author: FAIRCHILD, Circuit Judge.

text:
    Marko DUROVIC, an Individual and also known as Marko Durovic, formerly d/b/a Duga Laboratories et al., Plaintiffs-Appellants, v. Elliot RICHARDSON, Secretary of Health, Education & Welfare, and Charles C. Edwards, Commissioner of Food & Drugs, Defendants-Appellees.
    No. 71-1658.
    United States Court of Appeals, Seventh Circuit.
    Argued June 20, 1972.
    Decided April 25, 1973.
    As amended May 18, 1973.

      Anna R. Lavin, Chicago, 111., Solomon H. Friend, New York City, for plaintiffs-appellants.
    James R. Thompson, U. S. Atty., William T. Huyck, James C. Murray, Asst. U. S. Attys., Chicago, 111., and Cheryl S. Earner, Atty., Consumer Division Dept, of Justice, Washington, D. C., for defendants-appellees.
    Before FAIRCHILD, CUMMINGS, and STEVENS, Circuit Judges.
   FAIRCHILD, Circuit Judge.

Plaintiffs appeal from an unfavorable declaratory judgment entered on defendants’ motion for summary judgment in plaintiffs’ action for declaratory relief.

Plaintiffs are interested in the manufacture and distribution of the “drug product called Erebiozen as an agent for use in the management of malignant tumors”. Defendants are charged with administration of the Federal Food, Drug and Cosmetic Act, as amended. 21 U.S. C. § 355(a) prohibits the introduction of a “new drug” into interstate commerce unless an approval of a new drug application under § 355(b) (an NDA) is effective.

21 U.S.C. § 335 calls for notice to a proposed defendant before a violation is reported to a United States attorney. Such notice was given to plaintiffs. Although § 335 also calls for an opportunity administratively for presentation of views, it does not contemplate a proceeding leading to a final administrative order, subject to statutory judicial review. As a result of the notice, and, apparently, defendants’ rejection of views that sale of Krebiozen in interstate commerce required no effective NDA, plaintiffs brought this action. They sought a declaration (1) that Kre-biozen is not a new drug by reason of the operation of a “grandfather” provision, enacted in 1962, in other words, that Krebiozen was commercially sold or used and not a “new drug” under the law just before the 1962 amendments, or, alternatively (2) that if Krebiozen was a new drug, one or more NDA’s became effective, one in 1954 and one in 1961.

Each side moved for summary judgment. The district court entered judgment that “Krebiozen is now and has always been a new drug within the meaning of the statutory definition for which no approved New Drug Application is now or has ever been effective.” Findings and conclusions are reported at 327 F.Supp. 386. Plaintiffs appealed. We affirm.

Since summary judgment was granted, the questions on appeal are whether there was no genuine issue as to any material fact and whether the propositions declared were correct as a matter of law.

Plaintiffs’ alternative claims, that of grandfather clause exemption because Krebiozen was not a new drug under the 1938 law, and that of an effective NDA under the 1938 law are inconsistent. Although plaintiffs chose to press the grandfather clause claim first, chronology makes it more logical to take up their claims in the opposite order.

I. The 1954. and 1961 NDA’s.

Plaintiffs’ activity in the United States with Krebiozen, previously unknown, began in 1949-1951. Undeniably it was then a new drug as defined in sec. 201 (p) of the 1938 act, 52 Stat. 1040, then in force. Under sec. 505(a), unless an NDA was on file and effective, a new drug could not be introduced into interstate commerce except under regulations covering solely investigational use.

On April 15, 1954, consistently with the new drug status of Krebiozen, plaintiff Marko Durovic tendered an NDA. On May 25, 1954, the Secretary replied by letter stating that the application was incomplete in two particulars and accordingly that it may not be filed.

Plaintiffs contend that this NDA became effective by operation of law, 60, or at most 180, days after receipt. They rely on sec. 505(b) and (c). If this NDA were deemed an application filed when received, within the meaning of (b) , (c) would indeed cause it to become effective on the sixtieth day after the filing unless postponed by the Secretary to a time not more than 180 days after filing. Clearly there were no notice and hearing under (d) which would support an order refusing to permit the NDA to become effective, nor under (e) which would support an order suspending effectiveness.

Defendants’ position is that a document purporting to be an NDA, received, but deemed incomplete, is not a filed application under (b), so as to become effective by lapse of time under (c) .

Sec. 701(a) vested authority in the Secretary to promulgate regulations for the efficient enforcement of the act. In 1954, 21 C.F.R. § 1.110 provided that an application shall not be accepted for filing if incomplete on its face by omission of required material, and called for notice to the applicant. We consider the regulation a reasonable means of determining the fact and time of filing an application and preventing the triggering of the automatic operation of the statute where an intended application is incomplete under the statute. Notice of incompleteness, conforming to the regulation, was given. It does not appear either that Durovic amended the application so as to supply the omitted information, which would, under the regulation, have resulted in a filing date at the time of receipt of the amendment, if then complete, or that he challenged the refusal to accept for filing in any legal proceeding.

On March 27, 1961, Dr. Stevan Durovic, another plaintiff, submitted another NDA. This act was consistent with continued new drug status of Krebiozen. The application was supplemented March 31 and April 13. On May 23, 1961, the Director of the Division of New Drugs replied by letter stating that the application as amended was regarded as received April 13, that a preliminary review showed the NDA was incomplete in specified areas, but that there would be a further letter. On June 9, the Director wrote án eight page letter listing areas in which the NDA was incomplete and inadequate, and stating that, accordingly, it may not be filed.

The applicable regulation at this time was 21 C.F.R. 130.5. It was similar to the earlier one in all material respects, but also provided a procedure whereby the applicant, if he disputed the finding of incompleteness, could request filing over protest, and thus set the statutory machinery in motion. There is no claim that Dr. Durovic made such request.

We consider the regulations valid and that the agency complied with them. Accordingly we conclude that neither the 1954 nor 1961 NDA was a filed application so as to cause it to become effective by operation of law with lapse of time.

II. The “grandfather” claim.

Until 1962 the controlling definition of a new drug depended upon the lack of general recognition among experts that it was “safe” for use according to its labeling. The Drug Amendments of 1962 enlarged the required general recognition to “safe and effective”. 21 U. S.C. § 321 (p), as amended in 1962, reads in material part:

“(p) The term ‘new drug’ means—
(1) Any drug . . . the composition of which is such that such drug is not generally recognized, among experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof, or
(2) Any drug . . . the composition of which is such that such drug, as a result of investigations to determine its safety and effectiveness for use under such conditions, has become so recognized, but which has not, otherwise than in such investigations, been used to a material extent or for a material time under such conditions.” (We have italicized the words added by the Drug Amendments of 1962. All the other material quoted appeared in the 1938 act.)

The Drug Amendments of 1962 were approved October 10, 1962. Sec. 107(c)(4), 76 Stat. 789, a grandfather clause, provided:

“In the ease of any drug which, on the day immediately preceding the enactment date, (A) was commercially used or sold in the United States, (B) was not a new drug as defined by section [321 (p) ] of the basic Act as then in force, and (C) was not covered by an effective [NDA] the amendments to section [321 (p)] made by this Act shall not apply to such drug when intended solely for use under conditions prescribed, recommended, or suggested in labeling with respect to such drug on that day.”

The basic argument on behalf of plaintiffs is that on October 9, 1962, Krebiozen (A) was commercially used and sold in the United States, (B) was generally recognized as “safe” in the sense that it was non-toxic, and (C) was not, assuming their alternative argument be rejected, covered by an effective NDA. The basic argument of the government is (1) that, properly construed, the law before the 1962 amendments defined a drug which was to be used for treatment of a life-threatening disease as a new drug unless generally recognized as effective as well as otherwise safe; (2) that Krebiozen was not so recognized; (3) that its composition was not sufficiently known to enjoy general recognition as “safe” even in the narrow sense; i. e., non-toxic; and (4) that since Krebiozen was sold only for investigational use, it was not commercially used or sold within the meaning of the grandfather clause.

Activities of plaintiffs have been inconsistent with their present claim that Krebiozen had become a “recognized” rather than a “new” drug by October 9, 1962. The presentation of an NDA in 1954 and in 1961 implied that Krebiozen was a new drug on those dates. In June, 1963, plaintiff Stevan Durovic submitted a “Notice of Claimed Investigation Exemption” (IND) which, although withdrawn after a month, carried the same implication. In April, 1966, plaintiff Marko Durovic, under power of attorney for Stevan Durovic, wrote a letter to the FDA, which he referred to in the text as an “investiga-tional drug application” and a “Notice of Claimed Investigation Exemption”. Although this purported claim for in-vestigational exemption noted that it was without prejudice to the status achieved by the earlier NDA’s, it was inconsistent with the present claim that Krebiozen had, by October 9, 1962, ceased to be a “new” drug.

Conceding that plaintiffs may not be irrevocably bound by their acts implying that Krebiozen had not become a “recognized” rather than “new” drug by October 9, 1962, nor by the assumptions in later judicial decisions that it was still a “new” drug, we proceed to analysis of the showings made on motion for summary judgment in the instant case.

Grandfather requirement (A): “commercially used or sold” October 9, 1962.

Defendants assert that all Krebiozen sold at or recently before the critical date was sold under a restrictive label, pursuant to 21 C.F.R. 130.3, i. e., “An Agent for Investigational Use in the Management of Malignant Tumors . Caution — New drug limited by Federal Law to investigational use”. If so labeled and sold only to a qualified expert who promised to investigate the safety of the drug, the shipment was exempt from 21 U.S.C. § 355(a) prohibiting introduction into interstate commerce of a new drug without an effective NDA.

There appears to be a dispute whether all sales of Krebiozen were expressly restricted by the seller to investigational use. There is room for question concerning the meaning of “commercially” in the grandfather clause. We assume, since Congress was endeavoring to avoid imposing new burdens on drugs which had already achieved “recognized” status, and usage thereunder to a material extent and for a material time, that a gloss of openly and readily available and broadly distributed in the ordinary course of business as well as lack of restriction to investigational use was intended. Nevertheless we find it impossible to say, on the record presented, that defendants conclusively established that Krebiozen was not “commercially used or sold” as of October 9, 1962.

Grandfather requirement (B): “generally recognized as safe” as of October 9, 1962.

Defendants presented affidavits which, at least prima facie, established (1) that as of the critical date Krebio-zen was not generally recognized among qualified experts as safe and effective for management of malignant tumors, and (2) that as of the critical date its composition was not sufficiently known to be recognized as safe in the sense of non-toxic, for use in such statement.

One affiant was Jesse L. Steinfeld, M.D., Surgeon General, United States Public Health Service. He described his professional background and attainments, much of them in the field of cancer research, and stated that he is well acquainted with the opinions of experts in the field of cancer, especially chemotherapy, and with the relevant literature and that he is well acquainted with Krebiozen.

Dr. Steinfeld stated: “I know of no medical school which teaches, or has taught, that Krebiozen is a treatment of cancer. I know of no hospital associated with a medical school where Krebiozen is used for treatment of cancer. I know of no expert in the field of cancer who believes now, or who has ever believed, that Krebiozen is safe for the treatment of cancer or that Krebiozen has any efficacy whatsoever in the treatment of cancer. ... In 1963, I was a member of a committee of twenty-four cancer experts, selected from throughout the United States by the Director of the National Cancer Institute, who evaluated data on 504 patients submitted by Kre-biozen’s sponsors. I personally reviewed thirty-nine of the cases and participated in the review of many of the others. The Committee unanimously concluded that there was no substantive evidence in the data to demonstrate that Krebio-zen was of any value whatsoever in treating cancer. . . . Based on my professional education, training, and experience, on my knowledge of published scientific literature, and in my contact with colleagues, it is my opinion that the composition of Krebiozen is such that I do not recognize it, nor is it generally recognized by experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe or effective when used for the treatment of cancer in the manner suggested in its labeling. The drug has never been so recognized.”

Another affiant was Carl G. Baker, M.D., Director, National Cancer Institute, United States Public Health Service. He described his professional background and attainments, and substantial experience and expertise in the field of cancer, especially in the area of chemotherapy. He asserted similar opinions with respect to general recognition of Krebiozen.

With respect to the lack of general knowledge of the composition of Kre-biozen as of October 9, 1962, Dr. Stein-feld and Dr. Baker each stated as follows:

“The actual composition of Krebiozen was not known to any expert in the field of cancer until 1963, when the Department of Health, Education, and Welfare released information concerning assays of the drug’s composition. To my knowledge no meaningful scientific bioassay data on Krebiozen has ever been available to experts. Experts in the field of cancer, lacking information about a drug’s composition or about its biological activity, could not have made a determination prior to 1963 concerning the safety of this drug”.

Plaintiffs submitted the affidavits of Andrew C. Ivy, M.D. and Marko Duro-vic. Although they presented material to support a claim that Krebiozen is thought by some physicians to be safe and effective in the treatment of cancer, they by no means asserted that it is generally so recognized among experts.

Dr. Ivy described his very impressive qualifications and experience as a physician, teacher, and author. He asserted that he had studied Krebiozen in collaboration with plaintiff Stevan Durovic, had treated hundreds of patients with Krebiozen and “analyzed and reviewed the observations and experiences of more than 3000 licensed physicians who have treated about 4227 patients, most of whom were afflicted with advanced or hopeless cancer”. He asserted that Kre-biozen is non-toxic, that it “is a tissue hormone, which functions and an anticancer substance”. He asserted changes observed or reported. in large numbers of the patients referred to. He concluded: “In my opinion, as an acknowledged expert on cancer and on Krebiozen, and based upon my own personal experiences and the experience of some 3000 licensed physicians whose results have been studied by me, Krebiozen is safe and beneficial in the treatment of cancer, and possesses significant palliative, arresting and remissive action on human cancer”.

Plaintiff Durovic asserted no medical nor scientific qualifications. His affidavit was divided into eight parts, as follows:

1. “Krebiozen is not creatine”. (HEW has at times, beginning in September 1963, announced that ampules of Krebiozen contain mineral oil and some but not all contain a readily available and inexpensive laboratory substance known as creatine.) Affiant stated that creatine monohydrate is an impurity, associated in the ampule with a yellowish material or oil, a complex structure the components of which would require 10 years of effort to identify. He asserted that in the criminal trial it had been proved that Krebiozen was not mere creatine monohydrate, and referred to the testimony of various witnesses on that issue.

2. “Krebiozen is effective in the treatment of cancer”. Affiant asserted what he considered inadequacies in the qualifications, procedure, and standards of the committee of 24 referred to by Dr. Steinfeld.

3. “Krebiozen is effective in the treatment of advanced, and hopeless cancer cases” Affiant stated that a hospital in Philadelphia and a number of physicians have treated patients with Krebio-zen. He summarized or related certain testimony of Dr. John Pick who had seen cancer patients experience favorable results after treatment with Krebiozen and who stated that “it is of great help in the management of cancer”.

4. “The Affidavit of Marion I. Fin-kel, M.D., Deputy Director Bureau of Drugs of FDA”. Affiant pointed out that this affidavit, asserting certain announcements by FDA, did not establish the announcements were true.

5. “The Affidavit of Joseph Levine”. Affiant asserted certain facts which he said renders Levine’s determination of the composition of Krebiozen inadequate.

6. “The Affidavits of Dr. Jesse L. Steinfeld and Dr. Carl G. Baker”. Af-fiant asserted various facts on the basis of which he said their affidavits lack probative value.

7. “The Affidavits of Levine, Finkel, Baker, and Steinfeld”. Affiant asserted Dr. Scott Anderson and Dr. Walter McCrone had established that Krebiozen was not creatine monohydrate, and that in the criminal trial defendants were acquitted because of the government’s failure to prove that Krebiozen is creatine monohydrate or that ampules labeled Krebiozen and containing mineral oil, lacked Krebiozen powder.

8. “Krebiozen is safe and not toxic”. Affiant stated that Krebiozen is not toxic, and that this was proved by statements of physicians who had administered thousands of injections, Dr. Ivy’s observations, Dr. Pick’s testimony that he had been injected with 100 ampules without ill effects, and the report to that effect of the Philadelphia hospital after treating 40 patients.

It must be remembered that the issue presented under the applicable law is not whether Krebiozen is in fact nontoxic, nor in fact effective, nor whether some physicians or experts could be found who considered it so, but solely whether by October 9, 1962, it had achieved general recognition among the experts as safe for the management of malignant tumors, as the term “safe” was then properly interpreted. It is clear that neither Dr. Ivy’s affidavit nor the reports and opinions of others, reported by Durovic’s affidavit, purported to assert that Krebiozen had, as of October 9, 1962, achieved general recognition among experts as safe or safe and effective.

Analytically, it is plausible to argue that.the addition by Congress of “effective” to the standard by which drugs were to be judged on and after October 10, 1962, meant that effectiveness was not part of the standard before that date, when only “safe” appeared. On the other hand, it is clear that those responsible for the change understood that “The Food and Drug Administration now requires, in determining whether a ‘new drug’ is safe, a showing as to the drug’s effectiveness where the drug is offered for use in the treatment of a life-threatening disease. ... In such eases, the determination of safety is, in the light of the purposes of the new drug provisions, considered by the Food and Drug Administration to be inseparable from consideration of the drug’s effectiveness. The provisions of the bill are in no way intended to affect any existing authority of the Department of Health, Education, and Welfare to consider and evaluate the effectiveness of a new drug in the context of passing upon its safety”.

The thinking behind the position referred to is illustrated in the Steinfeld and Baker affidavits, as follows: “The use of an ineffective drug such as Kre-biozen for the treatment of a life-threatening disease such as cancer is not a safe medical practice. Any delay in the institution of effective therapy (e. g., radiation, surgery, effective chemotherapy) caused by the use of an ineffective drug allows the disease to progress beyond control. Delay means almost certain death”.

Bearing in mind the weight properly accorded to administrative construction, and Congressional awareness of the administrative view that the concept of safety in the law before the 1962 amendments included the concept of effectiveness for its indicated use where the drug is offered for use in the treatment of life-threatening disease, we think the definition of new drug before the amendments should be construed accordingly. It would follow that a drug offered for use in the treatment of cancer is now, and was before the amendments, a new drug unless it has achieved general recognition among the experts as safe and effective for such use.

Under that analysis, the status of a drug offered for such use would be subjected to the same test before and after the amendments, and the grandfather clause would have no effect on it.

Applying the reasoning just stated, the declaratory judgment was clearly correct. The affidavits demonstrate, beyond any issue of fact, that Krebiozen has not, either before or after October 9, 1962, achieved general recognition among qualified experts as safe and effective for use in the management of malignant tumors.

If, however, we are in error in such reasoning, an alternative path also leads us to affirm the judgment. Assuming arguendo that even for drugs intended for treatment of life-threatening disease, “safe”, before the 1962 amendments, meant only non-toxic, the affidavits have established that, as of October 9, 1962, the identity and composition of Krebiozen was so completely unknown that it could not, for that reason, have been generally recognized among qualified experts as safe, even in the narrow sense, for its indicated use.

We have been made aware, in this record, of much of the emotionally charged controversy about Krebiozen. Some characterize Krebiozen as a hoax, yet there are many who believe with deep sincerity that a number of cancer sufferers have been aided, or even saved, by it. Its advocates contend that the medical “establishment” both in and out of government has unfairly denied Kre-biozen a reasonable test. So distinguished a person as the Honorable Paul Douglas, former Senator from Illinois, has taken its part. Some would argue that if a substance is found to be innocuous, a sufferer who hopes it will relieve him is entitled to have it.

The issues suggested by the last paragraph, however, are not before us for decision.

The law, as Congress enacted it, looks primarily to the administrative process for deciding which new drugs meet appropriate standards for introduction into interstate commerce. That process is to protect the public through granting, denying, and suspending the effectiveness of NDA’s. Administrative decisions are subject to judicial review within the appropriate limits. Realizing, however, that there were already on the market, or might come to be, drugs offered to the public which already were, or would be, so clearly recognized as safe (before the 1962 amendments) or as safe and effective (thereafter) that subjecting them to the administrative process would be unnecessary and wasteful, Congress allowed them to bypass the NDA procedure. We think the standard of general recognition by qualified experts was intended to be strictly construed so that unless a drug is clearly entitled to proceed through the direct channel, it must proceed through the NDA channel.

Interpreting the law in the light of its purpose we are convinced that neither as of October 9, 1962, nor since, has Krebiozen achieved the extent and type of general recognition that entitles a drug to short-circuit the NDA procedure.

The judgment appealed from is affirmed.

      . Such opportunity is not a prerequisite to prosecution. United States v. Dotter-weich, 320 U.S. 277, 279, 64 S.Ct. 134, 88 L.Ed. 48 (1943) rehearing den. 320 U.S. 815, 64 S.Ct. 367, 88 L.Ed. 492.

      . P.L. 87-781, 76 Stat. 780.

      . Krebiozen lias been involved in a number of judicial proceedings, (a) Durovic v. Palmer, 342 F.2d 634 (7th Cir. 1965). Plaintiff Stevan Durovic unsuccessfully sought to challenge certain federal investigations in June, 1963 of the preparation of Krebiozen. The opinion reflects at least an assumption that Krebiozen was then a “new” drug, “being distributed ostensibly for investigational use. . . .” (b) Ivy v. Katzenbach, 351 F.2d 32 (7th Cir. 1965), cert. den. 382 U.S. 958, 86 S.Ct. 437, 15 L.Ed.2d 732. Ivy unsuccessfully sought to enjoin prosecution under an indictment and requested a court supervised clinical test of the drug. The prosecution proceeded and resulted in acquittal, followed by conviction of a juror of criminal contempt for having brought extra-judicial information concerning Krebiozen to the attention of fellow jurors. See United States v. Bukowski, 435 F.2d 1094 (7th Cir. 1970). (c) Tutoki v. Celebrezze, 375 F.2d 105 (7th Cir. 1967). Although present plaintiffs do not appear to have been parties, this court said “The present posture of Krebiozen vis-á-vis the Food and Drug Administration (FDA) is that it is not approved under or exempted from section 505”. (d) Rutherford v. American Medical Association, 379 F.2d 641 (7th Cir. 1967), cert. den. 389 U.S. 1043, 88 S.Ct. 787, 19 L.Ed.2d 835. Again present plaintiffs were not parties. This court said, however, “Krebiozen is unavailable in interstate commerce. As a new drug, it has not received an approval, required by the Food, Drug and Cosmetic Act, 21 U.S.C.A., § 355, which would permit its introduction into interstate commerce”, p. 643.

      . United States v. Seven Cartons, More or Less, etc., 424 F.2d 1364 (7th Cir. 1970); Tyler Pharmacal Distrib. Inc. v. U. S. Dept. of Health, E. & W., 408 F.2d 95, 99 (7th Cir. 1969); AMP Incorporated v. Gardner, 389 F.2d 825, 831 (2d Cir. 1968).

      . Senate Report No. 1744, July 19, 1962, 1962 U.S.Code Congressional and Administrative News, p. 2891.

      . In any event a grandfather clause exception is to be construed strictly against one who invokes it. United States v. Allan Drug Corporation, 357 F.2d 713, 718 (10th Cir. 1966) cert. den. 385 U.S. 899, 87 S.Ct. 203, 17 L.Ed.2d 131.

      . United States v. Dotterweich, supra, fn. 1, p. 280.


source: Caselaw Access Project

author: WALLACE, Circuit Judge: LUMBARD, Circuit Judge

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Kenneth Dale HUDSON, Defendant-Appellant.
    No. 72-1757.
    United States Court of Appeals, Ninth Circuit.
    Dec. 8, 1972.
    Rehearing and Rehearing En Banc Denied July 5, 1973.

      Lumbard, Circuit Judge, dissented in an opinion.
    Jerry E. Berg (argued), Palo Alto, Cal., for defendant-appellant.
    Joseph Reeves, Asst. U. S. Atty. (argued), John F. Cooney, Jr., Asst. U. S. Atty., James L. Browning, Jr., U. S. Atty., for plaintiffrappellee.
    Before LUMBARD, HAMLEY and WALLACE, Circuit Judges.

       Honorable J. Edward Lumbard, Senior United States Circuit Judge of the Second Circuit, sitting by designation.

   WALLACE, Circuit Judge:

Appellant was convicted of violating 50 U.S.C.App. § 462(a) for failing to report for induction at the bus depot as ordered. The only evidence of the crime was appellant’s Selective Service file; he contends that part of the file was inadmissible and the whole file was insufficient to sustain the conviction. Nowhere does he contend that he did report. We affirm.

Appellant was ordered to report on January 26, 1971. Page 11 of the file, entitled “Minutes of Actions by Local Board and Appeal Board and on Appeal to the President,” contains, next to a stamped date of “JAN 26 1971,” the typewritten entry “Failed to Report for Induction.” Page 56 is a letter dated March 2, 1971, from a “Field Supervis- or” of the state director to the local board. The letter indicates that appellant’s file was enclosed, states in part that “[i]t appears that the registrant is in violation of section 12 of the Military Selective Service Act of 1967,” and directs the local board to complete a “Report of Violation” form. Apparently in response, page 57 is a completed “Report of Violation” form dated March 3, 1971, which is addressed to the United States Attorney and signed by a representative of the local board. By checks in appropriate boxes, the form indicates that appellant was ordered to report for induction and failed to do so.

While there is some question as to the nature of the objection made at trial, it can be fairly construed to be directed to the pages in question and to include the ground of lack of foundation. No attempt was made to qualify the file as a business record pursuant to 28 U.S.C. § 1732. Admissibility as an exception to the hearsay rule must therefore be based upon a showing that it qualified as an official document under 28 U.S.C. § 1733(a) which provides:

Books or records of account or minutes of proceedings of any department or agency of the United States shall be admissible to prove the act, transaction or occurrence as a memorandum of which the same were made or kept.

The first step towards admissibility requires the copy of appellant’s Selective Service file be authenticated. 28 U.S.C. § 1733(b). This is satisfied when an officer having legal custody of the record, or his deputy, certifies the nature of the record, that he has custody of the original and attaches the seal of his office. Fed.R.Crim.P. 27; Fed.R. Civ.P. 44; Yaich v. United States, 283 F.2d 613, 617 (9th Cir. 1960). In the instant case, a “certificate” was attached to the file which complied with these requirements.

Once proven authentic, Selective Service files apparently have been deemed to comply with the statute and without any further showing admitted as official documents. United States v. Lloyd, 431 F.2d 160, 163-164 (9th Cir. 1970), cert. denied, 403 U.S. 911, 91 S.Ct. 2210, 29 L.Ed.2d 688 (1971); LaPorte v. United States, 300 F.2d 878 (9th Cir. 1962); Yaich v. United States, supra, 283 F.2d at 616; Kariakin v. United States, 261 F.2d 263, 265 (9th Cir. 1958). The point raised by appellant is that the record is silent as to who made the en-try on page 11 and pursuant to what duty. The alleged offense took place at a bus station. Yet, the entry of the failure to report is found in the “Minutes of Actions by Local Board and Appeal Board and on Appeal to the President.” Appellant claims there must be an affirmative showing that the person who made the entry actually witnessed the failure to appear, and he relies on United States v. Knudsen, 320 F.Supp. 878 (W.D.Wis. 1971).

Because § 1733 states the record “shall be admissible,” it could be contended that nothing further than general compliance with the statute is necessary for admissibility of every part of the file. However, appellant is partially correct in his contention that'the author of the challenged entry must possess personal knowledge of the evidence stated therein. Yaich v. United States, supra, 283 F.2d at 616; Olender v. United States, 210 F.2d 795, 801 (9th Cir. 1954). (One exception to this rule will be discussed infra.) On its face, the entry on page 11 could well be taken by the trial judge as a recording of a firsthand impression and therefore the declarant, if called to testify, could make the same statement in court. The trial court, therefore, did not commit error in admitting the statement under § 1733. That there is no independent affirmative evidence that the recorder actually had first-hand knowledge does not militate against its admissibility and we, therefore, decline to follow the district court in United States v. Knudsen, supra. Such a restrictive rule would virtually emasculate the purpose behind § 1733 and require the proponent of the record to call witnesses for each entry where the entrant did not sign his name, state his title and make an additional statement to the effect that “I was there and saw it.” The main thrust of both §§ 1732 and 1733 is to obviate the need to call witnesses to each item in a writing which qualifies pursuant to either one of the sections. Olender v. United States, supra at 801. So long as the entry meets the basic requirements referred to above and appears trustworthy on its face, there is no error if the court admits it into evidence.

This position is consistent with our earlier opinion in Kariakin v. United States, supra, where the defendant was convicted for failing to report for induction. We stated:

As proof of his failure to report on October 4 as required by the notice of the Board, there is contained in the file a letter dated October 1 by appellant, saying he refused to report; a notation on the minutes of the local board on October 8, 1956, “Papers ret’d. from Ind. Sta. Failed to Report for Induction”; and a record of his appearance at the local board on October 11, 1956 (one week after he was supposed to report for induction), at which time appellant wrote out a copy of his letter of October 1 (refusing to report).
We hold there was ample evidence to sustain the judgment of conviction.

261 F.2d at 265-266.

We note that one of the three entries mentioned was a notation in the minutes of the local board (similar to the page 11 entry in this case) stating in essence that there was a failure to appear. That evidence was considered, along with the two other items in the file, in sustaining the judgment of conviction. The Kariakin entry had one additional sentence which could be interpreted as making it less likely that the entrant was present when the act occurred. If that entry was acceptable, a fortiori, the questioned entry on page 11 in this case should be admissible.

That there is but one entry and it does not state all that could be recorded does not militate against admissibility. As we have held before, “the fullness and completeness of the official document would bear upon its weight and not upon its admissibility.” LaPorte v. United States, supra, 300 F.2d at 882.

The entries on pages 56 and 57 involve a different problem. That these items found their way into appellant’s file does not necessarily mean they are admissible. Each document contains a report of failure to appear. From their nature and content, one could only conclude they report what has been told to or read by the writer and are, therefore, double hearsay. If the source of the report came from within the file, it could only come from the page 11 entry. If from outside the file, there remains the question of the foundation for the extra step of hearsay. While § 1733(a) obviates the first step of hearsay so that the writer need not be called as a witness, it does not ordinarily make double hearsay admissible. We said in Olender v. United States:

Thus, this circuit and most of the other circuits which have passed on the question have held that the facts stated in the document must have been within the personal knowledge and observation of the recording official or Ms subordinates, and that reports based upon general investigations and upon information gleaned second hand from random sources must be excluded. (Emphasis supplied.)

210 F.2d at 801.

We have, therefore, noted an exception to the rule requiring first-hand knowledge when a subordinate with such knowledge reports to the recording officer.

However, it is unnecessary for us to determine whether pages 56 and 57 fit into this exception. They are, at the worst, only cumulative of the entry on page 11 which was properly before the trier of fact. In a case tried by the court without a jury, if there was admissible evidence sufficient to sustain a finding, the admission of improper evidence is not grounds for reversal. Bailey v. Sears, Roebuck & Co., 115 F.2d 904, 907 (9th Cir. 1940), cert. denied, 314 U.S. 616, 62 S.Ct. 82, 86 L.Ed. 495 (1941); Anglo California National Bank v. Lazard, 106 F.2d 693, 706 (9th Cir. 1939), cert. denied, 308 U.S. 624, 60 S.Ct. 379, 84 L.Ed. 521 (1940).

The next contention is whether the entry on page 11 is sufficient to sustain a conviction. Of course, evidence before the trier of fact must be interpreted in a light most favorable to the government. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942). The trial judge had before him the statement that appellant “failed to report for induction” which, under the law, must be considered as evidence that in fact the appellant did not appear. Such evidence was uncontradicted. The appellant chose not to take the stand nor offer any evidence in his own defense. Under the circumstances, we cannot say there was insufficient evidence for the court to find beyond a reasonable doubt that the appellant failed to appear as ordered.

LUMBARD, Circuit Judge

(dissenting) :

This is a case in which a defendant has been convicted solely on the basis of an anonymous notation in a Government record. Appellant was ordered to report for induction into the armed forces on January 26, 1971. He was indicted for failure to report., The only evidence that the Government introduced at trial, and on which the majority rely to sustain the conviction, is an unsigned, typewritten entry in appellant’s selective service file stating that appellant “Failed to Report for Induction” and dated January 26, 1971. There is nothing in the record to indicate who made this entry and what if any means that person would have had to observe who reported and who did not report at the induction station on the day in question. I cannot agree that the use of such evidence, without any foundation, is sanctioned by 28 U.S.C. § 1733. Therefore, I dissent from the opinion of the panel and would reverse and remand this case to the district court for a new trial.

Section 1733 is designed to eliminate the hearsay objection to the admission of statements appearing in Government records. Its purpose is to obviate the necessity and inconvenience of calling to the witness stand the Government officers who made and recorded the written hearsay statements. See Wong Wing Foo v. McGrath, 196 F.2d 120, 121 (9th Cir. 1952). Therefore, this provision eliminates any hearsay objection predicated on the fact that the statements sought to be admitted are third party statements in a Government record. However, § 1733 does not eliminate all evidentiary objections, other than the threshold hearsay argument, that might be raised to the admissibility of such statements, for this public-documents rule only serves to make the record a substitute for the appearance of the recording official in court. See Yaich v. United States, 283 F.2d 613, 616 (9th Cir. 1960).

The essence of appellant’s objection here is that the Government has not shown that the recorded matter was within the personal knowledge of the entrant. Appellant’s point is fundamental in the law of evidence: any witness who testifies to a fact that can be perceived by the senses must have had an opportunity to observe and must actually have observed the fact. “The same requirement ... is imposed upon declarations coming in under exceptions to the hearsay rule, that is, the declarant must so far as appears have had an opportunity to observe the fact declared.” McCormick, Evidence, p. 19. As Dean Wigmore stated:

Under the exceptions to the Hearsay rule the testimony of the witness deceased or absent must equally be based on personal observation. [T]he person making the statements must have the means of knowledge expected normally of every witness. 2 Wigmore § 670.

“The burden of laying a foundation by showing that the witness had an adequate opportunity to observe is upon the party offering the testimony.” McCormick, supra.

This requirement of first-hand knowledge has not been overlooked by the courts that have applied § 1733, and it appears to have been accepted as a prerequisite to the admission of statements that circumvent the hearsay objection by virtue of § 1733. Yung Jin Teung v. Dulles, 229 F.2d 244, 247 (2d Cir. 1956); Yaich v. United States, 283 F.2d 613, 616 (9th Cir. 1960). On the one hand, the majority appear to concede that some showing of first-hand knowledge is necessary; on the other.hand, they read all significance out of the requirement by holding that it is satisfied here merely because the statement on its face appears to be a record of first-hand knowledge.

The majority justify this curious approach on the ground that the application of the first-hand knowledge requirement would serve to emasculate § 1733. However, I fail to perceive this as a serious hazard. Section 1733 serves to obviate the hearsay objection. In the face of an objection, the Government need only show who the declarant was and that he was in a position to observe personally the fact that he recorded. This would not always require the Government to call the recording official, as the majority fear; for the entrant’s presence in a position to observe the recorded facts could be shown in any number of ways other than his own testimony. Hence, because of the majority’s groundless fears of emasculating § 1733, they have unnecessarily undermined the requirement of first-hand knowledge, a fundamental of the law of evidence. They appear to have concluded, erroneously I believe, that § 1733 makes statements placed into Government records impervious to serious evi-dentiary objections.

Applying the first-hand-knowledge requirement here would not overburden the Government in its prosecution of criminal cases, as the majority admit. Either it could introduce evidence of the identity of the entrant and of his opportunity to observe appellant’s failure to report, or it could introduce alternative evidence of this fact that would not be subject to the same objection. In either event, we would not be confronted with the alarming specter of a criminal defendant being convicted and sentenced solely on the statement of an anonymous person appearing in a Government record.

      . Knudsen, on its facts, would have been decided differently in this circuit. There, the failure to appear was apparently seen by two enlisted men who reported to a Captain who in turn, without affirmative proof of personal knowledge, stated the fact of non-appearance in a letter which was part of Knudsen’s Selective Service file. As the enlisted men can be considered subordinates reporting to the official who makes his report, the report would be admissible. See Olender v. United States, 210 F.2d 795, 801 (9th Cir. 1954).

      . The general thrust of admissibility for government records appears to be a type of presumptive cloak of validity because they are assumed ordinarily to be reliable. Wong Wing Foo v. McGrath, 196 F.2d 120, 123 (9th Cir. 1952) 5 Wigmore on Evidence § 1632 (3d ed. 1940).

      . If the entrant did not in fact observe the failure to appear, appellee could obviate this difficulty by producing and providing the necessary foundation for a Selective Service form No. 261 upon which the roll is taken at the place designated for induction. See 32 C.F.R. §§ 1632.15 and 1632.20. See also Kariakin v. United States, 261 F.2d 263, 265-66 (9th Cir. 1958). As an alternative theory, Professor Wigmore argues for the position that when the entrant has a duty to ascertain the facts about which the entry is made, his failure to observe the facts personally does not make the entry inadmissible. 5 Wigmore, supra, §§ 1635, 1638.

      . See also LaPorte v. United States, 300 F.2d 878, 882 (9th Cir. 1962). Some cases have apparently extended the rule further. See United States v. Harris, 446 F.2d 129 (7th Cir.), cert. denied, 404 U.S. 994, 92 S.Ct. 533, 30 L.Ed.2d 546 (1971), where a letter which asserted defendant did not report for alternative civilian work was held admissible as part of his Selective Service file; Holmes v. United States, 387 F.2d 781 (7th Cir.), cert. denied, 391 U.S. 936, 88 S.Ct. 1835, 20 L.Ed.2d 856 (1968), where a letter sent by the local board to a hospital requesting a statement that defendant refused alternative service and subsequently returned with an unsigned, undated notation that the hospital had no knowledge of defendant was held admissible as part of his file.

      . Similarly, under § 1732 there is an exception to the requirement that the writer observe the described act when the document sought to be introduced qualifies as a business record and a subordinate, who had first-hand knowledge, had made an oral or written report to the entrant in the regular course of business. LaPorte v. United States, supra, 300 F.2d at 881.

      . For example, the Government could identify the entrant, show that he was employed at the induction station with a duty to be present at the place where appellant would have reported, and show that he was on duty on the day in question.

      . In footnote 3 of the majority's opinion, it is noted that the Government could avoid any objection such as was raised here by producing, and providing the necessary foundation for a Selective Service form No. 261 upon which the roll is taken of those who report at the place designated for induction.


author: ALDRICH, Senior Circuit Judge. COFFIN, Chief Judge

text:
    In re KAUFFMAN MUTUAL FUND ACTIONS. Joseph B. Kauffman, Plaintiff-Appellant.
    No. 72-1288.
    United States Court of Appeals, First Circuit.
    Argued Jan. 4, 1973.
    Decided May 14, 1973.
    Coffin, Chief Judge, concurred and filed opinion.

      William T. Coleman, Jr., Philadelphia, Pa., with whom Bruce W. Kauffman, David H. Pittinsky, Lawrence Berger, Aaron M. Fine, Philadelphia, Pa., Joseph B. Kauffman, Atlantic City, N. J., Dil-worth, Paxon, Kalish, Levy & Coleman, Harold E. Kohn, Philadelphia, Pa., were on brief, for appellant.
    Lawrence T. Perera, and Sumner H. Babcock, Boston, Mass., with whom the following attorneys were on briefs, for appellees: Boston Fund, Inc., William J. Speers, Jr., Samuel Adams, Warner & Stackpole, Boston, Mass.; Boston Management & Research Co., Inc., Vance, Sanders & Co., Inc., Gael Mahony, Reginald C. Lindsay, Hill & Barlow, Boston, Mass.; The Colonial Fund, Inc., Lewis H. Weinstein, John Paul Sullivan, Christian M. Hoffman, Foley, Hoag & Eliot, Boston, Mass.; Colonial Management Associates, Inc., James H. Orr, John R. Hally, Nutter, McClennen & Fish, Boston, Mass.; Eaton & Howard Stock Fund, Eaton & Howard Balanced Fund, Thomas D. Burns, Erik Lund, Burns & Levinson, Boston, Mass.; Eaton & Howard, Inc., Charles F. Eaton, Jr., John F. Groden, John M. Reed, Withington, Cross, Park & Groden, Boston, Mass.; Fidelity Fund, Inc., Fidelity Capital Fund, Inc., Puritan Fund, Inc., Salem Fund, Inc. (formerly Dow Theory Investment Fund, Inc.), John J. Curtin, Jr., Richard F. McCarthy, Bingham, Dana & Gould, Boston, Mass.; Fidelity Management & Research Co., Edward C. Johnson 2d, Edward B. Hanify, George T. Finnegan, Ropes & Gray, Joseph P. Rooney, Ansel B. Chaplin, Roreg M. Barzun, Gaston, Snow, Motley & Holt, Boston, Mass.; Fidelity Trend Fund, Inc., Patrick T. Ryan, Drinker, Biddle & Reath, Philadelphia, Pa.; Keystone Custodian Funds, Inc., Wilfred Godfrey, Franklin R. Johnson, Boston, Mass.; Marvin Schwartz, Richard E. Carlton, Sullivan & Cromwell, New York City; Loomis-Sayles Mutual Fund, Inc., Daniel B. Bickford, Ely, Bartlett, Brown & Proctor, Boston, Mass.; Loomis-Sayles & Co., Inc., Maurice T. Freeman, Samuel Hoar, Goodwin, Procter & Hoar, Boston, Mass.; Massachusetts Fund, Daniel F. Featherston, Jr., Featherston, Homans & Klubock, Boston, Mass.; The Massachusetts Co., Inc., Henry R. Guild, Richard F. Barrett, Douglas Danner, Powers & Hall, Boston, Mass.; Pioneer Fund, Inc., C. Thomas Swaim, Sher-burne, Powers & Needham, Boston, Mass.; Pioneer Management Corp., Philip L. Carret, Jerome P. Facher, Hale & Dorr, Boston, Mass.; The Putnam Growth Fund, The George Putnam Fund of Boston, Putnam Investors Fund, Inc., Jeffrey Swope, Palmer & Dodge, Boston, Mass.; Putnam Management Co., Inc., Charles M. Werly, Samuel E. Gates, Steven A. Sehatten, Debevoise, Plimpton, Lyons & Gates, New York City; Van Strum & Towne, Inc., Isaac Shapiro, Milbank, Tweed, Hadley & McCloy, New York City; Bullock Fund, Ltd., Dividend Shares, Inc., Stephen R. Steinberg, Reavis & McGrath, New York City; Chemical Fund, Inc., E. Roger Frisch, Walsh & Frisch, New York City; Calvin Bullock, Ltd., Hugh Bullock, F. Eber-stadt & Co., Francis S. Williams, Distributors Group, Inc., Herbert R. Anderson, Marvin Schwartz, Richard E. Carlton, Sullivan & Cromwell, New York City; Energy Fund, Inc., Ralph E. Samuel & Co., Donald C. Samuel, Larry M. Lavinsky, Proskauer, Rose, Goetz & Mendelsohn, New York City; Investment Co. Inst., Edgar H. Brenner, Jeffrey A. Burt, Arnold & Porter, Washington, D. C.; Manhattan Fund, Inc., Paul M. O’Connor, Jr., Whitman & Ransom, New York City; Tsai Management & Research Corp., W. Foster Wollen, Shearman & Sterling, New York City; State Street Investment Corp., Federal Street Fund, Inc., Haskell Cohn, Mintz, Levin, Cohn, Glovsky & Popeo, Boston, Mass.; State Street Research & Management Company, Paul C. Cabot, Harold M. Willcox, Norman A. Hubley, Herrick, Smith, Donald, Farley & Ketchum, Boston, Mass.; Wellington Fund, Inc., Windsor Fund, Inc., Wellington Management Co., Walter L. Morgan, Robert M. Buchanan, Charles C. Cabot, Jr., Sullivan & Worcester, Boston, Mass.; Affiliated Fund, Inc., Edward J. Ross, Breed, Abbott & Morgan, New York City; Lord, Abbett & Co., Robert S. Driscoll, Judson A. Parsons, Jr., Dewey, Ballan-tine, Bushby, Palmer & Wood, New York City; Axe-Houghton Fund B, Inc., Scudder, Stevens & Clark Common Stock Fund, Inc., Scudder, Stevens & Clark Balanced Fund, Inc., Channing Shares, Inc., Channing Growth Fund, Channing Balanced Fund, Michael 0. Finkelstein, Barrett, Smith, Schapiro & Simon, New York City; E. W. Axe & Co., Inc., Louis K. Hyde, Jr., Scudder, Stevens & Clark, Ronald T. Lyman, Jr., Samuel E. Gates, Steven A. Schatten, Debevoise, Plimp-ton, Lyons & Gates, New York City; Gerald Tsai, Jr., David Hartfield, Jr., White & Case, New York City; National Securities Series, National Securities Stock Series, National Securities Growth Series, Thomas B. Fenlon, Emmett, Marvin & Martin, New York City; National Securities & Research Corp., Philip C. Smith, Robert J. Sisk, Hughes, Hubbard & Reed, New York City; The Dreyfus Fund, Inc., The Dreyfus Corp., Howard M. Stein, Stuart A. Jackson, Royall, Koegel & Wells, New York City; The One William Street Fund, Inc., Robert S. Carlson, Roth, Carlson, Kwit, Spengler & Goodell, New York City; Lehman Brothers, Allan B. Hunter, James J. Hagan, Simpson, Thacher & Bartlett, New York City; The Value Line Special Situations Fund, Inc., Arnold Bernhard & Co., Inc., Arnold Bernhard, United Funds, Inc., United Accumulative Fund, United Income Fund, United Science Fund, Waddell & Reed, Inc., Joe Jack Merriman, Albert D. Jordan, Valicenti, Leighton, Reid & Pine, Boston, Mass.; Selected American Shares, Inc., Security Supervisors, Edward P. Rubin, Edward H. Hatton, Lynne E. McNown, Jenner & Block, Chicago, 111.; Stein, Roe & Farn-ham Balanced Fund, Inc., Stein, Roe & Farnham, Harry H. Hagey, Jr., Otis H. Halleen, Sonnenschein, Levinson, Carlin, Nath & Rosenthal, Chicago, 111.; Technology Fund, Inc., Supervised Investors Services, Inc., John Hawkinson, Francis E. Schlax, Meyers & Matthias, Chicago, 111.; Financial Industrial Fund, Inc., Financial Programs, Inc., Thomas J. Herbert, Leland E. Modesitt, Gorsuch, Kir-gis, Campbell, Walker & Grover, Denver, Colo.; Hamilton Funds, Inc., James A. Clark, Berge, Martin & Clark, Denver, Colo.; Hamilton Management Corp., Roberts B. Owen, Covington & Burling, Washington, D. C.; Washington Mutual Investors Fund, Inc., Johnston, Lemon & Co., James H. Lemon, John A. Beck, Frost, Towers, Hayes & Beck, Washington, D. C.; T. Rowe Price Growth Stock Fund, Inc., Rowe Price New Horizons Fund, Inc., Stanley J. Friedman, Sher-eff, Friedman, Hoffman & Goodman, New York City; T. Rowe Price & Associates, Inc., Charles W. Schaeffer, Rowe Price Management Company, Inc., T. Rowe Price, Daniel A. Pollack, Pollack & Singer, New York City; Investors Diversified Services, Inc., Stuart F. Sillo-way, A. Vernon Carnahan, Donovan, Leisure, Newton & Irvine, New York City; American Mutual Fund, Inc., William W. Vaughn, O’Melveny & Myers, Los Angeles, Cal.; The Investment Co. of America, Carl J. Schuck, Overton, Lyman & Prince, Los Angeles, Cal.; Capital Research and Management Co., Jonathan B. Lovelace, Philip F. Belleville, Latham & Watkins, Los Angeles, Cal.; American Express Investment Fund, Inc., Robert D. Raven, Morrison, Foers-ter, Holloway, Clinton & Clark, San Francisco, Cal.; American Express Investment Management Co., Fred H. Merrill, Richard Murray, McCutehen, Doyle, Brown & Enersen, San Francisco, Cal.; Anchor Growth Fund, Inc. (formerly Diversified Growth Stock Fund, Inc.), Anchor Income Fund, Inc. (formerly Diversified Investment Fund), Fundamental Investors, Inc., Cornelius J. Moynihan, Jr., Peabody, Brown, Rowley & Storey, Boston, Mass.; Anchor Corp., John R. Haire, Daniel A. Pollack, Pollack & Singer, New York City; Group Securities, Inc., Howard F. Ordman, Putney, Twombly, Hall & Hirson, New York City; Investors Mutual, Inc., Investors Stock Fund, Inc., Investors Variable Payment Fund, Inc., Ralph M. Carson, Richard E. Nolan, Frank S. Moseley, Davis, Polk & Wardell, New York City.
    Before COFFIN, Chief Judge, ALD-RICH and McENTEE, Circuit Judges.
   ALDRICH, Senior Circuit Judge.

This appeal challenges two rulings of the district court that plaintiff’s derivative suit on behalf of certain mutual funds of which he is a shareholder is not maintainable because of failure to allege sufficient reason to excuse a prior demand on the directors, and, as to two funds, on the shareholder. F.R.Civ.P. Rule 23.1, post. We reach only the first issue.

Plaintiff is a shareholder in four mutual funds, the Dreyfus Fund, Inc., Manhattan Fund, Inc., Fidelity Trend Fund, Inc., and the Putnam Growth Fund, the latter two being, respectively, a Massachusetts corporation and a Massachusetts business trust. In December, 1968 he filed this suit in the District of New Jersey in several capacities — not only as a shareholder of the above funds, but also, inter alia, as a representative of shareholders of other funds — alleging antitrust and Investment Company Act causes of action against many large mutual funds, their external investment advisers, directors affiliated with both funds and advisers, and the Investment Company Institute, the trade association for the mutual fund industry. The thrust of the antitrust claim, the only one relevant to this proceeding, is that defendant fund directors, who were also affiliated with investment advisers, conspired with funds, advisers, and others to set excessive noncompetitive management fee schedules based solely on the average net assets of the funds. In April, 1969 defense counsel submitted a list of fifteen preliminary motions, divided into three groups, the second group including a Rule 23.1 attack on plaintiff’s failure to make a demand on directors and shareholders. The district court dealt with the first group, challenging plaintiff’s capacity to sue, denied the motions, Kauffman v. Dreyfus Fund, Inc., D.N.J., 1969, 51 F.R.D. 18, but certified an interlocutory appeal. The Third Circuit held that plaintiff could only sue derivatively on behalf of the four funds in which he owned shares, [the “Kauffman funds”]. 434 F.2d 727, cert. denied, 401 U.S. 974, 91 S.Ct. 1190, 28 L.Ed.2d 323.

Thereafter, when a second group of motions attacking jurisdiction, venue, and process, but not then including the Rule 23.1 motion, was pressed, the district court severed the antitrust claim (Count I) from the others, and divided it into ’ten separate actions to be tried in ten separate districts. In July, 1971 plaintiff applied for consolidation under 28 U.S.C. § 1407(a) and in January, 1972 the Judicial Panel on Multidistrict Litigation transferred some of the actions for consolidated pretrial proceedings to the District of Massachusetts. In re Kauffman Mutual Fund Actions, Jud.Pan.Mult.Lit.1972, 337 F.Supp. 1337. After an informal pretrial conference the district court issued a pretrial order to govern future proceedings, setting a time schedule for disposing of motions and looking toward the establishment of a timetable for completing “first-wave” and “second-wave” discovery. Defendants then brought forward, (1) a Rule 23.1 motion to dismiss for failure of plaintiff to make a demand on directors of the Kauffman funds, (2) a Rule 23.1 motion to dismiss, on behalf of the two Massachusetts Kauffman funds, for failure of plaintiff to make a demand on stockholders; (3) a Rule 23.1 motion to dismiss because of plaintiff’s inability to give fair representation, and (4) a motion by non-Kauffman funds to dismiss for failure to state or waiver of any claim upon which relief could be granted. The court, 56 F.R.D. 128, though denying the latter two motions, granted the first two and dismissed the complaint on July 7, 1972. This appeal followed; there being no cross-appeal.

Relative to the reasons for not making demand upon the directors, the complaint, the pertinent parts of which are summarized in the margin, alleges the following: (1) a demand would have been futile; (2) the unlawful combination and conspiracy began at least as early as January 1, 1965; (3) the fund directors who were affiliated with the external advisers dominated and controlled the personnel, policies, and boards of directors of the funds; (4) the contracts between the advisers and the funds “have not been either the subject or the result of arm’s length bargaining”; (5) the fee for investment advisory and management services, being based solely on the average net assets of a fund, bore no relation to services performed or results and were grossly excessive; (6) the conspiracy involved the funds, their advisers, the “self-dealing” directors, the Investment Company Institute and others unknown, and was aimed at fixing and maintaining the grossly excessive management fees and refraining from competition; and (7) all of the defendants “acquiesced, encouraged, cooperated and assisted in the effectuation and maintenance” of the conspiracy. By uncontra-dicted affidavits submitted in the spring of 1972, it was established that a majority of the directors of each of the Kauffman funds were not “affiliated” directors within the meaning of section 2(a)(3) of the Investment Company Act of 1940, 15 U.S.C. § 80a-2(a)(3). On the basis of these allegations and affidavits, the district court held that plaintiff had “not sufficiently shown the merits of his allegations of futility,” noting the presumption in 15 U.S.C. § 80a-2(a)(9) that a natural person shall be presumed not to be controlled, and that it could not assume that the non-affiliated (majority) directors had been lax in their duties or that appeal to them would be futile. While the court’s reference at this stage to a presumption may have been erroneous, we agree with the court’s result.

For lawyers and judges accustomed to the liberalized “notice” pleading of the Federal Rules, F.R.Civ.P. 8, a brief review of the background of Rule 23.1 is in order. Rule 23.1 is not an ordinary, but an exceptional rule of pleading, serving a special purpose, and requiring a different judicial approach. Socially desirable as minority stockholders’ actions may be thought to be, see Emerson and Latchman, Shareholder Democracy ch. VIII (1954); Pomerantz v. Clark, D.Mass., 1951, 101 F.Supp. 341, 346, it is normally the directors, not the stockholders, who conduct the affairs of the company. Hence, to be allowed, sua sponte, to place himself in charge without first affording the directors the opportunity to occupy their normal status, a stockholder must show that his case is exceptional. His initial burden is to demonstrate why the directors are incapable of doing their duty, or as the Court has put it, to show that “the antagonism between the directory and the corporate interest ... be unmistakable.” Delaware & Hudson Co. v. Albany & Susquehanna R. R., 1909, 213 U.S. 435, 447, 29 S.Ct. 540, 543, 53 L.Ed. 862. This has long meant, as the Court stated in Hawes v. Oakland, 1881, 104 U.S. 450, 26 L.Ed. 827, cited in Delaware, that the “cause of failure [to induce corporate action] . . . should be stated with particularity.” 104 U.S. at 461, 26 L.Ed. 827. See also Wathen v. Jackson Oil & Refining Co., 1915, 235 U.S. 635, 639-640, 35 S.Ct. 225, 59 L.Ed. 395.

Rule 23.1 — “The complaint shall also allege with particularity . the reasons for . . . not making the [demand]” — is thus the embodiment of a long-standing principle, or, as the Massachusetts court said in a parallel case, Bartlett v. New York, N.H. & H. R.R., 1915, 221 Mass. 530, at 538, 109 N.E. 452 at 456, “It is not a technical rule of pleading, but one of substantive right.” Whether the word “substantive” is exact, it is clear that the “particularity” must appear in the pleading itself; the stockholder may not plead in general terms, hoping that, by discovery or otherwise, he can later establish a ease. Indeed, if the requirement could be met otherwise, it would be meaningless.

Returning to our listing of plaintiff’s allegations, ante, we find that, (1) (demand would be futile) is merely a conclusion, not a reason; (2) (dates) does not purport to state a reason; (3) (domination and control) is, again, a statement of ultimate fact, not meeting the test of “particularity”; (4) and (5) are why, allegedly, the acts are wrongful; (6) advances nothing over (3), (4) and (5); (7) (all the named defendants conspired) insofar as it names individual director-defendants who are financially interested in the attacked transaction, fails to go far enough. We will group and discuss these allegations,' to the extent that they purport to be reasons for not making a demand, somewhat differently.

1. An allegation of domination and control, unsupported by underlying facts, does not satisfy the requirement of particularity.

The complaint asserts that the directors affiliated with the management advisers “dominate and control” the directorates of the funds. It is conceded, however, that in each instance the self-interested, affiliated director-defendants constitute less than a majority of the membership of the board. Were there a majority, this is a particularity from which a conclusion of control might follow. Delaware, 213 U.S. at 443, 29 S.Ct. 540; Rogers v. American Can Co., 3 Cir., 1962, 305 F.2d 297, 299. Without it, or some other factual support, see, e. g., Cathedral Estates v. Taft Realty Corp., 2 Cir., 1955, 228 F.2d 85 (stock control of plaintiff’s corporation by interested defendants), conclusory pleading is not enough. See Lucking v. Delano, 6 Cir., 1941, 117 F.2d 159, 160; Robison v. Caster, 7 Cir., 1966, 356 F.2d 924, 926-927; Dunphy v. Traveller Newspaper Assoc., 1888, 146 Mass. 495, 498, 16 N.E. 426; Bartlett v. New York, N.H. & H. R.R., 221 Mass, at 534-535, 109 N.E. 452. Plaintiff must allege specific facts demonstrating the unmistakable link between the unaffiliated majority and the affiliated and allegedly wrongdoing minority. Cf. Baffino v. Bradford, 1972, D.Minn., 57 F.R.D. 79.

In this circumstance plaintiff’s brief seeks to infer collective hostility to his claims by dwelling on the fact that his suit has met extended resistance. Whatever might be the effect if the resistance were on substantive grounds, cf. DePinto v. Provident Security Life Ins. Co., 9 Cir., 1963, 323 F.2d 826, cert. denied 376 U.S. 950, 84 S.Ct. 969, 11 L. Ed.2d 970, to attempt to capitalize on the circumstance that the corporations are seeking to dismiss because of plaintiff’s failure to make demand is classic bootstrap. Domination is not established by insistence on the right to have plaintiff plead a valid basis for suit.

2. The fact that the named defendants participated is not enough to excuse demand upon the directorate.

Apart from “control,” only the affiliated directors — a minority of each board —are alleged to have “acquiesced, encouraged, cooperated and assisted in the effectuation and maintenance” of the conspiracy. The unaffiliated directors are not named as defendants, or even as the ones who approved the acts complained of. Bartlett v. New York, N.H. & H. R.R., 221 Mass., at 536-537, 109 N.E. 452. If we were to rely on plaintiff’s citation of Moses v. Burgin, n.l, for anything, it would be for the fact that unaffiliated directors do not necessarily know all that is going on, pointing up again Rule 23.1’s requirement of particularity of allegation. The complaint alleges that the “funds” participated in the conspiracy, but does not specify in what manner. What is basically important, the complaint does not allege that those who were unaffiliated directors at the time of suit participated; viz., that the unaffiliated directors who would have voted on plaintiff’s demand in 1968, had he made one, were the same ones (and hence, assertedly, impervious to a demand) that composed the boards when the contracts in question were approved.

There is no burden on the court to make such assumptions. Were we, in disregard of the rule, to add to the complaint, we could only wonder whether we were not making interpolations that plaintiff could not in good faith sustain. Plaintiff’s explanation made in argument why he sued only the affiliated directors, whatever its value, cannot meet his burden of showing that as to the majority of the board at the time of suit demand would have been futile. Even were we mistaken with respect to our next point, on which, essentially, he grounds his claim of particularity, there are thus no sufficient allegations of futility relating to a majority of the board.

3. Approval by the directors of action alleged to be injurious to the corporation is not sufficient to excuse demand, except in circumstances not here alleged.

There is a further reason that, in the light of the extensive argumentation that has been made to us, we feel we should deal with. Even if we could assume that there had never been a change in the complement of the boards of directors, and that those who were the directors at the time of the suit had approved of the transactions presently attacked, it would not follow that mere prior participation would excuse making the demand. Where mere approval of the corporate action, absent self-interest or other indication of bias, is the sole basis for establishing the directors’ “wrongdoing” and hence for excusing demand on them, plaintiff’s suit should ordinarily be dismissed. In fact, only a single court, see ¶ 2 of n.6, post, has held otherwise.

In this respect, the nature of the alleged misconduct must be considered. Logic suggests a sharp distinction between a transaction completely undirected to a corporate purpose and one which, while perhaps vulnerable to criticism, is of a character that could be thought to serve the interests of the company. If the transaction attacked was one solely for the benefit of minority, interested directors — taking out a sham loan, trading in worthless real estate — the approval of the other, nominally disinterested, directors is prima facie inexplicable. If a director goes along with a colleague in an act on its face advantageous only to that colleague and not to the corporation, this in itself is a circumstance, or particularity, supporting the claim that he is under that colleague’s control. It may be assumed that he would remain so when the directorate votes on plaintiff’s demand. See Meltzer v. Atlantic Research Corp., 4 Cir., 1964, 330 F.2d 946, cert. denied sub nom. Sloan v. Meltzer, 379 U.S. 841, 85 S.Ct. 80, 13 L. Ed.2d 47. It does not follow, however, that a director who merely made an erroneous business judgment in connection with what was plainly a corporate act will “refuse to do [his] duty in behalf of the corporation if [he] were asked to do so.” Bartlett v. New York, N. H. & H. R. R., 221 Mass, at 536, 109 N.E. at 455. Indeed, to excuse demand in these circumstances — majority of the board approval of an allegedly injurious corporate act — would lead to serious dilution of Rule 23.1.

A minority stockholder, unless his claim is worthless on its face, necessarily alleges some illegal transaction or conduct harmful to the corporation. If demand is to be excused merely because the directors participated, the same could be said with respect to those who had failed to oppose, or, indeed, who, as new directors, had merely neglected to take action against their predecessors. If by plaintiff’s merely alleging error, the directors are to be presumed incapable of exercising sound business judgment, Rule 23.1 would become virtually meaningless — a stockholder would be entitled to try the case on the merits, (viz., to establish that the fees were excessive, or improperly arrived at, or in violation of the antitrust laws) to show that he had a right to bring it.

The conduct alleged in the present case was not, vis-a-vis the individual funds, undirected to a legitimate corporate purpose. The selection of an adviser, and a decision to compensate him, is obvious corporate business for a mutual fund. There is no facial impropriety in determining payment by a formula. A court sitting in Boston can take judicial notice that testamentary and indenture trustees are commonly compensated on a formula basis. Selection of a particular formula, of course, may be improper, and the underlying business judgment may be sufficiently unsound to call for correction. But it does not follow that it is to be conclusively presumed in such a case that an unaffiliated, or disinterested director, if demand were made upon him, would be unable to exercise an independent judgment in considering what new course to take. See Ash v. International Business Machines, Inc., 3 Cir., 1965, 353 F. 2d 491, cert. denied, 384 U.S. 927, 86 S. Ct. 1446, 16 L.Ed.2d 531.

Nor do we think that an exception is to be made in the case of unaffiliated directors of a mutual fund on the ground that since they are expected to be sensitive to misconduct of this variety they are automatically incapacitated from performing their duties — their approval or acquiescence making them “wrongdoers” — once a stockholder alleges a corporate injury stemming from the adviser-fund relationship. Apart from the fact that this, again, would enable a plaintiff to try his case on the merits in order to determine whether he had a right to bring it, if would be a misconception of the nature of unaffiliated directors. Normally self-dealing by any corporate directors is suspect. Congress recognized, however, that a certain type of self-dealing is endemic in a mutual fund, and must be permitted. In order to make sure that the directorate not be top-heavy, it provided for a minimum number of directors who would not be so interested. We do not believe it should follow from this that, as directors required to be disinterested in a particular transaction, they differ in their fiduciary obligations from a disinterested directors in any other corporate venture. All disinterested directors must “act honestly and according to their best judgment for the interests of all.” Corbus v. Alaska Treadwell Gold Mining Co., 1903, 187 U.S. 455, 463, 23 S.Ct. 157, 160, 47 L.Ed. 256. When corporate action, or inaction, is subsequently challenged, their duty is not extinguished, but, rather, refocused. After a demand provides them with “full knowledge of the basis for the claim,” Halprin v. Babbitt, 1 Cir., 1962, 303 F.2d 138, 141, it is for the directors, who have “the advantage of familiarity with the enterprise, with those who have conducted it and with the record of success or failure” to decide on the appropriate corporate response. Pomerantz v. Clark, 101 F.Supp. at 344. To the extent that they are “watchdogs” they should be given the opportunity, not deprived of it.

We recognize the social desirability of bona fide, well founded minority suits. We also recognize the tremendous waste involved in suits that are not well founded. We do not accept the dictum in deHaas v. Empire Petroleum Co., 10 Cir., 1970, 435 F.2d 1223, at 1228, that “[c]ourts have generally been lenient in excusing demand” if it is to be applied to allegations as substantively deficient as the present. Such easy remarks overlook the requirement that the directors’ “antagonism ... be unmistakable.” Delaware & Hudson Co. v. Albany R. R. If, as plaintiff suggests, this frustrates his ability to prosecute a worthwhile suit, the answer is that he was not entitled to bring it.

No further question need be reached. In affirming we must, however, comment upon one phrase in the order of the district court granting the motion to dismiss, that it is “without prejudice.” This must mean without prejudice as to the substantive cause of action. The dismissal is with prejudice on the issue of the obligation to mate a demand on the directors with respect to that substantive complaint. The principle applies that “ [although, where a judgment for the defendant is not on the merits, the plaintiff is not precluded from maintaining a new action on the same cause of action, he is precluded from relitigating the very question which was litigated in the prior action.” Restatement of Judgments § 49, comment b, at 195 (1942). See Acree v. Air Line Pilots Assoc., 5 Cir., 1968, 390 F.2d 199, 203, cert. denied, 393 U.S. 852, 89 S.Ct. 88, 21 L.Ed.2d 122; Estevez v. Nabers, 5 Cir., 1955, 219 F.2d 321, 324; 1B Moore’s Federal Practice ¶ .405 [5]. Cf. Stoll v. Gottlieb, 1938, 305 U.S. 165, 171-172, 59 S.Ct. 134, 83 L.Ed. 104; Stuhl v. Tauro, 1 Cir. 1973, 476 F.2d 233.

Affirmed.

COFFIN, Chief Judge

(concurring).

I concur in the judgment of affirmance. While agreeing that unsupported allegations of domination of a majority by a minority are insufficient, I would, but for one defect, find such support in the allegations that the named defendants, which include the mutual funds (and necessarily their boards of directors), “acquiesced, encouraged, cooperated and assisted in the effectuation and maintenance” of the conspiracy to establish exorbitant basic fee agreements benefiting fund advisers (and thus affiliated directors) to the detriment of the funds and in violation of the antitrust laws. But I view as fatal the absence of an allegation or indication in the affidavits, to use the court’s phrasing, “that the unaffiliated directors who would have voted on plaintiff’s demand in 1968, had he made one, were the same ones (and hence, assertedly, impervious to a demand) that composed the boards when the contracts in question were approved.” We cannot assume that new unaffiliated directors would be unwilling to reconsider the wisdom or legality of their predecessors’ actions and, if appropriate, bring suit.

I would, however, not go so far as the court does in delineating “the sharp distinction”, for purposes of excusing demand under Rule 23.1, between actions which “could be thought to serve the interests of the company” and those of a fraudulent or self-dealing nature. The distinction has not been so articulated in almost a century of derivative suit jurisprudence, although concededly most of the prominent cases have involved just such factual situations. Yet the language of a number of cases traces a wider compass. Moreover, these are times when corporations are exceeding in size and impact even the giantism of the past, when new layers and dimensions of corporate obligation are being recognized, and when the importance of directorate oversight of the management technocracy is greater than ever. A higher degree of professionalism, sensitivity, and scrutiny may fairly be expected on the part of directors today than in a simpler era. I am therefore reluctant, by resort to formula, to set boundaries to the action or inaction of directors, beyond which demand on them shall always be required.

Even if, however, such boundaries can be justified for corporate directors in general, on the supposition that they can reverse gears on a course previously undertaken once attention is refocused by an allegation that it constitutes a wrong to the corporation, the broad extension of “first refusals” to unaffiliated or independent directors of mutual funds would seem singularly inappropriate. For I believe, unlike the court, that the unaffiliated directors of mutual funds have a higher obligation of inquiry than directors of ordinary corporations, at least as to the type of transaction under assault here. As we said in Moses v. Burgin, 445 F.2d 369, 376 (1st Cir. 1971), Congress intended that these board members act as “independent watchdog directors”. The primary object of their surveillance is, patently, transactions between the funds and the investment advisers in which the other directors are personally interested. Their raison d’etre is acute scrutiny of the very contracts here attacked.

These contracts, additionally, are major corporate actions from any perspective. It thus seems reasonable to assume that the directors would be given advance notice of at least their final content and of the meeting at which they would be considered. Whatever the significance for excusing demand of mere knowing acquiescence in impending major corporate actions in other settings, see Liboff, supra, I believe that such, passive acceptance by unaffiliated directors of the very transactions which justify their place on the directorate would be sufficient involvement or subservience to find them unlikely to respond meaningfully to a demand. Here, there are no allegations regarding the meetings and the actual votes on the challenged fees or the relevant corporate quorum rules. But whether one assumes that action by a majority of the total membership or merely a majority of those actually present is required, clearly some unaffiliated directors either voted for the contracts or failed to vote, in person or by proxy, or appear at the appropriate meeting. Under my view, this would be enough to excuse demand, had it béen alleged that the unaffiliated membership was the same at both contract-making and demand time.

I also note that the management fee contracts are not attacked as simply ultra vires or as the product of mere negligence or even of “unsound” or “eroneous business judgment”. They are alleged to be illegal under federal antitrust laws. If I were to calibrate a scale to measure the impact of varying improprieties, I would rate such an allegation fairly high. I find it hard to imagine that a director, however, unaffiliated, who had participated, or under these circumstances knowingly acquiesced, in a major transaction, albeit for a corporate purpose, would authorize a suit, effectively against himself, claiming that the transaction violated the federal antitrust laws. Even independent watchdogs cannot be thought ready to sign a confession of that magnitude.

      . While we decided the merits in Moses v. Burgin, 1 Cir., 1971, 445 F.2d 369, cert. denied sub nom., Johnson v. Moses, 404 U.S. 994, 92 S.Ct. 532, 30 L.Ed.2d 547, a suit involving a mutual fund, where no demand had been made, this issue was not there raised and we do not agree with plaintiff that our action was a sub silentio ruling on that issue.

      . 10. [Demand would have been futile.]
      22. [At all times directors of each fund have been affiliated with their investment advisers.]
      23. [At all times (a) the affiliated directors and their investment advisers] “have dominated and controlled their respective . . . funds and their personnel, policies and boards of directors.” (b) [the affiliated directors] “have dominated and controlled their respective investment advisers and their personnel, policies and boards of directors.”
      24. [At all times the contracts and fee agreements between the investment advisers and the funds] “have not been either the subject or the result of arm’s-length bargaining between them.”
      25. [The management fees are] “calculated solely on the basis of average net assets.”
      27. [. . . and are improperly measured and grossly excessive.]
      28. “The combination and conspiracy involved in this action consisted and consist of a continuing agreement, understanding and concert of action, inter alia, between and among:
      (a) each externally managed mutual fund and its respective investment adviser ;
      (b) each externally managed mutual fund and its self-dealing directors;
      (c) each self-dealing director and his respective investment adviser;
      (k) the members of the externally managed mutual funds, investment advisers, and self-dealing directors classes and Institute.
      29. “The substantial terms of the aforesaid combination and conspiracy were and are to:
      (a) fix and adopt similar schedules of grossly excessive management fees unrelated to the services performed by investment advisers and the performance of the externally managed mutual funds;
      (b) maintain and stabilize prices for the services performed by investment advisers by adherence to said similar schedules of management fees;
      (c) refrain from competing for the business of externally managed mutual funds or the business of investment advisers.
      30. “All of the defendants have acquiesced, encouraged co-operated and assisted in the effectuation and maintenance of the aforesaid combination and conspiracy.”

      . The affidavits spoke in terms of “affiliated” persons, since the Act at the time of suit required that at least 40% of a fund’s directors not be “affiliated” with the fund’s adviser. In 1970 the Act was amended to require that at least 40% of the directors not be “interested” persons, as defined in 15 U.S.C. § 80a-2(a) (19), a somewhat broader category.
      The affidavits showed that five of nine trustees of the Putnam Growth Fund, five of the seven directors of Dreyfus, five of the eight directors of Fidelity, and three of the five directors of Manhattan were unaffiliated within the meaning of the Act. They reveal nothing more, except brief vocational information.

      . Although certain facts were presented by affidavit, n. 3, ante, basically the motion to dismiss tested the sufficiency, vel non, of the complaint. The presumption supplied by 15 U.S.C. § 80a-2(a) (9) that “[a] natural person shall be presumed not to be a controlled person,” whatever may be its effect at a trial, could not be used to contradict the complaint, if plaintiff is correct that the court so employed it.

      . We do not accept as contrary the ease of Smith v. Sperling, 1957, 354 U.S. 91, 77 S.Ct. 1112, 1 L.Ed.2d 1205. The sole question there raised, commencing with a 30-page opinion of the district court, 117 E.Supp. 781, was whether the corporation, as an indispensable party, was to be realigned as party plaintiff for jurisdictional purposes when it was found by the district court, after taking testimony, not to be antagonistic to plaintiff’s claim. It is true that the Supreme Court, in discussing plaintiff’s failure to make a demand, relied on the allegation that all of the directors .had approved the contracts complained of. However, it made no reference to the nature of the contracts, nor to the interest vel non of the directors. In addition, it noted that other reasons were asserted for failure to make demand.

      . Plaintiff, following argument, has cited Jannes v. Microwave Communications, Inc., N.D.Ill., 1972, 57 F.R.D. 18, a Rule 10b-5 misrepresentatiqjn case (15 U.S.C. § 78j (b)). We do not find it helpful. In the first place the court, in finding the derivative complaint sufficient, said it applied “the usual standard of whether any set of facts can be shown which would prove futility,” 57 F.R.D. at 21, citing a Fiftli Circuit decision which, in turn, purported to rely, as does the present plaintiff elsewhere, on Conley v. Gibson, 1957, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80. Conley, which dealt only with F.R.Civ.P. 8 “notice pleading,” is no authority for sucli an interpretation for Rule 23.1. More important, the Jannes court said that even a strict standard showed “self interest” on the part of all of the directors.
      We cannot similarly distinguish the recent case of Papilsky v. Berndt, S.D.N.Y., 59 F.R.D. 95. We do, however, note that the authorities cited do not, in fact, support the decision. Thus in Cathedral Estates v. Taft Realty Corp., 2 Cir., 1955, 228 F.2d 85, the corporate conveyance was by a majority of the directors to a corporation completely controlled by them. In Dopp v. American Electronic Laboratories, Inc., S.D.N.Y., 1972, 55 F.R.D. 151, the complaint contained specific allegations beyond the conclusion that the directors had approved the transaction. And as to the case which the court regarded as most directly in point, Liboff v. Wolfson, 5 Cir., 1971, 437 F.2d 121, in addition to the fact that we believe the Fifth Circuit confuses Rule 23.1 with notice pleading, the court specifically noted, at p. 122, that the “defendantsappellees conceded on oral argument that . a majority of the board . [met the description of ‘ownership and control’] as to them.”

       Delaware & Hudson Co. v. Albany & Susquehanna R.R., 213 U.S. 435, 451, 29 S.Ct. 540, 545, 53 L.Ed. 862 (1909) (“good faith . . . need not be questioned”); United Copper Securities Co. v. Amalgamated Copper Co., 244 U.S. 261, 264, 37 S.Ct. 509, 510, 61 L.Ed. 1119 (1917) (“no allegation that directors . . . have been guilty of any misconduct whatsoever”); Smith v. Sperling, 354 U.S. 91, 95, 77 S.Ct. 1112, 1115, 1 L.Ed.2d 1205 (1957) (“There is antagonism whenever the management is aligned against the stockholder and defends a course of conduct which he attacks. The charge normally is cast in terms of fraud, breach of trust, or illegality”); Cathedral Estates v. Taft Realty Corp., 228 F.2d 85, 88 (2d Cir. 1955) (“where the directors . . . are . . . involved in the transaction attacked, a demand on them is presumptively futile and need not be made”) ; Ash v. International Business Machines, Inc., 353 F.2d 491, 493 (3d Cir. 1965) (“the stockholder shall allege that the directors of the corporation are personally involved ... in the alleged wrongdoing in a way calculated to impair their exercise of business judgment on behalf of the corporation”); Liboff v. Wolfson, 437 F.2d 121, 122 (5th Cir. 1971) (the complaint, held to “fully meet the requirements of the rule”, alleged “The majority of said directors, participated, approved of and acquiesced in said transaction”); Papilsky v. Berndt, 59 F.R.D. 95 (S.D.N.Y., 1973) (allegation that “the directors participated or acquiesced in the wrongs alleged” held sufficient).