author: WINTER, Circuit Judge:

text:
    Peter J. BRENNAN, Secretary of Labor, Petitioner, v. GILLES & COTTING, INC., and Occupational Safety and Health Review Commission, Respondents.
    No. 73-2471.
    United States Court of Appeals, Fourth Circuit.
    Argued May 8, 1974.
    Decided Oct. 18, 1974.

      Barbara L. Herwig, Atty., U. S. Dept, of Justice (Irving Jaffe, Acting Asst. Atty. Gen., Carla A. Hills, Asst. Atty. Gen., Stephen F. Eilperin, Atty., U. S. Dept, of Justice, on brief), for petitioner.
    Robert C. Adams, Fairfax, Va. (Ken-non W. Bryan, Fairfax, Va., on brief), for respondent Gilíes and Cotting, Inc.
    Allen H. Sachsel, Washington, D. C., Appellate Counsel, for respondent Occupational Safety and Health Review Commission.
    Before BRYAN, Senior Circuit Judge, and WINTER and FIELD, Circuit Judges.
   WINTER, Circuit Judge:

Following the collapse of a scaffolding which caused the death of two workers on the payroll of Southern Plate Glass Company (Southern), a subcontractor of Gilíes & Cotting, Inc. (Gilíes), the Secretary of Labor issued citations against Southern and Gilíes for “serious violations” of the safety regulations governing scaffolds. Southern did not contest its liability, but Gilíes challenged the citation against it and the accompanying proposed fine of $550. The administrative judge decided both that the fatal scaffolding assembly had been constructed in violation of safety regulations properly promulgated pursuant to the Occupational Safety and Health Act of 1970 (OSHA), and that under the statute Gillgs was responsible for the violations. /'Though he found that Gilíes was answerable because its payroll employees had access to the zones of danger created by the scaffold, the principal basis of his decision was a broader holding that Gilíes, as general contractor, was liable under the Act for safety violations hazardous to employees of subcontractors.^'

On review, the Commission, in a split decision, reversed. Stating that no payroll employee of Gilíes was “affected” by the scaffold’s hazardous condition and concluding that Gilíes should not be jointly responsible for the hazard which Southern’s scaffolding created for Southern’s workers,/ihe majority exonerated Gille^i^he Secretary appealed.,

We conclude that, under OSHA, the Commission was empowered to decide both of the questions of whether a general contractor should be concurrently responsible for the safety of subcontractor workers as a joint employer and of whether proof of employee access to the zones of danger created by a safety violation, short of proof of presence in the zones of danger, will suffice to support a citation either way. We therefore affirm the Commission’s decision that a general contractor is not jointly responsible for the safety of subcontractor workers. However, we must remand the second issue of access versus presence, since the Commission’s decision was an unexplained rejection of the administrative judge’s decision and an unexplained departure from the rule of decision followed in other OSHA cases that access alone is sufficient to make out a violation. Finally, we sustain the right of the Commission, against the the challenge of the Secretary, to be an active party litigant in the instant proceedings to review.

I.

Gilíes was the general contractor for the construction of a fourth-floor addition on a building at the National Aeronautics and Space Administration’s (NASA’s) Goddard Manned Space Flight Center in Greenbelt, Maryland. Gilíes subcontracted the glass construction work on the project to Southern.

Under the construction contract between Gilíes and NASA, Gilíes was required to submit an accident prevention plan. The plan submitted placed primary safety responsibility on Gilíes’ job superintendent. His responsibilities included familiarizing himself and pertinent supervisory personnel with the applicable safety regulations, enforcing the accident prevention plan, checking supervisory personnel for compliance with their safety responsibilities, and coordinating Gilíes’ accident prevention activities with those of the subcontractors. Gilíes’ responsibilities as a general contractor included overall safety and accident prevention at the construction site.

Gilíes’ accident prevention plan provided that scaffolds were to be constructed and used in accord “with good practice.” Gilíes knew the construction standards pertaining to scaffolds, and was aware that they required frequent inspections.

The fatal scaffolding units were supplied, constructed, and used by workers on Southern’s payroll. The roof top assembly they built consisted of two tubular or patent scaffolding units each holding an I-beam that projected over the roof to support a suspended staging or swinging platform. The I-beams were bound to the wheeled scaffolding units by Y\ inch rope. The counterbalance on each unit consisted of approximately 350 to 400 pounds of elevator weights and roofer cement blocks set unsecured on a plywood platform against a two-by-four at the back of the scaffolding. At first, the units were tied back with rope to eye bolts or window washing rings in the roof. After a few “drops,” however, the scaffolding units were no longer tied to the eye bolts in the roof and no other means of securing them were used.

The scaffolding assembly was used by Southern’s workers to install windows in the building. Two men and a quantity of glass panes would be lowered to the correct height along the face of the building where the work was to be performed. At the completion of a stage of the work, the entire scaffolding assembly would be moved laterally to a new position where another “drop” would be made. The scaffolding design was of a type very infrequently used in this type of work and was adopted to make the work go faster.

The fatal accident occurred while two of the workers on Southern’s payroll were in the process of putting in a set of windows following a routine “drop” down the face of the building. The two men fell to their death, 374 pounds of glass crashed to the ground, and one of the tubular scaffolding units tipped over the parapet dropping 350 to 400 pounds of counterweights on the roof or ground as it tumbled earthward. The Department of Labor’s Occupational Safety and Health Administration’s Compliance Officer estimated that the debris was spread out over an area 50 feet in diameter.

II.

The administrative law judge held that the patent or tubular scaffolding assembly violated the Secretary of Labor’s safety regulation governing scaffolds promulgated pursuant to the Occupational Safety and Health Act, 29 C.F. R. § 1926.451, in three respects: (1) that the failure to secure the counterweights violated 29 C.F.R. § 1926.-451(a)(2), which provides in part that “[ujnstable objects such as barrels, boxes, loose brick, or concrete blocks, shall not be used to support scaffolds or planks,” (2) that the scaffolding assembly violated jj (2) of 29 C.F.R. § 1926.-451(g) covering outrigger scaffolds which requires that “the inboard ends of outrigger beams shall be secured against tipping and the entire supporting structure shall be securely braced in both directions to prevent any horizontal movement,” and (3) that the scaffold assembly violated 29 C.F.R. § 1926.-451(a)(7) which provides that “[s]caffolds and their components shall be capable of supporting without failure at least 4 times the maximum intended load.” Since the parties had stipulated that the amount of the proposed $550 penalty was reasonable and that the scaffolding assembly’s noncompliance with the safety standards constituted a “serious violation” under the Act, the only question remaining was whether Gilíes was responsible for the violation. On the factual predicates that Gilíes was responsible for safety at the job site and was aware of the construction standards pertaining to scaffolds, the administrative judge ruled that Gilíes was legally responsible under the Act for the violations on two grounds: (1) Gilíes’ workers, as well as those of other subcontractors, had “access” to the hazard and “could have been in a position to suffer injury from the collapse of the scaffolding,” and (2) alternatively, Gilíes was responsible for safety violations hazardous to subcontractors’ workers such as Southern’s because “in the construction of a building where subcontractors are also used it is logical and necessary that

overall safety and accident prevention be the responsibility of the general contractor.”

Discretionary review by the Occupational Safety and Health Review Commission was invoked, and in a 2-1 decision, the Commission reversed. The majority rejected the administrative judge’s first ground of decision that workers on Gilíes’ payroll had access to the scaffold’s danger zones with the simple, unelaborated statement that “no employee of the Respondent herein used the scaffold and no employee of this Respondent was affected by any alleged unsafe condition of the scaffold.” Addressing the remainder of its opinion to the second ground of decision, the majority held that Gilíes, as a general contractor, was not responsible for safety violations hazardous to Southern’s workmen because it was not “in fact” an “employer” of the subcontractor’s workers — and thus, under the majority’s interpretation of the Act, did not owe them any duty —and because it was “unfair” and did not “further the purposes of th[e] Act” to make Gilíes jointly responsible with Southern when Southern had the means to abate the violation — the right to direct and to control the workers on its payroll. The dissenting Commissioner would have upheld the citation and penalty on the narrow basis of the administrative judge’s first ground of decision, that the scaffold created a hazard for workers on Gilíes’ payroll.

III.

A. Because OSHA is still a relatively new and unfamiliar piece of federal legislation, and because a general understanding of the structure and objectives of the legislation is necessary to the resolution of the specific issues presented by this case, a brief description of the Act must be supplied. Congress enacted OSHA for the declared purpose of assuring “so far as possible every working man and woman in the Nation safe and healthful working conditions.” 29 U.S. C. § 651(b) (Supp.1974). Confronting a legislative record which showed that each year 14,500 workers died and two million were disabled because of their jobs, resulting in $1.5 billion in lost wages and an $8 billion loss to the GNP, see Subcommittee on Labor, 92d Cong., 1st Sess., Legislative History of the Occupational Safety and Health Act of 1970, 831, 844 (Comm. Print 1971) [hereinafter Legislative History], Congress passed a wide-ranging bill, characterized by one commentator as “the most revolutionary piece of ‘labor’ legislation since the National Labor Relations Act.” White & Carney, OSHA Comes of Age: The Law of Work Place Environment, 28 Bus.Law 1309 (1973). Although the Act provides for various governmental actions such as research and related activities, 29 U.S.C. § 669 (Supp.1974), training and employee education, Id. § 670, and the compilation of statistics, Id. § 673, the bulk of the Act and the extensive legislative history are concerned with the promulgation of health and safety standards for private employers, and administrative and judicial enforcement procedures. The operative provision setting forth a private employer’s duties under the Act is § 5(a), which provides that:

Each employer—
(1) shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees;
(2) shall comply with occupational safety and health standards promulgated under this Act. 29 U.S.C. § 654 (Supp.1974).

The authority to promulgate safety and health standards is vested in the Secretary of Labor, who is also authorized to inspect and to investigate, 29 U.S.C. § 657 (Supp.1974), to cite employers for violations and to fix a reasonable time for abatement of violations, 29 U.S.C. § 658 (Supp.1974), and, in appropriate cases, to establish proposed penalties up to a statutory ceiling of $1,000 in most cases, which will become final if uncontested. 29 U.S.C. §§ 659, 666 (Supp. 1974). Employers, unions, and individual employees can contest the Secretary’s action before an administrative judge of the Occupational Safety and Health Review Commission, and discretionary review lies with the three-member Presi-dentially-appointed commission itself. See 29 U.S.C. §§ 659(c), 661 (Supp. 1974). The Commission is independent of the Secretary of Labor because Congress thought that there would be greater confidence in the legislation and better compliance if adjudicatory functions were housed in a separate agency. See Legislative History, supra, 462-64, 470-73, 1147 (remarks of Senators Javits, Holland, Dominick and Williams.)

B. In this petition for review, we need decide only the issue of whether, in addition to a subcontractor, a general contractor should be responsible for safety violations hazardous to a subcontractor’s workers. The case arises in the factual context of the construction industry in which, unlike the typical single-employer business, the specialized workmen of a number of contractors customarily occupy the same workplace. Since the Secretary has issued an interpretative regulation limiting the effect of the safety regulations promulgated under § 5(a)(2) of the Act to the employment relationship, see 29 C.F.R. § 1910.5(d), we do not reach the question of whether Congress has granted the Secretary authority under § 5(a)(2) to require employers in multiple-employer industries to obey safety regulations for the protection of other employers’ workmen, for in this enforcement proceeding the Secretary is bound by his own rules. Cf. United States v. Walden, 490 F.2d 372, 374-376 (4 Cir. 1974); United States v. Heffner, 420 F.2d 809 (4 Cir. 1969). As a result, in this case the issue of Gilíes’ responsibility for the safety of Southern’s workers is presented only in the context of the specific question of whether the term “employer” should be interpreted to cover general contractors as “joint employers,” cf. Boire v. Greyhound, 376 U.S. 473, 84 S.Ct. 894, 11 L.Ed.2d 849 (1964), or “statutory employers.”

The statute itself does not answer the question. The Act depends wholly on the brief language of § 5’s general and specific duty clauses — respectively requiring “employers” to provide employment free of recognized hazards and to comply with safety standards promulgated by the Secretary. The legislation makes no specific reference to the special situation of a general contractor in the multiple-employer construction industry. Compare 9A Va.Code Ann. §§ 65.1-29 to 65.1-34 (1973 replacement volume) (Workmen’s Compensation Statute). In addition, the Act’s general definitions of “employer” and “employee” are uninformative to the issue at hand since they are framed in terms of Congress’ power over interstate commerce under Article I, § 8 of the Constitution.

Since the statute does not, on its face, provide an answer to the specific question of a general contractor’s concurrent responsibility for the safety of a subcontractor’s workers, reference to the statutory purpose behind the Act is especially necessary to arrive at an interpretation of the statute consistent with the objectives Congress sought to achieve through this legislation. This is a legal inquiry, not a factual one, as the Commission supposed.

In determining whether Gilíes should be held to be a joint employer subject to the obligations which § 5 of the Act imposes on “employers,” reference could be made to the common law. However, in determining the precise contours of the word “employer” and thus the reach of the Act, we do not believe, as the Commission apparently did, that proper statutory interpretation involves uncritical wholesale adoption of the common law definition of “master” or “employer” determined under the so-called “control” test: a superior who has the right, not only to specify the objectives of a subordinate’s service, but also “to control the physical conduct of the other in the performance of the service.” Restat. Agency 2d, § 2. See Chemical Workers Local No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 168, 92 S.Ct. 388, 30 L.Ed.2d 341 (1971). The common law definition of employer was and is being evolved for the purpose of determining a superior’s liability to third persons for the torts of his subordinates. See, e. g., Restat. Agency 2d, § 2, Comment, Jaffe, supra n. 4, 559. Hence, the scope of the common law definition of employer is determined by reference to the purposes of the tort law doctrine of respondeat superior, and not the purposes of OSHA.

A common law definition of employer is also unsuitable as the dispositive interpretation of the statutory term because the states differ on the proper scope of the term in various situations, and thus there is no uniform nationwide definition. See NLRB v. Hearst Publications, Inc., 322 U.S. 111, 120-124, 64 S.Ct. 851, 88 L.Ed. 1170 (1944). As a Congressional enactment of nationwide application, OSHA requires a single consistent definition of “employer” throughout the country so that there will be uniform application of this national legislation in all states. Cf. Id.

Over the years, Congress has enacted much social legislation similar to OSHA, imposing duties on “employers” for the benefit of their “employees.” Since an employment relationship is the predicate for the operation of all these statutes, the Court has had to consider the proper definition of employer and employee to determine the reach of these statutes. In a line of cases involving the delineation of the outer perimeter of statutes’ coverage through the definition of employer and employee, the Court has established the purpose of the statute and not the technical distinctions of the common law as the referent of decision. See Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961) (Fair Labor Standards Act); United States v. Silk, 331 U.S. 704, 713, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947) (Social Security Act); Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947) (FLSA); NLRB v. Hearst Publications, Inc., 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944) (Wagner Act). We therefore apply that test here.

C. As we view the statutory purposes of OSHA, the question of whether a general contractor should be concurrently responsible for the safety of subcontractor workmen under the concept of a joint or statutory employer can be answered either way. It follows that since Congress has chosen the Occupational Safety and Health Review Commission as the enforcing agency, the choice between these alternatives is appropriately committed to it. See, e. g., Udall v. Tallman, 380 U.S. 1, 15, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965); Hearst Publications, supra, 322 U.S. at 130-131, 64 S.Ct. 851; Gray v. Powell, 314 U.S. 402, 62 S.Ct. 326, 86 L.Ed. 301 (1941); Bates & Guild Co. v. Payne, 194 U.S. 106, 109-110, 24 S.Ct. 595, 48 L.Ed. 894 (1904); Jaffe, supra, n. 4, ch. 14.

The Secretary agrees that the issue of a general contractor’s joint responsibility for safety violations hazardous to subcontractor workmen is committed to agency discretion, but he argues that the issue should be committed to his discretion, not that of the Commission. In support of this position, he points out that Congress gave him broad powers to promulgate safety standards, to cite apparent safety violations, and generally to perform almost all administrative functions under the Act save that of adjudication. While the Secretary’s rule-making authority is broad, he has adopted no regulation on the subject at issue, and it is the power to adopt rules or policies in adjudication which we are concerned with in this case. The statute vests adjudicatory functions in the Commission. Moreover, as is made clear by the lengthy Congressional debates over enforcement procedures and the successful floor amendment withdrawing the Secretary’s authority over adjudication, see Legislative History, supra, 377, 388, 462-64, 470-73, 1147 (text of amendment and remarks of Senators Javits —sponsor of the amendment — Holland, Dominick, and Williams), Congress deliberately created the Commission separate and independent of the Secretary.

To accept the Secretary’s position would mean that the Commission would be little more than a specialized jury, an agency charged only with fact finding. But, as we read the statute, the Commission was designed to have a policy role and its discretion therefore includes some questions of law. See Brennan v. OSHRC & Republic Creosoting Co., 501 F.2d 1196 (7 Cir., No. 73-1304, Aug. 16, 1974). Rather than placing the trial of alleged violations in the federal district courts and state trial courts, see Federal Employers’ Liability Act, 45 U.S.C. § 51 et seq., where there could be wholly independent determinations of questions of law by reviewing appellate courts, Congress instead created a specialized agency and spelled out in the statute itself that it would be composed of persons specially qualified “by reason of training, education, or experience.” See OSHA, § 12(a), 29 U.S. C. § 661(a) (Supp.1974). Moreover, Congress intended that this agency would have the normal complement of adjudicatory powers possessed by traditional administrative agencies such as the Federal Trade Commission. See, e. g., Legislative History, supra, 462, 465 (remarks of Senator Javits, sponsor of the successful floor amendment creating the Commission).

Thus, we are persuaded, and so hold, that since the statutory objectives of the safety act allow decision either way on the necessity for concurrent “employer” enforcement of safety standards, the decision on a general contractor’s joint responsibility for subcontractor workmen is vested in those commissioners and administrative judges intimately familiar through day-to-day .adjudication with economic realities such as the working relationships between general contractors and subcontractors’ workmen, general contractors’ knowledge of safety hazards in specialized trades, and unusually dangerous industries requiring reenforced implementation of safety standards, and their interpretation should be accepted. Of course they should be guided by these “economic realities” in interpreting the terms “employer” and “employee” in a manner to achieve statutory objectives. See, e. g., Whitaker, supra, 366 U.S. at 28, 81 S.Ct. 933; Silk, supra, 331 U.S. at 713, 67 S.Ct. 1463; Hearst, supra, 322 U.S. at 129, 64 S.Ct. 851. Since the Commission has held that a general contractor should not be held responsible jointly with a subcontractor for the safety of the latter’s employees, we accept the decision as binding.

IV.

The question remains whether Gilíes is responsible as an employer of its own payroll employees. On the facts of this case, Gilíes’ responsibility for the scaffold as a direct employer of its own payroll workers turns on a question of law crucial to the enforcement of the Act: whether employee access to the zones of danger created by a safety violation suffices to support a citation or. whether proof of actual presence is required.

The record in this case contains no evidence that Gilíes’ payroll workers actually were present in the zones of danger beneath the scaffold, on the suspended platform, or near the patent assemblies on the roof. The record does permit a finding that Gilíes’ payroll employees had access to the zones of danger. Thus, while there is no indication in the record that any of Gilíes’ payroll workers were ever on the suspended platform, it does appear that the scaffolding was available for inspection use since a NASA inspector testified to his use of the platform for that purpose. In addition, while no Gilíes payroll worker testified that he walked beneath the fatally defective rigging, Gilíes had approximately 30 workers on the relatively limited job site who could have passed through the zone of danger. Indeed, Joseph Krewatch, Gilíes’ vice-president in charge of construction projects, who visited the construction site approximately once a week, was at the job on the Friday the accident occurred. He testified:

I was at the job many times when the windows were going up and I saw the operation from the ground; I saw it from the roof. Just specifically, I can’t remember just where or what exactly was taking place. (Emphasis added.)

The possibility of Gilíes’ payroll workers’ entering one of the zones of danger is also shown by the fact that Gilíes’ job superintendent James Diven, who was primarily responsible for safety at the construction site, observed the treacherous scaffolding units on the roof. However, at the time he made his observations, the scaffolding assembly was tied back to the eye bolts.

While the record does not reveal what tasks were performed by the workers on Gilíes’ payroll, it does show that there were roofers and possibly laborers on the roof during the most hazardous period when the scaffolding was not secured to the eye bolts and thus that there was access to the zones of danger on the roof by those not on Southern’s payroll.

The question of whether a citation can issue solely on the basis of employee access to the zones of danger created by a safety violation, or whether specific evidence of employee presence in the zone of danger is required, is important to enforcement of the Act. If access alone is sufficient to show a violation, the Secretary will often be able to make out a case solely on the basis of the testimony of the compliance officer. If, however, proof of employee presence in the zones of danger is required, then unless the compliance officer chances to see employees in a danger zone at the time of his inspection, the Secretary will have to depend on workers’ willingness to testify against their employers under the anti-retribution umbrella of § 11(c)(1) of the Act. Recalcitrant employers may be able to impede enforcement of the Act by refusing to correct safety violations disclosed by an inspection unless for each and every violation the Secretary is able to marshal employee testimony that, e. g., dangerous equipment available for use was actually used or that hazardous areas accessible to workers were at one time passed through or occupied.

We think that the issue of whether a citation can be predicated on access alone, or whether evidence of actual employee exposure to a hazard is required, can be answered either way consistent with the statutory purposes of the Act. Because the policy arguments bearing on the choice between access and actual exposure are particularly susceptible to sound resolution by those whose everyday responsibilities familiarize them with employer resistance or compliance with the Act, worker willingness to testify, compliance officer overreaching, and the significance in various industrial settings of the distinction between access and actual exposure, we believe that decision should be left to the agency Congress entrusted to effectuate the goals of the statute. See Legislative History, supra, 462-64, 470-73. The Commission’s expertise and experience in adjudicating safety violations in a great number of cases specially equip it to decide this question. We decline to freeze interpretation, for further enforcement experience may well demonstrate the wisdom of distinctions and exceptions, if not outright change.

While the choice between access and actual exposure is committed to the Commission’s discretion, and indeed would seem to be determinative of Gilíes’ liability in this case, the opinion of the Commission majority does not expressly decide the question, much less provide the thoroughgoing statement of reasons the issue deserves.

Two reasons therefore require us to reverse and to remand for an express decision of the issue of “access” versus “actual exposure.” First, administrative agencies must explain the grounds for their rejection of an administrative judge’s disposition of a case. See Lorain Journal Co. v. FCC, 122 U.S.App.D.C., 127, 351 F.2d 824, 828 (1965). Since the administrative judge in the instant case rested his decision on the “access” principle, the Commission must explain its rationale for rejecting his disposition. Second, while administrative agencies can change previously announced policies, see, e. g., NLRB v. Seven-Up Bottling Co., 344 U.S. 344, 73 S.Ct. 287, 97 L.Ed. 377 (1953), and can fashion exceptions and qualifications, they must explain departures from agency policies or rules apparently dispositive of a case. See NLRB v. Metropolitan Life Ins. Co., 380 U.S. 438, 85 S.Ct. 1061, 13 L.Ed.2d 951 (1965); City of Lawrence v. CAB, 343 F.2d 583 (1 Cir. 1965); Mary Carter Paint Co. v. FTC, 333 F.2d 654 (5 Cir. 1964) (especially concurring opinion of Brown, J). The latter rule is applicable because in the two Commission cases which appear expressly to decide the issue of “access” versus “actual exposure,” the rule of decision was that a citation could be supported on proof of access alone. See Harold Christiansen, - OSHRC Rpts -, (No. 3108, Feb. 21, 1974); Allied Electric Co., 1 OSHRC Rpts 440 (1972). Hence, while the Commission may choose to reject this principle or to distinguish those cases, it must set forth fully its reasons for doing so. See Barrett v. United States, 326 U.S. 179, 65 S.Ct. 1504, 89 L.Ed. 2128 (1945); NLRB v, Pittsburgh Plate Glass, 270 F.2d 167 (4 Cir. 1959); Northeast Airlines v. CAB, 331 F.2d 579, 589 .(1 Cir. 1965); Sunbeam Television Corp. v. FCC, 100 U.S.App.D.C. 82, 243 F.2d 26 (1957). We refer to the Allied Electrical Company and the Harold Christian-sen decisions:

In Allied Electric Company, supra, a Labor Department Compliance Officer issued a citation against an electrical subcontractor for an electric skillsaw which had had its ground prong cut off. The electric saw was located in a locked toolbox on a pickup truck parked near the building undergoing remodeling. The regulation allegedly violated provided that “[t]he non-current-carrying metal parts of portable and/or plug-connected equipment shall be grounded.” 29 C.F.R. § 1518.401(a)(1). The Secretary argued that it was not necessary to show “actual use” of defective equipment and concluded that “mere possession of equipment which fails to meet a safety standard is a violation.” 1 OSHRC Rpts at 451. The Commission judge agreed that it was not necessary to show that employers had actually been exposed to the danger created by the safety hazard.

It would be an undue burden on the petitioner to require a showing of actual use of defective equipment. Any such requirement would cause the compliance officer to wait around in hopes of someone using the equipment. This would result in a cat- and-mouse game as contended by the petitioner. More importantly, it would expose an employer to a hazard prior to the Secretary being able to require it to be corrected. 1 OSHRC Rpts at 451.

Thus, under Allied Electric, specific proof that employees were in the zone of danger is not required. However, the administrative judge rejected the position that “mere possession” of defective equipment constituted a violation. Instead, he held that

ft]he objective of the Act can best be accomplished by placing emphasis on the accessibility of the employee to the defective equipment. If the defective equipment is available for use by the employee and a standard is violated, then a citation should issue. Under such circumstances, the employee is exposed to potential hazard even if he is not using the equipment at the time of the inspection. The equipment is accessible to him and could be used.
Where the employer asserts his intention not to use the defective equipment until repaired and his contention is manifested in overt acts which have denied accessibility to the equipment by the employees, then the employer should not be held in violation of the particular safety standard which might apply to that equipment. 1 OSHRC Rpts at 451-52. (Emphasis supplied.)

Thus, in resolving the issue of “access” versus “actual use,” Allied Electric clearly and forcefully supports access.

Allied Electric’s access rationale was followed by a different administrative judge in Harold Christiansen. That case involved a violation of the same grounding regulation presented in Allied Electric. The ground plugs on a portable electric drill and a portable electric chipping hammer had been removed. The electrical subcontractor argued that the Secretary had failed to show that any of his employees ever used the tools, but the Commission judge upheld the citation and proposed penalty on the ground that the employees had access to the hazardous equipment, which was located in a “gang box” on the fourth floor of the construction project. In holding that accessibility rather than actual use sufficed to make out a violation, the administrative judge expressly followed Allied Electric, quoting the language set forth above.

Despite the opinions rejecting an actual use requirement and adopting accessibility as the rule of decision, the Commission argues that other OSHA cases have required the Secretary to show that employees actually passed through a zone of danger. See City Wide Truck-pointing Service Co., - OSHRC Rpts -, (No. 274, Commn.1973), 1 (CCH) OSHD |f 15,769; A. L. Amaral Co., - OSHRC Rpts -• (No. 2515, Feb. 21, 1974); Ellison Electric, 1 OSHRC Rpts 547, 1 (CCH) OSHD |f 15,133, 1 (BNA) OSHC 3034 (1972). However, none of these cases expressly considered the distinction between access and actual presence in a zone of danger. In addition, in A. L. Amaral Co., the Secretary was able to meet the more demanding standard of actual presence in a zone of danger, and in City Wide Truckpointing there was a somewhat unusual regulation which by its very terms made violations contingent on employees being required to work in, or pass through, the danger zone. In any event, giving these cases the interpretation urged by Commission’s counsel at best does no more than convince us that there is an apparent inconsistency in OSHA decisions which requires a remand in the instant case in order that the Commission may expressly state the principle and supporting rationale guiding its decision in the instant case.

V.

In his reply brief, the Secretary raised for the first time the argument that the Commission may not assume active party status in review proceedings in the courts of appeals. Although administrative agencies have traditionally been allowed to defend their decisions in the courts of appeals, see Davis, Administrative Law § 22.15, p. 283, n. 23 (1958) — even in the absence of statutory authority, see FTC v. Dean Foods Co., 384 U.S. 597, 607, 86 S.Ct. 1738, 16 L.Ed.2d 802 (1966) — and under Rule 15(a) of the Federal Rules of Appellate Procedure must be named as a respondent in petitions to review their orders, the Secretary argues that because the Commission has only adjudicatory responsibilities under the Act, it should be treated like a federal district court and should not be permitted to appear, file briefs, or argue to the court.

Ordinarily, in the absence of special justifying circumstances, we would not consider an issue untimely raised. Cf. Mississippi River Corp. v. FTC, 454 F.2d 1083, 1093 (8 Cir. 1972); Finsky v. Union Carbide Corp., 249 F.2d 449, 459 (7 Cir. 1957). However, in light of the public importance of the question presented in the instant case, we do not rest our decision on a procedural ground alone.

It is true, as the Secretary points out, that the Act divides adjudicatory functions from prosecutorial responsibilities and other administrative functions. However, instead of concluding that the Act’s division of functions between the Secretary and the Commission makes it appropriate to view the Commission as a lower court unable to appear and to defend its decisions in appellate proceedings, it seems more appropriate to us to conclude that an administrative body like the Commission possesses the powers normally exercised by such administrative agencies, and that the significance of the division of responsibilities between the Commission and the Secretary is that the Secretary, unlike the prosecutorial arm of most administrative agencies, e. g., the General Counsel of the NLRB, is able to appear in the courts of appeals to challenge final administrative determinations.

In any event, we note that in OSHA, Congress did not place adjudication in the federal district courts, compare, e. g., Federal Employers Liability Act, 45 U.S.C. § 51 et seq., and thus confer jurisdiction on tribunals which both are unable to appear in the courts of appeals to defend their opinions and are subject to a broad scope of review allowing de novo appellate determinations of all policy questions. Instead, Congress placed adjudicatory functions in the Commission, which is required by statute to be composed of persons specially expert in health and safety matters. See 29 U.S.C. § 661(a) (Supp.1974). The Commission is subject to a narrow scope of review which requires the courts of appeals to defer to Commission decisions of policy questions within their relatively broad area of discretion. See §§ III C and IV supra; Brennan v. Republic Creosoting Co., 501 F.2d 1196 (7 Cir. No. 73-1304, Aug. 16, 1974). We think that it is appropriate for the Commission to appear in the courts of appeals to defend the policies Congress empowered it to adopt in adjudication.

The fact that § 17 of the Act permits the assessment of no monetary penalty at all for nonserious violations, sets a ceiling of $1,000 in most cases for both serious and nonserious violations, and in effect allows “credits” for the size of a business, good faith, and a clean record, adds additional support to our conclusion. Under such a statute, there will often be inadequate financial justification for employers who have prevailed before the Commission to defend the Commission’s decision through costly appellate litigation. To make the statute’s provision for judicial review effective, the Commission must appear to ensure that both sides of issues are presented.

Vacated and remanded.

      . Under § 17 (k) of the Act, 29 U.S.O. § 666(j) (Supp.1974), where there is “a substantial probability” of “death dr serious physical harm,” a violation is denominated “serious” unless the employer “did not, and could not with the exercise of reasonable diligence, know of the presence of the violation.” While the Act permits a citation without an accompanying fine for nonserious violations, it requires the assessment of a civil penalty for all serious violations. Id. § 666(b), (c).

      . In pertinent part, the regulation states that:
      In the event a standard protects on its face a class of persons larger than employees, the standard shall be applicable under this part only to employees and their employment and places of employment.

      . Section 3 of the Act defines “employer” as “a person engaged in a business affecting commerce who has employees, but does not include the United States or any State or political subdivision of a State,” and “employee” as “an employee of an employer who is employed in a business of his employer which affects commerce.” 29 U.S.C. § 652(5) & (6) (Supp.1974).

      . Addressing this point in his treatise, Professor Jaffe explains:
      But the problem of analysis is further complicated where a word of common meaning is itself used in a statute. In such cases judges are tempted to argue that the application of the word involves a purely factual finding, and is therefore not subject to the judicial control which is appropriate to conclusions of law. It soon appears, however, that this analysis is insufficient. Words, particularly common ones, rarely have a single meaning, and disputes inevitably arise as to whether a given word does or does not describe the phenomenon in question. In such a situation the dispute must be resolved by reference to the purposes of the statute and the question is thus one of law. L. Jaffe, Judicial Control of Administrative Action, 551 (abridged ed. 1965).

      . We note that § 8(g)(2) of the Act provides that:
      [t]he Secretary [of Labor] and the Secretary of Health, Education, and Welfare shall each prescribe such rules and regulations as he may deem necessary to carry out their (sic) responsibilities under this Act, including rules and regulations dealing with the inspection of an employer’s establishment.
      No rule promulgated by the Secretary of Labor under this section bearing on the choice between access and actual exposure has been drawn to our attention and we therefore decline to speculate on the scope of the Secretary’s rule-making authority under this section and on whether any possible rule would differ from the Commission’s interpretation.

      . It is true that the majority reversed the administrative judge who had held Gilíes liable because the contractor’s payroll workers had “access” to the zones of danger and thus “could have been in a position to suffer injury from the collapse of the scaffolding.” Indeed, this disposition of the case was taken over the dissent of the remaining commissioner who agreed with both the administrative judge’s decision and his “access” rationale. However, the majority’s action cannot be taken with any assuredness to be even an implied decision of the “access” versus “actual exposure” issue, since the majority may have been relying on an unexpressed principle of law which allowed reversal of the administrative judge without reaching his “access” rationale, and even if the majority rejected the “access” principle, it did not necessarily consciously embrace the “actual exposure” rule.
      We do not foreclose the possibility that the Commission’s decision did result — or on remand could result — from the application of a rule of decision which would obviate the need to reach the “access” versus “actual exposure” issue. However, the opinion reveals no such rule of decision, and neither appellate counsel nor this court can supply one. See NLRB v. Metropolitan Life Ins. Co., 380 U.S. 438, 85 S.Ct. 1061, 13 L.Ed.2d 951 (1965) ; SEC v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943), 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947). Since the “access” versus “actual exposure” issue is an important policy question apparently dispositive of the case, for the reasons set forth in text, we require the Commission to disclose its rule of decision and accompanying rationale.

      . See, e. g., Legislative History, supra, 462, 465 (remarks of Senator Javits, sponsor of the floor amendment creating the independent Commission) (The Commission “will have the same type of authority that the Federal Trade Commission exercises.”)

        FTC v. Dean Foods, Inc., supra, 348 U.S. at 607, 86 S.Ct. 1738 (Federal Trade Commission possesses ancillary nonstatutory power to appear in review proceedings.)

      . The Commission argues that it is given active party status by the Act itself. It points out that in setting forth the procedures for obtaining review of Commission orders, the Act provides that the Secretary or any private party
      . . . aggrieved by an order of the Commission . . . may obtain a review of such order ... by filing in [the appropriate court of appeals] within sixty days following the issuance of such order a written petition praying that the order be modified or set aside. A copy of such petition shall be forthwith transmitted by the clerk of the court to the Commission- and to the other parties, and thereupon the Commission shall file in the court the record in the proceeding .... (Emphasis supplied.) Occupational Safety and Health Act of 1970 § 11(a) & (b), 29 U.S.C. § 660(a) & (b) (Supp.1974). The Commission reasons that since the clerk of the court must forward copies of the petition to the Commission and “other parties,” the clear inference is that the Commission is a party.
      We agree that this is one possible interpretation of the statute, but it is also possible to read this statutory language as requiring the clerk of the court to provide copies of the petition to all “other parties” except the petitioner, who would presumably already have a copy of his own petition. Since the section is obviously directed at the procedures for informing all interested persons of the filing of a petition for review, it gives at best only an oblique indication of the Commission’s party status, and we do not think it determinative.


source: Caselaw Access Project

author: PELL, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Walter A. LISOWSKI, Defendant-Appellant.
    No. 74-1042.
    United States Court of Appeals, Seventh Circuit.
    Argued June 3, 1974.
    Decided Oct. 29, 1974.
    Rehearing Denied Nov. 21, 1974.

      William A. Barnett, Charles R. Purcell, Chicago, 111., for defendant-appellant.
    James R. Thompson, U. S. Atty., Gary L. Starkman and Theodore. T. Scudder, Asst. U. S. Attys., Chicago, 111., for plaintiff-appellee.
    Before CLARK, Associate Justice (Retired), and PELL and SPRECHER, Circuit Judges.

       Associate Justice Tom C. Clark of the Supreme Court of the United States (Retired) is sitting by designation.

   PELL, Circuit Judge.

Defendant Walter A. Lisowski was convicted by a jury on all counts of an indictment charging him with five felony-grade offenses under the Internal Revenue Code.

The defendant raises three issues on appeal: (1) whether the evidence was sufficient to show that the defendant’s failure to report all his income was willful; (2) whether the district judge correctly charged the jury; and (3) whether the district court erred in excluding certain testimony.

I

The defendant’s first contention is that the evidence was insufficient to prove that he acted willfully in understating income on the tax returns involved in this case. “Willfulness,” in criminal tax offenses, requires a showing of “bad faith” or “evil intent.” United States v. Bishop, 412 U.S. 346, 361, 93 S.Ct. 2008, 36 L.Ed.2d 941 (1973); United States v. Murdock, 290 U.S. 389, 398, 54 S.Ct. 223, 78 L.Ed. 381 (1933).

Considering, as we must, the evidence in the light most favorable to the Government, Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942), the following facts were established at the trial.

During the period in issue, the defendant operated Mid-West Screw Products (Mid-West), a company engaged in manufacturing metal products. Until September 1, 1967, the business was operated as a partnership with Lisowski and his wife as the only partners. On that date, a corporation was formed which took over the partnership assets and continued the business. The defendant, owning 51 percent of the stock, became the president of the corporation.

In the course of manufacturing finished metal parts, Mid-West generated large quantities of scrap metal. During the years in question, Mid-West sold virtually all of this scrap to D. Pollack & Sons, Inc. (Pollack), a scrap broker. When Pollack picked up the scrap, shipping tickets were prepared, recording the type of metal and the weight but not the price. Payment for the scrap was usually made a month or two after the scrap had been picked up, with the pricing done by William Pollack, president of the Pollack company, based on the market price of scrap at the time of the pick up.

According to William Pollack, the defendant, during the three-year period in question, often telephoned him and requested that payment for the scrap be made partly by check and partly in cash. The Pollack records indicated that, during the pertinent time, 48 checks were written by Pollack’s bookkeeper for scrap payments to Mid-West, with 29 of these cheeks payable to “Mid-West” and 19 checks payable to “cash.” Of the 19 checks payable to “cash,” 15 were prepared and dated on the same date as another check payable to “Mid-West.” Only one check payable to “cash” was not prepared within three days of an accompanying cheek to “Mid-West.” The 19 “cash” checks ranged in amount from $848.11 to $2,070.08 and totaled over $26,000.

William Pollack testified that he himself would cash the “cash” cheeks at a bank, after which he would go to the Mid-West offices. According to Mr. Pollack, he sometimes gave the “Mid-West” cheek to the defendant’s bookkeeper, but he always delivered the cash personally to Lisowski when the defendant was alone. Often Mr. Pollack handed the defendant simultaneously the cash and a “Mid-West” check. A copy of the Pollack company receiving ticket always accompanied the payment to Mid-West.

Lisowski stated on some occasions, according to William Pollack, that he, Li-sowski, needed the cash to entertain customers and buy tools.

The payments of cash by Pollack to Lisowski continued until 1969. At that time Mr. Pollack told the defendant that “the I.R.S. is checking my books, and I don’t want to give any more cash.” Thereafter, the Pollack company made payments to Mid-West only by checks payable to “Mid-West.”

The books for Mid-West were kept by a bookkeeper at the Mid-West office. The evidence indicated that every “Mid-West” check from Pollack had been recorded by the bookkeeper in the Mid-West books. The bookkeeper testified that she was unaware, however, that cash payments were received from Pollack. Such cash was not recorded in Mid-West’s books.

The tax returns for Mid-West were prepared by an accounting firm. The accountants who prepared the Mid-West returns found entries in the records indicating the Pollack check payments but they found no corresponding entries for cash payments. The accountant who prepared four of the defendant’s five returns asked Lisowski “for all his outside income interests, dividends and any other income.” In response, Lisowski produced certain documents and told the accountant about certain business expenses and charitable deductions but did not mention the cash payments from Pollack. All of the tax returns in issue were signed by the defendant after they had been completed.

The defendant concedes that the evidence was sufficient to permit the finding that the returns understated the gross income and gross sales, respectively, of himself and of Mid-West, but contends that the evidence fails to show that the understatements were willful.

We find that there was more than enough evidence presented to support a finding that the defendant acted willfully. Over a two and one half year period, Lisowski expressly requested, on 19 occasions, that William Pollack make-payment for scrap partially in cash. Sizable amounts of currency, ranging from $848 to $2,070, were given to the defendant on these occasions. See Sherwin v. United States, 320 F.2d 137, 141 (9th Cir. 1963), cert. denied, 375 U.S. 964, 84 S.Ct. 481, 11 L.Ed.2d 420 (1964). The transfers always took place privately between Lisowski and William Pollack. Moreover, with one exception, the cash payments were always accompanied, on the same day or soon thereafter, by a check payable to “Mid-West.” No cash payment was ever recorded in Mid-West’s books and yet every check payment was recorded, even though Lisowski often received both simultaneously. “[A] consistent pattern of not reporting large amounts of income [is] sufficient to support an inference of willfulness.” Sherwin v. United States, supra at 141. See also Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 87 L.Ed. 418 (1943). Further, the reason allegedly given by the defendant for needing the cash (i. e., to entertain customers and to purchase tools) strains credulity in light of the amount of currency involved. See United States v. Scher, 476 F.2d 319, 324 (7th Cir. 1973). Also, the fact cannot be ignored that unreported income comes out of the highest bracket at which the taxpayer is being taxed. Unfortunately, the incentive to the dishonest person to forget reporting income increases as his income increases. Finally, we note that the practice of receiving part payment in cash came to an abrupt end when the I.R.S. began investigating Pollack.

The present case is clearly distinguishable from United States v. Pechenik, 236 F.2d 844 (3d Cir. 1956), upon which the defendant relies. In Pechenik, a corporate president was convicted of willful tax evasion on the ground that certain expenditures of the company were improperly treated, thereby decreasing the company’s net income. The evidence indicated that Pechenik had supplied his bookkeeper with complete information regarding the company’s income and expenditures and had left it to the bookkeeper to determine how the various expenditures should be entered on the books. The Third Circuit held that, in this situation, the evidence was insufficient to prove willfulness and reversed the conviction. In the present case,. Lisowski, unlike Pechenik, did not supply his bookkeeper or his accountant with any facts concerning this particular income of the company and himself, but instead handled the transactions relating to this income in what can only be termed a clandestine manner. “[A] taxpayer cannot shift the responsibility for admitted deficiencies to the accountants who prepared his returns if the taxpayer withholds vital information from his accountants, or takes positive action designed to mislead them.” United States v. Scher, supra, 476 F.2d at 321; Bender v. Commissioner, 256 F.2d 771, 774 (7th Cir. 1958). See also Windisch v. United States, 295 F.2d 531, 532 (5th Cir. 1961).

The question of willfulness was a matter for the jury to decide. Considering the record as a whole, the evidence was amply sufficient to support the jury’s verdict.

II

The defendant next argues that the district court erred in instructing the jury. The defense, however, failed to state in court specific objections to the jury charges, as required by Rule 30, Fed.R.Crim.P. Normally, such a failure constitutes a waiver of a defendant’s objection. United States v. Howard, 139 U.S.App.D.C. 347, 433 F.2d 505, 509 (1970). Lisowski contends, however, that specific objections were made during the conference on instructions and that these specific objections were not repeated in court because the district judge instructed counsel to make objections merely in a summary manner for the record. The defense explains that neither its specific objections made at the instruction conference nor the judge’s statement that objections for the record should be summary in nature are in the record since the district judge who tried this case does not permit, according to the defense, the court reporter to record the conference on instructions. The Government, in its brief and in oral argument, did not deny the defendant’s statement concerning what transpired. Under the circumstances, we will assume arguendo that the district court was sufficiently apprised of the objections to instructions and will not treat the objections as waived but will consider the merits of each objection.

First, Lisowski contends that the district court erred in giving an agency instruction, which the defense claims was “strongly suggestive” of derivative liability. We disagree. The evidence indicated that, although Lisowski signed the tax returns, the defendant did not himself keep the books for Mid-West or prepare the tax returns in question, These tasks were performed by a bookkeeper and accountants, respectively, and the net result of their actions was the understatement of income, even though these individuals may have been innocent pawns in the process whereby Li-sowski received money which was not reported for income tax purposes by him or by Mid-West to whom it was owing. Also, “through another,” i. e., William Pollack, he arranged to receive the money. Without the cooperation of Pollack the concealment would not have been possible.

Moreover, the jury instructions, when read, as they must be, as a whole, United States v. Hamilton, 420 F.2d 1096, 1098 (7th Cir. 1970), made clear that Lisowski should not be convicted unless it was proved beyond a reasonable doubt that he willfully attempted to evade or defeat taxes. In this situation, the giving of the instruction is not reversible error. See Gariepy v. United States, 220 F.2d 252, 260 (6th Cir. 1955), cert. denied, 350 U.S. 825, 76 S.Ct. 53, 100 L.Ed. 737; Pearson v. United States, 147 F.2d 950, 952-953 (9th Cir. 1945); Paschen v. United States, 70 F.2d 491, 503 (7th Cir. 1934).

The defendant next argues that the district court erred in instructing that the Government only need prove venue by a preponderance of the evidence. Lisowski contends that, the court should have required proof of venue beyond a reasonable doubt. This court, in United States v. Aldridge, 484 F.2d 655, 659 (7th Cir. 1973), has recently held that venue need only be proved by a preponderance of the evidence. We adhere to that decision and in any event, there was here ample undisputed indicia of the propriety of the venue.

Lisowski further contends that the district judge erred in refusing to instruct the jury:

“Salaries paid by a corporation to its officers, including shareholders, are deductible from the corporation’s gross income in computing its taxable income. If you find from the evidence that Walter Lisowski received money from Mid-West Screw, Inc., and that such money constituted additional.salary to him, then such amounts should be deducted from Mid-West’s gross income in determining its taxable income. Additional income to the corporation, to the extent it might also constitute additional salary, has no effect on the taxable income or tax of the corporation.”

The proffered instruction is an incomplete and inaccurate statement of the law and, therefore, the district court could properly refuse to give it. United States v. Fellabaum, 408 F.2d 220, 228 (7th Cir. 1969), cert denied, 396 U.S. 858, 90 S.Ct. 125, 24 L.Ed.2d 109. Section 162(a) of the Internal Revenue Code of 1954, 26 U.S.C. § 162(a), permits, inter alia, a taxpayer to deduct “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including — (1) a reasonable allowance for salaries or other compensation for personal services actually rendered.” (Emphasis added.) Absent a showing that a payment is an ordinary and necessary expense and reasonable in amount, a taxpayer may not deduct it as salary. See 4A J. Mertens, The Law of Federal Income Taxation, §§ 25.09 and 25.68 (1972).

The present case is, therefore, distinguishable from United States v. Bass, 425 F.2d 161 (7th Cir. 1970), on which the defendant relies. In Bass, the proffered instruction referred to “reasonable, ordinary, and necessary” payments.

Further, the factual situation in the present case is quite different from Bass. There the income received by the defendant had been deducted as corporate expenses. In connection with the charged § 7206 violation, it was a part of the Government’s case in Bass to prove that the claimed deductions were improper and, of course, salary payments under the circumstances recited above are properly deductible. In the present case, the cash amounts received by Lisowski never appeared in the corporate returns either as income received or as deductions. Lisowski, according to the evidence, was asking for the cash amounts for the purpose of entertaining customers or buying tools. While the latter might possibly have been a capital item, and only depreciable, entertaining customers might have been a deductible expense if the cash payments had ever been reflected in the corporate returns in the first place, but they were not. The corporate return here was false in not including the amounts of the cash paid to Lisowski.

Without laboring the point further, Lisowski’s belated attempt to find succor in the tendered instruction is of no avail to him.

Ill

Mid-West operated, for income tax purposes, on an accrual basis but recorded at the time payment was received the income from Pollack on scrap sales (at least those paid by check payable to Mid-West, the cash payments not being recorded anywhere). Out of this situation, Lisowski claims error in the district court’s sustaining of an objection to a propounded hypothetical question. The defendant on appeal asserts that the purpose of the hypothetical question was to show that Mid-West was using the cash method of accounting to reflect the scrap income and that if the income had been accrued it would have fallen into the fiscal year 1968 rather than 1969. Count IV pertained to the latter year and the witness supposedly would have shown that enough of the scrap income would have been removed from that year to leave the understatement of income too insubstantial to support a verdict. Of course, the understatement for the fiscal year 1968 covered by Count III would have been correspondingly increased. It is also clear that there would still have remained some understatement in 1969. Whether this would have been so insufficient as to have given life to defendant’s contention we do not need to decide.

At the outset, we have a semantical problem. While the parties purport to treat the reporting of the scrap sale income as having been on a cash basis, and Honig, one of the accountants who had prepared the Mid-West tax returns, apparently so recognized this status in response to a question, it is not clear to us that the situation was not merely one where the accrual was deferred until the price could be ascertained. This price was not ascertained until it was set by Pollack and his determination was based upon a number of factors including published prices. The published prices which apparently could have been available to Mid-West at the time of the delivery of the scrap did not always coincide with the prices determined by Pollack and accepted ordinarily by Lisowski. In any event, the price was not finally determined until payment time. This was the course of the dealing between the buyer and seller and would appear to establish the time that the liability for tax would be established, irrespective of whether the appearance on the books could be termed to be on a cash basis or an accrual basis.

As the district court stated, “You are on the accrual basis, but the question is when a given item should be accrued. The accountant the taxpayer hired to do his books and his tax return decided, based on his knowledge, that it should be accrued when payment was made. It seems to me that his decision as to that is binding on the taxpayer.”

The actual date of cash changing hands is not the significant factor in the ease of an accrual basis taxpayer. Nevertheless such a taxpayer cannot accrue an item until all the events occur which fix the amount of that item and determine the liability to pay it. Commissioner v. H. B. Ives Co., 297 F.2d 229, 230 (2d Cir. 1961), cert. denied, 370 U.S. 904, 82 S.Ct. 1250, 8 L.Ed.2d 400 (1962). Here the controlling events did not apparently occur until the time of payment.

Even if ordinary accounting terminology would label the belated payments as being on a cash basis, the method was that adopted by the taxpayer and was a part of the picture on which the jury was to determine whether he had willfully attempted in any manner to evade or defeat corporate taxes.

If Mid-West was employing a mixture of accrual and cash then “[w]hen the taxpayer has employed a hybrid or unauthorized accounting method, he is hardly in a position to complain when the computation employing that method is introduced to prove specific items of omitted income.” Morrison v. United States, 270 F.2d 1, 4 (4th Cir. 1959), cert. denied, 361 U.S. 894, 80 S.Ct. 196, 4 L.Ed.2d 150; cited with approval in United States v. Marttila, 434 F.2d 834, 837 (8th Cir. 1970).

The district court in not permitting the hypothetical question to be answered relied upon Morrison, supra, and Clark v. United States, 211 F.2d 100, 105 (8th Cir. 1954), cert. denied, 348 U.S. 911, 75 S.Ct. 289, 99 L.Ed. 714 (1955). The defendant candidly admits on appeal that Clark cannot be distinguished but asks that it not be followed in this circuit. While Clark may have some factual distinctions from the present case, we accept the principle enunciated in Clark and agree that there was no place for “hypothesizing of facts which had no probative basis.”

Lisowski contends that Morrison is of questionable authority because of the later case of United States v. Wilkins, 385 F.2d 465 (4th Cir. 1967), cert. denied, 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1144 (1968). We find Wilkins to be of no help to the defendant. That case correctly held that the Government could not include income in a year which would have been entirely without any legal basis despite the taxpayer’s attempt to do so at the time he filed the return. That is not the situation in the case before us.

We do not disagree with the Wilkins court that it is widely accepted that a defendant in a tax evasion case is entitled to show that no money was owing to the Government in the prosecution year. 385 F.2d at 470. We decline, however, to carry the principle to the point of saying that the defendant can repudiate the manner in which he did business. The facts pertaining to that manner of doing business and the tax consequences thereof cannot be brushed aside.

Further, and in any event, the hypothetical question was defective. It failed to include a necessary element that Mid-West had no available means of determining prior to the payments from Pollack what the current value of the scrap was as of the date of delivery.

For the reasons set out hereinbefore, the judgments of conviction on each count are affirmed.

      . Counts I and II of the indictment charged the defendant with willful attempts to evade and defeat income taxes owed by him and his wife for the calendar years 1967 and 1968, respectively, in violation of 26 U.S.C. § 7201. Counts III and IV charged Lisowski, as president of Mid-West Screw Products, Inc., a corporation, with willful attempts to evade and defeat income taxes of the corporation in the fiscal years 1968 and 1969, respectively, in violation of 26 U.S.C. § 7201. Count V charged the defendant with willfully making and subscribing a false partnership income return for Mid-West Screw Products, a partnership of the defendant and his wife, for the fiscal year 1967, in violation of 26 U.S.C. § 7206(1).
      26 U.S.C. § 7201 provides:
      “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony )}

      26 U.S.C. § 7206(1) provides :
      “Any person who . . . willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter . . . shall be guilty of a felony

      . Pollack’s bookkeeper indicated in the Pollack cash journal which “cash” checks were paid to Mid-West for scrap.

      . Lisowski did not testify at the trial.

      . The instruction stated :
      “It is not necessary to prove that the accused personally did every act constituting the offense charged. As a general rule, whatever any person is legally capable of doing himself, he can do through another as his agent. So, if the acts or conduct of an employee or other agent are willfully ordered or directed, or willfully authorized or consented to by the accused, then the law holds the accused responsible for such acts or conduct the same as if personally done by the accused.”

      . This proffered instruction was relevant only to Counts III and IV. The sentence as to each count was the same and the prison sentences run concurrently; however, each count was the basis of a separate fine,

      . We have not intended to express any opinion on the acceptability of a truly hybrid method under 26 U.S.C. § 446. We are here dealing with the charged violation of a criminal statute, 26 U.S.C. § 7201, -an attempt to evade or defeat taxes.


author: WALLACE, Circuit Judge. CHAMBERS, Circuit Judge HUFSTEDLER, Circuit Judge

text:
    Charles BERGSTRALH, Plaintiff-Appellant, v. Gayle LOWE and City of Bend, Oregon, Defendants-Appellees.
    No. 72-2820.
    United States Court of Appeals, Ninth Circuit.
    Aug. 6, 1974.
    Certiorari Denied Feb. 18, Í975.
    See 95 S.Ct 1131.
    Chambers, Circuit Judge, concurred, with opinion.
    Hufstedler, Circuit Judge, dissented with opinions.

      Richard Haeder, Portland Ore., for plaintiff-appellant.
    Thomas S. Moore, of Morrison, Bailey, Dunn, Cohen & Miller, Portland, Ore., for defendants-appellees.
   OPINION

Before CHAMBERS, HUFSTEDLER and WALLACE, Circuit Judges.

WALLACE, Circuit Judge.

Bergstralh seeks to recover damages under section 1983 of the Civil Rights Act, 42 U.S.C. § 1983, resulting from his arrest on charges of disorderly conduct by Lowe, a policeman employed by the city of Bend, Oregon. Bergstralh summoned Lowe to remove two alleged trespassers from his appliance store parking lot. When Lowe convinced the young men to leave and refused to arrest them, Bergstralh threw some beer bottles and made threatening and abusive remarks to Lowe and the young men. Lowe arrested Bergstralh without a warrant and charged him with disorderly conduct. Bergstralh was subsequently acquitted on that charge by a municipal court, but convicted on a charge of resisting arrest. In the district court, Bergstralh asserted that Lowe violated his Fourth and Fourteenth Amendment rights by using excessive force and illegally arresting him. The district court ruled at the conclusion of Bergstralh’s case-in-chief that, as a matter of law, the arrest was made with probable cause. The question of excessive force was submitted to the jury, which returned a verdict in favor of Lowe. Bergstralh now appeals, urging that the district court erred in its ruling on probable cause and in instructing the jury. We affirm.

Bergstralh’s primary claim is that because probable cause was absent, Lowe deprived him of his constitutional rights by illegally arresting him. The lawfulness of a state arrest by state police is to be determined by state law so long as the state law is not inconsistent with the federal Constitution. Ponce v. Craven, 409 F.2d 621, 625 (9th Cir. 1969). See Van Camp v. Gray, 440 F.2d 777 (10th Cir. 1971). Bergstralh does not argue that the Oregon laws governing arrest, if followed, are unconstitutional. Thus, our only task in this case is to determine if the district court’s ruling on probable cause was proper under Oregon law.

Bergstralh argues that since under Oregon law a police officer can make a warrantless arrest for a misdemeanor only when a crime is attempted or committed in his presence, his acquittal on the disorderly conduct charge by the municipal court conclusively establishes that his arrest was improper and entitles him to a civil judgment. We reject this argument as being without merit. Beauregard v. Wingard, 362 F.2d 901 (9th Cir. 1966). As the Supreme Court said in Pierson v. Ray, 386 U.S. 547, 555, 87 S.Ct. 1213, 1218, 18 L.Ed.2d 288 (1967):

Under the prevailing view in this country a peace officer who arrests someone with probable cause is not liable for false arrest simply because the innocence of the suspect is later proved. ... A policeman’s lot is not so unhappy that he must choose between being charged with dereliction of duty if he does not arrest when he has probable cause, and being mulcted in damages if he does, (citations omitted)

During a pretrial conference in chambers, the district court, relying upon Hryciuk v. Robinson, 213 Or. 542, 326 P.2d 424 (1958), and Restatement of Torts § 667(1) (1938), ruled that Berg-stralh’s conviction for resisting arrest conclusively established that the arrest was made with probable cause unless Bergstralh could show that his conviction was obtained by fraud, perjury or other corrupt means. When Bergstralh was asked whether he intended to attempt to establish that the conviction fell within one of the exclusions, the proceedings went off the record. Thus, we are unable to determine toward which issues Bergstralh’s evidence was directed.

After Bergstralh had presented his case-in-chief, Lowe moved for a directed verdict. The court denied the motion, but “rule[d] as a matter of law [that] there was probable cause for the arrest.” The court then stated, “I think the only question the Court feels there is any evidence on . . .is whether excessive force was used in placing [Bergstralh] under arrest.” In response to Bergs-tralh’s argument against the ruling, the court stated:

“You are ignoring entirely the evidence by the other witnesses which you called as part of your ease, all of whom said the bottles went out into the street. You have got a conflict certainly that would give the officer probable cause to arrest this man.”

It is unclear to us whether the court’s ruling was based upon Bergstralh’s failure to rebut the presumption adopted during the pretrial conference or upon all of the evidence presented during the case-in-chief. Clearly, the presumption was not rebutted and, therefore, any alternative holding would be unnecessary and thus any error in ruling on the alternative ground would be harmless.

Whether a rebuttable presumption should be applied is a matter of substantial law. Cf. Blue Diamond Coal Co. v. United Mine Workers, 436 F.2d 551 (6th Cir.), cert. denied, 402 U.S. 930, 91 S.Ct. 1525, 28 L.Ed.2d 863 (1970); Peterson v. Mountain States Telephone & Telegraph Co., 349 F.2d 934 (9th Cir. 1965). Accordingly, we are required to apply the Oregon presumption when testing the legality of an Oregon arrest, unless such an application would be inconsistent with the Constitution. Dick v. New York Life Ins. Co., 359 U.S. 437, 79 S.Ct. 921, 3 L.Ed.2d 935 (1959). Although Hryciuk v. Robinson, 213 Or. 542, 326 P.2d 424 (1958), and the Restatement of Torts both deal with a presumption for probable cause in a malicious prosecution by a private citizen, not probable cause for arrest by a police officer, the Hryciuk presumption as applied in this case does not deprive Bergstralh of his constitutional rights. The trial judge concluded that the municipal court jury in reaching a verdict of guilty for resisting arrest would have had to have concluded that Lowe had probable cause to believe that a misdemeanor was being committed in his presence. He was correct. As there was no statute to the contrary, Bergstralh was entitled to use all force reasonably necessary to resist an unlawful arrest. United States v. Di Re, 332 U.S. 581, 594, 68 S.Ct. 222, 92 L.Ed. 210 (1948) ; Basista v. Weir, 340 F.2d 74 (3d Cir. 1964). Thus, in order to conclude that Bergstralh was guilty of resisting arrest, the jury would have had to have concluded that his arrest was legal. Absent probable cause the arrest could not have been legal; thus, the issue was directly resolved by the jury. Since this issue had been resolved against Bergstralh by a jury, it was not error for the trial judge to conclude as a matter of law that there was probable cause, unless Bergstralh could show that the jury verdict was obtained by fraud or perjury. Bergstralh has not succeeded in so showing.

As to instructions, we cannot review Bergstralh’s claim that the district court erred in failing to instruct the jury that the acts of the three men who assisted Lowe in arresting Bergstralh should be considered in determining whether the force used was reasonable and in failing to instruct the jury that taking Bergstralh to jail was not a necessary element of the arrest. Bergstralh did not specifically assert these errors in the district court proceedings. See Fed.R.Civ.P. 51; Sears v. Southern Pacific Co., 313 F.2d 498, 505 (9th Cir. 1963).

Bergstralh’s remaining allegations of error are without merit. The court did not err in refusing to give a specific instruction that, in some circumstances, no force at all is necessary for an arrest since its instruction on reasonable force was sufficient to alert the jury to that possibility. The court also did not err in instructing the jury that reasonable force is determined by what force Lowe believed was necessary because the court expressly stated that the test was whether that belief was reasonable under the circumstances. The court adequately distinguished between Lowe’s belief and whether that belief was reasonable.

Affirmed.

CHAMBERS, Circuit Judge

(concurring) :

I concur in the result reached by Judge Wallace but for the following reasons.

The vindication of federal rights under 42 U.S.C. § 1983 is to be determined by federal law. See Donovan v. Reinbold, 433 F.2d 738, 742 (9th Cir. 1970). Several arrest cases similar to this case have so held. Sullivan v. Murphy, 156 U.S.App.D.C. 28, 478 F.2d 938, 972 (1973); Martin v. Duffie, 463 F.2d 464, 467 (10th Cir. 1972); Anderson v. Haas, 341 F.2d 497, 499 (3d Cir. 1965); see Mueller v. Powell, 203 F.2d 797, 800 (8th Cir. 1953). As stated by the Supreme Court in McNeese v. Board of Education, 373 U.S. 668, 674, 83 S.Ct. 1433, 1437, 10 L.Ed.2d 622 (1963):

“Nor is the federal right [to be redressed under § 1983] in any way entangled in a skein of state law that must be untangled before the federal case can proceed. For petitioners assert that respondents have been and are depriving them of rights protected by the Fourteenth Amendment. It is immaterial whether respondents’ conduct is legal or illegal as a matter of state law.”

But that general rule does not resolve this ease. A judgment of the district court which is correct must be upheld on appeal even if it was not decided on the best grounds. Brizendine v. Visador Co., 437 F.2d 822, 829 (9th Cir. 1971); Tanimura v. United States, 195 F.2d 329, 330 (9th Cir. 1952). The application of federal law by the district court would have mandated the result which it reached using state law.

The dissenter characterizes the issues of good faith and probable cause as defenses for which the burden of proof is borne by the defendants, but the analysis does not seem to consider the distinction between this case and the cases such as Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967). The difference is that which must be shown in order to establish a prima facie case. In cases such as Pierson the plaintiff is able to establish a prima facie case without reference to probable cause because the violation of a constitutional right results from an arrest for violation of an unconstitutional law. In the present context the violation of a constitutional right results, if at all, from an arrest without legal justification. The proper resolution of the good faith and probable cause issues in cases involving arrests allegedly made without legal justification was demonstrated in Martin v. Duffie, supra, 463 F.2d at 469:

“It is true that the burden was on the plaintiff to establish an invasion of his rights: an unlawful arrest. He did so by showing arrest and confinement without a warrant and without other justification. The plaintiff having established a prima facie case, the initiative passed to the defendant to go forward with evidence showing justification. Ultimately the plaintiff had what is often described as the risk of nonpersuasion on the issue of lack of probable cause . . .

In this case Bergstralh not only failed in his burden but his evidence established the existence of probable cause for the arrest. The withdrawal of that issue from the jury was therefore proper.

HUFSTEDLER, Circuit Judge

(dissenting) :

The key issue is whether the district court erred in ruling as a matter of law that Bergstralh had failed to make a prima facie showing that he had been illegally arrested. The district court took the probable cause issue from the jury on two grounds: (1) Under Oregon law, applicable to this civil rights action, Bergstralh’s conviction for resisting arrest created a presumption that the arrest was supported by probable cause, absent proof that the conviction was obtained by fraud, perjury, or other corrupt means, and (2) testimony of some of Bergstralh’s witnesses would have supported a finding of probable cause. Neither ground is sustainable.

As my brother Chambers recognizes, the Oregon presumption, if any there be, cannot be applied to the federal right here asserted. He asserts, however, that the district court’s erroneous reliance on the presumption was harmless error because Bergstralh did not prove a prima facie case of illegal arrest under federal law standards. We cannot be sure that the district court would have taken the issue from the jury had it- been aware that the Oregon law was inapplicable — although the record strongly indicates that it would not have done so; therefore, we cannot properly say that the error was harmless.

Even if the district court had completely disregarded the presumption, the record does not support the removal of the issue from the jury. This case presents the situation described in the footnote that my brother Chambers quotes from Martin v. Duffie (10th Cir. 1972) 463 F.2d 464, 469 n. 6: “[T]here may be instances in which the plaintiff’s evidence itself creates an issue of fact. . . . ” Bergstralh was arrested without a warrant, and no justification for the arrest existed unless he had committed a misdemeanor in the arresting officer’s presence. The only misdemeanors that appear to have been potentially in that category were' Berg-stralh’s throwing bottles into the street and his resistance to an arrest accomplished without excessive force. The testimony on both the bottle episode and the amount of force used to arrest him was conflicting. None of the evidence was inherently incredible. The conflicts were of .the garden variety that are the common accompaniment of the testimony of eye witnesses who perceive and recall the same event differently. Resolution of those conflicts was a task for the jury.

I would reverse and remand for a new trial.

504 F.2d — 81

      . In 1971 (subsequent to this case), a statute was adopted which prohibited the use of physical force to resist an arrest when the person has reasonable cause to believe that the arrest is being made by a police officer, whether the arrest is lawful or unlawful. ORS § 161.260 (1971). At the same time, a statute was also adopted which provided that it is not a defense to a crime of resisting arrest that the i>eace officer lacked legal authority to make the arrest. ORS § 162.-315 (1971). Under the present Oregon Laws, a conviction for resisting arrest would, of course, not be evidence of probable cause for the arrest.

      . “This is not to say that federal courts do not look to state decisions in formulating a federal standard in civil rights actions. The important point is that federal courts are not bound by the decisions of the state court . . . ” Martin v. Duffie, supra, 463 F.2d at 468.

      “6. We are mindful that there may be instances in which the plaintiff’s evidence itself creates an issue of fact, but this is not one of them . . . ’’

      . The district judge’s admonition to Bergs-tralh that he was ignoring the testimony of his own witnesses that established probable cause for the arrest demonstrates that the judge may indeed have applied the proper federal standards in reaching his decision.

      . The district court concluded that Oregon had adopted Restatement of Torts § 667. Section 667 states that, in a malicious prosecution action probable cause is to be presumed from proof of the fact that the arrestee was convicted of the offense for which he was arrested, absent proof of taint in obtaining the conviction. The district court’s conclusion was based on Hryciuk v. Robinson (1958), 213 Or. 542, 326 P.2d 424. Sryciule, held that commitment by a magistrate was prima facie evidence of probable cause to arrest in a malicious prosecution action; it distinguished Trullinger v. Dooly & Co. (1928), 125 Or. 269, 266 P. 909 which held that proof of conviction was conclusive proof of probable cause in a malicious prosecution action. The vitality of Trullinger is dubious, but even if Trullinger survives, neither that ease nor Hryciuk adopted section 667. To the extent that Trullinger is the law of Oregon, it is an adjunct of its substantive law of malicious prosecution; it is not a part of the Oregon law of arrest. ' The effect of the presumption is to foreclose recovery for malicious prosecution, even if the arrest was without probable cause, when that arrest was followed by a conviction that is immune from attack on the specified grounds. Moreover, neither Oregon law nor the Restatement purported to formulate a rule applicable to a cause of action that resembles a federal civil rights action.

      . The court in Martin held that the plaintiff’s proof of a warrantless arrest, the officers’ fruitless prior searches, and the subsequent filing of charges later dismissed established prima facie want of probable cause. The plaintiff was not required “to search out the subjective viewpoints of the arresting officers in a quest for information as to whether probable cause in a practical sense existed.” (463 F.2d at 468.) “[G]ood faith and probable cause [are] defenses,” and are so characterized in Pierson v. Ray (1967) 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (463 F.2d at 468.) Our problem did not arise in Martin because the evidence in the plaintiff’s case-in-chief was not conflicting, and the trial was without a jury.