author: BREITENSTEIN, Circuit Judge.

text:
    Dennis J. GALLAGHER et al., Plaintiffs-Appellants, v. The CONTINENTAL INSURANCE COMPANY, a New York corporation, et al., Defendants-Appellees.
    No. 73-1885.
    United States Court of Appeals, Tenth Circuit.
    Aug. 20, 1974.
    Rehearing Denied Sept. 10, 1974.

      John S. Carroll, Denver, Colo., for plaintiffs-appellants.
    Charles E. Carlsen, Minneapolis, Minn. (Weller, Friedrich, Hickisch & Hazlitt, Gorsuch, Kirgis, Campbell, Walker & Grover, Denver, Colo., Carlsen, Greiner & Law, Minneapolis, Minn., John S. Moore, Atty. Gen., Joseph M. Montano, Chief Highway Counsel, Sp. Asst. Atty. Gen., and Richard W. Phillips, Asst. Chief Highway Counsel, Sp. Asst. Atty. Gen., on the brief), for defendants-appellees.
    Before BREITENSTEIN, MeWIL-LIAMS and BARRETT, Circuit Judges.
   BREITENSTEIN, Circuit Judge.

Plaintiffs-appellants, as citizens and taxpayers of Colorado and the United States, brought this class action in state court to recover 55 million dollars for “the treasury of the State of Colorado and the treasury of the United States, as their interests may appear.” The controversy centers around a highway tunnel which is part of the National System of Interstate and Defense Highways. The defendants-appellees are the project contractors, their sureties, the State of Colorado, and various Colorado officials. All defendants moved under 28 U.S.C. § 1441(c) for removal to federal court and asserted federal jurisdiction under 28 U.S.C. §§ 1331 and 1332, federal question and diversity. The district court denied a motion to remand and dismissed the action on the ground, among others, of lack of standing to sue. We affirm.

In 1967 defendant State of Colorado, acting through defendant state officials, Love, Shumate, Dunham, and Middle-mist, contracted with defendants Al Johnson Construction Company, Gibbons & Reed Company, Western Paving Construction Company, and Kemper Construction Company, doing business as Straight Creek Tunnel Constructors, for a tunnel on Interstate 70 near Loveland Pass, Colorado. The tunnel was then known as the Straight Creek Tunnel and now as the Eisenhower Memorial Tunnel. The contract price was $54,140,486 of which the United States was to pay about 91% because the tunnel is part of a federal-aid highway within the purview of the Federal-Aid Highway Act. See 23 U.S.C. § 101 et seq.

Defendants Continental Insurance Company, Travelers Indemnity Company, Federal Insurance Company, and United States Fidelity and Guaranty Company are the sureties on the bond guaranteeing performance of the 1967 contract. The penal sum of the bond is $49,576,500, and is apportioned among the sureties in sums ranging from about $24,700,000 to about $4,900,000.

In 1970 the state and the contractors made a new contract which authorized additional payment to the contractors in the amount of some 55 million dollars. Both the 1967 and the 1970 contracts were approved by the appropriate federal official. In 1971 plaintiffs made a demand on the state officials that they refuse to pay the additional compensation called for by the 1970 contract and that they sue on the performance bond. The demand was refused. The tunnel was completed and is now in use.

The suit was filed in state court in 1973 and removed to federal court on the petition of all defendants. The remand motion asserts lack of federal jurisdiction and argues first that presence of the state as a defendant bars federal jurisdiction. Plaintiffs are all Colorado citizens. Because of this fact the Eleventh Amendment, which bars federal jurisdiction over a suit against a state by citizens of another state, is not literally applicable. However, the Supreme Court has held that an unconsenting state “is immune from suits brought in federal courts by her own citizens as well as by citizens of another State.” Employees v. Missouri Public Health Dept., 411 U.S. 279, 280, 93 S.Ct. 1614, 1616, 36 L.Ed.2d 251; see also Briggs v. Sagers, 10 Cir., 424 F.2d 130, 131-132, cert. denied 400 U.S. 829, 91 S.Ct. 58, 27 L.Ed.2d 59.

Whether immunity is a constitutional or common law bar, the Court has held that the bar may be waived by consent to suit. See Employees v. Missouri Public Health Dept., 411 U.S. 279, 280, 93 S.Ct. 1614, 36 L.Ed.2d 251; Petty v. Tennessee-Missouri Bridge Commission, 359 U.S. 275, 276, 79 S.Ct. 785, 3 L.Ed.2d 804; Missouri v. Fiske, 290 U.S. 18, 24, 54 S.Ct. 18, 78 L.Ed. 145; and Hans v. Louisiana, 134 U.S. 1, 20, 10 S.Ct. 504, 33 L.Ed. 842. In the instant case the state made a general appearance, joined in the removal petition and the resistance to plaintiffs’ remand motion, moved to dismiss for failure to state a claim, and on this appeal reasserts its contentions made in the district court. It appears by its attorney general whose authority to take the mentioned actions is not questioned.

Plaintiffs are not helped by Art. Ill, § 2, of the Constitution which defines the extent of federal jurisdiction but contains no bar to the exercise of that jurisdiction. Waiver of immunity is not conferment of jurisdiction by consent. Be that as it may, in the case before us federal jurisdiction is asserted on grounds having nothing to do with presence of the state as a defendant.

An anomalous situation results if federal jurisdiction is denied because a state is joined in a suit brought for its benefit. The argument that the state is an indispensable party because it made the 1967 and 1970 contracts proves nothing. We are concerned with jurisdiction, not joinder. If jurisdiction lies in federal courts, it is not defeated by the transparent device of making the state a party defendant.

Plaintiffs also contend that neither diversity nor federal question jurisdiction can be sustained because the $10,000 requirement of §§ 1331(a) and 1332(a) can be satisfied only by the impermissible aggregation of claims. Although the total sum sought is 55 million dollars, the interest of each plaintiff and of each member of the class whether considered as state or federal citizens and taxpayers is concededly less than $10,000. Separate and distinct claims may not be aggregated to satisfy the jurisdictional requirement. Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 1056, 22 L.Ed.2d 319. The rule is different when “two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest.” Ibid.

Zahn v. International Paper Co., 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511, is not to the contrary. It deals with a Rule 23(b)(3) spurious class action and asserts the continuing validity of Snyder. Ibid, at 301, 94 S.Ct. 505. We are concerned with a Rule 23(b)(1) true class action wherein the rights of class members are common and undivided. See Advisory Committee’s Note to Rule 23, 39 F.R.D. 73, 100. The complaint before us seeks to enforce a single right in which plaintiffs have a common and undivided interest. Hence, aggregation is proper. Snyder, 394 U.S. at 335, 89 S.Ct. 1053. See also Berman v. Narragansett Racing Association, 1 Cir., 414 F.2d 311, 315, cert. denied 396 U.S. 1037, 90 S.Ct. 682, 24 L.Ed.2d 681.

Diversity of citizenship exists between the plaintiffs and all of the sureties. Federal jurisdiction lies under § 1332 and removal is proper under § 1441(c) if a separate and independent claim is asserted against the sureties. In American Fire & Cas. Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702, a single plaintiff sued two foreign' insurance companies and their mutual resident agent for a fire loss. Plaintiff sought one recovery and alleged her inability to say which defendant was liable. One of the nonresident insurors removed. The Court said that the action was not removable because there was but a “single wrong” to plaintiff “arising from an interlocked series of transactions.” Ibid, at 14, 71 S.Ct. at 540.

The Tenth Circuit has denied removal in cases involving single injuries for which a single relief is sought. See Gray v. New Mexico Military Institute, 10 Cir., 249 F.2d 28; Snow v. Powell, 10 Cir., 189 F.2d 172; and Willoughby v. Sinclair Oil & Gas Co., 10 Cir., 188 F.2d 902. Removal was upheld in Greenshields v. Warren Petroleum Corporation, 10 Cir., 248 F.2d 61, cert. denied 355 U.S. 907, 78 S.Ct. 334, 2 L.Ed.2d 262, a civil conspiracy case in which the complaint charged a removing party with different acts occasioning different results than those pertaining to other defendants.

Climax Chemical Company v. C. F. Braun & Co., 10 Cir., 370 F.2d 616, cert. denied 386 U.S. 981, 87 S.Ct. 1287, 18 L.Ed.2d 231, was an action against one defendant for negligently performing a contract to design and engineer an industrial plant and to guarantee the overall operation. Other defendants were charged with negligence in the design and engineering of certain components of the plant. The court distinguished the cases involving one wrong and either joint or alternative liability, 370 F.2d at 619, said that the relationship of the claims to the same plant was not enough, Ibid., and upheld removability. The Eighth Circuit followed Climax in Crosby v. Paul Hardeman, Inc., 8 Cir., 414 F.2d 1, 4-5.

In the instant complaint two recoveries are sought, one against the sureties on the performance bond made in connection with the 1967 contract and one against the contractors for money paid under the allegedly invalid 1970 contract. Plaintiffs say that there is but one wrong, the breach of the 1967 contract, and that the claims asserted are all derived from that wrong. The difficulty is that the complaint alleges two wrongs, (1) nonperformance of the 1967 contract, and (2) payment to the contractors under the invalid 1970 contract. The difference is pointed up in the prayer for relief which seeks 49 million dollars from the sureties' under their bond and 55 million from the contractors, to the extent not paid by the sureties. Thus, the complaint asks two different recoveries. The sureties have no connection with, or concern over, the payments under the 1970 contract. The possibility of alternative relief for breach of the 1967 contract does not bar removal because of the claim based on wrongful payments under the 1970 contract. No doctrine of original sin suffices to unify the two different wrongs or the two different recoveries sought. The case differs from Finn in that, instead of a single incident giving rise to a single recovery, it presents two incidents giving rise to two possible recoveries. As said in Climax, 370 F.2d at 619, “[w]e take Finn to mean that there must be substantive separability, and no more.” That situation obtains here. The claim against the sureties would be removable if sued on alone because the requisite diversity exists between the sureties and the plaintiffs. Our conclusion that jurisdiction lies under § 1332 makes it unnecessary to consider whether jurisdiction also lies under § 1331. The motion to remand was properly denied. Removal of the entire case is discretionary with the district court, § 1441(c), and no claim is made that the discretion was abused.

After denying the remand motion, the trial court proceeded to the motions to dismiss filed by all defendants. The court notified all parties that the motions would be treated as motions for summary judgment and afforded all parties time for the filing of affidavits and memoranda of law. Summary judgment was granted in favor of all defendants and the action was dismissed.

The initial problem is the standing of the plaintiffs to maintain the action. They sue as citizens and taxpayers of Colorado and the United States. The amended complaint omits reference to federal status and plaintiffs do not now claim any benefit from that status.

Indeed they could not do so. See United States v. Richardson, 418 U.S. 166, 179, 94 S.Ct. 2940, 41 L.Ed.2d 678; Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 216, 94 S.Ct. 2925, 41 L.Ed.2d 706; O’Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 38 L.Ed.2d 674; and Nat. Res. Def. Coun., Inc. v. United States Env. P. Agcy., 10 Cir., 481 F.2d 116, 121.

Plaintiffs urge that as state citizens and taxpayers they may sue for the recovery of unlawfully disbursed funds. Viewed in this light, the suit is a derivative action to assert state rights. Authority to bring a suit of that nature depends on state law. Colorado has no constitutional or statutory authorization for maintenance of derivative actions on behalf of the state. It has been held that absent statutory authorization citizens and taxpayers may not bring a derivative suit on behalf of the state. See e. g. Elliott v. Superior Court, 180 Cal.App.2d 894, 5 Cal.Rptr. 116, 118. In some cases courts have implied such a right. See e. g. Richardson v. Blackburn, 41 Del.Ch. 54, 187 A.2d 823, 824. In Colorado, the right would have to be implied. We agree with the district court that it is not “the province of the federal judiciary to fashion implied state rights of action.”

Plaintiffs rely on Leckenby v. Post Printing & Publishing Co., 65 Colo. 443, 176 P. 490. That case does not concern a derivative action and is pertinent only to the plaintiffs' contention that they may sue to challenge official action. In Leckenby a taxpayer sued to enjoin state officials from paying money under an unconstitutional appropriation. The court said that a taxpayer may sue to restrain the misapplication of public funds or to enjoin the payment of an appropriation made in violation of the state constitution.

The only reference to the Colorado constitution in the complaint is to Art. V, § 28, which provides that no bill shall be passed giving extra compensation to a contractor after services are rendered or contract made. This provision has no pertinence because there is no claim that any such bill has been passed. The plaintiffs refer to no Colorado statute which has been violated. The complaint alleges neither breach of duty, fraud, bad faith, nor abuse of discretion. Colorado decisions upholding taxpayers’ suits against officials when one or more of such allegations are made have no pertinence.

The only attack on the 1970 contract is that it was entered into “without consideration.” The argument presented is that “the contractors were under a preexisting duty to perform.” The contract recites consideration which is adequate on its face. Failure of consideration is an affirmative defense. Rule 8(c), F.R.Civ.P. No claim is made that the execution of the 1970 contract violated any Colorado statute. The assertion of an affirmative defense is an option of the state, not of a group of taxpayers. We find nothing in the record which shows that the Colorado officials breached any legal duty or abused any discretion in rejecting the demand that they refuse to pay “extra compensation” to the contractors.

A demand was made on the state attorney general that he sue the contractors and sureties for damages resulting from breach of the 1967 contract. He refused. That refusal does not by itself create a cause of action in plaintiffs. Plaintiffs are doing no more than attempting to assert their private views under a claim of public interest. See Nat. Res. Def. Coun., Inc. v. United States Env. P. Agcy., 10 Cir., 481 F.2d 116, 120-121. Because the attorney general is not a defendant the action may not be taken as one in mandamus to compel suit. Even if it were, the effort would fail because there is no allegation of fraud, bad faith, illegal action, improper motivation, or abuse of discretion. See McNichols v. City and County of Denver, 130 Colo. 202, 274 P.2d 317, 321.

Finally, plaintiffs argue that they have standing to sue because they are third-party beneficiaries of the 1967 contract. We have held that the right of a third-party to sue on a contract made for his benefit requires that the right be apparent from the express provisions of the contract and that the benefit cannot be incidental “but must be a direct benefit intended by the contracting parties to accrue in favor of the third party.” Jett v. Phillips & Associates, 10 Cir., 439 F.2d 987, 991. The contract does not name plaintiffs, or any member of the general public, as promisees. The contract is with the State of Colorado, not with the people of the state as individuals. Plaintiffs are not pressing individual claims and have, at the most, an incidental interest. Recognition of the third-party beneficiary theory would open the doors to attack on every highway construction contract by any disgruntled taxpayer.

We conclude that the action was properly dismissed because the plaintiffs have no standing to sue. In the circumstances, we need not be concerned with the other grounds urged in support of the motions to dismiss.

Affirmed.


source: Caselaw Access Project

author: LEWIS, Chief Judge.

license: Public Domain

text:
    In re FOUR SEASONS SECURITIES LAWS LITIGATION. ARTHUR ANDERSEN & CO. et al., Appellants, v. STATE OF OHIO, Appellee.
    Nos. 73-1781-73-1784.
    United States Court of Appeals, Tenth Circuit.
    Argued May 16, 1974.
    Decided Aug. 13, 1974.
    Certiorari Denied Nov. 25, 1974.
    See 95 S.Ct. 516.

      William G. Paul and Harry A. Woods, Jr., of Crowe, Dunlevy, Thweatt, Swin-ford, Johnson & Burdick, Oklahoma City, Okl. (Wilson & Mcllvaine by Charles W. Boand and George W. Thompson, Chicago, 111. of counsel on the brief for appellant Arthur Andersen & Co.) ; (Michael H. Rauch and Alan J. Russo, of Fried, Frank, Harris, Shriver & Jacobson, New York City, on the brief for appellant Gordon H. McCollum); (Breed, Abbott & Morgan, Thomas W. Kelly and Richard W. Lyon, New York City, of counsel on the brief for appellants Walston & Co., Inc., Montgomery Co., and Glenn R. Miller) for appellants Arthur Andersen & Co., Gordon H. Mc-Collum, Walston & Co., Inc., Montgomery Co., and Glenn R. Miller.
    Robert B. McCaw, Washington, D. C. (Arthur F. Mathews, of Wilmer, Cutler & Pickering, Washington, D. C., with him on the brief), for appellant Jack L. Clark.
    Richard F. Stevens, Sp. Counsel to Atty. Gen., Cleveland, Ohio (William J. Brown, Atty. Gen. of Ohio, Ronald B. Brown, Asst. Atty. Gen., of counsel, Wayne C. Dabb, Jr., of Baker, Hostetler & Patterson, Cleveland, Ohio, on the brief), for appellee.
    Before LEWIS, Chief Judge, and McWILLIAMS and BARRETT, Circuit Judges.
   LEWIS, Chief Judge.

This appeal probes the interrelationship between Rule 23 class actions and Rule 60 relief from judgments. It follows the granting of such relief to the state of Ohio after the judgment on a class-action settlement and arises as yet another offshoot of the complex litiga-tional network that has been constructed around securities issued or guaranteed by Four Seasons Nursing Centers of America, Inc. or Four Seasons Equity Corporation. The transactions relevant here involve $4,000,000 in loans made by Ohio to Four Seasons Nursing Centers of America. The facts surrounding the execution of these loans are set out in Ohio v. Four Seasons Nursing Centers of America, 10 Cir., 465 F.2d 25, at 26, 27 as follows:

In early 1970, Mr. Jack L. Clark, the president of Four Seasons, received information that a Mr. Ronald R. Howard of Los Angeles, California, was in a position to assist Four Seasons in borrowing needed funds for continued operation and expansion. Howard and Clark conferred in Oklahoma City for the purpose of consummating an agreement for the procurement of funds. It was anticipated that Four Seasons would' borrow between $20,000,000 and $24,000,000 from the State of Ohio. Howard contacted Crofters, Inc., a Columbus, Ohio, investment firm. Mr. Harry A. Groban, the executive vice president of Crofters, requested a credit rating on Four Seasons from the National Credit Office, a division of Dun and Bradstreet. An employee of the National Credit Office procured the latest annual report of Four Seasons, as well as other statements and bank information concerning that corporation from Mr. John Mee, a vice president of and attorney for Four Seasons. Based on this material, the National Credit Office gave Four Seasons a rating of “prime” for commercial paper. This information was communicated by letter to Groban; Groban in turn furnished the information to Mr. Robert F. Gardner, Deputy Treasurer of the State of Ohio.
Groban advised Mee that funds would be available to Four Seasons from the State of Ohio. Thereafter, Mr. Alex Russell, an officer of Four Seasons, went to Columbus, Ohio, to secure the funds. On March 9, 1970, Russell consummated a loan of $3,000,000 for Four Seasons with the State of Ohio through Gardner and in the presence of Groban. The loan was evidenced by two promissory notes of Four Seasons, one for $2,000,000 payable in 120 days and another for $1,000,000 due in two years. The $2,000,000 note was made on the basis of 120 days with the understanding that when due the note would be renewed for a period of two years. A second loan for $1,000,000 was advanced on March 23, 1970; a note for $1,000,000 payable in two years to the State of Ohio was executed on that date.

Ohio subsequently sought reclamation of these funds against the Trustee in the Chapter X reorganization proceedings of the Four Seasons companies. It charged, inter alia, that Four Seasons had intentionally made material and fraudulent misrepresentations concerning its financial condition to the National Credit Office in order to obtain a prime rating, and that Ohio’s loans had been made in reliance on this rating. The trial court found neither fraud nor misrepresentation, In re Four Seasons Nursing Centers of America, W.D.Okl., 329 F.Supp. 647, and was upheld on appeal. The appellate court also found Ohio’s constructive trust argument unpersuasive and held that the evidence concerning procurement of the funds did not establish noncomplianee with the applicable Ohio statute. Ohio v. Four Seasons Nursing Centers of America, 10 Cir., 465 F.2d 25.

Ohio filed three appeals from orders in the Chapter X proceedings; It was particularly opposed to those portions of successive plans of reorganization which resulted in one-third of the stock in the reorganized corporation (Anta) going to “Class G Creditor Stockholders.” Ohio was designated a “Class C Creditor” (general unsecured creditor) and was permitted under the amended plan to receive one share of Anta stock for each $7 principal amount of allowed claims.

On May 21, 1971 ten actions — seven of which claimed to have been brought on behalf of all purchasers of stock of the Four Seasons companies who suffered a loss — were brought in or transferred to the Western District of Oklahoma and were assigned to Judge Thomsen by the Judicial Panel on Multidistrict Litigation for coordinated or consolidated pretrial proceedings under 28 U.S.C. § 1407. In re Four Seasons Securities Law Litigation, Jud.Pan.Mult.Lit., 328 F.Supp. 221. Numerous other cases were subsequently transferred. All together 40 individuals, partnerships, and corporations were named as defendants in one or more of the actions, which sought to be treated as class actions. In one or more of the complaints, claims were asserted against. some or all of the defendants under §§ 5, 11, 12, and 17(a) of the Securities Act.of 1933, under §§ 9, 10(b), and 20' of the Securities and Exchange Act of 1934, and under Rule 10b-5’ of the SEC. The litigation proceeded as M.D.L. 55.

Meanwhile, in March 1972 the state of Ohio, through the office of the Attorney General, filed three suits:

(1) State of Ohio v. Crofters, Inc., et al.,. Civil Action No. 72-81, in the United States District Court for the Southern District of Ohio, Western Division. Among the several groups of defendants in that case were Clark, Gray, Mee, Andrews and McCollum, defendants in some of the M.D.L. 55 cases. The complaint includes eleven claims:
First Claim — § 17(a) of the Securities Act, 15 U.S.C. §77q(a).
Second Claim — § 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.-10b-5; § 29(b) of the Exchange Act, 15 U.S.C. § 78cc(b).
Third Claim — § 15(a) (1) of the Exchange Act, 15 U.S.C. § 78o(a)(l).
Fourth Claim — § 17(b) of the Securities Act, 15 U.S.C. § 77q(b).
Fifth Claim — § 17(a) of the Securities Act, 15 U.S.C. § 77q(a); § 10(b) of the Exchange Act, 15 U.S.C. § 78j (b) and Rule 10b-5, 17 C.F.R. § 240.10b-5.
Sixth Claim — § 15(c)(1) of the Exchange Act, 15 U.S.C. § 78o(c)(l), Rule 15cl-2, 17 C.F.R. § 240.17cl-2; § 15(c)(2) of the Exchange Act, 15 U.S.C. § 78o(c)(2).
Seventh Claim — § 1707.44(B)(4), § 1707.43, Ohio Revised Code.
Eighth Claim — § 1707.44(G), § 1707.43, Ohio Revised Code.
Ninth Claim — § 1707.14, § 1707.-44(A), and § 1707.43, Ohio Revised Code.
Tenth Claim — § 1707.41, Ohio Revised Code.
Eleventh Claim — Common Law Fraud.

Some of these statutory bases are the same as those in one or more of the M.D.L. 55 class actions; some are not.

Clark filed a counterclaim against Ohio in this case, third-party claims against Walston & Co. and Arthur Andersen & Co., and various cross-claims.

(2) State of Ohio v. Herbert, et al., in the Court of Common Pleas of Franklin County, Ohio.

This is an action against the Treasurer of the State, another official, and the sureties on their bonds, alleging violation of certain Ohio statutes and of the officials’ duties. All of the defendants in State of Ohio v. Crofters, Inc., et al., have been brought into that case as third-party defendants.

(3) Shaul, Director of Commerce of the State of Ohio v. Crofters, Inc., et al., in the Court of Common Pleas of Franklin County, Ohio. Clark, Gray, Mee, Andrews, and McCollum are also defendants in that case, which is based on alleged violations of the Ohio Code, and seeks injunctive relief.

Negotiations took place in the spring and summer of 1972 which were aimed at the settlement of various claims, including those in the M.D.L. 55 actions, the actions of the Trustee of the debtor estates against many of the M.D.L. 55 defendants and the appeals of Ohio in the Chapter X proceedings. Various attorneys for the state of Ohio were aware of these negotiations and participated in one or more of the discussions, but no one moved to have State of Ohio v. Crofters, Inc., in the Southern District of Ohio, transferred to M.D.L. 55 in the Western District of Oklahoma.

In July 1972 Judge Thomsen stated he was willing to enter an order in M.D.L. 55 which would, in effect, designate five actions as class actions and divide the plaintiffs preliminarily, and subject to the right to modify, into two classes for pretrial and discovery purposes. Ohio was a member of one of these classes. At this time all counsel present, which did not include counsel for Ohio, asked the court to hold up entry of the proposed order to permit them to continue settlement negotiations. The order was held up and negotiations continued until a settlement was reached and presented to the court on September 21, 1972.

It became apparent during these negotiations that settlement of Ohio’s claims in the Chapter X proceedings was a prerequisite to the settlement of the Trustee claims in M.D.L. 55 because the plan for reorganization could not be carried out until Ohio’s claims were settled. Toward this end attorneys for Ohio and the Trustee continued negotiations until a settlement was agreed upon on September 13, 1972. During the course of these discussions, the Ohio attorneys met with counsel for some of the M.D.L. defendants, although they did not meet with attorneys for the plaintiffs in that litigation. The Ohio attorneys were never told that Ohio was a member of one of the classes which the court had indicated would be preliminarily designated in M.D.L. 55 if settlement negotiations there fell through. Ohio’s attorneys did not inquire about the M.D.L. 55 classes and no one volunteered the information to them.

Gretick, the attorney in charge of the case for Ohio, went to Oklahoma City on September 19 to work with Bailey, the Trustee’s attorney, on the terms of the joint application for settlement in the Chapter X proceedings. Bailey left for Baltimore on September 20 and was present when the M.D.L. 55 settlement was reached and the order signed by the court on September 21. That order defined the Rule 23(b)(3) classes as follows :

(a) All persons (other than the Four Seasons companies, the Trustee thereof, the reorganized company, its subsidiaries and affiliates, defendants named in any of these class actions, and the partners of any of said defendant partnerships) who at any time from May 9, 1968 to July 22, 1970, both inclusive, purchased or acquired securities or commercial paper issued by America, Franchise, or Overseas, and who suffered a loss thereon or after July 22, 1970 still owned any such securities or commercial paper;
(b) All persons (other than the Four Seasons companies, the Trustee thereof, the reorganized company, its subsidiaries and affiliates, defendants named in any of these class actions, and the partners of any of said defendant partnerships) who at any time from November 6, 1968 to July 22, 1970, both inclusive, purchased or acquired securities or commercial paper issued by Equity or FSN, and who suffered a loss thereon or after July 22, 1970 still owned any such securities or commercial paper.

Bailey returned to Oklahoma City on September 22 and completed work with Gretick on the joint application for settlement in the Chapter X proceedings that evening. He told Gretick that M. D.L. 55 “had been settled around Ohio.” By the terms of the settlement Ohio received, in addition to the Anta stock it received as a Class C Creditor, proceeds from the sale of valuable real estate. Ohio, in return, agreed to dismiss its pending appeals.

In addition to the designation of classes which, it is conceded here, included the state of Ohio, the M.D.L. 55 order of September 21 included several other clauses pertinent to our consideration on appeal. Clause 19 preserved the rights of the M.D.L. 55 defendants to assert their claims and causes of action, including cross-claims and claims for contribution and indemnity, which related to or arose out of or in connection with the Ohio $4,000,000 loan and the litigation relating thereto. In addition, the order provided that claims of Class C Creditors in the Chapter X proceeding should be reduced to ten percent of the face amount of the securities on which their claim was based. This provision was in recognition of the fact that Class C Creditors had already received compensation through the Chapter X proceedings.

Finally, the order made it clear that the settlement was intended to include all claims which had been or could be asserted by or on behalf of the classes, or any member thereof, arising out of or relating to any act or omission concerning the Four Seasons companies, and other related or affiliated companies, or relating to the business, management or financial statements of any of the Four Seasons companies, or transactions in the securities or commercial paper of any of the Four Seasons companies, prior to the date of entry of the final judgment provided for in the order, whether or not asserted in the class actions. It barred forever the prosecution against the defendants of any and all settled claims by any member of the classes, except by those who opted out.

Notice of the proposed settlement was published in the Wall Street Journal and two copies of the order, notice, and accompanying papers were mailed, . one to Ohio, c/o the Attorney General, and one to William Brown, Attorney General. The return receipts indicated that the mailings were delivered to the office of the Attorney General, one on October 6 and the other on October 10, 1972. One set was subsequently discovered in Gretick’s file. The other has not been located.

On October 12 Gretick was in Oklahoma City for hearings on the settlement of Ohio’s claims in the Chapter X proceedings. He had not read the September 21 order or the notice. Bailey showed him a copy of the order, Gretick “riffled” through it and asked Bailey to mail him a copy. This was not done. Gretick left the Attorney General’s office two weeks later and Ronald B. Brown was made lead counsel in the Four Seasons case. Late in October he saw the M.D.L. order of September 21, read the first page and thumbed through some additional papers, assuming that Gretick had done what was necessary. No election to opt out was filed by Ohio. Hearings on the M.D.L. 55 settlement were held on November 16 and 17, 1972. The judgment approving the settlement was signed November 30 and entered on December 4,1972.

On December 5 counsel for Clark referred to the settlement during a pretrial hearing in State of Ohio v. Crofters, Inc., et al., and Brown then read the September 21 order in M.D.L. 55 for the first time. Ohio took no appeal from the judgment but on January 2, 1973 filed its motion for relief from judgment under Rule 60(b)(1), (4), and (6). The motion was granted and this appeal by affected M.D.L. 55 defendants followed.

In granting Ohio’s motion for relief, the court below examined each of the allegations presented under Rule 60(b)(1), (4), and (6). .Ohio first claimed that its failure to opt out was the result of mistake, inadvertence, surprise, or excusable neglect under Rule 60(b)(1). The court was not persuaded by this claim. “If the order was not read, one or more of Ohio’s attorneys were negligent; if it was read, and not acted upon, they were equally negligent.” 59 F.R.D. at 678. The court concluded, however, that Ohio negotiated with the Chapter X Trustee in the belief that it would not be included in the M.D.L. 55 classes and the attorneys for the Chapter X Trustee did nothing to dispel this belief. These circumstances, plus the statement of the attorney for the Chapter X Trustee “that the case had been settled around Ohio,” explained but did not excuse Ohio’s neglect. 59 F.R.D. at 679.

Ohio’s Rule 60(B)(4) claim was that the judgment as to it was void. In this context the court considered the Rule 23(a)(3) requirement that the claims or defenses of the representative parties must be typical of the claims or defenses of the class, the Rule 23(a)(4) requirement that the representative parties will fairly and adequately protect the interests. of the class, and the Rule 23(c)(2) requirement that in any class action maintained under (b)(3) the members of the class must be given the best notice practicable under the circumstances. When these requirements are met, the court reasoned, due process is satisfied.

The court first found that the required notice was given (in fact two copies of the notice were actually received by Ohio) and then proceeded to examine the adequacy of representation and typicality questions. On the typicality issue, Ohio sought to distinguish its position from that of other M.D.L. 55 class members on grounds that (1) Ohio’s loans were evidenced by promissory notes maturing in two years and that Ohio, unlike the other securities purchasers, was bargaining for interest return alone and not for any present or prospective equity in Four Seasons; (2) that its loans were privately negotiated through a finder-broker and required no registration statement, prospectus, other reporting, or professional underwriting group; and (3) that the promissory notes were represented to be commercial paper.

The court concluded that Ohio was included within one of the classes created in M.D.L. 55 because the promissory notes it acquired were securities within the meaning of the Federal Securities Act of 1933 and the Securities and Exchange Act of 1934. Reasoning that typicality does not require that claim's of class representatives be “co-extensive with” or “identical to” those of other class members, the court pointed out that each member of the class purchased his security or securities in transactions separate from other class members and that the fact patterns for each necessarily varied. All relied on alleged misrepresentations embraced in the general conspiracy theory advanced by class representatives and covered by the alleged violations of the securities laws. After considering all of the evidence, the court found that “the claims of the class members were typical of the claims of Ohio asserted in State of Ohio v. Crofters, Inc., et al., and the third-party complaints against Clark and others in State of Ohio v. Herbert et al., but were not typical of the claims asserted by Ohio in its complaint against Herbert, Gardner and their sureties.” 59 F.R.D. at 682.

Ohio’s contention that it had not been represented adequately was premised on the same distinctions between its claims and those of the class representatives which were alleged in its typicality argument. The court found that these distinctions alone, again with the exception of the claims against Herbert, Gardner, arid their sureties, did not demonstrate a lack of adequate representation. But when viewed in light of the ultimate terms of the settlement, which provided for the claims of Class C Creditors in the Chapter X proceedings to be reduced to ten percent of the face amount of the securities on which their claim was based and further reserved the rights of the M.D.L. 55 defendants against Ohio, the representation question became more troublesome. The court pointed out that none of the Class C Creditors was a class representative and that there was therefore some force to Ohio’s contention that a Class C Creditor could not be adequately represented in the settlement. In addition, the court found that the provisions preserving the claims of the M.D.L. defendants against Ohio “were included with the expectation on the part of everyone that Ohio would opt out.” 59 F.R.D. at 683. Finally, when these provisions and the differences between Ohio’s claims and the claims of other class members were considered together, “Ohio has made a strong case that the judgment should be held void as to all the claims of Ohio.” Id.

Added to these factors, under Rule 60(b)(6), was the “lulling effect” which the court felt the dealings between the attorneys for Ohio and the attorney for the Chapter X Trustee had on Ohio’s failure to opt out. The end result was that “the totality of the evidence require[d] that Ohio be relieved from the operation of the judgment.” Id.

This account of the lower court’s deci-sional process is presented in some detail in order to demonstrate that the court did not pigeonhole its basis for relief into any particular one of the Rule 60(b) categories. Reliance to some extent was placed on 60(b)(1), (4), and (6) and our appellate review cannot be conveniently telescoped. We must therefore consider whether, under all of the circumstances, the relief granted was justified.

We must at the outset dismiss appellants’ contention that the provisions of Rule 60(b) (l)-(5) and 60(b)(6) are mutually exclusive and that the court below misapplied the rule in apparently aggregating claims under 60(b)(1), (4), and (6). It is true that the weight of authority indicates that a Rule 60(b)(6) motion must be based upon some reason other than those stated in clauses (1) — (5). Klapprott v. United States, 335 U.S. 601, 69 S.Ct. 384, 93 L.Ed. 266; United States v. Karahalias, 2 Cir., 205 F.2d 331 (on rehearing) ; and 7 Moore’s Federal Practice 60.27(1). But it is also clear that this rule stems of necessity from the one-year time limitation which attaches to motions for relief under 60(b)(l)-(3). Rule 60(b)(6) requires only that the motion be made within a “reasonable time” and it would obviously frustrate the one-year limitation if a 60(b)(6) motion could be brought after this period for reasons articulated in 60(b)(l)-(3). The cases support this interpretation of the exclusivity rule, and motions timely brought under Rule 60(b) have encountered little technical difficulty as to whether the motion in fact comes under clause (6) or one of the earlier clauses. Laguna Royalty Co. v. Marsh, 5 Cir., 350 F.2d 817; Rooks v. American Brass Co., 6 Cir., 263 F.2d 166; 11 Wright and Miller, Federal Practice and Procedure § 2864, at 212. Where, as in the case at bar, the motion is timely filed under any of the 60(b) clauses, the court should not be bound by a strict categorization of particular claims. We thus do not consider it necessary to attempt to pinpoint which, if any in particular, of the 60(b) clauses formed the basis for the decision of the court below.

When viewed in its entirety, it is apparent that the real basis for the court’s decision below, notwithstanding the analysis directed to particular clauses under Rule 60, was its belief that under all of the circumstances presented Ohio was simply denied due process of law. The court in essence concluded that the aforementioned clauses in the settlement agreement reflected an inadequacy of representation which, at least with respect to the claims against Herbert, Gardner, and their sureties, was predetermined through the lack of typicality of those claims under Rule 23(a)(3). It is interesting to note in this latter respect that at least one court has stated that the typicality requirement was “designed to buttress the fair representation requirement in Rule 23(a)(4).” Rosado v. Wyman, E.D.N.Y., 322 F.Supp. 1173, 1193, affirmed on other grounds, 2 Cir., 437 F.2d 619, affirmed, 402 U.S. 991, 91 S.Ct. 2169, 29 L.Ed.2d 157. This view, of course, comports with common sense in that atypical claims presumably could not be adequately represented by a class representative unfamiliar or unconcerned with their peculiar characteristics.

We are supported in our view that the lower court’s decision was based upon due process considerations by the fact that the major claims of Ohio were asserted and addressed under the Rule 60(b)(4) voidness of the judgment clause, and a judgment is not void merely because it is erroneous, but only if the court which rendered it lacked jurisdiction of the subject matter, or of the parties, or acted in a manner inconsistent with due process of law. 11 Wright and Miller, Federal Practice and Procedure § 2862, at 199, 200. Jurisdiction not being challenged, the judgment could be attacked as void only on due process grounds and, indeed, the court couched, its 60(b)(4) consideration in terms of due process. 59 F.R.D. at 679.

The touchstones of due process in class actions have always been notice and adequacy of representation, but their interrelationship has never been completely and clearly articulated. Assuming the conclusion of the court below on the adequacy question to be correct, we must at the outset determine what if any impact the notice provided to Ohio had on its standing to argue a denial of due process under Rule 60(b).

The landmark due process decision in class action law is Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed. 22. In that case the Supreme Court refused to give res judicata effect to a state court decision against certain ostensible class members who had not received notice and had not been adequately represented. The Court’s due process analysis was centered around the question of adequacy of representation and the decision has subsequently been interpreted to establish adequate representation as a prerequisite for due process in class actions. See, inter alia, Gonzales v. Cassidy, 5 Cir., 474 F.2d 67; Northern Natural Gas Co. v. Grounds, D.Kan., 292 F.Supp. 619; Dolgow v. Anderson, E.D.N.Y., 43 F.R.D. 472. It is important to note, however, that these cases are distinguishable from that presented here in that they involved either actions brought under sections other than 23(b)(3), with its built-in opportunity to opt out, or determinations as to whether a class action should be maintained in the first instance. The present case involved a unique factual situation and requires a closer consideration of due process requirements.

In 1966 class action procedures were revised under Rule 23(c)(2) with respect to actions, such as the instant one, brought under Rule 23(b)(3). Recognizing the unique availability of exclusion under 23(b)(3) actions, the revised rule requires that the best practicable notice under the circumstances be sent to the members of the class advising them of their right to opt out or to enter an appearance in the action through counsel. The resulting judgment, whether favorable or not, will bind all members who then fail to exercise the option to be excluded. By requiring this affirmative action by the absentee, the rule seeks to eliminate “one-way intervention,” a practice common in “spurious” class suits prior to 1966. Shane v. Northwest Indus., Inc., D.C.Ill., 49 F.R.D. 46; State of Minnesota v. United States Steel Corp., D.C.Minn., 44 F.R.D. 559.

While adequacy of representation has been upheld as an extremely important factor in due process considerations in class actions and has, in fact, been deemed a prerequisite thereto under most circumstances, we do not feel bound in the instant proceeding by Hansberry and its progeny. For we consider here an action in which Ohio not only received notice of its inclusion within the designated class, with the concomitant right to opt out, but one in which Ohio was also apprised of the very terms of the impending judgment. It was thus presented with the unique opportunity of judging, retrospectively, whether its interests had been adequately represented at a time when it was capable of excluding itself if not satisfied. We do not feel that due process requirements under the facts presented here have yet been articulated.

We are constrained to conclude that due process was satisfied here when Ohio received the notice and order delineating the terms of the proposed settlement and informing Ohio that it was a designated member of a class, that it had the opportunity to opt out or be represented by counsel, that it would be bound if it failed to opt out. In such a case, we conclude that due process may be satisfied by notice alone and that, where due process is thus satisfied, adequacy of representation need not be shown as a matter of constitutional necessity.

In reaching this conclusion we are guided by the purpose of the rule to prevent one-way intervention, the interests in the finality of judgments, and related case law precedent. To uphold the decision of the court below would, in our opinion, offer “a return to one-way intervention under a new guise.” Philadelphia Elec. Co. v. Anaconda Am. Brass Co., D.C., 43 F.R.D. 452, 459. See Note, Collateral Attack on the Binding Effect of Class Action Judgments, 87 Harvard Law Review 589, 601. Defendants would be placed in the difficult position of having to go through complex litigation a second time against parties that would have participated in the judgment had it been favorable to them and, as appellants contend happened in the present case, the same arguments may be used against them which they had previously urged when they originally challenged the maintenance of the class action. The purpose of class actions is. to avoid multiplicity of suits and upholding the decision of the court- below would frustrate not only the interest in finality of judgments but also the interest in settlement of complex litigation.

Finally, we note that this is not the first time that a class member with notice has been bound by a judgment after failing to take some affirmative action. See Brennan v. Midwestern United Life Ins. Co., 7 Cir., 450 F.2d 999; Mungin v. Florida East Coast Ry. Co., M.D.Fla., 318 F.Supp. 720; School District of Philadelphia v. Harper & Row Publishers, Inc., E.D.Pa., 267 F.Supp. 1001; Supermarkets General Corp. v. Grinnell Corp., S.D.N.Y., 59 F.R.D. 512, affirmed, 2 Cir., 490 F.2d 1183. In Research Corp. v. Asgrow Seed Co., 7 Cir., 425 F.2d 1059, appellants, who had not been named class defendants but who had received notice, sought to appeal from a class settlement judgment. Appellants did not intervene or object to the settlement and the appeal was dismissed for reasons which we find particularly pertinent here:

However, in order to encourage or even to permit settlement, a person in disagreement with the terms of a settlement must take, at least, these minimal steps to preserve his right to appeal. Accordingly, since appellants had both actual and constructive knowledge of the settlement and since they took no steps to object to the settlement prior to the entry of judgment, the appeal must be dismissed. 425 F.2d at 1060-1061.

We find for similar reasons that the Rule 60(b) relief sought in the court below should have been denied. Under the particular facts here presented there has been no denial of due process.

The case is reversed and remanded with instructions to reinstate the judgment.

      . For a thorough account of the history of the Four Seasons companies see In re Four Seasons Securities Law Litigation (Opinion No. 2), (W.D.Okl.) 58 F.it.D. 19.

      . A motion to transfer that case was subsequently made to the Judicial Panel on Multi-district Litigation, and the case was thereafter transferred by the panel to M.D.L. 55. In re Four Seasons Securities Laws Litigation, 361 F.Supp. 636.

      . Ohio was a class member as holder of securities, as defined in the Federal Securities Laws, or commercial paper, or both.

      . Rule 60. Relief From Judgment Or Order
      (b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, etc. On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; * * * (4) the judgment is void; * - * or (6) any other reason justifying relief from the operation of the judgment.

      . The court below entered an order based upon Ohio’s assurance that it would not file an appeal from the December 4 judgment, authorizing Ohio to file a contingent proof of claim under the M.D.L. 55 settlement. The proof of claim was to become null and void if Ohio’s Rule 60(b) motion was finally granted, but would become fully effective and unqualified if the motion was denied.

      . The “lulling effect” must be seen as only one more factor in the due process determination, especially in view of the fact that Ohio’s neglect was deemed, properly we think, inexcusable under Rule 60(b) (1).

      . Bass v. Hoagland, 5 Cir., 172 F.2d 205, cert. denied 338 U.S. 816, 70 S.Ct. 57, 94 L.Ed. 494.

      . It is not entirely unfair to characterize this interpretation as overly broad. The Court did not say that both notice and adequate representation were necessary to satisfy due process. It is entirely feasible that the Court reached the adequacy issue because no notice had been given and was willing to enforce the prior state decision if adequacy were present despite lack of notice. The question of whether notice itself would have been sufficient, it seems to us, was left unanswered. See also, e. g., Schrader v. Selective Service System Local Board No. 76 of Wisconsin, W.D.Wis., 329 F.Supp. 966, in which adequacy overcame the lack of notice.

      . In the Gonzales case, heavily relied on by Ohio, the court took pains to point out that the action was maintained under 23(b)(2) and not 23(b) (3) with its special notice requirements and opt-out provisions. “As a result of these distinctions class members in (b) (1) and (b) (2) actions must necessarily rely on the representative to protect their interests.” 474 F.2d at 74 n. 12.

      . A “spurious” suit was one in which the action was based solely on common questions. The judgment bound only the named parties and those who joined. 7A Wright and Miller, Federal Practice and Procedure § 1777, at 45. “One-way intervention” occurred when courts permitted absent parties to intervene after a decision favorable to their interests, even though an unfavorable decision would not have bound them.

      . In the recent case of Eisen v. Carlisle & Tacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732, dec. May 28, 1974, the Supreme Court extended the Rule 23(c)(2) best-practicable notice requirement to all 23(b)(3) class members who can be identified through reasonable effort. In response to the contention that adequacy of representation, rather than notice, was sufficient for due process, the Court responded: “We think this view has little to commend it. To begin with, Rule 23 speaks to notice as well as to adequacy of representation >and requires that both be provided.” The decision, however, preceded any judgment and concerned the question of whether the action could be maintained, and is thus, like the previous cases cited, factually distinguishable from this controversy. Moreover, the Court speaks to the requirements of the rule, and not the Constitution.

      . In Ace Heating & Plumbing Co. v. Crane Co., 3 Cir., 453 F.2d 30, the court considered the same issue as that presented in Research Corp. but concluded that it was not dispositive on the facts presented because appellants were members of a class so small that they had no litigable claims unless aggregated and that for those so situated the option to join in or opt out is in reality no option at all. They must accept, either nothing at all or a possibly unfair settlement, the court held, and thus had standing to appeal. No such mitigating circumstances are present here.


author: LAY, Circuit Judge.

text:
    Alan Daniel WILWORDING, Appellant, v. Harold R. SWENSON, Warden, Missouri Penitentiary, Appellee.
    No. 74-1071.
    United States Court of Appeals, Eighth Circuit.
    Submitted June 14, 1974.
    Decided Sept. 10, 1974.
    Rehearing and Rehearing En Banc Denied Oct. 1, 1974.

      Ronald M. Sokol, Public Defender, St. Joseph, Mo., of counsel; Ronald M. So-kol, Kansas City, Mo., and Robert Plot-kin, NLADA, Washington, D. C., on. brief, for appellant.
    David Robards, Asst. Atty. Gen., Jefferson City, Mo., for appellee.
    Before LAY, ROSS and STEPHENSON, Circuit Judges.
   LAY, Circuit Judge.

Petitioner Wilwording has spent five unsuccessful years seeking an eviden-tiary hearing on his claim of unconstitutional disciplinary measures in the Missouri State Penitentiary. In 1969, he filed a § 1983 civil rights action in the United States District Court for the Western District of Missouri and a petition for a writ of habeas corpus in the Circuit Court of Cole County, Missouri. The habeas petition was denied. The Supreme Court of Missouri affirmed the denial of the writ in December, 1969. Petitioner then filed the federal habeas petition involved in this appeal. The United States District Court dismissed the habeas petition on the ground that Wilwording had failed to exhaust a number of extraordinary writs theoretically available in Missouri in addition to the state habeas claim. This court affirmed on that ground, Wilwording v. Swenson, 439 F.2d 1331 (8th Cir. 1971). The Supreme Court of the United States summarily reversed, holding that Wil-wording had adequately fulfilled the exhaustion requirement.

The exhaustion-of-state-remedies rule should not be stretched to the absurdity of requiring the exhaustion of separate remedies when at the outset a petitioner cannot intelligently select the proper way, and in conclusion he may find only that none of the [alternatives] is appropriate or effective.

Wilwording v. Swenson, 404 U.S. 249, 250, 92 S.Ct. 407, 409, 30 L.Ed.2d 418 (1971).

The Court alternatively held that the petition might be viewed as arising under § 1983, in which event there was no exhaustion requirement. Id. at 251, 92 S.Ct. 407. The Court remanded with directions, inter alia, to determine the effect on the habeas claim of Wilwording’s separate civil rights suit, which had meanwhile been consolidated with those of several other Missouri prisoners. In those consolidated cases, at a pretrial conference of which no transcript has been prepared, the decision was made to drop most claims other than the Eighth Amendment claims which were the common question. Judge Elmo Hunter of the Western District of Missouri dismissed with prejudice the non-Eighth Amendment questions and tried the remaining claims on the merits. On June 28, 1971, Judge Hunter, in an exhaustive opinion, denied relief to Wilwording and all other petitioners. The prisoners were denied a certificate of good faith to appeal by both the district court and this court. The Supreme Court denied certiorari, Beishir v. Swenson, 407 U.S. 922, 92 S. Ct. 2467, 32 L.Ed.2d 807 (1972).

Thereafter, Wilwording continued to prosecute his habeas claim. On January 18, 1972, after remand from the Supreme Court, this court sent the habeas case back to the district court. Counsel was appointed on May 11, 1972, and all pleadings were completed shortly thereafter. Pretrial briefs were ordered in January, 1973, and were filed by June of. that year. On December 3, 1973, the district court, without evidentiary hearing, filed a detailed 52-page opinion denying petitioner relief on three alternative grounds: (1) that Wilwording’s ha-beas petition should be viewed as a § 1983 action, so that res judicata would bar re-litigation of issues tried in the civil rights suit; (2) that even if the habeas petition was viewed outside of a § 1983 claim, the dismissal in the civil rights suit should be given “controlling weight;” and (3) that any claims not adjudicated in the civil rights suit had not been stated in the original habeas petition and hence could not now be introduced without returning to the state courts to exhaust remedies there.

A. Nature of tke Claim — Habeas or § 1983?

Although the Supreme Court did state alternatively that Wilwording might be “entitled” to have his claims viewed as § 1983 questions, we find that ruling should not be invoked against him to deny relief here. On this second appeal, Wilwording has abandoned his cruel and unusual punishment claims. He urges that his petition must be treated as one seeking only habeas corpus relief (the petition has at all times been so entitled) since the surviving claims relate to denial of due process in disciplinary proceedings resulting in a false prison record and loss of good time.

In his pro se complaint Wilwording generally alleged a denial of substantive and procedural due process in the prison disciplinary action. He alleged :

[t]hat the petitioner’s institutional record has been greatly tainted by the respondents [sic] false and unjust reports with absolutely no valid evidence to support such charges. That the petitioner must be granted proper judicial review by this Honorable Court regarding these false charges, to clear his record of any wrong doing for further parole consideration.

Although inarticulately expressed, this sufficiently alleges that petitioner’s prison record contains false charges and affects his parole consideration. He claims “illegal detention,” in that his imprisonment may be lengthened by arbitrary government action taken without evidence. These allegations also raise the problem of loss of good time. Such issues are clearly cognizable in habeas corpus under Preiser v. Rodriguez, 411 U.S. 475, 93 S.Ct. 1827, 36 L.Ed.2d 439 (1973).

Treating Wilwording’s petition as a petition for a writ of habeas corpus subjects it to the requirement in 28 U. S.C. § 2254 of exhaustion of state remedies. However, the claims surviving were, as discussed above, adequately raised in the initial petition considered by the Supreme Court. The Supreme Court determined that Wilwording’s state habeas claim had fulfilled the exhaustion requirement by giving the state “an initial ‘opportunity to pass upon and correct’ alleged violations of its prisoners’ federal rights.” Wilwording v. Swenson, supra, 404 U.S. at 250, 92 S.Ct. at 409. Thus the law of this case is that the exhaustion requirement is satisfied.

B. Finality in Criminal Proceedings: Res Judicata, Collateral Estoppel, and Controlling Weight

Viewing the petition as seeking a writ of habeas corpus, traditional notions of res judicata become inapplicable. As the Supreme Court recognized in Sanders v. United States, 373 U.S. 1, 83 S.Ct. 1068, 10 L.Ed.2d 148 (1963):

Conventional notions of finality of litigation have no place where life or liberty is at stake and infringement of constitutional rights is alleged. . The inapplicability of res ju-dicata to habeas, then, is inherent in the very role and function of the writ.

Id. at 8, 83 S.Ct. at 1073.

Accord, Preiser v. Rodriguez, supra, 411 U.S. at 497, 93 S.Ct. 1827; Fay v. Noia, 372 U.S. 391, 423, 83 S.Ct. 822, 9 L.Ed. 2d 837 (1963); Townsend v. Sain, 372 U.S. 293, 312-318, 83 S.Ct. 745, 9 L.Ed.2d 770 (1963); Vestal, Res Judicata/Preclusion 270 (1969).

Nor does it appear that the petitioner’s voluntary dismissal of these claims from the civil rights suit would bar a hearing on them now under the usual principles of collateral estoppel. It has long been recognized that dismissal at plaintiff’s request, even if it is with prejudice, is insufficient to invoke the bar of collateral estoppel. That doctrine precludes a new hearing only on “issues actually litigated and determined in the prior suit.” Lawlor v. National Screen Service Corp., 349 U.S. 322, 326, 75 S.Ct. 865, 867, 99 L.Ed. 1122 (1955).

As the district court recognized, however, the principle that the judicial interest in finality is greatly attenuated in challenges to custody of the person does not mean it is absent altogether. The district court thus held that if neither res judicata nor collateral estoppel barred Wilwording’s claim, nevertheless the prior dismissal with prejudice should be accorded “controlling weight.” • In Sanders v. United States, supra, the Supreme Court set out criteria for determining when controlling weight may be given to denial of a prior application for federal collateral relief. The Court held that prior determination would bar a rehearing only if all three of the following conditions were met:

(1) the same ground presented in the subsequent application was determined adversely to the applicant on the prior application, (2) the prior determination was on the merits, and (3) the ends of justice would not be served by reaching the merits of the subsequent application.

Id. 373 U.S. at 15, 83 S.Ct. at 1077.

Dismissal with prejudice might be an adverse determination within the meaning of the first Sanders criterion, but it will not satisfy the second. The requirement of a decision “on the merits” in this context means that an evidentiary hearing was held on the contested issues of fact, unless it could be said that the files and records conclusively resolved the issue. Id. at 16, 83 S.Ct. 1068; Raiford v. United States, 483 F.2d 445, 446 (9th Cir. 1973); Cancino v. Craven, 467 F.2d 1243, 1246 (9th Cir. 1972); Oliver v. United States, 398 F.2d 353, 355 n. 5 (9th Cir. 1968). In the instant case, the surviving claims were dismissed before trial, so there was no evidentiary hearing, and those claims rest on contested issues of fact which were not resolved. Thus, the second Sanders criterion is unsatisfied, so it was error to attribute controlling weight to the dismissal in the civil rights suit. We conclude that the Sanders criteria have not been satisfied and that the judgment in Wilwording’s prior civil rights suit cannot properly be accorded “controlling weight” in the present habeas proceeding.

C. Voluntary Dismissal as Waiver Barring Subsequent Relief

Fes judicata, collateral estoppel and “controlling weight” do not exhaust the grounds for denial of a second application for federal relief, although those are the only grounds advanced by the respondents and discussed by the court below in this case. The principles of equity have traditionally governed habeas corpus, and among those is the idea that the petitioner’s bad faith or otherwise inequitable conduct may merit denial of relief. Where a prisoner deliberately bypasses an adequate state remedy, or purposefully withholds or withdraws a known claim from a prior application for federal relief, that may be deemed a waiver of any right to a subsequent hearing on the claim. Sanders v. United States, supra, 373 U.S. at 18, 83 S.Ct. 1068; Fay v. Noia, supra, 372 U.S. at 433, 438-439, 83 S.Ct. 822; Townsend v. Sain, supra, 372 U.S. at 317, 83 S.Ct. 745. Cf. Price v. Johnston, 334 U.S. 266, 289-292, 68 S.Ct. 1049, 92 L.Ed. 1356 (1948); Wong Doo v. United States, 265 U.S. 239, 241, 44 S.Ct. 524, 68 L.Ed. 999 (1924).

Such abuse of the writ, however, is “rare and extraordinary.” Simpson v. Wainwright, 488 F.2d 494, 495 (5th Cir. 1973). The burden of pleading and proving waiver of these constitutional claims falls on the government. Sanders v. United States, supra, 373 U.S. at 17, 83 S.Ct. 1068; Price v. Johnston, supra, 334 U.S. at 291-292, 68 S.Ct. 1049; United States v. Lee, 446 F.2d 350, 352 (9th Cir. 1971). Because a finding of waiver bars even a meritorious claim for habeas corpus relief, the government’s burden is a heavy one. The Supreme Court made it clear in Fay v. Noia that legal fictions were not to be introduced to deny habeas corpus relief, and that waiver in this context means “an intentional relinquishment or abandonment of a known right or privilege.” 372 U.S. at 439, 83 S.Ct. at 849. While Fay dealt with “deliberate bypasses” of state remedies, Sanders adopted that definition of waiver for use where prior opportunities for federal relief have allegedly been sidestepped. 373 U.S. at 18-19, 83 S.Ct. 1068.

It might be argued (although it has not been in the briefs on appeal or the opinion below) that Wilwording’s dismissal from the civil rights suit of the claims here pursued was such an “intentional abandonment of a known right.” Since this claim was not raised below, the facts surrounding those dismissals are not adequately developed. However, a study of the record indicates that Wilwording is not abusing the writ so as to foreclose relief on those claims. First, at the time the dismissals were entered, Wilwording’s habeas petition raising the same claims was pending in the same district court against the same respondents. Absent the transcript of the conference at which dismissal was orally agreed upon, it cannot be demonstrated that Wilwording or his attorney actually understood that voluntary dismissal from one suit would bar the claim from the habeas proceeding as well. Nor can it be said that they should have so interpreted the situation, for the principle that res judicata does not apply to habeas was already well established. Furthermore, the reason advanced for the dismissals, i. e., simplifying trial of the common questions in a consolidated case by eliminating other issues, lends support to petitioner’s claim that he never intended to dismiss “with prejudice.”

In sum, the government has not shown and the record does not indicate that Wilwording’s conduct has been inequitable or in bad faith so as to justify denial of relief. Dismissal of a claim from one suit when the same claim is still pending in another suit does not lull the state into false security until it is too late to present an adequate defense. To bar relief now merely because Wilwording did not appeal from the dismissal with prejudice nor attempt within one year to set it aside would be the kind of technical forfeiture of constitutional claims which the. Supreme Court rejected in Fay.

D. Availability of the Relief Re- ' quested

There remains one final obstacle to a hearing on the merits of Wilwording’s claims. The Supreme Court recently defined the minimum requirements of procedural due process in prison discipline, but it declined to give them retroactive effect. The Court held it too great a burden on the administration of justice to require expungement of prison records and restoration of good time whenever prior disciplinary actions had not met the newly announced procedural standards. Further, the Court noted that prison officials had relied in good faith on prior law not requiring the full array of new procedures, and the majority observed that the old procedures were not so unreliable as to warrant full retroactivity. Wolff v. McDonnell, 418 U.S. 539, 573, 94 S.Ct. 2963, 2983, 41 L.Ed.2d 935 (1974).

If Wolff covers Wilwording’s case, then his claim, however justified on the merits and however diligently pursued for five years, might be denied without an evidentiary hearing as one in which no relief can be granted.

We do not believe that that result is required in this case. Wilwording’s claims are based not so much on the failure of Missouri’s penitentiary to accord him procedural due process, the area defined in Wolff, as on a denial of the substance of due process. Wilwording alleges that he was punished for having allegedly helped plot an escape, and that that punishment was imposed without any evidence being offered against him. Punishment imposed in the complete absence of evidence against the accused in a criminal case has long been recognized as arbitrary and hence invalid. “Just as ‘Conviction upon a charge not made would be sheer denial of due process,’ so is it a violation of due process to convict and punish a man without evidence of his guilt.” Thompson v. Louisville, 362 U.S. 199, 206, 80 S.Ct. 624, 629, 4 L.Ed.2d 654 (1960); accord, Gregory v. Chicago, 394 U.S. 111, 112, 89 S.Ct. 946, 22 L.Ed.2d 134 (1969). Protection of individuals against arbitrary government action is the “great purpose” of the due process clause. Dent v. West Virginia, 129 U.S. 114, 124, 9 S.Ct. 231, 32 L.Ed. 623 (1889). Long before the requirements of procedural due process were imposed on prison disciplinary proceedings, this court recognized that those proceedings must at least afford substantive due process. We noted the history of this dichotomy in McDonnell v. Wolff, 483 F.2d 1059 (8th Cir. 1973):

The trial court properly held that Fourteenth Amendment substantive due process requirements are applicable to disciplinary proceedings. Even in those earlier cases in which we held procedural due process inapplicable in comparable settings, we recognized that administrative determinations must not be arbitrary. See, Morris-sey v. Brewer, supra, 443 F.2d [942] at 950 [8th Cir.]; Douglas v. Sigler, 386 F.2d 684, 687 (8th Cir. 1967). It would serve little purpose to require fair procedures but to permit arbitrary results. The procedures are not ends in themselves, but a means to insure that decisions imposing substantial penalties will be based on the knowledge that grounds for the imposition of the penalties exist. The courts, therefore, have a limited right to review the merits of decisions imposing substantial penalties. In each case, the sole concern of the court must be whether the decision of the prison authorities is arbitrary and capricious. It must not substitute its judgment for that of the prison authorities.

Id. at 1063.

We of course express no opinion on the merits of Wilwording’s petition; whether prison officials in fact had evidence to support the deprivation of good time, solitary confinement, and charges in his record for parole is for the trial court to determine. “[Whether the charges against petitioner were so totally devoid of evidentiary support as to render his [punishment] unconstitutional . . . turns not on the sufficiency of the evidence, but on whether [there was] any evidence at all.” Thompson v. Louisville, supra 362 U.S. at 199, 80 S.Ct. at 625. We conclude that Wilwording’s allegation that he is subjected to continuing punishment without any evidence against him adequately raises a claim for relief which is beyond the scope of and hence not foreclosed by the nonretroactivity holding of Wolff.

The case is remanded to the district court with directions that the petitioner be granted an evidentiary hearing as to his claim relating to the loss of good time which allegedly was deprived him by a denial of due process of law.

Judgment reversed and remanded.

      . The Supreme Court later characterized Wilwording’s petition as generally attacking “conditions of confinement.” See Preiser v. Rodriguez, 411 U.S. 475, 93 S.Ct. 1827, 36 L.Ed.2d 439 (1973).

      . Present counsel did not represent petitioner for purposes of the civil rights suit. Counsel’s motion for a transcript of the original trials was denied. Record at 36, 43; Slip Opinion at 19.

      . One non-Eighth Amendment claim of petitioner, that of denial of access to the courts, was apparently tried on the merits in the civil rights action.

      . Petitioner on remand attempted to amend the petition so as to clarify the grounds relied upon. The district court refused to allow the amendment, apparently on the ground that the petition should be reviewed in the same form as that presented to the Supreme Court. We disagree. Whenever counsel can assist the court in clarifying a pro se petition, the trial court should welcome the assistance. Obviously, if counsel added new factual grounds, requiring exhaustion, these must be rejected. On the other hand, pro se petitions should be liberally construed and if the amended grounds factually relate to the original pro se complaints, dismissal and a new round of litigation in the state courts should not be required. In the instant ease an amended petition could well have obviated the claims now abandoned; additionally it might well have clarified petitioner’s right to an eviden-tiary hearing on the claims still before us. It has been observed :
      The habeas statute permits amendment of a petition according to the rules applicable in civil actions. The Civil Rules provide for amendment at any time by leave of court, and leave is to be “freely given when justice so requires.” Recognizing the efficiency and fairness of resolving all of a petitioner’s habeas claims in one hearing, the courts have permitted liberal use of the amendment privilege.
      Note, Developments in the Law — Federal Habeas Corpus, 83 Harv.L.Rev. 1038, 1178-79 (1970).

      . The Supreme Court noted in Preiser that [T]he respondents’ suits in the District Court fell squarely within this traditional scope of habeas corpus. They alleged that the deprivation of their good conduct time credits was causing or would cause them to be in illegal physical confinement, i. e., that once their conditional release date had passed, any further detention of them in prison was unlawful; and they sought restoration of those good-time credits, which, by the time the District Court ruled on their petitions, meant their immediate release from physical custody.
      Even if the restoration of the respondents’ credits would not have resulted in their immediate release, but only in shortening the length of their actual confinement in prison, habeas corpus would have been their appropriate remedy. For recent cases have established that habeas corpus relief is not limited to immediate release from illegal custody, but that the writ is available as well to attack future confinement and obtain future releases.
      411 U.S. at 487, 93 S.Ct. at 1835. '

      . Wolff leaves uncertain the extent of nonretroactivity — that is, whether the doctrine will apply to pending cases or will affect only the litigants in Wolff itself. As the Wolff opinion notes, many district courts and courts of appeals have in varied forms long recognized that procedural due process applies to prison disciplinary procedures. 418 U.S. at 572 n. 20, 94 S.Ct. at 2963 n. 20. The Supreme Court has previously given general recognition to the applicability of procedural due process to prison discipline claims. Cf. Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1971). Thus, equitable principles would seem to require some form of procedural due process applicable to prisoners’ claims which were pending in the courts at the time of the Wolff decision. We need not decide this precise issue here since, as we will discuss, petitioner’s claim does not rest solely on the denial of procedural due process, but in addition on the allegation of a total absence of evidence linking him to the offense for which he was punished.


author: PER CURIAM.

text:
    NATURAL RESOURCES DEFENSE COUNCIL, INC., et al., Plaintiffs-Appellants, v. TENNESSEE VALLEY AUTHORITY, et al., Defendants-Appellees.
    No. 74-1132.
    United States Court of Appeals, Sixth Circuit.
    Argued June 10, 1974.
    Decided Aug. 29, 1974.
    Richard M. Hall, Natural Resources Defense Counsel, New York City, for plaintiffs-appellants. Charles D. Susano, Jr., Bernstein, Dougherty & Susano, Knoxville, Tenn., William A. Butler, Washington, D. C., Stephen C. Cawood, Pineville, Ky., on brief.
    Thomas A. Pederson, Atty., Knoxville, Tenn., for defendants-appellees. Robert H. Marquis, Gen. Counsel, L. Gray Ged-die, Jr., Attys., Tennessee Valley Authority, Knoxville, Tenn., C. D. McDou-lett, Jr., Holliman, Langholz, Runnels & Dorwart, Tulsa, Okl., Robert S. Young, McCampbell, Young, Bartlett & Woolf, Knoxville, Tenn., on brief, for defendants-appellees.
    Before PHILLIPS, Chief Judge, PECK,- Circuit Judge, and CECIL, Senior Circuit Judge.
   PER CURIAM.

This action was brought by three national and three local environmental groups challenging the adequacy of the Tennessee Valley Authority’s environmental impact statement for its coal purchasing policy. In opinions published at 367 F.Supp. 122 (E.D.Tenn.1973), and 367 F.Supp. 128 (E.D.Tenn.1973), District Judge Robert L. Taylor held that the statement met the requirements of § 102(2) (C) of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. § 4332(2) (C), and dismissed the complaint. We affirm.

For an extensive discussion of the facts of this case, reference is made to Judge Taylor’s two opinions, supra.

The issue in this appeal is whether the TVA’s environmental impact statement entitled “Policies Relating to Sources of Coal Used by the Tennessee Valley Authority for Electric Power Generation” complies with § 102(2) (C) of the NEPA, 42 U.S.C. § 4332(2) (C). That section provides that “all agencies of the Federal Government shall:

“(C) include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on—
“(i) the environmental impact of the proposed action,
“(ii) any adverse environmental effects which cannot be avoided should the proposal be implemented,
“(iii) alternatives to the proposed action,
“(iv) the relationship between local short-term uses of man’s environment and the maintenance and enhancement of long-term productivity, and
“(v) any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented.”

The crux of the question presented for review is whether the TVA’s impact statement is “detailed” within the meaning of the Act. Appellants contend that the statement is general, conclusory and lacks detail with respect to: 1) specific mining, sites, 2) the environmental impacts of mining, 3) the impact of mining on people, and 4) a discussion of reasonable alternatives to the TVA’s policy.

The purpose of the NEPA impact statement was described in Natural Resources Defense Council, Inc. v. Morton, 148 U.S.App.D.C. 5, 458 F.2d 827, 833 (1972), as follows:

“Congress contemplated that the Impact Statement would constitute the environmental source material for the information of the Congress as well as the Executive, in connection with the making of relevant decisions, and would be available to enhance enlightenment of — and by — the public. The impact statement provides a basis for (a) evaluation of the benefits of the proposed project in light of its environmental risks, and (b) comparison of the net balance for the proposed project with the environmental risks presented by alternative courses of action.” (Footnotes omitted.)

The statutory requirement of an impact statement “seeks to ensure that each agency decision maker has before him and takes into proper account all possible approaches to a particular project (including total abandonment of the project) which would alter the environmental impact and the cost-benefit balance. Only in this fashion is it likely that the most intelligent, optimally beneficial decision will ultimately be made. Moreover, by compelling a formal ‘detailed statement’ and a description of alternatives NEPA provides evidence that the mandated decision making process has in fact taken place and, most importantly, allows those removed from the initial process to evaluate and balance the factors on their own.” Calvert Cliffs’ Coordinating Committee, Inc. v. United States Atomic Energy Commission, 146 U.S.App.D.C. 33, 449 F.2d 1109, 1114 (D.C.Cir.1971), 17 A.L.R. Fed. 1.

Although the NEPA is an environmental full disclosure law, its interpretation is, nevertheless, tempered by a rule of reason. See, e.g., Environmental Defense Fund, Inc. v. Corps of Engineers of the United States Army, 492 F.2d 1123, 1131 (5th Cir. 1974); Environmental Defense Fund v. Tennessee Valley Authority, 492 F.2d 466, 468, n. 1 (6th Cir. 1974); Natural Resources Defense Council, Inc. v. Morton, supra, 458 F.2d at 834. “[I]t is entirely unreasonable to think that Congress intended for an impact statement to document every particle of knowledge that an agency might compile in considering the proposed action.” Environmental Defense Fund, Inc., supra, 492 F.2d at 1136.

With these considerations in mind and upon thorough consideration of the briefs, the oral arguments of counsel and the record, we hold that the TVA’s environmental impact statement comports with the requirements of the NEPA for the reasons set forth in Judge Taylor’s two opinions, supra.

The following statement from Environmental Defense Fund v. Tennessee Valley Authority, supra, 492 F.2d at 468, n. 1, is equally applicable to the case at bar:

“Our examination of the final impact statement indicates that it is as thorough and complete on all pertinent features' as could reasonably be expected. N.E.P.A., although rigorous in its requirements, does not require perfection, nor the impossible. In assessing the adequacy of such statement, practicability and reasonableness * * * are to be taken into account along with the broad purposes of the Act to preserve the values and amenities of the natural environment. This involves of course a balancing process which we think the district court correctly recognized and applied to this multi-purpose project, a project admittedly entailing considerable ecological damage and disturbance but many off-setting economic and social benefits. The specific objections of appellants to the final statement appear to us to be overly technical and hypercritical.”

Affirmed.