author: McWILLIAMS, Circuit Judge.

text:
    The FIRST NATIONAL BANK AND TRUST COMPANY, CHICKASHA, OKLAHOMA, Plaintiff-Appellee, v. The CONTINENTAL INSURANCE COMPANY, Defendant-Appellant.
    No. 74-1160.
    United States Court of Appeals, Tenth Circuit.
    Argued Oct. 25, 1974.
    Decided Jan. 10, 1975.
    Rehearing Denied Jan. 29, 1975.
    Certiorari Denied April 28, 1975.
    See 95 S.Ct. 1681.

      Kerry W. Caywood, Chickasha, Okl. (Park, Nelson & Caywood, Chickasha, Okl., on the brief), for plaintiff-appellee.
    Ben A. Goff, Oklahoma City, Okl. (Rhodes, Hieronymus, Holloway & Wilson, Oklahoma City, Okl., on the brief), for defendant-appellant.
    Before SETH, McWILLIAMS and BARRETT, Circuit Judges.
   McWILLIAMS, Circuit Judge.

This is a dispute between an insurance company and its insured and the issue here to be resolved is whether a loss suffered by the insured, a bank, is covered by a bankers blanket bond. The insurance company defended on the ground that the loss incurred was a loan loss and, as such, an excluded risk. In a trial to the court, sitting without a jury, the trial court held that the loss suffered by the insured was not a loan loss, and that the loan exclusion was therefore inapplicable. Accordingly, the trial court entered judgment in favor of the insured and against the insurance company in a total amount of $175,871.81. The insurance company now appeals, contending that the entire loss was a loan loss, and as such an excluded risk. We agree. In our view the findings and conclusions of the trial court are not supported by the record and are clearly erroneous. In order to demonstrate such, the facts must be summarized in considerable detail.

The Continental Insurance Company, hereinafter referred to as the Insurer, issued a Bankers Blanket Bond, Standard Form No. 24, to the First National Bank and Trust Company, Chickasha, Oklahoma, hereinafter referred to as First National, which bond was in force and effect when First National suffered the losses here involved. The insuring provision under which First National, the insured, seeks to hold liable the Insurer reads as follows:

“(B) Any loss of Property through robbery, burglary, commonlaw or statutory larceny, theft, false pretenses, hold-up, misplacement, mysterious unexplainable disappearance, damage thereto or destruction thereof, whether effected with or without violence or with or without negligence on the part of any of the Employees, and any loss of subscription, conversion, redemption or deposit privileges through the misplacement or loss of Property, while the Property is (or is supposed to be) lodged or deposited within any offices or premises located anywhere, except in an office hereinafter excluded or in the mail or with a carrier for hire, other than an armored motor vehicle company, for the purpose of transportation.” (Emphasis added).

The bond further provides that there is no coverage of several excluded risks, one of which reads as follows:

“This bond does not cover:
* * * * * *
“(d) Any loss the result of the complete or partial non-payment of or default upon any loan made by or obtained from the Insured, whether procured in good faith or through trick, artifice, fraud or false pretenses, except when covered by Insuring Clause (A), (D) or (E).”

The loss, or losses, for which First National seeks recovery occurred on or around July 1, 1971, and arose out of First National’s long business relationship with W. C. Francis & Sons, an automobile dealership in nearby Blanchard, Oklahoma, which company will hereinafter be referred to as Francis.

Francis was a Ford agency and dealt in new and used cars. As indicated, though First National’s losses occurred during June and July 1971, it had been financing Francis for more than ten years prior thereto. Francis floor planned the purchase of its new automobiles through First National by borrowing money to pay Ford Motor Company, and in turn executing promissory notes in favor of First National, with the acquired vehicles being given as security for such notes. Many of the vehicles sold by Francis, be they new or used, were sold on the installment plan, and in connection therewith First National down through the years had purchased, with recourse, much commercial paper from Francis. Additionally, First National from time to time would simply loan money to Francis, which in turn would sign a note in favor of First National for the money thus loaned, giving collateral of various kinds as security. The foregoing illustrates the general nature of the business relationship between First National and Francis, which, as indicated, was of long standing, and over the years involved the advancing of considerable sums of money by First National. Francis maintained a checking account in First National and the loan proceeds were generally channeled into that account.

The Ford Motor Company insisted that Francis pay for new automobiles as they were delivered, which required Francis to have a cashier’s check, or a certified check, in hand at the precise moment the new vehicles arrived. Francis was located in Blanchard, Oklahoma, somewhat removed from Chickasha, and this fact necessitated considerable travel back and forth between Blanchard and Chickasha by Francis in order that it might have a cashier’s check to pay Ford Motor Company at the moment of a delivery. To minimize this inconvenience, in early 1969 First National and Francis decided that the latter should use its checking account in • the First State Bank in Blanchard, hereinafter referred to as Blanchard Bank, to obtain the cashier’s checks needed for payment of newly delivered cars. It was agreed that Francis would present to Blanchard Bank checks drawn by Francis on its checking account in First National. Such checks were to identify by serial number the particular vehicle for which the cashier’s check was being given. On presentment of such a check, Blanchard Bank agreed to immediately give Francis a cashier’s check in the amount of the deposit, and in turn First National guaranteed payment to Blanchard Bank of the checks thus drawn on it by Francis. This entire arrangement was finalized in a letter dated January 24, 1969, sent by a vice-president of First National to Blanchard Bank, which reads as follows:

“ * * * New Ford vehicles are shipped to this firm on a C.O.D. basis and they are required to pay the convoy transport driver with either a certified check or a cashiers check for the vehicles that are being delivered to them at that particular time. When the delivery of the vehicle is made after normal banking hours, the convoy driver is required to telephone ahead to allow enough time for the dealer to be able to get to the bank for a cashiers check.
“This firm in the past has presented cheeks to you for cashiers checks. The checks presented to you will bear a new Ford serial number on the check and you are requested to issue your cashiers check for their check payable to Ford Motor Company identifying by serial number the vehicle for which the check is intended. These checks have been drawn on their account in this bank. If you will be so kind as to honor their request of having this cashiers check issued by your bank on their check drawn on this bank, this bank will guarantee payment of these checks for new Ford vehicles bearing a Ford serial number on the check presented to you. * * * ”

This arrangement between First National, Blanchard Bank and Francis went into effect in early 1969. It should be mentioned that not only did Francis use its account in Blanchard Bank to pay for newly acquired vehicles, but also drew on the account to pay for many of its day-to-day operating expenses.

Although Francis never did admit such, it would appear that soon after First National guaranteed payment of checks drawn on it by Francis, the latter began an extensive check kiting operation involving deposits and counter-deposits back and forth between its checking accounts in Blanchard Bank and First National. As illustrative of its check kiting proclivities, Francis would, for example, present for deposit in its account in Blanchard Bank a check drawn on its account in First National, where there were at the time insufficient funds to cover the check in question. The check thus presented bearing the serial number of a Ford motor vehicle, Blanchard Bank would immediately issue a cashier’s check in the amount of the deposit. On other occasions a check drawn on First National but bearing a fictitious Ford vehicle serial number would merely be deposited in Francis’ checking account, with no cashier’s check being given in return therefor, and Blanchard Bank would then allow Francis to immediately draw checks on the amount so deposited.

To cover such withdrawals from its account in First National, Francis would simultaneously deposit a like amount in its account in First National in the form of checks drawn on its account in Blanchard Bank, and First National would allow Francis to immediately draw upon such deposit. As indicated, this check kiting operation apparently commenced in early 1970 and thereafter grew in volume until during the month of June 1971 there was approximately $800,000 in checks drawn on First National and deposited in the Francis account in Blanchard Bank, and an equivalent dollar value of checks drawn on Blanchard Bank and deposited in the Francis account in First National.

On June 29, 1971, examiners of the Federal Deposit Insurance Corporation alerted Blanchard Bank to the possibility of a check kiting operation. Because of insufficient funds in the Blanchard account, the examiners instructed Blanchard Bank to return, unpaid, Francis’ checks drawn on Blanchard Bank and presented for payment by First National. On the same day, checks drawn on First National and negotiated at Blanchard Bank arrived at First National for payment. There were then insufficient funds in the Francis account for these items.

When First National was thus alerted to the possibility of a check kite, it called in the Francis brothers, Rene and Harold, for an explanation. The Francis brothers denied check kiting or any other misconduct, and asserted they had ample security to cover all overdrafts. Because of such reassurances and because First National believed it was obligated on its letter of guaranty to Blanchard Bank, First National on June 30, 1971, credited $88,760.50 to the Francis account at First National to cover the overdrafts. This transaction was treated as a loan by all parties with Francis signing a note in that amount in favor of First National and with First National carrying the credit on its loan account books. It soon developed that this was not a sufficient amount to cover additional overdrafts in the Francis account and two days later, on July 2, 1971, First National loaned Francis an additional sum of $33,302.22 by crediting Francis’ account with that amount, Francis again signing a promissory note. Both notes were accompanied by pledges of collateral which never materialized.

Francis paid only a very small amount on either of the aforesaid notes and later went out of business. After allowing certain credits and adjustments, the unpaid balance due on these two notes amounted to $121,324.38. Such sum, according to First National, is a loss caused by check kiting and represents a “loss of property through * * * false pretenses.” Conversely, the Insurer contends that this was a loan loss and an excluded risk under Exclusion (d). The trial court found that this loss was the result of a check kite, rather than a bad loan, and that under the provisions of the blanket bond the Insurer was liable to First National for its loss. Since this sum represents the major part of the judgment ultimately awarded First National, the total judgment being $175,-871.81, we shall first consider the problem of the nature of the loss.

Numerous courts have held that a check kite operation which results in a loss of money to a bank does constitute a “loss of property through false pretenses,” as that phrase is used in a bankers blanket bond of the type here under consideration. In so holding, these courts have rejected the argument that inasmuch as the depositor is himself legally liable to the bank, there is in reality a “loan” from the bank to the check kiter, and as such an excluded risk. See, for example, such cases as First National Bank of Decatur v. Insurance Co. of North America, 424 F.2d 312 (7th Cir. 1970); United States v. Western Contracting Corporation, 341 F.2d 383 (8th Cir. 1965); Fidelity & Casualty Company v. Bank of Altenburg, 216 F.2d 294 (8th Cir. 1954); and Hartford Accident & Indemnity Co. v. Federal Deposit Ins. Corp., 204 F.2d 933 (8th Cir. 1953).

Accordingly, under the authorities above cited, if the instant case involved a loss of property occasioned by a pure checking operation, First National would be entitled to recover under its blanket bond. The Insurer itself agrees that such would be the result if the ultimate loss was in fact caused by a check kite. The Insurer asserts, however, that the real cause of First National’s loss was Francis’ failure to repay the loan. We agree.

When First National was alerted to the possibility of a check kite scheme, the Francis brothers were called in for an explanation. Apparently the explanation was convincing, because First National immediately loaned Francis additional sums totaling $122,062.72, and credited Francis’ checking account with that amount. In return for such advances, Rene and Harold Francis executed two separate promissory notes to First National, secured by pledges of their individual and personal assets. On such a fact situation, First National sustained no loss as a result of the check kite, as the overdrafts were covered, in effect, by First National itself, which in turn received the promissory notes of Francis in exchange for the advances thus made.. The “loss” was incurred by First National when Francis later defaulted on its notes. This is clearly a bad loan loss, subject to the exclusion,. and the trial court erred in concluding to the contrary.

In this general connection it is interesting to note that when First National initially “uncovered” the check kiting scheme, it made no claim of a loss incurred as a result thereof. Rather than have its financial statement reflect such a bad check loss, it preferred to loan the amount of the overdrafts to Francis and then carry the latter’s promissory notes in its loan accounts. That First National itself did not regard its loss as one resulting from a check kite and within the coverage of its bond is also evidenced by the fact that in a letter to the Insurer, dated August 9, 1971, the president of First National stated, “It would appear to me at this moment that the loss is ours unless civil liability can be established through legal action.” The “civil liability” thus referred to was presumably against Francis, or Blanchard Bank, as there is nothing to indicate that First National was contemplating action against the Insurer. On the contrary, First National thought the “loss is ours.”

First National’s loss being occasioned by a bad loan, it is an excluded risk under Exclusion (d) of the bond. The fact that Francis may well have made false statements in securing the loan, and pledged fictitious or nonreachable collateral, does not alter the fact that the loan thus obtained comes within the Exclusion (d). As indicated, the exclusion provides that the bond does not cover any loss which results from complete or partial nonpayment of any loan made by the Insured, “whether procured in good faith or through trick, artifice, fraud or false pretenses.” In short, the exclusion fits the facts of the instant case most precisely, i. e., a loan secured through fraud and deceit. For cases holding that a loan induced by extrinsic falsity, such as a pledge of nonexistent collateral, is within an exclusion clause of the type with which we are here concerned, see such cases as Bank of Southwest v. Nat’l Surety, 477 F.2d 73 (5th Cir. 1973); Maryland Casualty Co. v. State Bank & Trust Co., 425 F.2d 979 (5th Cir. 1970); East Gadsden Bank v. U. S. Fidelity & Guaranty Co., 415 F.2d 357 (5th Cir. 1969); and State Bank of Poplar Bluff v. Maryland Casualty Co., 289 F.2d 544 (8th Cir. 1961).

The remaining items of “loss” awarded by the trial court in its judgment were unrelated to the check kiting operations. The trial court concluded that three promissory notes, representing monies loaned Francis by First National and for which Francis executed promissory notes, did not come within the exclusion clause because they were part of the overall scheme to defraud First National and were in fact secured by nonexistent collateral. Under the authorities above cited, such fact, i. e., nonexistent or fictitious collateral, does not mean that a loan valid on its face is outside the terms of the exclusion. The balance due on these three notes totaled $27,475 and the trial court erred in awarding First National judgment for that amount.

The balance of the judgment, exclusive of the prejudgment interest allowed by the trial court, was in the sum of $5159.43, and represented installment contracts and notes executed by purchasers of cars from Francis, which commercial paper First National in turn purchased, with recourse, from Francis. In these cases, the collateral never originally existed or was sold and Francis never fully remitted the proceeds to First National. The trial court concluded that this was not a “loan” of money, but was simply the purchase of commercial paper. We do not agree. The officer of First National who was in charge of First National’s myriad dealings with Francis candidly admitted that in purchasing, with recourse, these installment contracts and notes, First National was simply “financing the Francis brothers by buying paper” and that it was just as though it had loaned money to Francis and taken the latter’s promissory note in exchange therefor. Such was but a part of First National’s continuing financing of the Francis dealership. See Twin City Federal Savings & Loan v. Transamerica Ins. Co., 413 F.2d 494 (8th Cir. 1969).

Though we have ourselves devoted considerable attention to the check kiting aspect of this case, we have done so only in an effort to demonstrate that the check kite is not really the crux of the case. As indicated, First National did not cease its dealings with Francis when warned of a check kite, but on the contrary proceeded to loan Francis a sum well over $100,000. The important aspect of this case is the fact that for some ten years First National had been financing the Francis dealership by making countless loans, in one form or another. And when the Francis dealership folded, First National was left with unpaid loans. Such loss was an excluded risk.

Judgment reversed and cause remanded with directions that the trial court enter a judgment in favor of the Insurer dismissing First National’s action.


source: Caselaw Access Project

author: HUFSTEDLER, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Jerry Richard LARKIN, Defendant-Appellant.
    No. 74-1746.
    United States Court of Appeals, Ninth Circuit.
    Dec. 30, 1974.

      Frank T. Vecchione (argued), Federal Defenders, Inc., San Diego, Cal., for defendant-appellant.
    William A. Shaw, Asst. U. S. Atty. (argued), San Diego, Cal., for plaintiffappellee.
    Before HUFSTEDLER and CHOY, Circuit Judges, and SOLOMON, District Judge.

       Honorable Gus Solomon, District Judge, United States District Court for the District of Oregon, sitting by designation.

   OPINION

HUFSTEDLER, Circuit Judge.

Larkin appeals from his conviction for violating 21 U.S.C. §§ 841(a)(1), 846 (possession of marijuana with intent to distribute). The question on appeal is the validity of the vehicle search that revealed the marijuana. Resolution of the question turns on the issue: Does an informant’s tip that meets neither of the tests of Spinelli v. United States (1969) 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 and Aguilar v. Texas (1964) 378 U.S. 108, 84 S.Ct. 1509, 12 L.Ed.2d 723 supply probable cause to search or to arrest when innocuous information contained in the tip is corroborated by observations of law enforcement personnel?

Agent LeMon received a radio dispatch that a 1972 black on blue GMC “blazer-type” vehicle, with an identified license plate number, would be proceeding from El Centro toward Los Angeles carrying heroin and marijuana. The information given LeMon had been supplied by a drug enforcement officer who in turn had received the tip from an informant whose reliability was not proved and the dependability of whose information was not established. Later the same morning LeMon saw a vehicle answering the description. He followed it about 20 miles until the vehicle turned onto a different highway. In response to LeMon’s call for assistance, border patrol agents Domitrovich and Reyna caught up with LeMon’s patrol car and Larkin’s vehicle. The border patrol cars blocked the highway. LeMon stood by with a shotgun while agents Domitrovich and Reyna approached Larkin with drawn guns and ordered him to get out. After Larkin was in custody, Domitrovich stuck his head into the vehicle and smelled marijuana. A thorough search revealed a large load of marijuana in the automobile.

The search cannot be sustained unless the agents had probable cause to search the car or to arrest Larkin before they stopped the car. (Carroll v. United States (1925) 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543; Henry v. United States (1959) 361 U.S. 98, 80 S.Ct. 168, 4 L.Ed.2d 134.) The tip alone cannot supply probable cause because it was not proved both (1) that the informant was reliable and (2) that his information was dependable. (United States v. Harris (1971) 403 U.S. 573, 575, 579-580, 91 S.Ct. 2075, 29 L.Ed.2d 723; Spinelli v. United States, supra, 393 U.S. at 417, 89 S.Ct. 584; Aguilar v. Texas, supra, 378 U.S. at 114, 84 S.Ct. 1509.)

The question thus becomes whether the tip was sufficiently corroborated so that it can “fairly be said that the tip [as corroborated] . . •. is as trustworthy as a tip which would pass [both] tests without independent corroboration.” (Spinelli v. United States, supra, 393 U.S. at 415, 89 S.Ct. at 588.) The corroborating observations of the officers do not provide the necessary guarantees of the informant’s reliability and the dependability of his information.

The key factor in the tip was that the vehicle was carrying contraband. A statement that a vehicle of a described make with an identified license number will be proceeding toward Los Angeles from El Centro at a certain time is information that could be readily obtained by any bystander observing the vehicle on the road from El Centro to Los Angeles or, as in Spinelli, that “could easily have been obtained from an offhand remark heard at a neighborhood bar.” (393 U.S. at 417, 89 S.Ct. at 589.) Nothing about the described features of the car or its direction points to anything suspicious, let alone criminal. That a vehicle matching the description was spotted along a highway from El Centro in the general direction of Los Angeles corroborates nothing except, possibly, the ability of the informant accurately to relay what he has seen or what he has overheard. No hint is given thereby that the informant was truthful in reporting that the vehicle contained contraband. Nor does the observation supply any information about how the informant knew that contraband was being transported. The fact that these few innocuous details tallied with the officers’ observations cannot “be said to support both the inference that the informer was generally trustworthy and that he had made his charge against [Larkin] on the basis of information obtained in a reliable way.” (Id. at 417, 89 S.Ct. at 589; Whiteley v. Warden (1971) 401 U.S. 560, 91 S.Ct. 1031, 28 L.Ed.2d 306.)

United States v. Archuleta (9th Cir. 1971) 446 F.2d 518 is not to the contrary. In Archuleta, as in Draper v. United States (1959) 358 U.S. 307, 79 S.Ct. 329, 3 L.Ed.2d 327, the informant supplied such a wealth of detail that a magistrate would have been justified in concluding that the informant was “relying on something more substantial than a casual rumor” (Spinelli v. United States, supra, 393 U.S. at 416, 89 S.Ct. at 589) or an ordinary public observation. Moreover, the corroborating details in Archuleta were themselves suspicious. (See also United States v. Harris, supra, 403 U.S. at 582-583, 91 S.Ct. 2075.)

Reversed and remanded.

      . The Government tentatively suggests that if the tip created a “founded suspicion” justifying investigative detention (see Wilson v. Porter (9th Cir. 1966) 361 F.2d 412), that suspicion matured into probable cause when Domitrovich smelled marijuana. The suggestion is unacceptable; a confrontation with a vehicular blockade and drawn weapons cannot be equated with an investigative detention. (United States v. Strickler (9th Cir. 1974) 490 F.2d 378.)

      . Informants have a known propensity to fabricate allegations of criminal involvement and to bolster the charges by adding innocent details. (E. g., Rebell, “The Undisclosed Informant and the Fourth Amendment: A Search for Meaningful Standards,” 81 Yale L.J. 703, 712-14.)


author: FRIENDLY, Circuit Judge:

text:
    SCIENTIFIC HOLDING COMPANY, LTD., Plaintiff-Appellant, v. PLESSEY INCORPORATED, Defendant-Appellee.
    Nos. 180, 368, Dockets 74-1584, 74-1636.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 11, 1974.
    Decided Dec. 20, 1974.

      Francis J. McConnell, Chicago, 111. (Richard Campbell, Chicago, 111., and Robert M. Blum, New York City, of counsel), for plaintiff-appellant.
    James J. Maloney, New York City (Rogers & Wells, William F. Koegel, and John B. Koegel, New York City, of counsel), for defendant-appellee.

      f Before FRIENDLY, FEINBERG and GURFEIN, Circuit Judges.
   FRIENDLY, Circuit Judge:

I. The Facts

Plaintiff Scientific Holding Company, Ltd. (Scientific), an Illinois corporation, is the successor to International Scientific, Ltd. (ISL), a Barbados company which was organized and owned by a number of United States citizens now Scientific’s shareholders. Employing approximately 500 individuals, ISL was engaged in the manufacture, assembly, and sale of core memory products, cable harness assemblies, and other electronic and electro-mechanical products to the United States computer and peripheral equipment industry. Defendant Plessey Incorporated, a Delaware corporation, is a subsidiary of The Plessey Company Limited, a large multinational corporation with headquarters in England, engaged in the electronics business; for reasons not relevant to this appeal, prior to the closing of the contract hereafter discussed, the parent corporation assigned it to the defendant and we shall often refer to the two corporations collectively as Plessey.

During 1967 and 1968, ISL experienced significant operating losses and by August of 1969 it was running short of working capital and was apparently unable to raise funds by issuing either new debt or equity. A sale of the business thus appeared to be the only way for the shareholders to recover even a portion of their investment. At the same time, in mid-1969 English Plessey, which was successfully marketing computer components in Europe, determined that it would be desirable to gain entry into the United States market and it began to explore plans for attainment of that goal. In December 1969, English Plessey learned of the availability of ISL’s business and negotiations were begun between the corporations, resulting on February 4, 1970 in an agreement for the sale of all of ISL’s assets and business.

A condensed summary of the provisions of the contract, as corrected on February 18, 1970 to conform to the precise language earlier agreed upon, which are important to this appeal, is as follows:

(1) The purchase price consisted of $180,000 payable at the closing, an assumption by Plessey of all ISL’s liabilities, except for any obligation evidenced by convertible debentures issued by ISL (other than interest provided therein to the date of the closing), reflected on its December 31, 1969 balance sheet, or incurred thereafter until the closing in the ordinary course of business, and a further payment depending on the amount of profits derived from the use of ISL’s assets during the year commencing on the first day of the first calendar month after the closing (“the measuring year”), as described in paragraph (3) below.

(2) In order to allow the assets conveyed by ISL to generate profits during the measuring year, Plessey would make available to the business not less than $600,000 within a week after the closing and continue ISL’s business in good faith. It would allow ISL’s management to operate the business during the measuring year in accordance with highly complex terms, the details of which are not relevant to this appeal, except that “if ISL profits commencing with the third calendar month of the measuring year average less than Fifteen Thousand ($15,000) U. S. Dollars per month or if there have been three consecutive months of losses during that measuring year (excluding the first two months thereof)”, Plessey would have the right to assume full management responsibilities subject to the obligation to continue the business in good faith during the measuring year.

(3) If during the measuring year the profits from the acquired assets were $360,000 or more, Plessey would pay an additional $1,260,000; if the profits were less than $360,000, Plessey would pay an additional amount which bears the same ratio to $1,260,000 that the amount of profits for the measuring year bears to $360,000.

(4) The closing was to take place at Bridgetown, Barbados, W.I., on March 2, 1970.

(5) ISL agreed to hold a common stockholders meeting prior to the closing “for the purpose of voting upon the sale of its assets in accordance with this Agreement. . . . ”

(6) ISL represented and warranted, among other things, that an unaudited balance sheet as of December 31, 1969, “to the extent of ISL’s knowledge, presents a true and complete statement as of its date of the financial condition and assets and liabilities of ISL”, and that, with two exceptions not here relevant, there had been no change in its financial condition since December 31, 1969, with the specification that “[o]perating losses not at a rate in excess of Twenty Thousand ($20,000) U. S. Dollars per month for the period from December 31, 1969 to the closing hereof shall not constitute an out of the ordinary change of ISL’s condition.” Plessey’s obligation to close was conditioned, inter alia, on ISL’s representations and warranties being true as of the time of the closing.

(7) Plessey’s obligation to close was also conditioned on the receipt of an opinion of ISL’s counsel, a well-known Chicago firm, “dated the closing date” stating in part that:

(ii) The execution, delivery and performance of this Agreement by ISL have been duly authorized and approved by all requisite action of ISL’s Board of Directors and stockholders and that this Agreement has been duly executed and delivered by ISL and constitutes the valid and binding obligation of ISL in accordance with its terms;

(8) “This agreement shall be interpreted under and governed by the laws of the State of New York.”

At the closing ISL was represented by Kovar, its president and chief operating officer, and Julius Lewis, a partner in the Chicago law firm, who had both negotiated the terms of the agreement. Plessey was represented by Milton H. Albert, its comptroller, and Seth H. Du-bin, a partner in a New York law firm which had acted for Plessey in drafting the contract of sale. On the day of the closing Albert spent considerable time with Edward Hourihan, ISL’s comptroller, reviewing certain financial information relevant to the closing. At that time, based on his work sheets, Hourihan stated that ISL’s losses for January and February aggregated $74,000. He did not prepare a precise breakdown or even give an indication whether any of the items comprising the losses possibly were not operating losses for purposes of the loss limitation contained in the contract, see paragraph (6) supra, although ISL claimed at trial that the written financial statement which was provided Plessey after the closing showed that $36,000 of the expenses were for legal and audit fees related to the sale and special bank charges which would not be considered in determining “operating” losses. ISL’s year-end statements which were delivered to Plessey at the closing showed sales of only $1,083,000, a gross profit of only $36,000, and an operating loss of $399,000 in contrast with the November 30 figures, upon which Plessey had relied in signing the February 4 agreement, of $1,081,000, $217,000 and $169,000 for the same items. The December 31 balance sheet also revealed that the excess of ISL’s liabilities over its assets was approximately $200,000 more than shown in the November 30 balance sheet.

Albert and Dubin refused to close. When Dubin telephoned Warren J. Sinsheimer, Chairman of the Board and chief executive officer of Plessey Incorporated, and a member of English Plessey’s board of directors, in New York and informed him that ISL’s business was in substantially worse condition than had been represented in the financial statements in his possession and that February had been a “disaster,” Sinsheimer’s initial reaction was that Plessey should call off the transaction. Later, after a series of conversations with Dubin and Albert, Sinsheimer agreed that Plessey should go forward if ISL agreed to two modifications of the contract. The more important was that the contract clause governing Plessey’s right to take over the full management of ISL, see paragraph (2) supra, be amended so that the period in which an “average” of $15,000 in profits had to be attained was effectively reduced from the third to the second month of the measuring year:

if the profits of ISL commencing May 1, 1970 (crediting to the month of May the net profits of the 2-month period comprised of March and April, 1970, but not charging any net loss for that period) average less than $15,000 per month, or if there have been three consecutive months of losses during that measuring year (excluding the first two months hereof).

The other modification was that interest should be charged at a rate of 10% per annum on the additional $200,000 which Plessey then expected to be obliged to invest and that this charge should be considered in determining ISL’s operating losses.

The ISL board resolution of January 31, 1970 which had approved the sale of all the corporation’s assets to Plessey on the basis of a draft agreement stated that “the proper officers of this Corporation are authorized and directed to make such changes in that agreement as in the opinion of the directors shall be necessary or appropriate • . . ..” The summary of the contract contained in the proxy material sent to ISL stockholders prior to the special meeting called to vote on the proposed sale included a reference to the “third month” provision, see paragraph (2) supra; the record does not contain the text of the resolution voted by the stockholders. Kovar testified that at the closing he had expressed doubts to the Plessey representatives with respect to whether he had authority to agree to the proposed amendments; Lewis confirmed that Kovar had expressed doubt as to his authority to Dubin and further indicated that although he had said nothing to the Plessey representatives, he and Kovar had privately discussed the: “serious doubts” which they both had as to Kovar’s authority to accede to the changes. Nevertheless Kovar finally did sign the modified agreement, allegedly because ISL’s financial condition was so desperate that he had no other choice. The closing was then completed, with ISL delivering, among other things, the required opinion of counsel, see paragraph (7) supra.

ISL did not achieve a $15,000 profit level by May 1970, and Plessey notified ISL by letter dated June 9, 1970 that it was assuming management control. Raymond Carien, a member of the ISL board, testified that he was first told of the amendment at that time, and that he informed Sinsheimer on July 13 that Kovar had no authority to sign it. Despite investment by Plessey during the measuring year of $1,900,000, an amount greatly exceeding the sum stipulated in the agreement, see paragraph (2) supra, the transferred assets produced a $640,-000 loss for the measuring year, and Plessey notified ISL that it would make no further payment beyond the $180,000 paid at the closing.

II. The Proceedings in the District Court

In this action for breach of contract in the District Court for the Southern District of New York, wherein federal jurisdiction was based on diverse citizenship, Scientific, the successor to ISL, sought to recover the contingent payment of $1,260,000 plus interest, together with punitive damages of another $3,000,000. The complaint was predicated on several alternative theories. One claim was that the amendment at the closing on March 2, 1970 was invalid because of (a) lack of consideration, (b) economic duress, and (c) want of authority on the part of Kovar or ratification by the ISL board; and that Plessey’s management takeover in June 1970 was therefore premature and constituted prevention of performance by ISL of the $360,000 profit condition precedent to payment of the contingent balance, thereby excusing perform-, anee of that condition. (.The other claim ”was' TKat Plessey was obligated to pay the $1,260,000 even if the amendment were valid. Here again there were three subordinate theories, to wit, (a) that especially because of the use of the word “average” in the management takeover provision, Plessey was not authorized to take over on the basis of failure to attain a $15,000 profit in the single month of May; (b) that Plessey did not continue ISL’s business in good faith during the measuring year; and (c) that Plessey never had any intention of permitting ISL to manage its business.

Plessey counterclaimed for compensatory damages of $3,000,000 plus punitive damages in the amount of $9,000,000 because of ISL’s alleged breaches of warranty and deceit, but this claim was limited by Plessey at trial to $106,752 for an alleged breach of two specific provisions of the agreement.

The case was tried before Judge Bonsai and a jury. The judge withdrew from the jury the issue of the validity of the March 2 amendment and directed the jury to consider this to be valid. He instructed the jury to render a special verdict on the other issues raised by Scientific and on those raised by Plessey’s counterclaim. The jury found against Scientific on the issues raised by it and against Plessey on the claims of breach of warranty and deceit. Judgment was entered dismissing the complaint and counterclaim, with costs in favor of Plessey. Both parties have appealed.

III. The Directed Verdict on the Validity of the March 2, 1970 Amendment

A.

Scientific’s argument that the amendment was invalid for lack of consideration immediately collides with § 5-1103 of the New York General Obligations Law, McKinney’s Consol.Laws, c. 24 — A which removes the need for consideration for a change or modification of a contract, provided that the modifying agreement is in writing and signed by the party against whom enforcement is sought or his agent.

Scientific seeks to overcome this seemingly insurmountable obstacle by relying, on two bases. One is § 5 — 1111 of the General Obligations Law, which provides:

If executed by an agent, any agreement, promise, undertaking, assignment or offer required by section 5— 1103, 5-1105, 5-1107 or 5-1109 to be in writing, which affects or relates to real property or an interest therein in any manner stated in subdivisions one or two of section 5 — 703 of this chapter, shall be void unless such agent was thereunto authorized in writing.

This does not assist Scientific for two reasons: First, there is no evidence that the amendment affected or related to real property; ISL had owned a villa in Barbados but, in order that ISL might meet its payroll obligations, Plessey had purchased it for $84,000, to be credited against the contract price, in early February 1970. Moreover, New York courts have held that a corporate officer or director is not an “agent” for purposes of the Statute of Frauds, General Obligations Law § 5 — 703, requirement that the agent’s authority be in writing when executing a contract for the sale or lease for more than one year of real property. See, e. g., Commission On Ecumenical Mission v. Roger Gray Ltd., 27 N.Y.2d 457, 318 N.Y.S.2d 726, 267 N.E.2d 467 (1971) (dictum), and cases cited therein; Flax v. B. M. Development Corp., 35 A.D.2d 565, 313 N.Y.S.2d 591 (2d Dept. 1970) (mem.). • The stated rationale for this rule — that “corporations can only act through individuals”, Commission On Ecumenical Mission, supra, at 730, 318 N.Y.S.2d 726, 267 N.E.2d 467 — is applicable with equal force to the similarly worded written authorization requirement contained in § 5 — 1111; and we believe that a New York court would hold that a president of a corporation is not an agent within the meaning of that section.

Scientific’s other basis is a claim that the clause in the agreement which stipulates that New York law will govern its interpretation, see paragraph (8) supra, does not apply to an amendment and that a New York court would therefore apply Barbados law, to wit, the English common law rule requiring new consideration to accomplish a binding modification of an existing contract, Wood v. Benson (1831), 1 L.J.Ex. 18, 2 Cr. & J. 94. This ignores the rationale of the principle that “[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue”. Restatement of Conflicts 2d, § 187(1) and Comment c. This has been stated as follows, id. at 565.

Prime objectives of contract law are to protect the justified expectations of the parties and to make it possible for them to foretell with accuracy what will be their rights and liabilities under the contract. These , objectives may best be attained in multistate transactions by letting the parties choose the law to govern the validity of the contract and the rights created thereby. In this way, certainty and predictability of result are most likely to be secured. Giving parties this power of choice is also consistent with the fact that, in contrast to other areas of the law, persons are free within broad limits to determine the nature of their contractual obligations.

See also Ehrenzweig, Conflict of Laws § 176, at 467-468 (1962). The sales contract was negotiated by American lawyers, mostly in New York City, partly by telephone between New York and Chicago. It would seem most reasonable to assume that the parties intended to weave New York law into all aspects of the relations between them flowing from the agreement. Under these, circumstances, it would be foolish to let anything turn on the point that the amendment happened to be executed in Barbados.

B.

The district court was likewise correct in ruling that Scientific had- raised no jury issue by its claim of economic duress. The contention was that in addition to its awareness of the precarious financial condition of ISL, as evidenced, among other things, by its purchase in early February of the Barbados villa to enable ISL to raise $84,000 to meet its current payroll obligations, Plessey knew that ISL had previously borrowed $200,-000 from Data 100, another prospective purchaser, secured by pledge of the stock of ISL’s principal stockholders; that the loan was past due; that Data 100 had several times threatened to seize and sell the pledged stock; and that Data 100 had agreed to postpone this only because of the representations that ISL was about to close the sale to Plessey which would pay the loan.

It may well be that ISL had little practical alternative other than to accept the modifications on which Plessey insisted. But under New York law that does not suffice to establish the defense of economic duress. As was well stated by Judge Geller in Nixon v. Leitman, 32 Misc.2d 461, 466, 224 N.Y.S.2d 448, 452 (Sup.Ct. N.Y. Co. 1962), the doctrine is that “the courts will not enforce an agreement in which one party has unjustly taken advantage of the economic necessities of another and thereby threatened to do an unlawful injury.” (Emphasis supplied.) Accord Oleet v. Pennsylvania Exchange Bank, 285 App. Div. 411, 137 N.Y.S.2d 779 (1st Dept. 1955); Bachorik v. Allied Control Company, Inc., 34 A.D.2d 940, 942, 312 N.Y. S.2d 272, 275 (1st Dept. 1970) (mem.). If Plessey was entitled not to close, it thus would not be exercising economic duress in insisting on modifications, however little opportunity ISL had to resist. Scientific claims Plessey had no such right or, at least, that the directed verdict was inappropriate when evaluated under the appropriate review standard, see, e. g. Ondato v. Standard Oil Co., 210 F.2d 233 (2 Cir. 1954); Lindeman v. Textron, Inc., 229 F.2d 273, 274 (2d Cir. 1956); Fleming v. McEnany, 491 F.2d 1353, 1357 (2 Cir. 1974), since there were disputed issues of fact.

Even assuming, as we must, see, e. g., Lindeman v. Textron, Inc., supra, that the jury would have believed all the testimony favorable to Scientific and disbelieved all testimony adverse to it, we think that there was no triable issue of fact. It was undisputed that at the closing ISL’s comptroller had revealed to Plessey’s representatives losses exceeding $20,000 per month for the period from December 31, 1969 to the date of the closing in apparent violation of the operating loss guarantee contained in the sale-of-assets agreement, see paragraph (6) supra. Plessey was entitled to take him at his word. It is immaterial for the issue here under discussion whether calculations not then available to Plessey indicated that the comptroller may have included certain expenses not properly deductible in a determination of “operating” losses for purposes of the loss limitation. Also the December 31, 1969 financial statements afforded substantial ground for questioning whether the November 30 statements, on the basis of which Plessey had entered into the contract, fairly represented the facts; it was hardly possible that December sales had been only $2,000 but that cost of sales had increased by $181,000, see p. 19 supra.

Alternatively, under New York law a contract entered into under duress is generally considered not void, but merely voidable, see, e. g., Levine v. Levy, 285 App.Div. 848, 136 N.Y.S.2d 695 (4th Dept. 1955) (per curiam), and one who would repudiate a contract procured by duress must act promptly or will be deemed to have elected to affirm it. See, e. g., Maisel v. Sigman, 123 Misc. 714, 205 N.Y.S. 807 (Sup.Ct. N.Y. Co. 1924); Port Chester Electrical Construction Corp. v. Hastings Terraces, Inc., 284 App.Div. 966, 134 N.Y.S.2d 656 (2d Dept. 1954); Faske v. Gershman, 30 Misc.2d 442, 215 N.Y.S.2d 144 (Mun.Ct. N.Y.C. 1st Dist. 1961). Since, as will be developed below, Kovar’s knowledge of the modifications is attributable to ISL, this requirement was not satisfied.

C.

Scientific’s argument on the score of Kovar’s lack of authority is somewhat stronger but not strong enough.

/' Counsel have not favored us with a discussion of New York law with respect to the authority of the president of a corporation, despite the extensive literature, see, e. g., Fletcher, Cyclopedia Corporations Ch. 11, § 581 (1969); 12 N.Y. Jurisprudence, Corporations §§ 617, 620, 629 (1971); Cary, Corporations 205-206 (4th ed. 1969), and case law on that subject. In two early opinions, the New York Court of Appeals stated that the president or other general officer of a corporation engaged in business activities had, by virtue of his office, prima facie power to make any contract for the corporation that the board of directors could have authorized or ratified, and that the burden of proving any lack of authorization was on those seeking to impeach the contract. See Patterson v. Robinson, 116 N.Y. 193, 22 N.E. 372 (1889) (president); Hastings v. Brooklyn Life Ins. Co., 138 N.Y. 473, 34 N.E. 289 (1893) (secretary who was one of corporation’s general managing agents). However, a number of subsequent New York cases indicated adherence to the narrower proposition that the presumption of the president’s authority extends only to transactions in the ordinary course of the company’s business. See, e. g., Banker’s Trust Co. v. International Ry. Co., 207 App.Div. 579, 202 N.Y.S. 561 (1st Dept. 1924), aff’m, 239 N.Y. 619, 147 N.E. 220 (1925) (mem.); Wen Kroy Realty Co., Inc. v. Public Nat’l Bank & Trust Co., 260 N.Y. 84, 183 N.E. 73 (1932).

In 1934, Judge L. Hand, speaking for this court in Schwartz v. United Merchant & Manufacturers, Inc., 72 F.2d 256 (2 Cir. 1934), attempted to discern the precise content of the New York “rule.” After briefly summarizing most of the applicable New York decisions, Judge Hand concluded that “there is no absolute rule in New York that any contract which the president of a company may make, however out of the ordinary, throws upon the company the duty of showing that he was unauthorized. It is true that whatever powers are usual in the business may be assumed to have been granted; but the presumption stops there . . Id. 72 F.2d at 258. Although certain commentators have found this holding to be inconsistent with the Patterson-Hastings rule, see Note, Inherent Power As a Basis of a Corporate Officer’s Authority To Contract, 57 Colum.L.Rev. 868, 873 (1957), most subsequent New York- cases, as well as federal cases applying New York law, have adopted the “ordinary business rule”, see, e. g., Kraus v. General Motors Corp., 120 F.2d 109 (2 Cir. 1941); O’Connor v. Bankers Trust Co., 159 Misc. 920, 946, 289 N.Y.S. 252, 283 (Sup.Ct. N.Y. Co. 1936), aff’m without opinion, 278 N.Y. 649, 16 N.E.2d 302 (1938); Lieberman v. Princeway Realty Corp., 17 A.D.2d 258, 233 N.Y.S.2d 1001 (1st Dept. 1962), aff’m without opinion, 13 N.Y.2d 999, 245 N.Y.S.2d 390, 195 N.E.2d 57 (1963) (mem.); Greenpoint Coal Docks, Inc. v. Newtown Creek Realty Corp., 5 Misc.2d 812, 814, 91 N.Y.S.2d 466, 469 (Sup.Ct. Kings Co. 1949); American Express Co. v. Lopez, 72 Misc.2d 648, 340 N.Y.S.2d 82, 83 (Civil Ct. N.Y.C. 1973) (chairman of the board). But see Best-Site Associates, Inc. v. Ventrice, 245 App.Div. 758, 280 N.Y.S. 583 (2d Dept. 1935) (per curiam citing Hastings for proposition that president has authority to do any act which directors could authorize or ratify; held to have authority to hire counsel and prosecute action there under consideration).

It is clear that even under the Patterson-Hastings rule, Kovar did not have authority to bind ISL by the February agreement since this sale of all ISL’s assets was not a transaction which the directors could have authorized; indeed the agreement was expressly subject to approval by the ISL stockholders. However, under New York Business Corporations Law § 909(a)(3), McKinney’s Consol.Laws, c. 4, and apparently under the stockholders’ resolution authorizing the liquidation and sale of assets, the directors could have authorized the changes contained in the March 2 amendment. If the Patterson-Hastings rule were indeed the law of New York, this might end the matter since it would not be unreasonable to say that when a corporation dispatches its president to close an authorized contract, it endows him with actual and not merely apparent authority to agree to changes, material but not going to the heart of the contract, for which developments at the closing may call. However, the case becomes closer if, as we believe, the law of New York is what Judge Hand stated in Schwartz. And it becomes closer still in view of the statements allegedly made by Kovar to Plessey’s representatives at the closing questioning his authority to authorize the amendments since these expressed doubts might preclude reliance on his apparent authority as ISL’s president, chief operating officer, and principal negotiator of the agreement. It is an accepted principle of the law of agency that a person with notice of a limitation which has been placed on an agent’s authority cannot subject the principal to liability upon a transaction with the agent if he knows or should know that it is outside the scope of the agent’s authority. See Walsh v. Hartford Fire Ins. Co., 73 N.Y. 5, 10 (1878); Ernst Iron Works, Inc. v. Duralith Corp., 270 N.Y. 165, 200 N.E. 683 (1936); Harvey v. J. P. Morgan & Co., 166 Misc. 455, 463, 2 N.Y. S.2d 520, 530 (Mun.Ct. N.Y.C. 1937) (dictum), rev’d on other grounds 25 N.Y.S.2d 636 (Sup.Ct.2d Dept. 1938) (per curiam), aff’d 260 App.Div. 873, 23 N.Y.S.2d 844 (2d Dept. 1940) (mem.); Restatement of Agency 2d § 166. Knowledge of Kovar’s statements alone would hardly constitute express “knowledge” of his lack of authority, such as was present in Ernst Iron Works, since his expression of “doubts” might reasonably have been interpreted by Plessey’s representatives under the circumstances as a calculated bluff designed to gain additional time both to consider their demands and possibly to negotiate more favorable terms. However, depending upon the authority typically accorded presidents of corporations to approve at the closing modifications of agreements which are outside the ordinary course of business, Kovar’s expression of doubt may have been sufficient to place a duty on Plessey to inquire with ISL’s board as to the actual scope of his authority, which if not satisfied would prevent it from relying on his apparent authority, see Angerosa v. White Co., 248 App.Div. 425, 432, 290 N.Y.S. 204, 214 (4th Dept. 1936) (dictum), aff’m without opinion, 275 N.Y. 524, 11 N.E.2d 325 (1937); Traitel Marble Co. v. Brown Brothers, Inc., 159 App.Div. 485, 487, 144 N.Y.S. 562, 574 (1st Dept. 1913); Goldenberg v. Bartell Broadcasting Corp., 47 Misc.2d 105, 110, 262 N.Y.S.2d 274, 282-283 (Sup.Ct. N.Y. Co. 1965) — an issue to which counsel have not addressed themselves. Likewise they have cited no decisions, in New York or elsewhere, on the precise question of the authority of the president of a company which is selling all its assets or engaging in other transactions not in the ordinary course of business to enter into amendments at the closing, although one would think it must have arisen. The point is interesting but since we need not decide it in order to dispose of the case, we have felt no compulsion to engage in extensive research on an issue as to which our decision could not settle the law of New York in any event.

The decisive point is that even assuming arguendo the March 2 amendment to be invalid as unauthorized, at least if the jury had accepted the testimony of Kovar and Lewis, direction of a verdict was nevertheless proper on the ground that Scientific’s failure to repudiate the amendment for lack of authorization until mid-July estopped it from doing so later. In Rothschild v. Title Guarantee & Trust Co., 204 N.Y. 458, 459, 97 N.E. 879, 880 (1912), the Court of Appeals said:

A principle of law is: Where a person wronged is silent under a duty to speak, or by an act or declaration recognizes the wrong as an existing and valid transaction, and in some degree, at least, gives it effect so as to benefit himself or so as to affect the rights or relations created by it between the wrongdoer and a third person, he acquiesces in and assents to it and is equitably estopped from impeaching it.

The court explained further that the duty to speak and consequent estoppel for silence would arise when the party sought to be estopped:

remained silent when he had the opportunity of speaking and when he knew or ought to have known that his silence would be relied upon, and that action would be taken or omitted which his statement of the truth would prevent, and that injury of some nature or in some degree would N.Y. 270, 28 N.E. 627; Collier v. Miller, 137 N.Y. 332, 33 N.E. 374.

Construing the evidence most favorably to Scientific, as we must when considering an appeal by a party against whom there has been a directed verdict, see, e. g., Lindeman v. Textron, Inc., supra, Kovar and Lewis were aware that Plessey was investing substantial amounts in ISL relying in part on the amendment which advanced the date when Plessey could assume full management control unless monthly profits averaged $15,000. They were under a duty to Plessey to advise Scientific’s board of directors of the closing amendment immediately on their return to Chicago, so that if the board wished to repudiate the amended agreement Plessey could be promptly informed. Moreover, they were also under an independent duty to Scientific to advise its board of the modifications, see, e. g., C. N. Bank v. Clark, 139 N.Y. 307, 34 N.E. 908 (1893) (dictum); Dickenson v. Tysen, 209 N.Y. 395, 400-401, 103 N.E. 703 (1913); Restatement of Agency 2d § 381, so that if it wished to take some action other than ratification, Plessey could be notified. See, e. g., Hyatt v. Clark, 118 N.Y. 563, 569, 23 N.E. 891 (1890); Klein v. Twentieth Century-Fox International Corp., 201 Misc. 132, 108 N.Y.S.2d 767 (Sup.Ct. N.Y. Co. 1951), aff’m 279 App.Div. 989, 112 N.Y.S.2d 661 (1st Dept. 1952) (mem.).

If Kovar and Lewis had “serious doubts” with respect to the former’s authority to agree to the amendments, it is almost beyond belief that they did not recognize an imperative obligation to inform their principal which they must fulfill as soon as practicable. If, as they aver, they did not discharge that duty, their knowledge of the amendment is nevertheless imputed to the corporation. In Hurley v. John Hancock Mutual Life Ins. Co., 247 App.Div. 547, 288 N.Y.S. 199, 202 (4th Dept. 1936), the court stated:

It is a well-settled principle of agency that, as a general rule, the principal is bound by notice to or knowledge of his agent in all matters within the scope of the agency, although in fact the information may never have actually been communicated.

See, e. g., Howell v. Mills, 53 N.Y. 322, 328 (1873); Hyatt v. Clark, supra; Corrigan v. Bobbs-Merrill Co., 228 N.Y. 58, 69, 126 N.E. 260 (1920); Farr v. Newman, 14 N.Y.2d 183, 250 N.Y.S.2d 272, 199 N.E.2d 369 (1964); Hartford Accident & Indemnity Co. v. Walston & Co., Inc., 21 N.Y.2d 219, 225-226, 287 N.Y.S.2d 58, 65-66, 234 N.E.2d 230 (1967) (dictum). Even if Kovar had no authority to amend the contract, attendance at the closing was surely “within the scope of his agency” as the term is used in this context, namely, to exclude attribution 'of facts which came to the knowledge of the agent when acting in a purely private capacity or adversely to the principal, see, e. g., Credit Alliance Corp. v. Sheridan Theatre Co., Inc., 241 N.Y. 216, 149 N.E. 837 (1925), and all knowledge acquired by him at the closing thus is imputed to the corporation. Moreover, as said in Restatement of Agency 2d § 272, “the liability of a principal is affected by the knowledge of an agent concerning a matter as to which he acts within his power to bind the principal or upon which it is his duty to give the principal information.” (Emphasis added.) The period when Scientific was bound to disavow the amendment and repay the $180,000 paid by Plessey on the closing began to run within a few days after March 2 — not on June 9 when Kovar notified Carien that he had acceded to the modifications of the terms of the sale. Scientific could not simply sit by until mid-July, keeping the consideration it had received and allowing Plessey to invest substantial additional funds in the ISL business, and then assert that the amendment on which Plessey had relied in closing on March 2 and also in assuming full management control in early June had not been authorized. It also is of no consequence that when Carien spoke to Sinsheimer on July 13, the latter allegedly was still optimistic about the realization of a $360,000 profit during the measuring year since Scientific was already estopped to deny the binding effect of the amended agreement.

IV. Scientific’s Challenges to the Special Verdict

We can deal more briefly with Scientific’s challenges to the verdict on the three issues submitted to the jury and decided adversely to it since here the evidence must be viewed in the light most favorable to Plessey, e. g., Lavender v. Kurn, 327 U.S. 645, 652-653, 66 S.Ct. 740, 90 L.Ed. 916 (1945); Fanale v. Anderson, 427 F.2d 173 (2 Cir. 1970), and the verdict must be sustained if, assuming no reversible error, it is supported by any substantial evidence, e. g., Trade Development Bank v. Continental Ins. Co., 469 F.2d 35, 39 (2 Cir. 1972).

Scientific’s first claim is that paragraph 5(d) of the agreement permitting Plessey to assume full management control “if the profits of ISL commencing May 1, 1970 . . . average less than $15,000 per month” (emphasis supplied) cannot reasonably be read as entitling Plessey to assume management if profits did not equal $15,000 in the first relevant month, to wit, May. Scientific seeks to buttress this by the fact that a draft of the agreement had required profits of “$15,000 per month in any full month” and was changed to meet its objection. One trouble with Scientific’s argument is that considerable surgery on the language would be needed to remould the clause so as to exclude the first month. Also application of the $15,000 requirement to the first relevant month is not so harsh as Scientific alleges, since that month was to be credited with profits of previous months subsequent to the closing but was not to be charged with losses for such months — a very favorable form of averaging.

Scientific further contends, citing Fleischer v. W.P.I.X. Inc., 30 Misc.2d 17, 213 N.Y.S.2d 632 (S.Ct. N.Y. Co. 1961), that Plessey’s interpretation of the average profit requirement renders meaningless the provision in paragraph 5(d) that full management control might also be assumed “if there have been three consecutive months of losses during that measuring year (excluding the first two months [April and May] thereof) . ” since that language would permit losses in May, while the average profit provision would require at least a $15,000 profit. We do not find this argument to be compelling. Although perhaps unlikely, losses in May might have been more than offset by profits in the two previous months so that a $15,000 “average” profit would be attained that month. More important, the consecutive loss provision would permit losses in June and July, while even Scientific would concede that under the amendment the $15,000 “average” profit level must have been attained by the end of June.

The most that can be said about all this is that Scientific raised an issue of ambiguity which required the judge to admit parol evidence and submit the issue to the jury. See Meyers v. Selznick Co., 373 F.2d 218 (2 Cir. 1966). That was exactly what Judge Bonsai did. There was ample basis for the jury’s upholding Plessey’s construction.

Scientific’s two other claims — that Plessey did not continue ISL’s business in good faith during the measuring year and that it had never intended to do so — raised factual issues on which conflicting evidence required submission to the jury. Since this was done with instructions not claimed to have been erroneous and since there was substantial evidence to support the verdict, we must let it stand.

V. Plessey’s Counterclaim

In support of its counterclaim Plessey adduced testimony by a partner of Price Waterhouse & Co. that ISL’s December 31, 1969 balance sheet understated its liabilities in the form of accounts payable by $33,822 and overvalued inventory by $72,930. The principal item in the overvaluation of inventory was $58,500 attributable to 11,700,000 nonexistent memory cores. Plessey contends there was no evidence sufficient to justify the adverse verdict.

We do not reach the merits. Plessey never moved for a directed verdict, for judgment n. o. v., or for a new trial with respect to the counterclaim. A contention that there was insufficient evidence to warrant submission to the jury or that the verdict was against the weight of the evidence cannot be raised for the first time on appeal. 5A Moore, Federal Practice 150.03 [2] at 2334; 6A id. $ 59.-15 [1] at 265. Oliveras v. American Export Isbrandtsen Lines, Inc., 431 F.2d 814 (2 Cir. 1970), on which Plessey relies, held only that while failure to move for a directed verdict precludes the grant of a motion for judgment n. o. v., for reasons well stated in 5 Moore, Federal Practice 1 50.08 at 2359, it does not prevent a reversal and remand for a new trial when the district court has committed “a plain abuse of discretion,” United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 247, 60 S.Ct. 811, 84 L.Ed. 1129 (1940), in denying such a motion. Since Plessey made no motion for that relief, we have no occasion to consider whether its denial would have met the strict standard of Oliveras.

YI. Costs

Citing Srybnik v. Epstein, 230 F.2d 683 (2 Cir. 1956), and other cases, Scientific claims the district court erred in awarding costs against it, since Plessey, having lost on its counterclaim, was not “the prevailing party” within Fed.R. Civ.P. 54(d). This would be too wooden a view. At trial Plessey limited its counterclaim to the two items mentioned in Part V of this opinion. Little trial time was spent on the counterclaim, whereas consideration of plaintiff’s claim for $1,260,000 compensatory damages plus punitive damages required three weeks of trial, 16 witnesses, over 1,800 pages of testimony and more than 100 exhibits. District courts have held that a defendant who successfully fends off a large claim may be awarded costs despite failure to prevail on a counterclaim. E. g., B.B. Chemical Co. v. Cataract Chemical Co., Inc., 2 F.R.D. 159 (W.D.N.Y.), modified on other grounds, 122 F.2d 526 (2 Cir. 1941). Cf. Ryan v. Arabian American Oil Co., 18 F.R.D. 206 (S.D.N.Y.1955); Berg v. Wall Street Traders, Inc., 46 F.R.D. 47 (S.D.N.Y.1968) (mem.). See also 6 Moore, Federal Practice ¶ 54.70, at 1305-06 (2d ed. 1974). Judge Bonsai properly exercised his discretion in not denying costs to Plessey because of the judgment against it on its counterclaim.

Plessey complains that in his award of costs with respect to the expense of bringing essential witnesses to New York from Barbados and other places, the district judge erred in endorsing the clerk’s mechanical application of the “100-mile” rule. It is now clear the the court had power to allow more, Farmer v. Arabian American Oil Co., 379 U.S. 227, 232, 85 S.Ct. 411, 13 L.Ed.2d 248 (1964), and Plessey cites a number of cases, both before and after Farmer, where district judges have done this in circumstances apparently no more appealing than here. Maresco v. Flota Mercante Grancolombiana, S.A., 167 F.Supp. 845 (E.D.N.Y.1958) (travel expenses of two witnesses from Bogota, Colombia and from Portland, Oregon); Bank of America v. Loew’s International Corp., 163 F.Supp. 924, 928-929 (S.D.N. Y.1958) (travel expenses of three witnesses from England); Dunn v. Merrill Lynch, Pierce, Fenner & Smith Inc., 279 F.Supp. 937 (S.D.N.Y.1968) (travel expenses of two witnesses, ordered by the court to be brought from France); Oscar Gruss & Son v. Lumbermens Mutual Casualty Co., 46 F.R.D. 635 (S.D.N.Y. 1969) (travel expenses of two witnesses, whose testimony was “indispensable”, from Zurich); Electronic Specialty Co. v. International Controls Corp., 47 F.R.D. 158 (S.D.N.Y.), modified on other grounds, 409 F.2d 937 (2 Cir. 1969) (travel expenses of two witnesses, one from California). See also Moylan v. AMF Overseas Corp. S.A., 354 F.2d 825, 830 (9 Cir. 1965) (award of travel expenses of material witness from Guam within district court’s discretion); 10 Wright & Miller, Federal Practice & Procedure, § 2678, at 231-34 (1971). But cf. Grogan v. United States, 341 F.2d 39, 43 (6 Cir. 1965) (discretion of district court to allow costs of bringing witnesses from points more than 100 miles from hearing is not as broad as in many other areas). On the other hand, in Arico v. Cie. de Navegacion Transoceanique, 409 F.2d 1002, 1004 (2 Cir. 1969), the district court would not allow the costs incurred by the prevailing party in bringing a material witness from Europe and we refused to interfere, pronouncing the usual litany that the “allowance of expenses is discretionary.” While it undoubtedly is; something could surely be said in favor of promulgating more definite standards to channel discretion with respect to the so-called 100-mile rule, either by appellate decision or by rules, thereby assisting district judges to avoid disparity and making possible more meaningful appellate decisions whether discretion had been “abused”. Pending such action, which we do not feel inclined to take on the rather slender record and briefing here, it would be helpful if, in close cases, district judges would indicate, if only summarily, why they were or were not applying the 100-mile rule.

Judgment affirmed.

      . Scientific is not engaged in any business activity and has been continued in existence solely to prosecute the action under consideration here.

      . This statement had not yet been prepared when the contract was signed. Instead Plessey had relied on the unaudited November (II month) financial statements which it had received earlier, together with an estimate by ISL’s comptroller of probable losses for the month of December.

      . A later audit by Price Waterhouse & Co. showed that in fact ISL had sustained a 1969 loss of $544,000 on sales of $1,083,000.

      . The Plessey representatives denied that Kovar had expressed any reservations concerning his authority and cited a July 13, 1973 deposition of Lewis in which he testified that he had no recollection of any such doubts being expressed, but since, as will later appear, the judge directed a verdict against plaintiff on the issue to which the alleged statements are relevant, we have stated the evidence in the way most favorable to Scientific.

      . Although we believe that a New York court would rule that the choice of law clause in the agreement was sufficiently broad to cover the authority of officers of the parties in executing and performing it, compare Restatement of Conflict of Laws 2d § 291, we need not decide the point. Since neither party requested that the issue of Kovar’s authority be determined under Barbados law or furnished any information about it, see N.Y.C.P.L.R. § 4511(b), a New York court would assume that the common law of Barbados was the same as that of New York, Krasnow v. National Airlines, Inc., 228 F.2d 326, 327-328 (2 Cir. 1955), and cases there cited, or in any event decide the case as if it were. See Restatement of the Conflict of Laws 2d, § 136 comment h.

      . We are not impressed with Plessey’s argument that the opinion letter of ISL’s counsel, see paragraph (7) supra, delivered at the closing, to the effect that “[t]he execution, delivery and performance of this Agreement . have been duly authorized and approved by all requisite action of ISL’s Board of Directors and stockholders . . . is decisive in its favor. Plessey was aware that the opinion had been prepared in Chicago prior to the amendment, and Lewis testified that Kovar expressly indicated to Plessey’s representatives that he doubted his authority to approve the modifications. While it would have been preferable for Lewis to have revised the opinion to make clear that his firm had not passed on the validity of the amendment, Plessey cannot support a claim that it was misled at the time, assuming that such statements were made.

      . The injury arising from these alleged misrepresentations admittedly is reduced since the financial statement also contained $54,000 of accounts payable which had, in fact, been paid.

      . Applying the rule, the clerk of the district court reduced the defendant’s requested travel expenses for witnesses from $4,383.38 to $1,563.40.


author: SNEED, Circuit Judge:

text:
    COLUMBIA STEAMSHIP COMPANY, INC., a corporation, Appellant, v. AMERICAN MAIL LINE, LTD., et al., Appellees.
    No. 72-2943.
    United States Court of Appeals, Ninth Circuit.
    Jan. 16, 1975.

      Thomas M. Triplett (argued), and John L. Schwabe (argued), of Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland, Or., for appellant.
    Warner W. Gardner (argued), of Shea & Gardner, Stuart J. Land (argued), of Arnold & Porter, Washington, D. C., for appellees.
    Before KILKENNY, SNEED, Circuit Judges, and JAMESON, District Judge.

       Honorable William J. Jameson, United States Senior District Judge, District of Montana, sitting by designation.

   OPINION

SNEED, Circuit Judge:

Columbia Steamship Company, Inc., seeks to recover damages against American Mail Line, Ltd., and certain other shipping lines for alleged violations of (1) section 810 of the Merchant Marine Act of 1936, 46 U.S.C.A. § 1227; (2) section 601 of the same Act, 46 U.S.C.A. § 1171; (3) sections 15-18 of the Shipping Act of 1916, 46 U.S.C.A. §§ 814-817; and (4) sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2. The trial court dismissed the complaint. We affirm but stay the mandate until there has been a final disposition of the appeal from the judgment in the consolidated civil actions 1576-72, American Maritime Association v. Peterson, Secretary of Commerce, and 1667-72, States Marine International v. Peterson, Secretary of Commerce, rendered by the United States District Court for the District of Columbia. Should the district court’s judgment ultimately be affirmed, the mandate shall be issued forthwith. Should the district court’s judgment ultimately not be affirmed, the mandate shall not be issued and the plaintiff’s complaints will be reconsidered in light of the reasoning supporting the refusal to affirm.

In the proceedings below the trial court ordered the plaintiff to bring forth further evidence regarding the “conspiraey issue,” under section 1 of the Sherman Act. Shortly thereafter, the plaintiff amended its complaint to delete any claim based on section 1. Thereafter, the district court determined that the first issue to be tried was whether a stipulation of facts agreed to by the parties established a prima facie case that the defendants “engage[d] in any practice in concert with another carrier . which is unjustly discriminatory or unfair . . . ” within the meaning of section 810 of the Merchant Marine Act of 1936. The stipulation is brief and is set out in full in the margin.

In essence, the issue posed by this stipulation involves the interaction of legislation which requires that certain types of cargo move on United States flag vessels and that portion of the Merchant Marine Act of 1936 which provides an operating differential subsidy when, inter alia, the operation of the vessel “ . . .is required to meet foreign-flag competition and to promote the foreign commerce of the United States ..” Section 601, Merchant Marine Act of 1936, 46 U.S.C.A. § 1171(a). The plaintiff insists that subsidized carriers may not submit bids for the carriage of preference cargo shipped by the Department of Defense and the .civilian agencies of the federal government which are “less than fully distributed costs before crediting the operating differential subsidy.” See paragraph 3 of Stipulation n. 1. To do so, asserts the plaintiff, while aware that other subsidized carriers also are doing so, amounts to engaging in a practice in concert with other carriers which is unfair and discriminatory with respect to unsubsidized carriers, such as the plaintiff, and constitutes a violation of section 810 of the Merchant Marine Act of 1936.

The district court on the basis of the stipulation held that the plaintiff had failed to establish a prima facie case for such a violation and dismissed the claim based thereon. The district court then turned to the plaintiff’s other claims and directed that the plaintiff submit “its brief on whether the use of subsidy by defendants on defense and preference cargoes is unlawful and, if so, what remedies are available to it.” Order 71-132, June 2, 1972. This was done and thereafter the district court held (1) that Title VI of the Merchant Marine Act of 1936, 46 U.S.C.A. §§ 1171-1182, does not prohibit the carriage of preference cargo by subsidized carriers; (2) that, because a large amount of preference cargo moves by rates set by conferences which are influenced by the rates of foreign flag carriers, Title VI does not require that all cargo on subsidized carriers be subject to foreign competition; (3) that section 16 of the Shipping Act of 1916 is inapplicable because it is directed at a carrier’s discrimination against shippers and not at competitive activity among carriers and (4) that defendants did not violate section 2 of the Sherman Act because they constantly compete with one another.

Plaintiff appeals on the grounds that the trial court erred in holding (1) that a prima facie case of action in concert, within the meaning of section 810 of the Merchant Marine Act of 1936, 46 U.S. C.A. § 1227, was not established; (2) that there was no violation of Title VI of the Merchant Marine Act of 1938, 46 U.S.C.A. §§ 1171-1182; and (3) that there was no violation of section 2 of the Sherman Act without first affording the plaintiff an opportunity to develop a factual record in support of its allegations.

.1.

Although not relied upon by the plaintiff and quite understandably, not strongly argued by the defendants, we must determine at the outset whether the doctrine of primary jurisdiction requires that we reverse the dismissal of the complaint and remand with instructions to stay the action until the Maritime Subsidy Board and the Secretary of Commerce, possibly in conjunction with the Federal Maritime Commission, have had the opportunity to consider the issues raised by the plaintiff. To do so would constitute an application of the principle first stated in Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1907) and later refined in United States Navigation Co. v. Cunard S.S. Co., 284 U.S. 474, 52 S.Ct. 247, 76 L.Ed. 408 (1932); Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576 (1952); and Federal Maritime Board v. Isbrandtsen Co., 356 U.S. 481, 498-499, 78 S.Ct. 851, 2 L.Ed.2d 926 (1958). This court recently applied this doctrine in Industrial Communications Systems, Inc., et al. v. Pacific Telephone & Telegraph Co., 505 F.2d 152 (9th Cir. 1974), and there found it inappropriate for a court to work out an accommodation of antitrust and regulatory law without the benefit of the appropriate agency’s interpretation of that regulatory law. See 3 Davis, Administrative Law § 19.05 (1958 ed.).

In considering the doctrine’s application to the facts and posture of this case, we are confronted by a substantial difficulty. It consists of the fact that the plaintiff, together with other unsubsidized carriers, initiated a proceeding in 1969 before the Maritime Subsidy Board, Docket No. S — 244, to consider the adoption of rules that would eliminate the alleged “double subsidy” which results from the receipt of operating differential subsidies while engaged in the carriage of substantial amounts of preference cargo. This proceeding resulted in the promulgation by the Maritime Subsidy Board of a final opinion and order in which the position was taken that ships receiving operating differential subsidies must carry at least 50 percent non-preference cargo. Both subsidized and unsubsidized carriers, not including the plaintiff here, challenged this rule of the Maritime Subsidy Board in the United States District Court for the District of Columbia. That court declared the rule invalid and held operating differential subsidies could not be limited because of the carriage of preference cargo. In doing so heavy reliance was placed upon Comptroller General Opinion D-159245, SRR10, 264 (1966) which reached a similar conclusion. This decision has been appealed to the Court of Appeals for the District of Columbia Circuit. States Maritime International (No. 74-1499) and American Maritime Association (No. 74-1502) v. Peterson, Secretary of Commerce.

The consequence is that to a degree the purpose of the primary jurisdiction doctrine already has been served. The Maritime Subsidy Board has spoken. The judicial challenge to its rule, however, is highly relevant to the disposition of this case. Affirmance of the district court’s decision would strongly suggest, if not dictate, that the judgment of the trial court now before us be sustained while a reversal, in whole or in part, would suggest a thorough re-examination of the issues of this case in the light of such reversal. Thus, we find ourselves equipped with a substantial amount of guidance from an administrative agency but awaiting a judicial determination which inevitably will be influential in, and possibly controlling of, our disposition of this case. Under these circumstances we believe the proper course of action is to indicate our views with respect to the merits of the controversy before us, based on the administrative and judicial guidance presently available, and to stay the mandate until there has been a final disposition in the consolidated civil actions now before the District of Columbia Circuit. To remand to the district court with instructions to stay all proceedings until there has been an administrative determination of the precise issues before us in which the parties to this litigation participate appears to us to involve needless delay and expense. Therefore, we now turn to the merits.

II.

We agree with the district court’s holding that Title VI of the Merchant Marine Act of 1936, 46 U.S.C.A. §§ 1171 — 1182, does not prohibit the carriage of preference cargo by subsidized carriers. In doing so we reject the plaintiff’s contention that an operating differential subsidy is proper only in those circumstances in which the subsidized carrier is in direct competition with foreign vessels with respect to available cargo. Foreign competition exists by reason of the presence of foreign carriers operating in the international shipping market whose rates are set by shipping conferences consisting of both foreign and domestic carriers. To limit operating differential subsidies to instances of direct competition would reduce the effectiveness of such subsidies quite substantially. As the district court noted the link between the rates set by subsidized domestic carriers, even when bidding for preference cargo, and those of foreign carriers is much too strong to justify withdrawing the subsidy from vessels transporting preference cargo. We have found nothing in the legislative history that requires such a withdrawal.

III.

We also are in accord with the district court’s holding that the plaintiff has failed to establish a prima facie case of violation of section 810 of the Merchant Marine Act of 1936, 46 U.S.C.A. § 1227. The relevant part of that section reads:

It shall be unlawful for any contractor receiving an operating-differential subsidy under sections 1171-1182 of this title or for any charterer of vesseis under sections 1191-1204 of this title to continue as a party to or to conform to any agreement with another carrier or carriers by water, or to engage in any practice in concert with another carrier or carriers by water, which is unjustly discriminatory or unfair to any other citizen of the United States who operates a common carrier by water exclusively employing vessels registered under the laws of the United States on any established trade route from and to a United States port or ports.

To support its contentions the plaintiff relies on that portion of the stipulation which establishes (1) that the defendants received operating differential subsidies; (2) that the defendants made bids for preference cargo which would yield revenues “less than fully distributed costs before crediting the operating differential subsidy,” (Paragraph 3, Stipulation, n. 1); and (3) that defendants were aware that each was receiving a subsidy and submitting such bids but each was unaware of the actual bids of any other until published by the government.

Such facts are entirely consistent with a fully competitive system once it is determined that vessels transporting preference cargo are entitled to operating differential subsidies. Such a system is not “unjustly discriminatory or unfair” to a citizen of the United States who operates a domestic carrier. It is not made so by an awareness on the part of the defendants that each was submitting bids amounting to less than fully distributed costs. Cf. Independent Iron Works, Inc. v. United States Steel Corp., 177 F.Supp. 743 (N.D.Cal.1959), aff’d, 322 F.2d 656 (9th Cir. 1963), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 165 (1963). Moreover, such bids enable the Federal Government to benefit through lower rates from the operating differential subsidy. To permit the taxpayers to receive a direct return from a subsidy made available by their dollars surely cannot be contrary to an act of Congress in the absence of a very clear expression to that effect. Section 810 of the Merchant Marine Act of 1936 contains no such expression.

IV.

The trial court was correct in dismissing the plaintiff’s claim that the defendants violated section 2 of the Sherman Act. As the trial court stated, the defendants constantly compete with each other and nothing in the stipulation or record shows that any defendant possessed the required monopoly power.

This would be sufficient to dispose of the plaintiff’s appeal with respect to the Sherman Act were it not for the fact that it now insists that it should be given the opportunity to develop a factual record to support its claim. It is clear from the record of this case that the plaintiff relied heavily on the stipulation to establish the elements of a section 2 violation. That portion of its amended complaint pertaining to the violation of the antitrust laws, which is set out in the margin, reflects this. It is also true that the district court directed the plaintiff to submit “its brief on whether the use of subsidy by defendants on defense and preference cargoes is unlawful and, if so, what remedies are available to it.” The brief prepared in response to this order relies almost exclusively on the facts appearing in the stipulation to support its claim of unlawful conduct on the part of the defendants under section 2 of the Sherman Act. Under these circumstances we do not think the trial court erred in rendering judgment against the plaintiff on its Sherman Act claim. Obviously this judgment does not preclude the plaintiff from pursuing antitrust claims against the defendants to the extent such claims are based on acts not appearing in the stipulation and not resting upon the making of bids for carriage of preference cargo that yield revenues “less than fully distributed costs before crediting the operating differential subsidy.” As to claims based on such acts, the plaintiff has had its day in court.

Affirmed.

      . Plaintiff and defendants stipulate that a separate determination of the following issue may be ordered by the Court:
      Whether plaintiff will have established a prima facie case that defendants have conformed to an agreement with or engaged in any practice in concert with another carrier or carriers within the meaning of Section 810 of the Merchant Marine Act of 1936 (46 U.S.C. 1227), where its evidence on the point consists solely of the following facts to which defendants stipulate for the purpose of determining this preliminary issue: At all times pertinent:
      1. Each defendant received the operating differential subsidies provided under the Merchant Marine Act of 1936 for the operation of liner services.
      2. All cargo shipped by the Department of Defense and fifty per cent (50%) of the cargo shipped by the civilian agencies of the government was, with immaterial exceptions, limited by law to United States flag ships. A significant part of the cargo carried by defendants was within this category.
      3. Department of Defense cargo and government civilian agency cargo not shipped under a conference rate was subject to competitive bidding. In submitting competitive bids for such cargos, each defendant was aware that its revenue would include both freight revenue and the operating differential subsidy, and was aware that other United States flag steamship companies, including the other defendants, were also receiving operating differential subsidies and were submitting competitive bids for cargo so limited by law, and was further aware that unsubsidized operators, including plaintiff, were also submitting bids for such cargo.
      No defendant had knowledge of the actual bids submitted by any other defendant prior to any publishing thereof by the government. Since about the year 1966 each defendant became aware of each other defendant’s bids subsequent to their publishing by the government and was aware that in the case of most defendants the revenues produced by said defendant’s bids would be, in most instances, less than fully distributed costs before crediting the operating differential subsidy.

      4. Columbia Steamship Co. was an unsubsidized carrier whose vessels were of the break bulk variety. Defendants own and operate numerous break bulk vessels. 60% of the outbound cargo carried by break bulk vessels was military and civil agency cargo. Unsubsidized carriers of break bulk cargo, including plaintiff, were dependent upon carriage of military and civilian agency outbound cargo for their economic survival and each defendant was aware of this fact.

      5. The trade routes and the bids submitted with reference thereto by defendants and plaintiff in 1966 to 1971 were set forth in the MSTS Shipping Agreements and Rate Guides attached hereto.
      Note 1. The facts set forth in the second and last sentence of Section 3 and the entirety of Section 4 are denied by each defendant but are stipulated to solely for the purpose of determining this segregated issue of law. Nothing stated in said sections shall be construed as an admission against interest or shall in any way be utilized as evidence in the trial or any other proceedings arising out of the subject matter of this litigation.

      . E. g., Cargo Preference Act of 1904, 10 U.S. C.A. § 2631, (military cargo); section 901(b) of the Merchant Marine Act of 1936, 46 U.S.C.A. § 1241(b), (cargo owned or financed by U.S.).

      . Violation of the Antitrust Laws A. XVI.
      Beginning at a date presently unknown to plaintiff, defendants, and each of them, have monopolized or have attempted to monopolize trade and commerce among the several states or with foreign nations; to effectuate such monopoly, and to attempt to monopolize, defendants:
      A. Used the economic leverage of their operating differential subsidies to obtain defense, preference, and Public Law 480 cargoes by making unreasonably low bids to the exclusion of plaintiff.
      B. Forced the plaintiff out of business by cutting off its existing source of cargo; C. Submitted bids beneath their actual fully distributed costs;
      D. Unlawfully used their operating differential subsidies to obtain control of trade routes;
      E. Utilized operating differential subsidies for the carriage of cargo limited by law to United States flag ships.
      XVII.
      The acts charged in this amended complaint to have been done by each of the defendant corporations were authorized, ordered and done by the officers, agents, employees or representatives of each defendant corporation while actively engaged in the management, direction or control of its affairs, and acting on its behalf within the scope of their employment or agency.

        XVIII.
      As a direct and proximate result of defendants’ conduct as alleged, plaintiff was damaged and lost cargoes, all in an amount presently undetermined; plaintiff requests leave of court to amend this amended complaint when the amount of damages to plaintiff has been more definitely ascertained; plaintiff alleges on information and belief for the period January 1, 1969, to December 31, 1970, it has sustained damages in the sum of $4,145,-875.76 as a direct and proximate result of the acts of the defendants,