author: WIDENER, Circuit Judge:

text:
    Peter J. BRENNAN, Secretary of Labor, Appellant, v. BILL KIRK’S VOLKSWAGEN and William W. Kirk, Appellees.
    No. 73-1878.
    United States Court of Appeals, Fourth Circuit.
    Argued Feb. 7, 1974.
    Decided June 14, 1974.

      John K. Light, Atty. (William J. Kilberg, Solicitor of Labor, Carin Ann Clauss, Associate Sol., Donald S. Shire, Atty., Louis Weiner, Regional Sol., Dept, of Labor, on brief), for appellant.
    Warren M. Davison, Baltimore, Md. (Earle K. Shawe, Jeffrey L. Levin, and Shawe & Rosenthal, Baltimore, Md., on brief), for appellees.
    Before BRYAN, Senior Circuit Judge, and BUTZNER and WIDENER, Circuit Judges.
   WIDENER, Circuit Judge:

This suit was brought by the Secretary of Labor under § 17 of the Fair Labor Standards Act, 29 U.S.C. § 217, to enjoin Bill Kirk’s Volkswagen, Inc., and its president, William W. Kirk, Jr., from violating the Act’s overtime and recordkeeping provisions and to restrain the continued withholding of unpaid wages due several of its employees. The defendants claimed that Alexander Rheubottom, the only employee involved in this appeal, performed a portion of his work before and after regular business hours as an “independent contractor” and therefore such overtime work was not subject to the requirements of the Fair Labor Standards Act. The district court rejected this defense and found that Rheubottom was an employee within the meaning of the Act. But the court also held that Rheubottom’s work fell within the Act’s § 13(b) (10) exemption, 29 U.S.C § 213(b) (10), which in part exempts mechanics from the overtime requirements of the Act for work performed in servicing automobiles in a nonmanufacturing selling establishment.

While we are unable to agree that Rheubottom is exempt under the exemption of 29 U.S.C. § 213(b) (10), his work may be exempt under the premium rate provision of 29 U.S.C. § 207(e)(7), and we vacate and remand with instructions.

The facts are not controverted. Since 1965, Rheubottom has been employed by Bill Kirk’s Volkswagen, Inc., as a used car reconditioner. In this capacity, he buffs, paints and washes used cars. He checks periodically to insure they are in running order. When necessary, he changes batteries but otherwise he performs no mechanical tasks. In addition to these duties, Rheubottom performs other tasks of a miscellaneous nature during his 8:00 a. m. to 5:00 p. m. workday. During his regular work period, Rheubottom is paid an hourly rate of $2.-29; and he is paid at time-and-one-half, or $3.43, for any work over 8 hours a day or 40 hours in a week.

During the off-duty hours of the first, four years of his employment at the company, Rheubottom performed appearance reconditioning on used cars for a friend who had his own garage. The two of them obtained cars from various dealers and the friend paid Rheubottom a fixed sum per car reconditioned at his garage. After four years, this arrangement was terminated, but Rheubottom continued to supplement his income by working after hours for another automobile dealership in the Baltimore area. Finally, in 1970, Rheubottom approached company president William Kirk with the proposal that he be allowed to perform supplemental work at Kirk’s premises for a fixed price, set by Rheubottom, of $18.00 for each car he reconditioned. As Rheubottom testified at trial, the arrangement was quite satisfactory since “I avoid the travel, the expense, the overhead and the materials.” Indeed, it was shown that Rheubottom has made $4,400 more by this arrangement with the company than he would have earned had he been paid at time-and-one-half figured at his base rate of $2.29.

The district court dismissed the complaint on the basis that Rheubottom’s work was exempt from the Act’s overtime requirements under § 13(b) (10), 29 U.S.C. § 213(b) (10), which applies to

“any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trailers, trucks, farm implements, or aircraft if employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles to ultimate purchasers.”

We are of opinion, however, that Rheubottom’s appearance reconditioning work, which involves washing, cleaning, painting, and polishing used cars, and his various porter and errand duties do not qualify him as a mechanic under the definition of that term as considered here.

Rheubottom performs no work on the various mechanisms of the automobiles he reconditions, unless charging or changing a battery be so considered, nor does he utilize specialized tools. During trial, Rheubottom testified that “[i]f a car is not running and it takes more than a charge for the battery, I report it to the supervisor, and he in turn reports it to the mechanic, and the car is taken in for the proper maintenance to be done on it.”

The Act itself does not define the word mechanic, but the House Report states that “[t]he term ‘mechanic’ is intended to include all employees doing mechanical work. . . .” H.R.Rep.No.1366, 89th Cong., 2d Sess. 43 (1966). Moreover, the Regulations promulgated pursuant to the 1966 Amendments offer the following guidelines:

“As used in section 13(b) (10), a mechanic is any employee primarily engaged in doing mechanical work (such as get ready mechanics, automotive, truck, . . . used car reconditioning mechanics and wrecker mechanics) in the servicing of an automobile, trailer, truck . . . for its use and operation as such. . . . The term does not include employees primarily performing such nonmechanical work as washing, cleaning, painting, polishing, tire changing, installing seat covers, dispatching, lubricating, or other nonmechanical work. . . . ” 29 CFR § 779.372(c)(3) (1973).

Thus, the major portion of duties performed by Rheubottom in his appearance reconditioning work are those specifically listed in the regulation as not being the work of a mechanic.

Here, the Secretary’s position accords with the rule of construction that exemptions from the Act are to be narrowly construed. See, e. g., Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960); Snell v. Quality Mobile Home Brokers, 424 F.2d 233 (4th Cir. 1970). Under the circumstances presented here, we are unable to find that Rheubottom’s appearance reconditioning work, and related duties, qualify him as a mechanic within the meaning of the § 13(b) (10) exemption.

In both the briefs and during oral argument, there arose the distinct possibility that Rheubottom’s business arrangement with the company might meet the premium rate provisions of § 7(e) (7) of the Fair Labor Standards Act, 29 U.S.C. § 207(e)(7). Section 7(e)(7) instructs that the “regular rate” at which an employee is employed shall be deemed to include all remuneration paid to the employee, but shall not be deemed to include — •

“extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under subsection (a) of this section), where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek.”

If, in fact, the company’s after-hours work plan with Rheubottom fulfills the conditions of this section, then the arrangement would meet the requirements of the Fair Labor Standards Act.

Consequently, we must vacate the decision of the district court and remand with instructions to determine the applicability of § 7(e)(7) of the Act to the facts of this case.

Vacated and remanded with instructions.

      . The Secretary of Labor contends, however, that all remuneration earned by Rheubottom in his supplemental work for the company must be added to his regular and overtime earnings. Then, that sum must be divided by the total number of hours worked (both during and after regular working hours) in order to determine Rheubottom’s base rate. Thus, using the government’s computation, Rheubottom’s base rate becomes $4.52 per hour, and his overtime rate becomes $7.29 per hour. These computations were not passed upon by the district court since it found that, in any case, Rheubottom was exempt from the Fair Labor Standards Act overtime requirements.


source: Caselaw Access Project

author: HEANEY, Circuit Judge.

license: Public Domain

text:
    William DOVE, Sr., et al., Appellants, v. Dale BUMPERS et al., Appellees.
    No. 73-1756.
    United States Court of Appeals, Eighth Circuit.
    Submitted April 16, 1974.
    Decided May 7, 1974.
    Charles E. Williams, III, New York City, for appellants.
    John A. Davis, III, Pine Bluff, Ark., for appellee, City Council.
    Walter Murray, Asst. Atty. Gen., Little Rock, Ark., for Bumpers.
    Before HEANEY and STEPHENSON, Circuit Judges, and SMITH, Senior District Judge.

       TALBOT SMITH, Senior District Judge, Eastern District of Michigan, sitting by designation.

   HEANEY, Circuit Judge.

Four black residents of the City of Pine Bluff, Arkansas, representing a class consisting of all black voters of the City appeal from a three-judge court decision upholding the constitutionality of an Arkansas statute. The statute required that aldermen be elected at-large in cities of the first class which have a population of 50,000 or more and also have the mayor-council form of government.

The appellants contend that the three-judge court was improperly convened and, thus, their appeal to this Court, rather than to the Supreme Court, is proper. See, Bd. of Regents v. New Left Education Project, 404 U.S. 541, 92 S.Ct. 652, 30 L.Ed.2d 697 (1972); Moody v. Flowers, 387 U.S. 97, 87 S.Ct. 1544, 18 L.Ed.2d 643 (1967). They also contend that the three-judge court erred in its decision on the merits, and urge a reversal.

-/The appellees — the mayor and City of Pine Bluff — contend that the three-judge court was properly convened pursuant to 28 U.S.C. § 2281 and, thus, this appeal should be dismissed for lack of jurisdiction. They contend, alternatively, that if this Court reaches the merits of the case, the three-judge court’s decision should be affirmed.

The appellees — Dale Bumpers, Governor of Arkansas; James Guy Tucker, Attorney General of Arkansas; and Kelly Bryant, Secretary of State of Arkansas — contend that the 1973 amendment to the statute removed any basis for the appellants’ claim against the State and that this case should be remanded to the District Court for the entry of an order dismissing the State.

We hold that a Court of Appeals has jurisdiction to determine whether a three-judge court was properly convened. While there is no express authority for this holding, it is supported by logic and by a concern for the heavy caseload of the Supreme Court.

The question of whether this three-judge court was properly convened is not without difficulty. Had the statute specifically provided that aldermen in the cities of Pine Bluff and North Little Rock should be elected at-large, the convening of the three-judge court would have been clearly improper because the statute would not have been of statewide application. See, Rorick v. Board of Commissioners, 307 U.S. 208, 59 S.Ct. 808, 83 L.Ed. 1242 (1939). We think that this is also the case with the statute under consideration. Although it is couched in general terms, it applies exclusively to the same two cities and, thus, has only a local impact. See, Bd. of Regents v. New Left Education Project, supra; Gay v. Board of Registration Commissioners, 466 F.2d 879 (6th Cir. 1972). This resolution is consistent with the Supreme Court’s admonition that the three-judge court statute is to be strictly construed. Goldstein v. Cox, 396 U.S. 471, 90 S.Ct. 671, 24 L.Ed.2d 663 (1970); Phillips v. United States, 312 U.S. 246, 61 S.Ct. 480, 85 L.Ed. 800 (1941).

Although the three-judge court was improperly convened and appeal properly lies to this Court, the question of whether we should reach the merits of this case remains. We have been urged to do so in the interest of judicial economy. In Phillips v. United States, supra at 254, after deciding that a three-judge court had been improperly convened, the Supreme Court said:

Had a timely appeal been taken to the circuit court of appeals the decree below could have been reviewed there, though rendered by three judges. * * *

Despite this language, we do not think it is appropriate for us to reach the merits here. Three-judge court decisions are collegial, and we are not willing to assume that a single judge sitting alone, though formerly a member of the three-judge panel, would adopt the original opinion of the panel. See, Moody v. Gallion, 286 F.Supp. 653 (M.D.Ala.1968). Moreover, a remand is particularly appropriate here because the statute originally considered by the three-judge court has been amended.

We, therefore, remand this matter to the District Court for proceedings consistent with this opinion.

      . Dove v. Bumpers, 364 F.Supp. 407 (E.D.Ark.1973).

      . Arkansas Statutes Annotated § 19-1002.2 (1959).

      . The statute applied to only two cities, Pine Bluff and North Little Rock. We note that after the three-judge court heard this case but before it rendered its decision, the Arkansas Legislature amended the statute, giving all cities of the first class the option of electing aldermen by ward or at-large. Arkansas Statutes Annotated § 19-1002.7. (Supp.1973).
      It appears that this amendment was not brought to the attention of the three-judge court.

      . In Melendez v. Shultz, 486 F.2d 1032, 1033 n. 1 (1st Cir. 1973), the First Circuit stated:
      Lynch v. Household Finance, 405 U.S. 538 [, 92 S.Ct. 1113, 31 L.Ed.2d 424] * * * may arguably be read to direct that even purely jurisdictional questions about the convening of a three-judge court must be decided first by the Supreme Court. * * *
      We reject this reading of I/yneh.


author: PER CURIAM:

text:
    Elizabeth WHEELER, Plaintiff-Appellee, v. STANDARD TOOL AND MANUFACTURING COMPANY, Defendant-Appellant.
    No. 487, Docket 73-1913.
    United States Court of Appeals, Second Circuit.
    Argued Feb. 22, 1974.
    Decided May 20, 1974.
    Allan H. Gordon, Philadelphia, Pa. (Norman J. Landau, New York City, and Edward L. Wolf, Philadelphia, Pa., on the brief), for plaintiff-appellee.
    John G. Reilly, New York City (Thomas R. Newman, Benjamin H. Siff, and Reilly & Reilly, New York City, on the brief), for defendant-appellant.
    Before LUMBARD, FRIENDLY and TIMBERS, Circuit Judges.
   PER CURIAM:

This appeal brings up for review a judgment entered in a diversity negligence action now in its fifth year and arising from an accident that occurred more than seven years ago.

The judgment was entered after a bench trial in the Southern District of New York before Kevin T. Duffy, District Judge. It awarded plaintiff $12,500 general damages, plus $872.10 special damages, for personal injuries sustained while plaintiff was operating a hypodermic syringe assembly machine designed and manufactured by defendant.

The accident occurred on December 16, 1966 at the plant located in Canaan, Connecticut, of Becton-Dickinson & Company (Becton) where plaintiff was employed. At the time of the accident, plaintiff was operating one of Becton’s machines which had been designed and manufactured by defendant Standard Tool & Manufacturing Company (Standard) at its plant in Lyndhurst, New Jersey, in 1963. The machine was known as a plastic syringe assembly machine. The accident occurred when plaintiff slipped on some waste materials ejected by the machine. As she slipped, she instinctively thrust her right hand forward. This hand became caught in the machine’s unguarded needle assembly station. She sustained an injury to her right index finger for which damages were awarded by the district court below.

The theory of plaintiff’s action is not one of ordinary negligence, but rather one of strict liability against the manufacturer of a dangerous machine. Restatement (Second) of Torts § 402A (1965). We hold that Judge Duffy applied the correct choice of law rule in ultimately looking to Connecticut to determine the applicable law of strict liability. And we further hold that he correctly concluded that the Connecticut courts in cases of strict liability apply the Restatement, supra, § 402A. Basko v. Sterling Drug, Inc., 416 F.2d 417, 425 (2 Cir. 1969); DiMeo v. Minster Machine Company, Inc., 388 F.2d 18, 20 (2 Cir. 1968).

After a careful review of the evidence, including an evaluation of the evidence for credibility, Judge Duffy found that the absence of a guard at the needle inserting station was a “defective condition unreasonably dangerous to the user” within the meaning of § 402A. We hold that this finding was supported by substantial evidence and was not clearly erroneous.

We also reject, as did Judge Duffy, Standard’s massive reliance upon its claim that it simply built a special purpose machine in accordance with Becton’s specifications and left it to Becton to determine what safety devices were required for the moving parts above the lower section of the machine. This ignores the thrust of § 402A as well as critical evidence upon which Judge Duffy relied in making his findings. There is no reason in principle,- or under § 402A, why a manufacturer of a complicated machine which is to be used by another manufacturer may not avoid its strict liability by making it plain to the purchaser that it is relying on it to take over the provision of safeguards at a certain point. See Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965). But whether Standard did so here was a question of fact which Judge Duffy resolved against Standard. We hold that this finding was supported by substantial evidence and was not clearly erroneous.

We have carefully considered each of appellant’s claims of error and find them without merit.

Affirmed.

      . Restatement (Second) of Torts § 402A (1965) provides as follows:
      “§ 402A. Special Liability of Seller of Product for Physical Harm to User or Consumer
      (1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
      (a) the seller is engaged in the business of selling such a product, and
      (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
      (2) The rule stated in Subsection (1) applies although
      (a) the seller has exercised all possible care in the preparation and sale of his product, and
      (b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.”


text:
    Margaret H. SMITH, Appellant, v. FAIRFAX COUNTY SCHOOL BOARD et al., Appellee.
    No. 74-1259.
    United States Court of Appeals, Fourth Circuit.
    Submitted May 22, 1974.
    Decided June 7, 1974.
    Joseph B. Bullock and Henry B. Zachary, Alexandria, Va., on brief for appellant.
    Douglass S. Mackall, III, Fairfax, Va., on brief for appellee.
    Before RUSSELL, FIELD and WIDENER, Circuit Judges.
   PER CURIAM:

The appellant Margaret Smith filed suit in federal district court against the Fairfax County School Board alleging that she had been dismissed without procedural due process and that she had been discriminatorily discharged because of her race and sex. Appellant seeks to appeal the district court ruling denying relief relative to appellant’s due process claim. The district court, which deferred ruling on appellant’s other claims, did not however, make the certification authorized by F.R.Civ.P. Rule 54(b) that the ruling on the due process issue was final and appealable. Such a certificate is a jurisdictional prerequisite for an appeal of less than all of the claims in an action. United States v. Crow, Pope and Land Enterprises, Inc. (5th Cir. 1973) 474 F.2d 200, 202. Accordingly, for lack of a final appealable order this appeal must be dismissed.

Appellee’s motion to dismiss the appeal is hereby granted and the appeal is dismissed.


text:
    Theodore O. BATES, Appellant; Cross-Appellee, v. PRUDENTIAL-GRACE LINES, INC., Appellee; Cross-Appellant.
    Nos. 72-2659, 72-2689.
    United States Court of Appeals, Ninth Circuit.
    May 17, 1974.
    Rehearing Denied June 17, 1974.
    Thomas M. Geisness, McCutcheon, Groshong, Bettis, Geisness & Day, Seattle, Wash., for appellant in 72-2659, for appellee in 72-2689.
    H. Graham Gaiser, Bogle, Gates, Dobrin, Wakefield & Long, Seattle, Wash., for appellee in 72-2659, for appellant in 72-2689.
    Before MERRILL, ELY and GOODWIN, Circuit Judges.
   OPINION

PER CURIAM:

Bates was employed as a deck department seaman on the SS SANTA REGINA, a merchant vessel owned and operated by Prudential-Grace Lines, Inc. While the vessel was moored at a port in Chile, Bates took shore leave, and, as he was walking along the pier at which the vessel was docked, he stepped into a hole in the pier and suffered injuries. The hole was located about 580 feet from the vessel’s gangway. Bates instituted suit against his employer under the provisions of the Jones Act, 46 U.S.C. § 688. In a jury trial, the jury resolved the issue of liability in favor of Bates and fixed his damages at $90,000. This sum was reduced to $85,500 pursuant to the jury’s finding that Bates was contributively negligent to the extent of five percent. Subsequently, the district judge, Honorable William J. Lindberg, granted the shipowner’s motion for a judgment notwithstanding the verdict. Bates has appealed to this court, and the shipowner has filed a cross-appeal.

In support of his Order entering judgment for the shipowner notwithstanding the jury’s verdict, Judge Lindberg prepared and filed a carefully researched opinion, reported at 375 F.Supp. 774 (D.C.Wash.1972). Believing that Judge Lindberg correctly analyzed and resolved the issue of liability, we adopt his opinion as our own.

The judgment challenged by Bates is affirmed, and the shipowner’s cross-appeal is dismissed as moot.

So ordered.

      . We do not, however, necessarily approve or disapprove the reasoning of all the District Court opinions cited by Judge Lindberg.
      Bates relies heavily upon Hamilton v. Marine Carriers Corp., 332 P.Supp. 223 (E.D.Pa.1971). Insofar as the District Court’s opinion in that case may be relevant to the facts and liability issue here presented, we expressly disapprove and reject the Hamilton reasoning.


text:
    CYR BOTTLE GAS COMPANY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 73-1682.
    United States Court of Appeals, Sixth Circuit.
    Argued April 10, 1974.
    Decided June 4, 1974.
    Robert A. Gritta, Fort Worth, Tex., for petitioner.
    Joseph Thackery, Atty., N. L. R. B., for respondent; Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, William F. Wachter, Atty., N. L. R. B., Washington, D. C., on brief.
    Before CELEBREZZE, McCREE and MILLER, Circuit Judges. -
   ORDER

This action is before the Court upon the petition of Cyr Bottle Gas Company to review and set aside an order of the National Labor Relations Board issued June 6, 1973 (reported at 204 NLRB No. 83), and upon the cross-petition of the Board for enforcement of its order.

The Board found that employees of the Company were engaged in an economic strike. Reversing the Administrative Law Judge, it determined that the Company had offered only temporary jobs to applicants and had not permanently replaced any of its employees as of June 8, 1972, when nine of the strikers offered to return to work. The Board further found that the Company’s motive for refusing reinstatement was to eliminate employees who had been the cause of the Union’s certification. By failing to reinstate the nine strikers when they had not been permanently replaced, the Company, as the Board found, violated Section 8(a)(1) and (3) of the Act, 29 U.S.C. § 158(a)(1, 3). Its order required the Company to cease and desist from the unfair labor practices found, to reinstate and make whole the nine strikers, dismissing, if necessary, any persons hired as replacements on and after June 1, 1972, and to post the usual notices.

While differing inferences may be drawn from the evidence, we find that the Board’s findings are supported by substantial evidence on the record considered as a whole.

The petition to review should therefore be denied and the Board’s order should be enforced.

It is so ordered.


text:
    FOTOMAT CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 73-2190.
    United States Court of Appeals, Sixth Circuit.
    Argued June 4, 1974.
    Decided June 21, 1974.
    Joseph M. Day, Louisville, Ky., for petitioner; D. Paul Alagia, Jr., Brown, Alagia, Miller & Senn, Louisville, Ky., on brief.
    Joseph E. Mayer, Atty., N. L. R. B., for respondent; Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, Warren Ogden, Attys., N. L. R. B., Washington, D. C., on brief.
    Before EDWARDS, CELEBREZZE and McCREE, Circuit Judges.
   ORDER

Petitioner seeks review of an order of the National Labor Relations Board, reported at 207 N.L.R.B. No. 65 (1973). The Board found coercive interrogation of employees who were seeking to organize a union, in violation of § 8(a)(1) of the National Labor Relations Act, 29 U. S.C. § 158(a)(1) (1970), and violations by discriminatory discharges of Brenda Meyers and Jewell Newton, in violation of § 8(a) (3) and (1) of the Act.

Petitioner seeks review only as to the order requiring reemployment of Jewell Newton.

On review of the total record; and

Finding substantial evidence on same to support the findings and conclusions of the National Labor Relations Board,

Enforcement of the order of the Board is granted.


author: MILLER, Judge.

text:
    The CARRINGTON CO., and United Geophysical Corp., Appellants, v. The UNITED STATES, Appellee.
    Customs Appeal No. 5539.
    United States Court of Customs and Patent Appeals.
    June 13, 1974.
    Glad, Tuttle & White, San Francisco, Cal., attys. of record, for appellants. George R. Tuttle, San Francisco, Cal., of counsel.
    Irving Jaffe, Acting Asst. Atty. Gen., Andrew P. Yance, Chief, Customs Section, Michael S. O’Rourke, New York City, for United States.
    Before MARKEY, Chief Judge, and RICH, BALDWIN, LANE and MILLER, Judges.
   MILLER, Judge.

This appeal is from the decision and judgment of the Customs Court, Carrington Co. v. United States, 358 F.Supp. 1286, 70 Cust.Ct. 105, C.D. 4415 (1973), overruling appellants’ protests concerning classification of Flextrack-Nodwell motor vehicles imported with Mayhew drills. We affirm.

Familiarity with the opinion below is assumed. However, we point out that in one protest the drills were mounted on the vehicles, and in the other protest the drills merely accompanied the vehicles in an unassembled condition for subsequent mounting; also, that one vehicle which was entered without an accompanying drill was granted free entry under item 692.11 as a motor vehicle for the transport of persons or articles.

The imported vehicle with the mounted Mayhew drill circled is shown below:

The following reproduction shows the vehicle with the drill ready for operation:

The Customs Court held that classification of the imported vehicles was properly made under item 692.16, TSUS (the duty varying according to the date of entry). Pertinent provisions are as follows:

PART 6. — TRANSPORTATION EQUIPMENT
* * * * a s*
Subpart B. — Motor Vehicles
* * * * * *
Motor vehicles specially constructed and equipped to perform special services or functions, such as, but not limited to, fire engines, mobile cranes, wreckers, concrete mixers, and mobile clinics:
692.14 Fire engines .......... * * *
692.16 Other ................ 9% ad val.
C8% ad val.I

OPINION

The issue is whether the imported vehicles are specially constructed to perform special services or functions other than the mere transportation of goods or persons within the meaning of item 692.16, appellants having admitted that the drill is sufficient to make the imported vehicle specially equipped.

It is a well-established principle that classification of an imported article must rest upon its condition as imported. United States v. Baker Perkins, Inc., 46 CCPA 128, C.A.D. 714 (1959). That the imported vehicle is differently classified when imported without an accompanying drill or with different equipment would not be inconsistent with this principle. Moreover, the fact that the drill can be removed and replaced with other equipment, such as a kitchen diner or water tank, does not affect classification of the vehicle when imported with the drill. Nothing in item 692.16 requires that a vehicle chassis be suitable for one and only one purpose.

Accordingly, we conclude that versatility of purpose did not preclude the Customs Court from finding that the imported vehicles were specially constructed.

From the evidence of record, we also conclude that the vehicles in question are, for all practical purposes, mobile drills. They are specially constructed to transport and (with a drive-line power take-off from the engine) to operate a drill at a chosen site. It is to be noted that transportation and operation of equipment fixed to the vehicle to perform special services or functions are the two essential features which the imported vehicles have in common with the exemplars shown for item 692.16.

In view of the foregoing, we hold that the imported vehicles are specially constructed and equipped to perform special services or functions within the meaning of item 692.16 TSUS.

The judgment of the Customs Court is affirmed.

Affirmed.

LANE, Judge, concurs in the result.

      . Under General Interpretative Rule 10(h), Tariff Schedules of the United States, unless the context requires otherwise, a tariff description for an article covers such article, whether assembled or not assembled.

      . Item 692.11 applies to motor vehicles (except motorcycles) for the transport of persons or articles and imported from Canada (not including three-wheeled vehicles).

      . See United States v. Volkswagen of America, C.A.D. 1113, 490 F.2d 977, 61 CCPA - (1974).


text:
    Peter HEDGEWICK, Appellant, v. Edward G. AKERS, Appellee.
    Patent Appeal No. 9199.
    United States Court of Customs and Patent Appeals.
    June 13, 1974.

      Owen E. Perry, Atty. of record, Reising, Ethington & Perry, Southfield, Mich., for appellant.
    Giles C. Clegg, Jr., Thomas L. Cantrell, Joseph M. Revesz, attys. of record, Clegg & Cantrell, Dallas, Tex., for appellee.
    Before MARKEY, Chief Judge, and RICH, BALDWIN, LANE and MILLER, Judges.
   MILLER, Judge.

This appeal is from the decision of the Board of Patent Interferences awarding priority to appellee (Akers), the senior party, who is involved through application serial No. 710,032, filed March 4, 1968. Appellant (Hedge-wick), the junior party, is involved through application serial No. 715,391, filed March 22,1968. We affirm.

The interference concerns a safety package comprising a container and a cap which is disengageable therefrom by combined axial and rotative motion. Inasmuch as derivation-is the only dispositive issue raised on appeal, further discussion of the invention is unnecessary except to note that it involves a relatively narrow difference from appellant’s prior art Palm-N-Turn cap, the subject of his patent No. 3,344,942, issued October 3, 1967.

Hedgewick was president of International Tools Ltd. (ITL) of Windsor, Ontario, Canada, which is a subsidiary of ITL Industries. Reflex Corporation of Canada Ltd. (Reflex) is another subsidiary which was established for the production of the Palm-N-Turn cap. Reflex is assignee of the Palm-N-Turn patent and also of Hedgewick’s present application.

Alternative constructions to the Palm-N-Turn cap were discussed and sketched , among Hedgewick, McBride (an engineer for Reflex), and Morillo (manager of Reflex). The sketches, some of which satisfy the limitations of the two counts in interference, were kept in McBride’s personal files in a cabinet in the engineering area at Reflex. Although employees of the engineering area had access to them, the files were dormant after January 1, 1967.

Because of Akers’ experience with plastic closures and safety caps, he was hired by Hedgewick as a consultant for Reflex to design tooling for the Palm-N-Turn cap and to review production procedures, quality control, and other problems encountered in the Palm-N-Turn cap program. Akers was present on the premises of ITL and Reflex at various times from January to August, 1967, and had access to McBride’s “dormant” files. McBride, Morillo, and another employee were instructed not to withhold any information from Akers, but, on the other hand, no instruction was given to directly reveal anything to him. Morillo testified that he showed sketches to Akers of alternative cap constructions to the Palm-N-Turn cap, some of which satisfy the limitations of count 1. However, he could not produce any of the sketches and could not recall anyone else who saw them.

Akers testified that he did not recall seeing or discussing the contents of any of the documents introduced by Hedge-wick prior to the interference; that he paid no attention to sketches, such as those allegedly shown him by Morillo, because they were not drawn to scale and did not show the locking action of the container and cap; and that he did not recall seeing any of the sketches allegedly shown him by Morillo, although he conceded that anything was possible.

Akers testified that subsequent to his employment at Reflex he conceived his invention, as evidenced by various corroborated engineering drawings. Akers’ cap, as conceived and constructively reduced to practice, differs in form and design from the cap covered by Hedge-wick’s application, although the functioning of the essential elements is the same.

OPINION

As noted above, the only dispositive issue is derivation. In considering this issue, we point out that evidence of activity, knowledge or use concerning an invention in a foreign country is not precluded by 35 U.S.C. § 104 in establishing derivation. That section merely provides;

In proceedings in the Patent Office and in the courts, an applicant for a patent, or a patentee, may not establish a date of invention by reference to knowledge or use thereof, or other activity with respect thereto, in a foreign country, except as provided in section 119 of this title. [Emphasis supplied.]

Evidence of derivation has to do with origin of the invention — not date of invention. See In re Krank, 438 F.2d 609, 58 CCPA 976 (1971). As stated in Federico, Commentary on the New Patent Act, 35 U.S.C.A., page 24:

It should be noted that proof of . acts abroad is not" barred when the object is not to establish a date of invention, that is when the object is not to antedate a printed publication or public use or the date of invention of another; in a case where an applicant for patent, in an interference, is trying to show that the adverse party was not an inventor at all but derived the invention from him, the fact that the events took place in a foreign country would be immaterial.

The legislative history of 35 U.S.C. § 104 confirms this analysis. The predecessor statute (35 U.S.C. 109, 1946 ed., § 9 of the Boykin Act, P.L. 690, 60 Stat. 940 (1946)) was enacted to eliminate the anomalous situation resulting from Electric Storage Battery Co. v. Shimadzu, 307 U.S. 5, 59 S.Ct. 675, 83 L.Ed. 1071 (1939). As a result of the decision in that case, evidence of activity abroad was admissible for the purpose of proving a patentee’s date of invention in a patent infringement case in which the alleged infringer sought to defend on the ground of public knowledge or use prior to the patentee’s date of invention ; whereas as the Supreme Court pointed out, in an interference proceeding, such evidence was not admissible.

Thus, the testimony presented on behalf of Hedgewiek relating to acts, knowledge, or use of the invention in Canada was admissible for the purpose of the derivation issue. Although Hedge-wick himself did not testify, his testimony would have been relevant and admissible for this purpose.

The issue of derivation is one of fact, and the party asserting derivation has the burden of proof. Beall v. Ormsby, 154 F.2d 663, 33 CCPA 959 (1946). That burden is independent of the senior or junior party status of the parties. Fritz v. Hawn, 37 F.2d 430, 17 CCPA. 796 (1930). Derivation is shown by a prior, complete conception of the claimed subject matter and communication of the complete conception to the party charged with derivation. Egnot v. Looker, 387 F.2d 680, 55 CCPA 782 (1967); MacMillan v. Moffett, 432 F.2d 1237, 58 CCPA 792 (1970). Communication of a complete conception must be sufficient to enable one of ordinary skill in the art to construct and successfully operate the invention. Agawam Co. v. Jordan, 74 U.S. (7 Wall.) 583, 19 L.Ed. 177 (1869); DeGroff v. Roth, supra. All the circumstances in the record must be considered in evaluating the sufficiency of the communication. Bartsch v. Baker, 134 F.2d 487, 30 CCPA 919 (1942).

It should be emphasized that mere proof of motive and opportunity (e. g. access) is not sufficient to carry the burden of proving derivation. Rider v. Griffith, 154 F.2d 193, 33 CCPA 884 (1946). Under the proper circumstances, differences between the embodiments of the parties may demonstrate that their inventions were independently made. St. Pierre v. Harvey, 233 F.2d 337, 43 CCPA 918 (1956).

The board held that Hedgewiek failed to satisfy his burden of proving that sufficient information was communicated to Akers to constitute a complete conception, bearing in mind the narrow difference between the invention and the prior art Palm-N-Turn cap. For this purpose, it assumed, without deciding, that Hedgewiek possessed the necessary complete conception prior to the alleged disclosure to Akers.

That Akers had access to the files in the engineering area is, without more, insufficient to establish derivation. Any inference of derivation that could possibly arise from such access is dispelled by the differences in form and design between the embodiments of the parties. Morillo’s alleged communication of sketches of the invention to Akers is uncorroborated and was, for all practical purposes, denied by Akers.

In view of the foregoing, we conclude that the board correctly held that Hedge-wick failed to meet his burden of proof on the derivation issue.

Hedgewick raises an additional issue that Akers is not entitled to count 1 because it includes subject matter which he does not regard as his invention. 35 U.S.C. § 112 (2d par.). Whether this issue is ancillary to priority need not be decided at this time inasmuch as nothing in the testimony of Akers demonstrates that his claims include subject matter which he does not regard as his invention.

The decision of the board is affirmed.

Affirmed.

LANE, Judge, concurs in result.

      . The documents were various sketches of safety caps from the Palm-N-Turn program, such as those from McBride’s files.

      . S.Rep.No.1502, 79th Cong. 2d Sess. 8-9 (1946) and H.R.Rep.No.1498, 79th Cong. 2d Sess. 7-8 (1946). See also Federico, Commentary on the New Patent Act, supra; Ex parte Lemieux, 115 USPQ 149 (PO BdApp 1957).

      . It does not appear that the board drew any adverse inference from Hedgewick’s failure to testify. However, in certain cases an adverse inference would be permissible. Revise and Caesar, Interference Law and Practice, Yol. IV, § 649 and 657 (1948). See Kravig v. Henderson, 362 F.2d 1015, 53 CCPA 1534 (1966); DeGroff v. Roth, 412 F.2d 1401, 56 CCPA 1331 (1969). Nor does it appear that any adverse inference was drawn by the board because of the deletion of Canadian conception dates from appellant’s exhibits attached to his preliminary statement.

      . However, showing a prior, complete conception and communication thereof is not the only way to establish derivation. MacMillan v. Moffett, supra, and Alexander v. Williams, 342 F.2d 466, 52 CCPA 1155 (1965).

      . We believe the board should have decided whether Hedgewiek possessed the necessary conception with a view to avoiding the results of a piecemeal decision in event of reversal. See Wakefield v. Watkins, 491 F.2d 1268, (CCPA 1974), particularly the concurring opinion.

      . A count is a vehicle for contesting an interference and may not necessarily be awarded as a claim to a winning party or be proper under 35 U.S.C. § 112 (e. g. a phantom county. Whether a section 112 (2d par.) issue is ancillary to priority would depend on how it is characterized: patentability, third party inventorship, derivation, admission against interest, or disclaimer. On the latter point, see Kademann v. Bollmann, 421 F.2d 1372, 57 COPA 907 (1970). Characterization can be complicated by statements of an inventor who is not versed in the scope of claims or the various meanings of “invention.”


author: ROBERT P. ANDERSON, Judge:

text:
    AMERICAN NURSING HOME ASSOCIATION, Plaintiff-Appellee, v. The COST OF LIVING COUNCIL et al., Defendants-Appellants.
    Nos. DC-21, DC-22.
    Temporary Emergency Court of Appeals.
    April 29, 1974.
    As Modified May 15, 1974.
    Supplemental Order May 21, 1974.

      John N. Hanson, Atty., Dept, of Justice, Washington, D. C., with whom Irving Jaffe, Acting Asst. Atty. Gen., William E. Nelson, Stanley D. Rose, Attys., Dept, of Justice, were on the brief for appellants.
    Thomas C. Fox, Washington, D. C., with whom William A. Geoghegan and George R. Clark; Pierson, Ball & Dowd, Washington, D. C., were on the brief for appellee.
    Before TAMM, Chief Judge, and ANDERSON and ESTES, Judges.
   ROBERT P. ANDERSON, Judge:

The Cost of Living Council (CLC) and its members, defendants below, appeal, under § 211 of the Economic Stabilization Act of 1970, as amended (“the Act”), from a judgment entered by the District Court for the District of Columbia on February 7, 1974, declaring CLC regulations, as applied to nursing homes, arbitrary and capricious and in conflict with the reimbursement provisions for Medicare and Medicaid under the Social Security Act, and permanently enjoining CLC from enforcing the regulations against nursing homes. We reverse.

In order to give context to the issues raised on this appeal, brief summaries of the history of the regulations in question and of the relevant portions of the Social Security Act are of assistance. On December 29, 1971, the CLC issued regulations covering institutional providers of health services, including nursing homes. 6 C.F.R. § 300.18 (Phase II). With various exemptions and refinements, these regulations generally limited price increases to those justified by increased costs, but only to the extent that such increases did not raise the provider’s total annual revenues, adjusted for volume differences, by more than 6% above the level of the preceding year. Thereafter the regulations went through several recodifications, but without substantial change. On January 21, 1974, new regulations were issued in implementation of Phase IV of the Act. In general they imposed a 6.-5% ceiling on the annual increase in average revenues of establishments providing some kind of health care. While these new regulations eliminated the requirement of cost justification, they provided more flexible exceptions.

In 1965, Congress had added to the Social Security Act, Title XVIII (“Medicare”, 42 U.S.C. § 1395 et seq.) and Title XIX (“Medicaid”, 42 U.S.C. § 1396 et seq.). Medicare established a federal health insurance program under the supervision of the Secretary of the Department of Health, Education and Welfare (HEW) to provide medical care for the aged. Payments to nursing homes, and other health providers, for services covered by the program were based upon the reasonable cost of such services, as implemented by an agreement between the Secretary and the nursing home. Medicaid provided grants to the states to aid their programs designed- to furnish medical assistance to those in need of it. The amount of payment to. a participating nursing home, or other health provider, was to be determined by the state, though the Secretary first recommended, and then required by regulation, that payments under Medicaid could not exceed the reasonable cost reimbursement for comparable services under Medicare. Among amendments to the Social Security Act affecting reimbursements under these programs were those in 1972 which, inter alia, included a provision requiring states to use the Medicare reasonable cost reimbursement approach in Medicaid programs, effective July 1, 1976 (42 U.S.C. § 1396a(a)(13)(E)), and those of 1973, including a repeal of another section (§ 225) of the 1972 amendments, (42 U.S.C. § 1396b(j)), which had imposed a 5% anti-inflation limitation on increases in federal participation in payment for skilled and intermediate care facilities.

The CLC’s appeals, docketed as DC-21 and DC-22 and consolidated by this court on February 10, 1974, raise issues applicable to all of the CLC regulations, promulgated and amended from time to time under Phases II, III and IY.

Before reaching the merits of the two reasons advanced by the district court for finding these regulations invalid as applied to nursing homes, it is necessary to dispose briefly of certain preliminary contentions of the CLC.

The defendants first assert that American Nursing Home Ass’n (ANHA) had no standing to bring its suit because it failed to allege injury to itself and because it was not a “person suffering legal wrong” within the meaning of § 210(a) of the Act. But the Association made specific allegations of injury to its members, 7,000 nursing homes deriving approximately 75% of their revenues from Medicare and Medicaid reimbursements and suffering adverse effects from defendants’ regulations on the level of permissible reimbursements. Under these circumstances, standing is present. Sierra Club v. Morton, 405 U.S. 727, 737, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1971); United States v. Scrap, 412 U.S. 669, 685, 687, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1972). The words “person suffering legal wrong” do not in themselves impose a more stringent test of standing, but rather are used in the context of requiring that any suit brought under the Act, must be for redress of a legal wrong that is the result of an act or practice arising under the Act, or an order or regulation issued pursuant thereto.

CLC also contends that the complaint does not present a justiciable controversy, because the 7,000 members embody an “infinite variety of dissimilarities.” But this constituted no bar to prevent the district court from addressing issues not dependent on the individual circumstances of each nursing home, such as the two it was asked to, and did, decide, i. e. the claimed conflict of the regulations with the intent and purpose underlying the congressional enactments, and their alleged arbitrary and capricious nature.

Finally, CLC objects that ANHA did not exhaust its administrative remedies. There is some confusion in the factual premise for this contention, between individual exceptions and industry-wide exemptions, and whether the latter were properly requested. Nevertheless, all are agreed that no final CLC decision was reached before the plaintiff brought its district court suit, and the question thus posed is whether that circumstance should have prevented the district court from hearing the case.

The reasoning of the district court in concluding that it should hear and decide the two issues is stated as follows :

“The Court can interpret and rule on this conflict between regulation and statute as cogently as the agency and therefore the Court does not feel constrained to dismiss the complaint for failure to exhaust administrative remedies. If this were a matter where agency expertise was required or the plaintiff was trying to short-circuit the administrative process and an administrative record would be of benefit, the Court would hold differently.”

While this is a correct statement of the rule to be applied in passing upon the exhaustion requirement, the district court used it correctly only for the statutory construction issue and not for the question of whether the regulations were arbitrary and capricious.

The exhaustion doctrine is a practical one designed to increase both judicial and administrative efficiency. The most important factor in its application is, therefore, the one stated by the district court, whether “an administrative record would be of benefit” to proper resolution of the issues in controversy. This court, when considering the exhaustion requirement, has consistently stressed the importance of distinguishing between factual issues, upon which administrative expertise is best brought to bear, and legal issues, which courts are equally well equipped to handle. In City of New York v. New York Telephone Co., 468 F.2d 1401 (TECA 1972), we upheld dismissal of a complaint for failure to exhaust administrative relief, emphasizing that “[jjudicial review is surely hindered by the failure of the litigant to give the agency an opportunity to make a factual record, exercise its discretion or apply its expertise,” id., at 1403. We there relied on McKart v. United States, 395 U.S. 185, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969), which had stressed the desirability of letting “the agency develop the necessary factual background upon which decisions should be based,” id., at 194, and explicitly distinguished cases “solely of statutory interpretation” from those involving “expertise or the exercise of discretion,” id., at 197-198. Similarly in Anderson v. Dunlop, 485 F.2d 666 (TECA 1973), we insisted upon exhaustion where the gist of plaintiffs’ complaint was that the application of certain regulations to them was “arbitrary and capricious,” id., at 667. Finally, in Consumers Union v. Cost of Living Council, 491 F.2d 1396 (TECA 1974), we gave recognition to the exhaustion requirement but distinguished the case because there were no factual issues in dispute, and only a legal question remained' concerning the interpretation of the validity of certain regulations in the light of the Economic Stabilization Act.

In this case, the district court in its final decision of February 7, 1974, 372 F.Supp. 517, did not express any adverse criticism of the record before it with regard to the statutory interpretation issue. But on the arbitrary and capricious question, it recognized that “[t]he determination of whether these regulations are arbitrary and capricious must rest upon a careful examination of the record as presented to this Court;” and it then pointed out the deficiencies of the record from the standpoint of its inadequacy in providing a “rational basis” for the regulations. The plaintiffappellee takes the position that both issues are purely legal and that no factual issue remains in the case. The basis for the arbitrariness argument by the plaintiff and the finding to that effect by the district court was the disputed factual issue of whether nursing homes were a particularly inflationary sector. There is no law versus fact ambiguity in this question. See generally Davis, Administrative Law, § 30.05 (1958). It is on the answer to this factual question that the rational basis test squarely rests. Under these circumstances, exhaustion should have been ordered.

In this connection we turn to the matter of burden of proof, which undercuts the entire factual issue. Upon careful consideration of the trial court’s opinions of December 5, 1973 and February 7, 1974, we have concluded that it acted in reliance upon the principle that the burden of proof, thoughout the proceedings, rested upon the defendants. For example, toward the end of the February 7th memorandum it said, “. the COLC must be able to show, and refute evidence to the contrary, that they are not acting on a conclusory basis unsupported by fact that an industry is inflationary,” and again “. . . the government has failed to show a rational basis for these regulations and, therefore, this court can only find there is substantial reason to adjudge them arbitrary and capricious.”

As the district court (and for that matter the plaintiff as well) considered the arbitrariness issue to be whether the CLC “has a rational basis to support its position that the [nursing home] industry is inflationary,” the question on appeal is not, therefore, whether specific provisions of the regulations impose arbitrary and capricious requirements but whether there is an adequate basis to impose on the plaintiff any regulatory scheme at all. In finding no rational basis for regulating nursing homes along with other institutional providers of health services, the district court relied almost entirely on the failure of CLC to produce any reliable statistics relative to inflation in the nursing home industry as compared with the institutional health services industry as a whole.

In dealing with this issue the trial court erred in misplacing the burden of proof. In general the burden is on the challenger of agency regulations to demonstrate that they are arbitrary and capricious. New York Foreign Freight Forwarders & Brokers Association v. Federal Maritime Commission, 337 F.2d 289, 295 (2 Cir. 1964), cert. den., 380 U.S. 910, 85 S.Ct. 893, 13 L.Ed.2d 797 (1965); United States v. Ekberg, 291 F.2d 913, 921 (8 Cir.), cert. den., 368 U.S. 920, 82 S.Ct. 242, 7 L.Ed. 2d 135 (1961); American Export Lines, Inc. v. Dredge Admiral, 254 F.Supp. 1, 8, n. 8 (S.D.N.Y.1966). The same principle has been recognized by this court as applicable to actions by the CLC. Murphy v. O’Brien, 485 F.2d 671, 674 (TECA 1973). See also Pacific Coast Meat Jobbers Ass’n, Inc. v. Cost of Living Council, 481 F.2d 1388 (TECA 1973); Western States Meat Packers Ass’n, Inc. v. Dunlop, 482 F.2d 1401 (TECA 1973); League of Voluntary Hospitals and Homes of New York, et al. v. Local 1199, Drug and H. U., 490 F.2d 1398, 1403 (fn. 3) (TECA 1973).

There is nothing on the face of the regulation to indicate that it is arbitrary or capricious. The lumping of nursing homes in the same regulatory category with hospitals is certainly not bizarre. They both require the services of doctors, nurses, technicians, housekeepers, cooks and other similar classes of employees. They both require food supplies, fuel, similar kinds of furniture and furnishings and other like items of equipment and consumables. The CLC cannot be expected to subdivide designated inflationary sectors and create specialized regulations calibrated to fit the precise characteristics of small, slightly differentiated units at the insistance of every plaintiff. For the purpose of issuing and administering regulations under the Act, the CLC had only a duty to designate sectors made up of units which were reasonably similar in their economic attributes, purposes and functions. Where a particular unit or number of units, including an entire industry, did not produce the inflationary impact which the regulations were designed to stem, its remedy lay in the flexible provisions affording the right to petition CLC for exceptions or exemptions.

The CLC said that there was “no evidence to indicate that the rate of inflation in this area was substantially different from that experienced in the health care industry as a whole.” If this is incorrect and there are factors which show that nursing homes should be exempt or separately regulated, it is up to the plaintiff to prove that this is so. As the record stands there is no substantial evidence to show that the alleged differences exist.

There is, however, evidence that each major type of institutional health provider has “comparable cost components in approximately equal magnitude,” suggesting the likelihood that the inflation noticed as to all might well apply to each; and that these costs, labor and nonlabor, arise out of supply conditions in basically the same markets for each type of provider. While this evidence is indirect, when combined with the total lack of evidence to show that there was no inflation in the nursing home field, it is enough to satisfy the rational basis test.

Under the circumstances a remand for exhaustion of administrative remedies is called for.

The remaining issue is whether the regulations of the CLC improperly conflict with the reasonable cost reimbursement provisions of the Medicare and Medicaid sections of the Social Security Act; and the answer to this is to be found in congressional intent and statutory interpretation. We agree with the CLC’s position that the only conflict between the regulations and the pertinent portion of the Social Security Act is that which Congress intended.

There are two fundamental conceptual errors which manifest themselves in the analysis of what evidence was presented by the ANHA and reflected in the trial court’s opinion. The first is the failure to distinguish temporary legislation designed to meet the economy-wide problem of inflation on a short-run basis, such as the Economic Stabilization Act, and, second, more permanent legislation designed to address specific problems of an often long-term nature in various segments of the nation, such as health programs for the medically needy.

Controls of the first kind do not necessarily conflict with legislative schemes of the second type simply because they may impinge or overlap the same sectors of the economy. The second error involves the interpretation of legislative action where an assumption of congressional awareness or unawareness is necessary to such interpretation. If there is no evidence in either direction, the presumption must be in favor of congressional awareness. The factors on which the district court based its conclusion that there was a conflict between the CLC regulations and the Medicare and Medicaid portions of the Social Security Act did not include consideration of these basic concepts.

The only reason advanced in the December 5, 1973, decision was that Medicare and Medicaid programs are already “so strictly controlled by audit and governmental review.” But that ignores the separate purposes of the federal medical cost reimbursement and economic controls programs. In the later decision of February 7, the district court recognized that the purpose of the Medicare and Medicaid controls was to make sure nursing homes got only “reasonable costs” and not “unwarranted reimbursement from the government.” By contrast, the CLC regulations have an anti-inflationary purpose. In their original form, for example, they imposed an overall limit on the volume-adjusted revenues, beyond cost justification requirements, and in the latest version, eliminated cost justification altogether. There are different controls here, imposed for different purposes and for different periods of time. While preventing excessive demands on the governmental fiscal resources under the Social Security Act may indeed have anti-inflationary tendencies, it can hardly be supposed, absent explicit congressional direction to that effect, that inflation in a given sector of the economy is to be attacked, not by means of the Economic Stabilization Act, but only by preventing such demands.

The first reason for holding there is a fatal conflict between the regulations and the Social Security statutes, advanced by the trial court in its February 7 opinion, was said to be the very language of the Medicare-Medicaid reimbursement provisions, but this is just a repetition, in different guise, of the same rationale as that in the December 5 decision, because all that these provisions say is that reimbursement shall not exceed reasonable cost, as defined therein and by regulations. 42 U.S.C. §§ 1395f(b) and 1395x(v). They nowhere suggest that if an anti-inflation effort demands additional controls, these cannot be imposed.

The next reason advanced is based on § 203(j) of the Economic Stabilization Act, which provides:

“Nothing in this title may be construed to authorize or require the withholding or reservation of any obligational authority provided by law or of any funds appropriated under such authority.”

The legislative history shows that § 20S(j) was directed at preventing the impoundment of appropriated funds by the office of the President. Senate Report No. 93-63, U.S.Code Cong. & Admin.News, 93rd Cong., 1st Sess., at 1299. In this context, “terminations of programs legislated by the Congress” should be interpreted as action of greater direct impact than the regulations at issue here, which still provide for substantial federal reimbursements — and seek to curtail them only to the extent that they are inflationary. Moreover, if Congress, in enacting § 203(j), was trying to note its displeasure with the effect of CLC’s regulations, it chose a singularly inept means by which to express that dissatisfaction.

The district court next considered the statement by Congressman Wilbur Mills, as House manager of a bill repealing § 225, 42 U.S.C. § 1396b(j):

“The final medicaid provision in the Senate amendment would delete a provision in the present law which limits the average per diem costs for skilled nursing facilities and intermediate care facilities to no more than 5 percent a year. The wage-price guidelines which apply to such institutions already perform the type of function intended by this provision and will no doubt continue to do so for some time.” Cong.Rec., June 30, 1973, H. 5790.

It recognized that this statement pointed in the direction opposite to its own conclusion but stated that Congressman Mills did not have the matter before him in the context of statute versus regulations and that his statement, therefore, should carry no weight. We disagree with this interpretation. The trial court placed considerable reliance on the statements of Senator Williams, sponsor of the same repeal bill, who said, after mentioning the fact that the Medicaid regulations included cost controls: “The Cost of Living Council controls the rates nursing homes can charge to private patients.” Cong.Rec., May 16, 1973, S. 9217. The district court inferred from this a distinction between public and private patients in CLC controls. A more reasonable interpretation, given the context, is that Senator Williams was simply trying to show that the full gamut of nursing home services, including those for private patients, were covered by other controls, not that public patients were not covered by CLC regulations. The statement is thus easily reconcilable with that of Representative Mills. In any event, since the CLC regulations did apply to Medicaid and Medicare reimbursements, there is no reason to ascribe error or ignorance to Senator Williams when it is more natural and logical to suppose that he was in substance saying the same thing as the Congressman.

The district court relied on the amendment to Title 42 U.S.C. § 1396a, enacted on October 30, 1972, to become effective in 1976, which adopted the extension of the reasonable cost reimbursement approach of the Medicare program for the reimbursement of skilled nursing and intermediate care facilities under Medicaid in 42 U.S.C. § 1396a(13) (E). This rationale again misses the distinction between legislation designed to corn-bat inflation and that designed to protect federal funds, especially as the effective date of this provision is not until July 1, 1976, by which time the economic controls may no longer be in operation.

The declaration and judgment of the district court that the regulations issued by the Cost of Living Council, placing limits on the prices charged by health care providers, 6 C.F.R. § 300.18, as implemented and amended, are, as applied to nursing homes, arbitrary and capricious is reversed, and this issue is remanded to the Cost of Living Council for the purpose of exhaustion of administrative remedies based upon plaintiff’s petition for an industry-wide exemption, filed March 30,1973.

We hold that there is no conflict, other than what was intended by the Congress, between the above mentioned regulations of the CLC as they apply to nursing care homes and Titles XVIII and XIX of the Social Security Act and the district court’s declaratory judgment and its order for a permanent injunction are reversed and the injunction is forthwith dissolved.

SUPPLEMENTAL ORDER

In the light of the termination as of May 1, 1974, of mandatory controls under the Economic Stabilization Act o.f 1970, as amended, and the issuance of Executive Order No. 11,781 of May 6, 1974, this Court orders the Cost of Living Council, forthwith to make, file and record suitable findings, conclusions and a formal Order on the issue of whether the plaintiff-appellee, American Nursing Home Association, should be granted an industry-wide exemption from the regulations covering institutional providers of health services for the effective period of the regulations prior to May 1, 1974, and to give notice of such action to the parties to the suit pursuant to Section 207(a) of the Act.

      . The plaintiff brought its action on September 17, 1973, seeking a declaratory judgment and injunctive relief against CLC’s enforcement of Phase IV regulations on the grounds, among others, that, as applied to nursing homes, they were arbitrary and capricious and in conflict with the reimbursement standards of Titles 18 and 19 of the Social Security Act. The defendant (CLC) filed a motion to dismiss and on December 5, 1973, after a hearing, the district court gave judgment for the plaintiff, granted a permanent injunction and dismissed CLC’s motion. CLC moved for a stay and reconsideration after the presentation of further evidence. This was granted oi December 28, 1973 and the judgment of December 5th was amended to make the injunctive relief temporary rather than permanent. On January 4, 1974 CLC filed a notice of appeal from the December 5 and December 28 judgment and order, and the case was docketed on appeal as DC-21.
      This court on motion of CLC granted a further stay pending the additional proceedings in the district court. On January 21, 1974 new Phase IV regulations concerning nursing homes were promulgated. The plaintiff moved the district court for leave to file a supplemental complaint challenging the new regulations. The court granted the motion on January 30, 1974; and, after giving the case further consideration, it entered a judgment granting the plaintiff a permanent injunction against the enforcement of the regulations against the plaintiff’s members by CLC, which on February 10, 1974 filed its notice of appeal from this judgment. It was docketed in this court as No. DC-22. On the same day this court consolidated Nos. DC-21 and DC-22, and denied CLC’s motion for a further stay.

      . In 6 C.F.R. § 130.61, 38 F.R. 1479, Jan. 11, 1973 (Phase III); then 6 C.F.R. Part 150, 38 F.R. 21978, Aug. 15, 1973.

      . 6 C.F.R. §§ 150.769-150.787, 39 F.R. 2670, Jan. 23, 1974.

      . The CLC appears to insist that ANHA’s individual members must seek individual exceptions, but this concept is unsuited to industry-wide issues best handled under the exemption procedures. The district court mentioned the fact that the plaintiff had sought an exemption, saying, “[p]laintiff availed itself of this opportunity on March 30, 1973, by filing for such an exemption under the then existing Phase III regulations.” Although the letter of March 30 was addressed to Dr. Dunlop, as Director of the CLC, the regulations at the time required an exemption request to be filed with the district office of the Internal Revenue Service unless the CLC agreed to accept a direct filing. See 6 C.F.R. § 105.30 (a) (37 F.R. 10939, June 1, 1972), and § 401.302 (37 F.R. 1010, Jan. 21, 1972). There is no claim that such permission was ever granted. The plaintiff’s petition, however, is still pending.

      . No argument has been advanced in this case that 5 U.S.C. § 556(d), which provides that “the proponent of a rule or order has the burden of proof,” changes these general principles for the purpose of this case and places the burden on the CLC. In any event, this construction of the provision would have to be rejected because of the holding of the Supreme Court in American Trucking Associations v. United States, 344 U.S. 298, 318-320, 73 S.Ct. 307, 97 L.Ed. 337 (1953). That case held that the provision does not apply if the governing statutes of the agency do not require rules to be made on the record after opportunity for an agency hearing, because of the interaction of 5 U.S.C. §§ 556(a), 553(c), and 554(a). Here the provisions of the Economic Stabilization Act of 1970, as amended do not impose any such requirements on the issuance of regulations. See § 203 of the Act. Indeed, § 207(b) shows that the emergency nature of the legislation and the aim of increasing the speed of administrative action resulted in a statutory scheme which relied substantially on hearings after the promulgation of regulations for those aggrieved. See United States v. Florida East Coast R. Co., 410 U.S. 224, 234, 93 S.Ct. 810, 35 L.Ed. 2d 223 (1973); United States v. Allegheny Ludlum Steel Corp., 406 U.S. 742, 756-757, 92 S.Ct. 1941, 32 L.Ed.2d 453 (1972).
      Moreover § 207(a) of the Act explicitly excludes the operation of 5 U.S.C. § 556 from functions exercised under the Economic Stabilization Act.

      . It is of interest that Charles C. Edwards, Assistant Secretary in HEW responsible for the policy development of Medicare and Medicaid programs, in an affidavit submitted to the district court found no conflict in either theory or practice between the health services cost reimbursement scheme and anti-inflation controls. On the contrary, he pointed out that “ . . . it has been the Department’s experience that it has little or no capacity to regulate the cost of personal health care under [its] programs and authorities.” Since in particular “the Medicare program provides little or no basis for controlling inflation” (iu fact encouraging, by reimbursement, increases in the level of health care costs), and since Medicaid similarly “failed to limit any but the most unreasonable increases in health care costs,” HEW “has in recent years relied, in the planning and administration of the Medicare and Medicaid programs, upon the price control regulations pertaining to providers of health services issued under the Economic Stabilization Act . . . ” In short, it was Mr. Edwards’ considered judgment that far from interfering with the Medicare and Medicaid programs, “the Cost of Living Council’s health care regulations . . . rather complement and support their efficient administration.”

      . There is also the need to recognize, in dealing with the statutory interpretation as opposed to the arbitrariness issue, the full breadth of the plaintiff’s argument. The reasoning is not limited to nursing homes but includes hospitals and all other institutional providers of health services affected by both economic controls and the Medicare and Medicaid reimbursement provisions.

      . The affidavit of Charles C. Edwards of HEW, see fn. 6, supra, similarly explains why that Department did not oppose the repeal of § 225 : “ . . .it believed existing regulations under the Economic Stabilization Act would achieve the same objective.”

      . On oral argument the parties, for the most part, limited their discussions of sources from which congressional intent might be inferred, to five particular actions taken by Congress in which, had it purposed or intended to do so, Congress had clear opportunities to exercise economic controls in the health services industry. It did not, however, do so.
      By negative inference the defendants have claimed that Congress intended that the health providers should remain under the CLC regulations. The plaintiff claims the contrary. The five legislative acts are: (a) the enactment in October, 1972, of the Social Security Act amendments, P.L. 92-603; (b) the congressional debates on the extension and modification of the Economic Stabilization Act in early 1973; (c) the reenactment of the Economic Stabilization Act in April, 1973; id) the repeal of § 225 of the 1972 amend-, ments to the Social Security Act in July, 1973; and (e) the amendment of § 233 of the 1972 Social Security amendments in December, 1973.
      Indeed, it should be pointed out that ANHA’s argument before this Court about the repeal of § 225, 42 U.S.C. § 1396b(j), is directly contradicted by the argument it presented to Congress on March 29, 1973, when it sought explicit statutory exemption from economic controls. It then argued that § 225 would have “a very extensive anti-inflationary impact” and that there was thus “a strong case . . . for discontinuation of wage and price controls throughout the nursing home industry.” See, Hearings of the House Committee on Banking and Currency, 93rd Cong., 1st Sess., on H.R. 2099 and H.R. 6168, at 295-96. Yet ANHA now asserts, by way of a heading in its brief, that “There Is No Clear Evidence That Congress Was Aware Of And Approved The Nursing Home Price Regulations When It Repealed Section 225

      . This court is aware that the authority of the President, delegated to the Cost of Living Council, to make regulations and to issue and enforce orders with respect to the issues in this case will terminate on April 30, 1974 unless extended to a later date by congressional action.


author: GEE, Circuit Judge: BY THE COURT:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Kathryn Frances HAND, Defendant-Appellant.
    No. 73-1949.
    United States Court of Appeals, Fifth Circuit.
    July 26, 1974.
    Rehearing En Banc Granted Sept. 16,1974.
    Morton L. Susman, Mark Perrin, Thomas M. Roberson, Houston, Tex., for defendant-appellant.
    Anthony J. P. Farris, U. S. Atty., Robert Darden, U. S. Atty., Houston, Tex., for plaintiff-appellee.
    Before COLEMAN, AINSWORTH and GEE, Circuit Judges.
   GEE, Circuit Judge:

Kathryn Frances Hand appeals from her conviction on a jury verdict of ten counts of embezzlement from her employer, a federally insured credit union. Her appeal presents, with others, contentions of unreasonable search and seizure, of deficiencies in the indictment and variances in proof, and of a constitutionally inadequate defense provided by her retained trial counsel.

Mrs. Hand was the bookkeeper and office manager of ILA 1351 Federal Credit Union (the Union), operating in Houston, Texas. According to her testimony, she discovered a serious shortage of cash in the Union accounts about 2% years before the events which led to her indictment, a shortage which steadily increased over the ensuing time to many thousands of dollars. She was in effective control of the Union’s accounting operations. Mrs. Hand admitted having concealed the increasing shortage from the federal credit union examiners over the course of several annual audits, but asserted that she had no idea where the funds were going. The technique which she employed in this scheme was that known in accountancy as “lapping,” which involves using later cash receipts to match earlier deposits and relying on posting delay to bridge the gap between what should have been in the coffers and what was. Though her case presents troubling questions on two points, we affirm.

I.

The Search and Seizure Contention

Appellant Hand had placed within purses many cash-received vouchers which evidenced her scheme for concealing the credit union’s shortage. These purses were located in or on file cabinets and desks in the Union’s office. At a time when the focus of suspicion had begun to center strongly on Mrs. Hand, she told the federal examiner that she was sending someone by to pick up these purses, and perhaps other personal property. On receiving this word, he opened the purses — to ascertain whether or not they were hers, so he testified — and discovered the incriminating vouchers.

Assuming that Hale was the sort of person to whose searches and seizures the Fourth Amendment applies, his search of the handbags in these circumstances raises close questions. Before us, the United States seeks to justify it under the “plain view” exception to warrant requirements, contending that Hale blundered upon the evidence in the course of an innocent attempt to find identification. This was, indeed, his testimony, and the trial court considered and rejected a motion to suppress after hearing it. It thus might seem the court credited Hale’s explanation, an in limine fact-finding which we would be reluctant to overturn on a cold record. On the other hand, the basis of the court’s ruling is not clear: the record indicates that the government urged that Hale was merely a private citizen, to whose searches Fourth Amendment safeguards did not apply, while the defense memorandum on the subject sought to negative consent as a warrant exception. The court merely overruled the defense motion to suppress, without elaboration. In these circumstances, where we are unable to determine with assurance whether the court made the fact-finding — innocent stumbling upon the evidence — upon which the plain view exception must rest, we must proceed further. To do so requires consideration of the facts leading up to the search.

When Hale, the federal examiner, arrived in early April, 1971, to make his annual examination of the Union, he was aware from three previous examinations that the Union had had a continuing problem with the handling of cash. He considered Mrs. Hand to be the one who “ran” the Union. Almost immediately, he discovered a thirty-dollar cash shortage related to a particular cash voucher. In the course of the audit, other ominous signs appeared. Interest income appeared too small for the volume of loans. About $22,000 in unreported delinquent loans surfaced. Upon inquiry of Mrs. Hand, she produced — after a day’s delay — extension agreements covering the delinquent loans, but four of these bore signatures which Hale felt, and advised Mrs. Hand, appeared suspicious. A cheek with one of the supposed signatories produced a receipt showing his loan had not been extended at all, but paid. At this point, Hale advised the Union’s board of the situation, suggesting suspension of Mrs. Hand and a thorough investigation and verification of all accounts. On April 8, she was suspended.

The next day, April 9, Hale was informed by the other female employee of the Union, Mrs. Westergreen, that Mrs. Hand had telephoned about some missing ledger cards. Hale called Mrs. Hand, and she told him the names of various members whose ledger cards had, she said, mysteriously appeared that morning on her front porch. Hale and the credit union president went to her home that same day and received from her ledger cards corresponding to the names she had given over the telephone, most of which were torn across and which Hale recalled taping back together. Upon Hale’s return to the Union office, he received yet another call from Mrs. Hand, one in which she confessed that a shortage of funds had been going on at the Union for two-and-a-half years, that during this period she had been concealing the shortage, and that though she did not know where the funds had gone she was willing to make some amount of restitution.

Against this background, Mrs. Hand also told' Hale, either in the exchange in which she confessed cooking the books or in her third telephone call to him that day, that she was sending for some of her purses which were in the Union office, as well as some books and scarves. In the process of gathering up her property, Hale testified, he opened the purses, looking for credit cards or for other identification of them as Mrs. Hand’s. He found identifying matter. He also found over 150 vouchers minuting cash transactions in tens of thousands of dollars, the very great majority of which were initialed by Mrs. Hand as the receiving person. Assuming the worst, that a deliberate, warrantless search of the purses was carried out at this point by Hale, does it pass Fourth Amendment muster ?

We conclude that it does. By the time Hale learned of Mrs. Hand’s immediate purpose to remove her handbags from the office, she had admitted juggling the Union’s accounts; and numerous of its financial records had appeared at her home, under highly suspicious circumstances and in a condition indicating an aborted effort to destroy them. Probable cause existed to believe that she had previously concealed and removed and might again conceal or remove records, and the purses were a likely vehicle for either action. Hale would have been remiss in his duty had he permitted such containers to be abstracted from the proximity of the accounting files without determining that they were not being so used.

It may be that in these circumstances, even absent Mrs. Hand’s notice that she was sending for the purses, Hale would have been authorized by the Union’s consent to examine the contents of such containers as he found in and about the files. The record indicates that purses were either in or on the file cabinets or desks in the office, and it does not indicate that Mrs. Hand had use of these furnishings to the exclusion of other employees, rather the contrary. And though personal handbags imply privacy, the fact that numbers of them were left about the office while she was elsewhere places these in a position little more personal, if at all, than that which would have been held by a closed folder found in the files and marked, say, “K. F. Hand — Personal.” At any rate, he received Mrs. Hand’s call stating her purpose to remove the purses while present in a place where he was authorized to be and to most of which he had an unquestioned right of access.

But when to these is added the exigency of Mrs. Hand’s stated purpose to send for the purses, the scale is decisively tipped. On the record, Hale’s choices at this juncture were to release the purses unexamined, to refuse to release them while he contacted regular law enforcement authorities and a warrant issued, or to inspect their contents and be guided by what he found. Probable cause existing, the first course would have been a dereliction of duty. As to the latter two, if Hale’s official “investigative” position was such as to subject him to Fourth Amendment strictures, it was perforce such as to authorize his seizure and immobilizing of the purses. Having the power to seize, in the situation presented, he had the duty to do so. And having seized, the lesser intrusion was to check the purses for Union documents and, if none were found, to release them without more ado. Chambers v. Maroney, 399 U.S. 42, 51-52, 90 S.Ct. 1975, 1981-1982, 26 L.Ed.2d 419, 428 (1970); United States v. Soriano, 497 F.2d 147 (5th Cir., en banc, 1974) [No. 72-1520, July 15, 1974, slip op. 5783].

It is true that the facts of Chambers and Soriano differ from these and from each other, and true moreover that Mrs. Hand was not under arrest and her handbags did not contain, and were not thought to contain, contraband or dangerous instrumentalities. But they were easily movable, and she had announced a positive and immediate intent to remove them. There was probable cause to believe that they contained evidence, and the opportunity to preserve it was fleeting. In the totality of these circumstances, we conclude that the reasoning of Chambers transcends its factual setting sufficiently to justify the search. And we have held in Carlton v. Estelle that warrantless search of a parked car for “mere evidence” was justified by the presence of persons presumably sympathetic to Carlton who might have made away with it. Here the suspect herself had avowed an immediate intent to have the movable and suspect articles removed. In these circumstances, the seizure and search were permissible.

II.

The Indictment: Was Jurisdiction Alleged and Proved?

Appellant also raises in various modes and points what may be seen either as a deficiency in the indictment, a variance between the accusation and the proof, or a failure of proof. The indictment contained ten counts. Each, except for dates and amounts, was identical to the others. Count I will therefore serve to illustrate all of them:

COUNT I

That on or about the 25th day of July, 1968, in the Houston Division of the Southern District of Texas, and within the jurisdiction of this Court, one KATHRYN FRANCES HAND, being an employee of the ILA 1351, Federal Credit Union, Houston, Texas, the deposits of which Credit Union were then and there insured by the National Credit Union Administration, did knowingly and with intent to injure and defraud the said ILA 1351, Federal Credit Union at Houston, Texas, embezzle certain monies of the said Credit Union, which had therefore been entrusted to the care and custody of the said KATHRYN FRANCES HAND by reason of her position as an employee of said Credit Union, in the amount of One Thousand One Hundred Ninety Four and 94/100 ($1,194.94) Dollars, more or less.
(Violation: Title 18, United States Code, Section 657)

It is undisputed that the United States offered no proof that the deposits of the Union were insured in the manner charged in the indictment or, indeed, in any manner. Moreover, 18 U.S.C. § 657 did not include embezzling from an insured institution as an offense before it was amended to do so, effective Octoher 19, 1970. The first six counts of the indictment charge offenses committed before that date, and thus — insofar as they merely charge embezzlement from an insured institution — charge what was not made a crime by 18 U.S.C. § 657 or by any other law at the time of the asserted offense. The question of the existence vel non of insurance was not submitted to the jury as an element of the offense charged, and appellant contends that consequently the jury failed to find a crucial and jurisdictional element of the alleged crimes. As to the accusation of having embezzled from a federally insured institution, appellant is entirely correct: it was neither proved nor found.

It remains to consider whether this admitted variance between pleading and proof was fatal. We also consider whether the indictment sufficiently charges as well the commission of the crime of embezzling from a federally chartered credit union and, if so, whether the conviction may properly be affirmed on this ground.

The indictment is clearly susceptible of being read as charging that Mrs. Hand’s offense was committed against an entity which (1) was a federal credit union and (2) the deposits of which were federally insured. It is also susceptible of being read as referring to an entity which merely incorporated the phrase “Federal Credit Union” in its title. Competent pleading of this jurisdictional ground would at the least have added some such phrase as, “a federal credit union” after what was arguably merely a title. Had this been done, the allegation of this ground of jurisdiction would have been clearly sufficient. United States v. McAdams. This careless omission, together with the utter failure of proof as to the other ground of jurisdiction alleged, remits us to a brief consideration of first principles which should have had no place whatever in this ease. These may be simply stated, the difficulty is in their application.

Common-law ruffles and flourishes form no part of the current law of criminal pleading. An indictment is sufficient which plainly asserts the essential facts of the offense. The purpose of the indictment is said to be to inform the accused of the charge against him sufficiently for him to prepare his defense, to protect him after conviction or acquittal against further prosecution for the same cause, and to inform the court of the facts charged so that, if necessary, it may pass on their legal sufficiency to support a conviction. Surplusage, though subject to being stricken on defendant’s motion, does not vitiate an indictment.

As noted above, each count of Mrs. Hand’s indictment alleges that, while employed by “ . . . ILA 1351, Federal Credit Union, Houston, Texas, the deposits of which Credit Union were then and there insured by the National Credit Union Administration. .” she made away with funds entrusted to her. The United States entirely failed to prove the alleged insurance, but proved the Union was a federal one, chartered under the laws of the United States, beyond peradventure. If the indictment’s reference to insurance be regarded as surplusage, and if its reference to ILA 1351, Federal Credit Union, is a sufficient allegation of federal incorporation, then the government has alleged two jurisdictional bases, either of which would do, and proved one of them. “Federal Credit Union” is a term of art analogous to “National Bank” and similar titles'. And so, stated most favorably to Mrs. Hand, the decision under this head of appeal comes down to this: as a matter of criminal pleading, was jurisdiction sufficiently alleged, against objection made for the first time on appeal, by the simple assertion that defendant embezzled from “the X National Bank” or “the Y Federal Credit Union.” Not without difficulty, we conclude that it was.

There can be little doubt that the major purposes of an indictment were served by this one. Mrs. Hand was charged with embezzling specified sums from her named employer, for whom the record shows she had worked about five years before being suspended. Here is no question such as might have been presented had she worked for two or three with similar names, or picked several pockets in one day; she well knew what she was accused of. This was fair notice to her under the Sixth Amendment. And it is equally plain that, in the event of conviction or acquittal, the pleading — supplemented if necessary by the record of all proceedings against her — -would suffice to protect her from further jeopardy. It is with Fed. R.Crim.P. 7(c) and its demand for “ . . .a plain, concise and definite written statement of the essential facts constituting the offense charged. . . . . ” that we come to the rub.

A skimpier assertion of jurisdiction can scarcely be imagined than we find here. The element is, moreover, one which can in no sense be waived or cured by verdict, being of the type whose absence is available for consideration even on motion in arrest of judgment. Yet the modern rule for treatment of indictments is that they are to be read as a whole and interpreted in a common-sense manner, free of the trammels devised by the common law at a time when every felony was punishable by death, and the rule is not otherwise as to essential elements of the pleading. Such a reading indicates that an entity styled a “Federal Credit Union” is at least very likely to be a federal credit union, whether or not realleged to be such in lower case. Nor need there be fear in this case, such as was expressed in Stirone v. United States, 361 U.S. 212, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960), that the grand jury which returned this indictment did not mean to charge the offense of which Mrs. Hand was convicted. No prejudice to the substantial rights of Mrs. Hand appears from the sketchiness of the pleading, and hence it was not fatally defective. Berger v. United States, 295 U.S. 78, 55 S.Ct. 629, 79 L.Ed. 1314 (1935). Indeed, it is far from certain that an entire failure to allege the federal character of the association would have been fatal, where a proper head of jurisdiction was alleged and another was proved without objection to the evidence as variant, and without motion for judgment of acquittal, motion in arrest of judgment, or other outcry below. Cf. Jackson v. United States, 123 U.S.App.D.C. 276, 359 F.2d 260 (1966). In these circumstances the indictment, though a good example of bad practice, did not mislead or prejudice Mrs. Hand and was sufficient.

III.

Inadequacy of Trial Counsel and Other Matters

Appellate counsel for Mrs. Hand faults retained trial counsel by hindsight for failing to take various steps in the course of the proceedings below. A catalogue of things which might have been done and were not is presented. Though we are not in the business of rating legal performance, we have considered counsel’s supposed deficiencies, severally and in total effect, in relation to the record and are entirely unable to say that the charge is well grounded. Nothing is advanced which may not be viewed either as a legitimate tactical choice, the relinquishment of an untenable position or, at worst, an honest mistake. We take occasion to reiterate both that we do not view such roundings on trial counsel with favor and that there is a wide expanse of tolerance for ability of counsel between success in the case and an inadequacy so extreme and so clear as to offend the Constitution.

We have 'carefully considered appellant’s remaining points, as well as those which we have discussed. None requires reversal.

Affirmed.

ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC

Before BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORN-BERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, RONEY and GEE, Circuit Judges.

BY THE COURT:

A member of the Court in active service having requested a poll on the application for rehearing en banc and a majority of the judges in active service having voted in favor of granting a rehearing en banc.

It is ordered that the cause shall be reheard by the Court en banc on briefs without oral argument. The Clerk shall set a briefing schedule for the filing of supplemental briefs.

      . An assertion somewhat dubious at first blush, since they were women’s handbags, and the only other female who worked in the office appears to have been present when he opened them.

      . See McCormick, Evidence § 53 at 121 (2d Ed. 1972) : “Accordingly, under the traditional view and the generally accepted principle the trial judge decides with finality those preliminary questions of fact upon which depends the admissibility of an item of evidence that is objected to under an exclusionary rule. . . . ”

      . Though it seems likely, that, had the court felt Hale was testifying disingenuously, other consequences would have ensued.

      . This circumstance, with the highly specific nature of the probable cause here present to believe Mrs. Hand might have concealed her employer’s property for her own purposes, tends to distinguish the case at bar from United States v. Blok, 88 U.S.App.D.C. 326, 188 F.2d 1019 (1951), in which an employer’s consent was held ineffective to validate search for evidence of an extraneous crime of a desk reserved for an employee’s exclusive use. There the Court noted: “Her superiors could not reasonably search the desk for her purse ... or anything else that did not belong to the government [her employer] and had no connection with the work of the office.” 188 F.2d at 1021. Here, though Mrs. Hand’s purse was searched, it was precisely such matter which, with probable cause, was sought.

      . Though probable cause to arrest her doubtless existed at the time of the search.

      . 480 F.2d 759 (5th Cir. 1973).

      . For all the record shows they well may not have been.

      . Though the statute, elided to refer only to insured institutions, was read as an earlier part of the court’s charge.

      . At all pertinent times § 657 denounced this as a crime. United States v. McCarthy, 196 F.2d 616 (7th Cir. 1952); United States v. McAdams, 303 F.Supp. 824 (N.D.W.Va.1969).

      . Id.

      . Fed.R.Crim.P. 7 (c).

      . 1 Wright, Federal Practice and Procedure : Criminal § 125.

      . Fed.R.Crim.P. 7(d) ; see 1 Wright, Federal Practice and Procedure: Criminal § 127.

      . Defined at 12 U.S.C. § 1752 as a cooperative association organized under that chapter, which is, in turn, entitled the “Federal Credit Union Act.” 12 U.S.C. § 1751.

      . Russell v. United States, 369 U.S. 749, 82 S.Ct. 1038, 8 L.Ed.2d 240 (1962); Woodring v. United States, 376 F.2d 619 (10th Cir. 1967).

      . And with the third function of the indictment, to “set out the specific offense,” Russell v. United States, 369 U.S. at 768, 82 S.Ct. at 1049, 8 L.Ed.2d at 253, so as “to inform the court of the facts alleged, so that it may decide whether they are sufficient in law to support a conviction . . . .” United States v. Cruikshank, 92 U.S. 542, 558, 23 L.Ed. 588, 593 (1875).

      . Fed.R.Crim.P. 34.

      . 6 Moore, Federal Practice ¶ 7.04.

      . If more be needed, defendant’s requested jury instructions inquired merely whether Mrs. Hand was the employee of ILA 1351, Federal Credit Union.

      . Horsley v. Simpson, 400 F.2d 708 (5th Cir. 1968).