author: LUMBARD, Circuit Judge: KOELSCH, Circuit Judge

text:
    Michael J. RYAN, Plaintiff-Appellee, v. PACIFIC COAST SHIPPING CO., LIBERIA, Defendant-Appellant.
    No. 73-2742.
    United States Court of Appeals, Ninth Circuit.
    Jan. 2, 1975.

      Kenneth E. Roberts (argued), Souther, Spaulding, Insey, Williamson & Schwabe, Portland, Or., for defendant-appellant.
    Raymond J. Conboy (argued), Portland, Or., for plaintiff-appellee.
    Before LUMBARD, KOELSCH and WRIGHT, Circuit Judges.

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

   OPINION

LUMBARD, Circuit Judge:

Defendant Pacific Coast Shipping Co. (Pacific Coast), a shipowner, appeals from a judgment entered May 23, 1973, in the District Court of Oregon, Robert C. Belloni, J., awarding plaintiff Michael J. Ryan (Ryan), a longshoreman, damages for personal injuries in an amount of $53,129.05 plus costs and interest. The judgment awarded Pacific Coast damages in the amount of its liability to Ryan, plus its costs and interest, from Scrap Loaders, Inc., Ryan’s employer. Scrap Loaders does not appeal.

The judgment of the trial court was virtually identical to the first judgment which it entered in this case on June 6, 1969. That earlier judgment was affirmed by this court on September 8, 1971. 448 F.2d 525 (1971). However, on January 17, 1972, the Supreme Court vacated our judgment, 404 U.S. 1035, 92 S.Ct. 713, 30 L.Ed.2d 727 and the case was remanded to us for reconsideration in light of Usner v. Luckenbach Overseas Corp., 400 U.S. 494, 91 S.Ct. 514, 27 L.Ed.2d 562 (1970), and Victory Carriers, Inc. v. Law, 404 U.S. 202, 92 S.Ct. 418, 30 L.Ed.2d 383 (1971). We in turn remanded the case to the district court for reconsideration in light of Victory Carriers on August 25, 1972. The district court reviewed its decision in light of both Usner and Victory Carriers and concluded that its initial decision was correct. We disagree and reverse on the basis of Usner.

On January 25, 1966, Ryan was employed as a longshoreman by Scrap Loaders, Inc., and was engaged in discharging a cargo of steel pipe from the S. S. Popeye, a ship owned by Pacific Coast and berthed in navigable waters at Portland, Oregon. A dockside crane was used to unload the ship. The unloading procedure was as follows: the crane operator would lift the steel pipes out of the ship’s hold in bundles weighing between four and six tons. He would then swing them over the dock and deposit them in a railroad car on the dock. Ryan, who was working as a slingman, would unhook the bundles after they had been placed in the car. When it had been necessary to straighten the pipes so that they would fit into the railroad car, the crane operators for the six shifts pri- or to the accident had first straightened them on the deck of the Popeye before depositing them in a railroad car.

The accident occurred when a new crane operator, Vic Bono, discharging his first bundle of pipes, either accidentally or in an attempt to straighten the bundle, swung it so that it hit the side of the railroad car into which it was to be loaded. That caused the railroad car to tip and pin Ryan-between that car and an adjacent car.

The issue is whether the district court was correct in concluding that Ryan’s injury was caused by some condition that rendered the Popeye unseaworthy rather than by an individual act of negligence. Our answer is dictated by Usner v. Luckenbach Overseas Corp., supra, where the Supreme Court held that an unseaworthy condition was not created when a winch operator lowered a cargo sling attached to his winch too fast and thereby caused injury to a longshoreman engaged in unloading the ship. The Supreme Court described the underlying facts in Usner as follows:

[Pjetitioner and others were on the barge, where their job was to “break out” the bundles of cargo by securing them to a sling attached to the fall each time it was lowered from the ship’s boom by the winch operator. The loading operations had been proceeding in this manner for some time, until upon one occasion the winch operator did not lower the fall far enough. Finding the sling beyond his reach, the petitioner mentioned to the flagman standing on the deck of the ship to direct the winch operator to lower the fall farther. The winch operator then lowered the fall, but he lowered it too far and too fast. The sling struck the petitioner, knocking him to the deck of the barge and causing his injuries. Neither before nor after this occurrence was any difficulty experienced with the winch

Usner v. Luckenbach Overseas Corp., supra, at 495, 91 S.Ct. at 515.

This case is quite similar to Usner. The unloading operation had proceeded without incident for some time. The action that caused Ryan’s injury — the striking of the railroad car by the crane operator — had not occurred before and did not occur again. In the words of Usner, “[w]hat caused [Ryan’s] injuries in the present case, however, was not the condition of the ship, her appurtenances, her cargo, or her crew, but the isolated, personal negligent act of petitioner’s fellow longshoreman. To hold that this individual act of negligence rendered the ship unseaworthy would be to subvert the fundamental distinction between unseaworthiness and negligence that we have so painstakingly and repeatedly emphasized in our decisions.” Usner v. Luckenbach Overseas Corp., supra, at 500, 91 S.Ct. at 518.

The district court apparently felt that Bono intended to bang the pipes against the car in order to straighten them. It attempted to distinguish Usner by characterizing the issue as the “propriety of an unloading technique.” We agree that a vessel can be rendered unseaworthy if an unsafe method of discharging cargo is adopted by the longshoremen. Blassingill v. Waterman S. S. Corp., 336 F.2d 367 (9th Cir. 1964). However, no such unsafe method had been adopted here. For six shifts prior to the accident a proper technique had been used. The actions of Bono in discharging his first load cannot be characterized as the adoption of a new unloading technique. Indeed, the term “unloading technique” seems singularly inappropriate. Ryan, who had worked on the docks for over 20 years, testified at trial that he' had never seen anyone do this before. Indeed, no other witness stated that he had seen a crane operator intentionally do what Bono did here. We conclude that Ryan’s injury was the result of an isolated act of negligence by Bono, and not the result of an unloading technique somehow invented by Bono simultaneously with the accident.

To convert this single negligent act into an unseaworthy condition is to play a game with words. This we decline to do. Virtually any such act could be described as an adoption by the person committing the act of an unsafe practice. For example, in Usner the Supreme Court could well have- said that the winch operator adopted the practice of lowering the fall “too fast.” However, it clearly rejected such an approach. Here the Court’s reasoning impels us to conclude that this one-time occurrence — the banging of steel pipes against a railroad car — did not give rise to an unseaworthy condition.

As a matter of policy our decision seems appropriate. In 1972, Congress amended the Longshoremen’s and Harbor Workers’ Compensation Act to eliminate unseaworthiness claims such as Ryan makes here. 33 U.S.C. § 905(b) (Supp. II 1972). In addition, while we have thought it unnecessary to consider, and do not rely on Victory Carriers for our decision, we note that our decision implements the policy enunciated there of discouraging the expansion of admiralty suits where such claims tend to circumvent a state’s statutory provisions for compensating injured workmen. Victory Carriers, Inc. v. Law, supra, at 211-212, 215-216, 92 S.Ct. 418.

Reversed.

KOELSCH, Circuit Judge

(dissenting):

The trial judge, as the majority recognizes, was well aware of the nice distinction between operational negligence and unseaworthiness. That being true, I share the view of the Second Circuit in Radovich v. Cunard Steamship Co., 364 F.2d 149, 152 (2d Cir. 1966), that

“If anything emerges from these cases other than the difficulty of applying the act-condition (or operational negligence-unseaworthiness) dichotomy, it is that the findings of the trier of fact should be left undisturbed, if the law to be applied to the facts is properly understood.”

It is well to note that the evidence in this record was essentially uncontradicted and that the crucial findings of fact, now rejected by the majority, concern motive and intent — matters of a kind which sometime elude easy perception in cold records, which generally tend to lack flavor.

Given the undisputed fact that “lengths of pipe must be straightened before they can be loaded in the cars,” does it necessarily follow that all operators act alike in aligning their loads. Or is it inconceivable because no operator during the six prior shifts had performed the operation by slamming his load against the gondola car, and that no one had previously observed this done, that Bono’s act was not “conscious and intended,” as the court found. Or can we unhesitatingly say that the fact-finder was nonetheless mistaken when he further found that “The procedure employed would have been, in all likelihood, repeated if not for the injury to Ryan.” I am firmly convinced the answer is “No.”

Because the majority does not reach appellant’s second assignment, I will not discuss it, but merely make the passing comment that it, too, lacks merit.

      . Scrap Loaders joined in the appeal of that first decision on the ground that it should not be held liable since Oregon had an exclusive liability provision in its Workmen’s Compensation law. We followed the weight of authority on that issue and rejected Scrap Loaders’ contention.

      . Since we feel that Usner requires reversal of the district court’s decision, we need not consider whether Victory Carriers also mandates reversal.

      . Although the Supreme Court directed us to reconsider our decision in light of Usner, virtually all of the cases cited by Ryan predate that decision and thus are of little help.

      . Although Usner was decided prior to our first opinion in this case, and was cited in that opinion, the remand of the case by the Supreme Court for reconsideration in light of Usner suggests that we did not adequately consider the effect of Usner on this case at that time.

      . Crucial to the district court’s position was its finding that “the procedure employed would have been, in all likelihood, repeated if not for the injury to Ryan.” But that is sheer speculation. Bono did not testify at trial, and there is nothing in the record to support the court’s statement.

      . The very words “unseaworthy condition” suggest that there must be some period of time during which the condition exists. For example, in cases involving injuries sustained by a longshoreman when part of a ship’s cargo has fallen on him, courts have generally refused to allow recovery if the accident occurred soon after the cargo was stowed. They have concluded that a condition of unseaworthiness must consist of more than one act and last longer than a few seconds or minutes. Caparro v. Koninklijke Nederlandsche Stoomboot Maatschappij, N.V., 503 F.2d 1053, 1054 (2d Cir. 1974) (per curiam); La Fleur v. M. S. Maule, 349 F.Supp. 1318 (W.D.La.1972); Smith v. Olsen & Ugelstad, 324 F.Supp. 578 (D.Mich.1971), affd., 459 F.2d 915 (6th Cir.), cert. denied, 409 U.S. 1040, 93 S.Ct. 526, 34 L.Ed.2d 490 (1972). By analogy these cases suggest that no unseaworthy condition was created here since Ryan’s injury was the immediate consequence of the questioned act of the crane operator.

      . We also reject Ryan’s argument that the vessel was unseaworthy because no taglines or pike poles were provided. They would not have prevented the accident and they were unnecessary since loads could be and usually were first straightened on the deck of the Popeye.


source: Caselaw Access Project

author: WEICK, Circuit Judge.

license: Public Domain

text:
    In the Matter of Paul E. ENYART, Bankrupt-Appellant.
    No. 74-1286.
    United States Court of Appeals, Sixth Circuit.
    Jan. 23, 1975.

      Michael R. Dowling, Diedrich & Lycan, Ashland, Ky., for bankrupt-appellant.
    Joe R. Massey, Jr., Ashland, Ky., for appellee.
    James E. Adkins, Catlettsburg, Ky., for trustee.
    Before WEICK, CELEBREZZE and MILLER, Circuit Judges.
   WEICK, Circuit Judge.

The controversy in this case arises out of the bankruptcy proceeding of Paul E. Enyart, who was adjudicated bankrupt on December 2, 1968, on his voluntary petition.

The referee in bankruptcy sustained Objections and Specification to the discharge of the bankrupt and denied his discharge. The referee’s order was affirmed by the District Court on petition for review, and was affirmed by this Court on appeal, Enyart v. Ashland Discount Co., et al., Sixth Circuit No. 71— 1751, May 1, 1972. Certiorari was denied by the Supreme Court, Enyart v. Ashland Discount Co., 409 U.S. 880, 93 S.Ct. 134, 34 L.Ed.2d 133 (1972).

In the bankruptcy proceeding Ashland Discount Company filed proof of a secured claim. The bankrupt filed a counterclaim thereto, praying for judgment against Ashland for damages in the amount of $100,000. A suit, the subject of the counterclaim, had been pending in the state court prior to bankruptcy. The trustee in bankruptcy was granted leave by the referee to disclaim interest in the counterclaim as valueless to the bankrupt’s estate, and the bankrupt then moved to dismiss his counterclaim, and it was dismissed by the referee.

Under date of January 13, 1971 the claim of Ashland was “allowed in the undisputed amount of $64,883.62 . . ” subject to a requirement ■ that Ashland liquidate its security and apply the proceeds to the debt.

On December 22, 1972 the referee, on motion of Ashland, entered judgment against Enyart in favor of Ashland, on its claim, in the amount of $65,144.56, with interest and costs.

Enyart filed a motion to vacate the judgment on January 2, 1973, which motion the referee denied on June 29, 1973 in an opinion and order.

Under date of August 3, 1973 Enyart filed a motion for an extension of time to file a petition for review of the order of June 29, 1973, alleging that he had mistaken his remedy and had filed a notice of appeal from the referee’s order direct to the Court of Appeals for the Sixth Circuit. The referee denied the motion to extend the time for filing the petition for review, on the ground that he was without authority under Section 39(c) of the Bankruptcy Act, 11 U.S.C. § 67(c), to grant an extension after the ten-day period provided for in said section had expired. Upon petition for review, the District Court affirmed.

Enyart then moved the District Court to alter the order and stay its effect, contending that the bankruptcy court was without jurisdiction to enter a personal judgment against him, and that the judgment is void. He claims that he can raise the issue any time under Rule 60(b)(4) of the Federal Rules of Civil Procedure. The District Court denied the motion and Enyart appealed. We affirm.

I

The threshold question is whether the method for review of orders of the bankruptcy court provided in Section 39(c) of the Bankruptcy Act, 11 U.S.C. § 67(c) is exclusive.

This section permits a person aggrieved by an order of the referee to file a petition for review of the order, by a judge, within ten days after entry of the order, or within such extended time as the court, upon petition filed within such ten-day period, may for cause shown allow.

Prior to amendment of the section in 1960, the bankruptcy court had discretion to extend the time even though no petition had been filed within the ten-day period. Pfister v. Northern Ill. Finance Corp., 317 U.S. 144, 63 S.Ct. 133, 87 L.Ed. 140 (1942); United States Machinery Movers v. Beller, 280 F.2d 91 (8th Cir. 1960).

The 1960 amendment changed that by adding thereto the following:

Unless the person aggrieved shall petition for review of such order within such ten-day period, or any extension thereof, the order of the referee shall become final.

In the present case the judgment entered by the referee on December 22, 1972 became final on June 29, 1973, on which date the referee denied the bankrupt’s motion to vacate the judgment.

It was not until August 3, 1973, however, that Enyart filed a motion for an extension of time to file a petition for review. Section 39(c) required him to file such motion within ten days after June 29, 1973. The referee had no power or authority to grant such a motion.

We construed the 1960 amendment to Section 39(c) of the Bankruptcy Act in In Re Charmar Investment Co., City Nat’l Bank & Trust Co. v. Charmar Investment Co., 475 F.2d 560 (6th Cir., 1973), cert. denied, 414 U.S. 823, 94 S.Ct. 123, 38 L.Ed.2d 56 (1973). In that case Circuit Judge Peck, who wrote the opinion for the Court, stated:

We find that Section 39(c) of the Bankruptcy Act disposes of these claims. Amended in 1960, the Act provides that a petition for review, or a petition to extend the time for filing a petition for review, must be filed within ten days after entry of a referee’s order. The 1960 amendment provided a clarification and made compulsory the ten-day limitation. It is clear that the intent was to provide finality to a referee’s order unless there was timely direct attack. Since the amendment was enacted, courts have required strict compliance. Appellant has failed to file such a petition for review within the time specified. In fact the record does not reveal that any petition for review has ever been filed. An appeal to this Court cannot be substituted for a petition for review, and consequently, appellant’s claims must be rejected. [Footnotes omitted.] (Id., 475 F.2d at 563-564)

Other Circuits have held similarly that strict compliance with the ten-day rule was mandatory. In Re Abilene Flour Mills Co., 439 F.2d 937 (10th Cir. 1971); Goff v. Pfau, 418 F.2d 649 (8th Cir. 1969), cert. denied, 398 U.S. 931, 90 S.Ct. 1830, 26 L.Ed.2d 97, rehearing denied, 399 U.S. 917, 90 S.Ct. 2212, 26 L.Ed.2d 577 (1970); In Re Imperial “400” Nat’l, Inc., 391 F.2d 163 (3d Cir. 1968); St. Regis Paper Co. v. Jackson, 369 F.2d 136 (5th Cir. 1966).

Section 39(c) provides the exclusive method of review of orders entered by the referee. In Re Chelsea Hotel Corp., 241 F.2d 846 (3d Cir. 1957).

II

Enyart contends that the bankruptcy court had no jurisdiction to enter a personal judgment against him, and that the judgment is void. He urges that Rule 60(b)(4), Federal Rules of Civil Procedure, permits the issue of jurisdiction to be raised at any time.

11 U.S.C. § 11 vests jurisdiction in the bankruptcy court to:

(2) Allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates;
(15) Make such orders, issue such process, and enter such judgments, in addition to those specifically provided for, as may be necessary for the enforcement of the provisions of this title; .

In Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), the Supreme Court stated:

It is equally clear that the expressly granted power to “allow,” “disallow” and “reconsider” claims, Bankruptcy Act § 2, sub. a(2), 11 U.S.C. § 11, sub. a(2) (1964 ed.), which is of “basic importance in the administration of a bankruptcy estate,” Gardner v. State of New Jersey, 329 U.S. 565, 573 [67 S.Ct. 467, 471, 91 L.Ed. 504] is to be exercised in summary proceedings and not by the slower and more expensive processes of a plenary suit. United States Fidelity Guaranty Co. v. Bray, 225 U.S. 205, 218 [32 S.Ct. 620, 625, 56 L.Ed. 1055]; Wiswall v. Campbell, 93 U.S. 347, 350-351 [23 L.Ed. 923]. This power to allow or to disallow claims includes “full power to inquire into the validity of any alleged debt or obligation of the bankrupt upon which a demand or a claim against the estate is based. This is essential to the performance of the duties imposed upon it.” Lesser v. Gray, 236 U.S. 70, 74 [35 S.Ct. 227, 228, 59 L.Ed. 471], [Footnotes omitted] (Id. 382 U.S. at 329, 86 S.Ct. at 472)

The Court further stated at page 334, 86 S.Ct. at page 475:

The normal rules of res judicata and collateral estoppel apply to the decisions of the bankruptcy courts.

Congress has invested bankruptcy courts with legal as well as equitable jurisdiction. Bankruptcy Act § 2a, 11 U.S.C. § 11(a); Katchen v. Landy, supra, at 327 n.2, 86 S.Ct. 467.

In exercising their equitable powers, bankruptcy courts can grant full and complete relief, and they are not required to leave part of a case for resolution by other courts.

The bankruptcy courts also deal in a summary way with “questions between a bankrupt and his creditors, which are presented in the ordinary course of the administration of the bankrupt’s estate.” Taylor v. Voss, 271 U.S. 176, 181, 46 S.Ct. 461, 463, 70 L.Ed. 889 (1926), approved in Katchen v. Landy, supra, 382 U.S. at 327, 86 S.Ct. 467.

As before stated, the referee had allowed Ashland’s claim on January 13, 1971, in the undisputed amount of $64,-883.62, subject to a requirement that it liquidate its security and apply the proceeds to the debt.

If a discharge had been granted to the bankrupt, it would not have been necessary to enter any further order with respect to Ashland’s claim. However, the bankrupt was denied a discharge, and the referee, on motion of Ashland, entered judgment in its favor against the bankrupt in the amount of $65,144.56. Entry of such judgment was authorized, not only by 11 U.S.C. § ll(a)(15), but also under the general equity powers of the court. Katchen v. Landy, supra.

The bankrupt must have thought that the bankruptcy court had jurisdiction, because he filed a counterclaim against Ashland, praying for judgment for damages in the amount of $100,000.

In our opinion the bankruptcy court had in personam jurisdiction over the bankrupt and in rem jurisdiction over the bankrupt’s estate. The bankrupt could have obtained full review of the referee’s order by compliance with Section 39(c) of the Bankruptcy Act. He recognized the applicability of this section when he filed a belated motion to extend the time for its filing. At most the order of the referee was voidable. It was not void.

The bankrupt may not relitigate in some other court the issues decided against him by the bankruptcy court, as he is barred by res judicata and collateral estoppel. Katchen v. Landy, supra.

Affirmed.

      . 11 U.S.C. § 67(c) provides:
      (c) A person aggrieved by an order of a referee may, within ten days after the entry thereof or within such extended time as the court upon petition filed within such ten-day period may for cause shown allow, file with the referee a petition for review of such order by a judge and serve a copy of such petition upon the adverse parties who were represented at the hearing. Such petition shall set forth the order complained of and the alleged errors in respect thereto. Unless the person aggrieved shall petition for review of such order within such ten-day period, or any extention thereof, the order of the referee shall become final. Upon application of any party in interest, the execution or enforcement of the order complained of may be suspended by the court upon such terms as will protect the rights of all parties in interest.

      . In entering judgment against the bankrupt after his discharge had been denied, the referee relied on Section 2(a)(12) of the Bankruptcy Act, 11 U.S.C. Section ll(a)(12), which grants jurisdiction to:
      (12) Discharge or refuse to discharge bankrupts, set aside discharges, determine the dischargeability of debts, and render judgments thereon.
      As we will point out, the bankruptcy court already had jurisdiction to enter the judgment. It is not necessary for us to determine whether Section 2(a)(12) has any application.


author: MEREDITH, Chief District Judge.

text:
    Edward KECKEISEN, Appellant, v. INDEPENDENT SCHOOL DISTRICT 612 et al., Appellees.
    No. 74-1326.
    United States Court of Appeals, Eighth Circuit.
    Submitted Nov. 13, 1974.
    Decided Feb. 10, 1975.
    Rehearing Denied Feb. 28, 1975.

      William B. Korstad, Minneapolis, Minn., for appellant.
    Norvell C. Callaghan and James F. Nelson, Winter & Nelson, Ltd., Glen-wood, Minn., for appellees.
    Before VAN OOSTERHOUT, Senior Circuit Judge, HEANEY, Circuit Judge, and MEREDITH, Chief District Judge.

       JAMES H. MEREDITH, Chief Judge, Eastern District of Missouri, sitting by designation.

   MEREDITH, Chief District Judge.

This is a civil rights action sought to be maintained under 42 U.S.C. §§ 1983 and 1985, in which appellant, Edward Keckeisen, seeks a permanent injunction restraining defendants from terminating his employment contract, reinstatement as principal of the Glenwood High School, and punitive damages. Appellant’s employment contract was terminated pursuant to the School Board’s policy, which provides in pertinent part:

It shall be the policy of the Board of Education not to employ the combination of husband and wife in the schools of the District where a conflict of interest could arise; said policy is to apply to the following:

1. Administrator — Teacher relationship
2. Husband and Wife combination in the same building
3. All other situations where a conflict of interest occurs.
Where the employment of a husband and wife in Independent School District 612 causes a conflict of interest to occur or should one of the above three conditions arise, that then either the husband or the wife shall resign. In the event neither the husband or the wife resigns within 10 days of notification of the conflict of interest or the occurrence of the above conditions, that then and in that event the Board of Education shall determine which position should be terminated according to statute.

Edward Keckeisen, the principal of Glenwood High School, was married to Lois Korbel, a physical education teacher at the school, in December 1972. Both were tenured teachers, having been employed three and six years, respectively, at their positions. The School Board’s policy, the constitutionality of which is the subject of this appeal, was officially adopted by the Board on June 12, 1972, notice of its adoption being sent to all faculty members in the school district. The record indicates that the Board was apprised of the intention of Keckeisen and Korbel to marry at the time that it officially adopted the policy in question, but there is no allegation or evidence that the policy was invidiously tailored to fit the circumstance of their prospective marriage. In the record of the hearing that was held before the School Board on March 29, 1973, there was testimony by the Superintendent of Schools and past board members, dating back to 1945, that there had been a policy in the district not to hire married couples in the school system. There was testimony that on several occasions persons had not been hired, or that they had been asked to resign, because of the fact that they were married to someone who was already employed by the school district. It was also pointed out in that hearing that the district does use husbands or wives of faculty members as substitute teachers from time to time. This was explained as being necessary due to the small size of the community, and the scarcity of qualified persons who can be available on short notice. It is clear to the court that the problems of substitutes and those of permanent staff members are quite different and are distinguishable for purposes of the issue to be decided here.

Upon the marriage of Keckeisen and Korbel, the School Board notified the Keckeisens of the applicability of the policy to them, and in March 1973 a public hearing was held to determine whether the Keckeisens, or either of them, should be terminated in their employment. By resolution of the School Board, appellant was notified, on March 29, 1973, that his employment contract would not be renewed beyond the end of the school year, and, in fact, appellant has not been employed by appellee since the completion of the 1973 academic year.

Appellant then brought the matter before the federal district court, claiming that his Ninth Amendment right to privacy and Fourteenth Amendment right to equal protection of the laws had been violated. Chief Judge Devitt dismissed the matter, holding in a brief opinion that a cause of action was not stated, and, further, “that even if one were stated the school board’s conflict of interest policy * * * is a permissible one under constitutional standards * * *.”

In considering the constitutionality of appellees’ policy, and particularly its application to Edward Keckeisen, it is instructive to note that appellees’ alternatives were rather strictly limited by the setting of the events. Glenwood is a small town in which there is only one high school. There is an elementary school in Glenwood, but neither of the Keckeisens were certified, as required by Minnesota law, to teach at the elementary level; and the position of principal of the elementary school was filled by a tenured teacher. It was not possible, therefore, to transfer either of the Keckeisens to another school within the district, which would have mitigated the severity of the result reached pursuant to the Board’s policy.

Jurisdiction

Appellees contend that the matter is not properly one of federal cognizance because appellant has not exhausted the remedies provided by Minnesota law and because appellees are not “persons” within the import of 42 U.S.C. §§ 1983 and 1985. This court finds, however, that appellant has properly stated a cause of action under 42 U.S.C. § 1983.

Although the states are given immunity by the Eleventh Amendment from the prosecution of civil claims, individuals and associations acting under col- or of state law are not immune to the sanctions of the Civil Rights Act and may be sued, unless it is clear to the court that the claim is actually a ruse by which personal jurisdiction over the state is sought to be exercised. See Whitner v. Davis, 410 F.2d 24 (9th Cir. 1969) (action dismissed as to state and college, but allowed to proceed against board of trustees); Porcelli v. Titus, 302 F.Supp. 726, 730 (D.N.J.1969), aff’d, 431 F.2d 1254 (3d Cir. 1970), cert. denied, 402 U.S. 944, 91 S.Ct. 1612, 29 L.Ed.2d 112 (1971); Miller v. Parsons, 313 F.Supp. 1150 (M.D. Pa.1970). Cf. Board of Trustees of Arkansas A & M College v. Davis, 396 F.2d 730 (8th Cir. 1968), cert. denied, 393 U.S. 962, 89 S.Ct. 401, 21 L.Ed.2d 375 (1968). Likewise, municipal corporations were not intended to be included as “persons” under § 1983, as appellees point out, but it would defeat the central intention of the Civil Rights Act to disallow actions against individuals employed by municipal corporations. Such is the holding of the Supreme Court in Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), where it was held that individual police officers, but not the city itself, were subject to the sanctions of § 1983. This court, in affirming the district court in Brenden v. Independent School District 742, 477 F.2d 1292 (8th Cir. 1973), found school districts to be within the meaning of “persons” for the purposes of § 1983.

As to whether the present action is barred by appellant’s decision not to pursue the matter in the state courts of Minnesota, it must be understood that appellant has alleged the violation of his federal constitutional rights. Appellees miss the mark entirely with their contention that school boards are vested with discretionary powers that should not be subjected to judicial scrutiny, for what is involved in the case at bar is not merely the wisdom of a school board’s decision to terminate the services of a teacher, as in Scheelhaase v. Woodbury Central Community School District, 488 F.2d 237 (8th Cir. 1973). At issue in this case is the constitutionality of a policy of terminating teachers under certain circumstances because they are married. This is not, then, a simple case of contract law, but a case arising under the federal Constitution.

As the Supreme Court stated in McNeese v. Board of Education, 373 U.S. 668, 672, 83 S.Ct. 1433, 1436, 10 L.Ed.2d 622 (1963):

We would defeat those purposes [of 42 U.S.C. 1983] if we held that assertion of a federal claim in a federal court must await an attempt to vindicate the same claim in a state court. The First Congress created federal courts as the chief — though not always the exclusive — tribunals for enforcement of federal rights.

See also Monroe v. Pape, supra.

The Constitutional Claim

In Loving v. Virginia, 388 U.S. 1, 12, 87 S.Ct. 1817, 1824, 18 L.Ed.2d 1010 (1967), the Supreme Court held that:

The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men.

The case at bar is unlike Loving in a signally important respect, however. The policy in question here does not deny to people the right to marry; it only prohibits the employment of married couples in administrator-teacher situations. The stated purpose of the rule is a laudatory one: preventing conflicts of interest and favoritism. What we have before us then is the state’s interest in providing good education for its children — and we have that interest fully and directly before us because conflicts of interest in the administration of education are clearly subversive of the state’s interest — and, on the other hand, a somewhat attenuated claim involving the right to marry. Were the right to marriage claim not so attenuated by the fact that marriage itself is not the subject of the School Board’s policy — i. e., were the right more directly involved— then we should perhaps, reach a different result. Under the facts of this case, however, we are constrained to uphold the decision of the district court.

It is important to note that the record gives no indication that appellant’s performance as principal of the high school was in any way unsatisfactory from the time of his marriage through the end of the school year. We are convinced that Keckeisen was, in fact, fair-minded in his administration of the school, but the policy of the School Board is quite naturally concerned not only with the actual administration of the school, but also with the effect of an apparently prejudiced arrangement on the morale of the other teachers. To put the matter more simply, the mere existence of the husband-wife/ administrator-teacher situation is bound to have a deleterious effect on the morale of the faculty. We have no doubt that in many cases where husbands and wives are employed in supervisor-supervisee capacities, the married couple makes an exemplary effort to maintain fairness, but we cannot say that a policy based on the assumption that married couples are susceptible to the natural prejudices of their relationships is irrational, arbitrary or capricious. There was testimony at the school board hearing that the policy was implemented to avoid situations where a conflict of interest was likely to arise. The superintendent of the district testified that where a teacher is married to an administrator, under whose supervisory control he or she is working, there is a strong possibility of conflicts of interest becoming a problem in several areas. The superintendent of a neighboring district, called as an expert witness, concurred in this opinion. Such problem areas would include: evaluation of the teacher’s performance by the administrator, disciplinary problems with students in the teacher’s classes where the administrator might be called upon to decide a dispute between student and teacher, the disciplining of teachers themselves, the assignment of classrooms and extracurricular duties, recommendations for the purchase of supplies and equipment, and the assignment of school aides. There was testimony that the situation could, in light of the above-mentioned areas where a conflict could arise, create a morale problem among the other members of the faculty under the control of the administrator in question. The superintendent testified that there was some competition among faculty members in the areas of classroom assignments, extra duties, requisitioning supplies, and the assignment of school aides.

In light of these considerations, the court cannot say that the Board was clearly wrong in attempting to avoid conflicts before they arose. With so many areas where a conflict could occur, there is a strong possibility that an administrator, no matter how careful he might be, could unintentionally let his judgment be swayed by his close relationship with one of the teachers. It also could place the administrator in the position of having to defend his actions where normally he would not.

This court does not feel that where such definite possibilities of conflict of interest exist, the Board should be placed under a constitutional burden of having to wait until a conflict of interest becomes a problem situation before it can take any action. The law should not block legitimate measures taken to anticipate problems and avert them.

It must be noted that appellant did not offer any evidence at the hearing and he has failed to inform the court of any possible alternatives by which appellees might have served the state’s interests in eliminating conflicts of interest. Such alternatives are by no means inconceivable, but in the absence of any showing as to what the School Board might have done short of terminating appellant, the court must be satisfied that no such alternatives exist. Had appellant showed some reasonable alternatives of accomplishing the same result, this court might have found the incidental burden on the right to marriage to be, in balance, greater than the burden on the state.

Affirmed.

      . In Scheelhaase, on which appellees rely heavily in this regard, this court stated: “ * * * in the absence of a tenure statute a local school board has the right to decline to employ or to re-employ any teacher for any reason or for no reason as long as such a decision is not violative of a specific constitutional right.” 488 F.2d at 242. Clearly, the present case is inapposite Scheelhaase in that Scheelhaase involved the non-constitutional right to keep one’s job, while the constitutional right to marriage is involved here.

      . The portion of the School Board’s policy dealing with the employment of husband-wife teams in the' same building, where. they are not in the administrator-teacher relationship, is not challenged on this appéal and is not affected by our' holding in this case.


author: OAKES, Circuit Judge:

text:
    Philip HANDELMAN and Esther Handelman, Appellees, v. COMMISSIONER OF INTERNAL REVENUE, Appellant.
    No. 37, Docket 74-1166.
    United States Court of Appeals, Second Circuit.
    Argued Dec. 4, 1974.
    Decided Jan. 27, 1975.

      Stephen M. Gelber, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Jonathan S. Cohen, Tax Div., Dept, of Justice, of counsel), for appellant.
    Robert M. Trien, New York City, for appellees.
    Before KAUFMAN, Chief Judge, and ANDERSON and OAKES, Circuit Judges.
   OAKES, Circuit Judge:

This is an appeal by the Commissioner of Internal Revenue from an adverse decision of the United States Tax Court, William H. Quealy, Judge, according capital gains treatment to $95,000 received by the taxpayers in connection with the purported sale of stock of Graphic Arts Exhibit Building, Inc. (Graphic Arts), and allowing taxpayers to deduct 60 per cent of their expenses incurred in connection with the maintenance and operation of a 46-foot sailing sloop during the taxable years 1963 to 1965, inclusive, as entertainment expense in connection with taxpayer Philip Handelman’s business, the practice of law. We disagree with the Tax Court in both respects as a matter of law and accordingly reverse the judgment.

On or about January 20, 1961, taxpayer caused Graphic Arts to be organized under New York law for the purpose of constructing and leasing space in a building at the site of the New York World’s Fair which was to be held in 1964 — 65. Apparently taxpayer had obtained a commitment for a particular lot on the World’s Fair grounds on which a graphic arts pavilion was to be built. In June, 1961, an agreement was entered into with Thomas R. O’Connor providing that O’Connor was to be employed by Graphic Arts in exchange for advancing working capital in the amount of about $100,000, with the understanding that he was to acquire some stock in the corporation. Subsequently O’Connor, acting on behalf of himself and of his partner and financial backer, Joan G. Van de Maele, offered to purchase all of the stock of the Graphic Arts corporation. During 1961 Van de Maele paid Handelman $25,000 which he incidentally originally reported as ordinary income from his legal practice. In December, 1961, it was agreed that O’Connor and Van de Maele would buy 59 shares of Graphic Arts stock owned by the taxpayer and 24 shares belonging to a Dr. A. Alfred Solomon. Van de Maele accordingly executed on December 8, 1961, two notes payable to taxpayer on June 8, 1962, in the amounts of $50,000 and $17,000. Van de Maele and O’Connor also executed a note in the amount of $48,000 payable to Dr. Solomon. On February 20, 1962, and thereafter on March 26, 1962, Van de Maele made additional payments to taxpayer in the amounts of $30,000 and $40,000, respectively. These amounts were not applied in reduction of the two notes payable to taxpayer which had been executed in December, 1961. When the notes were presented for payment on June 8, 1962, they were returned unsatisfied.

Thereafter, by an agreement between the taxpayer and O’Connor dated June 13, 1962, O’Connor and Van de Maele jointly executed an additional note in the amount of $59,000, payable September 14, 1962, and it was provided that 88 shares of Graphic Arts stock, not the previous total of 83 shares, would be held in escrow, 63 shares to be delivered to O’Connor upon payment of the original notes of $50,000 and $17,000 payable to the taxpayer and $48,000 payable to Dr. Solomon. The remaining 25 shares were to be delivered after payment of the additional note of $59,000 executed on June 13, 1962. The terms of the agreement provided that the voting rights of the stock were to remain with taxpayer during the escrow and that in the event the notes were not paid by the closing date the stock was to be returned to him. The notes were not in fact paid. The escrow was accordingly terminated and the stock returned to taxpayer. He thereupon also became entitled to retain the original $25,000 payment made to him in 1961 by Van de Maele. This, together with the $70,000 cash received in February and March, 1962, made up the $95,000 here in question.

Thereafter on or about March 14, 1963, a second escrow arrangement was entered into under terms differing from those of the escrow agreement of June 13, 1962. Under the March 14, 1963, agreement, the taxpayer deposited 104 shares of Graphic Arts stock, 16 more shares than were covered by the agreement of June 13, 1962, and was to receive $150,000 or $24,000 more than was payable to him by virtue of the two notes of December, 1961, and the one note of June 13, 1962. This new escrow arrangement did not include the shares of Graphic Arts stock held by Dr. Solomon which had been included in the earlier escrow agreement. This arrangement was extended by still another escrow dated March 20, 1963, also providing that the stock was to be returned in the event payment was not made to the taxpayer. The payments were not in fact made and the escrow was terminated.

Thereafter taxpayer ' initiated an action against O’Connor and Van de Maele, not upon any purportedly enforceable contract of sale, but upon the three notes payable to him in the aggregate amount of $126,000 (i. e., $50,000, $17,000 and $59,000, respectively), also seeking, however, an additional $24,000 which was to have been paid under the escrow arrangement of March, 1963. Van de Maele and O’Connor in their answer in the Supreme Court of the State of New York asserted in defense the clauses of the escrow agreements of June 13, 1962, and March 14, 1963, directing the return of the stock and claimed that these provisions comported with an oral understanding of the parties to the effect that any agreement to purchase the stock would be cancelled if Van de Maele were unable to satisfy the notes. The state court held that this defense was insufficient and that parol evidence was impermissible to raise a defeasance provision in derogation of the unconditional terms of the promissory notes but denied taxpayer’s motion for summary judgment insofar as it related to the additional $24,000, as “not proved by document.” Meanwhile, the corporation had never erected any building, and, indeed, it defaulted on its lease of the business site and subsequently, in 1965, was dissolved by proclamation by the Secretary of State of New York for nonpayment of taxes.

Ultimately, in April, 1971, the litigation brought by taxpayer against Van de Maele and O’Connor was settled, with the partners paying taxpayer an additional $89,500 (not here in question) in return for a general release, the three notes held by him and certificates representing 64 shares of the then totally defunct Graphic Arts stock.

The question, thus, is whether there was a “sale or exchange” within the meaning of § 1222(3) of the Internal Revenue Code, 26 U.S.C. § 1222(3), so that the $95,000 received by taxpayer was long-term capital gain therefrom.

Taxpayer does not really dispute the proposition that whether a sale or exchange occurred involves “the legal characterization, for federal income tax purposes, of the transactions between the parties” which is “not a question of fact, but rather one of law” fully reviewable by us on appeal. Union Planters National Bank of Memphis v. United States, 426 F.2d 115, 117 (6th Cir.), cert. denied, 400 U.S. 827, 91 S.Ct. 53, 27 L.Ed.2d 56 (1970).

Where a seller receives payment but retains control and dominion over the capital asset so that the agreement remains executory and is ultimately uncompleted, he cannot obtain the benefit of the capital gains provision of the Code. Mittleman v. Commissioner, 56 T.C. 171, 178-179 (1971), aff’d, 464 F.2d 1393 (3d Cir. 1972) (per curiam) (advance on purchase of stock retained by seller when purchaser withdrew treated as ordinary income); Smith v. Commissioner, 50 T.C. 273 (1968), aff’d, 418 F.2d 573 (9th Cir. 1969) (per curiam) (deposit on contract to purchase stock treated as ordinary income to seller when purchase not completed); Binns v. United States, 385 F.2d 159 (6th Cir. 1967) (amount of down payment retained by seller when buyer failed to complete purchase of stock was ordinary income although stock was escrowed, despite absence of liquidated damage provision); Melone v. Commissioner, 45 T.C. 501 (1966) (amount received by seller on settlement of litigation over buyer’s failure to complete purchase of residential property treated as ordinary income because seller regained possession upon default and sale not completed); Boatman v. Commissioner, 32 T.C. 1188, 1192 (1959) (amount received by seller from settlement entered into when agreement for sale of farm not completed treated as ordinary income since no sale or exchange occurred); Johnson v. Commissioner, 32 B.T.A. 156, 161 (1935) (amount received by seller when purchaser failed to complete purchase of stock treated as ordinary income).

Here Van de Maele and O’Connor entered into executory agreements, but none of these was ever consummated. Taxpayer retained all the voting rights to the stock, one circumstance indicating that a sale or exchange was never completed. See Kuehner v. Commissioner, 214 F.2d 437, 441 (1st Cir. 1954). The payments received were to secure taxpayer’s agreement to escrow the particular number of shares of Graphic Arts stock to which each executory transaction related. No part of the $95,000 was ever applied in reduction of the notes. Rather, taxpayer brought suit on the notes and no credit on them was given for the $95,000 payments made. Thus, the payments were more in the nature of liquidated damages; as such they were taxable as ordinary income. Mittleman, Smith, Melone, Boatman, and Johnson, supra. There need have been no specific provision for liquidated damages in any of the escrow agreements. Binns v. United States, supra; Melone v. Commissioner, supra; Myers v. Commissioner, 287 F.2d 400 (6th Cir.), cert. denied, 368 U.S. 828, 82 S.Ct. 48, 7 L.Ed.2d 31 (1961). See also United States Freight Co. v. United States, 422 F.2d 887, 893 — 894 (Ct.Cl.1970) (purchaser afforded ordinary loss treatment for down payment sacrificed when intended purchase of stock not completed and sale or exchange accordingly not resulting).

The Tax Court relied upon Rule 1 of § 100 of the New York Personal Property Law (McKinney’s Consol.Laws, c. 41, 1962), one of the pre-Code rules for ascertaining intention as to when “the property in the goods [is to pass] to the buyer.” But this provision related to the sale of chattels; stock transfers were governed by § 162 of the Personal Property Law, which required that “[t]itle . to the shares . . . can be transferred only” by delivery of the certificates, either endorsed or with accompanying assignment or power of attorney. Coyne v. Chatham Phenix National Bank & Trust Co., 155 Misc. 656, 660, 281 N.Y.S. 271, 277 (City Ct. N.Y.1935). Federal tax law is concerned with the “benefits and responsibilities associated with legal ownership.” Titcher v. Commissioner, 57 T.C. 315, 323 (1971). Here all such benefits and responsibilities were retained by taxpayer at all times, subject only to escrow of the stock against future payment of notes that were not paid.

True, there may be circumstances where capital gain or loss treatment has been deemed appropriate because in the first instance there was an actual sale or exchange of some underlying asset. Thus in Lowe v. Commissioner, 44 T.C. 363 (1965), relied on by the Tax Court below, the purchasers did acquire by virtue of the initial sale of the stock “the greater bundle of rights and attributes of ownership, including title, possession and management, and the burdens and benefits accompanying same. . . . ” 44 T.C. at 369. . But this could not be said of anything acquired by Van de Maele and O’Connor from taxpayer. There was no transfer of any asset to them. Nor can it be argued that the settlement agreement of April, 1970, effected a sale or exchange of the Graphic Arts stock, for by that time the corporation was long since defunct; the delivery of the certificates was merely a formality, in the nature of a sop to the buyers who paid a total of $184,500 for stock in a corporation that apparently never transacted any real business and was a desiccated shell before the certificates were ultimately transferred. In short, the settlement of April, 1970, cannot serve retroactively to create a sale or exchange where none occurred in the first instance. See Dobson v. Commissioner, 321 U.S. 231, 232, 64 S.Ct. 495, 88 L.Ed.2d 691 (1944). Indeed, the New York Supreme Court’s decision denied taxpayer relief in reference to his claim for $24,000 on the basis that the claim was “not proved by document.”

In view of our holding that there was no sale or exchange so that taxpayer was not entitled to treat the gain as a capital one, it is unnecessary to reach the question whether taxpayer was entitled to the benefit of the installment reporting section of the Code, 26 U.S.C. § 453(b)(1)(B). For purposes of this lawsuit the parties agreed that $25,000 was received in 1961, $40,000 was reportable in 1962 and $30,000 was deemed taxable in 1963.

The Tax Court allowed the taxpayer deductions for entertainment expense in connection with the use of his 46-foot off-shore sailing sloop, the Chee Chee V, on which he claimed to entertain clients and potential clients in connection with his law practice. But in our view the Tax Court failed to apply properly § 274 of the Internal Revenue Code, 26 U.S.C. § 274, which was applicable to the taxable years in question. Section 274, which was adopted to eliminate tax abuses in respect to entertainment expense deductions, is strictly a disallowance provision, the terms of which must be met in addition to other provisions of the Code such as 26 U.S.C. § 162, which would otherwise allow a deduction. See Sanford v. Commissioner, 50 T.C. 823, 826 (1968), aff’d, 412 F.2d 201 (2d Cir.) (per curiam), cert. denied, 396 U.S. 841, 90 S.Ct. 104, 24 L.Ed.2d 92 (1969). Section 274(a)(1)(B) denies any deduction unless the taxpayer shows (i) that the facility was “used primarily for the furtherance of the taxpayer’s trade or business” and (ii) that the particular expenses were “directly related to the active conduct of such trade or business.” Under § 274(d) the taxpayer has the additional responsibility of substantiating the expenses claimed and the business relationship thereof. The Treasury Regulations, 26 C.F.R. §§ 1.274-2, 1.274.-5, explaining the disallowance and substantiation provisions of the statute have previously been upheld and applied by this and other courts. E. g., Hippodrome Oldsmobile, Inc. v. United States, 474 F.2d 959 (6th Cir. 1973); D. A. Foster Trenching Co. v. United States, 473 F.2d 1398 (Ct.Cl.1973); Sanford v. Commissioner, supra. In our view the taxpayer here did not establish that his facility was used “primarily” for the furtherance of his trade or business, nor did he establish that the expenses were “directly related to the active conduct” of his trade or business, in addition to which he did not sufficiently substantiate the expenses.

Regulation § 1.274-2(e)(4)(iii) follows the Congressional committee reports in providing that the “primary use” of a facility is established by “showing that more than 50 per cent of the total calendar days of use of the facility during the taxable year were days of business use.” See H.R.Rep.No. 1447, 87th Cong., 2d Sess. 22 (1962) (1962-3 Cum.Bull. 426); S.Rep.No.1881, 87th Cong., 2d Sess. 31, 170 (1962-3 Cum.Bull. 736-37), U.S.Code Cong. & Admin.News, p. 3297. Here there was no evidence either as to taxpayer’s total use of the sloop or as to the clearly nondeductible personal use of the boat, although there was considerable testimony that he did use the boat for racing purposes (and the publicity that such racing developed for him). The taxpayer took the position that there were only 12 weekends available for use of the boat and that he used it on these weekends to entertain people who subsequently either brought him business or became clients. The statute and regulations clearly require that there be a showing that the facility was “used primarily” for business purposes by a precise accounting of the days and purposes of use. Fiorentino v. Commissioner, 29 T.C.M. 1445 (1970), supp. op., 29 T.C.M. 1665 (1970), aff’d, 455 F.2d 1406 (2d Cir. 1971) (without opinion) (no adequate evidence of business purpose of entertainment or business relationship of persons entertained for days of alleged business use); Andress v. Commissioner, 51 T.C. 863 (1969) aff’d, 423 F.2d 679 (5th Cir. 1970) (per curiam) (club dues and liquor not deductible where no showing of direct relationship to law practice and no showing of days of total use, nondeductible use and business use of facility); Nicholls, North, Buse Co. v. Commissioner, 56 T.C. 1225 (1971) (boat held not primarily used for business where insufficient showing that days of business use exceeded days of nondeductible days of personal use); Ashby v. Commissioner, 50 T.C. 409 (1968) (no proof that more than 50 per cent of the days of use of boat were business related). Taxpayer did introduce some summaries prepared by his secretary on the basis of underlying telephone logs and diaries, but these did not include an accounting of use taxpayer made of his yacht for personal purposes but only those specific uses arranged through the office; the summaries, moreover, did not in any way indicate the business purpose or business relationship of the persons entertained on each occasion. Treas.Reg. § 1.274-5(c)(6)(iii) and § 1.274 — 5(b)(3); Fiorentino v. Commissioner, supra

Beyond, this, the Tax Court did not consider the requirement of the statute that the particular expenses claimed must themselves be “directly related to the active conduct” of business. See § 274(a)(1)(B); Hippodrome Oldsmobile, Inc. v. United States, supra. The most that the taxpayer showed was that he used the Chee Chee V as a means of generating good will among persons he hoped would become clients. As Hippodrome Oldsmobile held, “as a matter of law . . deductions claimed by the taxpayer for entertainment of customers” the purpose óf which was to establish good will are not directly related to the active conduct of the taxpayer’s business. 474 F.2d at 960. See also D. A. Foster Trenching Co. v. United States, supra. As stated in the House Report, H.R.Rep.No.1447, supra, at 20 (1962-3 Cum.Bull. 424), the taxpayer must “show more than a general expectation of deriving some income at some indefinite future time from the making of the entertainment-type expenditure . ■ .. ” One has to conclude from this record that the taxpayer scrupulously avoided any encroachment on the glamorous atmosphere he wished to create so that he did not conduct any business on the boat and in no manner suggested that the Chee Chee V was being used for specific business purposes.

One of the clear purposes of enacting § 274 was to overrule Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930), where this court permitted an approximation of expenses actually incurred for otherwise deductible purposes. See Hughes v. Commissioner, 451 F.2d 975, 976-78 (2d Cir. 1971); Sanford v. Commissioner, supra. Here, however, the Tax Court, purporting to follow LaForge v. Commissioner, 434 F.2d 370 (2d Cir. 1970), held that there was substantiation on the basis of the list compiled from his office records showing the names of guests entertained aboard the yacht, taken together with taxpayer’s testimony that some of those individuals became actual paying clients or forwarders of business. The court was satisfied that taxpayer substantiated his right to the deduction of not less than 60 per cent of such costs for the taxable years 1963 to 1965, relying on the fact that that was the deduction agreed upon by the parties for the taxable years 1961 and 1962 (which were, of course, prior to the effective date of § 274). While taxpayer established the overall cost of running his sailboat, he did not establish the time and place of each use of the boat, the business purpose pertaining thereto or the business relationship to the taxpayer of the persons using the boat. His summaries do not in any way help to determine the allocable portion of the total expenses since they are merely composite lists of the persons entertained. In LaForge v. Commissioner, supra, we held that a surgeon who customarily purchased lunch for his assistants at a hospital cafeteria where receipts were not given could fulfill the substantiation requirements by his own statements and other corroborative evidence if both were “sufficiently precise” to satisfy such element of substantiation. 434 F.2d at 372. In Hughes v. Commissioner, 451 F.2d at 979, we said as to LaForge:

The significance of LaForge is that, even though a written statement may not be required for substantiation, the corroborative evidence must nevertheless establish each statutory element— amount, time, place and purpose — of the expenditure with precision and particularity. In LaForge the cashier’s oral testimony properly corroborated those elements of the taxpayer’s claimed expenses; thus the evidentiary basis for the deduction was established, and the remand was appropriate to allow the taxpayer to subtract only his non-deductible expenditures. In the case before us, however, not only did the corroborative evidence presented not approach the specificity and precision we believe required by the statute and regulations, but there was no corroborative evidence whatsoever relative to the statutory elements of all but a minimal number of the claimed expenditures.

Here, also, the taxpayer has presented unspecific and imprecise evidence with no corroboration.

Settlement for the two pre-§ 274 years, of course, has no bearing on the deduction for the years in question.

Judgment reversed; cause remanded to Tax Court for recomputation in accordance with this opinion.

      . Esther Handelman is an appellee and was a petitioner below solely by virtue of having filed a joint return with her husband; accordingly references throughout this opinion to “taxpayer” are to Philip Handelman.

      . 26 U.S.C. § 1222:
      (3) Long-term capital gain. — The term “long-term capital gain” means gain from the sale or exchange of a capital asset held for more than 6 months, if and to the extent such gain is taken into account in computing gross income.

      . Both §§ 100 and 162 of the Personal Property Law were repealed upon enactment of the Uniform Commercial Code, McKinney’s Con-sol.Laws, c. 38, § 10-102, effective Sept. 27, 1964.

      . Taxpayer called himself “basically a litigator.” His schedules C for each of the taxable years 1963, 1964 and 1965 showed the following:

        1963 1964 1965

      Gross Receipts 70,171.92 136,504.56 310,522.87
      Fees Paid to Other Lawyers 14,759.30 48,219.22 200,331.93
      Promotion and Entertainment Expense 14,410.99 11,416.70 18,968.88
      Other Business Deductions 59,931.85 74,880.90 85,039.30
      Net Reportable Income from Law Practice (18,930.22) 2,023.74 6,182.76
      The transcript of the hearing below contains this colloquy:
      The Court: In looking at your returns I added them up here for a year and a half, Mr. Handelman, and I must congratulate you as to your survival. As I stated previously, taking your returns for 1961 through 1965 I come up with an average taxable income of $3,200 a year.
      The Witness: Well, your Honor, we’re talking about — to simplify it—
      The Court: (Interrupting) Let’s take 1965; when all of this should bear fruit, it shows that you had a net profit of $6,182 from the practice of law. That’s not enough to run the boat on.

      . Section 274 was added to the Internal Revenue Code of 1954 § 4(a)(1) of the Revenue Act of Oct. 16, 1962, Pub.L.No. 87-834, 76 Stat. 974, and is applicable to taxable years ending after December 31, 1962. It reads as follows:
      § 274.
      (a) Entertainment, amusement, or recreation.—
      (1) In general. — No deduction otherwise allowable under this chapter shall be allowed for any item—
      (A) Activity. — With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, unless the taxpayer establishes that the item was directly related to, or, in the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), that such item was associated with, the active conduct of the taxpayer’s trade or business, or
      (B) Facility. — With respect to a facility used in connection with an activity referred to in subparagraph (A), unless the taxpayer establishes that the facility was used primarily for the furtherance of the taxpayer’s trade or business and that the item was directly related to the active conduct of such trade or business,
      and such deduction shall in no event exceed the portion of such item directly related to, or, in the case of an item described in subparagraph (A) directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), the portion of such item associated with, the active conduct of the taxpayer’s trade or business.

      (d) Substantiation required. — No deduction shall be allowed—
      (2) for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity,
      unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating his own statement (A) the amount of such expense or other item, (B) the time and place of the travel, entertainment, amusement, recreation, or use of the facility, or the date and description of the gift, (C) the business purpose of the expense or other item, and (D) the business relationship to the taxpayer of persons entertained, using the facility, or receiving the gift. The Secretary or his delegate may by regulations provide that some or all of the requirements of the preceding sentence shall not apply in the case of an expense which does not exceed an amount prescribed pursuant to such regulations.
      (Emphasis in all cases added.)

      . See H.R.Rep.No. 1447, 87th Cong., 2d Sess. 19 (1962) (1962-3 Cum.Bull. 423); S.Rep.No. 1881, 87th Cong., 2d Sess. 25 (1962) (1962-3 Cum.Bull. 730-31), U.S.Code Cong. & Admin. News, p. 3297.

      . The transcript contains this testimony of the taxpayer:
      I don’t know what kind of boat your Honor is referring to, but certainly there has been more entertainment done on sailboats in recent years. That’s what the glamor part is. I submit it may be a sneaky way to practice law. I do think utilizing a little glamor, giving somebody what they think they want — it may be your tie or the curl of your hair. — I don’t know how one selects a lawyer, but I have been fortunate. I have had a few cases on the books that involve millions of dollars coming directly from that field, and after all, I hit on this idea some years back, and I am now really for the first time cashing in on this program because that’s where my analysis was that people in the boating field, just as in the entertainment, manufacturers and so forth, those are the people who spend money. If they spend money they have money, and they make good clients.

      . Since the Tax Court itself recognized this and mentioned it after the documentary evidence had been presented, we fail to see why the court allowed the deduction:

        The Court: You may proceed, Mr. Jaffe, but the Court would remind you that for the 274 years we have to have an enumerator and denominator, and there is no way from the information which has been submitted thus far to arrive at any ratio, and the law says it has to be used primarily, and that has been construed to be more than half.

      . “I have used the boat primarily for entertainment and promotion with the idea of creating clients and obtaining legal retainers.”

      . While the Senate took a view more generous to the taxpayer, the conference committee report indicates that entertainment expense for the purpose of good will may be allowed only in respect to entertainment activities, not the use of entertainment facilities. H.Conf.Rep.No.2508, 87th Cong., 2d Sess. 15-16 (1962) (1962-3 Cum.Bull. 1144), U.S.Code Cong. & Admin.News, p. 3297; Hippodrome Oldsmobile, Inc. v. United States, 474 F.2d 959 (6th Cir. 1973).

      . Taxpayer seeks to have us carve out an exception to the general rule that entertainment expenditures must relate to specific business purposes by arguing that lawyers, unlike automobile salesmen, see Hippodrome Oldsmobile, supra note 10, or underground construction companies, see D. A. Foster Trenching Co. v. United States, 473 F.2d 1398 (Ct.Cl.1973), are prohibited from advertising by the Code of Professional Responsibility. Accordingly, he maintains, he was “trying to sell himself” to wealthy individuals who might require legal services in the future in the only way in which he was permitted. Merely to state this argument is to demonstrate its absurdity. Counsel invites us to grant a tax deduction for expenditures designed not only to circumvent the strictures of the Code of Professional Responsibility, but also to develop business for a lawyer because of his conviviality or sailing ability rather than his legal talents. Nor are we shown any tax principle that enables a lawyer’s inability to advertise in some ways to render deductible what would otherwise be nondeductible expenditures. Thus, there is little basis for removing this case from the usual rule that the general expectation of income at some indefinite future time is insufficient to justify an entertainment deduction.


author: HUFSTEDLER, Circuit Judge:

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. LOCAL UNION 396, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, and Frank Matula, Secretary-Treasurer of Local Union 396, Respondents.
    No. 73-2451.
    United States Court of Appeals, Ninth Circuit.
    Jan. 22, 1975.
    Certiorari Denied May 19, 1975.
    See 95 S.Ct. 1975.

      Jay E. Shanklin, Gen. Counsel, NLRB (argued), Washington, D. C., for petitioner.
    George A. Pappy (argued), of Brundage, Neyhart, Miller, Reich & Pappy, Los Angeles, Cal., for respondents.
    Before CARTER and HUFSTEDLER, Circuit Judges, and SCHNACKE, District Judge .

      Honorable Robert H. Schnacke, Northern District of California, sitting by designation.

   OPINION

HUFSTEDLER, Circuit Judge:

The National Labor Relations Board seeks enforcement of its order (1) requiring Local 396, International Brotherhood of Teamsters, Chauffeurs, Warehouse-men and Helpers of America [the “Union”] and its Secretary-Treasurer, Matula, to cease specified violations of section 8(b)(1)(A) of the National Labor Relations Act (29 U.S.C. § 158(b)(1)(A)), (2) directing the Union to proceed promptly to arbitration over the grievances of nine employees in respect of the seniority dates assigned to each, (3) permitting the aggrieved employees to retain counsel independent of the Union to represent them in the arbitration, and (4) requiring the Union to pay the employees’ counsel fees. The Union and Matula resist enforcement contending that (1) the evidence was inadequate to sustain the Board’s determination that they breached their duty of fair representation to the named employees, (2) arbitration is inappropriate because the employees’ seniority grievances have no colorable merit, and (3) no substantial basis exists to support the requirement that the Union pay the employees’ legal fees.

The employees involved here are “feeder drivers” for United Parcel Service [the “Company”], which delivers packages and merchandise for stores and other businesses. Feeder drivers transport packages in bulk from feeder centers to package centers, or hubs, where “package drivers” pick up the packages in smaller quantities and deliver them to their ultimate destinations. The Company divides its operations into geographical regions and districts. The region involved in this case consists of two districts: “Metro L.A.,” encompassing most of Los Angeles County, and “South Calif.,” embracing Southern California, other than Los Angeles County, and parts of Nevada and Arizona. The employees in both districts are represented as a single bargaining unit, but under the terms of the regional labor agreements in force during 1968-72, each local within the region administered the contract and handled grievances within its own territorial jurisdiction. Local 396’s territory corresponds roughly with the Metro L.A. district.

Prior to the 1970-72 labor agreement, one seniority list was maintained for all feeder drivers in the region. No adjustments in seniority were necessary when a feeder driver was transferred from one district to another or the driver bid successfully for any run in the region. This system changed under the 1970-72 labor agreement; eight separate feeder driver seniority lists were created for different geographical areas within the region. Thus, one feeder driver seniority list was maintained for feeder drivers located in Los Angeles and another for those located in Santa Barbara.

The grievances of the nine feeder drivers involved here arose when, after the Company shut down its Santa Barbara facility, the drivers transferred to the Metro L.A. district and were “end-tailed” (placed at the bottom of the Metro L.A. feeder driver seniority list) instead of being “dovetailed” (given the seniority they would have enjoyed if a single, region-wide list had been maintained continuously). The transferees filed a grievance report with Local 396 alleging that they were denied their proper seniority in bidding the posted runs and asking for full seniority, based on dovetailing, and back pay. Local 396 refused to process the grievances. The Board found that Local 396 and Matula, in violation of section 8(b)(1)(A), denied the transferees the same representation accorded other employees within the Local’s jurisdiction because the transferees were not members of Local 396 and because they invoked the processes of the Board. The Board’s findings are fully supported by the record.

In apparent recognition of the futility of quarreling with the record, the Union and Matula do not press resistance to the cease-and-desist order. Their attack is focused on those portions of the Board’s order involving arbitration. They argue that under the terms of the 1970-72 labor agreement, the aggrieved employees have no plausible seniority claim; therefore, the Union’s failure to process the grievances was not a breach of its duty of fair representation, and even if the failure were a breach, requiring arbitration of frivolous claims is an unwarranted exercise of the Board’s remedial powers.

The crisp disposition of the Union’s contentions is that the grievances were not frivolous. The question whether these employees were entitled to be dovetailed turns on the construction and application of some ambiguous provisions of the 1970-72 labor agreement. Section 11 of the agreement provides:

“Feeder Drivers. It is agreed that there shall be a separate seniority list for regular feeder drivers, and those employees presently employed as regular feeder drivers shall retain their seniority in this classification. When additional openings occur in this classification, these may be filled by employees from the bargaining unit who qualify for this work, but these employees shall be placed at the bottom of the feeder driver seniority list. In the event of a reduction in force, feeder drivers may return to their former position and retain their full seniority. Employees desiring to qualify for feeder driver work shall indicate this desire. The names of those employees who are qualified by the Company for feeder driver work shall be placed on a list in seniority order. All vacancies in this classification shall be filled from this list. * * *” (Emphasis added.)

Transfer of these employees was due to “a reduction in force”; therefore, they “may return to their former position and retain their full seniority.” The definition of “former position,” in the light of the history of the development of seniority lists for feeder drivers in the region, and the proper application of the correct standard to the differing employment histories of the drivers are far from clear. The development of multiple feeder driver seniority lists from the single list system, the negotiations preceding the 1970 — 72 contract, and the conduct of the Company and the Union under the contract cast serious doubt upon the Union’s contention that the contract unequivocally foreclosed dovetailing of transferred employees. The Board’s conclusion that the grievances were plausible is supported by the record.

The record also sustains the Board’s determination that arbitration was an appropriate means of resolving conflicting interpretations of the labor agreement and of securing the impartial resolution of the merits of the grievances. The order to arbitrate was well within the Board’s remedial discretion. (See Local Union No. 12, United Rubber, C., L. & P. Wkrs. v. N.L.R.B. (5th Cir. 1966), 368 F.2d 12, 24-25; cf. Humphrey v. Moore (1964), 375 U.S. 335, 349-351, 84 S.Ct. 363, 11 L.Ed.2d 370.)

The novel issue presented here is the propriety of the Board’s order requiring the Union to pay the legal fees that may be incurred in the employees’ retention of independent counsel to represent them in the arbitration. The Union concedes that if the order to arbitrate is upheld, the aggrieved employees have a right to independent representation. The Union’s sticking point is that part of the order directing the Union to pay the bill.

The Board’s order that the Union pay counsel fees was within the power granted to the Board by the Act. “Congress has vested the Board, not the courts, with broad discretion to order a violator ‘to take such affirmative action as will effectuate the policies of [the Act]”’ (N.L.R.B. v. Food Store Employees Union, Local 347, Etc. (1974), 417 U.S. 1, 8, 94 S.Ct. 2074, 2079, 40 L.Ed.2d 612). That discretion includes the grant or denial of litigation expenses and attorneys’ fees. (See N.L.R.B. v. Local 485, Int. U. of Electrical, R. & M. Wkrs. (2d Cir. 1972), 454 F.2d 17, 22 n.9; International Union of E., R. & M. W., AFL-CIO v. N.L.R.B. (1970), 138 U.S. App.D.C. 249, 426 F.2d 1243, 1253 n.15; cf. N.L.R.B. v. Food Store Employees Union, Local 347, Etc., supra, 417 U.S. 1, 94 S.Ct. 2074, 40 L.Ed.2d 612.) A court will not decline to enforce a Board order unless the order is “a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the Act” (Virginia Electric & Power Co. v. N.L.R.B. (1943), 319 U.S. 533, 540, 63 S.Ct. 1214, 1218, 87 L.Ed. 1568).

One of the policies of the Act is to undo the effects of unfair labor practices by bringing about “a restoration of the situation, as nearly as possible, to that which would have obtained but for the illegal discrimination” (Phelps Dodge Corp. v. N.L.R.B. (1941), 313 U.S. 177, 194, 61 S.Ct. 845, 852, 85 L.Ed. 1271; see also N.L.R.B. v. Rutter-Rex Mfg. Co. (1969), 396 U.S. 258, 265, 90 S.Ct. 417, 24 L.Ed.2d 405). If the Union had not violated its duty of fair representation by its discriminatory refusal to process the grievances, the issues would have been resolved by litigation or arbitration in which the aggrieved employees would have enjoyed vigorous representation at no added cost to themselves. They cannot be restored to that position unless they are relieved of the expenses they will incur in securing the independent representation to which they are concededly entitled.

Our inquiry, however, does not end with our conclusion that the order compelling the Union to pay counsel fees was within the zone of discretion committed to the Board. The particular order must be scrutinized ■ to enable us to decide whether, in the circumstances of this case, the Board abused its discretion.' The aggrieved employees are entitled to the kind of representation that they would have had in processing their grievances but for the Union’s unfair labor practices. Would they have been represented by a lawyer, a paraprofessional, or both? If they would not have been represented by a lawyer, is there some other circumstance that sustains the Board’s order compelling the payment of attorneys’ fees as opposed to fees for a paraprofessional? Would it be feasible and in the interest of all concerned to award payment of fees for a single attorney or single paraprofessional to represent all of the aggrieved employees if their grievances are identical? The record before us does not disclose what the facts are that bear on these questions, nor does it otherwise enable us to determine the rationale of the Board in issuing the challenged order. A limited remand to the Board will afford it “the opportunity, through additional evidence or findings, to reframe its order better to effectuate that [national labor] policy” (N.L.R.B. v. Food Store Employees Union, Local 347, Etc., supra, 417 U.S. at 10, 94 S.Ct. at 2080).'

The Board’s order will be enforced, except that portion thereof directing the Union to pay counsel fees, which is remanded to the Board for further proceedings consistent with the views herein expressed.

      . Conceivably these aggrieved employees are not confined to arbitration as a means of redress. An aggrieved employee may seek “judicial enforcement of his contractual rights [where] the union has sole power under the contract to invoke . . the grievance procedure, and if the employee-plaintiff has been prevented from exhausting his contractual remedies by the union’s wrongful refusal to process the grievances” (Vaca v. Sipes (1967), 386 U.S. 171, 185, 87 S.Ct. 903, 914, 17 L.Ed.2d 842; emphasis in original).

      . In this case we are concerned only with legal fees incurred as a consequence of the arbitration proceeding. Our opinion is not addressed to legal expenses of any other kind. (Cf. Hall v. Cole (1973), 412 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702).

      . The propriety of compelling the Union to bear the expenses of independent representation for the aggrieved employees is premised, in this case, on the Union’s breach of its duty of fair representation. There may be occasions where such a breach is absent, but where the interests of the union and one or more of its members clash on a particular matter, with the result that the Union’s plausible interpretation of the applicable labor agreement conflicts with an equally plausible interpretation of an aggrieved member. In such circumstances, it might be unrealistic to expect the Union to represent that member, whose interests and interpretation are adverse to the Union’s own, in arbitration. We do not have to decide today whether, in those' circumstances and absent an unfair labor practice, the Union could be compelled to pay for the independent representation of the aggrieved employee. (Cf. Humphrey v. Moore (1964), 375 U.S. 335, 349-351, 84 S.Ct. 363, 11 L.Ed.2d 370.)