author: STEPHENSON, Circuit Judge. LAY, Circuit Judge

text:
    UNITED STATES of America, Appellee, v. Eugene SCHAEFER, Appellant. UNITED STATES of America, Appellee, v. Angelo DEL PIETRO, Appellant. UNITED STATES of America, Appellee, v. Frank VINCERI, Appellant. UNITED STATES of America, Appellee, v. Clifford LANCASTER, Appellant. UNITED STATES of America, Appellee, v. James LONSBERRY, Appellant. UNITED STATES of America, Appellee, v. John Edward VOGT, Appellant. UNITED STATES of America, Appellee, v. William CHRISTOPHEL, Appellant.
    Nos. 73-1506, 73-1526, 73-1538, 73-1577, 73-1578, 73-1611 and 73-1617.
    United States Court of Appeals, Eighth Circuit.
    Submitted June 25, 1974.
    Decided Jan. 3, 1975.
    Rehearings and Rehearings En Banc Denied Feb. 27, 1975.
    Certiorari Denied May 19, 1975.
    See 95 S.Ct. 1975, 1980.

      Donald Wolff, Merle L. Silverstein, Clayton, Mo,, Harold M. Weber, St. Louis, Mo., and Ray B. Marglous, Clayton, Mo., for appellants.
    Marc P. Riehman, Dept, of Justice, Grim. Div., App. Section, Washington, D. C., for appellee.
    Before LAY, BRIGHT and STEPHENSON, Circuit Judges.
   STEPHENSON, Circuit Judge.

These consolidated criminal appeals concern review of convictions for conducting an illegal bookmaking business and conspiracy to conduct that business. We affirm the substantive charges and reverse the conspiracy charges.

All seven defendants (an eighth defendant died subsequent to conviction) were charged in two-count indictments. Count I charged violation of 18 U.S.C. § 1955, “Prohibition of illegal gambling businesses.” Count II charged conspiracy to violate § 1955.

Jury trial was waived and the cases were tried to- the court on essentially undisputed facts, including a lengthy stipulation. Two defendants, Lancaster and Lonsberry, chose not to stipulate regarding expert testimony of an F.B.I. . agent as to bookmaking customs and procedures. Those defendants were severed and tried separately. They went to trial essentially on stipulated facts except for the expert testimony.

All defendants were convicted on both counts. The trial court sentenced each defendant to a prison term and fine on Count I. All defendants received suspended sentences on Count II with a probation period to run consecutively to the sentence on Count I.

At the outset we must meet the argument raised by all appellants that the contents of the intercepted oral communications, which formed the greatest part of the government’s case, should have been suppressed because the wiretap application was signed by a Deputy Assistant Attorney General and not the Attorney General or his specially designated Assistant Attorney General as required pursuant to 18 U.S.C. § 2516.

Since the United States Supreme Court decided United States v. Chavez, 416 U.S. 562, 94 S.Ct. 1849, 40 L.Ed.2d 380 (1974), this court has twice considered Justice Department procedures almost identical to those which led to the wiretaps in the instant case. United States v. Brick, 502 F.2d 219 (8th Cir. 1974); United States v. Schullo et al., 508 F.2d 1200 (8th Cir. filed January 3, 1975). As in those prior cases the record here indicates that Attorney General Mitchell initialed the wiretap authorization and submitted his affidavit 'reciting that he had authorized application for the specified interception order. Chavez and this court’s opinions following Chavez have found this procedure to be sufficient. See also United States v. Cox, 462 F.2d 1293 (8th Cir. 1972).

Certain of the appellants further argue that the pen register used by the government to record numbers dialed from certain telephones is not authorized by the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. §§ 2510— 2520. We have held otherwise. United States v. Brick, supra, 502 F.2d at 223.

Several appellants claim that the affidavit of Robert J. Wilkinson, Special Agent of the F.B.I., was insufficient to demonstrate probable cause and need for the wire interception and the use of the pen register. Citing U.S.Const. Amend. IV; 18 U.S.C. § 2518(l)(c).

The affidavit in question is substantially similar to that approved in Brick, supra at 224. There we said:

The affidavit presented, that of Robert J. Wilkinson, Special Agent of the F.B.I., set forth in detail his personal observations concerning the investigations conducted, as well as those of two unnamed informants, one of whom had provided reliable information for several years to Special Agents “on a continuous basis concerning gambling matters.” The affidavit described ■ in detail the operations of the gamblers, and named certain of the persons involved, together with their places of meetings, movements and conversations. In addition it was stated that the informants, noted above, would not testify, nor, as evidenced by past experience, would the gambler’s customers; that gambling raids had in the past proved ineffective, as had the telephone toll records.
The above representations in the affidavit, in conjunction with others more detailed contained therein, furnished ample probable cause for the order entered and were sufficient to demonstrate on a factual basis, as distinguished from a mere conclusion, that “other procedures reasonably appear unlikely to succeed.” The statute does not require more. (Footnote omitted.)

The same holds true in the instant case.

The most serious problem before the court is whether the evidence shows activity which is proscribed by 18 U.S.C. § 1955. That is, whether the facts of this case evidence the sort of illegal gambling business, “involvpng] five or more persons who conduct, finance, manage, supervise, direct or own all or part of such business,” that Congress sought to arrest.

The parameters of the Congressional intent when enacting § 1955 have now been fairly well defined. Congress sought to draw the line between large scale gambling operations and those that are relatively small. Brick, supra, 502 F.2d at 224; Schullo, supra, 508 F.2d at 1204; 116 Cong.Rec. 603 (1970) (remarks of Senator Allot). The statute is not meant to reach gambling operations that are of insignificant monetary proportions or those that are only occasional or intermittent in operation. Schullo, supra at 1204 and citations. Only gambling that is continuous and substantial was to be proscribed. H.R.Rep.No.1549, 91st Cong., 2d Sess. (1970), 1970 U.S. Code Cong. & Admin.News at 4029.

It has further been established that the alleged violator of the statute need not know that the activity engaged in was composed of five or more participants. Brick, supra, 502 F.2d at 224; see also United States v. Smaldone, 485 F.2d 1333, 1348 (10th Cir. 1973), cert. denied, 416 U.S. 936, 94 S.Ct. 1934, 40 L.Ed.2d 286 (1974); United States v. Iannelli, 477 F.2d 999, 1002 (3rd Cir. 1973), cert. granted, 417 U.S. 907, 94 S.Ct. 2602, 41 L.Ed.2d 211 (1974). However, mere customers of the gambling business are not within the statute’s intended reach. Schullo, 508 F.2d at 1205 and citations.

Congress was aware that it is oftentimes difficult to prove the workings of an organized gambling setup and surmised that the statute would often oper- ' ate against gambling networks much larger than the statutory definition of “five or more” would indicate. S.Rep. No.91 — 617, 91st Cong. 1st Sess. 73 (1969); Schullo, supra at 1205.

In the context of the bookmaking business this court has recognized that layoff betting is the major link connecting independent operations into an effective gambling organization that will work profitably and well for all concerned. Schullo, supra at 1205; Brick, supra, 502 F.2d at 225; see also United States v. DeCesaro, 502 F.2d 604, 611 (7th Cir. 1974); United States v. McHale, 495 F.2d 15, 18 (7th Cir. 1974). The layoff system was studied by Congress before it enacted § 1955. See Hearings on S. 30 and related proposals before Sub-corn. No. 5 of the House Comm, on the Judiciary, 91st Cong. 2d Sess.

The government’s case rested upon stipulations, the transcribed wiretap conversations (logs) taped from appellant Lancaster’s telephone, gambling records seized from several of the appellants’ premises, and the expert opinion of Special F.B.I. Agent Whitcomb.

The stipulated evidence and logs show that Lancaster and the other appellants were bookmakers. Lancaster received line information from Angelo Del Pietro and Frank Vinceri. Lancaster also exchanged layoff bets with these men. Lancaster passed along the line information he received. At times he would adjust the line information himself before passing it along. Lonsberry took bets from customers for Lancaster and relayed line information to those customers for him. Lancaster and Lonsberry had numerous customers of their own with whom they dealt directly. Vogt maintained customers of his own. He received line information from Lancaster and exchanged layoff bets with him. Christophel discussed line information and layoff betting with Lancaster. Schaefer received line information from Lancaster and discussed line adjustments. Schaefer also bet with Lancaster. The logs disclose that all appellants carried on conversations regarding the status of accounts.

Appellants all claim that the evidence does not show one gambling business but several. We disagree.

The stipulated evidence and especially the wiretap logs indicate to us that this is the type of sustained and substantial gambling activity which Congress sought to curb. Each appellant was involved in the network of gambling activity interlaced through the Lancaster operation. Compare Brick and Schullo, both supra.

We are not persuaded by the contention of appellants Lancaster and Lonsberry that they are “independent businessmen” and are no different than independent hotel owners who refer customers back and forth and rely on cooperation from each other. It is patently obvious from the legislative history of § 1955 that Congress was well aware that the gambling business is unlike the hotel business or any other business. Nowhere does Congress indicate that it sought to regulate a “business” only in the sense of central bookkeeping, central cashiers, and central control. The bookmaking business does not operate that way, and the legislators were acutely informed of the fact.

The interdependence of the various individual components, including the sharing of line information and the exchanging of profits through layoff betting, outweighs the “independent businessmen” theory urged by appellants and satisfies us that there was one “illegal gambling business” here for the purposes of 18 U.S.C. § 1955. Brick, supra, 502 F.2d at 225; United States v. Sacco, 491 F.2d 995, 1003 (9th Cir. 1974) (en banc); United States v. Hunter, 478 F.2d 1019, 1022 (7th Cir. 1972), cert. denied, 414 U.S. 857, 94 S.Ct. 162, 38 L.Ed.2d 107 (1973).

Appellant Schaefer argues that the evidence does not support the finding that he was a bookmaker. He claims that his transactions with Lancaster were those of a mere customer. Christophel joins with Schaefer in arguing that no layoff betting has been shown as to them and that they should not be included in the business.

While the evidence of layoff betting as to these men is not as strong, we are satisfied that they were a part of the loose affiliation which, through continuous communication, conducted this gambling operation.

Lancaster and Christophel discussed layoff betting. Close examination of the transcribed conversations which Lancaster had with Schaefer and Christophel discloses discourse which could well be construed as layoff betting. Both men discussed line information with Lancaster and disseminated the line to customers. They also discussed the status of their accounts with Lancaster. These men continuously conferred with and advised each other with respect to various aspects of the gambling business. Viewing the evidence as a whole and in the light most favorable to the government, we are satisfied that Schaefer and Christophel, along with the other appellants, were bookmakers and were systematically and continuously involved in this gambling business.

We next turn to the question of whether the conspiracy to violate § 1955, charged in Count II of the indictments, is different in any material respect from the substantive charge of conducting the business. If it is not, the Constitutional provision against double jeopardy voids the conspiracy charge.

There are, of course, instances where a conspiracy charge may not be added to the substantive charge. One is where the agreement of two persons is necessary for the completion of the substantive crime and there is no ingredient in the conspiracy which is not present in the completed crime.

Pinkerton v. United States, 328 U.S. 640, 643, 66 S.Ct. 1180, 1182, 90 L.Ed. 1489 (1946). The United States Supreme Court has further held:

The applicable rule is that, where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one is whether each provision requires proof of [a] fact which the other does not. Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 182, 76 L.Ed. 306 (1931).

An examination of the indictment and the record in this case leads to the conclusion that the conspiracy charge in Count II “comprehends nothing more than the agreement which [the appellants] necessarily performed by the commission of the substantive offense itself.” United States v. Hunter, 478 F.2d 1019, 1025 (7th Cir. 1973); United States v. Manson, 494 F.2d 804, 808 (7th Cir. 1974). Seven individuals were charged with conducting a gambling business composed of five or more, and seven individuals were charged with conspiracy to conduct a gambling business of five or more. We find no element in the conspiracy which is not present in the completed crime. Pinkerton, supra, 328 U.S. at 643, 66 S.Ct. 1180; Hunter, supra, 478 F.2d at 1026. The Count II conspiracy charges are therefore reversed.

Appellants Schaefer, Del Pietro, Lancaster and Lonsberry urge this court to review the sentences received by them. They claim abuse of trial court discretion. Woosley v. United States, 478 F.2d 139 (8th Cir. 1973) (en banc).

The severity of a criminal sentence will not be reviewed by this court unless there appears a manifest or gross abuse of discretion or a sentence which has been imposed on a mechanical basis. Woosley, supra; Thompson v. United States, 493 F.2d 480 (8th Cir. filed September 25, 1974).

This case is not at all like Woosley. The court obviously apportioned the sentences with care. Nothing in the circumstances or record of the instant case can be construed as an abuse of discretion. Indeed, the sentences reflect careful and logical consideration of each defendant’s role in the “business.”

The judgments of conviction on Count II aré reversed. The cases are affirmed in all other respects.

LAY, Circuit Judge

(dissenting).

I would reverse the convictions on both counts. Congress did not intend by the enactment of § 1955 to expand federal criminal law so as to rival the power of the states to regulate localized gambling operations. Yet this is the interpretation of § 1955 which is now adopted by the majority opinion. It is inconceivable to me that Congress intended to commit the limited law enforcement resources of the federal government and the federal courts to the regulation of localized bookmaking. The Organized Crime Control Act of 1970, of which § 1955 is a part, was aimed at countering “organized crime” and its syndicated activities which are carried out on so large a scale as to affect interstate commerce and hence become a national concern. The several gambling provisions of the Act were intended to further its purpose by permitting federal prosecution of those gambling enterprises whose profits flowed to syndicated crime. United States v. Sacco, 491 F.2d 995, 998-999 (9th Cir. 1974) (en banc). The House Judiciary Committee Report states:

The intent of section 1511 and section 1955, below, is not to bring all illegal gambling activity within the control of the Federal Government, but to deal only with illegal gambling activities of major proportions. It is anticipated that cases in which their standards can be met will ordinarily involve business-type gambling operations of considerably greater magnitude than simply meet the minimum definitions. The provisions of this title do not apply to gambling that is sporadic or of insignificant monetary proportions. It is intended to reach only those persons who prey systematically upon our citizens and whose syndicated operations are so continuous and so substantial as to be of national concern, and those corrupt State and local officials who make it possible for them to function. (Emphasis added.) H.R.Rep.No.1549, 91st Cong., 2d Sess. (1970); 2 U.S.Code Cong. & Admin. News 1970 at 4029.

The majority opinion holds that several individual bookmakers, who do not share phones, customers, profits or losses, or maintain any specific accounting or bookkeeping among one another, can nevertheless fuse themselves into a single illegal gambling business involving five or more persons as proscribed by 18 U.S.C. § 1955. The magic synthesis by which all became one was allegedly accomplished by exchanging line information and, when it was to their individual profit, making layoff bets with the same person. The inevitable result of this decision is to subject all bookmakers to federal prosecution, a result which is contrary to the language and purpose of the Act.

The legislative history of § 1955 makes it clear that Congress intended to limit the reach of § 1955 to entities so large and continuous that they might rationally be presumed, at least as a class, to finance organized crime and hence to fall within federal jurisdiction under the commerce power. To that end, the statute requires proof of the existence of a single “illegal gambling business” involving five or more persons other than customers who “conduct, finance, manage, supervise, direct or own” the business for at least thirty consecutive days. 18 U.S.C. § 1955(b)(1). In light of this purpose, I cannot conclude that this language, which in common understanding and ordinary commercial usage would refer to a unified, organized business enterprise, was intended by Congress to encompass the isolated activities of these defendants.

•The statutory language requiring proof that five or more persons conducted a single business commands evidence that each defendant acted in furtherance of the alleged joint business. At oral argument, the government conceded that mere exchange of line information did not evidence involvement in a single bookmaking business. However, the additional proof that defendants exchanged layoff bets with Lancaster with the object of individual profit should be similarly insufficient under the Act. More is needed to show that they were involved in the same business.

The majority reasons that Congress could not have intended to require further proof of complicity because bookmakers do not as a rule operate with centralized cashiers, bookkeeping and control, and that Congress was aware of that fact. Yet almost all § 1955 convictions affirmed by the circuit courts have rested on just such a further showing in bookmaking as well as other gambling businesses. Where employees are paid a salary or commission, where co-workers are subject to orders such as use of a uniform line, where several persons use the same office or phones to receive bets, where there is division of functions such as bookkeeping, taking bets and paying off winners, or where there is central handling of revenues, the language of the Act can rightly be invoked. See United States v. Sacco, 491 F.2d 995, 998 (9th Cir. 1974) (en banc) (division of functions among owners, phonemen and splitters); United States v. Meese, 479 F.2d 41, 42 (8th Cir. 1973) (partnership with 6-8 salaried employees and division of functions); United States v. Hunter, 478 F.2d 1019, 1022 (7th Cir. 1973) (partners employed 12 others at same office); United States v. Fino, 478 F.2d 35, 36 (2d Cir. 1973) (several bet-writers phone bets in to central office with central bookkeeping); United States v. Becker, 461 F.2d 230, 232 (2d Cir. 1972) (owners employed four runners); accord, United States v. Harris, 460 F.2d 1041, 1043 (5th Cir. 1972); United States v. Vigi, 363 F.Supp. 314, 321 (E.D.Mich.1973); United States v. Kohne, 358 F.Supp. 1053, 1064 (W.D.Pa.1973); United States v. Mainello, 345 F.Supp. 863, 883 (E.D.N.Y.1972).

In United States v. Bobo, 477 F.2d 974 (4th Cir. 1973), the evidence showed considerably more interaction and evidence of agreement between the defendants than mere exchange of line and layoffs. The Fourth Circuit noted that the bookmakers had developed a system of placing split bets or “middling” utilizing the differences in the line in various states. Under the system the defendants might not always win, but they could not lose. Id. at 977. Furthermore, they always used a uniform line to “prevent outsiders from playing them against each other, which was what they were frequently doing to other bookmakers.” Id. at 990. Finally, some of the defendants relayed bets from the others to outside bookmakers as part of their system. Id. at 977.

Similarly, in United States v. Ciamacco, 362 F.Supp. 107 (W.D.Pa.), aff’d mem., 491 F.2d 751 (3d Cir. 1973), the central figure, Levine, had an agreement with the individual bookmakers who laid bets off to him whereby he would rebate a percentage of his profits from handling their accounts. Clearly this demonstrates an essential interaction missing here.

The analogy drawn to describe the Kotteakos conspiracies is equally appropriate in this case. The appellants’ separate bookmaking enterprises formed a pattern of “ ‘separate spokes meeting at a common center,’ though without the rim of the wheel to enclose the spokes.” Kotteakos v. United States, 328 U.S. 750, 755, 66 S.Ct. 1239, 1243, 90 L.Ed. 1557 (1946). Lancaster was the hub, the common denominator, of otherwise unrelated enterprises. Even his position was, as likely as not, fortuitous. Had another’s phone been tapped, that person might have appeared as the hub, and quite a different group of defendants might have been indicted, for the expert admitted that each of those who talked to Lancaster probably sought the opinions of and laid off bets to other bookmakers with equal frequency. That necessary cooperation and loose affiliation are the nature of the bookmaking business, but a higher degree of concerted activity was required by Congress in § 1955. Drawing again on Kotteakos, it is appropriate to remember that

[t]hieves who dispose of their loot to a single receiver — a single “fence” — do not by that fact alone become confederates: they may, but it takes more than knowledge that he is a “fence” to make them such. Id. at 755, 66 S.Ct. at 1243.

Similarly, the fact that all of the appellants used Lancaster to supply some of the necessary information and to take layoffs for their individual businesses does not make them all partners in a single gambling business under § 1955. That too takes more.

The majority concedes that proof of the substantive offense under § 1955 requires the same elements as does conspiracy and then reverses the conspiracy convictions as violative of double jeopardy. While I concur in the application of the constitutional principle governing double jeopardy, I conclude that there is insufficient proof either of conspiracy or the substantive offense. In each instance, the prosecution has failed to show that commonality of purpose which would link the defendants into a single gambling business.

In Blumenthal v. United States, 332 U.S. 539, 68 S.Ct. 248, 92 L.Ed. 154 (1947), the Court found one overall conspiracy and then commented on Kotteakos:

The case therefore is very different from the facts admitted to exist in the Kotteakos case. Apart from the much larger number of agreements there involved, no two of those agreements were tied together as stages in the formation of a larger all-inclusive combination, all directed to achieving a single unlawful end or result. On the ■contrary each separate agreement had its own distinct, illegal end. Each loan was an end in itself, separate from all others, although all were alike in having similar illegal objects. Except for Brown, the common figure, no conspirator was interested in whether any loan except his own went through. And none aided in any way, by agreement or otherwise, in procuring another’s loan. The conspiracies therefore were distinct and disconnected, not parts of a larger general scheme, both in the phase of agreement with Brown and also in the absence of any aid given to others as well as in specific object and result. There was no drawing of all together in a single, over-all, comprehensive plan. 332 U.S. at 558, 68 S.Ct. at 257.

Here the government failed to prove one overall general scheme among the parties to conduct a gambling business of five or more persons. There is no proof of any agreement among the defendants generally, but rather a bare showing that several of the defendants each exchanged layoff bets with Lancaster when to do so individually benefited both parties. When it did not benefit one party, proffered layoffs were freely refused, even though in at least one instance that meant that Lancaster sustained a large loss. As in Kotteakos, the defendants in laying off bets with Lancaster may have had similar illegal objectives, but no defendant was interested in whether the others made a profit or not. The government has failed to show that the individual defendants made Lancaster’s business “their own venture.” See United States v. Falcone, 109 F.2d 579, 581 (2d Cir.) (Hand, J.), aff’d, 311 U.S. 205, 61 S.Ct. 204, 85 L.Ed. 128 (1940).

In United States v. Aviles, 274 F.2d 179 (2d Cir. 1960), the court commented on the interaction necessary to fuse several independent conspiracies into a larger single combination:

A single act may be the foundation for drawing the actor within the ambit of a conspiracy. . . . But, since conviction of conspiracy requires an intent to participate in the unlawful enterprise, the single act must be such that one may reasonably infer from it such an intent. Thus, when two men join together to commit a single robbery, one may infer from their common participation in the robbery that they have conspired to commit the robbery. However, in a multiparty conspiracy of the sort revealed in the present case, with actors performing many different tasks in many places, the inference does not necessarily follow from one contact with one member of the conspiracy. 274 F.2d at 189-190.

In commenting on Aviles, the Seventh Circuit stated:

[A] single act performed with parties who are involved in more than one conspiracy may be insufficient to draw an inference of the existence of an agreement between the parties in the case of multiple conspiracies. Knowledge of the existence of the other parties to the conspiracies is insufficient. While the crime of conspiracy is completed as soon as the unlawful agreement is formed, United States v. Kissel, 218 U.S. 601, 607, 31 S.Ct. 124, 54 L.Ed. 1168 (1910), it must be shown that this agreement was made prior to or during the consummation of the single act. United States v. Varelli, 407 F.2d 735, 743 (7th Cir. 1969).

The primary thesis of the government’s case is that there exists an essential network of action between the independent conduct of the defendants with Lancaster to create a common business and thus place their conduct within the scope of § 1955. The majority observes that “layoff betting is the major link connecting independent operations into an effective gambling organization that will work profitably and well for all concerned.” As earlier discussed this reasoning places every local bookmaker within a federal conspiracy whether he knows it or not. This clearly was not the intent of Congress. In commercial enterprises, wholesale businesses depend on retail establishments to purchase and distribute the goods sold to them by the manufacturers who have made them, each financially dependent on the other —yet, no law suggests that this interrelationship establishes a commonality of a single business. Cf. United States v. Falcone, 311 U.S. 205, 61 S.Ct. 204, 85 L.Ed. 128 (1940).

Simply because we deal with criminal legislation we should not twist common terminology from accepted understanding to accommodate the jurisdictional limits of federal prosecution.

      . The Honorable James H. Meredith, United States District Court, Eastern District of Missouri.

      . This court delayed decision in several cases, including the instant case, pending the Su preme Court’s disposition of Chavez.

      . The statute provides in relevant part:
      (a) Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined not more than $20,000 or imprisoned not more than five years, or both.
      (b) As used in this section—
      (1) “illegal gambling business” means a gambling business which—
      (i) is a violation of the law of a State or political subdivision in which it is conducted;
      (ii) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and
      (iii) has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.
      (2) “gambling” includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein.

      . It was stipulated that “a bookmaker is an individual who is in the business of accepting bets and wagers from bettor-customers on the outcome of sporting events such as baseball, football, basketball, and hockey games, and on horse races. As compensation for the services which he renders, the bookmaker retains the difference between what a bettor-customer is required to risk in order to win a given amount of money and the amount which the bettor-customer can in fact win. The magnitude of the difference is determined by the line or odds issued by the bookmaker on the event which is the subject of the bet or wager.”

      . Layoff, it was stipulated, “is a bet or wager placed by one bookmaker with another bookmaker which is necessitated by the influx of an imbalance of bets and wagers on a given sporting event and which has the effect of distributing the said bets and wagers, thus minimizing the risk of substantial loss.”

      . As stipulated, “a line is an addition to or subtraction from the anticipated point scoring potential of each of the two participating teams which is designed to equalize the betting propositions and thereby to induce the placement of bets by customers on both teams.”

      . We reject the claim of appellants that the adjustment of line information negates the concept of one gambling business. The evidence shows that the adjustment of line information serves at times the same as layoff betting to balance books.

      . Appellants Lancaster and Lonsberry called an expert in hotel management to the stand for the purpose of showing that hotels rely on cooperation in customer and information exchange but are nevertheless separate businesses.

      . We reject the argument of appellants Christophel and Vinceri that since they stipulated to being in the business only from May 14 through May 28, 1971, the 30-day requirement of § 1955 is not met as to them. The 30-day requirement is an alternative to the $2000 gross revenue requirement. See § 1955(b)(l)(iii) quoted in note 3 supra. The evidence shows that the business had gross revenue in excess of $2000 on both May 18 and May 23, 1971. See United States v. Bridges, 493 F.2d 918, 922 (5th Cir. 1974).

      . Before trial defendants moved to dismiss the indictments as duplicitous and violative of double jeopardy. They also moved that the government be required to elect between the counts, again claiming double jeopardy. On appeal the various appellants plead double jeopardy inferentially through their comments and case citations. They rely more heavily on Wharton’s Rule. We view the double jeopardy claim as having been adequately raised.
      Because we decide that the conspiracy charges in the case violate the Fifth Amendment command against double jeopardy, we need not consider the conflict that has begun to arise in the cases relying on Wharton’s Rule and its third party exception as it relates to conspiracy pursuant to 18 U.S.C. § 1955. Compare United States v. Becker, 461 F.2d 230, 234 (2d Cir. 1972), with United States v. Figueredo, 350 F.Supp. 1031, 1032 (D.Fla.1972); see Hunter, supra 478 F.2d at 1024-1026; Comment, Gambling Under the Organized Crime Control Act: Wharton’s Rule and the Odds on Conspiracy, 59 Iowa L.Rev. 452, 462-67 (1973).

      . The sentences imposed on Count I were: Lancaster, 3 years imprisonment and $10,000 fine; Lonsberry, 2 years and $10,000 fine; Del Pietro and Vinceri, 18 months and $5,000 fine; Christophel, Schaefer and Vogt, 9 months and $5,000 fine.

      . SENATOR McCLELLAN. I support the very laudable objectives of S. 2022, the illegal gambling business bill. Nevertheless, there are some reservations that I must express. I am concerned that the effect of this bill would be to extend Federal jurisdiction so far that it would be virtually the same as local criminal jurisdiction in this area. Now you have mentioned this problem in your remarks already.
      MR. WILSON. We have tried to head that off, and if we haven’t done it, it needs to be done, because it is not our purpose to move all this into Federal courts. (Emphasis added.)
      Hearings before the Subcommittee on Criminal Laws and Procedures of the Senate Committee on the Judiciary, 91st Cong., 1st Sess. 396 (1969).

      . It is uncontroverted that both the exchange of line information and layoff betting are necessary to “running a book,” no matter how small. At trial the government’s gambling expert, FBI Special Agent T. C. Whitcomb, testified:
      I think we’ve got to realize that we’re speaking about a bookmaking business. Bookmaking by its very nature requires cooperation. Yes. You may have individual enterprises by various bookmakers in an area or a large area or a small area, but the loose affiliation I’m speaking about again requires cooperation between them in exchanging the line information, in taking of friendly bets, for paying for services, furnishing line information, for example, and also to have available certain of these bookmakers which will accept wagering in the terms that we’re talking about, lay off, which protects the interests of the individual bookmakers and where one bookmaker lays off this time to another bookmaker, he will reciprocate at a later time and will take lay off from the other individual or may do it all on the same day. This is the nature of the bookmaking business. It can’t be escaped.
      Appendix at 401.
      Q. (By Mr. Cashill) Sir, in your opinion, what function does frequent or substantially continuous conversation among bookmakers for the purpose of exchanging lay off bets or wagers or to exchange line information serve insofar as their bookmaking operation is concerned?
      A. It keeps each of the individual bookmakers so involved in these conversations aware of changes, the very important changes, for example, in line or point information that comes across in sporting events. It also permits them to know how the other bookmakers are being bet in case that, as bookmakers have to do from time to time, is adjust their line based on the original line that he had in order to probably attract activity or action or wagers on the other side of an event or more events. Generally, it is this mutual coopration again that I speak about, the nature of bookmaking, independently organized, but must cooperate above the bettor level in order to continue to function adequately.
      Appendix at 392-93.
      If that necessary cooperation in itself proves that the participants are conducting the same illegal gambling business, then the requisite five persons can always be found and the statutory limitation is rendered meaningless.

      . The justification for federal jurisdiction is premised on the rational connection between large-scale gambling and the flow of commerce. United States v. Sacco, 491 F.2d 995 (9th Cir. 1974). Thus, the constitutionality of the Act rests in large measure on its limited application to illegal operations of national concern. For the federal government now to expand the Act’s prohibitions to local activities is to betray the congressional purpose.

      . This is not to suggest that persons who place and accept layoff bets are immune from prosecution under § 1955 as mere customers. Congress intended layoff bettors in some instances to be within the reach of the statute. Cf. United States v. DeCesaro, 502 F.2d 604, 611 (7th Cir. 1974); United States v. McHale, 495 F.2d 15, 18 (7th Cir. 1974). However, in my view something more than mere acceptance of those bets is needed to show that both are involved in the same business. That something extra could be demonstrated, as in United States v. Ciamacco, 362 F.Supp. 107 (W.D.Pa.), aff’d mem., 491 F.2d 751 (3d Cir. 1973), by the existence of an agreement to rebate a percentage of the profits to layoff bettors. In addition, it might be sufficient if the government could show, over a period of several weeks, that the “layoff man” never refused to accept proffered bets or at least that he attempted to help the others place theirs if he did not want to accept them himself. That was not the case here, for these defendants refused to take layoffs, even from Lancaster, their supposed “boss,” when it was not necessary to balance their own books on an individual basis.

      . The evidence showed that defendants in this case did not always use the same line. Yet the government’s own expert witness testified that within a single bookmaking business, a uniform line was essential.

      . The Third Circuit recently reversed convictions for the related offense of conspiracy to facilitate an illegal gambling business under 18 U.S.C. § 1511 (also enacted as part of the Organized Crime Control Act of 1970) for lack of evidence that five or more persons were involved. United States v. Riehl, 460 F.2d 454 (3d Cir. 1972). The court found that while one defendant was indeed selling “punchboards” for gambling purposes in violation of state law, and two others were arguably engaged in helping him do that, nevertheless there was no showing that five persons were involved. The defendant’s employees did not handle the punchboards. The others were found to be merely customers, who bought the punchboards and used them for gambling purposes. Their independent character was not lost merely because they purchased the essential supplies for their type of gambling business from a common supplier. Since they did not kick back any of the profits to the punchboard supplier, the court found that they were not involved in his business for purposes of the statute, but rather “operated for their own account.” Id. at 460. The analogy to bookmakers who cooperate only by sharing line information and exchanging layoff bets should be clear; while they do receive essential supplies from one another, that is not enough to create the danger of true large-scale organized crime the statute was intended to reach.

      . As I view the evidence, only Lancaster’s “business” involved more than one person. Lonsberry and Athanas (the co-defendant who died before sentencing) sometimes relayed customer bets to Lancaster and collected losses from Lancaster’s customers on his behalf. This would involve three persons in his business, but not the requisite five or more.


source: Caselaw Access Project

author: TALBOT SMITH, Senior District Judge.

license: Public Domain

text:
    LaCRESCENT CONSTANT CARE CENTER, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 74-1468.
    United States Court of Appeals, Eighth Circuit.
    Submitted Dec. 12, 1974.
    Decided Feb. 19, 1975.
    R. Walter Bachman, Jr., Minneapolis, Minn., for petitioner.
    Stephen Quinn, Atty., N.L.R.B., Washington, D. C., for respondent.
    Before LAY and BRIGHT, Circuit Judges, and TALBOT SMITH, Senior District Judge.

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

   TALBOT SMITH, Senior District Judge.

This case is before us on the petition of LaCrescent Constant Care Center, Inc. (Company) to set aside an order of the National Labor Relations Board requiring it to bargain with the Minnesota Council # 65, American Federation of State, County and Municipal Employees, AFL-CIO (Union). The Board cross-petitions for enforcement of its order. The Company urges that its refusal to bargain is justified because the Board’s certification of the Union is invalid. It asserts that the representation election upon which the certification is based was tainted by material misrepresentations made by a Union organizer, Mr. Roth, during the election campaign. We agree and decline enforcement.

The Company is a Minnesota corporation which operates a proprietary nursing home in LaCrescent, Minnesota. On June 5, 1973 the Union won a Board-conducted consent election by a vote of twenty-six to twelve with no void or challenged ballots. The Company filed timely objections to the conduct of the election, asserting that the Union had so misrepresented its financial condition to the employees as to preclude the free choice of a bargaining agent.

The Acting Regional Director made an investigation and found evidence that Roth had made misrepresentations to the employees. These pertained to the Company’s profit position and hence bore directly upon its repeated assertions to its employees that it could not pay higher wages because it was losing money. The truth was, as the Director found, that “in fiscal 1972, the employer actually suffered a loss.” He concluded, however, that “the employees were in a position to independently evaluate Roth’s statement. In addition, I am not convinced that the alleged misrepresentation was so substantial as to warrant setting aside an election. * * * I' therefore find that the alleged misrepresentation, if made, did not affect the results of the election.”

Again the Company filed exceptions; their principal thrust, as before, was directed towards the “false statements” made by the Union organizer to the effect that the Company was making a “substantial, even excessive, profit,” and that a Minnesota court had denied relief to the Company in a welfare lawsuit because of excessive profits. The exceptions also attacked the Director’s conclusion that the employees were in a position to “independently evaluate” the Union statements.

The Board, however, with Member Kennedy dissenting, rejected the objections made, adopted the Acting Regional Director’s Report and found ' that the Company’s exceptions “raise no material issues of fact or law which would warrant the holding of a hearing or reversing the findings, conclusions, and recommendations of the Acting Regional Director.” It thereupon certified the Union as the bargaining agent.

Thereafter, the Company refused to bargain with the Union, and the Board issued a complaint alleging a refusal to bargain in violation of §§ 8(a)(1) and (5) of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1) and (5). The Company admitted its refusal to bargain, but contended that it was justified in its refusal because the certification was invalid for the reasons urged in its objections to the election. The Company and the Union entered into a stipulation stating that the Board should “transfer this proceeding to the Board for final determination,” that there were “no issues of fact which would warrant a hearing,” and that both parties “waive the right to a hearing before the Administrative Law Judge,” the filing of briefs, and other procedural steps.

The cause was thereupon submitted to the Board which granted the General Counsel’s motion for summary judgment on the ground that all issues in the case were or could have been litigated in the representation proceeding. This action followed.

We recognize that the Board is vested with a wide discretion in dealing with matters relating to representation proceedings. Within this discretion the Board has adopted the following standard concerning preelection propaganda:

We believe that an election should be set aside only where there has been a misrepresentation or other similar campaign trickery, which involves a substantial departure from the truth, at a time which prevents the other party or parties from making an effective reply, so that the misrepresentation, whether deliberate or not, may reasonably be expected to have a significant impact on the election. * * [E]ven where a misrepresentation is shown to have been substantial, the Board may still refuse to set aside the election if it finds upon consideration of all the circumstances that the statement would not be likely to have had a real impact on the election. For example, the misrepresentation might have occurred in connection with an unimportant matter so that it could only have had a de minimis effect. * * * Or, the Board may find that the employees possessed independent knowledge with which to evaluate the statements.

Hollywood Ceramics, Inc., 140 NLRB 221, 224 (1962) (footnotes omitted).

In the instant case the Board and the Acting Regional Director (whose findings and conclusions the Board adopted) focused on the last part of this test, whether “the statement would * * * be likely to have had a real impact on the election.” In this regard the Board found that the Company’s memoranda and letters to its employees gave them sufficient independent knowledge to evaluate Roth’s misrepresentations, which thus, presumably, had no impact on the election. The Board noted that the Union was not in a special position to know more than the employees about the Company’s lawsuit against the Department of Social Welfare. Finally, the Board found that the employees were likely to have sufficient “common judgment” to be able to evaluate Roth’s statement to the effect that a subtraction of the Company’s out-of-state purchases from gross sales shows sufficient funds left over to pay a wage increase.

The Company does not challenge the Hollywood Ceramics standard. Rather, it challenges whether the conclusions reached by the Board in applying its chosen standard are supported by substantial evidence on the record considered as a whole.

Our point of departure is clear: the Board does not, generally speaking, police the utterances of the parties to a Union election. It does not insist on the niceties of phraseology one would demand in a deed, and it is not unaware that within the limits of fair electioneering it must expect the voters to be exposed to a puffing of the merits of a proponent’s position accompanied by derogation of that of the opponent. See Bok, The Regulation of Campaign Tactics in Representation Elections Under the National Labor Relations Act, 78 Harv.L.Rev. 38, 82-91 (1964); Fuchs, Pre-election Campaign Propaganda and Activities Before the National Labor Relations Board, 4 B.C.Ind. & Com.L.Rev. 485, 488-89 (1963).

However, a point may be reached where the pre-election propagandizing has created an atmosphere rendering the free choice of a bargaining agent by the employees highly improbable. In such event the election must be invalidated. Here it is conceded that the Union organizer made misstatements of fact. They pertained to wages, “the stuff of life for Unions and members, the selfsame subjects concerning which men organize and elect their representatives to bargain.” In this situation, where the vigorously contested ability of the Company to pay higher wages assumed primary importance in the pre-election campaigning, the misrepresentation found to have been made cannot be regarded as other than material. Under these circumstances our holding in NLRB v. Lord Baltimore Press, Inc., 370 F.2d 397, 402 (8th Cir. 1966) is pertinent to the problem presented:

[A] resort to deliberate falsehood or intentional fraud, as is alleged to have existed here, will generally be a matter of significance in a representation election, for * * * “No one is in a better position than the union to know what the voters need to be told”.

The misrepresentations as to the Company’s profit position had two aspects, not unrelated, but with a somewhat different emphasis. The first concerned the general charge that the Company had the money with which to pay a wage increase as shown by the Stipulation for Certification Upon Consent Election. This showed gross sales by the Company of $323,902 and purchases outside of the State of Minnesota in excess of $50,000. Subtracting the jurisdictional figure from the gross, Roth argued that the Company “had over $200,-000 to meet additional expenses and must surely have some money left over to pay at least a minimal wage increase.” Actually the Company was losing money during this fiscal period, and it charges that Roth’s statement amounted to a misrepresentation by the Union of its financial standing. The Board’s position was that the “ ‘nurses aides, housekeeping employees, and laundry employees’ [were not] so bereft of common judgment as to be unable to evaluate statements to the effect that by subtracting out-of-state purchases from gross sales shows that sufficient money was left over to pay a minimal wage increase,” and that “the employees were well able to determine that the Employer’s expenses of operation included more than out-of-state purchases * * ” in short, that the employees’ common sense would warn them that the Roth statement was misleading. 208 NLRB No. 9, at 3 n. I. We need not, however, determine the degree to which the common sense of an employee may supply the factual information normally deemed essential to a profit and loss determination in view of the fact that the second Roth statement then moved into an area of gross and undeniable misrepresentation.

In February of 1972 the Company had filed suit challenging the legality of the statewide freeze of welfare rates in nursing homes. The decision of the court upheld the legality of the welfare rate freeze. The loss of this suit was employed by Roth as an argument supporting his thesis that the Company was well able to pay higher wages. As summarized by the Acting Regional Director:

Employees’ accounts of Roth’s statement, however, indicate that Roth told them the Employer had lost its lawsuit because it was making “too much profit” or “too much money” and that it could have won the lawsuit if it had shown a “negative cash flow.” Assuming that the testimony of employee witnesses is accurate, Roth’s assertion that the Employer had made a profit is a misrepresentation. In fact, the outcome of the lawsuit was in no way based on the Employer’s profit or loss. Furthermore, in fiscal year 1972, the Employer actually suffered a loss.

At this point the line has been crossed. We are no longer dealing with puffery, electionéering rhetoric. Here the organizer has either recklessly or deliberately falsified the record. To lend credence to his claim that the Company could well afford a wage increase, Roth invoked the aegis of a court by asserting, in effect, that an impartial judicial authority had determined that the Company was reaping high profits. This was a complete falsehood which cannot be characterized as less than a “substantial departure from the truth” under the Hollywood Ceramics test.

Viewing the totality of the circumstances presented, we conclude that the Board’s finding that Roth’s misrepresentations were not likely to have a significant impact on the election is clearly unsupported by substantial evidence on the record as a whole. Accordingly,

Enforcement of the Board’s bargaining order is denied.

      . The Board’s decision and order are reported at 211 N.L.R.B. No. 72 (1974).

      . There were approximately forty-four eligible voters in the appropriate unit consisting of:
      All full time and regular part time nurses aides, housekeeping employees, laundry employees, dietary employees, social activities aide, orderlies and maintenance employees; excluding casual employees, temporary employees, confidential employees, LPN’s, RN’s, guards, and supervisors as defined in the National Labof Relations Act as amended.

      . In more detail LaCrescent’s objections asserted:
      1. Petitioner Union, and agents and employees of said Union, misstated material facts during the conduct of the election. A central issue during the election was the past, present, and future ability of the employer to afford pay increases, given an 18 month “freeze” in the level of reimbursement for the care of welfare patients payable to the employer by the Houston County Welfare Board and Minnesota Department of Public Welfare. Petitioner Union grossly distorted the facts relating to the past, present, and future ability of the employer to receive increased reimbursement from welfare agencies and, hence, the ability of said employer to allow employee wage increases.
      2. Petitioner Union, and agents and employees thereof, grossly misrepresented the nature, judgment, and reasons for judgment in a major lawsuit in which the employer sought additional reimbursement for the care of welfare patients from Minnesota Welfare agencies, thereby misstating the past, present, and future abilities of the employer to grant increased wages to members of the bargaining unit.
      3. Petitioner Union, and agents and employees thereof, otherwise misstated the financial standing and status of the employer so as to induce members of the bargaining unit to believe that the employer was “profiteering” at the expense of members of the bargaining unit.
      The employer hereby formally objects to the above-stated misconduct which affected the results of the election herein * * *.

      . The finding assumes that the testimony of employee witnesses as to Roth’s statements that the Company had lost its lawsuit because it was making “too much money” was accurate. See, respecting the situation where all the facts contended for by the challenging party are given credence, NLRB v. Commercial Letter, Inc., 455 F.2d 109, 115 (8th Cir. 1972) (Lay, J., concurring) and cases there cited.

      . 208 NLRB No. 9 (1974).

      . “In cases such as these, an employer wishing to obtain judicial review of a § 9 representation determination, a non-final order, must refuse to bargain with the representative it considers as incorrectly certified and then litigate a subsequent cease-and-desist final order issued pursuant to § 10.” NLRB v. Skelly Oil Co., 473 F.2d 1079, 1082 n. 3 (8th Cir. 1973). See Boire v. Greyhound Corp., 376 U.S. 473, 476-79, 84 S.Ct. 894, 11 L.Ed.2d 849 (1964); AFL v. NLRB, 308 U.S. 401, 409, 60 S.Ct. 300, 84 L.Ed. 347 (1940).

      . See 29 C.F.R. § 102.50 (1974).

      . The stipulation was clearly intended to expedite the unfair labor practice proceedings, which in this context were merely pro forma. What we said in NLRB v. Skelly Oil Co., 473 F.2d 1079, 1083-84 (8th Cir. 1973) is pertinent here:
      If, after the investigation, the Regional Director recommends certification without a hearing, and the Board finds that the Employer raises no material or substantial issues of fact or law warranting reversal or a hearing, further consideration of an Employer’s objections is foreclosed. This is the product of the Board’s non-relitigation rule [29 C.F.R. §§ 102.67(f), 102.69(c) (1974)] and, although such a rule is not unacceptable, a challenge to certification by refusing to bargain leads inexorably to the finding that there has been an unfair labor practice and to a cease-and-desist order. Thus, here, although there has been a series of procedural steps involved in the § 10 proceedings, the Board’s order was the inevitable by-product of the original § 9 proceeding. [footnotes omitted.]

      . 211 NLRB No. 72, at 4-5 (1974).

      . NLRB v. Wyman-Gordon Co., 394 U.S. 759, 767, 89 S.Ct. 1426, 22 L.Ed.2d 709 (1969); e. g. NLRB v. Modine Mfg. Co., 500 F.2d 914, 916 (8th Cir. 1974); NLRB v. Commercial Letter, Inc., 455 F.2d 109, 115 (8th Cir. 1972) (Lay, J., concurring).
      The courts have not deferred to this discretion, however, where the Board fails in its “duty * * * to establish ‘the procedure and safeguards necessary to insure the fair and free choice of bargaining representatives by employees.’ ” NLRB v. Savair Mfg. Co., 414 U.S. 270, 276-7, 94 S.Ct. 495, 498, 38 L.Ed.2d 495 (1973).

      . This court has approved the Hollywood Ceramics standard. NLRB v. Modine Mfg. Co., 500 F.2d 914, 915-16 (8th Cir. 1974); NLRB v. Southern Paper Box Co., 473 F.2d 208, 210 (8th Cir. 1973); NLRB v. Georgia-Pacific Corp., 473 F.2d 206, 208 (8th Cir. 1973); see NLRB v. Skelly Oil Co., 473 F.2d 1079, 1083 (8th Cir. 1973); NLRB v. Lord Baltimore Press, Inc., 370 F.2d 397, 402 (8th Cir. 1966).

      . By memorandum of January 31, 1972 the Company informed its employees that it was suspending all raises because of a state-imposed “freeze” on the level of reimbursement for the care of welfare patients. On June 16, 1972 a letter to all employees (accompanying checks representing partial back pay for such suspended raises) stated that the Company’s requests for increased reimbursement from the Department of Public Welfare had been denied. On March 20, 1973 a memorandum informed employees that as a result of a change in Department policy it anticipated the Department to grant increased reimbursement, and that certain employees could expect a Yaise. Finally on May 27, 1973 (four days after the meeting here in question) employees received checks for back pay, stated to have been made possible by the receipt of increased reimbursement from the Department.

      . 208 NLRB No. 9, at 2 n. 1 (1974) (semble).

      . Id.

      . Id., at 3 n. 1.

      . See notes 10 & 11, supra.

        . National Labor Relations Act § 10(e), 29 U.S.C. § 160(e); Universal Camera Corp. v. NLRB, 340 U.S. 474, 487-88, 71 S.Ct. 456, 95 L.Ed. 456 (1951); e. g. NLRB v. Payless Cashway Lumber Store, Inc., 508 F.2d 24 (8th Cir. 1974).

      . NLRB v. Houston Chronicle Publishing Co., 300 F.2d 273, 280 (5th Cir. 1962), quoted in Gallenkamp Stores Co. v. NLRB, 402 F.2d 525, 534 (9th Cir. 1968); NLRB v. G. K. Turner Associates, 457 F.2d 484, 488 (9th Cir. 1972).

      . The Board asserts jurisdiction over non-retail operations which have an annual out-of-state inflow or outflow of at least $50,000. R. Smith, L. Merrifield & T. St. Antoine, Labor Relations Law 55 (5th ed. 1974). Its dollar volume standard for asserting jurisdiction over nursing homes is a gross annual revenue of at least $100,000. Id. at 57; University Nursing Home, Inc., 168 NLRB 263 (1967). See § 14(c)(1) of the National Labor Relations Act, 29 U.S.C. § 164(c)(1).

      . A portion of Member Kennedy’s dissent goes to the same point:
      The Acting Regional Director’s investigation revealed that the Employer continually communicated to its employees by letter and memoranda that it was attempting to secure additional funds from the Minnesota Department of Public Welfare. He found this created a “clear implication” that the Employer, faced with rising costs, had no funds available for wage increases. He concluded, from this implication, that the employees were in a position to independently evaluate the Petitioner’s misrepresentation. Such reasoning is unacceptable to me. The Board has not adopted, and in my estimation should not adopt, a penumbra-like approach to solving preelection misrepresentation questions. It is far fetched to suggest that “nurses aides, housekeeping employees, and laundry employees” would possess the expertise to independently evaluate the Petitioner’s misstatements. To conclude that employees would view the statements of the Petitioner’s representative as mere innocuous puff is unlikely at best.
      The misrepresentation of the Employer’s financial condition, whether or not deliberate, involved an important matter to the voters. The Employer did not have an opportunity to make an effective reply to this misrepresentation. And, of course, any misrepresentation concerning wages cannot be considered trivial.
      208 NLRB No. 9, at 5 (1974) (footnotes omitted).

      . The Company’s communications offered no factual information concerning its financial status, but merely alleged that its financial status was poor because of the penurious policies of the Department of Social Welfare.

      . LaCrescent Constant Care Center, Inc. v. State, No. 383235 (Minn.2nd Dist.Ct., April 10, 1973).

      . The Court’s opinion referred to by the Union held that the “provider agreements” executed by the Company required the payment only of “reasonable costs,” and that the State of Minnesota from February 1, 1971 through October 31, 1972 had reimbursed the Company on the basis of “reasonable costs; ” that the Company’s “Notice of Termination” created no new contractual obligations upon the State; that the legislative action reducing appropriations for the Medical Assistance Program for fiscal 1971-1973 required the Minnesota Department of Public Welfare to expend only duly appropriated sums; that the action of the Minnesota Department of Public Welfare imposing a rate freeze upon nursing homes was neither arbitrary nor capricious; and that the Company was entitled to no relief. We find no support in the record or in reason for the Director’s conclusion that the employees had independent knowledge by the use of which “they could evaluate Roth’s alleged assertion that the Employer had lost its lawsuit because it made a profit.”


author: KOELSCH, Circuit Judge:

text:
    Erle E. PEACOCK, Jr., Plaintiff-Appellant, v. BOARD OF REGENTS OF the UNIVERSITIES AND STATE COLLEGES OF ARIZONA et al., Defendants-Appellees.
    No. 74-2259.
    United States Court of Appeals, Ninth Circuit.
    Feb. 4. 1975.
    Certiorari Denied June 23, 1975.
    See 95 S.Ct. 2668.

      William Lee McLane (argued), Phoenix, Ariz., for plaintiff-appellant.
    Jack J. Rappeport. (argued), Tucson, Ariz., for defendants-appellees.
    Before LUMBARD, KOELSCH and WRIGHT, Circuit Judges.

       The Honorable J. Edward Lumbard, Senior United States Circuit Judge for the Second Circuit, sitting by designation.

   OPINION

KOELSCH, Circuit Judge:

Erie E. Peacock,-.Jr., appeals from an order of the district court granting him a preliminary injunction but for less than all the relief he sought. Our jurisdiction is predicated upon 28 U.S.C. § 1292(a).

From 1969 until late in 1973, appellant was a tenured Professor of Surgery and Head of the Department of Surgery at the University of Arizona’s College of Medicine, a state school. He was employed under a written contract which during the events here in issue appointed him “Professor and Department Head in the Department of Surgery” “for the fiscal year 1973 — 1974 effective July 1, 1973. . ” The University, however, became dissatisfied with his administrative performance, and on October 25, 1973, summarily dismissed him as Head of the Department. An academic power struggle ensued, with further strife and bickering, during which, on February 11, 1974, the University suspended appellant as Professor of Surgery, again without a prior hearing, although in this regard offering him a post-suspension hearing on his status as professor.

On February 22, 1974, appellant instituted this suit for damages and equitable relief to redress the denial of his right, allegedly protected by the Due Process Clause, to a hearing prior to being deprived by the State of his protected property interests — his position as Head of the Department and his position as professor, both held under contract. See Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); Perry v. Sinderman, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). Appellant also moved for a preliminary injunction reinstating him as Head of the Department, and removing his suspension as professor, until such time as the University afforded him a pre-deprivation hearing.

Ruling on the motion, the district court concluded with respect to the “headship” that appellant had a property interest in the position — a legitimate claim of entitlement of a year’s duration created by the appointment papers — and that no circumstances existed warranting deprivation of that interest absent a hearing. However, the court declined to exercise its equitable powers to order full reinstatement. Instead, the court ordered the University to reinstate him as Head with the option of “reliev[ing] him from performing any duties as head pending a hearing in accordance with the rules and regulations, Faculty Manual, Chap. VIII 13 ed., regarding the dismissal of tenured faculty members.” With respect to the professorship, the court likewise ruled that appellant had a cognizable property interest, and that his suspension without a hearing probably violated due process, but again refused to order reinstatement. It ordered the University to continue effective the offer to a post-suspension hearing.

Initially, appellant’s appeal was from both aspects of the court’s order. However, he has now advised us that during its pendency the University .has reinstated appellant as professor. Accordingly, the parties stipulated that the portion of the court’s order refusing to reinstate appellant as professor is no longer in issue and is withdrawn from the appeal. However, the question of the propriety of the order as it relates to appellant’s reinstatement as Head of the Department remains.

Appellant contends, in substance: (1) that he possessed a property interest in the position as Head of the Department for a one-year term (ending June 30, 1974, eight and one-half months after he was dismissed); (2) that due process entitled him to a pre-deprivation hearing; (3) that the district court erred in refusing to order full reinstatement because it is as a matter of law an abuse of discretion to balance rights of a constitutional dimension against the state’s interest in denying those rights, see Youngstown Sheet & Tube Co. v. Sawyer, 103 F.Supp. 569, 576 (D.D.C.1952); and, (4) that this court must remedy the district court’s error now by ordering appellant’s reinstatement, even though his contractual appointment has expired while the case was pending on appeal. The University takes the position that a headship does not constitute a protected property interest; it argues (and submits a number of supporting affidavits) that the position is quasi-administrative, that under the common law of the campus (see Perry v. Sinderman, supra) the heads of departments are appointed by and serve at sufferance of the University President, that they can attain no tenure in the position, and that they are subject to the unfettered discretion of the President, who can dismiss department heads at any time and for any reason or for no reason.

As noted, the district court found that appellant had a “legitimate claim of entitlement” created by his one-year appointment — an interest of the sort protected under Perry v. Sinderman, supra. We think there is a great deal of merit in the University’s contention that the contractual appointment should be read as merely delimiting the term during which appellant was to serve at sufferance, see Adams v. Walker, 492 F.2d 1003, 1007 (7th Cir. 1974), and that, as the position was terminable at will, he had no protected interest in it.

“Although comprehensive definition of the entitlement concept is not yet possible, the contexts in which prior notice and hearing have or have not been required provide guidance in determining the kinds of interests that are entitlements. An interest that gives rise to an entitlement is always a conditional interest, but not all conditional interests in governmental benefits give rise to entitlements. To create an entitlement, the law must remove the decision to grant the benefit from agency discretion. (See, e. g., Arnett v. Kennedy (1974) 416 U.S. 134, at 181-182, 94 S.Ct. 1633, 40 L.Ed.2d 15 (op’n of White, J.) (government employment terminable at will of government not subject to prior notice and hearing).)”

Geneva Towers Tenants Organization, etc., et al. v. Federated Mortgage Investors, Inc., et al., 504 F.2d 483, at 494. (9th Cir., 1974), (Hufstedler, J., dissenting). See Board of Regents v. Roth, supra, at 578, 92 S.Ct. 2701. However, in the present posture of the case, before a complete record has been developed at a trial on the merits, we are unwilling to hold that the district court’s conclusion about the ■ nature of the position was clearly erroneous.

Nevertheless, assuming that appellant had a protected expectation of employment, we think the district court’s order afforded him his due process rights. The University, as noted, did not provide appellant a hearing either before or after dismissing him as Head. The effect of the court’s order reinstating appellant to the position but granting the University the option of suspending him from his duties pending a hearing was precisely the same as a ruling that the University action violated due process but that a hearing following a summary suspension was an adequate procedure. We think that under.the circumstances of this case, due process does not require a pre-suspension hearing, and that the district court’s order declining to completely reinstate appellant pending such a hearing was proper.

As we recently recognized:

“The Supreme Court, in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), enunciated a two-step process for analyzing cases involving deprivation of a governmental benefit. First, it must be ascertained whether the interest at issue is a constitutionally protected ‘property’ or ‘liberty’ interest. See id. at 262, 90 S.Ct. at 1011. Second, if the interest is a protected one, the beneficiary’s interest in avoiding loss must be balanced against the government’s interest in summary adjudication.” Geneva Towers, supra, 504 F.2d at 488. (Footnotes omitted.)

To amplify the second point — “Once it is determined that due process applies, the question remains what process is due [D]ue process is flexible and calls for such procedural protections as the particular situation demands.” Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972). Notice and opportunity to be heard “must be granted at a meaningful time and in a meaningful manner.” Armstrong v. Manzo, 380 U.S. 545, 552, 85 S.Ct. 1187, 1191, 14 L.Ed.2d 62 (1965). To determine whether the opportunity to be heard provided was at a time sufficiently meaningful to satisfy due process, we must balance the University’s interest in the form of procedure ultimately afforded appellant by the court against appellant’s interests in a more rigorous procedure. See, e. g. Goldberg v. Kelly, 397 U.S. 254, 262, 90 S.Ct. 1011, 25 L.Ed.2d 287 et seq. (1970); Geneva Towers, supra, 504 F.2d 483. See Note, The Supreme Court, 1973 Term, 88 Harv. L.Rev. 13, 77, 85 (1974).

Appellant contends that absent exceptional circumstances (none of which here' exists) the outcome of that traditional due process balancing test is presumptively weighted in favor of a prior hearing. He cites several cases to support his position — Fuentes v. Shevin, 407 U.S. 67, 82, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Bell v. Burson, 402 U.S. 535, 542, 91 S.Ct. 1586, 29 L.Ed.2d 90 (1971); Goldberg v. Kelly, 397 U.S. 254, 259-260, 264, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Sniadach v. Family Finance Corp., 395 U.S. 337, 339, 342, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969) — which, particularly Fuentes, indeed support his contention. See also Board of Regents v. Roth, supra, 408 U.S. at 570 n. 7, 92 S.Ct. 2701. Before the Court’s decisions last term in Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.E.d.2d 406 (1974), and Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974), we might have agreed. See Geneva Towers, supra, 504 F.2d 483; Stewart v. Pearce, 484 F.2d 1031 (9th Cir. 1973). However, in Mitchell a majority of the Court applied the traditional balancing test unaided by a presumption in favor of a prior hearing and upheld a sequestration statute which provided only a post-seizure hearing. And in Arnett the Court upheld the OEO’s employee dismissal procedures, under the Lloyd-LaFollette Act, 5 U.S.C. § 7501, even though the procedures provide a trial-type hearing only after termination. Three members of the Court explicitly applied a balancing test to reach the conclusion that a hearing post-removal was adequate, see 416 U.S. at 167 — 168, 94 S.Ct. 1633 (opinion of Powell, J., with which Blackmun, J., concurred), and 416 U.S. at 188, 94 S.Ct. 1633 (opinion of White, J.); and the plurality, two members of which joined in the Mitchell majority, went further to hold that the defined removal procedures limit a claim of entitlement created by the state as much as a substantive limit, and that adherence to those procedures satisfies due process. We think the upshot of Arnett and Mitchell is that in considering the due process validity of the procedure provided we must apply the traditional balancing test without a presumption favoring a prior hearing.

So applying the test, we conclude that the procedure provided by the district court comported with due process. Appellant’s interest in a hearing before rather than after he was suspended from the performance of his duties as Head of the Department was relatively slight. No financial interest is involved — the position was not remunerated, and appellant continued to receive his full professor’s pay while suspended. Clearly appellant was not threatened with the spectre of brutal need which would dictate the necessity of a prior hearing. Compare Goldberg v. Kelly, supra (welfare benefits); Sniadach, supra (wage garnishment); Geneva Towers, supra (rent increases). The suspension pending a hearing did not impair appellant’s liberty interests, see Board of Regents v. Roth, supra, at 573, 92 S.Ct. 2701, as the proposed termination was not for any reason which might stigmatize appellant in the way that a charge of dishonesty or immorality might.

We recognize that the suspension probably does adversely reflect on appellant. The prestige that attached to the holding of the position, and whatever lustre it added to appellant’s reputation as a doctor, may incidentally be temporarily diminished. Perhaps a suggestion of incompetence does result, even though the University never questioned his professional competence but sought to remove him solely because of his lack of cooperation stemming from differences of opinion about how to run a medical school. And a suspension, of course, temporarily prevents him from performing the tasks of the position, which he may enjoy and which may contribute to the development and maintenance of his career skills. See Lafferty v. Carter, 310 F.Supp. 465 (W.D.Wis.1970). (However, we are here discussing appellant’s suspension as Head of the Department, not as a professor of surgery; and while the record indicates that the administrative position was important to him, its deprivation did not remove him from the “mainstream of his occupation” (310 F.Supp. at 470) as a teacher and surgeon.) Whatever damage appellant will suffer by a suspension is minimized by the requirement of a prompt post-suspension hearing, which limits the duration of the suspension and the extent of the damage he will suffer should the suspension later be found to have been unwarranted.

. On the other side of the ledger is the University’s interest in the prevention of harm to and efficient administration of the medical school and the University Hospital. The record indicates that although the head of a department at the University of Arizona is in immediate charge of administrative matters, the President and Board of Regents, being vested with the ultimate authority of the University, possess the power to make the decisions concerning the department and bear the responsibility for its proper operation. Consultation and compromise with a department head may in the end prove the best way for the President and Board to run the school. Nevertheless, as the ultimate authority, the President and Board are entitled to have a department head follow their orders. Some measure of loyalty and cooperation is required; without that cooperation a segment of the University, here the medical school and the University Hospital, may be injured either by misadministration or a lack of administration. Thus, the University has a significant interest in suspending a potentially recalcitrant or disloyal department head in order to keep the channels of administration properly functioning, cf. Hostrop v. Board of Junior College District No. 515, 471 F.2d 488 (7th Cir. 1972); this is particularly true if his cooperation is not likely to improve pending a hearing. We conclude that the potential threat to the administration of the medical school and the incidental threat of disruption of the functioning of the University Hospital was sufficient to outweigh appellant’s limited interest in a pre-suspension hearing.

The various opinions in Arnett, supra, support our conclusion that the procedure ordered by the court satisfied due process. There, Justice White, in the course of expressing his conclusion that a pre-termination hearing was required, nevertheless observed:

“One must also consider another type of cost to the Government if preseparation hearings were provided — the necessity of keeping a person on the scene who might injure the public interest through poor service or might create an uproar at the workplace. However, suspension with pay would obviate this problem.” 416 U.S. at 194, 94 S.Ct. at 1664.

And Justice Powell, in his concurring opinion, expressed the view that a suspension with pay was unnecessary and that a post-termination hearing was adequate. 416 U.S. at 169 n. 4, 94 S.Ct. 1633. And finally, the three dissenters suggested that they, too, regard a suspension with pay pending a hearing in a better light than an immediate termination.

In conclusion, we decide that under the circumstances of this case the ordered post-suspension hearing on appellant’s status as Head of the Department satisfied the requirements of due process and that the court committed no error in limiting its injunction. We emphasize that under different circumstances, involving a more serious intrusion on a protected property interest, such as the professorship, or on a “liberty” interest, or an employment relationship in which loyalty and cooperation are less imperative, a pre-deprivation hearing may be required.

Affirmed.

      . As a result, we express no opinion on the propriety of the district court’s refusal to order appellant’s reinstatement as professor.

      . Appellant contends that unless we order reinstatement, he will be left without an effective remedy for the district court’s error in not granting preliminary relief. Cf. Stewart v. Pearce, 484 F.2d 1031 (9th Cir. 1973).

      . We do not reach the issue of whether the court may “balance the equities” to refuse to injunctively enforce a constitutional right, as we conclude here that the court adequately enforced appellant’s due process rights.

      . Assuming that the University is correct in contending that the campus understanding is that a head of a department is subject to discretionary removal at any time, and that in ’ accepting the position appellant was likewise subject to such removal, the Arnett plurality’s position would dictate that in that case appellant has no right to any hearing, as the removal procedures condition the substantive right. As six of nine Justices rejected the position in Arnett, we do not follow it here. See 416 U.S. at 166-67, 94 S.Ct. 1633 (Powell, J.); 416 U.S. at 177-78, 94 S.Ct. 1633 (White, J.); 416 U.S. at 211, 94 S.Ct. 1633 (Marshall, J.). Nevertheless, we note that the distinction drawn by those six Justices between substantive and procedural limitations on an “entitlement” is somewhat illusory in this case, as the common law of the campus understanding (if it exists) that a head of department is subject to summary removal, even if for cause, may equally lead either to the conclusion that such a removal satisfies due process, or that appellant does not have a substantive entitlement. See 88 Harv.L.Rev. at 87.

      . We do not intimate that appellant in fact refused to perform tasks assigned by the administration or that his lack of cooperation ever damaged either the medical school or the Hospital' — the University’s interest in obviating a potential threat is here sufficient to justify the suspension pending a hearing.