author: CELEBREZZE, Circuit Judge.

text:
    AKRON NATIONAL BANK AND TRUST COMPANY, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
    No. 74-1612.
    United States Court of Appeals, Sixth Circuit.
    Feb. 18, 1975.

      Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Michael Paup, Ann Belanger Durney, Tax Div.-Dept. of Justice, Washington, D. C., Frederick M. Coleman, U. S. Atty., Cleveland, Ohio, for defendant-appellant.
    John M. Glenn, Buckingham, Doolittle & Burroughs, Sam D. Bartlo, Akron, Ohio, for plaintiff-appellee.
    Before CELEBREZZE and LIVELY, Circuit Judges, and O’SULLIVAN, Senior Circuit Judge.
   CELEBREZZE, Circuit Judge.

This appeal presents the question whether certain funds should have been added to Appellee Bank’s bad debt reserve for the purpose of calculating its 1968 deduction under section 166(c), Int. Rev.Code of 1954, 26 U.S.C. § 166(c) (1967). The Commissioner of Internal Revenue determined that funds undisbursed under construction loan agreements as of December 31, 1968 should not have been included within Appellee’s 1968 base of outstanding loans, used to calculate its bad debt reserve for .that year. The District Court disagreed and ordered a refund.

This dispute involves a number of construction mortgage loans signed in 1968, under which portions of the borrowed funds were not disbursed by Appellee until 1969. Each construction loan began with the approval of the Borrower’s mortgage loan, followed by the execution of a Loan Agreement. Thereafter, the Borrower executed a Mortgage Note for the face amount of the loan and a Mortgage Deed securing the note. At this point funds were not disbursed to the Borrower. Rather, the Loan Agreement governed disbursement.

The Loan Agreement required the Borrower to construct buildings on the mortgaged land according to submitted plans, with changes to be permitted only with the Bank’s consent. The Bank held the loan proceeds in a “Due to Borrower” account and did not pay out funds until presented with vouchers “payable to subcontractors, contractors, and materialmen only” and until “the services and/or materials for which they have been given have been actually installed or completed.” The Bank agreed to check for defects in materials and services under the construction contract. Most significantly for the question before us, the following provisions appear in the Loan Agreement:

5. Borrower agrees that in the event:
(a) There has been any improvement made on the premises at the time when the mortgage is filed with the Recorder;
(b) There is any breach of any of the terms or conditions of this agreement or of the mortgage deed or the promissory note referred to above;
(c) There are any false representations made by Borrower to Bank;
(d) Any voucher is submitted at any time which Borrower knows has not been earned by performance by the payee for materials or for services used in or furnished for the building^) on the aforementioned land;
(e) Any cessation occurs at any time in construction of the building(s) for more than one week except for strikes, riots, or other causes beyond Borrower’s control or any substantial change is made in construction thereof from that provided by plans or changes in plans as approved by Bank in writing;
(f) The cost to complete said building(s) as estimated by Bank in good faith at any time appears likely to exceed the balance of funds retained by it in Borrower’s special account after deducting from the amount thereof the total of unpaid vouchers outstanding;
(g) Borrower is adjudged bankrupt, suffers the appointment of a receiver, files a petition junder Chapter XI of the Bankruptcy Act, or
(h) Borrower requests a termination of the loan, or confesses inability to continue construction,

Then, Bank may immediately and without notice declare the loan and mortgage deed securing such loan to be in default, apply all sums remaining in Borrower’s special account to the principal amount of the mortgage indebtedness, and accelerate the balance remaining for payment immediately.

Failure of Bank to assert a default shall not be deemed a waiver of its right to do so at any time thereafter.

6. This Agreement inures only to the benefit of the Bank and Borrower and to no other persons. In particular, failure of the Bank to pay any vouchers submitted for payment of services and/or materials for sub-contractors, materialmen, and/or contractors, shall not give rise to any action or claim on their behalf under this agreement or otherwise.

Thus, the Borrower did not have complete control of funds which the Bank had agreed to lend the Borrower upon the signing of the mortgage. The funds remained in the Bank and did not constitute property rights of contractors or others until actually disbursed. If an event specified in term (5) of the Loan Agreement occurred, the undisbursed funds could have been retained by the Bank and applied to reduce the principal amount of the Borrower’s debt.

For 1968 Appellee reported a bad debt deduction on its federal income tax return under the procedure set forth in Revenue Ruling 65 — 92, 1965-1 Cum. Bull. 112. This ruling clarified the option available to banks which chose to deduct for bad debts under section 166(c), Int.Rev.Code of 1954. Rather than having to take a deduction for bad debts in the years they became worthless under section 166(a), banks were allowed to deduct the amount necessary to maintain a reserve for bad debts at 2.4 percent of their total “outstanding loans” at the end of each taxable year.

In 1968 Appellee made an addition to its bad debt reserve of $432,661.99 and claimed this as a deduction. Included within the base of “outstanding loans” used to calculate this figure was the total amount of construction mortgage loans signed and outstanding as of December 31, 1968, including funds retained by the Bank in “Due to Borrowers” accounts.

The Commissioner of Internal Revenue determined that the funds remaining in “Due to Borrowers” accounts on December 31, 1968, should not have been considered in computing the base of “outstanding loans”. Thus, the Commissioner reduced the amount of “outstanding loans” by $1,723,791.29, disallowed $41,-370.99 of Appellee’s reported addition to its bad debt reserve (and, accordingly, the same amount of its bad debt deduction), and assessed a deficiency of $21,-843.88 for 1968. Appellee paid the deficiency, plus interest, filed an unsuccessful refund claim, and then sued for a refund.

The District Court, upon consideration of factual stipulations, briefs, and the testimony of two of Appellee’s officials, determined that the entire amount of funds committed under construction mortgage loan agreements outstanding as of December 31, 1968 was includable in the base of loans outstanding at the end of Appellee’s 1968 taxable year. It ordered Appellant to refund $23,882.15, the amount paid by Appellee to cover the deficiency, plus interest.

The basic question for decision is whether the Commissioner’s determination of an allowable addition to Appellee’s bad debt reserve for 1968 was reasonable. Paramount Finance Co. v. United States, 304 F.2d 460, 464, 157 Ct.Cl. 824 (1962). When a bank elects to report its bad debt deductions by the reserve method, it subjects itself to the reasonable discretion of the Commissioner in limiting annual additions to its reserve for bad debts, under section 166(c), which provides: “In lieu of any deduction under subsection (a), there shall be allowed (in the discretion of the Secretary or his delegate) a deduction for a reasonable addition to a reserve for bad debts.”

This section “gives the Commissioner of Internal Revenue great discretion.” Central Bank Co. v. Commissioner, 329 F.2d 581 (6th Cir. 1964). In exercising his discretion, the Commissioner promulgated Revenue Ruling 68 — 630, 1968 — 2 Cum.Bull. 84, which clarified what was includable within the base of “outstanding loans”, for the purpose of computing an addition to a bank’s bad debt reserve. “Cash collateral” was not to be includable:

Sec. 4. Cash Collateral.
Revenue Ruling 63 — 122, C.B. 1963 — 2, 98, holds, in part, that for the purpose of computing reasonable annual additions to its reserve for bad debts a bank is required to decrease the face amount of installment loans outstanding by the amount of any so-called “hold back” accounts related to such installment loans. As described in that ruling “hold back” accounts are in the nature of guarantee deposits left with the bank by dealers discounting installment paper. Revenue Ruling 63 — 122 also is applicable to the extent that a lending bank has collected and retained cash derived from collateral pledged to the bank and to the extent that loan payments made by a borrower are maintained in a separate account and are not immediately credited to the outstanding loan balance.
The underlying concept behind Revenue Ruling 63 — 122 is applicable to other situations in which a lending bank has rights in specific cash items or cash balances under its control such as when a lending bank receives collateral in the nature of cash on deposit in the lending bank that is represented by a passbook, certificate of deposit, or other similar instrument.
An outstanding loan otherwise eligible for inclusion in the loan base is not affected by the fact that a borrower is required, by virtue of an arrangement with the lending bank, to maintain a minimum, average, or compensating balance in a demand deposit account within the lending bank while the loan is outstanding. An overdraft in one or more deposit accounts of a customer is an outstanding loan eligible for inclusion in the loan base whether or not other deposit accounts of the same customer have balances in excess of the overdraft.
Loans secured by collateral such as passbooks, certificates of deposit, or other similar instruments representing cash on deposit in a bank (as defined in section 581 of the Code) or in a branch or agency of a foreign bank engaged in the banking business in the United States that may be entitled to compute the addition to its reserve for bad debts under Revenue Ruling 65 — 92 (see Revenue Ruling 68 — 524), other than the lending bank, must be excluded from the loan base to the extent that the lending bank may control withdrawal of such cash deposits. These principles do not apply to collateral representing sums held by non-banking institutions.

The District Court reasoned that each of the construction loans was eventually completed and “became a conventional real estate mortgage loan.” It found that if a borrower were to default on a construction loan, as a practical matter the Bank would “under most circumstances be compelled to assume the responsibility of completing the construction with the undisbursed funds.” Since the undisbursed funds were effectively committed to completing the construction “once disbursement of funds begins, [t]he undisbursed construction loan funds in the due to borrowers’ account are not equivalent to cash collateral, and do involve a risk of loss.”

The question before us is not whether this view of section 166(c) and Revenue Ruling 68 — 630 is reasonable. Rather as stated above, it is whether the Commissioner’s view is reasonable. As the Court stated in Paramount Finance Co. v. United States, 304 F.2d 460, 464, 157 Ct.Cl. 824 (1962):

Certainly the plaintiff has shown that the method it used in determining the amount to be added to its bad debt reserve was reasonable, but this is irrelevant. It does not follow that if the plaintiff was reasonable in its determination the defendant was unreasonable.

See also Dixie Furniture Co. v. Commissioner, 390 F.2d 139, 141-42 (8th Cir. 1968); American State Bank v. United States, 279 F.2d 585, 589 (7th Cir.), cert. denied, 364 U.S. 881, 81 S.Ct. 170, 5 L.Ed.2d 103 (1960).

The Commissioner determined that funds undisbursed from construction loan “Due to Borrowers” accounts were not includable within the total of “loans outstanding.” We are convinced that this determination was reasonable and was not an abuse of the Commissioner’s discretion under section 166(c).

Under each Loan Agreement, the Borrower agreed that if any of eight events (including default) occurred, the “Bank may immediately and without notice apply all sums remaining in Borrower’s special account to the principal amount of the mortgage indebtedness. . . . ” The undisputed testimony of Appellee’s vice president in charge of mortgage loans shows that the Bank understood this provision to give the undisbursed funds the status of cash collateral:

THE COURT: Well, you use your own terms. Under what circumstances would the contract not be completed and money be left in that account?
THE WITNESS: Where the borrower would be insolvent and the loan would go in default with no hope of repayment. Then we would have the legal right at that point to use that money as a cash collateral offset.

The Bank’s loans were secured in cash to the extent of the undisbursed funds.

The District Court rejected the reasonableness of the Commissioner’s position by concluding that the construction loan agreements were “indivisible.” While it may be true as a practical matter that the “loan funds move[d] continually towards a condition of full distribution,” on December 31, 1968 a significant portion had not been distributed and did represent “cash collateral.” The loan agreements were legally divisible in time. Even for an accrual taxpayer such as Appellee, “A liability does not accrue within a given taxable year unless the final event which fixes the amount and determines the liability of the taxpayer to pay occurs within that year.” Fourth Ave. Amusement Co. v. Glenn, 201 F.2d 600, 605 (6th Cir. 1953). See also Loewi & Co. v. Commissioner, 232 F.2d 621, 624 — 25 (7th Cir. 1956); Milton Bradley Co. v. United States, 146 F.2d 541 (1st Cir. 1944). The undisbursed funds did not lose their character as cash collateral until disbursed in 1969, and any bad debt deduction was properly taken only in that year.

A different case might be presented if the undisbursed funds were completely within the borrowers’ control and were merely held by the Bank in a checking deposit or savings account. See, e. g., First Trust & Savings Bank of Davenport v. United States, 301 F.Supp. 194, 197 (S.D.Iowa 1969), where “once the [Bank] credits the special account in a customer’s name, the funds are immediately available for disbursement on the order of the borrower, and the [Bank] exercises no control over said funds, other than to retain physical possession thereof within the confines of the bank.” But here the Bank retained the right to apply undisbursed funds against the principal indebtedness of defaulting borrowers.

A contrary holding would require the Commissioner to make a factual inquiry into the probabilities that funds with the legal status of cash collateral are risked as a practical matter when a loan agreement is signed, and should therefore not be treated as cash collateral. Such inquiry, taking an “all-or-nothing” view of each loan agreement, is not required. First American National Bank of Nashville v. United States, 327 F.Supp. 675 (M.D.Tenn. Feb. 16, 1971). See also Rev. Rui. 63-122, 1963-2 Cum. Bull. 98. Cf. Welch v. Helvering, 290 U.S. 111, 54 S.Ct. 8, 78 L.Ed. 212 (1933).

We hold that the Commissioner reasonably determined, within his discretion, that construction mortgage loan funds undisbursed as of December 31, 1968, should not have been included in Appellee’s base of outstanding loans when computing the 1968 addition to its bad debt reserve.

Accordingly, the judgment of the District Court is reversed, and the cause is remanded for entry of an appropriate order.

      . In 1968 Appellee reported its income on the calendar year and accrual basis.

      . The Tax Reform Act of 1969 deprived banks of this option through the enactment of section 585, effective for taxable years beginning after July 11, 1969, § 431(d), 83 Stat. 618 (1969).


source: Caselaw Access Project

author: MERRILL, Circuit Judge:

license: Public Domain

text:
    Helen SMITH and Herman Smith, Plaintiffs-Appellants, v. Tianna STECHEL et al., Defendants-Appellees.
    No. 72-1846.
    United States Court of Appeals, Ninth Circuit.
    Feb. 3, 1975.

      Lowell Johnston (argued), San Francisco, Cal., for plaintiffs-appellants.
    Peter W. Davis, Oakland, Cal. (argued), of Grubb & Ellis Co. & Price, for defendants-appellees.
   OPINION

Before MERRILL, HUFSTEDLER and TRASK, Circuit Judges.

MERRILL, Circuit Judge:

The plaintiffs in this civil rights action appeal from a judgment of the district court dismissing the action. Their complaint, which was filed on December 7, 1971, alleged that they were hired by appellee Grubb & Ellis, as agent for appellee Stechel, to manage an apartment complex of seventy-three units located in Oakland, California, and owned by Stechel; that they were fired on September 10, 1970, by appellee Price, an employee of Grubb & Ellis, for renting apartments to blacks and Mexican-Americans. They asserted that this constituted a violation of rights granted, among other sections, by 42 U.S.C. §§ 1981 and 1982, and §§ 810, 812, and 817 of Title VIII of the 1968 Civil Rights Act, 42 U.S.C. §§ 3610, 3612, and 3617, with jurisdiction conferred by 28 U.S.C. § 1343(4).

The district court ruled that the allegations were insufficient to state a claim of violation of rights conferred by §§ 1981 or 1982, and that any rights bestowed by Title VIII were barred by limitation. Both rulings are assigned as error. We hold that the court erred in holding the claim under Title VIII barred by limitation. Accordingly, we do not reach the questions presented by the ruling as to §§ 1981 and 1982.

Title VIII provides, in 42 U.S.C. §§ 3604, 3605 and 3606, that certain discrimination on the basis of race, color, religion or national origin in the renting of dwellings and in the provision of financing and brokerage services shall be unlawful. Section 3602(f) provides: “ ‘Discriminatory housing-practice’ means an act that is unlawful under section 3604, 3605, or 3606 of this title.”

The limitations held to be applicable by the district court were those set forth in 42 U.S.C. §§ 3610 and 3612(a). The latter provides immediate access to the courts by civil action brought “within one hundred and eighty days after the alleged discriminatory housing practice occurred * * Section 3610 provides procedures for remedying discriminatory housing practices with the assistance of the Secretary of Housing and Urban Development in efforts to obtain voluntary compliance with the Act, with times specified within which each specified step may be taken. There would seem to be no question that suit here was not brought within the time provided by these two sections.

However, on the facts before us, these are not the applicable sections. Section 3617 is the section applicable to the facts of this case. It provides as follows:

“It shall be unlawful to coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of, or on account of his having exercised or enjoyed, or on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by section 3603, 3604, 3605, or 3606 of this title. This section may be enforced by appropriate civil action.”

This section is not expressly brought within the limitation provisions of §§ 3610 or 3612 by the language of those sections. They refer only to cases of discriminatory housing projects as defined in §§ 3604, 3605 and 3606.

The district court ruled that in absence of any contrary provision respecting limitations, the most appropriate period applicable to § 3617 would be that applicable to claims arising under the sections to which it makes reference. We disagree.

Section 3617 does not necessarily deal with a discriminatory housing practice, or with the landlord, financer or brokerage service guilty of such practice. It deals with a situation where no discriminatory housing practice may have occurred at all because the would-be tenant has been discouraged from asserting his rights, or because the rights have actually been respected by persons ■ who suffer consequent retaliation. It also deals with situations in which the fundamental inequity of a discriminatory housing practice is compounded by coercion, intimidation, threat or interference.

In such cases the functions assigned to HUD in order to seek to obtain voluntary compliance will not assume the significance they have in cases involving discriminatory housing practices. Further, the importance of unusual promptness in resolving disputes concerning rights to Housing does not exist where the grievance is not the loss or lack of housing but is, instead, injury resulting from wrongful interference or retaliation.

Finally, § 3617 could very simply have been brought expressly within the limitation period provided by § 3610 or § 3612. Congress seems designedly to have refrained from doing so. The concluding sentence of § 3617, “This section may be enforced by appropriate civil action” to us seems to say that that “appropriate civil action” can be brought within the time generally applicable to such action.

Reversed and remanded with instructions that judgment be vacated and for further proceedings.


author: WEICK, Circuit Judge. EDWARDS, Circuit Judge

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner-Appellant, v. KILGORE CORPORATION, Respondent-Appellee.
    No. 74-1506.
    United States Court of Appeals, Sixth Circuit.
    Argued and Submitted Dec. 2, 1974.
    Decided Feb. 13, 1975.
    Elliot Moore, Deputy Associate Gen. Counsel, N. L. R. B., Washington, D. C., Peter Nash, John Irving, Patrick Hardin, John Burgoyne, Corinna Metcalf, Frank C. Morris, Jr., John J. A. Reynolds, Jr., Director, Region 26, N. L. R. B., Memphis, Tenn., for petitioner-appellant.
    Richard A. Brackhahn, Bowling, Brackhahn & Jackson, Yelverton Cowherd, Jr., Memphis, Tenn., for respondent-appellee.
    Before WEICK, EDWARDS and PECK, Circuit Judges.
   WEICK, Circuit Judge.

The National Labor Relations Board has petitioned this Court, .pursuant to Section 10(e) of the National Labor Relations Act as amended, 29 U.S.C. § 160(e), for enforcement of its bargaining order issued against the Kilgore Corporation. Kilgore Corporation (Kilgore) has cross-petitioned to have the order reviewed and set aside. The Board’s Decision and Order are reported at 209 NLRB No. 134.

The Decision and Order, which granted the General Counsel’s motion for summary judgment, found that Kilgore violated Sections 8(a)(5) and (1) of the Act by refusing to bargain with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) as the certified collective bargaining representative of employees in the appropriate unit at Kilgore’s plant in Toone, Tennessee. The Order required Kilgore to cease and desist from the unfair labor practice found, and similar violations of the employees’ Section 7 rights, and, affirmatively, to bargain with UAW on request and to post appropriate notices.

UAW was certified after it won a rerun election ordered by the Board. The refusal to bargain is Kilgore’s vehicle for obtaining review by this Court of the Board’s decision setting aside the first election (which election the UAW lost) and ordering the rerun election.

Concerning the first election the Board held that Kilgore destroyed the “laboratory conditions” for a fair and free election by not posting the official NLRB notice of election in the proper places and far enough in advance of the election. The Board’s decision in the underlying representation proceeding is reported at 203 NLRB No. 28.

Kilgore is engaged in the manufacture and distribution of pyrotechnic products in Toone, Tennessee. Its employees are scattered throughout approximately sixty buildings, approximately seventy per cent of the employees being located in three of the buildings; however, Kilgore has one cafeteria which is used by all employees, for lunch and for daily breaks.

UAW filed its representation petition on February 24, 1972. The Board’s Regional Director issued a Decision and Direction of Election on April 14, 1972, which excluded “over-the-road truckdrivers” from the appropriate unit. Kilgore filed with the Board a timely request for review, objecting to the exclusion from the unit of the over-the-road truckdrivers.

On April 27, 1972 the Acting Regional Director sent a letter to Kilgore, enclosing ten copies of the official NLRB notice of election. The letter stated in part:

Please immediately post the notices at conspicuous and usual posting places easily accessible to the voters.

The notice set out the date, time, place of polling, eligibility requirements, the employees included in and excluded from the voting unit, examples of conduct which may result in the setting aside of the election, and a summary statement of employee rights under the National Labor Relations Act.

The election was set for Thursday, May 11, 1972 to begin at two o’clock p. m., in the cafeteria. In accord with the Regional Director’s unit determination the notice expressly excluded over-the-road truckdrivers from the unit.

The Board denied Kilgore’s request for review of the unit determination, on Friday, May 5, 1972.

On Monday or Tuesday, May 8 or 9, 1972 Kilgore posted a notice in its main personnel office. All of the other official government notices, including the wage and hour notice and the notice required by the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance, were posted on the bulletin board in the personnel office. However, Kilgore’s president testified:

As a matter of a routine workday the employees would not come into this office, but they do visit the office on personal matters. (A. 72)

On Wednesday, May 10, 1972 at 6:30 a. m., Kilgore posted a second notice of election in the cafeteria where the polling was scheduled for the following day. When a Board agent, named Kirby, contacted Kilgore’s attorney, on May 10th, regarding a report by UAW that no notice had been posted, the attorney advised Kirby, the Board agent, that the notices had been posted in the personnel office and in the cafeteria. These were the places that notices had been posted in the two previous elections conducted by the Board. Kilgore’s attorney offered to postpone the election for one week if the notice-posting had created any problem, but Kirby replied in the negative as to postponement of the election.

Kirby told Kilgore’s attorney that he had raised the possibility of rescheduling the election, with the union’s representatives, and that they had declined, and they advised Kirby that they wished to proceed with the election as scheduled.

The election was held on May 11, 1972 at 2:00 p. m. The tally sheet reveals approximately 272 eligible voters. The employer stated, and the Board assumed, that three persons on the eligibility list left Kilgore’s employ before the election.

The election resulted in 132 votes for UAW, 132 votes against UAW, one void ballot, and four challenged ballots. The Regional Director sustained two of the challenges, and overruled two challenges. One of the overruled challenges was a vote against UAW, and, because the other vote would not change the outcome of the election, it was not opened. Not counting the void ballot, 98.8% of the eligible voters participated in the election.

UAW subsequently filed fourteen objections to the election. All objections, except the objection pertaining to the posting of the election notices, were eventually overruled or withdrawn, and a new election was ordered.

The rerun election ordered by the Board was held on May 24, 1973. Of approximately 241 eligible voters, 130 cast votes for UAW, 83 cast votes against UAW, with ten challenged ballots. Counting the challenged ballots, 92.5% of the eligible voters participated in the rerun election.

It is noteworthy that a higher percentage of eligible voters participated in the first election than in the rerun election.

The sole issue in this case is whether the Board acted within its discretion in setting aside the first election and ordering the rerun election.

The Board has wide degree of discretion in conducting and supervising representation elections, to the end of insuring that such elections are conducted fairly and that the results reflect the free choice of a majority of employees in the appropriate unit. NLRB v. A. J. Tower Co., 329 U.S. 324, 330, 67 S.Ct. 324, 91 L.Ed. 322 (1946). This Court will set aside the Board’s determination only if it has acted arbitrarily and abused its discretion. NLRB v. Dean Foods Co., 421 F.2d 664 (6th Cir. 1970), cert. denied, 398 U.S. 939, 90 S.Ct. 1843, 26 L.Ed.2d 271.

After considering the record as a whole, we conclude that the Board has acted arbitrarily and has abused its discretion. We deny enforcement of its order.

The Board based its decision in the underlying representation case entirely on the times and places the two notices were posted, and the fact that Kilgore’s operations at its Toone, Tennessee plant are conducted in many separate buildings. The. Board held that because of the manner in which the notices were posted the employees were not sufficiently advised of the time, date, location of polling, eligibility for voting, and their rights under the National Labor Relations Act; that the employees were unable to discuss election issues “so that they might come to a reasoned decision by the date of the election;” and that thereby the laboratory conditions necessary for a fair election were destroyed.

In General Shoe Corp., 77 NLRB 124, 126-127 the Board wrote:

Conduct that creates an atmosphere which renders improbable a free choice will sometimes warrant invalidating an election, even though that conduct may not constitute an unfair labor practice. An election can serve its true purpose only if the surrounding conditions enable employees to register a free and untrammeled choice for or against a bargaining representative.
In election proceedings it is the Board’s function to provide a laboratory in which an experiment may be conducted, under conditions as nearly ideal as possible, to determine the uninhibited desires of the employees. It is our duty to establish those conditions; it is also our duty to determine whether they have been fulfilled. When, in the rare extreme case, the standard drops too low, . . . the requisite laboratory conditions are not present and the experiment must be conducted over again.

We conclude, for the reasons set out below, that the times and places the official election notices were posted did not interfere with the employees’ freedom of choice and did not disturb the laboratory conditions for the first election.

The Board has not established a rule specifying the time prior to an election when notices must be posted, nor the exact places where the notices must be posted.

In examining the record it is important to note that Kilgore did not have the burden before the Board of proving that the election was fairly conducted; rather, the burden is on the party filing objections to an election, namely the union, to establish that the election was not fairly conducted. NLRB v. Mattison Mach. Works, 365 U.S. 123, 81 S.Ct. 434, 5 L.Ed.2d 455 (1961); NLRB v. Dean Foods Co., 421 F.2d 664 (6th Cir. 1970), cert. denied, 398 U.S. 939, 90 S.Ct. 1843, 26 L.Ed.2d 271.

The record strongly indicates that all of Kilgore’s employees knew of the election. Very few employees failed to participate in the election, and the record does not indicate why they did not participate.

Kilgore did post two notices of election. One was posted in the personnel office; the other was posted more than thirty hours before the election, in the cafeteria, which was used by all Kilgore employees for lunch and for work breaks. The employees had five opportunities, during three work breaks and two lunch breaks, to observe the notice.

The election campaign itself alerted employees that an election was scheduled. During the three or four weeks prior to the May 11, 1972 election Kilgore mailed or distributed at least a dozen items of campaign literature to its employees; and UAW also distributed campaign literature and information. On the morning of May 10, 1972 (the day before the election) Kilgore’s president, David Giffin, walked through the plant and delivered a prepared speech to all employees assembled at various locations throughout the plant. The speech stated, in opening and in closing, that balloting would be the following day. Finally, the extremely high percentage of employee participation in the election is evidence that knowledge of the election was widespread.

The Board asked why Kilgore delayed posting the notices. The notices contain a description of those employees who were eligible to vote in the election. Over-the-road truckdrivers were expressly excluded from the unit. Kilgore requested the Board to review this exclusion. The Board did not deny the request until Friday, May 5, 1972. The first notice of election was posted in the personnel office, with the other official government notices, on Monday or Tuesday, May 8 or 9, 1972. Had the Board granted Kilgore’s request for review, the unit description contained in the notices might have been wrong.

Later, when Kilgore’s attorney was notified that there might be a problem because of the notice-posting, he offered to postpone the election for one week, but the Board’s agent Kirby and the union rejected this offer and insisted that the election be held as scheduled.

It was not Kilgore’s fault that the Board scheduled the election before ruling on all matters affecting the election, and that the Board’s final ruling was not made until a few days before the election date.

In the absence of any unfair labor practices by the employer during the first election, these facts indicate that Kilgore was acting in good faith in the manner in which it posted the notices. Neither the Board nor the Regional Director found that Kilgore was acting in bad faith.

The Board stated that in addition to advising employees that an election would be held, the notice also advised employees of their rights under the Act, and warned employers and unions against committing unfair labor practices.

The Board relies on its decision in Overland Hauling, Inc., 168 NLRB 870 (1967). In that case the employer posted the official notices of election, but turned the section of the notice entitled “Rights of Employees” underneath the remaining portion of the notice. The Board stated in that case:

The manner in which the Employer posted the Notice herein was a patent attempt to minimize the effect of the Board’s Notice. The Employer thereby denied the employees access to information deemed necessary to the conduct of an election and thus interfered with the laboratory conditions essential for a free expression of preference by the voters.

Overland Hauling is distinguishable on its facts from the instant case. In Overland Hauling the employer’s bad faith was evident when it attempted to totally obscure part of the intended message of the notice. In the instant case there is evidence of the employer’s good faith, and the entire notices actually were posted.

In Pegwill Packing Co., 115 NLRB 1151 (1956) the official notices did not arrive in time to be posted before the election. The employer posted an announcement of his own and called a meeting of all employees after work to announce certain information about the election. The Regional Director set aside the election on the ground that the purpose of the election and the rights of employees, contained in the official notice, were not conveyed to the employees. The Board disagreed. It emphasized the importance of notice-posting, and the fact that the failure to post the notices was not the employer’s fault. In its discussion the Board stated:

Even if we assume, contrary to the Employer’s contention, that the employees were not informed by the Petitioner and the Employer of their basic rights under Section 7 of the Act to organize, bargain collectively, and engage in other concerted activities, we think it is fair to assume, in the absence of any evidence to the contrary, that the employees were aware of these long established rights of labor. (115 NLRB at 1154).

In the instant case there is no evidence that the employees were not familiar with the long-established rights of labor. Moreover, they had five opportunities to observe the official notice posted in the cafeteria. The evidence also indicated that NLRB had conducted two elections in the four years prior to May 11, 1972, when notices were posted in the same places, and that Kilgore had retained approximately seventy-five per cent of its employees over that period.

It is difficult for this Court to accept the contention that Kilgore’s employees needed additional exposure to the notice involved in the first election in order to insure a fair and free choice. The Ninth Circuit has described the portion of the Board’s notice dealing with the rights of employees as “potentially misleading.” NLRB v. Sauk Valley Mfg. Co., 486 F.2d 1127, 1132 (9th Cir. 1973); NLRB v. G. K. Turner Associates, 457 F.2d 484, 486 (9th Cir. 1972).

The notice implies that an employee has an absolute right to refrain from joining or assisting a union. However, Sections 7 and 8 of the Act, 29 U.S.C. §§ 157 and 158, state that an employee’s right to refrain from joining or assisting a union may be- affected by an agreement between an employer and a labor organization requiring membership in the labor organization as a condition of employment. We agree that thé notice is potentially misleading. Additional exposure to it would not be helpful in informing the employees of their rights.

The Board also suggested that Kilgore’s employees did not have time to consider the election issues and come to an informed decision. Kilgore and UAW conducted an election campaign prior to the election. Kilgore distributed to its employees at least a dozen pieces of campaign literature; and UAW also distributed campaign literature and information. The employees had ample time to come to an informed decision.

If the Board really felt that Kilgore’s employees did not have enough time to reach an informed decision, it should have acceded to the suggestion of Kilgore’s counsel, and delayed the election for one week; but the union opposed the delay, as it no doubt felt it could win the' election. Since the union lost the first election it moved to set that election aside on the ground that the employees did not have adequate time. The rerun election gave the union another chance for additional campaigning, and the argument that the Board had decided in favor of the union.

In our opinion the laboratory conditions necessary for a free and fair election were not disturbed, and the Board abused its discretion in setting aside the May 11, 1972 election. Therefore, Kilgore was not obligated to bargain with UAW as a result of the certification issued on the basis of the results in the rerun election.

Enforcement denied.

EDWARDS, Circuit Judge, filed a separate dissenting opinion.

EDWARDS, Circuit Judge

(dissenting).

Respondent-Appellee Kilgore Corporation manufactured explosives in 60 separate buildings. The Board, prior to the first election, sent the company ten notices for posting. Respondent only posted one in a place accessible to employees, namely, the cafeteria, and then only 30 hours before the election began. There is little doubt that the employees of this plant were well aware of the date of the impending election. But the Board found that the notice contained provisions which if read, could make voters feel more secure in exercising their impartial judgment. It certainly would appear that nearly 300 people could not have had time to read the one notice on the limited break periods that are relied on here.

The union lost the first election by one vote, 133 to 132. Subsequently, the Regional Director recommended that the Board approve setting aside the election and holding a new election, (which the union won), on the ground that the company had failed to post notices of the election at sufficient and appropriate places in timely fashion.

These facts present issues which Congress has committed to the Board’s discretion; and I find no abuse thereof.

      . See 29 C.F.R. § 101.19(a)(1); Pegwill Packing Co., 115 NLRB 1151 (1956); United States Gypsum Co., 70 NLRB 1322 (1946); Proximity Print Works, 11 NLRB 379 (1939).

      . Part of the section entitled “Rights of Employees”, as contained in the notice, reads:
      Under the National Labor Relations Act, employees have the right:
      • To self-organization
      • To form, join, or assist labor organizations
      • To bargain collectively through representatives of their own choosing
      • To act together for the purposes of collective bargaining or other mutual aid or protection
      • To refrain from any or all such activities

      [Emphasis added] (A. 115).

      . The notice involved, which I consider a fair statement of the law, is reprinted as an appendix to this dissent.


author: PER CURIAM.

text:
    Charles O. ROSS, Petitioner-Appellant, v. Honorable Frank REDA, Judge, Franklin County Municipal Court, Respondent-Appellee.
    No. 74-1771.
    United States Court of Appeals, Sixth Circuit.
    Feb. 13, 1975.
    R. Raymond Twohig, Jr., Handelman & Twohig, Columbus, Ohio, William M. Kunstler, Center for Constitutional Rights, New York City, Campbell, Schwarzwalder & Sanford, Columbus, Ohio, for petitioner-appellant.
    James Hughes, City Atty., Carl T. Wolfrom, Columbus, Ohio, for respondent-appellee.
    Before PHILLIPS, Chief Judge, MILLER, Circuit Judge, and DeMASCIO, District Judge.

       Honorable Robert E. DeMascio, Judge, United States District Court for the Eastern District of Michigan, sitting by designation.

   PER CURIAM.

This is an appeal from an order denying the application of Charles O. Ross for a writ of habeas corpus. It is contended that refusal of the Ohio State trial court to admit out-of-state counsel pro hac vice to represent Ross at his trial in that court deprived Ross of his Sixth Amendment right to counsel. The out-of-state attorney had been licensed to practice in other jurisdictions, but was not licensed to practice in Ohio. Reference is made to the decisions of the Ohio Court of Appeals in State v. Ross, 36 Ohio App.2d 185, 304 N.E.2d 396 (1973), cert. denied, 415 U.S. 904, 94 S.Ct. 1397, 39 L.Ed.2d 461 (1974), for a statement of the facts of this case. We affirm the denial of the writ.

While the Sixth Amendment right “[i]n all criminal prosecutions” to the “assistance of counsel” implies a degree of freedom to be represented by counsel of defendant’s choice, this guarantee does not grant the unconditional right to representation in a state court by a particular out-of-state attorney. To the contrary, in Thomas v. Cassidy, 249 F.2d 91, 92 (4th Cir. 1957), cert. denied, 355 U.S. 958, 78 S.Ct. 544, 2 L.Ed.2d 533 (1958), the Court said:

t is well settled that permission to a nonresident attorney, who has not been admitted to practice in a court, to appear pro hac vice in a ease there pending is not a right but a privilege, the granting of which is a matter of grace resting in the sound discretion of the presiding judge.

Moreover, the Sixth Amendment claim is modified significantly by the actual availability and presence of other competent counsel.

Before his trial in the State court the defendant Ross had retained three lawyers who were licensed to practice in Ohio. These Ohio attorneys were ready and available to represent the defendant. Ross chose to discharge his Ohio lawyers and to present his own case. At least one of these attorneys remained in the courtroom throughout the trial and was available to Ross for consultation at all stages of the proceeding.

The prerogative of a trial judge to exclude out-of-state counsel, like the right of a defendant to be represented by the counsel of his choice, is not an absolute right. In the present case the state trial court denied the application of the out-of-state attorney for admission pro hac vice on the ground that he affirmatively refused to limit his out-of-court statements about the case during its pendency. In his order the trial judge noted, among other reasons for denying the application, the following:

[B]ut there is no question in the mind of this Court that the applicant’s conduct was unprofessional and in violation of the Code of Professional Responsibility, particularly Canon 7, EC 7- 36, DR 7 — 107(A)(B); Canon 8, DR 8— 102(B); Canon 9 EC 9-1, 2, 6.

The Ohio Court of Appeals held that the refusal of the out-of-state counsel to limit his out-of-court statements about the case during its pendency constituted a potential violation of Canon 7 of the Ohio Canons of Ethics.

We view this justification as sufficient to warrant the legitimate exercise of the state’s power to “require high standards of qualification, such as good moral character or proficiency in its law, before it admits an applicant to the bar . . . .” Schware v. Board of Bar Examiners, 353 U.S. 232, 239, 77 S.Ct. 752, 756, 1 L.Ed.2d 796 (1957). The states necessarily maintain this power over the admission of attorneys as an “incident to their broader responsibility for keeping the administration of justice and the standards of professional conduct unsullied.” Cohen v. Hurley, 366 U.S. 117, 123-24, 81 S.Ct. 954, 958, 6 L.Ed.2d 156 (1961); see State v. Kavanaugh, 52 N.J. 7, 243 A.2d 225, cert. denied, 393 U.S. 924, 89 S.Ct. 254, 21 L.Ed.2d 259 (1968).

The judge who denied the application for out-of-state representation subsequently disqualified himself. The appellant contends that he was denied a fair trial because the judge chosen as a replacement relied on the prior judge’s rulings, without' making an independent investigation into their merits. Our examination of the record convinces us that the substituted judge did in fact review the prior rulings and upheld them only after he determined they were correct.

The decision of the District Court is affirmed. No costs are taxed.

      . This term refers to the practice of admitting out-of-jurisdiction attorneys who associate with in-state counsel for a particular case. It means literally “for this turn; for this one particular occasion.” Black’s Law Dictionary 1363 (4th ed. 1968).


author: WILLIAM E. MILLER, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Salvatore SARULLO and Garry M. Solomon, Defendants-Appellants.
    Nos. 74-1273, 74-1274.
    United States Court of Appeals, Sixth Circuit.
    Feb. 20, 1975.
    Marvin C. Goff, Jr., Goff, Kizer & Cribbs, F. P. Cribbs, Jr., Phillip E. Kuhn, Memphis, Tenn., for defendants-appellants.
    Thomas F. Turley, U. S. Atty., J. Richard Buchignani, W. Hickman Ewing, Jr., Memphis, Tenn., for plaintiff-appellee.
    Before WEICK and MILLER, Circuit Judges, and O’SULLIVAN, Senior Circuit Judge.
   WILLIAM E. MILLER, Circuit Judge.

The principal issue on this appeal is the applicability of collateral estoppel as a defense to charges of a conspiracy to misapply and actual misapplication of federally secured bank funds.

Defendant Garry M. Solomon was assistant cashier of the Memphis Bank and Trust Company. In this capacity one of his duties was to handle the operative features of a special bank account referred to variously as the collections-in-transit account or account A-71. This account was' designed to accommodate only those bank customers approved for its benefits by higher bank authority to effect collection of various items, in many instances the purchase price of corporate stocks. For example, one James N. Reddoch, a Memphis stock broker, had been approved by the appropriate bank authorities to benefit from the account in making collections of the purchase price of stocks sold by him or his brokerage firm. Two procedures were employed to effectuate the collections. These procedures are described as “drafting out” and “drafting in.” If Reddoch had sold stock to a purchaser in another area, Memphis Bank and Trust would advance to him funds out of account A-71 equal to the purchase price immediately upon receiving from him the stock certificates properly endorsed. The certificates would then be forwarded or drafted out to a correspondent bank, together with a collection letter, a copy of which would be retained by Memphis Bank and Trust for its record. Upon receiving collection, the funds would be redeposited in account A-71. For this service, Reddoch would be charged interest on the advance covering the period required for collection. The reverse procedure of drafting in was used infrequently by Reddoch when he was the purchaser of stock forwarded to Memphis Bank and Trust for collection. Upon receiving the certificates, the bank would not release them to Reddoch until it had collected the purchase price from him. These were approved procedures, involving no misapplication of the bank’s funds and exposing it to a minimum risk of loss.

In contrast, soon after August 23, 1969, without the knowledge or approval of higher bank authority, Solomon and defendant, Salvatore Sarullo, who had not been approved by higher bank authority to have the benefit of the account, began using account A-71 to enable the latter to obtain capital to trade on the stock market, without paying interest on the funds advanced to him and without furnishing collateral. This was accomplished in some instances by drafting in for collection stocks purchased by Sarullo. When these stocks were received, Solomon would forward the purchase price by debiting account A-71. Simultaneously, he would release the stocks to Sarullo. Only after he had resold the stocks would Sarullo reimburse the bank. Solomon also frequently made the bank’s funds available to Sarullo to purchase stock simply by debiting A-71 in the amounts advanced and crediting the same amounts to one of the two personal accounts maintained by Sarullo at the bank. By the use of numerous debit-credit memos, funds approximating $1,500,000.00 were transferred by Solomon from A-71 to Sarullo’s personal checking accounts. These transactions resulted in a net loss to the bank of $286,000.00. For his part in the scheme, Solomon received monetary rewards evidenced by advances from Sarullo’s personal account to Solomon’s account.

The Solomon-Sarullo dealings led to the return of a ten-count indictment against them on July 12, 1971. (Cr — 71— 154). The first count charged Sarullo and Solomon with engaging in a conspiracy, in violation of 18 U.S.C. Sec. 371, to misapply funds of a federally insured bank over a period of unknown duration but ending on December 3, 1973. Counts two through ten charged Solomon as principal and Sarullo as aider and abettor with violating 18 U.S.C. Secs. 2 and 656 by willfully misapplying bank funds in specific instances. These are referred to as the substantive counts of the indictment as distinguished from the conspiracy count. Many of the same misapplications of funds on specific occasions are charged in count one of the indictment as overt acts in furtherance of the conspiracy. The first trial under this indictment resulted in a jury verdict of guilty under counts two through ten and a mistrial under the conspiracy charge of count one. Later the district court granted the motion of Solomon and Sarullo for a new trial based on newly discovered evidence.

Before the second trial of Solomon and Sarullo under indictment Cr. — 71 — 154, another indictment was returned (Cr. — 71— 160) on July 17, 1971, against Solomon and Sarullo and John Gary Veazey and James Barham Lambert. Count one of this indictment charged these four defendants with conspiring to misapply funds of Memphis Bank and Trust Company in violation of 18 U.S.C. Sec. 371. Counts two through four charged Solomon as principal, and Sarullo, Veazey and Lambert as aiders and abettors, with violating 18 U.S.C. Secs. 2 and 656, by misapplying bank funds in specific transactions occurring prior to December 3, 1969. These specific misapplications in addition to being charged as substantive offenses are also charged as overt acts in furtherance of the conspiracy. In this case the court directed a verdict of not guilty on one of the substantive counts and the jury returned a verdict of acquittal on the remaining three counts, including the conspiracy charge of count one.

Defendants Solomon and Sarullo then filed a motion in Cr. — 71 — 154 to dismiss the indictment on grounds of collateral estoppel, double jeopardy and res judicata based upon their acquittal on the conspiracy and substantive charges in Cr.— 71 — 160. Another motion by defendants to restrict the evidence to be used in the re-trial of Cr — 71 — 154 was also filed. All defense motions were overruled and Cr — 71-154 was brought on for re-trial, resulting in the defendants being found guilty on all ten counts and in their receiving sentences of thirty months’ confinement. The present appeal ensued.

It is not disputed that in January 1969, Sarullo, Veazey and Lambert formed a partnership, under the name of Security Investors, to engage in the buying and selling of stock. As in the case of Sarullo individually, Solomon made large amounts of bank funds available to the firm to engage in stock trading without receiving interest or security and without approval by higher authority of Security Investors as a customer entitled to the use of account A-71. In these instances also the scheme was carried out through a misuse of account A — 71 in a fashion comparable to its use by Sarullo. Funds in excess of $1,000,-000.00 were wrongfully channeled by Solomon to the firm’s account, finally causing a net loss to the bank of $21,000.

Because the Solomon-Sarullo transactions and the Solomon-Sarullo-Security Investors transactions, both keyed to account A-71 and to Solomon and Sarullo as the core figures, were practically identical in method and technique, defendants insist that their acquittal of the charges in Cr — 71 — 160 bars their prosecution on the charges in Cr. — 71 — 154. To meet this argument, the government insists that two distinct conspiracies were in operation and that the issue of criminal intent on the part of Solomon and Sarullo was essentially different in the two cases. To buttress this argument, the government points to certain distinguishing featúres:

1. The conspiracy charged in Cr — 71— 154 consisted of Solomon and Sarullo only, while the conspiracy charged in the later indictment was composed of four conspirators.

2. Only Sarullo and Solomon benefited from the Solomon-Sarullo transactions, while Veazey and Lambert not only received no benefit from these dealings but had no knowledge that they were taking place. Indeed, the separate dealings of Sarullo with Solomon were in direct violation of his agreement with his partners when Security Investors was formed that he would not engage in stock trading individually but only through the partnership.

3. While a part of the evidence in the two cases from which criminal intent might be inferred was overlapping, the overlap was caused not by the government but by Veazey and Lambert in unnecessarily eliciting facts on cross-examination pertaining to the Solomon-Sarullo transactions.

4. The specific transfers or misapplications charged in the two indictments as overt acts or as substantive violations were altogether separate and distinct transactions. The parties were also essentially different in these transfers in that in the Cr. — 71 — 154 transactions only Solomon and Sarullo were involved, while in the transactions described in Cr. — 71 — 160, Solomon advanced bank funds to Security Investors, a partnership composed of Sarullo, Lambert and Veazey.

Defendants repeatedly state that the criminal intent of defendants Solomon and Sarullo was a fact essential to establish the offenses charged in both indictments. Since this issue, they argue, was actually adjudicated in the trial of Cr.— 71 — 160 in favor of defendants, it cannot be relitigated in the later trial of Cr — 71 — 154. The argument necessarily presupposes that since defendants had no criminal intent in the Solomon-SarulloSecurity Investors dealings, they could not have had such intent in the SolomonSarullo transactions.

It is apparent to us that the basic fallacy in this argument is that it ignores the truism that “criminal intent,” being a state of mind, may be determined only from the attendant facts and circumstances to which it bears a direct relationship. One may possess a criminal intent in one framework of facts but be perfectly innocent in another.

The Supreme Court in Ashe v. Swenson, 397 U.S. 436, 444, 90 S.Ct. 1189, 1194, 25 L.Ed.2d 469 (1970), clearly delineated the test to be followed to determine in criminal cases whether collateral estoppel is applicable to bar a subsequent prosecution.

The federal decisions have made clear that the rule of collateral estoppel in criminal eases is not to be applied with the hypertechnical and archaic approach of a 19th century pleading book, but with realism and rationality. Where a previous judgment of acquittal was based upon a general verdict, as is usually the case, this approach requires a court to “examine the record of a prior proceeding, taking into account the pleadings, evidence, charge, and other relevant matter, and conclude whether a rational jury could have grounded its verdict upon an issue other than that which the defendant seeks to foreclose from consideration.” The inquiry “must be set in a practical frame and viewed with an eye to all the circumstances of the proceedings.” Sealfon v. United States, 332 U.S. 575, 579 [68 S.Ct. 237, 240, 92 L.Ed. 180]. Any test more technically restrictive would, of course, simply amount to a rejection of the rule of collateral estoppel in criminal proceedings, at least in every case where the first judgment was based upon a general verdict of acquittal.

Our examination of the indictment, the evidence and the court’s charge in Cr — 71 — 160, leads us,to the determination that a rational jury could have grounded its verdict upon an issue other than that which the defendants seek to foreclose from consideration in the present case. The dealings and transactions constituting the basis for the prosecution of Cr. — 71 — 160 are so essentially separate, disparate and distinct from those involved here, that it cannot reasonably be said that the jury’s finding in the former case on the issue of criminal intent is conclusive of the issue of criminal intent on the facts of the present case. A comparison of the two proceedings demonstrates that a jury might fairly find that defendants Solomon and Sarullo acted with criminal intent in their dealings with one another but without such criminal intent in the separate transactions in which the firm of Security Investors was involved, a firm composed of Veazey and Lambert in addition to Sarullo. In this connection the language of this Court in United States v. O’Dell, 462 F.2d 224, 226, n. 2, (1972), is apposite:

O’Dell was previously acquitted of charges that he joined in a conspiracy to deprive persons of their civil rights. Though involving the same time period and a similar extortion scheme the earlier charges (Indictment # 7167) differed substantially from the present ones in the identity of both O’Dell’s alleged co-conspirators and the victims of the asserted plots.
O’Dell contends that the Government improperly separated one conspiracy into two to increase its chances of successful prosecution. Had he been able to establish that but a single overall conspiracy existed we would be compelled to uphold his former jeopardy claim. United States v. Cohen, 197 F.2d 26 (3rd Cir. 1952); United States v. Palermo, 410 F.2d 468 (7th Cir. 1969).
O’Dell had the burden of showing the unified nature of the conspiracy. Sanchez v. United States, 341 F.2d 225 (9th Cir. 1965), cert. denied 382 U.S. 856, 86 S.Ct. 109, 15 L.Ed.2d 94 (1965); Rothaus v. United States, 319 F.2d 528 (5th Cir. 1963). He has not met that burden.
The District Court held that the total dissimilarity of the alleged victims of the two plots alone required a finding that two conspiracies existed. While this view has support (see United States v. Brimsdon, 23 F.Supp. 510 [W.D.Mo.1938]) we are reluctant to base our entire decision on it, given the fact that the conspiracy may well have been aimed not at any specific individuals, but at a broad class of persons arguably composed of victims named in both indictments. We therefore rely also on the difference in the identity of the alleged conspirators and the difference in their official positions. While the group in # 7167 was primarily composed of state highway patrolmen, that named in the present indictment was composed entirely of local policemen. In the absence of any evidence that the two distinct groups worked together toward a common goal, rather than merely following parallel plans built around the central figures — O’Dell and Leatherwood — we do not find any reason to view the two plots as part of a single unified conspiracy.
In light of this holding with respect to the existence of two separate and distinct conspiracies and in the absence of any indication whatever that the overt acts involved in the two conspiracies were identical in time, place or participants, we also find O’Dell’s claim of collateral estoppel without merit.

As we have pointed out, in the present case there is not only a difference in the identity of the alleged conspirators, but it affirmatively appears that the overt acts averred in the two indictments are separate and distinct and, as far as the records show, unrelated. There is nothing to establish that the two groups worked together toward a common goal despite the fact that the modi operandi in the two cases were practically the same, encompassing the use of account A-71, Solomon and Sarullo being the central or core figures in both instances.

We have examined the cases cited and relied upon by the defendants but we deem them to be distinguishable and not controlling here.

The defendants’ other assignments advanced in this Court for reversal of their convictions have been carefully weighed and have been found to be without merit. These include the contentions that improper comment was made upon the defendant Sarullo’s fifth amendment right not to take the witness stand in his own behalf, that the trial court improperly injected itself into the trial, that the trial court erred in refusing to dismiss the indictment by reason of unreasonable pre-indictment delay, and finally that the trial court erred in allowing the prosecution to question defense witness Young regarding a statement he had taken from Solomon.

Affirmed.

      . Although defendants in their brief frequently refer to double jeopardy, collateral estoppel and res judicata as synonymous terms, the principal thrust of their appellate position is most accurately described as being that the prosecution of this case is barred by collateral estoppel arising from defendants’ prior acquittal in another case. As we find that collateral estoppel is not applicable, we have not found it necessary to discuss the principles of double jeopardy and res judicata.


author: GIBBONS, Circuit Judge.

text:
    James E. McKENNA, Appellant, v. Nicholas FARGO, Director of Public Safety, Jersey City, and Raymond Gibney, Chief of Jersey City Fire Department, Appellees.
    No. 74-1547.
    United States Court of Appeals, Third Circuit.
    Argued Jan. 20, 1975.
    Decided Feb. 11, 1975.
    Kevin Michael Prongay, Jersey City, N. J., for appellant.
    Dennis L. McGill, Corp. Counsel, William J. Cleary, Jr., Thomas S. Fodice, Asst. Corp. Counsel of Jersey City, N. J., for appellees.
    Before VAN DUSEN, GIBBONS and HUNTER, Circuit Judges.
   OPINION OF THE COURT

GIBBONS, Circuit Judge.

This is an appeal from an order of the district court “that plaintiff’s complaint be dismissed with prejudice for lack of federal subject matter jurisdiction.” The complaint was filed on April 17, 1974 by appellant McKenna, a resident of Jersey City, New Jersey, against appellees Fargo and Gibney, the Director of Public Safety and Chief of the Fire Department, respectively of that city. It alleges jurisdiction under 28 U.S.C. § 1343. Relying on 42 U.S.C. § 1983 and 28 U.S.C. § 2201 it seeks declaratory and injunctive relief to prevent the city from requiring that McKenna, as a precondition to his appointment to the Fire Department, take a psychological examination alleged to be a serious infringement of fundamental rights guaranteed by the United States Constitution.

Duly verified, the complaint charges that the psychological examination includes personal interviews in which questions are asked about the applicant’s family, his social, religious, sexual and political beliefs, his physical functions, including bowel and bladder habits, and matters concerning personal hygiene. The complaint alleges, moreover, that subjecting McKenna to this intrusive testing

“deprive[s] plaintiff of his fundamental rights of freedom of expression and association under the First Amendment of the United States Constitution, (a) by chilling plaintiff’s desire to freely express himself both during the testing periods and during his everyday affairs; and (b) by deterring plaintiff from associating with other parties who may be considered ‘abnormal psychological types’ by the defendants and the testing administrators.”

The complaint further alleges that the testing deprives McKenna of his fundamental right to privacy safeguarded by the Constitution by requiring that -he divulge information about his political, religious, social, economic, family and sexual beliefs and behavior which are within the realm of personal and marital sanctity, as a precondition to employment with the Fire Department. Finally, the complaint alleges that McKenna submitted to one set of tests for an earlier civil service list for the Fire Department but was not appointed before that list expired.

On April 17, 1974, the date the complaint was filed, a district court judge issued an order directing the defendants to show cause on April 22, 1974 why a preliminary injunction should not issue ordering them to withdraw all directions, orders, or commands to plaintiff to submit to psychological retesting as a precondition to appointment to the Fire Department. Because the district court had not issued a temporary restraining order, and the psychological test was scheduled for April 18, 1974, McKenna submitted to the exam on that date. On April 22, 1974 the defendants submitted the affidavit of Harry W. Western, Deputy Chief of the Fire Department which established that the tests complained of had been required of applicants since 1966, and alleged:

“Since approximately one and one-half years had passed since the last of the applicants from the previous list had undergone processing, I administratively determined that all applicants from all previous lists should resubmit to processing before employment.”

The affidavit did not attempt to justify the scope of questioning involved in the psychological testing. No answer or motion was filed.

At the hearing on the return day, McKenna’s attorney made an opening statement in which he acknowledged that the court could not grant relief with respect to McKenna’s submission to the test on April 18th. He urged however that the retention of the results of the exam in computer data banks and the danger to constitutional rights through their dissemination required the granting of injunctive relief. The district court at this point heard a seven sentence response from the attorney for the defendants, and then ruled from the bench:

“THE COURT: Gentlemen, I think the Courts of the State of New Jersey are better equipped to handle matters such as this. I don’t think we have any jurisdiction and this case will be dismissed.
There will be' no injunction of the State of New Jersey. Start it in the New Jersey Courts.
MR. PRONGAY: May I have a basis for your ruling?
THE COURT: Because I feel we have no jurisdiction in this case, that it is best held and best attended to by the State Courts. I agree with Chief Justice Burger on that where we’re getting every kind of a case you can think of here, when they can be well attended to in the State Courts. Our State Courts are very well equipped. They can handle the Civil Rights requirements. They can handle the testing requirements and that’s where they belong. Not here.
MR. PRONGAY: Your Honor, just for the record, your basis for dismissal is-
THE COURT: I just stated it.
MR. PRONGAY: No jurisdiction.
THE COURT: I have no jurisdiction.
MR. PRONGAY: Under 1343(3).
THE COURT: That’s right.” (Tr. at 7)

On April 25, 1974 a written order in the form quoted at the outset of this opinion was entered.

On this appeal the appellees, . not surprisingly, concede that the court’s ruling is indefensible. Instead, they have moved to dismiss the appeal as moot on the ground that McKenna passed the April 18, 1974 psychological and other tests, and has placed second on the current civil service appointment list for firemen. At oral argument before this court on January 21, 1975, the parties represented, however, that this list would soon expire and that it was unlikely in the city’s present budgetary posture that McKenna would be appointed before the list’s expiration. This would, of course, subject him to the likelihood of a repeat battery of psychological testing if he wanted to obtain a place on a new civil service list. Moreover, so far as we have been informed, the data collected in the prior two tests to which the complaint refers, is still stored in the data bank. Thus, the requested relief directed at safeguarding against misuse of the stored data cannot be considered moot. See Super Tire Engineering Co. v. McCorkle, 416 U.S. 115, 94 S.Ct. 1694, 39 L.Ed.2d 797 (1974).

The motion to dismiss the appeal as moot will be denied. The order appealed from will be reversed, and the cause remanded to the district court for further proceedings consistent with the Federal Rules of Civil Procedure.

      . Counsel for appellant stated:
      “We had no difficulty in asking him to submit to another medical examination or accepting another medical examination because we thought that this didn’t deal with the mind, but [sic] with beliefs that are inherent in the Constitution, but the psychological examination and basically all this information, I might add, is inside, is computed by Stevens Institute of Technology [the testing contractor] and stored in a data bank and available to different organizations of the American Psycological Association, for cross reference.
      This information is placed in this data bank and it’s kept on record. In the future anyone may retrieve it, especially in New Jersey since we have a right to know law which makes just about everything available to anybody on request, and this has been sanctioned by the city which is basically a state subdivision.
      [W]e would like an injunction right now at this present time to enjoin the defendants from further using any of this data, segregating this data from the Stevens Institute data bank, and not making it available to Jersey City Fire Department or the results of that test to make a determination as to this man’s capability to be a fireman on the Department. He took the test in 1972, passed it.
      I think that, in and of itself, is enough.
      And finally, we would like to have these records retrieved and we believe that this matter will have to await trial. But, in the meantime, we want some protection offered to defend him as far as his constitutional rights and his right to privacy, to keep these records within the repose of Stevens Institute, pending the further litigation in this matter.” (Tr. at 3-5)
      Essentially the same contentions had been made in McKenna’s brief in support of the application for a preliminary injunction.

      . See, e. g., Russell v. Bodner, 489 F.2d 280 (3d Cir. 1973); Fischer v. Cahill, 474 F.2d 991 (3d Cir. 1973); Marshall v. Brierley, 461 F.2d 929 (3d Cir. 1972).
      The district court’s reference in its ruling dismissing the complaint for lack of subject matter jurisdiction undoubtedly related to certain remarks made by Chief Justice Burger at the American Bar Association’s annual meeting held in Washington, D. C. during August, 1973. See Burger, Report on the Federal Judicial Branch — 1973, 59 A.B.A.J. 1125, 1128 (1973) which commented on Russell v. Bodner, supra. But the Chief Justice was hardly suggesting that the district courts take liberties with the procedural requirements of the Federal Rules of Civil Procedure or disregard plain grounds of federal jurisdiction.


author: ALDRICH, Senior Circuit Judge.

text:
    Gregorio Sanchez TORRES et al., Petitioners-Appellants, v. Gerardo DELGADO, Warden, et al., Respondents-Appellees.
    No. 74-1316.
    United States Court of Appeals, First Circuit.
    Submitted Feb. 5, 1975.
    Decided Feb. 10, 1975.
    Santos P. Amadeo and Jose Enrique Amadeo of Rio Piedras, P. R., on brief for appellants.
    Miriam Naveira de Rodon, Sol. Gen., and Candita R. Orlandi, Asst. Sol. Gen., San Juan, P. R., on brief for appellees.
    Before COFFIN, Chief Judge, and ALDRICH and CAMPBELL, Circuit Judges.
   ALDRICH, Senior Circuit Judge.

The single question raised by these appeals from the dismissal of petitions for habeas corpus is the constitutionality of Article II, § 11, subsection 2 of the Constitution of the Commonwealth of Puerto Rico, adopted in 1948, which provides as follows:

“In all prosecutions for a felony the accused shall have the right of trial by an impartial jury composed of twelve residents of the district, who may render their verdict by a majority vote which in no case may be less than nine.”

Attacking, this last clause, twenty citizens of Puerto Rico convicted by less-than-unanimous verdicts, seek to avoid, by asserting a distinction between the Commonwealth and the several states, the case of Apodaca v. Oregon, 1972, 406 U.S. 404, 92 S.Ct. 1628, 32 L.Ed.2d 184, which held that a state constitution permitting such verdicts did not offend the United States Constitution. See also, Johnson v. Louisiana, 1972, 406 U.S. 356, 92 S.Ct. 1620, 32 L.Ed.2d 152.

In Apodaca Mr. Justice White, in an opinion joined in by three other justices, declined to be bound by the two-centuries-old “accepted feature of the common-law jury” that verdicts in criminal cases should be unanimous, concluding that the basic requirement of trial by jury was satisfied without it. Mr. Justice Powell, in a separate concurrence, expressed the view that this result would not be permissible for the federal government by virtue of the Sixth Amendment, but concurred in the result because, in his opinion, less was required by the Fourteenth. It may be noted, however, in the light of the argument that was pressed upon us by petitioners, that both the plurality and the dissenting opinions approached the issue in terms of “the Sixth Amendment . made applicable to the States by the Fourteenth.” 406 U.S. at 383, 406 and 414, 92 S.Ct. at 1630.

By a process of reasoning based in part on such claims as that Puerto Rico’s 1948 Constitution was sparked by improper political motives (although nothing is clearer than the fact that motivation is irrelevant if a statute is otherwise unobjectionable, United States v. O’Brien, 1967, 391 U.S. 367, 88 S.Ct. 1673, 20 L.Ed.2d 672), and flew in the face of its “overwhelmingly long tradition of common law jury trials” (1901— 1948; with which compare Apodaca’s rejection of two centuries), and in part on an assertion that the Sixth Amendment, and not the Fourteenth, applies to Puerto Rico (a conclusion we need neither accept nor reject), petitioners contend that although state legislatures may provide for less-than-unanimous verdicts, Puerto Rico may not. We rejected this conclusion when advanced by this same counsel in Fournier v. Gonzalez, 1 Cir., 1959, 269 F.2d 26, saying, at 29,

“Certainly it would be an odd result if the people of Puerto Rico were less free to legislate with reference to a modification of the jury system than are the people of the several States in the Federal Union.”

We have no reason to change.

It is true that a majority, perhaps all, of the justices indicated in Apodaca and Johnson, ante, that the federal government would be obliged to continue to adhere to the principle of unanimity, but we find nothing in the reasoning of those permitting the states greater leeway that would forbid a state previously favoring unanimity from making a change. Nor are petitioners advanced by their contention that Balzac v. People of Puerto Rico, 1922, 258 U.S. 298, 42 S.Ct. 343, 66 L.Ed. 627, has been overruled. Whatever may be the status of Balzac today, petitioners suggest no reason for attacking its basic premise that the United States Constitution does not impose greater restrictions on Puerto Rico than it does upon the states.

The Puerto Rico decisions such as Fournier v. Warden, 1958, 80 P.R.R. 254, were properly accepted by the district court. Its dismissal of the several petitions herein is affirmed without oral argument. Local Rule 12.

       We expressly decline to pass on the correctness of the district court’s conclusions on that subject. For a comprehensive discussion of certain aspects, see Acevedo Montalvo v. Colon, D.C.P.R., 1974 (three-judge court), 377 F.Supp. 1332.