text:
    William J. LESTER, Plaintiff-Appellant, v. COUNTY OF TERRY, TEXAS, Defendant-Appellee.
    No. 73-1961.
    United States Court of Appeals, Fifth Circuit.
    March 29, 1974.

      See also, D.C., 353 F.Supp. 170.
    Leota Heil Alexander, Johnny Splawn, Lubbock, Tex., for plaintiff-appellant.
    Tom S. Milam, Cecil C. Kuhne, Lubbock, Tex., for defendant-appellee.
    Before THORNBERRY, GOLDBERG and INGRAHAM, Circuit Judges.
   PER CURIAM:

On September 17, 1971, plaintiff-appellant suffered serious injury to his back while in the employ of Terry County, Texas. He initially filed a workmen’s compensation claim, only to discover that the County did not carry this form of employer’s liability insurance. He then instituted the present action under the Texas Tort Claims Act in the United States District Court for the Northern District of Texas. Jurisdiction was founded on diversity of citizenship. At trial special issues were submitted to the jury, which returned findings against defendant on the question of negligence, and against plaintiff in the matters of contributory negligence and assumption of risk. On the basis of these findings the trial court entered a judgment that plaintiff take nothing.

Plaintiff does not dispute the sufficiency of the evidence introduced in support of the common law defenses of contributory negligence and assumption of risk. He argues, rather, that as a matter of state statutory and federal constitutional law the issues should never have been submitted to the jury. Finding plaintiff’s legal arguments to be without merit, we affirm.

The Texas rule on the common law tort defenses available to a county in actions by its employees appears in Article 8309c, § 3 of the state’s Revised Civil Statutes. The implications of that Article for plaintiff’s cause of action were ably set out by the district court after a hearing on the County’s motion to strike two paragraphs of plaintiff’s complaint —one dealing with the question of the common law defenses.

“[Article 8309c, § 3] provides in part that a county may voluntarily choose to purchase workmen’s compensation insurance but that said provision “is permissive and not mandatory.” A county not voluntarily electing to carry Workmen’s Compensation Insurance is not deprived of its common-law defenses in an action against it by a county employee.
“This same art. 8309c, § 3, provides further that a county must purchase such insurance if the voters of the county so determine in an election and provides that ‘if such county fails to provide either self-insurance or insurance under a policy of insurance, the county shall be subject to Sections 1 and 4, of Article 8306 . . . ’ [emphasis added]. Section 1 of art. 8306 denies employers the benefit of the common-law defenses. Therefore it is an inescapable inference that in a county in which no election has resulted in a mandate for insurance coverage, section 1 of art. 8306 does not apply and the county has available to it the common-law defenses. See Op. Atty.Gen.1969, No. M-527 (Tex.)”

Lester v. County of Terry, Texas, 353 F.Supp. 170,172 (N.D.Tex.1973).

We find no fault in this reasoning ; and, since no workmen’s compensation election had been held in Terry County, the district court correctly applied Texas law in submitting the issues of contributory negligence and assumption of risk to the jury.

Plaintiff’s primary constitutional argument rests on the equal protection clause of the Fourteenth Amendment. Private employers eligible for participation in Texas’ workmen’s compensation system lose their common law defenses in personal injury actions by their employees if they fail to participate in the program. Plaintiff contends that if this Court interprets Article 8309c, § 3 as preserving those defenses to certain eligible but nonparticipating counties, then the employees of those counties, placed in a less advantageous position than employees of nonparticipating private enterprises, have been denied the equal protection of the laws. We find this position singularly unpersuasive.

This Court cannot disturb the boundaries of coverage drawn by the Texas legislature for the state’s workmen’s compensation program unless we find those parameters to be without rational basis. United States v. Carolene Products Co., 1938, 304 U.S. 144, 58 S.Ct. 778, 82 L.Ed. 1234. Article 8309c, § 3 is designed to provide counties with one method for meeting the financial burdens imposed by the Texas Tort Claims Act when their employees are injured on the job —workmen’s compensation. In the private sector participation in the program is partly coerced by the removal of the important common law defenses for non-subscribers without the imposition of a countervailing limit on liability in tort. The decision not to coerce county participation by the automatic abrogation of defenses could justifiably arise from the legislature’s recognition that both governmental resources and employee needs might differ significantly among Texas’ 254 counties, making a system of workmen’s compensation unnecessarily expensive or cumbersome for some areas. It might also derive from a desire to provide maximum flexibility to local governmental units out of a general solicitude fbr the public treasury. This same concern over the assault of private tort claims on the tax dollar once prompted complete governmental immunity, a concept whose constitutionality plaintiff does not challenge. An interest sufficient to justify absolute immunity will certainly support the present limited retention of defenses.

Affirmed.

      . Vernon’s Tex.Rev.Civ.Stat.Ann. art. 6252-19 (1970).

      . Tex.Rev.Civ.Stat.Ann. art. 8306, § 4 (1970).


source: Caselaw Access Project

author: LEVIN H. CAMPBELL, Circuit Judge.

license: Public Domain

text:
    Nicholas A. PALMIGIANO, Plaintiff, Appellant, v. James W. MULLEN, Warden, et al., Defendants, Appellees.
    No. 73-1331.
    United States Court of Appeals, First Circuit.
    Submitted Dec. 3, 1973.
    Decided Feb. 19, 1974.
    As Amended Feb. 27, 1974.

      Nicholas A. Palmigiano, on brief pro se.
    W. Slater Allen, Jr., Asst. Atty. Gen., and Richard J. Israel, Atty. Gen., on brief, for appellees.
    Before COFFIN, Chief Judge, Mc-ENTEE and CAMPBELL, Circuit Judges.
   LEVIN H. CAMPBELL, Circuit Judge.

Plaintiff Nicholas Palmigiano, serving a life sentence for murder, has sued correctional personnel comprising the prison Classification Board at Rhode Island’s Adult Correctional Institution. Citing 42 U.S.C. § 1983 and companion provisions, he asks for damages from the individual defendants.

Palmigiano’s grievance devolves from the Classification Board’s unwillingness to alter his classification as a maximum security prisoner, a classification resulting in more severe restrictions than are imposed upon inmates in other categories. In his complaint he intimated that he was so classified only because he headed several prisoners’ rights organizations, and alleged that the classification was arbitrary and without reason.

Defendants moved for summary judgment, filing an affidavit that Palmigiano had applied for reclassification on several different dates, that on almost every occasion he had a hearing before the Board at which he was assisted by a lay advocate, that it had been the Board’s consistent conclusion that his presence in maximum security was warranted by need for prison security and his further rehabilitation, and that he had not appealed to the Rhode Island Superior Court.

Palmigiano filed an unsworn “answer” to the affidavit, admitting among other things that he had not appealed but denying that he had been assisted by the particular named lay advocate. ' The district court thereafter granted summary judgment on the ground of Palmigiano’s failure to appeal to the Rhode Island Superior Court.

The district court erred in granting summary judgment on that ground, and since it mentioned no other, we are constrained to remand. The Supreme Court reiterated last term in Preiser v. Rodriguez, 411 U.S. 475, 93 S.Ct. 1827, 36 L.Ed.2d 439 (1973), that a prisoner need not exhaust state judicial remedies before he may bring a § 1983 action. See Raper v. Lucey, 488 F.2d 748, 751 n. 3 (1st Cir. 1973). The ground is thus foreclosed. Were we facing the question de novo, much might be said in favor of requiring Palmigiano to exhaust state judicial remedies, as prisoner classification is governed in Rhode Island by constitutionally adequate regulations that were, indeed, recently developed with the assistance of, and approved by, the federal court. Morris v. Travisono, 310 F.Supp. 857, 870 (D.R.1.1970). The enforcement of these regulations, which the Rhode Island courts are well equipped to do, would seem at one and the same time to assure Palmigiano of his constitutional rights.

Following remand, the district court will have pending before it for further consideration all other grounds for summary judgment. The district court rather than ourselves is the appropriate body to deal first with such issues, especially in view of the possible need for supplementation of the record. The following observations may assist:

1. It is far from clear, though we do not foreclose the possibility, that Palmigiano has demonstrated or can demonstrate the existence of a federal claim. Not every classification error gives rise to an infringement of a constitutionally-protected right. Given the history and constitutional adequacy of Rhode Island’s classification standards and rules, it will be the unusual case, involving marked departure by state officials therefrom, which might give rise to a supportable claim of constitutional deprivation. To avoid summary judgment Palmigiano must show with convincing particularity some likelihood either that the defendants disregarded Morris procedures or else classified him a maximum security prisoner for reasons utterly beyond the scope of any legitimate authority granted to them. To the extent he complains simply that the decision of the Classification Board reflects an erroneous judgment, his only remedy is that provided by state law and procedures. There is no federally-protected right to a particular classification nor even to an error-free decision by the state authorities.

“The Constitution does not assure uniformity of decisions or immunity from merely erroneous action, whether by the courts or the executive agencies of a state.” Snowden v. Hughes, 321 U.S. 1, 15, 624 S.Ct. 397, 404, 88 L.Ed. 497 (1944) (Frankfurter, J., concurring).

2. In a damages action such as this plaintiff must also show that he is prepared to prove the defendants’ bad faith or at least such a degree of neglect or malice or—in equal treatment cases —deliberate discrimination as to deprive defendants of official immunity for merely erroneous action. See Pierson v. Ray, 386 U.S. 547, 555-558, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967); Francis v. Lyman, 216 F.2d 583 (1st Cir. 1954) ; Kelley v. Dunne, 344 F.2d 129 (1st Cir. 1965); Jobson v. Henne, 355 F.2d 129 (2d Cir. 1966); Gaffney v. Silk, 488 F.2d 1248 (1st Cir. 1973); 3 K. C. Davis, Administrative Law Treatise § 26.06 (1958; Supp.1970). An inmate may not force state officials to trial on a damages claim merely by catchall allegations of unfairness and mistake. We do not suggest that possibly meritorious claims should be defeated because of mere pleading defects. But we do require even pro se plaintiffs to establish, when called upon to do so at a preliminary stage, that their claim has sufficient prima facie merit to warrant the bother and expense of a trial. Section 1983, like habeas corpus, is not “a general form of relief for those who seek to explore their case in search of its existence.” Aubut v. Maine, 431 F.2d 688, 689 (1st Cir. 1970).

3. Finally an inmate in an institution governed by the Morris rules seems less likely to prevail in a § 1983 damages action for purported misclassification without having made a reasonable attempt to secure review of his classification by the state director of corrections. It is unclear whether plaintiff has done so. The state director rather than the Classification Board may review and has ultimate legal responsibility for the classification. G.L.R.I. § 13-3-3; Morris v. Travisono, supra, 310 F. Supp. at 871. While the Classification Board’s own action, when complete, is, as we have said, “ripe” in the Raper sense, and while we do not say that failure to seek the director’s review would bar suit in this case, an inmate suing for damages should recognize that a failure to mitigate damages by making a reasonable attempt to place his grievance before the director might seriously affect the ultimate outcome.

Reversed and remanded.

      . Palmigiano also filed, among other papers, two affidavits, one from a fellow prisoner and one from a guard. Both recited the affiant’s belief that Palmigiano was a model prisoner.

      . Anyone aggrieved by an adverse decision of an “agency”, as defined in G.L.R.I. § 42-35-1 (a), may appeal the decision to the Superior Court and, if still dissatisfied, to the Supreme Court. G.L.R.I. §§ 42-35-15, 42-35-16. The Classification Board is established by Rhode Island statute, G.L.R.I. § 13-3-2, and the various classifications, the restrictions imposed under each, and the procedures for classifying are set forth at length in state regulations now known as the “Morris rules” which were adopted in settlement of civil rights litigation in the district court. Morris v. Travisono, 310 F.Supp. 857 (D.R.I.1970).

      . We interpret its ruling as requiring prior “exhaustion” of state judicial remedies. If what the court meant was that Palmigiano had stated no federal claim and hence was left with only a state remedy, it would presumably have said so.

      . An aggrieved person must, however, pursue the administrative process until the case is “ripe” for judicial determination, see Raper v. Lucey, 488 F.2d 748, 751. Palmigiano’s case is ripe in the Raper sense because he is experiencing the confinement of which he complains and the Classification Board has completed passing on his applications.

      . We leave open whether in certain § 1983 prisoner’s actions, particularly those for equitable relief, an inmate may not be required to exhaust readily available and adequate administrative procedures specially designed for the very grievance in issue. Gibson v. Berryhill, 411 U.S. 564, 574-575 n. 14, 93 S.Ct. 1689, 36 L.Ed.2d 488 (1973) ; Blanton v. State University, 489 F.2d 377 at 382-384 (2d Cir. 1973).


author: MATTHES, Senior Circuit Judge.

text:
    UNITED STATES of America, Appellee, v. James Ray GASKILL, Appellant.
    No. 73-1628.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 16, 1974.
    Decided Feb. 14, 1974.
    Rehearing Denied March 4, 1974.
    A. L. Shortridgg, Joplin, Mo., for appellant.
    Anthony P. Nugent, Jr., Asst. U. S. Atty., Kansas City, Mo., for appellee.

      Before MATTHES, Senior Circuit Judge, HEANEY, Circuit Judge, and SMITH, Senior District Judge

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

   MATTHES, Senior Circuit Judge.

A multiple count indictment charged that James Ray Gaskill used the mails for the purpose of executing a fraudulent scheme in violation of 18 U.S.C. § 1341. Specifically, the indictment alleged that beginning on or about August 28, 1968, and continuing to on or about December 23, 1970, defendant devised a scheme to defraud Retail Grocers Association of Kansas City, Missouri, Kraft Foods Company, General Foods Company and other companies that could and would be induced by defendant to redeem cash-off merchandise coupons from him and to make payment on the coupons. The indictment further alleged that defendant knew that the coupons had not been turned in by retail purchasers of merchandise. The jury found defendant guilty on four counts, each involving a separate mailing. After his posttrial motions were denied, defendant was fined $1,000 on each of three counts and placed on one year probation on the fourth count. Defendant has appealed and we affirm.

The basic issue at trial and on appeal is the sufficiency of the evidence to warrant a jury in finding that the defendant had concocted a scheme to defraud within the ambit of § 1341. Defendant submits that there was a complete failure of proof as to any fraudulent scheme. In resolving this question, we are guided by the axiomatic principle which requires us to review the evidence in the light most favorable to the verdict and accept as established all reasonable inferences to support the conviction. United States v. Rauch, 491 F.2d 552 (8th Cir. 1974); United States v. Dugan, 477 F.2d 140 (8th Cir. 1973); United States v. Henson, 456 F.2d 1045 (8th Cir. 1972).

IGA Thriftway South is a supermarket in Joplin, Missouri. Defendant became manager of Thriftway South in 1962 and remained in that capacity until January, 1971, when the store was sold. The focus of the trial was upon defendant’s conduct as manager of the supermarket during the period from August, 1968, to September, 1970, insofar as his managerial conduct related to the submission for redemption of an unusually high volume of cash-off coupons to manufacturers of merchandise and to the Retail Grocers Association, a coupon clearinghouse, for redemption.

The cash-off coupon is a discount, designed by the manufacturer of a certain product to encourage consumers to purchase that product by offering it to them at a reduced price. The manufacturer distributes the coupons to the consuming public through various means. The consumer thereby learns that a certain item may be purchased at a reduced price when the appropriate coupon is presented to a retailer at the time of purchase. The value of the coupon varies, there being some evidence indicating that the average value is about ten cents. Upon tender by the customer, the retailer accepts the coupons and either deducts the value thereof from the cost of the price of the article sold, or pays the amount of the coupon to the consumer. The retailer then submits the coupon directly to the manufacturer who initially distributed it, or indirectly to the manufacturer through a clearinghouse, which charges a nominal fee for handling. In either case, the manufacturer eventually repays the retailer the face value of the coupon plus an additional few cents on each coupon to remunerate the retailer for his effort in accepting the coupon from the consumer.

In August, 1968, defendant placed ads in the Fire Fly Reporter, described as a “refund bulletin,” having nationwide circulation. The ads appeared under the name of Pyramid Hobbies, a title adopted by defendant. Typical of many of the ads which appeared in numerous issues of Fire Fly Reporter during the existence of the scheme is the following:

Will trade two G.B. TV or S&H Green Stamps for each cash-off coupon. Worthy cause. Fast service. Enclose SASE. Pyramid Hobbies, P.O. Box 82 Joplin, Mo. 64801 (9-70).

The advertising campaign proved successful. Defendant received literally thousands of cash-off coupons through Pyramid Hobbies from individuals living in various parts of the United States. The S&H green stamps used by the defendant in the exchange for the coupons were purchased in connection with a used car business defendant operated.

Between September 6, 1968, and September 25, 1970, the Coupon Redemption Account of Retail Grocers Association in Kansas City, with whom defendant on behalf of Thriftway South had entered into a contract to redeem coupons submitted by the store, issued 73 checks to IGA Thriftway South in the total sum of approximately $167,500. There was a wide variance in the amount of the checks. The one issued on April 21, 1969, was for $178.00, whereas the one issued on November 18, 1969, was for $10,891.39. All the checks were issued for the purpose of redeeming the face amounts of the coupons plus a relatively small amount of commission. The cheeks bore the stamped endorsement of “IGA Thriftway South.” Four of the checks, totaling about $14,000, were endorsed by defendant’s personal signature.

The foregoing facts were established by uncontradicted evidence. Indeed, they were expressly or impliedly conceded by defendant in his testimony. The only controverted issue, as we see it, is whether the inordinately large volume of coupons were legitimately obtained by Thriftway South from customers who had tendered them upon purchase of merchandise, or whether, as the government contended, the redeemed coupons had been collected by defendant through his mail order campaign and then submitted to manufacturers of the merchandise by misrepresenting that the coupons had been received legitimately in the course of business by Thriftway South.

Defendant unequivocally testified that all the redeemed coupons had been collected from customers of Thriftway South, but telling circumstances were such that the jury was fully justified in declining to credit his testimony. Representatives of several large food corporations testified that Thriftway South was submitting for redemption many times the normal value of coupons tendered to a market having the volume of business comparable to Thriftway South by its customers. During the period from August, 1968, to September, 1970, Thriftway South was submitting coupons at the rate of approximately $6,700 per month, while two other markets in Joplin, Thriftway East and Thriftway West, having sales nearly as large as Thriftway South, were submitting coupons to a clearinghouse at the rate of only about $100 or $400 per month. There is evidence showing that the normal rate of redemption of General Foods Company coupons from a store having a volume of business comparable to Thriftway South would be approximately $900 per year. However, defendant was responsible for submission of General Foods coupons by Thriftway South for redemption valued at over $10,000 in a one year period in 1968 and 1969. Additionally, there was evidence that several coupons submitted for redemption by Thriftway South had been distributed solely in a test market area in the state of California.

Defendant’s own testimony relating to the marked increase of coupons submitted shortly after his mail order campaign was initiated strains credulity. On cross-examination, he was asked to account for the sudden increase in coupon redemptions by his store from $1,353 per month prior to the advertising campaign to an average of $7,197 per month after the Pyramid Hobbies ads began to appear in Fire Fly Reporter. He responded by stating that “our program [to redeem coupons] was more aggressive. We sold more products and we took in more coupons.” Considering the relatively small value of each coupon, it readily becomes apparent that it was highly improbable, if not impossible, for a market of the size of Thriftway South in the area where it was located to legitimately collect coupons each month having a value of over $7,000.

Obviously, the jury discredited defendant’s asserted motive for purchasing the large volume of coupons through his Pyramid Hobbies operation for a relatively small amount, which was that he intended to purchase Thriftway South or some other supermarket and was collecting the coupons in order to use them in an effort to induce consumers to purchase merchandise from whatever store he acquired.

Summarizing, there was substantial evidence to prove the elements of an offense under 18 U.S.C. § 1341. The subject scheme was established albeit by resort in part to circumstantial evidence, cf. Isaacs v. United States, 301 F.2d 706 (8th Cir.), cert. denied, 371 U.S. 818, 83 S.Ct. 32, 9 L.Ed.2d 58 (1962), and there was direct evidence that the mails were used to further the scheme. Thus we have a fraudulent scheme and the use of the mails, the vital elements of a mail fraud case. See Gold v. United States, 350 F.2d 953 (8th Cir. 1965). Unlike United States v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974), here the use of the mails was an integral element of the scheme to defraud by supplying the defendant with a source of coupons with which to defraud the food companies issuing the coupons.

We reject also the defendant’s contention that there was no evidence of intent tb defraud. The evidence viewed realistically depicts a clever and ingenious scheme to enable defendant to acquire an exceedingly large volume of coupons for almost nominal consideration and to transmit an excessive number of coupons to manufacturers of merchandise or clearinghouses for redemption with the implied representation that the coupons had been legitimately received in the operation of Thriftway South. It is clear that the misrepresentation as to the source of the coupons induced the manufacturers to honor coupons which they were under no contractual duty to honor and would not have honored if they had known the true origin of many of the coupons submitted by Thriftway South. It is established that from such conduct intent to defraud can be inferred. United States v. Seasholtz, 435 F.2d 4 (10th Cir. 1970).

We have considered defendant’s contention that the trial court erred in denying his motion to dismiss the indictment and find it without merit. The fact that the grand jury based its indictment, in part at least, on a summary of a postal inspector’s report covering his investigation of defendant’s activities does not render the indictment vulnerable to a successful attack. Costello v. United States, 350 U.S. 359, 76 S.Ct. 406, 100 L.Ed. 397 (1956). See also 1 C. Wright, Federal Practice & Procedure § 111 (1969).

The judgment is affirmed.

      . Apparently defendant attempted to allay the suspicions of some of the manufacturers by asserting that his store did $6 million in grocery business annually, a figure quadruple the actual sales of the store. Nevertheless, several companies refused to honor all the coupons defendant’s market submitted for redemption because defendant as store manager declined to prove that his store’s sales of a certain product corresponded to the number of coupons submitted by Thriftway South for that item.

      . The manager of the General Foods Coupon Redemption Center testified without contradiction that an average retailer will submit for redemption $600 in General Foods coupons per $1 million in sales.

      . The evidence is undisputed that the total amount paid by defendant for the S&H green stamps was $5,600.

      . Defendant never did purchase a supermarket, and at the time of trial still had in his possession a large quantity of coupons which he had received through the mails.

      . There was no direct evidence that defendant converted all of the profits of the checks to his own use, but a reasonable inference to be drawn from the evidence is that he did profit from his machinations. He had full and free access to the bank account of Thriftway South. He always had available in his market a very substantial amount of currency. Four of the checks issued to Thriftway South carried defendant’s personal endorsement, indicating, according to the testimony of the president of the United Missouri Bank of Joplin, that the proceeds of the checks were paid to defendant.
      In any case, proof that the defendant obtained gain from his scheme is not essential for conviction under the mail fraud statute, Erwin v. United States, 242 F.2d 336 (6th Cir. 1957), nor need there be any evidence that anyone was actually defrauded by the scheme, Pritchard v. United States, 386 F.2d 760 (8th Cir. 1967), cert. denied, 390 U,S. 1004, 88 S.Ct. 1247, 20 L.Ed.2d 104 (1968).


author: ALFRED T. GOODWIN, Circuit Judge:

text:
    BANKAMERICA CORPORATION, Petitioner, v. BOARD OF GOVERNORS OF the FEDERAL RESERVE SYSTEM, Respondent.
    No. 72-2325.
    United States Court of Appeals, Ninth Circuit.
    Jan. 29, 1974.

      Robert H. Fabian, H. Helmut Loring, Neal L. Petersen (Argued), Thomas C. Holman, San Francisco, Cal. (Bank of America Center), for appellant.
    Thomas J. O’Connell, Gen. Counsel, Michael A. Greenspan, Asst. Secretary, Board of Governors of Federal Reserve System, Washington, D. C., Jim Browning, U. S. Atty., San Francisco, Cal., Morton Hollander, U. S. Atty. Gen., Chief of Appellate Section, William D. Appier, Ronald Glanez (Argued), U. S. Dept. of Justice, Washington, D. C., for respondent.
    Before ELY, KILKENNY and GOODWIN, Circuit Judges.
   ALFRED T. GOODWIN, Circuit Judge:

This petition for review challenges an order denying an application by a bank holding company to operate a computer-equipment leasing business.

BankAmerica seeks, pursuant to 12 U.S.C. § 1848, to reverse the Board of Governors of the Federal Reserve System, which denied BankAmeriea’s application to engage, through a newly organized subsidiary, in the leasing of computter equipment and the providing of lease-financing programs for data-proeessing manufacturers. BankAmeriea contends that the Board improperly denied it a hearing, failed to render its decision in the proper form, and employed a “business risks” test not authorized by the relevant statute. We reject these arguments and affirm the Board’s order.

BankAmerica, as a company subject to regulation by the Board under the Bank Holding Company Act, 12 U.S.C. § 1841 et seq., is precluded from acquiring control of ' nonbanking companies, unless, among other exceptions not relevant here, the Board determines that the acquired company’s activities are “so closely related to banking or managing or controlling banks as to be a proper incident thereto.” 12 U.S.C. § 1843(a), (c) (8).

In 1970 Congress amended this subsection to eliminate the requirement of a hearing and the requirement that the Board act on the basis of the record made at such hearing. Instead, the amendment permitted the Board to consider applications to engage in nonbanking activities “after due notice and opportunity for hearing * * * (by order or regulation) * * 12 U.S.C. § 1843(c) (8). Pursuant to this new authority, the Board conducted extensive public hearings in 1971, with the announced objective of issuing regulations defining which activities were “so closely related” as to be permissible under the Act.

BankAmerica participated in the hearings, urging in its written submissions and in oral argument before the Board, that bank holding companies be permitted to engage in “non-full payout” leasing activities. (A non-full payout lease is one in which the lessor bank does not receive its investment back under the original lease or reasonably anticipated extensions of the lease with the same lessee.) The Board rejected BankAmerica’s position, and on June 15, 1971, issued a regulation permitting bank holding companies to engage in leasing personal property and equipment only on a full payout basis. See 12 C.F.R. § 225.4 (a)(6). BankAmerica did not contest the regularity of the promulgation of this new regulation.

Instead, eight months later, Bank-America submitted an application for authority to engage in the leasing of computer equipment. Most of the arguments which BankAmerica advanced had been made earlier in the rule-making hearings and had been rejected. The Board denied the application, explaining that, as reflected in its new regulation, 12 C.F.R. § 225.4(a)(6), and interpretations of that regulation, 12 C.F.R. § 225.123(d),’ “it has been and is of the view that leasing transactions that are not the functional equivalent of extensions of credit [t. e., non-full payout leases] are not closely related to banking.”

BankAmerica now contends that the Board improperly denied it a hearing. We reject this argument. Putting aside the problem that BankAmerica failed to ask for a hearing until after the Board’s order, we note that the very purpose of the 1970 amendment was to delete the specific hearing requirement and to enable the Board to establish general regulations just as it has done here. See H.R.Rep.No.91-387, 91st Cong., 1st Sess. 16 (1969); S.Rep.No.91-1084, 91st Cong., 2d Sess. 15, 1970 U.S.Code Cong. & Admin.News pp. 5519, 5534; Conf.Rep.No.91-1747, 91st Cong., 2d Sess. 15, 1970 U.S.Code Cong. & Admin. News pp. 5561, 5566; 116 Cong.Rec. 42422, 42428, 42436 (1970) (remarks of Senators Bennett, Sparkman, and Good-ell). Holding that BankAmerica has an automatic right to a hearing at which it can rehearse arguments previously made and rejected at the rule-making hearing would virtually nullify the 1970 amendment.

The Board’s own regulation requires it to publish “a notice of opportunity for hearing only if it ¡believes that there is a reasonable basis for the holding company’s opinion” that the proposed activity is closely related to banking. 12 C.F.R. § 225.4(a). In view of its recent regulations on full payout leasing, 12 C.F.R. §§ 225.4(a)(6), 225.-123(d), we agree with the Board that it did not abuse its discretion in deciding that a hearing was unnecessary here.

BankAmerica had no right under the due-process clause of the Fifth Amendment to a separate hearing before the Board. The Board issued its regulations on full payout leasing only after conducting extensive public hearings. At these hearings BankAmerica had sought a rule that would allow non-full payout leasing of computers and related equipment. Rejecting this -request, the Board issued regulations permitting bank holding companies to engage only in full payout leasing. See 12 C.F.R. §§ 225.4(a)(6), 225.123(d). There is no constitutional requirement that Bank-America be granted a second, separate hearing at which it can once again challenge the Board’s decision to limit leasing activities to full payout leases. See Fed. Power Comm’n v. Texaco, Inc., 377 U.S. 33, 84 S.Ct. 1105, 12 L.Ed.2d 112 (1964); cf. Commercial Nat’l Bank of Little Rock v. Bd. of Governors of Fed. Reserve Sys., 451 F.2d 86 (8th Cir. 1971); see generally K. Davis, Administrative Law Treatise § 7.01, at 301-19 (1970 Supp.).

BankAmerica also contends that the Board’s order of June 29, 1972, denying its request to engage in the business of leasing computer equipment, was formally defective in that it failed to include sufficient findings of fact. We disagree. The Board’s order unequivocally states that it rejected BankAmerica’s proposal because the leasing arrangement did not constitute the functional equivalent of an extension of credit. The basis for denial was sufficiently clear to permit judicial review. See Camp v. Pitts, 411 U.S. 138, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973) (per curiam).

BankAmerica’s final contention, that the Board improperly imposed a business-risks test not authorized by the relevant statute, we find to be equally without merit. Having found that the proposed leasing activities were not “closely related to banking,” the Board— as it recognized in its order denying BankAmerica’s request—did not even have to consider whether these activities were a “proper incident” to banking. See Conf.Rep.No.91-1747, supra at 22, 1970 U.S.Code Cong, and Admin.News, supra at pp. 5572-5573. Thus, its statement that leasing arrangements which do not permit a bank holding company to recover its full investment in the property to be leased subject the holding company to greater risks than would otherwise be the case was obiter dictum. Even if this finding were essential however, nothing in the Bank Holding Company Act prevents the Board from considering the risk of a particular activity to the holding company. Title 12 U.S.C. § 1843(c) (8) specifically requires the Board, when determining whether a proposed activity is a proper incident to banking, to consider such adverse effects as “unsound banking practices.” Surely, that phrase contemplates something like a business-risks test. Cf. H.R.Rep.No.91-387, supra at 14, U.S.Code Cong. & Admin.News 1970, p. 5519.

The order of the Board is affirmed.


author: OAKES, Circuit Judge:

text:
    GEORGE STEINBERG AND SON, INC., Petitioner, v. Earl L. BUTZ, Secretary of Agriculture, and United States of America, Respondents.
    No. 218, Docket 73-1226.
    United States Court of Appeals, Second Circuit.
    Argued Dec. 17, 1973.
    Decided Feb. 11, 1974.

      Robert A. Katz, New York City (Joseph Einhorn, New York City, of counsel), for petitioner.
    Judith S. Feigen, Dept. of Justice, Washington, D. C. (Irving Jaffe, Acting Asst. Atty. Gen., Kathryn H. Baldwin, Dept. of Justice, Washington, D. C., on the brief), for respondents.
    Before LUMBARD, FRIENDLY and OAKES, Circuit Judges.
   OAKES, Circuit Judge:

Petitioner, a corporation, seeks review of an order issued by the Secretary of Agriculture finding petitioner in “flagrant and repeated violation” of the Perishable Agricultural Commodities Act (PACA or Act) and denying its application for a license thereunder. The Secretary’s “Judicial Officer” found the petitioner corporation to have committed such violations of PACA by failure to make full payment on 283 lots of commodities purchased from 19 sellers in violation of 7 U.S.C. § 499b(4). Petitioner makes four main arguments: (1) that the administrative complaint in this action was not signed by the proper official in the Department of Agriculture; (2) that because the hearing officer (as opposed to the judicial officer) found that the record did not establish willfulness with respect to the transactions involved, petitioner was therefore entitled to a so-called “second chance” under § 9(b) of the Administrative Procedure Act, 5 U.S.C. § 558(c), providing that the withdrawal or suspension of a license is lawful only if the licensee has been given written notice of the conduct warranting suspension and opportunity to demonstrate compliance with all lawful requirements; (3) that Paul Stein-berg, a stockholder and employee of petitioner, cannot be deprived of his right to obtain employment without due process; and (4) that there should be a remand to the Department for a new hearing on the question of willfulness. We reject each of petitioner’s arguments and deny review.

Before briefly recounting the underlying factual background of this case, it is well to recall that PACA was originally enacted by Congress in 1930 for the purpose of regulating the interstate business of shipping and handling perishable agricultural commodities such as fresh fruit and vegetables. See generally 1962 U.S.Code Cong. & Admin.News p. 2749. Zwick v. Freeman, 373 F.2d 110 (2d Cir.), cert. denied, 389 U.S. 835, 88 S.Ct. 43, 19 L.Ed.2d 96 (1967). The essential need for regulation arose in the unfair activities of commission merchants, dealers and brokers who received shipments from growers and shippers. Upon receiving a shipment of perishable commodities, the commission merchants, dealers and brokers would wrongfully reject the shipment, in many eases making the false claim that the commodities had arrived in a damaged condition or some other claim permitting rejection of the shipment. These fraudulent rejections were made when the market for the commodity was declining so that the commission merchant, dealer or broker would have suffered a loss had he accepted the shipment and paid the contract price. See H.R.Rep. 1041, 71st Cong.2d sess., H.R.Rep. 1546, 87th Cong. 2d sess.

Essentially the Act provides a system of licensing and penalties for violations. Under § 2, 7 U.S.C. § 499b, it is unfair for a commission merchant, dealer or broker to engage in listed unfair practices, including in subsection (4) failure to “make full payment promptly.” Section 3 of the Act, 7 U.S.C. § 499c, requires them to obtain a license from the Secretary of Agriculture as a condition of doing business, and § 4 as amended, 7 U.S.C. § 499d, governs the issuance of licenses. Under § 5 of the Act as amended, 7 U.S.C. § 499e, a violator of § 2 is liable for damages to the injured party which may be obtained in an action before the Secretary or by a separate lawsuit, while §§ 6 and 7 of the Act, 7 U.S. C. §§ 499f, 499g, relate to complaints to the Secretary for investigation and hearing and provide for the issuance of reparation orders requiring a violator to pay damages. Section 8 as amended, 7 U.S.C. § 499h, provides in subsection (a) the grounds for revocation of licenses by the Secretary for violation and in subsection (b) empowers the Secretary to limit employment within the industry of “any person who is or has been responsibly connected with” such violators.

Petitioner, George Steinberg and Son, Inc., was a New York corporation licensed under § 3 of the Act, 7 U.S.C. § 499c. Its officers, each of whom owned 50 per cent of the stock, were George Steinberg, president, and Paul Stein-berg, secretary. Between April, 1968, and May, 1969, the corporation purchased, received and failed to pay for 328 lots of perishable agricultural commodities with a total value of $67,641.96. On November 19, 1968, a petition for involuntary bankruptcy was filed against the corporation. At that time George Steinberg retired from the corporation and full and complete control was vested in Paul Steinberg, for whom relief is sought in this petition. On January 8, 1969, a voluntary plan under Chapter XI of the Bankruptcy Act was entered but this was abandoned on June 2, 1969, and the corporation was adjudicated bankrupt. Its license to do business terminated on June 28, 1969, and due to its bankruptcy the corporation failed to renew it.

In July, 1969, the Secretary of Agriculture first learned of the corporation’s failure to pay for purchased commodities. An investigation was begun, and notice was sent to the corporation on April 21, 1970, allowing an opportunity to demonstrate or achieve compliance with all of the requirements of the Act. The corporation did not respond to this notice, probably owing to its prior bankruptcy. By complaint filed July 1, 1970, and signed by the director of the Fruit and Vegetable Division, the Steinberg corporation was charged with flagrant and repeated violations of § 2 of PACA by reason of its failure to pay the more than $67,000 owed, as previously recounted. The corporation failed to respond, although the complaint notified it that failure to answer would constitute admission of the facts alleged and that failure to request a hearing would constitute waiver of the hearing. Again petitioner alleges that it did not receive the complaint, which does not seem unlikely in light of its defunct state. A default order against the petitioner was entered but was vacated on January 13, 1971, by the issuance of an order reopening the proceeding. On February 5, 1971, petitioner filed an answer in which it did not deny the failure to make full payment on perishable agricultural commodities received and accepted in interstate commerce. On March 24, 1971, the corporation applied for a new license under the Act. Paul Steinberg, listing himself as vice president of the corporation, applied for the license in an effort to secure the procedural advantages conferred on parties who are licensed on the day that the complaint is filed. It was specifically stated, however, that the applicant did not seek a license to conduct business and would not conduct business under it until the further approval of the Secretary. The director of the Fruit and Vegetable Division issued a notice to show cause why the license should not be denied, the notice setting forth the alleged failure of the corporation to make full payment promptly for the 328 lots of commodities previously referred to. By an order dated April 26, 1971, the disciplinary proceeding and the proceeding on the notice to show cause why the license should not be denied were consolidated.

During the subsequent hearing, witnesses affiliated with three unpaid creditors of the corporation testified that their companies had not received payments on more than 30 shipments, and one witness testified that a check for over $3,000 signed by Paul Steinberg to a creditor had been returned for insufficient funds in 1968. Thereafter the parties stipulated that the corporation had purchased from creditors in interstate commerce perishable agricultural merchandise and admitted violations of § 2 of the Act on 328 separate occasions. However, the corporation denied that Paul Steinberg had personal knowledge or involvement in the transactions. Thereafter the Department determined not to pursue violations occurring after January 8, 1969, the date on which the corporation consented to an adjudication in bankruptcy, so that the stipulation was effective only as to 283 violations covering the period from April 24, 1968, through January 7, 1969.

It is an interesting sidelight here that the hearing examiner recommended that respondent’s license application should be denied, but also felt that the complaint in the disciplinary proceeding should be dismissed on the basis that the corporation had not been given the “second chance” under § 9(b) of the Administrative Procedure Act, 5 U.S.C. § 558(c) because there had been no allegation of willfulness in the complaint, relying on In re American Fruit Purveyors, Inc., 30 A.D. 1542 (1971). The judicial officer, however, in reviewing the matter, requested the corporation to specify any proof which might concern lack of willfulness as that term is defined in American Fruit Purveyors, supra; whether any sellers had waived their right to be paid in full; to what extent if any the sellers had been paid; whether there had been any other mitigating circumstances; and on what date if any prior to January 8, 1969, a trustee had been appointed or a committee established with power to direct the actions of the corporation, as opposed to its being directed by Paul Steinberg. The corporation’s response indicated that if the case were remanded it would offer proof to show that George Stein-berg had a chronic cardiac condition which prevented him from attending to business regularly during 1968; that five of the 19 unpaid sellers knew the risk involved and would waive payment; and that if the corporation had been given the opportunity to make payment in April, 1970, it could have reduced its obligation since the final report of the trustee listed corporate assets in excess of $11,000. Petitioner’s counsel also stated that, if willfulness had been in issue, he would not have stipulated to the alleged violations. The judicial officer denied the remand and held that the uncontroverted facts compelled the conclusion that the corporation committed “flagrant and repeated violations of § 2 of the Act” by its failure to pay $57,207.42 to 19 sellers on 283 occasions. On the issue of willfulness the judicial officer concluded that the violations were willful, although noting that willfulness was not relevant since § 9(b) of the APA was not involved because no license was being suspended or revoked. The judicial officer ordered publication of the facts and circumstances relating to the flagrant and repeated violations and ordered that the application for a license be denied. Following a motion for rehearing, reargument and reconsideration which was denied, this petition for review followed and the order of the judicial officer was stayed pending this appeal.

I.

Petitioner argues that only the Deputy Administrator may file disciplinary complaints. Here, however, the director of the Fruit and Vegetable Division signed the administrative complaint. Under 7 C.F.R. § 47.27(b) “disciplinary proceedings may be instituted only upon moving papers filed by the Deputy Administrator acting either as a result of the informal complaint procedure hereinbefore provided or on his own motion.” The term “Deputy Administrator,” nevertheless, is broadly defined to include “any officer or employee of the [Consumer and Marketing] Service to whom authority has heretofore lawfully been delegated, or to whom authority may hereafter lawfully be delegated, to act in his stead.” 7 C. F.R. § 47.2(e).

The Deputy Administrator for the Consumer and Marketing Service is responsible for general supervision of all of the programs and activities assigned to the Service, including those under PACA. 33 Fed.Reg. 10750-51. These programs are carried out by six commodity divisions, including the Fruit and Vegetable Division. Ibid. The Fruit and Vegetable .Division is specifically responsible for administering PACA, 33 Fed.Reg. 10752, and the director of that division is delegated authority to perform all duties and to exercise all functions and powers vested in the Deputy Administrator except such authority as is reserved to the administrator, associate administrator or deputy administrators, but there is no specific reservation of authority to issue complaints under PACA. 33 Fed.Reg. 10754-55. Under this 1968 organization set forth in 33 Fed.Reg. 10750 et seq., the director of the Fruit and Vegetable Division, therefore, has the authority to administer PACA and consequently the power to initiate disciplinary proceedings under it. The administrative construction of the regulation is consistent with this conclusion and, as such lends it some weight. Thorpe v. Housing Authority, 393 U.S. 268, 276, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969). Accordingly, we reject petitioner’s first argument.

II.

The petitioner argues that the “second chance” doctrine as set forth in the APA § 9(b), 5 U.S.C. § 558(c), must be applied to this case. As we have said, the hearing examiner agreed with petitioner and, relying on In re American Fruit Purveyors, Inc., supra, believed that the corporation must be given an opportunity to demonstrate or achieve compliance, that is, must be given a “second chance,” before the complaint is filed except in cases of willfulness. Since the complaint here contained no allegation of willfulness, the hearing examiner concluded that a “second chance” had to be afforded to the corporation. But there are at least two answers to this. First, § 9(b) by its own terms applies only to “the withdrawal, suspension, revocation, or annulment of a license.” 5 U.S.C. § 558(c). The American Fruit Purveyors case, relied upon by the hearing examiner below (and incidentally decided by the same judicial officer who decided the instant case), is obviously inapplicable since in it there was a currently valid license under PACA. In this case, the issue whether George Steinberg and Son, Inc., committed flagrant and repeated violations of § 2 of PACA does not involve the withdrawal, suspension, revocation, or annulment of a license, and the collateral consequences of the determination of that issue upon Paul Steinberg have no bearing on any license issue, since Paul Steinberg was not a licensee. The statutory prohibition against licensees employing for one year a person who was responsibly connected with a corporation found to have committed flagrant and repeated violations is not a sanction involving the suspension or revocation of a license of the responsibly connected person. Compare 7 U.S.C. § 499h(b)(l) with 7 U.S.C. § 499h(b)(2). It is undisputed that petitioner Paul Steinberg as an officer and 50 per cent shareholder was “responsibly connected” with George Steinberg and Son, Inc. Accordingly, he is subject to the consequences established in § 8, 7 U.S.C. § 499h, if the corporation has committed repeated or flagrant violations: It seems clear enough that the corporation has committed such violations. Zwick v. Freeman, supra-, Fruit Salad, Inc. v. Secretary of Agriculture, 451 F.2d 162 (1st Cir. 1971).

Moreover, the “second chance” doctrine would apply only if the violations had not been willful. It is clear enough that under § 9(b), doing an act which is prohibited and doing it intentionally “irrespective of evil motive or reliance on erroneous advice” or “acts with careless disregard of statutory requirements” are willful. See Goodman v. Benson, 286 F.2d 896, 900 (7th Cir. 1961); see also United States v. Illinois Central Railroad Co., 303 U.S. 239, 243, 58 S.Ct. 49, 82 L.Ed. 518 (1938). Here as in Zwick v. Freeman, 373 F.2d at 115, “it is inconceivable that petitioners were unaware of their financial condition and unaware that every additional transaction they entered into was likely to result in another violation of the Commodities Act.”

III.

Section 8(b) of PACA, 7 U.S.C. § 499h(b), is constitutional. The restriction upon employment of any person who is or has been reasonably connected with a licensee who has been found to have committed any flagrant or repeated violations of the Act has been held by this court neither to violate the due process clause of the fifth amendment nor to constitute a bill of attainder. We have nothing to add to what has already been said in Zwick v. Freeman, 373 F.2d at 118-120. See also Birkenfield v. United States, 369 F.2d 491 (3d Cir: 1966).

IV.

Petitioner seeks a remand on the question of willfulness, arguing that had it known that willfulness was in issue it never would have stipulated to the violations of the Act; the claim is that it has never had an opportunity to present evidence on the question of willfulness. As previously stated, however, willfulness is irrelevant since § 9(b) of the Administrative Procedure Act is not applicable to the case for the reasons stated in part II above. But in any case, the judicial officer gave petitioner an opportunity to make an offer of proof relative to willfulness and about the best that the petitioner could do was to indicate that in connection with a few transactions close to bankruptcy, the petitioner was having some collection problems of its own. But with so many violations charged, the number of its own non-payments that could be explained in this way was very small indeed. Two hundred fifty-three of the violations occurred before the involuntary petition was filed on November 19, 1968. More than 30 of these were proved by witnesses at the hearing prior to the stipulation of violations. There is, in short, nothing new that petitioner could offer which would go to eliminate the consequences of the Act as applicable to Paul Steinberg. We point out, however, that after one year the Secretary may approve his employment by a licensee if a satisfactory bond is given and after two years he may approve such employment without bond. Note 1, supra.

We deny review of the order of the Secretary of Agriculture.

      . The statute in pertinent part reads :
      (a) Whenever (a) the Secretary determines, as provided in section 499f of this title, that any commission merchant, dealer, or broker has violated any of the provisions of section 499b of this title, . . . the Secretary may publish the facts and circumstances of such violation and/or, by order, suspend the license of such offender for a period not to exceed ninety days, except that, if the violation is flagrant or repeated, the Secretary may, by order, revoke the license of the offender ;
      (b) Except with the approval of the Secretary, no licensee shall employ any person, or any person who is or has been responsibly connected with any person—
      (1) whose license has been revoked or is currently suspended by order of the Secretary ;
      (2) who has been found after notice and opportunity for hearing to have committed any flagrant or repeated violation of section 499b of this title, but this provision shall not apply to any case in which the license of the person found to have committed such violation was suspended and the suspension period has expired or is not in effect;
      The Secretary may approve such employment at any time following nonpayment of a reparation award, or after one year following the revocation or finding of flagrant or repeated violation of section 499b of this title, if the licensee furnishes and maintains a surety bond in form and amount satisfactory to the Secretary as assurance that such licensee’s business will be conducted in accordance with this chapter and that the licensee will pay all reparation awards, subject to its right of appeal under section 499g(c) of this title, which may be issued against it in connection with transactions occurring within four years following the approval. The Secretary may approve employment without a surety bond after the expiration of two years from the effective date of the applicable disciplinary order.

      . Section 9(b) of the Administrative Procedure Act, 5 U.S.C. § 558(c), provides in pertinent part:
      . . . Except in cases of willfulness or those in which public health, interest or safety requires otherwise, the withdrawal, suspension, revocation, or annulment of a license is lawful only if, before the institution of agency proceedings therefor, the licensee has been given—
      (1) notice by the agency in writing of the facts or conduct which may warrant the action; and
      (2) opportunity to demonstrate or achieve compliance with all lawful requirements.
      When the licensee has made timely and sufficient application for a renewal or a new license in accordance with agency rules, a license with reference to an activity of a continuing nature does not expire until the application has been finally determined by the agency.