author: WANGELIN, District Judge.

text:
    UNITED STATES of America, Appellee, v. Randy HUGHES and Kenny Hughes, Appellants.
    No. 73-1757.
    United States Court of Appeals, Eighth Circuit.
    Submitted Feb. 12, 1974.
    Decided June 28, 1974.
    Rehearing Denied Aug. 6, 1974.
    James H. McKenzie, Prescott, Ark., for appellants.
    Robert E. Johnson, U. S. Atty., Fort Smith, Ark., for appellee.
    Before HEANEY and BRIGHT, Circuit Judges,- and WANGELIN, District Judge.

       H. KENNETH WANGELIN, District Judge, Eastern District of Missouri, sitting by designation.

   WANGELIN, District Judge.

This appeal is from the holding of the United States District Court for the Western District of Arkansas, Texarkana Division, that Randy Hughes and Kenny Hughes, appellants herein, have a mortgage that is junior to the prior encumbrance of the Small Business Administration (herein SBA).

The- ultimate issue is whether the Hugheses were equitably subrogated to the first lien position because of their satisfaction of the first mortgage held by the Nashville Federal Savings and Loan Association.

Appellants contend that with their payment to the holder of the first lien for the full amount, then based on the rule in United States v. Gregory-Beaumont Equipment Company, 243 F.2d 591 (8th Cir. 1957), they are entitled to be subrogated to rights of the first mortgagee. A close reading of that case is necessary, particularly as to the following:

Arkansas law approves the rule that when one advances money to pay off an incumbrance at the instance of either the owner of the property or the holder of the incumbrance with the express or implied understanding that the advance made is to be secured by a first lien on the property and the new security is not a first lien, the holder of such security, if not chargeable with culpable and inexcusable neglect, will be subrogated to the rights of the prior incumbrancer.
At 592.

From the above cited rubric it would seem that the contention of the appellants is well founded save for the exception “if not chargeable with culpable and inexcusable neglect.” Such gives rise to the pivotal issue: whether the Hugheses were chargeable with culpable and inexcusable neglect.

As we read the trial court’s opinion, it determined that the Hugheses,- as purchasers of the property, were guilty of inexcusable neglect in consummating the transaction and failing to pay heed to the SBA second mortgage, and, therefore, the Hugheses should not be equitably subrogated to the rights of the first mortgagee, Nashville Federal Savings and Loan Association. The evidence discloses that aside from constructive notice under the Arkansas recording statute, § 16-114, Ark.Stat.Ann.1947 (1968 Replacement Volume), that Kenny Hughes knew of the SBA mortgage but proceeded with the purchase and satisfied the first mortgage and accepted a deed to the land without further regard to the interests of the SBA.

The district court in making this ruling denying equitable subrogation to the purchasers of the land did not misapply Arkansas law under the circumstances. Accordingly, we affirm.

Affirmed.

      . It should be noted that the law of Arkansas governs the priority of liens. United States v. Gregory-Beaumont Equipment Company, supra; United States v. Kramel, 234 F.2d 577 (8th Cir. 1956).


source: Caselaw Access Project

author: HILL, Circuit Judge.

license: Public Domain

text:
    Reuben ABEYTA et al., Plaintiffs-Appellants, v. The TOWN OF TAOS, a municipal corporation, et al., Defendants-Appellees.
    No. 73-1828.
    United States Court of Appeals, Tenth Circuit.
    Argued May 16, 1974.
    Decided July 2, 1974.

      Peter B. Shoenfeld, Santa Fe, N. M. (Neil C. Stillinger, Santa Fe, N. M., on the brief), N. M. Civil Liberties Union, for plaintiffs-appellants.
    Eliu E. Romero, Taos, N. M., for defendants-appellees.
    Before HILL, SETH and HOLLOWAY, Circuit Judges.
   HILL, Circuit Judge.

This is a civil rights action brought by former municipal employees who claim they were unlawfully discharged from their employment. Appellants are former police officers of Taos, New Mexico, a municipal corporation. Appellees are the mayor and city council of Taos, New Mexico. Jurisdiction is founded on 42 U.S.C. §§ 1983, 1985 and 1988.

The relevant facts may be summarized as follows. In March, 1972, the appellees, newly-elected town officials, decided that the Taos Police Department needed to be revamped. Accordingly, they gave the police chief thirty days to accomplish the task. Believing this was an inadequate amount of time to achieve the desired results, the police chief resigned. Thereafter, Fernando Rivera was appointed as police chief and he immediately began implementing new policies and restructuring the department.

One of Rivera’s first changes was made on May 26, 1972, when he discharged Mabel Valdez, a clerical employee. Her termination letter stated “the office feels that a woman would be out of place with the tedious work we anticipate in order to update and modernize the department.” In a subsequent letter to the Taos Police Commission, however, Rivera said he terminated Valdez because (1) she could not keep an adequate filing system, (2) she accepted money for traffic fines but failed to give it to the police magistrate, and (3) she had become involved with one of the police officers. The record does not disclose that the town council acted on Valdez’ termination.

Thereafter,' on August 7, 1972, Rivera discharged appellant Jose Montoya for bypassing the chain of command and for dereliction of duty. The termination letter informed Montoya he had ten days to appeal the decision. The police commission subsequently recommended approval of Montoya’s dismissal and he was officially terminated by the town council.

On August 30, 1972, ■ Rivera discharged appellant DeBaca. The termination letter made specific reference to violations of police department rules and informed DeBaca he had ten days to appeal the decision. DeBaca did appeal and on September 27, 1972, a special town council meeting was held to afford him a hearing. He was officially terminated at the next regular town council meeting.

The remaining police officers became increasingly dissatisfied with Rivera’s actions and policies. On December 8, 1972, they sent a letter to Rivera complaining of employee harassment, requesting better working conditions, and demanding a meeting with the police commission. On December 18, 1972, the officers, Rivera, the police commission, and the town council met as a group to discuss the grievances. At that time accusations were heard by the officers against Rivera, and vice versa.

On December 20, 1972, and apparently as a result of the December 18 meeting, appellants Montano, Cordova and Robert Montoya were suspended from duty. Other police officers were placed on probation. An attorney representing these men requested a hearing on the matter. His letter to the mayor stated, inter alia:

The hearing may be before the Town Council, the Police Commission, or an impartial panel appointed by the Town Council.

Although not required by state statute, an impartial panel was constituted to hear all charge's previously made. It requested the police officers to attend its meetings, which lasted over a two week period. Appellants Montano and Cordova refused to attend although most of the officers, if not all, did participate.

On February 15, 1972, at the recommendation of the panel, officers Abeyta and Suazo and appellants Gallegos, Em-sweller, Lucero and Martinez were discharged. Appellants’ counsel sent a letter to the mayor on February 28, 1973, demanding reinstatement and a hearing. The demands were ignored.

The police officers then instituted this action against appellees and the Town of Taos, in the United States District Court for the District of New Mexico. The complaint alleged, inter alia, (1) their terminations were not approved by the town council in the manner required by state statute, and thus were of no effect; (2) termination of their employment, a property right safeguarded by the Fourteenth Amendment’s equal protection and due process clause, required a hearing; (3) appellees’ unlawful action damaged appellants’ reputations and chances of finding other employment; and (4) a partial reason for appellants’ termination was the letter they sent to Rivera on December 8, 1972, which was a constitutionally protected exercise of free speech. Appellants requested reinstatement and back wages, or in the alternative, reinstatement and back wages pending final outcome of a hearing.

An evidentiary hearing was held on May 18, 1973. At that time the town of Taos was dismissed as a party, and Abeyta’s cause of action was dismissed for failure to prosecute. Based on the evidence presented, the trial court made the following findings: (1) appellants were not entitled to a termination hearing because their employment was not a property interest protected by due process; (2) their letter to Rivera revealed problems the town of Taos could legitimately correct by appropriate action; (3) DeBaca’s termination did not conform to state law because not enough votes were cast in favor of termination, but did not merit relief; and (4) Valdez’ termination, without a hearing, deprived her of due process and infringed upon her liberty because the charges against her could injure her reputation. Accordingly, the trial court ordered Valdez reinstated with back wages, but dismissed the action as to the remaining plaintiffs. Valdez has not appealed.

Appellants contend procedural due process demands that they be given a hearing on the reasons for their termination.

The requirements of due process apply only to deprivation of interests encompassed within the Fourteenth Amendment’s protection of “property” and “liberty”. Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972); Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). Appellants claim retention of their employment is a protected property right and rely on such cases as Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), where it was held that due process entitles welfare recipients to an adversary hearing before termination of benefits. However, these cases are dissimilar to the area of law now before us and are not persuasive. The types of property protected by the due process clause vary widely and what may be required by that clause in dealing with one set of interests may not be required in dealing with another set of interests. Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974).

In this regard, public office or employment generally is held not to be a property interest within the meaning of the Fourteenth Amendment. See, e. g., Board of Regents v. Roth, supra; Lontine v. VanCleave, 483 F.2d 966 (10th Cir. 1973); Burks v. Perk, 470 F.2d 163 (6th Cir. 1972), cert. den’d, 412 U.S. 905, 93 S.Ct. 2288, 36 L.Ed.2d 970. This rule is not applicable in all situations, as where public employees hold contractual rights to continuing employment under formal tenure grounds. Summary termination of employment, under such circumstances, may well be actionable. Wilderman v. Nelson, 467 F.2d 1173 (8th Cir. 1973).

However, the record does not disclose that appellants have any rights to continued employment which could constitute a property interest. They operate under no contract or commission and have no fixed term of employment, and their employment must be considered terminable at will. At best, appellants have a mere unilateral expectation of continued employment. This is not a property right encompassing due process guarantees. Perry v. Sindermann, supra; Board of Regents v. Roth, supra.

Appellants also contend that, because of the nature of the charges upon which their dismissals were básed, a hearing was required before they could be deprived of their “liberty” protected by the Fourteenth Amendment against deprivation of due process. In Arnett v. Kennedy, supra, the Supreme Court said:

The liberty here implicated . is not the elemental freedom from external restraint . . . but is instead a subspecies of the right of the individual “to enjoy those privileges long recognized ... as essential to the orderly pursuit of happiness by free men.” But that liberty is not offended by dismissal from employment itself, but instead by dismissal based upon an unsupported charge which could wrongfully injure the reputation of an employee. [Citations omitted].

In this respect, appellants’ complaint alleged that their reputations were injured and that they were consequently placed at a disadvantage in obtaining other employment.

The charges against appellants, which can be characterized as allegations of improper job performance, are not of a nature that would stigmatize or injure their reputations, as would charges of dishonesty or immorality. Moreover, appellants have presented no evidence whatsoever to support this argument.

Nor can we conclude that their terminations have placed appellants at a disadvantage in obtaining other employment. Several appellants have found other jobs. Those who have not have sought employment only in Taos. In fact, one unemployed appellant testified ■that he was offered a job in another city as a deputy sheriff, but that he declined the offer.

Appellants have not established a deprivation of protected property or liberty interests, and therefore have no rights to a termination hearing.

The next issue concerns the letter appellants sent Rivera on December 8, 1972. They assert that it was a reason for their dismissal and contend the trial court erred in failing to find it was a constitutionally protected exercise of free speech.

The trial court did not hold that the letter was not an exercise of free speech, but only that it revealed existing problems which the town of Taos had a legitimate concern in correcting. This was not error. We recognize, as did the trial court, that a governmental employee cannot be dismissed solely because he makes statements critical of his superiors. See, e. g., Pickering v. Board of Educ., 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968). But appellants were not dismissed because they wrote the letter. Instead, their dismissals resulted from findings of misfeasance made by a subsequently constituted investigatory panel. This was not an infringement upon their rights of free speech. The letter revealed substantive problems which were matters of public concern, and town officials would have been remiss in their duties had they not taken corrective action. Appellants’ contention is without merit.

The final argument is that the trial court erred in refusing to grant relief to appellant DeBaca for his admittedly improper discharge. N.M.S.A. § 14-10-6 provides, inter alia, that an employee may be suspended or discharged by a majority vote of all the members of the governing body. Taos, a mayor-council form of municipal government, has four councilmen and a mayor, who votes only to break a tie vote.

DeBaca was terminated by the town council on October 11, 1972. One councilman voted against his termination while two councilmen and the may- or voted in favor of his termination. One councilman was absent. This vote did not result in a valid discharge, which could only result from (1) three councilmen voting in favor thereof, or (2) a tie vote, broken by the mayor in favor of termination.

The trial court conceded that the vote was improper but nonetheless refused to grant DeBaca the equitable relief requested. This decision was a matter within its discretion and will not be reversed absent an abuse of that discretion.

Under the circumstances, we cannot conclude that the trial court abused its discretion. Even if the absent councilman had voted against termination there would have been a tie, which the may- or’s vote would have broken. And even if DeBaca were reinstated, nothing could prevent his subsequent discharge at the next town council meeting. The relief granted would be ephemeral at best. Moreover, at the hearing on his discharge DeBaca stated that even if rehired, he would not return to work under existing conditions in the police department.

Finally we believe reinstatement with back wages would impose a considerable burden on the town of Taos, whose actions were in good faith." Equitable relief should not be granted where the hardship to the defendant substantially outweighs the benefit to the plaintiff.

Affirmed.

        . The suspended officers requested reasons for their suspensions. On January 10, 1973, the mayor sent each man a letter stating the reasons. Montano and Cordova were suspended for shooting a police car. Montoya was suspended because of complaints received about his treatment of persons he stopped for traffic violations and because it was believed he had been shooting out windows in town.

      . Emsweller sent a letter to the mayor, on behalf of himself and the other appellants, requesting reasons for this action. The following reasons were given. Emsweller — disrespect to superior officers, taking time off work without prior notice or permission, lack of judgment in dealing with confidential matters; Gallegos — abusing sick leave, acting in a manner unbecoming a police officer, disobeying orders ; Lucero — disobeying orders, lack of attendance to duties, lack of judgment in performing duties; Martinez— failure to observe and give effect to department policies, disrespect to superiors, lack of judgment in performing duties.

      . Where a police officer’s employment is not fixed he holds his office at the pleasure of the appointing authority. See, e. g., 56 Am. Jur.2d Municipal Corporations § 333 (1971) ; 62 C.J.S. Municipal Corporations § 577 (1949).

      . N.M.S.A. § 14-10-6(D) (1) provides: the governing body may discharge an appointed official or employee by a majority of all the members of the governing body ;

      . N.M.S.A. § 14-10-3 provides: The mayor of a municipality is the presiding officer of the governing body. In all municipalities the mayor shall vote only when there, is a tie vote.

      . Our refusal to reinstate these Taos employees does not apply to Valdez. The trial court properly found that her liberty had been infringed upon and she has not appealed from that decision.


author: GOLDBERG, Circuit Judge:

text:
    Jose RIOS, et al., Individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. Dr. Everett G. DILLMAN, etc., et al., etc., Defendants-Appellees.
    No. 74-1136
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 23, 1974.
    Bart Cox, Am. Civ. Liberties Union, El Paso, Tex., for plaintiffs-appellants.
    Travis White, City Atty., John C. Ross, Jr., Wade Adkins, Michael F. Ainsa, Asst. City Attys., El Paso, Tex., for def endants-appellees.
    Before WISDOM, GOLDBERG and GEE, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v.'Citizens Casualty Co. of New York et al., 5th Cir. 1970, 431 F.2d 409, Part I.

   GOLDBERG, Circuit Judge:

This case comes to us as an appeal from an order dismissing plaintiffs’ complaint for failure to state a claim upon which relief can be granted, Fedit.Civ.Pro. 12(b)(6). The focus of our review is simple. In testing the sufficiency of a complaint against a 12(b)(6) motion to dismiss, the trial court must utilize the now familiar litmus from Conley v. Gibson, 1957, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80.

[O]ver and over and over again — but apparently not often enough — this Court has stated, explained, reiterated, stressed, rephrased, and emphasized one simple, long-established, well-publicized rule of Federal practice: a motion to dismiss for failure to state a claim should not be granted unless it appears to a certainty that the plaintiff would not be entitled to recover under any state of facts which could be proved in support of his claim.

Cook & Nichol, Inc. v. Plimsoll Club, 5 Cir. 1971, 451 F.2d 505, 506 (Brown, C. J.). On numerous occasions we have warned of the dangers inherent in precipitate, final disposition of a case on the basis of barebones pleadings. See Cook & Nichol, Inc. v. Plimsoll Club, supra, 451 F.2d at 506-507. By now it. should be clear even to the most astigmatic that we view motions to dismiss for failure to state a claim with disfavor, and that in our opinion they should rarely be granted. See 5 C. Wright & A. Miller, Federal Practice and Procedure § 1357 at 598 (1969).

This does not mean, however, that motions to dismiss for failure to state a claim should never be granted. See, e. g., Robles v. El Paso Community Action Agency, 5 Cir. 1972, 456 F.2d 189; Jaeger v. Freeman, 5 Cir. 1969, 410 F.2d 528. “When used with care, there is a time and a place for 12(b) motions to dismiss.” Cook & Nichol, Inc. v. Plimsoll Club, supra, 451 F.2d at 507 n. 8. In our opinion the case at bar represented the proper time and place for the use of Rule 12(b)(6). Finding no error in that disposition of the case, we affirm.

Like many other municipalities, El Paso, Texas has elected to grant preferential treatment to veterans seeking employment within the city’s civil service. Under Article VIII, Section 3 and Article VI, Section 7 of the Civil Service Provisions of the El Paso Municipal Charter, anyone qualifying as a “veteran” and attaining a passing score on a civil service examination automatically receives an additional five points. The named plaintiffs, two policemen and two firemen, none of whom are “veterans” within the meaning of the ordinance, challenge the constitutionality of the veterans preference points on behalf of themselves and all other municipal employees who fall outside the statutory definition. Conceding the validity of veterans “credits” for original appointment in the civil service, they nevertheless insist that insofar as the ordinance adds preference points to veterans’ promotional examinations it violates the Fourteenth Amendment’s guarantee of equal protection of the laws. We do not agree.

The basic principles governing application of the Equal Protection Clause need no lengthy explication. The Fourteenth Amendment

does not deny to States the power to treat different classes of persons in different ways, [citations omitted] The Equal Protection Clause of that amendment does, however, deny to States the power to legislate that different treatment be accorded to persons placed by a statute into different classes on the basis of criteria wholly unrelated to the objective of that statute. A classification “must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike.” [citation omitted]

Reed v. Reed, 1971, 404 U.S. 71, 75-76, 92 S.Ct. 251, 254, 30 L.Ed.2d 225, 229. To pass constitutional muster a legislative classification must bear some rational relationship to legitimate state purposes or governmental interests. United States Department of Agriculture v. Moreno, 1973, 413 U.S. 528, 93 S.Ct. 2821, 37 L.Ed.2d 782, 787; San Antonio Independent School District v. Rodriguez, 1973, 411 U.S. 1, 40, 93 S.Ct. 1278, 36 L.Ed.2d 16, 47; Weber v. Aetna Casualty & Surety Co., 1972, 406 U.S. 164, 172, 92 S.Ct. 1400, 31 L.Ed.2d 768, 777.

Although the portions of the El Paso charter cited to us by the parties contain no explicit statement of purpose, the statutory objectives are hardly mysterious given the long-standing, widespread existence of veterans’ preference legislation at all levels of government. Indeed, “it is apparent to anyone who has lived through periods of war that contrived explanations are not necessary.” August v. Bronstein, supra note 4, 369 F.Supp. at 193. Historically veterans’ preference laws have been directed to three principal objectives: (1) to recognize that the experience, discipline, and loyalty that veterans gain in military service are conducive to the better performance of public duties; (2) to encourage citizens to serve their country in time of war and to reward those who, either involuntarily or through enlistment, did so; and (3) to aid in the rehabilitation and location of the veteran whose normal life style has been disrupted by military service. Russell v. Hodges, 2 Cir. 1972, 470 F.2d 212, 218; White v. Gates, 102 U.S.App.D.C. 346, 253 F.2d 868, cert. denied, 1958, 356 U.S. 973, 2 L.Ed.2d 1147; Feinerman v. Jones, supra note 4, 356 F.Supp. at 259; Koelfgen v. Jackson, supra note 4, 355 F.Supp. at 253; Stevens v. Campbell, supra note 4, 332 F.Supp. at 106.

Appellants do not really challenge the propriety of any of these objectives, and in any event the decisions cited above— as well as the plethora of cases on which they rely — amply demonstrate that the legitimacy of the governmental interest in veterans preference legislation is beyond serious judicial dispute. Appellants’ dissatisfaction with the El Paso scheme seems to be, rather, that the preference accorded to veterans is simply too great. To some extent appellants appear to be simply questioning the desirability of what is in effect a permanent promotional advantage for .veterans in the civil service. We remind them that given a legitimate legislative end, this Court does not ordinarily sit to evaluate the wisdom of particular statutory means; that task is assigned to others in our system of government.

Appellants also challenge the placement of the line dividing those civil servants who are eligible for the promotional preference points from those who are ineligible. Understandably enough, the operative word in the El Paso ordinance is “veteran.” It can hardly be debated that insofar as the statutory classification has the effect of limiting the preference to those who are in fact veterans, it makes no irrational, impermissible distinctions. Russell v. Hodges, supra, 470 F.2d at 218. The El Paso ordinance, however, goes several steps further, for it is perfectly explicit that not all those who have served in the military qualify as “veterans.” in the first place, one must be a veteran of a war fought by the United States and must have received an honorable discharge from the service. Beyond that, one must have “rendered actual field duty” for a certain period of time, which varies depending on whether the service included duty overseas. As we have already indicated, appellants do not quarrel with the differential treatment accorded military alumni on examinations for original appointment in the civil service. Thus, the thrust of their equal protection argument is that the criteria used to identify the recipients of the promotional preference distinguish among those with prior military service in a manner which is unreasonable, arbitrary, and capricious given the size of the advantage granted.

We find ourselves unable to accept appellants’ position. We do not necessarily disagree with the proposition implicit in appellants’ argument — that a classification may be rational and reasonable at one level of preferential treatment but irrational and arbitrary when the advantage granted is much stronger. But this is not such a case. The promotional preference provided under the El Paso scheme is certainly quite extraordinary, see Koelfgen v. Jackson, supra, 355 F.Supp. at 253, and we recognize that it may be unfair to withhold that preference from those with prior military service who for some reason do not meet all the qualifications outlined in the statutory definition of a veteran. Nonetheless, we are unwilling to conclude that the decision of El Paso to draw the qualifying line where it did is arbitrary, capricious, or unreasonable.

Certainly El Paso could reasonably conclude that those honorably discharged veterans who performed field duty for a particular period of time during time of war are the ones most likely to have gained whatever experience, discipline, and loyalty are determined to be conducive to better performance as a public employee. The decision to grant those veterans the promotional preference as a means of encouraging military service in times of war and rewarding such service is not arbitrary or capricious. Nor is it unreasonable to determine that those veterans are the most worthy or the most in need of assistance in. rehabilitation and employment placement to compensate for disruption caused by military service. Finally, we cannot say that the promotional preference, great though it may be, is so much greater than that granted for original appointment that the same criteria are unreasonably used to apportion both. In that regard we agree with the sentiments of the lower court in Koelfgen, supra, 355 F.Supp. at 254:

the differences which exist between granting veterans an initial preference and granting them a five point promotional preference are primarily differences in degree rather than principle. [citation omitted] For this Court to draw a constitutional line between initial and promotional preferences would require a kind of hair splitting that courts are ill equipped to handle.

Buttressing our conclusion that appellants’ argument must fail is the analogy supplied by Koelfgen v. Jackson, supra, which involved a challenge to the Minnesota veterans’ preference statute. Unlike most veterans’ preference laws, but like the El Paso ordinance, the Minnesota statute granted a promotional preference to veterans. As under the El Paso ordinance, veterans who otherwise passed a civil service promotional examination could receive an additional five points on their scores. And much like the El Paso ordinance, the Minnesota statute limited this preference to veterans who had served on active duty for other than training purposes during a war or armed expedition by the United States and who had received an honorable discharge. The three-judge court that heard the challenge to the statute found no equal protection infirmity in the promotional preference. Accord, August v. Bronstein, supra note 4, 369 F.Supp. at 193 (2%-point promotional preference). The Supreme Court affirmed the decision of the lower court without opinion, thus stamping its imprimatur of approval on the result, if not on all the reasoning, below.

We read no inexorable command in the Supreme Court’s affirmance, for Koelfgen and the case at bar are not equarely on all fours with each other. The Minnesota statute, like the New York statute considered in August v. Bronstein, supra, allowed the promotional points to be used only once, whereas the El Paso ordinance appears to grant the preference on every promotional exam which the veteran otherwise passes. This factual distinction does not, in our opinion, lessen the persuasive force of Koelfgen on the ease sub judice. As with the difference between an initial preference and a promotional preference, the difference between a one-time promotional preference and a recurring preference is primarily one of degree, review of which would require instruments calibrated far beyond those available to us.

We emphasize that by our decision we intimate no views regarding the wisdom of the El Paso veterans’ preference plan. Obviously the city could — and perhaps should — have rationally decided on a smaller preference or a broader definition of eligibility. That does not make the decision to do otherwise irrational or arbitrary. The Equal Protection Clause does not automatically condemn statutory programs that are not as finely tuned as they might be. We conclude only that appellants could not in our judgment have presented any set of facts that would compel a negative answer to “the crucial question whether there is an appropriate governmental interest suitably furthered by the differential treatment.” Police Department of Chicago v. Mosley, 1972, 408 U.S. 92, 95, 92 S.Ct. 2286, 2290, 33 L.Ed.2d 212, 216.

The Equal Protection Clause is not an automatic leveler, nor does it reduce legislative bodies to classificatory impotence. It allows statutory distinctions; and so long as a classification does not turn on suspect criteria, it requires only a rational justification for the decision to classify. The list of suspect classifications is not plethoric, and thus far does not include veterans. Therefore, our constitutional “thou shall not” is most limited: we may cross the Rubicon only to search out capriciousness and arbitrariness. Having determined that the classification here challenged is explicable in rational, reasonable terms, we conclude that the El Paso ordinance favoring veterans is not aberrational. There our inquiry ceases.

Affirmed.

      . The first time the case was filed, the district court, after allowing one amendment of the complaint, granted defendants’ motion to dismiss for failure to allege facts showing that the named plaintiffs were personally affected by the challenged provisions of the El Paso City Charter. This Court affirmed, intimating no view as to the merits of the complaint. Rios v. Washington, 5 Cir. 1973, 480 F.2d 543. On October 9, 1973, plaintiffs filed a new original complaint, pleading in great detail the manner in which each class representative is personally affected by the ordinance in question. The dismissal of this subsequent complaint pursuant to Rule 12(b) (6) gives rise to the instant appeal.

      . Accord, Battle v. Liberty National Life Insurance Co., 5 Cir. 1974, 493 F.2d 39, 44; Jennings v. Patterson, 5 Cir. 1972, 460 F.2d 1021, 1022; Stefanski v. Mainway Budget Plan, Inc., 5 Cir. 1972, 456 F.2d 211, 212. See generally 5 C. Wright & A. Miller, Federal Practice and Procedure § 1357 (1969).

       ARTIOLE VIII SECTION 3.
      SPECIAL CREDIT FOR WAR VETERANS
      “Veterans of any of the wars of the United States who have obtained a passing rate at an examination, and who present an honorable discharge from military service, shall have their ratings in said examination advanced five points.
      “The term ‘veteran’ as used in this Amendment shall be construed to mean any person.who rendered actual field duty in the army, navy, marine, or air corps for a period of not less than thirty days during time of war, if such service included services overseas, or for a period of not less than three months in time of war, if such service did not include service overseas. Service in the Student Army Training Corps or in the Reserve Officers’ Training Corps shall not be considered field duty within the meaning of this rule. Field duty shall not include service while on furlough. Field duty shall not include office, laboratory or shop service performed under other than field conditions.
      “Veterans who fully qualify as above stated, and who are suffering from disability traceable directly or indirectly to war service shall have their examination rating advanced another five points, provided, however, that the present fact of such disability is directly or indirectly traceable to war services and that such disability is certified to by an army or navy surgeon or other competent Governmental medical authority.
      “Limitations as to age in respect of any positions under the classified service shall not apply to veterans as such term is defined herein; provided, however, that the exemption from age limits herein granted shall not apply to position in the fire or police departments of the City of El Paso, nor to any position to which any retirement plan now in existence or hereafter adopted by the City of El Paso shall apply-
      “Nothing in this provision shall be construed to authorize or direct the placing of the name of any person on any eligible list who does not meet the physical standards set up by the commission for the position for which said eligible list has been created.”
      ARTICLE VI SECTION 7
      RULES APPLYING TO ORIGINAL EXAMINATIONS TO APPLY TO PROMOTIONAL EXAMINATIONS.
      “Eligible lists resulting from examinations held under the foregoing sections shall in all respects have the same standing and be subject to the same restrictions as eligible lists resulting from original entrance examinations, except that in case two or more persons take a promotional examination and receive the same rating, the person who has greater seniority in the position qualifying him for promotion shall be placed higher on the resulting list. No person shall be certified from a promotional eligible list who has .been permanently separated from the service.”

      . Recently a number of courts have faced equal protection attacks on veterans’ preference legislation based on the argument that “the challenged state action must be subjected to the searching judicial scrutiny reserved for laws that create suspect classifications or impinge upon constitutionally protected rights.” San Antonio Independent School District v. Rodriguez, 1973, 411 U.S. 1, 40, 93 S.Ct. 1278, 1301, 36 L.Ed.2d 16, 47. At least two refused to find any fundamental right “to be fairly considered for public employment.” Feinerman v. Jones, M.D.Pa.1973, 356 F.Supp. 252 (three-judge court); Koelfgen v. Jackson, D.Minn.1972, 355 F.Supp. 243, aff’d mem., 1973, 410 U.S. 976, 93 S.Ct. 1502, 36 L.Ed.2d 173. Another concluded that a durational residency requirement attached to veterans’ preference legislation infringed the fundamental right of interstate travel and served no compelling state interest. Carter v. Gallagher, D.Minn.1971, 337 F.Supp. 626 (three-judge court). Contra, August v. Bronstein, S.D.N.Y.1974, 369 F.Supp. 190 (three-judge court; limited residence requirement does not infringe the right to travel). See also Stevens v. Campbell, D.Mass.1971, 332 F.Supp. 102 (three-judge court; residency requirement not rationally related to permissible goal of state).
      Plaintiffs-appellants have made no attempt to invoke this “searching judicial scrutiny” in the case sab judiee. We therefore need not reach the question whether under any conceivable set of facts plaintiffs could establish that the El Paso veterans’ preference ordinance unconstitutionally classifies on the basis of “suspect” criteria or infringes a fundamental right.

      . Cf. Johnson v. Robison, 1974, 415 U.S. 361, 94 S.Ct. 1160, 39 L.Ed.2d 389; Feinerman v. Jones, M.D.Pa.1973, 356 F.Supp. 252, 259-260.

      . Although the original complaint in this case is not totally clear, it does not appear that any of the named plaintiffs are themselves within the group of those having military service but excluded from the definition of “veteran.” Ordinarily this might pose problems of standing and ability of the named representatives to represent the class pleaded ; however, we need not consider these problems in determining whether, for purposes of defendants’ motion to dismiss for failure to state a claim, plaintiffs could prove any set of facts that would entitle them, or the class they purport to represent, to the relief sought.

      . In Thompson v. Gallagher, 5 Cir. 1973, 489 F.2d 443, this Court held that a city ordinance barring veterans with other than honorable discharges from municipal employment violated the Equal Protection Clause. We concluded that the statutory classification did not rationally relate to the stated municipal interest — maintaining the quality of the city work force — because the criterion used, honorable discharge, did not reasonably differentiate among veterans and imposed no test of qualification on nonveterans.
      We do not think Thompson compels reversal in the case at bar. A statute that bars all employment has a substantially different effect from one that simply grants an advantage to some otherwise qualified for employment, and the honorable discharge requirement is significantly less reasonable for •one than for the other. Obviously a person may be discharged other than honorably for a variety of reasons, not all of which necessarily reflect on that person’s ability, experience, loyalty, need for rehabilitation, or suitability for reward for serving the nation in time of war. It might be more reasonable and more fair to draw the line at some other point, for example, limiting the preference to those with other than a dishonorable discharge,, see the Emergency Employment Act of 1971, P.L. 92-54, 85 Stat. 146. This does not mean that granting the preference to those with honorable discharges only is unreasonable. As we have noted, many other courts have upheld veterans’ preference statutes that limit benefits to those with honorable discharges. E. g., Russell v. Hodges, supra; White v. Gates, supra (upholding the Veterans’ Preference Act, now 5 U.S.C. § 2108 et seq.) ; Koelfgen v. Jackson, supra.

      . We recognize that the exact precedential weight of a Supreme Court summary affirmance without opinion is a matter of some debate. Compare Dillenburg v. Kramer, 9 Cir. 1972, 469 F.2d 1222, 1225 (“very little precedential significance”) with Jordan v. Weaver, 7 Cir. 1973, 472 F.2d 985, 989 (“a summary affirmance is a decision on the merits having precedential value”), rev’d sub nom., Edelman v. Jordan, 1974, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662. Writing for the Supreme Court in Edelman, supra, 415 U.S. at 669, 94 S.Ct. at 1359, 39 L.Ed.2d at 677, Justice Rehnquist said,
      [T]hese . . . summary affirmances obviously are of precedential value . . . . Equally obviously they are not of the same precedential value as would be an opinion of this Court treating the question on its merits. Since we deal with a constitutional question, .we are less constrained by the principle of stare decisis than we are in other areas of the law.
      Of course, this Court, as an intermediate appellate court, does not enjoy the same flexibility with regard to the principle of stare decisis in Supreme Court constitutional decisions as the Supreme Court itself. On the other hand, the case sub judioe well illustrates the difficulty of assessing the precise precedential value of a summary affirmance. Koelfgen and the case at bar are factually distinguishable, but the absence of an opinion by the Supreme Court in Koelfgen leaves us with only our own reasoned speculation regarding the legal importance of the differences. We prefer to conclude that because of the factual distinctions, the Supreme Court action in Koelfgen stands as highly persuasive — -if not controlling — authority, which we are not free simply to disregard.


author: PER CURIAM:

text:
    James L. HARVEY, Plaintiff-Appellant, v. Frank NUNLIST, Assistant Postmaster General, U. S. Postal Service, Defendant-Appellee.
    No. 74-1671
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 26, 1974.

      Clarke Gable Ward, Houston, Tex., for plaintiff-appellant.
    James R. Gough, W. Palmer Kelly, Asst. U. S. Attys., Houston, Tex., for defendant-appellee.
    Before BROWN, Chief Judge, and THORNBERRY and AINSWORTH, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5th Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

Plaintiff Harvey, assistant supervisor at a Houston, Texas, post office, was charged with falsification of official Post Office records by assisting a subordinate in the preparation of a voided postage due sheet in the amount of $120. Despite an untarnished record and 19 years of service with the Postal Service, Harvey was dismissed from the department. He complained of racial discrimination, but an E.E.O.C. investigation found the complaint to be unsupported. A post office hearing officer held that the falsification charge was supported by the evidence and that the discrimination charge was meritless. The hearing officer’s findings were upheld on administrative appeal. Plaintiff appealed to the district court which granted summary judgment in favor of defendant.

Harvey asserts on appeal that the postal authorities acted too harshly in dismissing him from the service rather than imposing a lesser punishment. However, the scope of judicial review of agency actions is limited to discerning whether procedural due process requirements were met and whether the agency action was arbitrary or capricious or unsupported by substantial evidence. See Dozier v. United States, 5 Cir., 1973, 473 F.2d 866; Vigil v. Post Office, 10 Cir., 1969, 406 F.2d 921, 922. Neither of these issues is before us, as Harvey admits the violation with which he was charged. The district court considered the record of the agency proceedings and found that the Postal Service had a rational basis for dismissal which was not motivated by bad faith or malice. Absent such factors, the trial judge correctly noted that he lacked the power to substitute his judgment for that of the agency in matters of employee removal and discipline. Chiriaco v. United States, 5 Cir., 1964, 339 F.2d 588; Hargett v. Summerfield, 1957, 100 U.S.App.D.C. 85, 243 F.2d 29, 32, cert. denied, 353 U.S. 970, 77 S.Ct. 1060, 1 L.Ed.2d 1137.

Affirmed.


text:
    Enoch DICKINSON, Jr., Plaintiff-Appellant, v. CHIEF OF POLICE et al., Defendants-Appellees.
    No. 74-1839
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 28, 1974.
    Rehearing Denied Sept. 25, 1974.

      Enoch Dickinson, Jr., pro se.
    William J. Baxley, Atty. Gen., Montgomery, Ala.,' for defendants-appellees.
    Before GEWIN, GODBOLD and CLARK, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N. Y. et al., 431 F.2d 409, Part I (5th Cir. 1970).

   PER CURIAM:

The complaint initiating this damage action under 42 U.S.C. §§ 1981 and 1983 charged numerous officials connected with Dickinson’s incarceration in the Mobile City Jail, pending his federal trial for mail fraud, with maliciously denying him essential medical attention. He avers that he sought treatment for stomach pains, dizzy spells and severe cramping but was given nothing other than “indigestion tablets.” He further avers that during the course of his incarceration a physician made a cursory examination that failed to detect his medical disability. Finally, he avers that immediately upon being transferred to a United States penitentiary he was found to be suffering from low blood pressure, a bleeding peptic ulcer and abnormal blood circulation. The complaint sought monetary damages from the defendant officials.

Without a hearing and before an answer was filed, the district court dismissed the complaint as frivolous. In considering the action of the district court our standard of review is set forth in Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972). Unless the court can say with assurance that under the allegations of the pro se complaint, which is subject to less stringent standards than formal pleadings drafted by lawyers, it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief, the complaint should not be summarily dismissed.

Our review of the record convinces us that the district court gave careful consideration to the allegations of the complaint and correctly concluded that the evidence of record and the knowledge gained by the district court during the plaintiff’s mail fraud trial completely rebutted the allegations of the complaint.

During the first day of the criminal trial Dickinson was present in court and appeared to be normal in every respect. The court observed that he assisted his counsel, aided in striking the jury and otherwise conducted himself in a usual and normal manner. On the second day he appeared in court without his shoes; he refused to stand when the court was called into session, and he placed his head on the counsel table and refused to raise it. At the instruction of the court the Marshal was required to physically raise his head from the table in order for witnesses to identify him. The court conducted several in camera examinations of him and interrogated him as to any difficulties he was experiencing. On one occasion he turned from the court and began to walk away. The court made specific inquiry as to why he refused to wear shoes and why he refused to raise his head from the counsel table. He refused to make any response or to advise the court of his difficulties, if any.

Finally, the court instructed the Marshal to obtain a physician to examine Dickinson. The examination was conducted by Dr. Dumas who gave a terse report in which he stated that Dickinson was physically and mentally able to stand trial and that he could find no significant medical problems at that time. We realize that the record discloses" that when Dickinson was admitted to the Atlanta Penitentiary he was placed in the hospital. It was found that his hemoglobin and hematocrit were low and his final diagnosis at discharge was “peptic ulcer disease.” The prison psychiatrist concluded that there was no indication of any mental illness. After treatment he was discharged from the prison hospital and returned to a regular cell house. But he refused to enter the cell and the Penitientiary physician’s report shows he was placed in segregation for refusing to obey an order to enter the cell

As noted above, the court carefully undertook to ascertain whether Dickinson was suffering from any difficulty and repeatedly questioned Dickinson without any response or cooperation. The court further observed that Dickinson had filed many frivolous writs in the court and was well known to the trial judge.

In view of the foregoing findings of fact, the court’s personal knowledge of events which transpired during the trial on the mail fraud charge and the reports of the physicians, we believe the district court properly concluded that the petition was frivolous under the standards of Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972).

The quality of justice dispensed to all litigants would be reduced if a time consuming evidentiary hearing was required even when the trial judge is intimately aware of the factual background of a prisoner’s pro se complaint. Our holding in Willard v. United States, 422 F.2d 810 (5th Cir. 1970) is applicable to the case at bar:

[T]he District Court exercised a great deal of care in examining' the factual background as presented in the transcript of the hearing in the criminal proceeding. Thus this dismissal cannot appropriately be said to be on the pleadings alone. The Court had a definite, factual basis for concluding that the claim asserted was so lacking in substance as to be frivolous.

Affirmed.

      . As we said in United States v. Curry, 497 F.2d 99, 101 (5th Cir. 1974) “the acumen gained by the trial judge who presided during the entire course of these proceedings makes him well qualified to rule on the motion . . . and makes a time consuming hearing unnecessary.” See also Bryan v. United States, 492 F.2d 775 (5th Cir. 1974) (en banc) where an evidentiary hearing was not held on an allegation of a broken plea bargain when the record refuted such a claim.


text:
    Paul G. SPINKS and Mary E. Spinks, Plaintiffs-Appellees, v. J. L. JONES, Sr. and J. L. Jones, Jr. d/b/a J. L. Jones Construction Company, et al., Defendants, v. UNITED STATES of America, Intervenor-Appellant.
    No. 74-1373
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 23, 1974.
    Edward J. Vulevieh, Jr., Asst. U. S. Atty., Mobile, Ala., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Chief, Daniel F. Ross, Jonathan S. Cohen, Attys., Tax Div. Dept, of Justice, Washington, D. C., for intervenor-appellant.
    L. Y. Sadler, Jr., Camden, Ala., for other interested parties.
    Alvin T. Prestwood, Montgomery, Ala., for plaintiffs-appellees.
    Before COLEMAN, DYER and RO-NEY, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 431 F.2d 409, Part I (5th Cir. 1970).

   PER CURIAM:

The sole question on this appeal is the propriety of the District Court’s award of attorney’s fees to the stakeholders of an interpleaded fund partially impressed with federal tax liens. The award reduced the Government’s recovery pro tanto. We vacate and remand.

J. L. Jones Construction Company recovered a judgment against Paul and Mary Spinks in an Alabama court. Faced with conflicting claims against the moneys represented by the state judgment, including federal tax liens, the Spinkses brought an interpleader action. The District Court determined the priority of each claim and ordered distribution of the fund: first, $3,700 to the Construction Company’s attorney, employed on a contingent retainer, for his services in creating the fund; second, $500 to the Spinkses as reasonable attorney’s fees for bringing the inter-pleader action; third, $2,070.74 in full payment to Marshall Lumber & Mill Company on its mechanic’s lien; and fourth, the balance of the $11,100 fund to the United States in partial satisfaction of its tax liens. The Government appealed the $500 reduction in the amount otherwise available to it caused by the award of attorney’s fees to the Spinkses.

The stakeholder of an interpleaded fund is not entitled to attorney’s fees to the extent that they are payable out of a part of the fund impressed with a federal tax lien. Commercial Standard Insurance Co. v. Campbell, 254 F.2d 432, 433 (5th Cir. 1958); see United States v. R. F. Ball Construction Co., 355 U.S. 587, 78 S.Ct. 442, 2 L.Ed.2d 510 (1958); United States v. Hubbell, 323 F.2d 197 (5th Cir. 1963); United States v. State National Bank, 421 F.2d 519 (2d Cir. 1970); United States v. Wilson, 333 F.2d 147 (3d Cir. 1964). See generally J. Moore, Federal Practice ¶ 22.16 [2], at 3159-3162 (1974); C. Wright & A. Miller, Federal Practice & Procedure: Civil § 1719, at 488-489 (1972). The Spinkses stress that here, unlike the above cases, the Government does not have the paramount claim. This distinction finds no support in the decided cases. The judicial prerogative to award stakeholders their attorney’s fees must give way to the supremacy of the federal tax lien law whenever an award would invade the amount subject to tax lien. United States v. Chapman, 281 F.2d 862, 870 (10th Cir. 1960). In this ease, the District Court’s fee award “off the top” invaded the tax lien by reducing the amount which would therein be recoverable by the Government. The portion of an interpleaded fund that is subject to a Government tax lien cannot be reduced by an award of attorney’s fees to the stakeholder for bringing the interpleader action.

We therefore vacate the judgment insofar as it decreases the sum otherwise available to the United States for satisfaction of its tax lien by the $500 attorney’s fees to the Spinkses and remand this cause to the District Court for further consideration in the light of this opinion.

Vacated and remanded.


author: GEE, Circuit Judge:

text:
    James HUNTER, Jr., Petitioner-Appellant, v. Louie L. WAINWRIGHT, Director, Division of Corrections, Respondent-Appellee.
    No. 74-1324
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 23, 1974.

      James Hunter, Jr., pro se.
    Andrew W. Lindsey, Asst. Atty. Gen., Tallahassee, Fla., for respondent-appellee.
    Before WISDOM, GOLDBERG and GEE, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5th Cir. 1970, 431 F.2d 409.

   GEE, Circuit Judge:

Hunter appeals from the district court’s denial of his petition for habeas corpus. On March 21, 1961, Hunter unrepresented by counsel pleaded guilty at arraignment on charges of robbery. On August 1, 1961, he appeared with counsel for trial before the state court. The guilty plea went unchanged and the result was twenty-five years imprisonment. Hunter took no direct appeal but he has exhausted state remedies in attacking the conviction. His attack in state and federal court focused on (1) lack of representation by counsel at arraignment, and (2) involuntariness of the guilty plea. Neither the state courts nor the federal district court conducted an evidentiary inquiry into Hunter’s allegations.

In Harris v. Wainwright, 406 F.2d 1 (5th Cir. 1969), the court discussed the constitutionality vel non of lack of counsel at arraignment in a Florida capital case. The same guidelines are appropriate in considering this serious felony conviction. The court stated the question as:

Whether (a) Florida’s arraignment procedure is such a critical stage of the criminal proceeding that (b) the lack of counsel during arraignment establishes a per se violation of constitutional rights without any showing of prejudice.

And the court concluded:

(a) it is a critical stage, unless (b) there has been no likelihood of prejudice, but (c) the burden of disproving likelihood of prejudice is on the State.

Harris, 406 F.2d at 2; Stanley v. Wainwright, 406 F.2d 8 (5th Cir. 1969).

The court below concluded that the arraignment was not a critical stage because Hunter had presented the argument (that denial of defense counsel at arraignment was harmful) to the state court and that court summarily decided the question against him. We conclude that the district court incorrectly shifted to Hunter the burden of showing likelihood of prejudice. The court stated that Hunter’s arraignment “without the assistance of counsel was not critical to the petitioner since sufficient opportunity has been afforded petitioner with subsequently provided counsel to demonstrate allegations of harm.” Hunter alleged that “he made known to his counsel prior to sentencing that he wished to withdraw his plea, and would prefer a jury trial, but was informed by counsel that since he- had pleaded guilty at the arraignment, there was nothing he could do.”

That allegation, if true, establishes the critical nature of arraignment to Hunter’s case. Even though not the general rule, for Hunter the uncounselled guilty plea at arraignment may have foreclosed any possible defense at trial. If on remand the court concludes as alleged that Hunter’s uncounselled arraignment guilty plea foreclosed a not guilty plea at trial then the arraignment was sufficiently critical to require assistance of counsel.

Should the court reach that conclusion, the next inquiry would be whether Hunter validly waived the right to counsel — a waiver the state must prove that Hunter made knowingly and intelligently. Goodwin v. Smith, 439 F.2d 1180 (5th Cir. 1971).

Secondly, Hunter complains that his guilty plea was involuntary. He alleges that the plea at arraignment was coerced by a threat and was not made knowingly and understandingly. The state and federal courts decided that because Boykin v. Alabama, 395 U.S. 238, 89 S.Ct. 1709, 23 L.Ed.2d 274 (1969), which requires the record to reflect the voluntary and understanding, nature of state court guilty pleas, was not retroactive Hunter was not entitled to relief. To the extent Hunter based his claim on Boykin, the district court was correct; however, the court failed to consider whether Hunter’s plea was involuntary in fact. On remand the court should allow Hunter an opportunity to prove his allegation. Hendry v. Henderson, 447 F.2d 983 (5th Cir. 1971).

In summary, we reverse and remand for an evidentiary hearing and a determination of Hunter’s claims in light of the discussion above.

Reversed and remanded.

      . If made, an apparent misrepresentation by . counsel, Sardinia v. Florida, 168 So.2d 674 (Fla.1964).

      . See, Dominguez v. Henderson, 447 F.2d 207 (5th Cir. 1971).


author: SIMPSON, Circuit Judge:

text:
    In the Matter of DIPLOMAT ELECTRIC, INC., Bankrupt. William G. MILLER, Jr., Morris C. Tucker, Richard H. Roth and Henry J. Prominski, also known as, Miller, Tucker, Roth & Prominski, and Joseph A. McGowan, Appellants, V. V. Radionoff, Trustee in Bankruptcy, Intervenor-Appellant, v. WESTINGHOUSE ELECTRIC SUPPLY COMPANY, a division of Westinghouse Electric Corporation, Appellee.
    No. 73-3027.
    United States Court of Appeals, Fifth Circuit.
    Aug. 12, 1974.
    Rehearing Denied Sept. 5, 1974.

      Joseph A. McGowan, Miami, Fla., for Miller and others.
    Henry J. Prominski, Pompano Beach, Fla., J. B. Booher, Fort Lauderdale, Fla., for Radionoff.
    Eugene C. Heiman, Richard E. Reek-son, Miami, Fla., for appellee.
    George A. Buchmann, Jr., Robert Rust, U. S. Atty., Miami, Fla., for other interested parties.
    Before BROWN, Chief Judge, and TUTTLE and SIMPSON, Circuit Judge.
   SIMPSON, Circuit Judge:

We consider two separate appeals from an order of the district court affirming rulings of a referee in Bankruptcy. Appellee Westinghouse Electric Supply Company (WESCO), a division of Westinghouse Electric Corporation, was a creditor of the bankrupt Diplomat Electric Inc. (Diplomat). In 1965 Diplomat sued WESCO in an unrelated action for defamation and ultimately obtained judgment for $200,000 which we afiirmed on appeal. Diplomat Electric, Inc. v. Westinghouse Electric Supply Co., 5 Cir. 1970, 430 F.2d 38. The firm of Miller, Tucker, Roth & Prominski and Joseph A. McGowan were counsel of record for Diplomat at various stages in the defamation litigation. While that suit was pending WESCO sued Diplomat for unpaid contract debts and reduced its claims to final judgments aggregating roughly $163,000. Thereafter, Diplomat filed for bankruptcy.

The district court below affirmed the referee’s determination that WESCO was entitled to set off its contractual judgment against its tort liability and pay Diplomat’s Trustee in Bankruptcy the remaining difference under Sec. 68 of the Bankruptcy Act The Trustee appeals that determination as an abuse of the discretion vested in the district court pursuant' to its equity jurisdiction. Counsel in the defamation suit also attack the validity of the set-off and, alternatively, the further finding that it should be superior to their asserted attorneys’ charging lien on the $200,000 judgment. We find neither abuse of discretion nor error demonstrated in the lower court’s disposition of the case, and affirm as to each appeal.

I

We set forth only so much of the involved procedural history of this case as is necessary to our disposition of the appeals before us.

In 1965 Diplomat retained the law firm of Miller, Tucker, Roth and Prominski (special counsel) to represent it in the defamation suit. The contract of employment was apparently oral. Under its terms special counsel were to receive as compensation 33%% of any agreed settlement, 40% of any final judgment following a trial, and 50% of an award affirmed on appeal. The three judgments obtained by WESCO against Diplomat during the pendency of the defamation action were for materials furnished to Diplomat as electrical subcontractor on different construction jobs. Attorney McGowan joined special counsel for Diplomat in 1968 under a written employment contract, which provided for 50% of any proceeds of the defamation action to be paid to counsel as a contingent fee. At this time WESCO’s claims for materials against Diplomat had been reduced to judgments, then outstanding and unpaid. Special counsel successfully prosecuted the defamation suit in district court and on appeal here, recovering, as related, a judgment for $200,000.

Shortly after this judgment in the district court for Diplomat, a voluntary petition in bankruptcy was filed in its behalf. Thereupon, WESCO filed a proof of claim with the referee with respect to its three judgments previously obtained against Diplomat. No mention -of the defamation judgment was made in the proof of claim. Instead, in the place provided, paragraph 7 of the claim: “That there are no set-offs or counterclaims to the same (except . . . .)”, WESCO’s scrivener placed a period after the word “same”, and left the remainder blank. WESCO, at that time, was in the process of perfecting its unsuccessful appeal from the $200,000 judgment. Diplomat’s Bankruptcy Trustee having acquired the right to that judgment, was obliged to defend it in the court of appeals. To this end, and with the permission of the district court, he retained McGowan’s services to represent him and Diplomat in the appeal.

Shortly after our affirmance of the defamation judgment, WESCO filed before the referee in Bankruptcy its “Petition to Confirm Off Set and to Resolve Conflicting Claims”, asserting therein the right to offset the $200,000 judgment against it by the approximately $163,000 Diplomat owed to WESCO on the three judgments arising from the supplying of electrical materials. The referee first ordered WESCO and its surety on supersedeas bond covering the appeal from the defamation judgment, Fidelity & Deposit Co. of Maryland (Fidelity) to pay the amount of the judgment to the Trustee. Therefore, by an order of May 20, 1971, the referee denied WESCO’s Petition to Confirm Off Set and further denied WESCO’s later filed motion to amend the proof of claim to include the asserted right of set-off. By order of June 15, 1971, the referee granted special counsel a charging lien against the defamation judgment and declined to find — in view of his previous determination that no right of set-off existed — whether or not that charging lien would be a superior lien to a valid set-off.

WESCO petitioned the district court for review of the referee’s denial of set-off. The district court by its order of August 19, 1971, remanded the case to the referee for further factual findings. The district court held that WESCO had demonstrated a right to set-off valid on its face and that it was up to the Bankruptcy Trustee to allege and prove any affirmative defenses to that right. Apparently in issue was the absence of proof as to whether WESCO’s insurer, Liberty Mutual Insurance Co. (Liberty Mutual) — which had furnished the defense to the defamation action — had paid to WESCO the amount of the Diplomat judgment against WESCO. The court made no determination that proof of payment would in fact constitute a valid affirmative defense, but found only that the proof was not demonstrated on the record before it.

Following further proceedings before him, the referee entered his final order on December 26, 1972. He found the existence of proof that Liberty Mutual had paid WESCO for its liability in the defamation action, but concluded that such payment was not an affirmative defense to a valid right of set-off. He then determined that WESCO did have a right of set-off and, finally, that it was superior to the charging lien of special counsel. This left counsel with the right to a lien only upon the net amount remaining after set-off, approximately $37,000. On petition for review this order was affirmed by the district court on June 14, 1973. The trustee and special counsel have each appealed therefrom to this court.

II

One question common to both appeals is the propriety of setting off under See. 68 of the Bankruptcy Act (note 2, supra) a debt arising from tort liability against a credit based on breach of contract. While all parties are aware that Sec. 68 does not distinguish between contractual and tortious debts, they recognize that courts have so distinguished them on occasion. The district court expressed its view in its memorandum opinion and order on the petition for review:

“Although the language of Sec. 68 seems mandatory, the cases uniformly hold that the right to a set-off is discretionary. See, e. g. First National Bank of Portland v. Dudley, 231 F.2d 396 (9th Cir. 1956). The principles and rules of equity jurisprudence guide the Court in the exercise of this discretion. Under the circumstances, the Court shares the opinion held by Collier that ‘the better view would seem to be that under Sec. 68 tort claims may be set off against contract, or vice versa’ so long as the claim asserted against the estate is provable under Sec. 63, as is WES-CO’s debt claim. 4 Collier on Bankruptcy, Sec. 68.04 at 879 (14th ed. 1969)”.

Neither appellant disputes that the right of set-off is governed by the discretion of the court and that the judgments in question were both claims provable in bankruptcy under Sec. 63 of the Act. Appellants’ argument then rests, as it must, on the assertion that the court abused its discretion under the facts of this case.

We review the lower court’s exercise of discretion mindful that it should not be disturbed in the absence of clear abuse. See, for example, Godfrey v. Powell, 5 Cir. 1947, 159 F.2d 330; Williamson v. Williams, 4 Cir. 1943, 137 F.2d 298. It is difficult to discern how a district judge’s choice between conflicting views on a particular point of law could ever be such an abuse, since there is authority for whichever side he takes. Appellants suggest that, in the case of intentional torts such an abuse obtains, and cite in support thereof only one applicable case. Brunswick Corp. v. Clements, 6 Cir. 1970, 424 F.2d 673. We do not find Brunswick controlling and reject appellants’ claim of discretionary abuse.

In Brunswick the plaintiff had sold the bankrupt, Olympic Lanes, Inc., bowling lanes and pinsetters on conditional sales contracts. Olympic defaulted on its payments to Brunswick and the latter brought replevin to recover its property. In the meantime, Brunswick moved into Olympic’s facilities and began running the business. In the replevin action Olympic conceded that it had defaulted in its obligation to pay, but counterclaimed for damages arising out of the conversion of personal property by Brunswick in the course of the take over. Olympic prevailed on the counterclaim, but was later adjudicated bankrupt. Brunswick sought by its proof of claim in the bankruptcy proceeding to set off its liability on the counterclaim against the debts owed it by Olympic. The Sixth Circuit on appeal reversed the allowance of set-off.

As noted in Brunsuñck, even Collier, who advocates set-off, acknowledges that the tort of conversion represents a well founded exception to the general rule. 4 Collier on Bankruptcy, Sec. 68.04 at 879-80, n. 50, 56 (14th ed. 1969). The rationale for the exception was outlined by the court in Brunswick as: “a creditor of a bankrupt should not be permitted to pay himself through the device of setoff by converting the bankrupt’s property, particularly at a time when he knows of the bankrupt’s insolvency.” Ibid, 424 F.2d at 676. That rationale is inapplicable here. WE SCO’s tort was in no sense a subterfuge for gaining priority over other creditors. There was not the slightest omen of impending bankruptcy when the defamation occurred, Diplomat concededly being solvent at that time and for years thereafter. The tort when committed bore no relationship to WESCO’s position as a creditor vis-a-vis other creditors.

It must be recognized then that the equitable policy considerations justifying denial of set-off of damages for conversion of the debtor’s property may not be applied indiscriminately to every instance of intentional tort. More specifically, such considerations clearly do not apply to this case. We hold that no abuse of discretion occurred when WESCO was allowed to set off its liability under the tort judgment against the judgments it held arising from breaches of the.bankrupt’s contractual obligation to pay for materials furnished.

Ill

As noted earlier, WESCO failed to include notice of its outstanding judgment liability to Diplomat as an off-set in its original proof of claim in the bankruptcy proceedings. But promptly upon this court’s affirmation of that liability, WESCO petitioned for a confirmation of the off-set and filed a motion to amend its proof of claim. Both requests were in the first instance denied by the referee but he granted the petition after the district court’s remand. The Trustee urges that the right of set-off was waived by virtue of WE SCO’s failure either to assert it originally in its proof of claim or to move to amend within the statutory six months time limitation after the first meeting of creditors under Sec. 57(n) of the Bankruptcy Act. The Trustee cites the general rule that a creditor who proves his claim in bankruptcy without asserting any right of set-off accruing to him, is deemed to have waived it. See, for instance, 4 Collier on Bankruptcy, 14th Ed., Sec. 68.07, pps. 888-890; 9 Am.Jur.2d, Bankruptcy, Sec. 521, pps. 403-404; In re Brockton Shoe Mfg. Co., Inc., (D.C.Mass., 1934) 8 F.Supp. 959; In re Mauch Chunk Brewing Co., supra; Annot. 143 A.L.R. 451.

The district court considered and then rejected this argument on the authority of Chassen v. United States, 2 Cir. 1953, 207 F.2d 83, cert. denied, 1954, 346 U.S. 923, 74 S.Ct. 309, 98 L.Ed. 416. There the United States had inadvertently omitted to claim a set-off to which it was entitled when filing a proof of claim in bankruptcy. As here, the claim form stated that there were “no set-offs or counterclaims”. The actual facts were not put forward by the government until many months after the expiration of the six months time limitation. The government then asked for permission to assert its right of set-off, and the Second Circuit held that it could do so. The action was termed “the equivalent of an amendment” and permissible since there had been no detrimental reliance on the omission by other creditors.

We consider that Chassen reached a sound result and approve its application to this case by the district court. Here, as in Chassen, no detriment to other creditors is suggested. Strangely, in view of the district court’s reliance on Chassen, neither appellant discussed the case in their briefs to this court. The district court also relied upon Chassen’s alternative ground that there could be no waiver in the absence of “intentional ' relinquishment of a known right.” Chassen v. United States, supra, 207 F.2d at 84 n. 3. WES-CO insists that it omitted the set-off from its proof of claim to avoid a judicial admission of liability on the judgment while its appeal therefrom was pending. The Trustee suggests, probably correctly, that this was clearly not an estoppel situation and that WESCO’s position in this respect is specious. Perhaps so, but nevertheless it was understandable that WESCO should refrain from making an admission which might later be construed as relevant to its appeal of the issue. Under these circumstances, what and all that WESCO intentionally relinquished was not its right of set-off, but only the putting of the result of its pending appeal in jeopardy. We do not conceive that waiver occurred under the circumstances here.

IV

Section 68(a) of the Bankruptcy Act (note 2, supra) specifically refers to set-off in the context of “all cases of mutual debts or mutual credits” and that phrase is usually interpreted to entail “mutuality” of both obligations and obligors as essential to application. Appellants suggest that such mutuality was absent in this case for two reasons. First, the obligations were not mutual because, while Diplomat alone owed WESCO on the judgments for the contractual debts, WESCO’s debt on the defamation judgment was joint and several with its surety, Fidelity, by virtue of the supersedeas bond posted on appeal. Second, the obligors were not mutual because Diplomat alone owed WES-CO, whereas WESCO was reimbursed by its insurer, Liberty Mutual, and was therefore not personally obligated to Diplomat.

We can say little in embellishment of the district court’s disposition of the first of these claims:

“The contention that obtaining a surety who becomes a joint obligor destroys mutuality is objectionable from a policy standpoint. The practice of posting supersedeas bonds permits an unhurried appellate resolution of questions raised on appeal and avoids irreparable harm to the appellant in the interim. It should not be undermined in the name of equity by engrafting this proposed restriction on the right to set-off.
“No cases on point are cited by the petitioners, as they rely instead on a more general discussion of the mutuality requirement. The many cases dealing with assignments are of course inapplicable. It would be inequitable to permit a creditor to assign his claim to another who can use it as a set-off. In this case, that problem does not exist. The judgment debt in question was owed by WESCO to Diplomat at the time of Diplomat’s petition. The supersedeas merely suspended operation of the judgment and prevented execution on it. The policy of Sec. 68 is in no way offended by permitting a set-off in such a situation.”

The courts have uniformly interpreted Section 68 of the Bankruptcy Act as did the court below whenever joint and several obligations have been urged as a bar to mutuality. See, e. g., In re Sherman Plastering Corp., 2 Cir. 1965, 346 F.2d 492; 4 Remington on Bankruptcy, Mutual Debts and Credits, Sec. 1465 Joint obligations; partnership debts (and cases there cited).

Appellants’ second claim with respect to a lack of mutuality of obligors by reason of WESCO’s being insured smacks of sophistry. As noted by the district court, “WESCO should not be penalized for its foresight in providing insurance.” We fail to find either policy or authority supportive of the proposition that WESCO could or did destroy the mutuality of its claim by the act of insuring against just such a contingency as occurred. In terms of plain logic, WESCO, not its insurer, was obligated to pay the judgment. Diplomat had no legal recourse against the insurer. We do not construe the presence of insurance as defeating the mutuality created by Diplomat’s judgment against WES-CO.

V

Special counsel were most assuredly entitled under Florida law, which we are Erie-bound to follow, to a charging lien for the services rendered in connection with the defamation suit. The final issue for our resolution is the priority of that lien vis-a-vis the set-off to which WESCO is entitled. If the charging lien is superior, appellants will receive a percentage of the full $200,000 judgment; otherwise, they may only share in the net remaining after set-off, as the district court held.

The district court resolved the issue thusly:

“There is no statutory provision for charging liens in Florida, so they are governed by common law principles
“The briefs illuminate the split of authority on this question. Florida courts have not spoken to the point since 1855. In Carter v. Bennett, 6 Fla. 214 (1855), the Supreme Court adopted as its guide:
‘The doctrine of the Courts of Chancery in England, as laid down in Ex parte Rhodes, 15 ves. 541 by Lord Eldon, that the right of set-off prevails in general cases, so as to interfere with the Solicitors lien upon the debt recovered . . . . ’ Id. at 258. .
“This statement is in accord with a line of eases from other jurisdictions where the charging lien is held to be superior to set-offs acquired subsequent to the attachment of the lien, but inferior to pre-existing judgments

The district court thus concluded that Florida follows the common law rule which distinguishes pre-existing and after-acquired judgments when considering the priority between set-offs and charging liens. Further authority cited was Lewis v. Railroad Retirement Board, 1951, 256 Ala. 930, 54 So.2d 777, cert. denied 1952, 343 U.S. 919, 72 S.Ct. 677, 96 L.Ed. 1333; United States F. & G. v. Levy, 5 Cir. 1935, 77 F.2d 972.

We agree with the district court. Florida has no statute fixing priorities in this situation so we look to common law. Nichols v. Kroelinger, Fla.1950, 46 So.2d 722, 724. The district court correctly assessed the status of the common law, and the fact that the contractual judgments preceded the defamation judgment gives superiority over the charging lien to WESCO’s right of set-off.

The judgment appealed from was correct.

Affirmed.

      . Diplomat’s defamation action was originally disposed of in the lower court by a summary judgment in WESCO’s favor. We reversed, Diplomat Electric, Inc. v. Westinghouse Electric Supply Co., 5 Cir. 1967, 378 F.2d 377. After remand Diplomat recovered judgment for $200,000 and WESCO appealed. As the text indicates, we affirmed the judgment at 430 F.2d 38. This brief recital should account for the time-consuming nature of that litigation.

      . Sec. 68 of the Bankruptcy Act, Title 11, U.S.O., Sec. 108, provides, in pertinent part:
      “a. In all cases of mutual debts or mutual credits between the estate of a bankrupt ánd a creditor the account shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid.”

      . Of course, even if we found Brunsioich to be apposite, it would not) necessarily control our decision.

      . The first meeting of creditors in the Diplomat bankruptcy was held June 6, 1969, so that the statutory time limit expired December 6, 1969. The petition to confirm the set-off. was filed September 3, 1970, and the motion to amend the claim followed on December 18, 1970.

      . Worley v. Phillips, Fla.App.1972, 264 So.2d 42; 3 Fla.Jur., Attorneys at Law, Sec. 73; Winn v. City of Cocoa, Fla.1954, 75 So.2d 909; Carter v. Davis, 1858, 8 Fla. 183; Carter v. Bennett, 1855, 6 Fla. 214; Randall v. Archer, 1854, 5 Fla. 438.
      See also, Chancey v. Bauer, 5 Cir. 1938, 97 F.2d 293: Webster v. Sweat, 5 Cir. 1933, 65 F.2d 109; L. Bucki & Son Lumber Co. v. Atlantic Lumber Co., S.D.Fla.1904, 128 F. 332.

      . In addition to the authorities cited in the text, see 7 Am.Jur.2d Attorneys at Law, ' Sec. 289-90, Priority of lien; 34 A.L.R. 323, supplemented by 51 A.L.R. 1268, and cases cited therein. The cases cited by appellant are neither factually apposite to the case at bar, nor inconsistent with the estimate of the common law distilled from the above authorities : i. e. a pre-existing judgment is superior to a charging lien on a later acquired judgment.


author: INGRAHAM, Circuit Judge:

text:
    SAN ANTONIO TELEPHONE CO., INC., INC., Northeastern Telephone Co., Gulf Telephone & Electronics, Inc., El Paso Telephone Co., on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. AMERICAN TELEPHONE & TELEGRAPH COMPANY et al., Defendants-Appellees.
    No. 73-4037.
    United States Court of Appeals, Fifth Circuit.
    Aug. 23, 1974.

      Philip E. McCleery, Joel W. West-brook, J. Robert Sheehy, Waco, Tex., for plaintiffs-appellants.
    J. Burleson Smith, Brice A. Tondre, San Antonio, Tex., for American Tel.
    Hubert W. Green, Jr.; San Antonio, Tex., for American Tel. and others.
    Hugh L. Steger, John K. Delay, Jr., Dallas, Tex., for Western Elect.
    Before BELL, GODBOLD and IN-GRAHAM, Circuit Judges.
   INGRAHAM, Circuit Judge:

The only question presented in this private antitrust litigation is whether venue lies in the Western District of Texas. The appellants are engaged in selling and installing telephone equipment in places like hotels, while the appellees are twenty-two telephone operating companies that are physically located in distant portions of the United States. The district court concluded that venue was improper with regard to the twenty-two operating companies and dismissed the complaint under Rule 12(b), F.R.C.P., as to them. We affirm.

Appellants present principally two arguments to support their contention that venue lies in the Western District of Texas. First, in accordance with the terms of § 12 of the Clayton Act, the twenty-two operating companies, appellants contend, transact business within the Western District. While these companies maintain no facilities or personnel in Texas, appellants argue that the interconnection of the communications network, coupled with a division among the companies of revenues obtained from long distance communications, eonstitutes the transaction of business within that district.

In deciding whether a corporation transacts business within a judicial district, the Supreme Court has defined that term more specifically to mean conducting business in the “ordinary and usual sense.” Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 47 S.Ct. 400, 71 L.Ed. 684 (1927); see United States v. Scophony Corp., 333 U.S. 795, 68 S.Ct. 855, 92 L.Ed. 1091 (1948). Like the district court, we believe that interconnection of the network, even coupled with the division of revenues, is too tenuous a connection with the Western District of Texas to constitute transacting business in the ordinary and usual sense.

Second, appellants argue that the twenty-two operating companies are merely a part of the larger organization of American Telephone & Telegraph Company, and since venue is proper for AT & T in the Western District, venue is also proper for the operating companies. While it is true that venue may be established through a relationship between corporations when they in effect comprise a single entity, Fisher Baking Co. v. Continental Baking Corp., 238 F.Supp. 322 (D.Utah, 1965), the evidence in this case does not demonstrate such a total disregard for the separate corporate entities. Rather it appears that, while AT & T may dictate general policies of the operating companies, the daily business affairs are the responsibility of the different companies. See O. S. C. Corp. v. Toshiba America, Inc., 491 F.2d 1064 (9th Cir., 1974).

Affirmed.

      . As outlined by the district court, the twenty-two operating companies are as follows:
      “New England Telephone and Telegraph Company, New York Telephone Company, New Jersey Bell Telephone Company, The Bell Telephone Company of Pennsylvania, The Diamond State Telephone Company, The Chesapeake and Potomac Telephone Company, The Chesapeake and Potomac Telephone Company of Maryland, The Chesapeake and Potomac Telephone Company of Virginia, The Chesapeake and Potomac Telephone Company of West Virginia, Southern Bell Telephone and Telegraph Company, South Central Bell Telephone Company, The Ohio Bell Telephone Company, Michigan Bell Telephone Company, Indiana Bell Telephone Company, Wiseonsin Telephone Company, Illinois Bell Telephone Company, Northwestern Bell Telephone Company, Pacific Northwest Bell Telephone Company, The Pacific Telephone and Telegraph Company, The Southern New England Telephone Company, The Cincinnati and Suburban Bell Telephone Company (now Cincinnati Bell, Inc.), all of which are associated operating companies of the Bell System, and The Woodbury Telephone Company.”

      . Four other defendants were named in the complaint, American Telephone & Telegraph Company, Southwestern Bell Telephone Company, Mountain States Telephone & Telegraph Company and Western Electric Company, Inc., but these parties have not challenged venue.

      . Appellants also argue that, under Giusti v. Pyrotechnic Industries, 156 F.2d 351 (9th Cir., 1946), a corporation can be regarded as transacting business in a district in which a conspiracy in violation of the anti-trust laws has had an effect. See 1 J. Moore, Federal Practice, ¶ 0.144 [15] (1974). As pointed out by the district court, however, the conspiracy theory for establishing venue generally has been rejected. See e. g. Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 74 S.Ct. 145, 98 L.Ed. 106 (1953). While Mr. Justice Clark, writing for the majority in Holland, briefly recognized petitioner’s argument that venue was established as a result of defendant’s involvement in the conspiracy, Mr. Justice Frankfurter in dissent elaborated on this point as follows;
      “If we now had to decide whether a co-conspirator as such is an ‘agent’ for purposes of venue under 15 U.S.C. § 15, it cannot be doubted that we would have to conclude that the district judge was right in finding that the Georgia Commissioner could not be kept in the suit. Once it is clear that the Georgia defendant has the right to be let out, all discussion of the limits of mandamus becomes irrelevant and gratuitous. Obviously a judge cannot be mandamused to put a proposed defendant into a litigation when as a matter of unquestioned law he should be let out.”

        Id. at 386, 74 S.Ct. at 150; H. L. Moore Drug Exchange, Inc. v. Smith, Kline & French Laboratories, 384 F.2d 97 (2nd Cir., 1967); West Virginia v. Morton International, Inc., 264 F.Supp. 689 (D.Minn., 1967).

      . Section 12, codified at 15 U.S.C. § 22 (1970), provides in full as follows :
      Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.

      . Appellants also attempt to show that appellees transact business in Texas because of the nationwide advertising campaign conducted by the defendants in conjunction with AT & T. The evidence, however, demonstrates that the only nationwide advertising done by AT & T pertains to long distance communications. Any other advertising is done by the operating company and only in the locality where the particular operating company conducts its business. As noted by the district court, “national advertising which finds its way into a particular jurisdiction is insufficient to support a finding of transaction of business.” Albert Levine Assoc. v. Bertoni & Cotti, 309 F.Supp. 456 (S.D.N.Y., 1970).