author: ALDRICH, Senior Circuit Judge.

text:
    Margaret MARSHALL et al., Plaintiffs-Appellants, v. George J. MULRENIN et al., Defendants-Appellees.
    No. 74-1253.
    United States Court of Appeals, First Circuit.
    Argued Oct. 9, 1974.
    Decided Dec. 20, 1974.

      Edward F. Myers, Boston, Mass., with whom Cornelius J. Sullivan, Boston, Mass., was on brief, for plaintiffs-appellants.
    Richard L. Neumeier, Boston, Mass., with whom Philander S. Ratzkoff, Richard P. Melick, and Parker, Coulter, Daley & White, Boston, Mass., were on brief, for defendants-appellees.
    Before COFFIN, Chief Judge, ALD-RICH and McENTEE, Circuit Judges.
   ALDRICH, Senior Circuit Judge.

Plaintiff appellant (strictly, plaintiffs are husband and wife) allegedly fell and injured herself on business premises in Massachusetts known as Craig Village by the Sea in September, 1967. In July, 1969 plaintiff retained counsel and in August a diversity action was instituted in the Massachusetts District Court against a Mr. and Mrs. Kirk, who appeared on the certificate on file in the appropriate town hall in accordance with Mass.G.L. c. 110, § 5, as the “real name of the person conducting the business.” In fact, several years before the accident the Kirks had conveyed the premises to the Mulrenins, husband and wife, the present appellees, who at all material times thereafter continued to operate under the original name, but without filing a new certificate. Plaintiff named the Kirks as defendants, relying upon the old certificate as to which, in violation of the statute, the Kirks had failed to file a notice of discontinuance. When, after the Massachusetts statute of limitations for actions for personal injury had run, plaintiff discovered the true facts, she sought to amend by dismissing against the Kirks as defendants and naming the Mulrenins in their stead. Invoking F.R.Civ.P. 15, the court held that the amendment, introducing new and unnotified defendants after the statute had run, was impermissible.

Rule 15 reads as follows.

“(c) Relation Back of Amendments. Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading. An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied and, within the period provided by law for commencing the action against him, the party to be brought in by amendment (1) has received such notice of the institution of the action that he will not be prejudiced in maintaining his defense on the merits, and (2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against him.”

Plaintiff urges that the notice given the Kirks was, under the circumstances of the case, “such actual or constructive notice” as to fulfill the rule’s requirements.

There can be no question of actual notice. Conceivably, notice to the individuals whom the operators of the business permitted to appear as the owners of record should be considered constructive notice to the operators within the meaning of Rule 15(c). This, however, is by no means an obvious conclusion. There was no evidence that the Mulre-nins were aware of the statute, or that it had been violated by the prior owners’ leaving their certificate on file. We do not pursue the matter, in the absence of authority, because we believe that in spite of Rule 15(c), plaintiff had an absolute right under Massachusetts law to bring in the Mulrenins.

Mass.G.L. c. 231, § 51 reads as follows:

“Amendments as to parties, process ■or pleading. The court may, at any time before final judgment, except as otherwise provided, allow amendments introducing a necessary party, discontinuing as to a party or changing the form of the action, and may allow any other amendment in matter of form or substance in any process, pleading or proceeding, which may enable the plaintiff to sustain the action for the cause for which it was intended to be brought, or enable the defendant to make a legal defence.”

There can be no question but that the conditions of this statute were complied with — clearly the action intended to be brought in the statutory sense was against the Mulrenins; nor was there any laches on plaintiff’s part. The sole issue, accordingly, is whether the statute may be looked to.

In denying plaintiff’s motion on the ground that its power to amend was limited by the terms of Rule 15(c) the district court relied, basically, on Hanna v. Plumer, 1965, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8. Our conclusion that Hanna is only superficially apposite requires an extensive analysis. Briefly, and with the greatest of respect, our position is that, perhaps because of the way in which issue was joined, the Court misconstrued the state statute that it struck down, but that this misreading is not to be taken as part of the ratio decidendi so far as the treatment of other state statutes in other circumstances is concerned.

In the first sentence of its opinion the Hanna Court stated that it proposed to resolve the following issue:

“The question to be decided is whether, in a civil action where the jurisdiction of the United States district court is based upon diversity of citizenship between the parties, service of process shall be made in the manner prescribed by state law [which the Court found to exclude service upon a suitable person residing at the defendant’s dwelling house or usual place of abode (hereinafter last and usual service)] or that set forth in Rule 4(d)(1) of the Federal Rules of Civil Procedure,” [which permits such service].

This was the question presented by the petition for certiorari, and the question briefed by both parties. After discussing the conflict in the light of Erie R.R. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, and other authorities, the Court answered its question. “Rule 4(d)(1) is valid and controls the instant case.”

Chapter 197 of the Massachusetts General Laws is entitled “Estates of Deceased Persons.” Section 9 thereof, the statute which the Court referred to as “state law,” is the first section of a sub-chapter entitled “Limitation of Actions by Creditors.” It reads in material part as follows:

“§ 9. Commencement of actions; extension of limitation by court. Except as provided in this chapter, an executor or administrator shall not be held to answer to an action by a creditor of the deceased which is not commenced within one year from the time of his giving bond for the performance of his trust, or to such an action which is commenced within said year unless before the expiration thereof the writ in such action has been served by delivery in hand upon such executor or administrator or service thereof accepted by him or a notice stating the name of the estate, the name and address of the creditor, the amount of the claim and the court in which the action has been brought has been filed in the proper registry of probate.

In the opinion of the court of appeals section 9 required dismissal of the action because the statute of limitations had run in the absence of due notice within the statutory period. The court did not suggest that the last and usual service made upon the defendant was defective service, or that the defendant was not properly in court. Rather, it stated there was “adequate service of process in the procedural sense.” 331 F.2d at 159. The Supreme Court, however, without taking affirmative note of that language, held that section 9 was twofold in purpose; “in part a statute of limitations,” and in part a prescribed method of serving process. The Court then held that section 9’s failure to recognize last and usual as a method of service was in conflict with Rule 4, and that the latter must prevail.

In our view section 9 does not purport to be, and is not, a restriction on methods of service so far as process is concerned, but leaves extant the full Massachusetts service procedure, which includes lasf and usual service, precisely in accord with the provisions of Rule 4. Mass.G.L. c. 231, § 31. Rather, in addition to bringing the executor into court, the Massachusetts legislature felt it so important that he be free to make distributions at the earliest possible moment, that it afforded him the protection of affirmative personal notice within the year during which suit must be commenced, and specified three permissible means of notification so as to leave no room for dispute. The suggestion by Mr. Justice Harlan in his concurring opinion that last and usual service under Rule 4 affords substantially as good a notice, 380 U.S. at 478, 85 S.Ct. 1136, is a direct contravention of the statute. Last and usual service, rather than guaranteeing notice, leaves a risk. Massachusetts regards compliance with the statutory terms so important that the defense of inadequate notice cannot even be claimed to be waived. Epstein v. Blender, 1957, 15 Mass.App.Dec. 74. Cf. First Portland Nat’l Bank v. Taylor, 1948, 323 Mass. 492, 496, 83 N.E.2d 161; Nochemson v. Aronson, 1932, 279 Mass. 278, 282, 181 N.E. 188.

Timely notice, as distinguished from service of process, is a common Massa-' chusetts requirement as a condition for suit. Viewed in this light, we find nothing in section 9, either in terms or by implication, that restricts a claimant to service in hand. Service in hand is recognized simply as a permissible manner of affording personal notice. We can only think the Court misread the statute when it said, “Generally, service of process must be made by ‘delivery in hand,’ although there are two alternatives: acceptance of service by the executor, or filing of a notice of claim . . ..” 380 U.S. at 462-463, n. 1, ante, n. 3, 85 S.Ct. at 1139. All alternatives are alternative (and positive) methods of notice, not of process.

We have gone into the matter at this length because the question naturally arises how the Court came to take the view it did of the Massachusetts statute. Did it mean to give the Federal Rules so broad a scope that every state statute which, by some process of construction, could be thought to conflict therewith could not survive, regardless of its substance? Nothing in the language of the opinion suggests so broad a compass. We prefer to think that the Court, concerned to speak early lest the Federal Rules be whittled away by varying state practices, failed to note the underlying defect in what we can only regard as alarmist petition for certiorari. The petitioner in phrasing the question he claimed was presented made no attempt to support his construction of the state statute as a service provision, but simply asserted the conflict. Unfortunately, at least from the standpoint of his own best interests, respondent merely met petitioner on his own terms, arguing that section 9, although a service provision, embraces substantive goals. The Court apparently thought the court of appeals was of the same view, for it said, “The Court of Appeals for the First Circuit concluded that the conflict of state and federal rules was over ‘a substantive rather than a procedural matter,’ ” 380 U.S. at 462-463, 85 S.Ct. at 1139 (Ital. suppl.). It then held that visa-vis Rule 4(d)(1) there was, in fact, “conflicting state procedure.” 380 U.S. at 465, 85 S.Ct. 1136.

Under all the circumstances we conclude it proper to take Hanna at its word, as stating a principle for resolving a direct conflict between two strictly procedural rules. We do not accept the “singularly hard-hearted” view, Ely, The Irrepressible Myth of Erie, 1974, 87 Harv.L.Rev. 693, 697, that Hanna commands that the Federal Rules be woodenly applied irrespective of a discoverable substantive, as distinguished from a merely procedural, state purpose. We consider Hanna’s definitive holding to be contained in its disclaimer of an intent to effect substantive consequences. Such a construction does not, of course, render Federal Rules inoperative in their procedural aspects. It merely means that a rule is not to be applied to the extent, if any, that it would defeat rights arising from state substantive law as distinguished from state procedure.

This line may not always be easy to draw. We recognize, too, that Hanna has evoked much learned analysis. However, in this instance we are content to cast ourselves as Christopher Sly.

In the case at bar there is in fact a true conflict between the federal amendment of parties rule and the Massachusetts statute. Paradoxically, Rule 15 seems, basically, drawn to avoid a substantive effect so far as statutes of limitations are concerned, so as not to extend the statute under the guise of permitting an amendment, whereas section 51, although cast in procedural terms, has a direct substantive effect. We believe the federal court must recognize it.

The various Massachusetts limitation statutes, Mass.G.L. c. 260, require that action be commenced within a certain period. The time is extended by other provisions. For example, the commencement date is postponed in case of the minority, section 7, or insanity, section 25, of the claimant; or during the obligor’s absence from the jurisdiction, section 9, or in case of fraudulent concealment of the cause of action, section 12. The state must be equally free to define what constitutes sufficient commencement. We believe this to be the clear meaning of section 51: an action is commenced within the meaning of ^ " the Massachusetts statute of limitations although the wrong defendant is named,

so long as it appeared that the correct defendant had been the one intended.

We have no question but that the federal court normally must recognize such a provision in a diversity case. Cf. Perry v. Allen, 5 Cir., 1956, 239 F.2d 107. A statute of limitations “bears on a State-created right vitally and not merely formally or negligibly.” Guaranty Trust Co. v. York, 1945, 326 U.S. 99, 110, 65 S.Ct. 1464, 1470, 89 L.Ed. 2079. It should make no difference whether the legislature proceeded within the four corners of the statute of limitations’ formal provisions, or by a new act cast in procedural terms that state the result.

We do not believe Hanna requires us to refuse this recognition. Although Rule 15, on its face, conflicts with section 51, to apply the rule would mean that the choice of forum “would wholly bar recovery.” See n. 8, ante. We do not read Hanna to mean that although the statute of limitations would be tolled if an action were brought on the state side, because of the civil rules it will run if brought in the federal court. We accordingly hold that section 51 permits the amendment adding appellees as defendants to relate back for the purpose of the Massachusetts statute of limitations in spite of the contrary provisions of Rule 15. To the extent that the courts in Simmons v. Fenton, 7 Cir., 1973, 480 F.2d 133, 136; Welch v. Louisiana Power & Light Co., ante, and Loudenslager v. Temple, 3 Cir., 1972, 466 F.2d 249, 250, suggest otherwise, we decline to follow them.

The judgment is vacated and the action remanded to the district court for further proceedings consistent herewith.

      . Section 51 has since been replaced by Massachusetts Rule of Civil Procedure 15, which tracks F.R.Civ.P. 15, except that the content of section 51 is included. While the question is not before us, we would expect that the Massachusetts rule retains the same substantive force as the merged statutory provision,

      . We are further conscious of the fact that J we were the court; x Cir„ 331 p.2d 157, which Hanna unanimously reversed.

      . “Section 9 is in part a statute of limitations, providing that an executor need not ‘answer to an action . . . which is not commenced within one year from the time of his giving bond . . .This part of the statute, the purpose of which is to speed the settlement of estates ... is not involved in this case, since the action clearly was timely commenced.
      “Section 9 also provides for the manner of service. Generally, service of process must be made by ‘delivery in hand,’ although there are two alternatives: acceptance of service by the executor, or filing of a notice of claim, the components of which are set out in the statute, in the appropriate probate court. The purpose of this part of the statute, which is involved here, is, as the court below noted, to insure that executors will receive actual notice of claims. Parker v. Rich, 297 Mass. 111, 113-114, 8 N.E.2d 345, 347 (1937). Actual notice is of course also the goal of Rule 4(d)(1); however, the Federal Rule reflects a determination that this goal can be achieved by a method less cumbersome than that prescribed in § 9.” 380 U.S. at 462-463 n. 1, 85 S.Ct. at 1139.

      . In stating that an executor subject to last and usual service need only “check at his own house or the federal courthouse” (380 U.S. at 478, 85 S.Ct. at 1148.) in order to obtain the notice for himself, the Justice may be thought to have minimized the risk. Quite apart from the fact that there may be more than one possible federal courthouse, clerks’ offices make mistakes. So, also, may a mistake arise out of last and usual service. Cf. Mullane v. Central Hanover Bank & Trust Co., 1950, 339 U.S. 306, 314-315, 70 S.Ct. 652, 94 L.Ed. 865; McDonald v. Mabee, 1917, 243 U.S. 90, 92, 37 S.Ct. 343, 61 L.Ed. 608. From such apprehensions the legislature wished executors to be free.

      . See, e. g., Mass.G.L. c. 84, § 15 (notice of highway defect as condition of suit against municipality); G.L. c. 84, §§ 18-21 (timely notice a condition to suit for injuries due to snow and ice).

      . For what it is worth, we believe the Court must have misread Parker v. Rich, 1937, 297 Mass. 111, 8 N.E.2d 345, as well. In that case the claimant filed a timely notice in the probate court. However, he failed to take timely steps to enter the writ or make service of process. The Massachusetts court held that filing the notice did not commence the action. If filing notice in the probate court was an alternative service of process, we believe the court would not have reached that result.

      . Cf. Welch v. Louisiana Power & Light Co., 5 Cir., 1972, 466 F.2d 1344, 1345 (“arguably procedural matters”).

      . “Petitioner, in choosing her forum, was not presented with a situation where application of the state rule would wholly bar recovery; rather, adherence to the state rule would have resulted' only in altering the way in which process was served.” [Footnotes omitted.] 380 U.S. at 469, 85 S.Ct. at 1143.

      . See, e. g., Ely, ante; Chayes, Some Further Last Words on Erie — the Bead Game, 1974, 87 Harv.L.Rev. 741; McCoid, Hanna v. Plu-mer: The Erie Doctrine Changes Shape, 1965, 51 Va.L.Rev. 884.

      . “Beg. .... A good matter, surely. Comes there any more of it?

        Lady. My lord, ’tis but begun.

        Beg. ’Tis a very excellent piece of work, madam lady. Would ’twere done!” The Taming of the Shrew, end of Act I, Scene 1.


source: Caselaw Access Project

author: DYER, Circuit Judge:

license: Public Domain

text:
    Donald M. PETERSON, Plaintiff-Appellant, v. Caspar W. WEINBERGER, Secretary of Health, Education and Welfare, et al., Defendants-Third-Party Plaintiffs-Ap-pellees, v. James E. PETERSON, Third-Party Defendant-Appellant.
    No. 74-1067.
    United States Court of Appeals, Fifth Circuit.
    Feb. 14, 1975.
    Rehearing and Rehearing en Banc Denied March 27, 1975.

      Glynn A. Pugh, Dallas, Tex., for Donald Peterson.
    Joseph A. Jenkins, James W. DeMik, Jerry Jordan, Dallas, Tex., for J. E. Peterson.
    Frank D. McGown, U. S. Atty., Ft. Worth, Tex., Kenneth J. Mighell, Asst. U. S. Atty., Dallas, Tex., for U.S.A.
    Before DYER, SIMPSON and CLARK, Circuit Judges.
   DYER, Circuit Judge:

James E. Peterson and his brother, Dr. Donald M. Peterson, appeal from a money judgment entered against them for submitting false claims against the Government. Dr. Peterson also appeals from the denial of his entitlement to in-junctive relief and tort and breach of contract damages against the defendants. We affirm.

Although much of the complicated statutory and factual background of this and the cognate cases has been treated in the district court’s opinion, and in this Court’s opinion on the appeal of the criminal trial of the Peterson brothers, a recount of the salient facts is helpful to focus upon the issues raised by the Pe-tersons.

James Peterson was the president, director, and a 69 per cent stockholder of Concord Manor Nursing Home, an extended care facility. He was also the sole owner of Zodiac Enterprises, Inc., which contracted with Concord and other nursing homes to provide physical therapy services to their patients. In 1968, Concord was a certified provider of services under Part A of the Medicare program. Medicare payments were handled through a fiscal intermediary, Mutual of Omaha, to whom Concord submitted its bills for services rendered at the nursing home at a daily rate which included physical therapy. Zodiac could not submit bills for its physical therapy services directly to the Medicare intermediary because Zodiac and Concord were related corporations, i. e., James Peterson was the sole owner of one and held the controlling interest in the other. Therefore, the only way Zodiac could be reimbursed by Medicare for its services was for Concord to include physical therapy in its bills to Omaha. Only the cost, without profit, of services rendered was reimbursable. Concord was required to file cost reports each year with Omaha so it could determine the appropriate allowable cost. Concord failed to file these reports for 1967, and after three notices and the reduction of allowable daily rates, payments were stopped on March 1, 1969, and it ceased being a provider on August 31, 1969.

Thus, early in 1969, James Peterson was faced with a dilemma regarding physical therapy services: Zodiac could not bill directly for therapy services it had furnished to Concord in the first six months of 1968, and payments to Concord under Part A had been stopped. Thereupon, Peterson directed his employee, Morton, to prepare Part B claim forms and “get them out as soon as possible so he could get the money back in.” This necessitated the use of a form different from that used for Part A in that it required a physician’s personalized provider number and the physician’s signature certifying that the service had been rendered by him personally or under his personal direction. Morton and another employee prepared 120 Part B claims, signed Dr. Peterson’s name and provider number to them, and put James Peterson’s Post Office box number on the forms rather than Dr. Peterson’s address. Morton testified that “Mr. Peterson gave us the instructions on all of the forms.”

The Part B claims for Medicare payments were then sent to Blue Cross/Blue Shield of Texas which operated the Medicare program as an agent of the United States on a non-profit basis pursuant to a written contract executed under the provisions of 42 U.S.C.A. §§ 1395h and 1395u. All of the claims were paid by checks made payable to Dr. Peterson and mailed to him.

The circumstances surrounding Dr. Peterson’s receipt and handling of the checks are far from clear. He testified that he assumed the checks were made out and sent to him because he was the medical director of Zodiac. He called his brother to find out why he got checks for physical therapy that he had not billed. James Peterson told him that “the claims had been filed.” The doctor didn’t ask why the checks had been made to him, nor did he contact Group Medical. He simply told James Peterson that he would forward the funds. Instead of endorsing the checks, Dr. Peterson deposited them to his own account and sent his personal check with a notation “account payable” to James Peterson, who deposited it in the Zodiac account.

Dr. Peterson was not on the payroll of Zodiac. He knew that the 120 checks payable to him did not belong to him. He knew he had never personally rendered any of the services in question. Subsequently and inexplicably, Dr. Peterson received six invoices from Zodiac for the therapy services rendered during the first six months of 1968 at Concord which comprised the 120 claims. Dr. Peterson did not. pay the amount of the invoices because he “didn’t think he owed the money.” James Peterson’s version was that Dr. Peterson had been billed for physical therapy services rendered while the doctor was medical director of Zodiac. He claimed that Dr. Peterson’s check was in payment of the invoices. This is inexplicable because Dr. Peterson sent his check to James Peterson on June 3, 1969, and the Zodiac invoices were not prepared or sent to Dr. Peterson until July, 1969. Moreover, neither James Peterson nor Dr. Peterson could give any plausible explanation why Zodiac should bill its medical director for services its physical therapy department performed. Finally, also without explanation was the notation on Dr. Peterson’s check to Zodiac, “account payable.”

In July, 1969, a complaint was received by Gruninger, Program Integrity Specialist, Bureau of Health Insurance, Department of Health, Education and Welfare. The niece of a Medicare beneficiary at Concord questioned the payment to Dr. Peterson for physical therapy services not rendered by him. There followed an investigation concerning claims filed over the signature of Dr. Peterson for physical therapy rendered at Concord for the first six months of 1968 and submitted for payment in April of 1969. The investigation revealed that although Dr. Peterson’s name appeared on the claim forms, he had not personally rendered the services, nor had they been performed under his personal direction. In December, 1969, because of the possibility of fraud, Gruninger issued a letter to Blue Cross/Blue Shield ordering suspension of further payments to Dr. Peterson under the Medicare program. In May, 1970, a conference was held with Dr. Peterson in which he was given an opportunity to respond to accusations made against him. Through counsel he subsequently replied by letter. The suspension, however, remained in effect.

Dr. Peterson responded by filing suit seeking to enjoin the defendants from wrongfully withholding funds due him under the Medicare Act. He also alleged that certain torts precipitated his suspension from the Medicare program. The Government filed a counterclaim against Dr. Peterson and a third party complaint against James Peterson for submission of false claims. A criminal indictment was also returned against the Peterson brothers which resulted in the conviction of both on one count of conspiracy, and of James Peterson on 39 substantive counts of submission of false claims (representing 39 of the 120 claims in the instant suit). On appeal this Court affirmed the conviction of James Peterson on the substantive counts and reversed the conviction of both Petersons on the conspiracy count.

Upon the trial of Dr. Peterson’s complaint and the Government’s counterclaim and third party claim, the district court found that Dr. Peterson was entitled to neither injunctive relief, nor tort or breach of contract damages against any of the defendants, and dismissed his complaint. The major portion of the trial was then devoted to the Government’s claims. The court found that the Peterson brothers had violated the False Claims Act, 31 U.S.C.A. § 231, by knowingly submitting to the Government 120 false claims totaling $16,153.44, and thereupon entered a joint and several judgment for $31,606.72 representing double damages, together with the sum of $100,000 representing a $2,000 forfeiture for 50 of the 120 claims in question, with interest awarded from the date of judgment.

Dr. Peterson’s Tort Claims

We first turn to Dr. Peterson’s prayer for compensatory and punitive damages for the alleged tortious conduct of the defendants. He asserts that the Government and the individual defendants conspired to destroy him and to make it impossible for him to practice as a physician, and that the defendants took his property without due process, and wrongfully and maliciously interfered with his contractual rights. To support these charges, Dr. Peterson argues that he was wrongfully suspended from the Medicare program without notice or a hearing by employees of the Bureau of Health Insurance, H.E.W., who had no authority to impose sanctions, and that this was accomplished as a part of a conspiracy with the Government. Further, he complains that he was required to respond to criminal indictments and defend himself in a criminal trial as well as defend against the Government’s counterclaim for liability under the False Claims Act in the instant suit.

We have combed the record to find some basis for the numerous claims of tortious conduct on the part of the defendants and can find no evidence to support any of them. Evidence of a conspiracy between the Government and the individual and corporate defendants is non-existent. The suspension of Dr. Peterson and the withholding of payments due him by H.E.W. employees were actions both appropriate and necessary under instructions requiring the immediate suspension of any doctor participating in the Medicare program upon the discovery of possible fraud in the submission of claims under the Act. Bureau of Health Insurance Identical Memorandum No. 176, June 11, 1969. There is not a scintilla of evidence that the actions taken by the Bureau of Health Insurance employees were prompted by any reason other than to protect the integrity of the program. The corporate defendants, as fiscal intermediaries, did no more than act on the instructions received by them. This they were required to do. Convinced, as we are, that Dr. Peterson caused false claims to be made, we agree with the district court that the conduct of the defendants was neither malicious, negligent, nor unreasonable in the circumstances.

Finally, we are unpersuaded that Dr. Peterson’s property was taken without due process. His argument, premised upon Goldberg v. Kelly, 1970, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287, is that H.E.W. was not entitled without a hearing to withhold funds due him under Medicare as an offset against false claims then under investigation.

We note that the district court, by preliminary injunction, ordered the withheld funds paid to Dr. Peterson upon his posting of a bond to indemnify the Government should the claims indeed prove false. This was accomplished. Since the funds were no longer held by the Government, this removes this case from the parameters of Goldberg. In any event, Dr. Peterson’s argument is laid to rest by our decision in Hilburn v. Butz, 5 Cir. 1972, 463 F.2d 1207. There, the Hilburn family were concededly owed money under various Department of Agriculture programs. After an investigation, the Secretary administratively determined that the Hilburns had been overpaid under the same programs in previous years and that the monies presently owed them should be applied to offset such overpayments. We held that the Secretary had the right to withhold current funds equal to the overpaid funds, at least until the issues relating to the overpayments were judicially determined. Judge Clark, reasoning in a manner eminently appropriate to this case, held Goldberg inapplicable saying:

The result in Goldberg v. Kelly was based on a judicial notice of the fact that welfare recipients as a class would be deprived of their very means of existence while awaiting the outcome of a post-termination hearing. In turn, those recipients’ necessary search for daily subsistence would adversely affect their ability to seek redress from the welfare bureaucracy. No evidence of any such dire consequences was adduced in this case. Hil-burn v. Butz, 463 F.2d at 1209.

We conclude that there was no denial of due process, and that Dr. Peterson wholly failed to prove tortious conduct on the part of any of the defendants; the district court properly entered judgment in their favor.

Immunity from Liability

The defendants urged the district court to dismiss Dr. Peterson’s amended complaint for tort liability on the ground of official immunity. The court declined to do so at that stage of the proceedings, but, after hearing all of the evidence, concluded that their claim of immunity was well taken. We agree.

With respect to defendants, Secretary of H.E.W. and the United States of America, there can be no question that this was an unconsented suit against the sovereign over which the court lacked jurisdiction. The individual defendants were all employees of the Bureau of Health Insurance, Department of Health, Education and Welfare. McSteen was the Regional Representative responsible for the administration of the Medicare program in five states, including Texas. Adams supervised all of the work on fraud and abuse cases, including Dr. Peterson’s case. Gruninger was a program integrity specialist whose responsibility it was to investigate claims of fraud and abuse and forward them for prosecution where indicated. Chancellor was also on the program integrity staff of the Dallas, Texas, regional office. He had the responsibility of contacting the families of beneficiaries who had been billed for services by Dr. Peterson. Dr. Peterson’s case was processed and investigated in precisely the same manner as other suspected fraud cases. His suspension was effected as required by Bureau of Health Insurance Identical Memorandum No. 176, June 11, 1969. Peterson’s argument that the individual defendants were guilty of gross negligence in improperly imposing sanctions on the wrong person, without just cause, in conspiracy with one another and with the Government, and outside the scope of their employment, is wholly unfounded. There is not the slightest indication that any of the individual defendants acted outside of their line of duty or the scope of their employment in carrying out their official responsibilities.

We find equally without merit Dr. Peterson’s contention that the individual defendants were lower echelon employees who are not entitled to claim immunity. In the seminal case of Barr v. Matteo, the Supreme Court reasoned that:

The complexities and magnitude of governmental activity have become so great that there must of necessity be a delegation and redelegation of authority as to many functions, and we cannot say that these functions become less important simply because they are exercised by officers of lower rank in the executive hierarchy. (footnote omitted.)
It is not the title of his office but the duties with which the particular officer sought to be made to respond in damages is entrusted — the relation of the act complained of to “matters committed by law to his control or supervision,” Spaulding v. Vi-las, supra, 161 U.S. [483,] at 498, [16 S.Ct. [631,] at page 637], 40 L.Ed. 780 —which must provide the guide in delineating the scope of the rule which clothes the official acts of the executive officer with immunity from civil defamation suits. (1959), 360 U.S. 564, 573-574, 79 S.Ct. 1335, 1340-1341, 3 L.Ed.2d 1434.

Pared of distracting shadow contentions, the acts complained of were

the result of a judgment or decision which it is necessary that the Government official be free to make without fear or threat of vexatious or fictitious suits and alleged personal liability.

Norton v. McShane, 5 Cir. 1964, 332 F.2d 855, 859, citing with approval Ove Gustavsson Contracting Co. v. Floete, 2 Cir. 1962, 299 F.2d 655, cert. denied, 374 U.S. 827, 83 S.Ct. 1862, 10 L.Ed.2d 1050. See also Scheuer v. Rhodes, 1974, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90; Chafin v. Pratt, 5 Cir. 1966, 358 F.2d 349. The alleged tortious acts were committed by agents of the Government responsible for the integrity of the Medicare program during the course of an investigation of purported violations of the Medicare Act; all the agents were shielded by immunity. Waymire v. Deneve, 5 Cir. 1964, 333 F.2d 149.

We need not tarry long with respect to the asserted tort liability and the immunity of the corporate defendants. They are Medicare fiscal intermediaries who act as agents at the sole direction of the Secretary of Health, Education and Welfare pursuant to 42 U.S. C.A. §§ 1395h and 1395u. In this situation the United States is the real party in interest. Under the doctrine of sovereign immunity, the district court lacked jurisdiction over all these defendants, both governmental and private as agents of the Government. Cf. Pine View Gardens, Inc. v. Mutual of Omaha Insurance Co., 1973, 158 U.S.App.D.C. 294, 485 F.2d 1073; Johnson v. Johnson, E.D.Pa.1971, 332 F.Supp. 510; Kuenstler v. Occidental Life Insurance Company, C.D.Cal.1968, 292 F.Supp. 532.

Government’s Counterclaim and Third Party Complaint

By its counterclaim and third party complaint, the Government sought recovery against the Peterson brothers under the False Claims Act, 31 U.S.C.A. § 231. As a common defense they urge that the Act was not violated because the physical therapy services were performed by qualified people, the patients receiving these services were entitled to them under Medicare, there was no financial loss to the Government, and the monies paid by the Government were therefore a liability which the Government was statutorily obligated to pay. This argument is unsound.

The claim forms here involved contain a place for the signature of physician or supplier, and the statement “(A physician’s signature certifies that physician’s services were personally rendered by him or under his personal direction).” Each claim submitted bore Dr. Peterson’s purported signature (written by Morton) certifying something that simply was not so: Dr. Peterson did not personally ren■der the service, nor was it rendered under his personal supervision. The services were rendered by Zodiac who was not a certified provider. It could not have been paid, had it submitted a bill to Blue Cross. Furthermore, it is abundantly clear that Dr. Peterson was not the medical director of Zodiac, nor had he any supervision over the physical therapist who actually rendered the services. In short, the services billed were plainly not “covered” services, and the Government thus paid on the basis of the false claims presented.

As a further common defense, the Pe-tersons argue that there is no statutory or regulatory requirement for the physician’s certification; thus, they contend, the certification is not material to the claim, so no liability can attach to a false certification. This contention is without merit. It is, of course, true that the statute does not prescribe the type of claim form required, but it does provide that under Part B the services must be performed by a physician or as an incident to a physician’s service. It was entirely reasonable and necessary for the Government to require such a certification on the claim forms to implement the Act, and at the same time protect public funds. Obviously, a false certification on the claim form frustrated the Government’s attempt to process only valid claims and led to the payment for services which were not covered or payable under the Act.

James Peterson next argues that “there is no delineation as to whether the court found a ‘false’ statement or a ‘fraudulent’ statement. Further, there is no distinction as to the falsity or the fraudulence of the ‘claim,’ or whether there was a ‘claim.’ ” This is a futile exercise in semantics. A claim is within the purview of the False Claims Act if it is grounded in fraud which might result in financial loss to the Government. Simply stated:

This remedial statute reaches beyond “claims” which might be legally enforced, to all fraudulent attempts to cause the Government to pay out sums of money. United States v. Neifert-White Co., 1968, 390 U.S. 228, 233, 88 S.Ct. 959, 962, 19 L.Ed.2d 1061.

The inclusiveness of the statute was spelled out in United States ex rel. Marcus v. Hess, 1943, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443.

These provisions, considered together, indicate a purpose to reach any person who knowingly assisted in causing the government to pay claims which were grounded in fraud, without regard to whether that person had direct contractual relations with the government. 317 U.S. at 544-545, 63 S.Ct. at 384.

Finally, James Peterson faults the Government for failing to bear its burden of proving scienter; he claims the evidence did not demonstrate his personal knowledge and participation in the false certification of the claims. In restating the applicable test, we said in United States v. Aerodex, Inc., 5 Cir. 1972, 469 F.2d 1003;

The law is settled in this Circuit that to show a violation of the False Claims Act the evidence must demonstrate “guilty knowledge of a purpose on the part of [the defendant] to cheat the Government,” United States v. Priola, 272 F.2d 589, 594 (5th Cir. 1959), or “knowledge or guilty intent,” United States v. Ridglea State Bank, 357 F.2d 495, 498 (5th Cir. 1966). See also Henry v. United States, 424 F.2d 677 (5th Cir. 1970). 469 F.2d at 1007.

James Peterson insists that he did not instruct Morton to sign Dr. Peterson’s name to the forms but simply told her “to get them out as soon as possible.” It was Dr. Peterson’s responsibility, so James Peterson contends, to prepare and sign the forms as Medical Director of Zodiac, but the preparation of the forms was done by Concord personnel as a convenience because the records were kept there. We are convinced, however, that the record fully supports the district court’s finding that Morton signed Dr. Peterson’s name and provider number and James Peterson’s post office box number to the claims at the direction of James Peterson. We are equally convinced, for the reasons we have previously stated, that Dr. Peterson was not the medical director of Zodiac and that this was a title trumped up in an effort to circumvent the requirements of the Act. There was ample evidence to conclude that James Peterson had knowledge or guilty intent to make false claims against the Government.

We have considered the additional attacks made by James Peterson on the findings of fact. They raise immaterial discrepancies that cannot be parlayed into a reversal. The findings are not clearly erroneous. McAllister v. United States, 1954, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20. On the contrary, they have substantial support in the record. The other errors asserted by James Peterson do not merit discussion.

Dr. Donald Peterson argues (in addition to the common defenses raised with his brother) that he is not personally liable under the False Claims Act because he had neither the intent to cause a financial loss to the Government nor the knowledge that the claims submitted by James Peterson contained a false or fraudulent statement. To support his argument, Dr. Peterson points out that he served as the medical director for Zodiac for the first six months of 1968. He knew the checks he received were for physical therapy services rendered by Zodiac at Concord and therefore thought this money belonged to Zodiac. He paid the money to Zodiac in good faith, knowing nothing about the contents of the claims filed. If this were the end of the story, Dr. Peterson would surely not be liable under the Act. But the parlous journey he began does not come to an end so quickly.

Not later than the first week in May of 1969, Dr. Peterson received from Group Medical and Surgical Service 120 individual checks made out to him totaling $15,803.36. Of these, 110 checks were dated April 28, 1969, and 10 checks were dated either May 1 or 2, 1969. Attached to each check was an “Explanation of Medicare” which set forth the name of the patient, that the services were provided by D. M. Peterson, D.O., his unique identifying number, the date and amount of the charge submitted, the amount allowed, the fact that the funds were assigned to the doctor, and the total amount of the Medicare payment. This “Explanation” and the accompanying check, made payable to D. M. Peterson, D.O., were sent to Dr. Peterson at his correct address in Dallas, Texas. For some reason, left unexplained in the record, the checks were not deposited until June 9, 1969, over a month after their receipt. In the meantime, however, on June 3, 1969, six days before depositing the 120 checks, Dr. Peterson sent to James Peterson his personal check made to Zodiac.

We reiterate that the district court was fully justified in finding that Dr. Peterson was not the medical director of Zodiac. He had no basis for assuming that the checks were sent to him because he was the medical director of Zodiac. On the contrary, the Medicare Explanation accompanying each check indicated that the claim was being paid to him personally and that the services were provided by him, under his unique identifying number, when in fact they were not. Under the circumstances, we agree with the district court that the act of Dr. Peterson in endorsing the checks and depositing them with the knowledge that he was not entitled to the proceeds was for the purpose of aiding James Peterson in obtaining payment and constitutes the making of a false claim as to each check. By this maneuver James Peterson and Zodiac ended up obtaining Government funds to which they were not entitled. The payment of the 120 claims would never have been questioned except for the complaints of patients who had never heard of Dr. Peterson.

Other Errors Asserted by Dr. Peterson

Dr. Peterson complains that the district court erred in refusing to enter judgment for him for the sums, plus interest, due him that were withheld during his suspension from the Medicare program. This issue is no longer viable. The district court granted a preliminary injunction in favor of Dr. Peterson, ordering that the Government pay him all sums due on claims which had been filed, and conditioned upon his posting a bond to secure the amount of any set-off that might ultimately be due the Government on its counterclaim. The bond was posted and Dr. Peterson received his money. Dr. Peterson is not entitled to interest for the period that the sums were withheld. “It is well established that the United States is not liable for interest in the absence of a contractual or statutory requirement to pay interest.” United States v. Delaware Tribe of Indians, 1970, 427 F.2d 1218, 1222, 192 Ct.Cl. 385. There is no statutory provision for the payment of interest under 42 U.S.C.A. § 1395, 28 U.S.C.A. § 1331, or 28 U.S. C.A. § 1361.

Next, Dr. Peterson argues that he was denied a fair trial because the court changed the order of proof, unduly limited his time for presenting his case, and acted as trial attorney for the Government. These charges border on the frivolous. The district court properly required that liability be established before proof of damages was offered, and it was within the court’s discretion, which was soundly exercised, to initially try the issues raised by the counterclaim. Each witness offered on that phase of the case was, however, subjected to examination and cross-examination, without time limitation, in support of Dr. Peterson’s claims of tortious conduct. Finally, the record is devoid of the slightest suggestion that the court was an advocate for the Government. Moreover, these and other evidentiary errors asserted by Dr. Peterson were not the subject of objection below and cannot be raised for the first time on appeal. D. H. Overmyer Co. v. Loflin, 5 Cir. 1971, 440 F.2d 1213.

Dr. Peterson’s contention that he was denied due process in connection with the suspension of his Medicare payments is unfounded. There is no administrative procedure prescribed by statute or regulation for suspension of Medicare recipients suspected of fraud. They, of course, have recourse to the courts for review of the action taken. Aquavella v. Richardson, 2 Cir. 1971, 437 F.2d 397. Here Dr. Peterson received a full hearing on the Government’s claim of fraud.

Without further extending this opinion it is sufficient to say that we have carefully considered the various other issues raised by Dr. Peterson and find them meritless.

The Government’s Asserted Errors

The Government urges that the district court erred in refusing to award interest on the fraudulent claims from the date the payment was made to the Petersons. We disagree. We subscribe to the view that since double damages, plus a specified sum, was provided in the False Claims Act for the purpose of making sure that the Government would be made completely whole, it is error to assess prejudgment interest on the recoverable amount. United States v. Foster Wheeler Corp., 2 Cir. 1971, 447 F.2d 100.

Finally, the Government argues that since the district court found that 120 false claims had been filed, it should have assessed a $2,000 forfeiture for each false claim, or a total of $240,-000, as provided in 31 U.S.C.A. § 231, instead of limiting the forfeiture to 50 claims totaling $100,000. The short answer is that the Government did not file a cross-appeal and may not now be heard to complain of the judgment entered below. In any event, the Government tacitly admits that the court may exercise discretion where the imposition of forfeitures might prove excessive and out of proportion to the damages sustained by the Government. The forfeiture should reflect a fair ratio to damages to insure that the Government completely recoups its losses. United States v. Hess, supra; Toepleman v. United States, 4 Cir. 1959, 263 F.2d 697. The district court used sound discretion in the imposition of forfeiture in this case.

We are satisfied that the issues were fully and fairly tried. The findings of fact have substantial support in the record and are not clearly erroneous. Proper legal conclusions were reached by the district court. Finding no error the judgment is

Affirmed.

      . Peterson v. Blue Cross and Peterson v. West, 5 Cir. 1975, 508 F.2d 55, this day decided.

      . Peterson v. Richardson, N.D.Tex.1973, 370 F.Supp. 1259.

      . United States v. Peterson, 5 Cir. 1974, 488 F.2d 645.

      . See note 3 supra. The Court found that the jury lacked sufficient evidence to find Dr. Peterson guilty of conspiracy; reversing his conviction removed James Peterson’s confederate, so the latter’s conviction for conspiracy was also reversed.

      . Dr. Peterson has conceded that the Government is not liable under the Federal Tort Claims Act for malicious prosecution and interference with contract rights. See 28 U.S. C.A. § 2680(h).

      . The Memorandum provides in pertinent part: “Where cases of potential fraud are uncovered, the carrier should be instructed by the R.O. [Regional Office] to withhold payments in all pending assigned claims from the ‘suspect’ until the investigation is completed and conclusion reached as to whether fraud was perpetrated and, if so, what further action is to be taken.”

      . Under regulations promulgated by the Department it is provided that “In the performance of their contractual undertakings, the carriers act on behalf of the Secretary, carrying on for him the administrative responsibilities imposed by the law. The Secretary, however, is the real party in interest in the administration of the program. . 20 C.F.R. § 405.670 (1973).

      . On almost parallel evidence James Peterson was convicted on 39 counts under 18 U.S.C.A. § 1001 of the substantive offenses of unlawfully and knowingly making false statements of material facts to a government agency. This Court held that the overwhelming evidence established that Dr. Peterson did not in fact supervise the administering of physical therapy to any particular Zodiac patients, and that the evidence was sufficient to support the jury’s finding that James Peterson had made willful misrepresentations on the claim forms filed with Group Medical and Surgical Service. United States v. Peterson, 5 Cir. 1974, 488 F.2d 645.


text:
    Donald M. PETERSON, Plaintiff-Appellant, v. BLUE CROSS/BLUE SHIELD OF TEXAS et al., Defendants-Appellees. Donald M. PETERSON, Plaintiff-Appellant, v. Bill WEST et al., Defendants-Appellees.
    No. 74-1374.
    United States Court of Appeals, Fifth Circuit.
    Feb. 14, 1975.
    Rehearing Denied March 26, 1975.

      Glynn A. Pugh, Dallas, Tex., for plaintiff-appellant.
    Frank D. McCown, U. S. Atty., Kenneth J. Mighell, Asst. U. S. Atty., Dallas, Tex., for defendants-appellees.
    Before DYER, SIMPSON and CLARK, Circuit Judges.
   DYER, Circuit Judge:

In these two cases (consolidated on appeal) Dr. Peterson sought damages for malicious prosecution and for tortious conduct related to his alleged wrongful suspension under the Medicare program. The district court granted summary judgment for the defendants. We affirm.

The first suit was filed May 8, 1973, in a Texas state court against West, Vice President of Blue Cross of Texas, Stafford and Martin, Regional and Assistant Regional Counsel, respectively, of the Department of Health, Education and Welfare, and McSteen, Gruninger, Adams and Chancellor, all H.E.W. employees, whose duty it was to insure the integrity of the Medicare program. The claims made in this suit are admittedly identical (except for malicious prosecution) with the claims made in Peterson v. Weinberger, 5 Cir. 1975, 508 F.2d 45 this day decided. Likewise, the defendants are the same in both suits except for the addition here of the defendants West, Stafford, and Martin.

The second suit filed a week later, on May 17, 1973, in a Texas state court was against Blue Cross/Blue Shield of Texas, Group Medical and Surgical Services, and Group Hospital Service, Inc. It raised the identical issues against the same corporate defendants as were included in Weinberger, supra. Admittedly this was a “protective” suit filed in the state court against the contingency that the federal court would determine in Weinberger that it was without jurisdiction over the corporate defendants.

Final judgment in Weinberger was entered on October 29, 1973. The district court found that Peterson had failed to prove a claim for either breach of contract or tort damages. It further found that the agents and employees of the Government had immunity from liability because they had acted within the scope of their employment in suspending Peterson and withholding payments due him under the Medicare program because of his possible fraud. The court also found that Peterson and his brother had submitted false claims to the Government, for which they were cast in damages.

A petition for removal under 28 U.S. C.A. § 1442(a)(1), was timely filed in both state court cases in behalf of all the defendants as officers, employees, and agents of the United States. The district court granted summary judgment for the Government, finding that the issues presented were identical to those resolved on the merits in Weinberger and therefore should not be relitigated. We have this day affirmed Weinberger in all respects.

Peterson makes a two-pronged attack in these cases. He contends that both cases were improperly removed and should have been remanded, ergo the district court was without jurisdiction to pass upon the merits. He next argues that, even if the district court had jurisdiction, the judgment in Weinberger does not operate as res judicata because in one of these suits, a new cause of action (malicious prosecution) was alleged, and in the other, three additional defendants were included.

Although we are strongly inclined to the view that the issues resolved in Weinberger were identical to the issues in these suits and are therefore res judi-cata as to the same defendants and their privies, we prefer to sustain the district court’s judgment on the grounds that the removal of the suits was proper, the district court had jurisdiction of the parties and the subject matter, and all the defendants had governmental immunity from liability.

The defendants in these suits, except West, Stafford and Martin, were defendants in Weinberger. West’s official capacity and his duties and responsibilities were detailed by him in that proceeding. Stafford and Martin, Regional and Assistant Regional Counsel, H.E.W., here named as eo-eonspirators, are alleged to have carried out the same illegal acts leading to Peterson’s Medicare suspension as were attributed to the Weinber-ger defendants.

It is indisputable that each of the defendants was either an “officer of the United States or an agency thereof, or persons acting under him” and that their actions were “under color of such office.” Peterson urges however, that what he labels as tortious conduct took the defendants beyond the scope of their statutory authority. We took some pains in Weinberger to relate the factual background leading to the suspension of Peterson and concluded that “[tjhere is not the slightest indication that any of the individual defendants acted outside of their line of duty or the scope of their employment in carrying out their official responsibilities.” Peterson v. Weinberger, supra, at 51. We further concluded that since the corporate defendants were simply Medicare fiscal intermediaries, acting pursuant to a contract with the government, they were under the sovereign immunity umbrella.

The purpose of the removal statute is to prevent federal officers or persons acting under their direction from being tried in state courts for acts done within the scope of their federal employment. In Willingham v. Morgan, 1969, 395 U.S. 402, 405, 89 S.Ct. 1813, 1815, 23 L.Ed.2d 396, the Supreme Court noted that “the removal statute is an incident of federal supremacy, and that one of its purposes was to provide a federal forum for cases when federal officials must raise defenses arising from their official duties.” On this premise, the Court further noted that “the test for removal should be broader, not narrower, than the test for official immunity.” Id. In fashioning a broad application of the statute, the Court said:

The federal officer removal statute is not “narrow” or “limited.” Colorado v. Symes, 286 U.S. 510, 517 [52 S.Ct. 635, 637, 76 L.Ed. 1253] (1932). At the very least, it is broad enough to cover all cases where federal officers can raise a colorable defense arising out of their duty to enforce federal law. This policy should not be frustrated by a narrow, grudging interpretation of § 1442(a)(1). Id. 395 U.S. at 406-407, 89 S.Ct. at 1816.

In a variety of circumstances removals under § 1442(a)(1) have been upheld; for example, Chafin v. Pratt, 5 Cir. 1966, 358 F.2d 349 (libel and slander suit against eight employees of the Public Health Service’s Communicable Disease Center); Murphy v. Kodz, 9 Cir. 1965, 351 F.2d 163 (mid-air plane collision wrongful death suit against an officer of the United States Forest Service); Poss v. Lieberman, 2 Cir. 1962, 299 F.2d 358 (libel suit against a claims representative of H.E.W.); Texas v. National Bank of Commerce of San Antonio, 5 Cir. 1961, 290 F.2d 229 (quo warranto suit by Texas against National Bank for violation of Texas law).

We conclude that the defendants in the instant actions were persons acting within the purview of § 1442(a)(1) and that the suits were properly removed. Removability having been established, the district court had jurisdiction to consider the controversy. What we said in Weinberger concerning immunity is fully applicable here. The entry of judgments for the defendants was proper.

Affirmed.

      . 28 U.S.C.A. § 1442 provides:
      (a) A civil action or criminal prosecution commenced in a State court against any of the following persons may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending:
      (1) Any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office.


author: COFFIN, Chief Judge.

text:
    UNITED STATES of America, Appellee, v. Joseph L. BELCULFINE, Defendant-Appellant.
    No. 74-1110.
    United States Court of Appeals, First Circuit.
    Argued Sept. 10, 1974.
    Decided Dec. 6, 1974.

      Robert Snider, Boston, Mass., for defendant-appellant.
    Alan R. Hoffman, Asst. U. S. Atty., with whom James N. Gabriel, U. S. Atty., was on brief for appellee.
    Before COFFIN, Chief Judge, MOORE and McENTEE, Circuit Judges.

       Of the Second Circuit, sitting by designation.

   COFFIN, Chief Judge.

Appellant was convicted in the United States District Court for the District of Massachusetts of the possession and mailing of a pipe bomb. The bomb, contained in a package addressed to the Worcester Music Co., exploded in the South Boston Postal Annex. Investigation by postal authorities revealed that the explosion had been caused by a home-made bomb charged with black powder, and triggered by a device wired to attached batteries by means of soldered circuits. Officials of the Worcester Music Co. told postal inspectors that appellant had been employed by Worcester as a service manager; that he had knowledge of electrical circuitry and soldering; that appellant and another former employee of Worcester were the proprietors of Bell Music and Amusement Co., against which Worcester had obtained an $80,000 judgment for breach of a covenant not to compete; and that Bell Music would be apt to have a workshop equipped to do electrical soldering.

Subsequently, the postal inspectors received a report from the Postal Service Crime Laboratory that appellant’s thumb print had been identified on the inner wrappings of the parcel which had contained the bomb. The postal inspectors secured from a magistrate a warrant to search the premises of Bell Music and Amusement Co. In the affidavit submitted in support of their application for the warrant, the inspectors recounted the above described results of their investigation and stated:

“12. On several occasions between July 26 and August 8, 1973, we went to the premises of Bell Music and Amusement Company, Inc., at 1 Pine-land Avenue, Shrewsbury, Massachusetts, looked through the glass window. [sic] The premises consisted of a front office with one desk and file cabinets. To the rear of this office through a door partially open, we observed a wooden bench and table.”

The present appeal arises out of the refusal of the district court to suppress the fruits of the search of Bell Music, strands of wire similar to that used in the construction of the bomb. Appellant contends that the inspectors’ representation that they had observed a wooden bench and table in the Bell Music establishment was false, that evidence presented at, the suppression hearing made it apparent that they could not have seen what they said they saw, and that they admitted as much in their testimony at the hearing.

A little over a decade ago the Supreme Court noted that it had

“. . . never passed directly on the extent to which a court may permit [examination of the validity of a search warrant] when the search warrant is valid on its face and when the allegations of the underlying affidavit establish ‘probable cause’.” Rugendorf v. United States, 376 U.S. 528, 531— 532, 84 S.Ct. 825, 827-828, 11 L.Ed.2d 887 (1964).

This observation came amid a slow thaw in the rigidity of the rule which had long predominated among the circuit courts that judicial scrutiny of the propriety of the issuance of a warrant could not probe beneath the surface of the supporting affidavits. In several circuits the process of reassessment has culminated in the adoption of general standards which permit examination of the accuracy of affidavits underlying a warrant in a variety of circumstances. In United States v. Carmichael, 489 F.2d 983 (7th Cir. 1973), the Seventh Circuit ruled that a defendant is

“. . . entitled to a hearing which delves below the surface of a facially sufficient affidavit if he has made an initial showing of either of the following: (1) any misrepresentation by the governmnment agent of a material fact, or (2) an intentional misrepresentation by the government agent, whether or not material.” 489 F.2d at 988.

Evidence should be suppressed, the court ruled, only if after the hearing the trial court finds the government agent to have been “recklessly or intentionally untruthful”. Ibid. Upon such a finding, evidence resulting from a search pursuant to a warrant based on the untruthful affidavit must be suppressed, the court held, regardless of whether, absent the misrepresentative portions, the affidavit still establishes probable cause.

The Fifth Circuit, in United States v. Thomas, 489 F.2d 664 (5th Cir. 1973), discussed the rule established by the Seventh Circuit in Carmichael, and adopted a rule which is similar, but marked by two important variations. Evidence should be suppressed, the court ruled, if the warrant was issued on the basis of an affidavit containing a misstatement that

“. . . (1) was committed with an intent to deceive the magistrate, whether or not the error is material to the showing of probable cause; or (2) made non-intentionally, but the erroneous statement is material to the establishment of probable cause for the search.” 489 F.2d at 669.

The Fifth Circuit’s formulation of the rule, unlike the Seventh Circuit’s would hold a warrant invalid if the underlying affidavit contained a negligent but unintentional misrepresentation that was material. A second distinction between the rules set forth in the two decisions is that the Fifth Circuit explicitly requires that a non-material misrepresentation must have been made with an intent to deceive the magistrate if it is to vitiate the resulting warrant. The Seventh Circuit’s rule seems to contemplate no determination of whether the affiant intended to deceive the magistrate.

In essence the two rules reflect differing pragmatic judgments of what sort of misconduct — negligent or intentional, flagrant or trivial — can and ought to be deterred by the suppression of evidence at trial. At what point does the increase in deterrence effected by an expansion of the Fourth Amendment rights of defendants become so marginal that it does not warrant the hindrance to successful prosecution of the guilty which results?

“The rule is calculated to prevent, not to repair. Its purpose is clear — to compel respect for the constitutional guaranty in the only effectively available way — by removing the incentive to disregard it.” Elkins v. . United States, 364 U.S. 206, 217, 80 S.Ct. 1437, 1444, 4 L.Ed.2d 1669 (1960).

We find perplexing the question of the prophylactic value of the exclusion of evidence secured with a warrant issued in reliance on negligent and material, but not intentional misstatements. At this stage of development of legal doctrine, we would hesitate to adopt a position for this circuit on a hypothetical basis. Suffice it to say that, as we view the record, the question is not before us, and we imply no views as to the answer.

We find the misstatements at issue in the present appeal non-material. The testimony and photographic evidence adduced at the suppression hearing establish conclusively that the statement in the affidavit that “[t]o the rear of this office through a door partially open, we observed a wooden bench and table” was incorrect. Excising that paragraph of the affidavit, however, we still find at least the minimal requirements for probable cause satisfied. The affidavit truthfully recounted the statements of the Worcester Music Company officials that they had won a substantial judgment against appellant and Bell Music, that appellant had electrical wiring skills, and that Bell Music would probably have a workshop facility. Combined with the information supplied by the Postal Service Crime Laboratory with respect to the manner of construction of the bomb and the identification of appellant’s thumb print on the wrappings of the bomb, these facts viewed in a commonsense manner were sufficient to establish probable cause for a search of Bell Music. United States v. Ventresca, 380 U.S. 102, 108, 85 S.Ct. 741, 13 L.Ed.2d 684 (1964); Rosencranz v. United States, 356 F.2d 310 (1st Cir. 1966).

That we regard the misstatement in the affidavit as immaterial in the sense of not being a “but for essential” of probable cause, however, does not dispose of the case. The fact that the investigating agents had actually seen a workbench within the Bell Music premises may have carried great weight with the magistrate, for it both provided an independent fact supporting a finding of probable cause, and verified by observation the educated guess given by the Worcester Music officials, thus strengthening the credibility of all they said. It changed a marginally adequate affidavit into a solidly persuasive one. A knowing misstatement of so significant a fact would exhibit exactly that quality of unscrupled zeal which impelled the adoption of the exclusionary rule.

We are sensitive to the fact that allowances must be made for errors in judgment, observation, or memory on the part of fallible human beings endeavoring faithfully to carry out the duties of office, sometimes under conditions of great pressure. But we see no policy reason for overlooking intentional, relevant, and non-trivial misstatements in an affidavit which could subject any maker of such, be he an official or a private citizen, to a fine or imprisonment for perjury under 18 U.S.C. § 1621. Indeed, policy suggests particular sensitivity to such misstatements in an affidavit for a search warrant which is necessarily granted ex parte, and in complete reliance upon the truthfulness of the statements in the affidavit. The major reliance for implementation of the Fourth Amendment is a warrant, a judgment of probable cause, i. e., a conclusion that there exist “reasonable grounds to believe — that criminally related objects are in the place which the warrant authorizes to be searched, at the time when the search is authorized to be conducted”, by “a neutral and detached magistrate . . . [not of an] officer engaged in the often competitive enterprise of ferreting out crime.” Johnson v. United States, 333 U.S. 10, 14, 68 S.Ct. 367, 369, 92 L.Ed. 436 (1948).

Were the judicial response to be merely the elimination of the false statements and the assessment of the affidavit’s adequacy in the light of the remaining averments, enforcement officers would be placed in the untoward position of having everything to gain and nothing to lose in strengthening an otherwise marginal affidavit by letting their intense dedication to duty blur the distinction between fact and fantasy. We therefore see no supportable alternative to suppression of evidence obtained pursuant to a warrant based on an affidavit containing an intentional, relevant, and nontrivial misstatement. We see no basis for confining this sanction to false statements made with the specific intent to deceive the magistrate as opposed to false statements merely intended to “round out the picture”. We see no danger of frequent frustration of warrant-based searches and seizures occasioned by challenges based on intentional misstatements. Such challenges, to be entertained, would have to be preceded by a showing of falsity of allegation — a showing presumably not easily to be made in most cases.

Since neither the magistrate, nor the district judge dealt with the question whether the postal inspectors knowingly misrepresented the facts, we must remand this case for a hearing on that issue. The hearing should be conducted by the district judge and, if he determines that the misstatements in the affidavit were knowingly made, the evidence discovered in the search of Bell Music and Amusement Company must be suppressed and a new trial granted to appellant. In the future when a defendant makes a preliminary showing of knowing misstatements in an affidavit underlying a warrant, a hearing should be conducted by a judge to determine whether the evidence obtained pursuant to the warrant should be suppressed.

In Wingo v. Wedding, 418 U.S. 461, 94 S.Ct. 2842, 41 L.Ed.2d 879 (June 26, 1974), the Supreme Court held that the Federal Magistrates Act, 28 U.S.C. §§ 631-639, did not affect the longstanding requirement that evidentiary hearings in habeas corpus cases be conducted by a judge. The Court found “nothing in the text or legislative history of the Magistrates Act” to suggest that Congress intended to change the requirement.

“Rather, both text and legislative history plainly reveal a congressional determination to retain the requirement. For, although the Act gives district judges broad authority to assign a wide range of duties to Magistrates, Congress carefully circumscribed the permissible scope of assignment to only ‘such additional duties as are not inconsistent with the Constitution and laws of the United States.’ 28 U.S.C. § 636(b) (emphasis added).” 94 S.Ct. at 2848.

In Campbell v. United States District Court, 501 F.2d 196 (9th Cir. Aug. 15, 1974), the Ninth Circuit faced the question whether the Magistrates Act permitted reference of a motion to suppress to a magistrate for findings and recommendations. Paralleling the Supreme Court’s analytical approach in Wingo the circuit court sought to determine whether before the passage of the Magistrates Act the laws or Constitution required that a motion to suppress be heard, in the first instance, by a judge. The court found that unlike habeas corpus proceedings motions to suppress were subject to no preexisting requirement that they be heard initially by a judge. See also Weber v. Secretary of Health, Education, and Welfare, 503 F.2d 1049 (9th Cir. Sept. 13, 1974). That it is permissible to refer a motion to suppress to a magistrate does not imply, the court added, that the district judge is relieved of the responsibility of finally deciding the issues raised at the hearing. Scrupulous care must be taken, the court stated, that the final adjudication is made by the district court, without special deference to the findings of the magistrate.

The rule we establish here is not addressed to the general question whether motions to suppress may be referred for preliminary action to a magistrate. We limit ourselves to one specific situation, where the veracity of an affidavit underlying a warrant is challenged. In such circumstances the credibility of witnesses is so likely to be determinative, and the evidence so delicately balanced that we see little probability that judicial time would be saved by preliminary reference to a magistrate. Furthermore, in this circuit we have relatively few full time magistrates; these deal with a limited number of federal agents. We see risks to both the defendant and the government in requiring the same magistrate who believed the challenged statements of government agents or who has believed them in the past, to hold a hearing to determine if the agents perjured themselves in obtaining a warrant. Cf. Halliday v. United States, 380 F.2d 270 (1st Cir. 1967).

Judgment vacated; remanded to the district, court for further proceedings consistent with this opinion.

      . The posture of the district court, relative to the issues raised by appellant, is as follows. The district judge referred the motion to suppress to the magistrate who wrote a memorandum recommending that the motion be denied. Although the magistrate permitted counsel for appellant to cross-examine the two postal inspectors about their observations of the Bell Music offices, he made no findings regarding the veracity of the statements made in the affidavit, indicating instead that he was constrained to look only within the “four corners of the affidavit”.
      The district judge heard brief argument from counsel for appellant, but, stating that he was concerned only “with what is in the affidavit”, denied the motion to suppress without findings.
      The government argues that appellant made no request for findings, that Fed.R. Crim.P. 41(e) does not require findings, and that absent such findings we must affirm the action of the district court if any reasonable view of the evidence supports it. See United States v. Horton, 488 F.2d 374 (5th Cir. 1973), cert. denied, 416 U.S. 993, 94 S.Ct. 2405, 40 L.Ed.2d 772 (1974). Here, although the government in its memorandum in opposition to the motion to suppress cited United States v. Carmichael, 489 F.2d 983 (7th Cir. 1973), a leading case permitting examination of the veracity of statements contained in a probable cause affidavit, neither the magistrate, nor the district court believed it permissible to delve beneath the surface of the affidavit. Since we hold that the district court must, in certain circumstances, delve beneath the surface of a facially sufficient affidavit, it would be improper for us to treat the case as though the district court had decided that no intentional misstatement had been made in the affidavit. Thus, this case is distinguishable from Horton, where the district court did not appear to have misconceived the controlling law.

      . See, e. g., United States v. Gillette, 383 F.2d 843 (2d Cir. 1967); United States v. Dun-nings, 425 F.2d 836 (2d Cir. 1969); King v. United States, 282 F.2d 398 (4th Cir. 1960); United States v. Upshaw, 448 F.2d 1218 (5th Cir. 1971); United States v. Pearce, 275 F.2d 318 (7th Cir. 1960); United States v. Roth, 391 F.2d 507 (7th Cir. 1967); United States v. Bridges, 419 F.2d 963, 966 n. 4 (8th Cir. 1969); Chin Kay v. United States, 311 F.2d 317, 323 (9th Cir. 1962) (dissenting opinion); United States v. Harwood, 470 F.2d 322 (10th Cir. 1972).

      . We accept the Seven Circuit’s phrasing as the proper characterization of “material” in this context — information which is essential to a showing of probable cause — and so use the term throughout this opinion. We reject appellant’s effort to have us accept a definition which would equate “material” to relevant to an element of probable cause. Kip-perman, Inaccurate Search Warrant Affidavits As a Ground for Suppressing Evidence, 84 Harv.L.Rev. 825, 829 n. 35.

      . The position of the court on the question of the significance of material misstatements negligently made is rendered somewhat nebulous by a footnote several pages subsequent to the quoted passage which states that the court does not reach the question of what degrees of negligence will invalidate a warrant. 489 F.2d at 671 n. 5.
      Both the Thomas and Carmichael courts discuss the arguments in Kipperman, Inaccurate Search Warrant Affidavits As a Ground for Suppressing Evidence, 84 Harv.L.Rev. 825 (1971), which advocates the exclusion of evidence secured with a warrant which depends for probable cause on negligently misstated facts.

      . The importance of this distinction becomes apparent in the context of the Thomas opinion. The court found that the affidavit there challenged contained knowing misrepresentations indicating that the agent’s sources had named a man called Finley in connection with criminal activities described in the affidavit. In fact the sources had named a man called “Tee” and the agent had concluded, on the basis of further investigation, that “Tee” was Finley. Closely analyzing the facts, the court held the resulting warrant valid since the agent’s false statements were made in “good faith”, 489 F.2d at 671-672, i. e„ with no intent to deceive the magistrate.

      . Compare United States v. Gonzales, 488 F.2d 833 (2d Cir. 1973), and United States v. Marihart, 492 F.2d 897 (8th Cir. 1974).

      . Inspector O’Leary testified that his observation was through a closed drape. “It was a quick look, but I looked, and to the best of my knowledge, I saw what appeared to be a workbench or a table.”
      Inspector Peterson testified that he had “a feeling” that his observation was through a glass door rather than a window, and that there may have been a shade on the door which may have been drawn. Photographs introduced into the record by appellant show that it was not physically possible for the inspectors to have seen the workshop in the Bell Music offices from either the door or the window.

      . 18 U.S.C. § 1621 reads in part:
      “Whoever, having taken an oath before a competent tribunal, officer, or person, in any case in which a law of the United States authorizes an oath to be administered, that he will testify, declare, depose, or certify truly, or that any written testimony, declaration, deposition, or certificate by him subscribed, is true, willfully and contrary to such oath states or subscribes any material matter which he does not believe to be true, is guilty of perjury . . ..”
      We note that the term “material” is here used in the broader sense of relevant or persuasive. See United States v. Wesson, 478 F.2d 1180 (7th Cir. 1973); United States v. Birrell, 470 F.2d 113, 115 n. 1 (2d Cir. 1972).

      . Amsterdam, Perspectives on the Fourth Amendment (The Oliver Wendell Holmes Lee-tures), 58 Minn.L.Rev. 349, 358 (1974) [footnotes omitted].

      . To preserve this allocation of authority the court established the following rules:
      “If neither party contests the magistrate’s proposed findings of fact, the court may assume their correctness and decide the motion on the applicable law.
      “The district court, on application, shall listen to the tape recording of the evidence and proceedings before the magistrate and consider the magistrate’s proposed findings of fact and conclusions of law. The court shall make a de novo determination of the facts and the legal conclusions to be drawn therefrom.
      “The court may call for and receive additional evidence. If it finds there is a problem as to the credibility of a witness or witnesses or for other good reasons, it may, in the exercise of its discretion, call and hear the testimony of a witness or witnesses in an adversary proceeding. It is not required to hear any witness and not required to hold a de novo hearing of the case.
      “Finally, the court may accept, reject or modify the proposed findings or may enter new findings. It shall make the final determination of the facts and the final adjudication of the motion to suppress.” [Footnote omitted.] 501 F.2d at 206-207.


author: STEVENS, Circuit Judge.

text:
    Gordon H. ALLEN and the Dow Chemical Company, Plaintiffs-Appellants, v. W. H. BRADY CO., Defendant-Appellee.
    No. 73-1200.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 25, 1974.
    Decided Dec. 27, 1974.
    Rehearing Denied Feb. 10, 1975.

      Sidney J. Walker, Dow Chemical Co., Midland, Mich., Sidney Wallenstein, Chicago, 111., for plaintiffs-appellants.
    Britton A. Davis, Chicago, 111., Donald G. Casser, Milwaukee,, Wis., for defendant-appellee.
    Before PELL, STEVENS and SPRECHER, Circuit Judges.
   STEVENS, Circuit Judge.

The Dow Chemical Company, as the assignee of Prosser, received a patent on a simple method of warning excavators of the presence of underground utility lines. A strip of colored polyethylene film is buried in the backfill above the line where it will be brought to the surface by subsequent excavation. Pros-ser’s invention was admittedly anticipated by Law, but as a result of an interference with a still earlier application, Law did not obtain a patent and never developed his idea commercially. The principal question presented by this appeal is whether the bar to patentability found in 35 U.S.C. § 102(g) was avoided by an abandonment of Law’s application before the Prosser patent issued.

The district court rejected defendant’s § 102(g) argument, but held the patent invalid as obvious. Finding a lack of candor in the processing of the application, the court awarded attorney fees to the defendant. We do not reach the obviousness issue because we find the patent invalid under § 102(g); we disagree with the conclusion that this is an exceptional case in which fees should be awarded to the infringer.

In order to set forth the essential facts we need only refer to three patent applications. The earliest of the three, the Allen application, did not specifically teach the use of polyethylene film or other plastic strips. The language in the Allen claim referred to “a readily frangible colored body” as a warning device; in practice, Allen was using such materials as colored oxide, sand, or powder. However, the generic language in Allen’s application was construed by the Patent Office also to encompass the use of plastic film which was expressly taught in the Law application.

As already noted, Law’s application anticipated the invention claimed by Prosser. Law, however, did not receive a patent because an interference was declared between his specific application and the earlier generic application filed by Allen. After the decision in the interference proceeding in December of 1973, which awarded priority to Allen, Law made no effort to develop his idea commercially. However, Allen, who had admittedly learned of the idea of using polyethylene film from the Law application, did promptly commercialize it: he sold the product himself and licensed others to use it under his generic claims.

Prosser conceived the same invention independently. Nevertheless, it is clear that the invention had previously been conceived by Law and was already the subject of a pending patent application. Plaintiff makes no claim that Law abandoned his invention before Prosser discovered it or before Prosser filed his application. The abandonment argument rests entirely on Law’s acquiescence in the adverse ruling in the interference proceeding with Allen which preceded the issuance of the Prosser patent.

I.

For two reasons we hold the patent invalid under § 102(g). The critical language of that section provides:

“A person shall be entitled to a patent unless—
******
“(g) before the applicant’s invention thereof the invention was made in this country by another who had not abandoned, suppressed, or concealed it.”

As we read this language, the abandonment is irrelevant unless it occurred “before the applicant’s invention.” The use of the pluperfect tense — “had not abandoned” — plainly refers to an abandonment which occurred “before the applicant’s invention.”

Moreover, the concept of abandonment contemplates a voluntary decision by the original inventor to terminate any effort to practice his conception. In some circumstances abandonment of a patent application by acquiescing in an adverse ruling by the Patent Office might amount to an abandonment of the invention, but certainly not in the circumstances disclosed by this record. For the invention itself had no more been abandoned than if Law had assigned his interest in it to Allen. The practical effect of the interference ruling was to give Allen, rather than Law, the opportunity to profit from Law’s idea. Since there was no abandonment of the invention, and since Law’s failure to participate in its exploitation was not voluntary, we do not believe he “abandoned” his invention within the meaning of § 102(g). Certainly he did not do so “before the applicant’s invention.”

II.

The district court found that Dow and Allen were guilty of a lack of candor in connection with the processing of the patent application and therefore awarded attorney fees pursuant to 35 U.S.C. § 285. We are persuaded that this finding is not supported by the record.

The district court found that relevant prior art had not been cited by Dow and that the Allen patent was not cited as prior art by the Examiner. We agree with Dow that the Allen patent was clearly the most relevant prior art and the record does establish that it was brought to the attention of the Examiner. We attach no particular significance to the fact that several months passed after Dow became aware of the Allen patent and before it was cited, since the Examiner plainly had ample time in which to consider its relevance. The Examiner’s decision not to cite the Allen patent as a reference is not attributable to Dow.

We have also carefully considered the suggestion that the patent is tainted by Allen’s conduct. Allen purchased plastic tape from Dow, accepted an exclusive license under the Prosser patent from Dow, and granted sublicenses to licensees under the Allen patent. Assuming, without deciding, that the net effect of the relationship would have been to extend the practical useful life of Allen’s patent by three years (since the Prosser patent issued three years after Allen’s), our holding of invalidity adequately vindicates the public interest. We are also persuaded that there was no failure by Allen to make any disclosure either to Dow or to the Patent Office which affected the integrity of the Patent Office proceedings. This is not an “exceptional case” within § 285.

Accordingly, the portions of the Judgment Order entered on December 26, 1972, holding the patent invalid and unenforceable, and awarding normal costs to the defendant (paragraphs 1 through 4), are affirmed; the portion of said judgment awarding attorney fees to the defendant (paragraph 5) is reversed.

Affirmed in part and reversed in part.

      . Patent No. 3,282,057 on Underground Line and Method of Installing Same, issued November 1, 1966, pursuant to application of Adam W. Prosser, assignor to The Dow Chemical Company, filed July 12, 1961,

      . Claims 2 and 5 of the patent read as follows:
      “2. In a method for the installation of buried lines which comprises excavating a trench, placing a line within said trench, and backfilling said trench, the improvement which comprises partially backfilling said trench to a predetermined level, placing within the trench a tearable plastic indicating sheet and subsequently completing the backfilling operation.
      # * * * * *
      “5. The method of claim 2, wherein the plastic indicating sheet is a. polyethylene plastic indicating sheet.”

      . Section 102(g) reads as follows:
      “§ 102. Conditions for patentability; no'1 elty and loss of right to patent.
      “A person shall be entitled to a patent unless—
      ******
      “(g) before the applicant’s invention thereof the invention was made in this country by another who had not abandoned, suppressed, or concealed it. In determining priority of invention there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.”

      . Claim 2 of Patent No. 3,155,861 (the Allen patent) entitled Locating Elements of Construction Beneath the Surface of Earth Soils, which issued on December 31, 1963, pursuant to application filed February 29, 1960, reads as follows:
      “2. An area of earth soil carrying at least one element of construction positioned from about 5 to 15 feet beneath the surface of said earth soil and a readily frangible colored body beneath said surface and in a position about 1 to 2 feet and extending over the lateral extent of said element of construction a distance of about one to several feet in each direction, said colored body carrying a substantially water-insoluble coloring material the color of which contrasts with that of the surrounding earth soil whereby to facilitate the location of said element of construction.”

      . In his application, filed on August 22, 1960, Law stated that he had “found that polyethylene strip is ideally suited for this purpose since it remains substantially in its initial condition over long periods of time even when emersed in damp and highly acid soils and since it may be readily colored with vivid and distinctive hues, such as bright yellow and chartreuse.” Defendant’s Exhibit p. 2.

      . Section 285 reads as follows:
      “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”