extent consistent with protecting the Government’s interest, and, at the same time, making available to the taxpayer[s] sufficient facts and figures to acquaint [them] with the basis, nature, and other essential elements of the proposed criminal charges.

We agree with the District Court that the furnishing of the additional details sought by the taxpayers in this mandamus action was discretionary, not mandatory or ministerial.

The District Courts are vested with original jurisdiction under 28 U.S.C. § 1361 of “any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.” This language has been construed uniformly to mean that mandamus will not lie unless the alleged duty imposes a mandatory or ministerial obligation. If the alleged duty is discretionary or directory, the duty is not “owed.”

As stated by Chief Justice Taft in Work v. United States ex rel. Rives, 267 U.S. 175, 177, 45 S.Ct. 252, 69 L.Ed. 561 (1925): “Mandamus issues to compel an officer to perform a purely ministerial duty. It can not be used to compel or control a duty in the discharge of which by law he is given discretion.”

We, therefore, affirm the decision of the District Court in denying the application for a writ of mandamus.

III.

We have considered the taxpayers’ allegations of jurisdiction under the Tucker Act, 28 U.S.C. § 1346(a)(2), and find that claim to be without merit. Jurisdiction under the Administrative Procedure Act, 5 U.S.C. § 701-706, was asserted in the District Court but has not been raised on appeal.

The judgment of the District Court is affirmed. The costs of this appeal are assessed against the appellants.

      . This provision has been amended and now states:
      A taxpayer who may be the subject of a criminal recommendation will be afforded a district intelligence conference when he requests one or where the Chief, Intelligence Division, makes a determination that such a conference will be in the best interests of the Government. At the conference, the IRS representative will inform the taxpayer by a general oral statement of the alleged fraudulent features of the case, to the extent consistent with protecting the Government’s interests, and, at the same time, making available to the taxpayer sufficient facts and figures to acquaint him with the basis, nature, and other essential elements of the proposed criminal charges against him.
      The amendment deals with events which establish the right to a conference. There is no substantive change in the language which describes the amount of information to be disclosed.


author: MURRAH, Circuit Judge.

text:
    Edward A. GREGORY, Plaintiff-Appellant, v. Fred WYSE, Warden, Colorado State Penitentiary, et al., Defendant-Appellee. Reverend John David CONTI, Plaintiff-Appellant, v. Fred WYSE, Warden, Colorado State Penitentiary, et al., Defendant-Appellee.
    No. 73-1405.
    United States Court of Appeals, Tenth Circuit.
    March 11, 1975.

      John C. Guadnola, Denver, Colo., for plaintiffs-appellants.
    John P. Moore, Atty. Gen., John E. Bush, Deputy Atty. Gen., and Richard G. McManus, Jr., Asst. Atty. Gen., for defendants-appellees.
    Before MURRAH, SETH and BARRETT, Circuit Judges.
   MURRAH, Circuit Judge.

This consolidated appeal is from separate judgments sustaining motions to dismiss civil rights actions (42 U.S.C. § 1983, 28 U.S.C. § 1443) by inmates of the Colorado penitentiary against responsible state administrators. We know, of course, the complaints should not be dismissed for failure to state a claim unless it appears beyond doubt that the complainants can prove no set of facts in support of their claims which would entitle them to relief. And where, as here, there are substantial allegations of violations of constitutional rights in the treatment of state prisoners, the complaint must be considered on its merits by proper hearing. Ordinarily, we should remand these cases for the development and consideration of the facts in accordance with applicable procedures. See Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972); Black v. Warden, 467 F.2d 202 (10th Cir. 1972). However, upon the filing of pro se petitions in these cases, the trial court immediately appointed counsel who filed amended complaints pleading the operative facts with elaborate specificity. Each of the complaints undertake to state three separate claims on identical facts for the deprivation of in-prison procedural due process and to recover the same money damages (both compensatory and punitive) and the same injunctive relief. In these circumstances, we shall take the cases on the pleaded facts to determine if they state a claim on which relief can be granted under any legally supportable theory.

While both Gregory and Conti were inmates of the Colorado penitentiary system, Gregory escaped from custody on or about July 2, 1972, and was returned to the penitentiary on August 11, 1972. Conti escaped on May 20, 1972, and voluntarily returned to the penitentiary on June 7, 1972. Upon their return, they were stripped, sprayed and confined in the maximum security portion of the penitentiary for at least ten days, a substantial portion of which was spent in solitary confinement twenty-four hours a day in a cell six feet square, provided only two meals per day, one shower per week, forced to sleep on a cement slab with no bedding, with a light in the cell twenty-four hours a day, and were deprived of all privileges normally afforded the prison population, including cigarettes. Four or five days after their return, they were each called before the prison Administrative Adjustment Committee. Upon a hearing, the committee determined that the inmates had in fact escaped and ordered that both inmates should:

“(i) forfeit all good time heretofore earned,
(ii) be ineligible for parole or discharge for two years, during which two year period they were not to be permitted to leave the penitentiary under any circumstances,
(iii) be ineligible to earn any additional good time during that two year period, and
(iv) forfeit all normal prisoner’s pay and all privileges of the general prison population for 90 days from the date of the order.”

The contention is that “the hearing” was conducted in such a way that neither of them was afforded any meaningful opportunity to object in his own behalf, present witnesses, question the personnel upon whose reports the committee relied, or obtain a record, the assistance of counsel or the compulsory process of witnesses. They contend that the determination that an escape had occurred amounted to a finding that a felony had been committed in violation of Colorado law, for which they were entitled to jury trial; that the deprivation of earned good time and eligibility for parole for two years had the effect of increasing their sentences despite the fact that their guilt had never been properly determined.

In sum, as we read the complaints, they allege and contend (1) that the solitary confinement amounted to cruel and unusual punishment, (2) that the deprivation of their statutory prisoners’ rights was done without affording minimum procedural due process, and (3) they are therefore entitled to (a) a judgment for compensatory and punitive damages, (b) an order enjoining the defendants and their agents from enforcing any punishment found by the court to have been imposed in violation of their constitutional right to due process, and (c) an order requiring the defendants to present to the court for its approval proposed standards and regulations to govern in-prison disciplinary procedures to insure minimum procedural due process for the determination of in-prison violations and the imposition of authorized penalties therefor.

At the outset, it is well to point out that since the commencement of these cases and the decisions of the trial court, it has been authoritatively decided that habeas corpus with concomitant exhaustion of state remedies is the sole remedy for the withholding or forfeiture of good time credits, insofar as it affects the “fact or length of his confinement.” See Preiser v. Rodriguez, 411 U.S. 475, 494, 500, 93 S.Ct. 1827, 1838, 36 L.Ed.2d 439 (1973); Wolff v. McDonnell, 418 U.S. 539, 94 S.Ct. 2963, 41 L.Ed.2d 935 (1974); Rodriguez v. McGinnis, 456 F.2d 79 (2d Cir. 1972). So, the restoration of good time credits and eligibility for parole are not within the scope of this proceeding. But this jurisdictional limitation in no way affects the availability of § 1983 to grant money damages and appropriate equitable relief for the deprivation of in-prison procedural due process. See Preiser, 411 U.S. at 494, 498, 93 S.Ct. 1827; Wolff, 418 U.S. at 553-555, 94 S.Ct. at 2973-2974.

Also since the judgments were entered in these cases, the Supreme Court in Wolff, supra, has promulgated elaborate and flexible standards to provide an in-prison species of due process for achieving “a reasonable accommodation between the interests of the inmates and the needs of the institution.” See Wolff v. McDonnell, supra, at 572, 94 S.Ct. at 2982; and see also Palmigiano v. Baxter, 487 F.2d 1280 (1st Cir. 1973); and Sands v. Wainwright, 357 F.Supp. 1062 (M.D.Fla.1973). Colorado concedes that the procedures employed in these eases do not measure up to the standards established in Wolff. But Wolff is prospective only and the procedural due process requirements in these cases must therefore be judged according to pre-Wolff law on which there has been considerable contrariety. See Wolff, 418 U.S. page 572, n. 20, 94 S.Ct. page 2982.

While this court has been reluctant, perhaps more so than other courts, to interfere with in-prison disciplinary proceedings, we have consistently recognized that when a convicted person enters a prison he does not leave all of his constitutional rights behind. “ . [W]e have never turned a deaf ear to a bona fide claim for relief based upon the deprivation of a constitutional right when asserted by federal or state prisoner, either in the nature of mandamus or habeas corpus proceedings or, as a claim under the Civil Rights Act.” See Bethea v. Crouse, 417 F.2d 504, 506, and cases cited there (10th Cir. 1969); Dearman v. Woodson, 429 F.2d 1288 (10th Cir. 1970).

In harmony with the generally accepted view, we have consistently held that solitary or disciplinary confinement is not per se cruel and unusual punishment. See Kostal v. Tinsley, 337 F.2d 845 (10th Cir. 1964); Graham v. Willingham, 384 F.2d 367 (10th Cir. 1967); Evans v. Moseley, 455 F.2d 1084 (10th Cir. 1972); Courtney v. Bishop, 409 F.2d 1185 (8th Cir. 1969); Sostre v. McGinnis, 442 F.2d 178, 190, and cases collected there (2d Cir. 1971). See also Annotation 51 A.L.R.3d 111, 161.

The question, then, is at what point does solitary or disciplinary confinement become cruel and unusual punishment and within the prohibition of the 8th and 14th Amendments when viewed against the historical background of the 8th Amendment case law. It seems fairly accurate to say that in-prison punishment becomes cruel and unusual when, in the language of Chief Justice Warren, it offends “the evolving standards of decency that mark the progress of a maturing society.” See Trop v. Dulles, 356 U.S. 86, 101, 78 S.Ct. 590, 598, 2 L.Ed.2d 630 (1958); Justice, then Judge, Blackmun in Jackson v. Bishop, 404 F.2d 571, 579 (8th Cir. 1968); Chief Judge Kaufman in Wright v. McMann, 387 F.2d 519, 525 (2d Cir. 1967) and 460 F.2d 126 (2d Cir. 1972); Anderson v. Nosser, 438 F.2d 183 (5th Cir. 1971), modified en banc 456 F.2d 835 (5th Cir. 1972); Sostre v. McGinnis, supra, at 190. See comprehensive treatment of the subject 51 A.L.R.3d 111.

Applying these concepts specifically to solitary confinement, the trial court drew a clear distinction between the facts of these and other cases from this circuit and cases like Jordan v. Fitzharris, 257 F.Supp. 674 (N.D.Cal.1966), in which the court held, very properly we think, that confinement in a stripped cell for twelve days was cruel and unusual punishment because the cell was seldom cleaned of accumulated bodily waste and the inmate was kept naked and not provided with a bed, interior light, adequate heating, ventilation, furnishings, except a toilet flushed only from the outside, or soap and water for personal hygiene. See Wright v. McMann, supra; Jackson v. Bishop, supra; Anderson v. Nosser, supra; compare Sostre v. McGinnis, supra.

Agreeing with Fitzharris, the trial court was of the view that solitary confinement must be accompanied by “such essential requirements as may be necessary to maintain a degree of cleanliness compatible with elemental decency in accord with the standards of a civilized community.” Fitzharris, supra 683. Compare Wright v. McMann, supra. In our case the court observed that the hard bed, cramped quarters, continuous light, and other restrictions were harsh, but “none of the conditions alleged constitute deprivation of basic care.” And see Sostre v. McGinnis, supra. The court concluded that within these bounds the disciplinary measure was a matter for the warden in the exercise of his “judgment in the light of modern penological thought.” We agree that the temporary solitary confinement in these cases did not amount to cruel and unusual punishment nor did it amount to denial of due process for which damages are recoverable under § 1983. See Sostre v. McGinnis, supra, at 190; Courtney v. Bishop, supra.

The Adjustment Committee found that the complainants did, in fact, escape, and there is no doubt of it. The complaints so allege, and Colorado statutes make it a felony, itself punishable by not less than one year or more than ten years. See C.R.S. 40-7-53 (1963). But it is not alleged nor does it appear that the complainants have been charged with the statutory crime.

The penalties imposed in these proceedings, though grievous to be sure, are not punishment in a criminal-sense “but is rather an administrative disciplinary sanction imposed on a prisoner for breaking rules of the prison.” Silva v. People, 158 Colo. 326, 407 P.2d 38, 40 (Colo.1965). In these circumstances due process does not require a trial type hearing. See Sostre v. McGinnis, supra, at 194 and cases cited there. Moreover, as we read the Colorado statutes, they mandate the most serious of the disciplinary sanctions imposed for these escapes. C.R.S. 105-4-6 (1963) expressly provides, “If any convict shall escape, or attempt to escape, from the penitentiary, he shall forfeit all deductions from the time of his sentence which he shall have earned under sections 105-4 — 4 and 105-4 — 5 . . The date of the return to the penitentiary, or apprehension of said convict, shall be a new starting point for the earning of all such good time, which shall thereafter be computed in the same manner as if said convict were then commencing to serve the first year of a new sentence. . . . ” (emphasis ours).

C.R.S. 39-18-7(2) (1963) expressly provides that, “No prisoner confined in the state prison and no prisoner under sentence to the state prison who has escaped or attempted to escape from the prison or the guards may be paroled or discharged until he has served at least two calendar years from and after the date of his return to the prison, whether such two years extend beyond his maximum sentence or not, and during such two years such prisoner shall not be credited with any good time whatsoever.”

We read these statutes to be self-executing and non-discretionary. Considered together, they seem to provide in substance and effect that an escapee forfeits all accrued good time, but commences to earn good time from the date of his return to the prison. He is not eligible for parole or discharge for at least two calendar years from the date of his return, and the good time earned under 105-4-6 is not to be credited to him until the end of the two year period. In the language of the Colorado Supreme Court, “It is the statutory scheme to grant prison inmates good-time credits for their conduct toward reduction of prison time to be served. C.R.S.1963, 105-4-4 and 105-4-7. As a corollary, good-time credits are forfeited for an escape or attempt to escape, as well as for other misbehavior. C.R.S. [1963], 105 — 4-6 and 105 — 4-8. An additional sanction is imposed for escape by the parole statute, C.R.S.1963, 39-18-7(2) ..” Lange v. Schauer, 520 P.2d 753, 755 (Colo.1974).

C.R.S. 105 — 4-7(4) provides in material part that, “The warden may restore to the credit of any prisoner now or hereafter confined to the state penitentiary all or any portion of good time credits which have been forfeited ... as a result of any disciplinary action or provision of law.” C.R.S. 105 — 4-7 (1963, 1967 Supp.). But this section is prospective and in no way affects or conditions the forfeitures mandated under 105 — 4-6 and 39-18-7(2). As we have seen insofar as the operation of the statutes affect the duration of the sentences, they are cognizable only in habeas corpus and relevant here only as they bear upon the deprivation of procedural due process as a basis for money damages and appropriate injunctive relief, i. e. see supra, page 381. It is sufficient for due process purposes that the fact of escape having been administratively established, the penalties are self-executing and there can be no question of their constitutionality for they merely provide, in substance and effect, that a privilege granted for good conduct is automatically forfeited for misconduct.

This leaves only the matter of forfeiture of normal prisoner’s pay and all privileges of the general prison population for 90 days, and we certainly can not say that this amounts to the deprivation of a constitutional right for which damages are justifiable under § 1983.

The judgment is affirmed.

      . Ineligibility to earn any additional good time during the two year period as provided in (iii) (see page 380) is inconsistent with our interpretation of the statutes and to that extent may be unauthorized. However that may be ultimately settled, no § 1983 due process issue is presented here. The fact of escape having been established, the statute is self-executing without reference to a hearing. Inasmuch as the matter at hand ultimately affects the duration of the sentence, habeas corpus may lie, but in no event would any relief be grantable until the end of the two year period, under our interpretation of the statute. After that time, the necessity for the exhaustion of remedies would bring the matter before the Colorado courts for authoritative interpretation of the relevant statutes. It should be noted that the state does not cite or rely on any of these statutes and we are therefore deprived of the benefit of the attorney general’s opinion or interpretation. Chief Judge Arraj cites these statutes as authorizing the sanctions imposed here but apparently does not give them mandatory effect as we do.

      . In the Lange case the escapee was held unaccountable for the escape because of legal insanity and the statutory forfeitures were consequently inapplicable.