author: MANSFIELD, Circuit Judge:

text:
    Irving STOLBERG, Plaintiff-Appellant, v. MEMBERS OF the BOARD OF TRUSTEES FOR the STATE COLLEGES OF the STATE OF CONNECTICUT et al., Defendants-Appellees.
    No. 217, Docket 72-1726.
    United States Court of Appeals, Second Circuit.
    Argued Dec. 6, 1972.
    Decided Jan. 29, 1973.

      Louis M. Winer, New Haven, Conn. (Tyler, Cooper, Grant, Bowerman & Keefe, Irving S. Schloss, New Haven, Conn., of counsel), for plaintiff-appellant.
    Sidney D. Giber, Asst. Atty. Gen. (Robert K. Killian, Atty. Gen., F. Michael Ahern, Asst. Atty. Gen., Hartford, Conn., of counsel), for defendants-appel-lees.
    Before LUMBARD, FEINBERG and MANSFIELD, Circuit Judges.
   MANSFIELD, Circuit Judge:

Irving Stolberg, formerly an Assistant Professor of Geography at Southern Connecticut State College (“SCSC”), appeals from a judgment in his favor in his action under the Civil Rights Act, 42 U.S.C. § 1983, against the former President of SCSC and members of the Board of Trustees for the State Colleges of Connecticut based on their nonrenewal of his teaching contract and consequent denial of tenure, allegedly in violation of his First Amendment and Due Process rights. The district court, M. Joseph Blumenfeld, Chief Judge, sitting without a jury, found defendants’ action to have been in retaliation for Stolberg’s exercise of his First Amendment rights and awarded him reinstatement with tenure and no loss of seniority and $9,000 to cover his salary loss. However, he denied additional compensatory damages, punitive damages or attorneys’ fees. The court found it unnecessary, in view of its disposition of the First Amendment claims, to decide whether Stolberg had also been denied procedural due process.

Stolberg here contends that the district court should have decided his due process claims and should have awarded him additional compensatory damages for humiliation, emotional distress and injury to his reputation, plus punitive damages and attorneys’ fees. We affirm except as to the denial of attorneys’ fees, which we reverse, and we remand for determination and award of reasonable attorneys’ fees.

The findings of the district court, made in an unreported decision, are not disputed. They reveal an unpleasant picture, characterized by reactionary and rather high-handed conduct on the part of a college president toward a faculty member, approved by some trustees and tolerated by others. Beginning with the 1966-1967 school year Stolberg, a graduate of the University of California at Los Angeles, with a distinguished academic record, was employed by SCSC as an Assistant Professor. Under existing regulations and practice at SCSC, teachers who satisfactorily completed three years in probationary status were entitled to tenure.

In February, 1968, as part of his active participation in discussions regarding international political affairs, particularly our country’s involvement in the war in Vietnam, Stolberg sent to his fellow faculty members at SCSC an invitation to support a Peace Program and Memorial Service to be held in New Haven relating to that war. Two months earlier Stolberg had sent a letter to the President of Albertus Magnus College in New Haven suggesting that she had arbitrarily suspended a number of students and offering the mediation services of The American Association of University Professors, a local chapter of which Stolberg was then President.

Dr. Hilton C. Buley, President of SCSC, whose views apparently differed sharply from those of Stolberg, whom he seems to have regarded as subversive, did not take kindly to Stolberg’s communications. Buley promptly notified Stol-berg that his contract would not be renewed for the coming year, 1968-1969, which would have been his third year on the faculty.

Stolberg unsuccessfully appealed President Buley’s decision to the personnel committee of the Board of Trustees for the State College and subsequently requested the Board to reconsider his case, claiming that the committee’s procedures did not comport with the requirements of due process. The Board then sought advice from the State Attorney General, who expressed the opinion that the Board proceedings upholding Buley’s decision were not legally sound in view of the appeal clause in the Board’s Personnel Policies. President Buley thereupon volunteered to rescind Stolberg’s termination, and Stolberg continued on the faculty during the 1968-69 term. Buley, however, sought to have the clause repealed with the intention of dismissing Stolberg thereafter.

The Board, fearing discontent among the faculty, decided against repeal of the appeal procedure in December, 1968. Nonetheless, on February 27, 1969, Bu-ley again notified Stolberg, without reasons, that his contract would be terminated at the end of the term and tenure thereby denied, despite recommendations from the chairman and members of the geography department that he be given tenure. Stolberg again appealed to the Board’s Personnel Committee and was allowed to appear personally before them, although he received no notice of any charges against him. Dr. Buley appeared ex parte before the Board two weeks later, without notice to Stolberg, and listed several “incidents” as the basis for the latter's dismissal.

The Board subsequently affirmed Bu-ley’s decision on June 13, 1969. This action was filed by Stolberg on December 15, 1969. At no time during the course of administrative or judicial proceedings regarding Stolberg’s termination was his competence as an instructor questioned.

At the conclusion of the trial, at which no defense was presented, Chief Judge Blumenfeld held that the “incidents” listed by Buley had been makeweights and that the real reason for not renewing Stolberg's teaching contract was his previous exercise of his First Amendment rights, a constitutionally impermissible basis for dismissal, Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968). Judge Blumenfeld directed the Board of Trustees to reinstate Stolberg as a faculty member at SCSC with tenure and without loss of seniority, and awarded judgment in the sum of $9,000 against Dr. Buley and certain of the individual members of the Board to compensate Stolberg for his intervening salary loss. Neither the relief granted nor the basis on which it was predicated are challenged on appeal by the defendants. Stolberg, however, challenges the sufficiency of the relief granted in his favor, for the above stated reasons.

We conclude that it was entirely proper for Chief Judge Blumenfeld not to adjudicate appellant’s additional claim that he was deprived of his livelihood through procedures lacking in due process. Though Stolberg claims he suffered additional harm, based on a due process denial, through loss of an earlier opportunity to clear himself before the Board of Trustees of unsupported charges against him, made ex parte to the Board by Dr. Buley, any resulting injury to reputation would have been compensable, if proved, and fully remediable as a consequence of the non-renewal of his teaching contract in retaliation for his lawful exercise of his First Amendment rights. See Donovan v. Reinbold, 433 F.2d 738, 743 (9th Cir. 1970); Lee v. Southern Home Sites Corp., 429 F.2d 290, 293 (5th Cir. 1970); cf. Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 238-240, 90 S.Ct. 400, 24 L.Ed.2d 386 (1969).

Thus a decision of the due process claim was not necessary to accord Stol-berg whatever relief he was entitled to on that claim. The most he lost by reason of the court’s failure to decide it was the inability to achieve the personal satisfaction of obtaining a finding that his Due Process as well as his First Amendment rights had been violated. This would not mandate a decision. Furthermore, the subsequent decisions of the Supreme Court in Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), the pen-dency of which was noted by Judge Blu-menfeld, and in Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), confirmed the district court’s observation that the serious question of what procedural process is due before administrators of public educational institutions may decline to renew contracts of tenured and nontenured teachers, involves complicated sub-issues that are not easily answered. Under these circumstances, it was entirely proper for Judge Blumenfeld not to “anticipate a question of constitutional law in advance of the necessity of deciding it,” Ashwander v. TVA, 297 U.S. 288, 346-347, 56 S.Ct. 466, 483, 80 L.Ed. 688 (1936) (Brandies, J., concurring).

We turn then to the question of the sufficiency of the relief granted Stolberg. The district court found that following his dismissal from SCSC he was almost immediately able to secure another position at a lower salary as an instructor of geography at another college and was elected to the Connecticut House of Representatives from the district encompassing SCSC. The award to him of $9,000 in compensatory damages represented the difference in earnings between the salaries he would have earned at the two colleges. Additional compensatory damages for humiliation, distress, and injury to reputation were denied for failure of proof and because any such damage would be “wholly speculative.” We agree.

We do not find Judge Blumenfeld’s findings to be clearly erroneous, Rule 52, F.R.Civ.P. Neither medical evidence of pain and suffering nor evidence of damage to Stolberg’s reputation in his community was introduced, save Stolberg’s own testimony of being upset over the whole course of events. Although he testified that he had encountered public damage to his reputation, had been hindered in his election campaign efforts and in his effectiveness later as a State legislator, and had experienced disruption of personally valuable relationships with his former students, other factors, including the relative ease with which he obtained a new position elsewhere and his successful election to the State legislature, tended to negate or minimize any such harm.

The credibility to be accorded the evidence was for Judge Blumenfeld, and it is obvious that some of the alleged injury was too speculative to be compensable in any event. Donovan v. Reinbold, supra, 433 F.2d at 743, relied on by appellant, merely indicates that a district court may award damages for emotional or mental distress found to have resulted from loss of a public job to which the holder had an unusual dedication and from which he has been unconstitutionally dismissed, and not that such a finding is to be presumed or found solely on the basis of the plaintiff’s testimony.

Similarly we affirm the denial-of punitive damages. At the end of the trial in December, 1971, counsel for the trustees stated in open court that the trustees were at that point willing to offer appellant tenure. Largely from this statement, Judge Blumenfeld concluded that an award of exemplary damages against these State officials was unnecessary to secure “full compliance with constitutional requirements” and might, to the public’s detriment, unnecessarily deter responsible citizens from agreeing to serve in the voluntary capacity of members of the Board. While punitive damages may, in an appropriate case, be awarded for violation of 42 U.S.C. § 1983, even in the absence of actual damages, see Basista v. Weir, 340 F.2d 74, 86-88 (3d Cir. 1965); Mansell v. Saunders, 372 F.2d 573, 576 (5th Cir. 1967); Caperci v. Huntoon, 397 F.2d 799 (1st Cir.), cert. denied, 393 U.S. 940, 89 S.Ct. 299, 21 L.Ed.2d 276 (1968), failure to award such relief will not be lightly overturned. Whether the standard to be applied in the first instance for determination of whether punitive damages should be allowed is restricted to instances where “willful or malicious violations of Constitutional rights” are proved, Sexton v. Gibbs, 327 F.Supp. 134, 142-143 (N.D.Tex.), affd., 446 F.2d 904 (5th Cir. 1971), or where “a defendant has acted wilfully and in gross disregard for the rights of the complaining party,” Lee v. Southern Home Sites Corp., supra, 429 F.2d at 294 (action under 42 U.S.C. §§ 1981, 1982), or should be extended to instances where the defendant acted with knowledge that he was violating the plaintiff’s rights or with reckless disregard of whether he was violating such rights, see Adickes v. S. H. Kress & Co., 398 U.S. 144, 233-234, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) (opinion of Brennan, J.), appellate review of the district court’s determination should necessarily be circumscribed.

“The allowance of such damages inherently involves an evaluation of the nature of the conduct in question, the wisdom of some form of pecuniary punishment, and the advisability of a deterrent. Therefore, the infliction of such damages, and the amount thereof when inflicted, are of necessity within the discretion of the trier of the fact.” Lee v. Southern Home Sites Corp., supra, 429 F.2d at 294.

Here Judge Blumenfeld concluded that the award of punitive damages would be unwarranted, unwise and unnecessary. There was ample support for his exercise of discretion.

The failure to award reasonable attorneys’ fees rests on a somewhat different footing, and we believe that such relief should have been granted. With respect to the issue of whether to award attorneys’ fees, the emphasis is not placed solely on whether the defendants should suffer pecuniary punishment or be additionally deterred. Rather the objective is to assure that the plaintiff, and others who might similarly be forced to great expense to vindicate clear constitutional claims, are not deterred from securing such vindication by the prospect of costly, protracted proceedings which have become necessary only because of the obdurate conduct of the defendants. It is especially important to assure that a healthy climate of free expression is not inhibited “in the community of American schools,” Shelton v. Tucker, 364 U.S. 479, 487, 81 S.Ct. 247, 251, 5 L.Ed.2d 231 (1960).

The circumstances of this case persuade us that an award of counsel fees is necessary to protect against the possibility that other faculty members might be reluctant to engage in activities protected by the First Amendment or might forgo the vindication of their rights to do so in a court of law. Such a result would be destructive of the educational process in a free society. When, as here, the constitutional right is one of great importance and proof of an intentional and serious violation is clear and definite, enforcement should not be inhibited by reason of litigation costs.

The district judge denied attorneys’ fees primarily on the ground that the only purpose to be served in awarding damages was individual redress, see Arroyo v. Walsh, 317 F.Supp. 869, 873 (D.Conn.1970). He concluded that such an award was rendered unnecessary because the trustees were willing to offer Stolberg tenure at the end of the trial and because the court had now issued a ruling for the future guidance of the defendants. However, application of established principles to the district court’s own findings shows that the standard for awarding attorneys’ fees was fully met.

Although the award of attorneys’ fees is restricted to the exceptional case, see, e. g., Bell v. School Board, 321 F.2d 494, 500 (4th Cir. 1963), the standard is whether “bringing of the action should have been unnecessary and was compelled by the school board’s unreasonable, obdurate obstinacy,” Bradley v. School Board, 345 F.2d 310, 321 (4th Cir.), vacated on other grounds, 382 U.S. 103, 86 S.Ct. 224, 15 L.Ed.2d 187 (1965); Monroe v. Board of Commissioners, 453 F.2d 259, 263 (6th Cir.), cert. denied, 406 U.S. 945, 92 S.Ct. 2045, 32 L.Ed.2d 333 (1972). The Supreme Court has furthermore recognized that “a federal court may award counsel fees to a successful plaintiff where a defense has been maintained ‘in bad faith, vexatiously, wantonly, or for oppressive reasons,’ 6 Moore’s Federal Practice 1352 (1966 ed.).” Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402 n. 4, 88 S.Ct. 964, 966, 19 L.Ed.2d 1263 (1968) (per curiam). Because suit clearly should have been unnecessary in this case and was compelled by defendants’ conduct, counsel fees should have been awarded.

Stolberg was originally notified by Dr. Buley in February, 1968, that his contract would not be renewed, for reasons that were found to be constitutionally improper and which have never been seriously contested by defendants. Judge Blumenfeld found that at the hearing on Stolberg’s first appeal to the Board of Trustees he was “questioned solely about his political and moral convictions. There was no discussion of his competency as a teacher.” Despite the subsequent advice of the Attorney General that the appeal proceedings were not legally sound, and the observation of the Board’s Personnel Committee in December, 1968, that “in the absence of evidence more convincing than that presented last year, the Committee concluded that it could not support the President (Buley) in dismissing Irving Stolberg,” the committee in June, 1969, did affirm the second dismissal of Stol-berg. Furthermore, the dismissal followed an ex parte appearance of Dr. Bu-ley, at which he listed several “incidents” as the basis for dismissal, all later found by Judge Blumenfeld to be a mere facade.

When Stolberg was ultimately forced to sue for reinstatement in December, 1969, his suit was vigorously opposed through extensive discovery proceedings and until the end of the trial two years later, in December, 1971. It was not until that point, some 3% years after the first improper failure to renew Stol-berg’s contract, that the defendants, after failing to present any defense to appellant’s case, finally offered to reinstate him with tenure.

Nor was the belated offer of reinstatement delayed because of any doubt about the legal rights of appellant at the time of the Board’s initial decision to approve dismissal. Compare Kelly v. Guinn, 456 F.2d 100, 111 (9th Cir. 1972); Monroe v. Board of Commissioners, supra, 453 F.2d at 263. Rather the situation was governed by the well established principle, recently reaffirmed in Perry v. Sindermann, 408 U.S. 593, 598, 92 S.Ct. 2694, 2698, 33 L.Ed.2d 570 (1972), where the Supreme Court stated that it had “twice before . specifically held that the non-renewal of a nontenured public school teacher’s one-year contract may not be predicated on his exercise of First and Fourteenth Amendment rights. Shelton v. Tucker, supra [1960]; Keyishian v. Board of Regents, supra [1967].”

Judge Blumenfeld, in considering whether defendants were state officials who had a defense of good faith to an action for damages under § 1983, cf. Pierson v. Ray, 386 U.S. 547, 555, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967), found it unnecessary to decide that question because “the court does not find that the defendants here have established that they acted in good faith.” Under these circumstances, where the constitutional rights of the appellant were clear at the time of the appellees’ conduct, as well as at the time of suit, where the long course of vindication of those rights caused by the appellees should, as a consequence, have been unnecessary, and where the award of fees will help prevent inhibition of the future exercise of such rights at public institutions by other public employees, the financial burden of litigation should be removed “from the shoulders of the plaintiff seeking to vindicate the public right.” Knight v. Auciello, 453 F.2d 852 (1st Cir. 1972). See also Lee v. Southern Home Sites Corp., 444 F.2d 143, 147-148.

Affirmed in part, reversed in part, and remanded for determination of reasonable attorneys’ fees. The costs of this appeal are awarded to appellant.

      . After such additional sums had been denied at trial, appellant moved under Rules 52 and 59, F.R.Civ.P., for amendment of Chief Judge Blumenfeld’s findings and judgment to include these items of relief. The motion was denied.

      . Stolberg v. Members of the Board of Trustees, Civil No. 13,591 (D.Conn. Feb. 29, 1972).

      . The district judge was also concerned that since the members of the Board of Trustees serve voluntarily the award of attorneys’ fees and punitive damages would, if granted, inhibit responsible citizens from performing valuable services for public institutions. The Assistant State Attorney General represented at the oral argument of this appeal that if attorneys’ fees were assessed against the defendants he would seek to have them reimbursed by the State. See Conn. Gen. Stats. § 10-235 (1972 Supp.). In any event, we do not believe that this factor should prevent the necessary protection of the clear First Amendment freedoms of faculty members at the State colleges.


source: Caselaw Access Project

author: CLARK, Circuit Judge:

license: Public Domain

text:
    INGERSOLL-RAND COMPANY, Plaintiff-Appellant-Cross Appellee, v. BRUNNER & LAY, INC., Defendant-Appellee-Cross Appellant.
    No. 72-2026.
    United States Court of Appeals, Fifth Circuit.
    Feb. 20, 1973.
    Rehearing and Rehearing En Banc Denied April 4, 1973.

      Richard S. Banick, Miami, Fla., John M. Calimafde, New York City, Carl R. Horten, Princeton, N. J., for plaintiff-appellant.
    John H. Oltman, Fort Lauderdale, Edward C. Vandenburgh, Arlington Heights, Fla., for defendant-appellee.
    Before GODBOLD, DYER and CLARK, Circuit Judges.
   CLARK, Circuit Judge:

Invalidity for obviousness is the broad subject of this patent appeal. A subsidiary issue is joined on the trial court’s application of the doctrine of file wrapper estoppel. The imitator who was successful in the court below cross-appealed from the court’s refusal to award it attorney’s fees. Because we reverse the trial court’s determination of obviousness and its invocation of an estoppel against the patentees, the attorneys’ fee issue is eliminated; but the case must be remanded for an accounting.

United States Letters Patent No. 3,424,479 issued to J. D. Ditson and James F. Cantrel, the assignors of the plaintiff, Ingersoll-Rand Company, on a coupling and rod system for rock drills. The present action was instituted to enjoin the defendant, Brunner & Lay, Inc., from manufacturing and marketing a drill rod which was alleged to infringe Claims 4 and 5 of the 479 patent. No issue was raised as to the novelty or utility of the device covered by these patent claims. Nor is infringement an issue on this appeal. The complaint sought injunctive relief against continued infringement and an accounting for damages. Brunner & Lay counterclaimed for declaratory judgment of patent invalidity and sought general relief. Brunner & Lay now contends that In-gersoll-Rand’s assignors were guilty of fraud in the procurement of the patent and that the trial court abused its discretion in refusing to allow Brunner & Lay to recover attorneys’ fees incurred in defense of the litigation.

Background of the Patent

A percussion drilling rod, as described in the patent claims, is a thick steel tube usually 10 feet in length and iy2 inches in outside diameter, which forms a connection between a hammer on one end and a bit on the other end in an equipment system used to drill holes into rock formations for the purpose of setting dynamite charges. A simple analysis of the physics of the system discloses that rapid hammer blows are struck on the upper end of the drilling rod, which then drives the bit attached to its lower end into the dense material being drilled. As heavier and more efficient hammers and better bits were developed and deeper hole capacity was required, rods were strengthened and were provided with threaded sections at both ends to facilitate attachment to the hammer and bit and to enable interconnection between drill rods. Modern day drill rods not only transmit the enormous force of the rapid heavy hammer blows to the bit, but also serve to carry a stream of air down their bore and through the center of the bit to blow chips and debris back up and out of the hole.

Technology which brought improvements at the hammer and bit ends, made rod breakage due to metal fatigue and wear of threads the most acute equipment problems in this field. When drill rod breaks occurred the equipment operator either had to abandon the broken rod and bit and start a new hole with new equipment, or he had to retrieve the broken section and recondition or replace it. Rods with worn threads similarly had to be reconditioned or replaced. Prior to the marketing of present patented rod, the two principal solutions were to (1) use rods made of relatively low strength steel, which, while subject to breakage, could be reconditioned at the job site by cutting additional threads; or (2) use rods of high strength treated steel which did not break as often, but could only be reconditioned at a machine shop. Although breakage may occur at any point throughout the length of the rod, most breakage failures and wear outs oc-cured within the threaded areas at the ends.

The Patent in Issue

In May of 1965, J. D. Ditson applied for a patent on a coupling and drill rod system. On January 11, 1966, a eontinu-ation-in-part patent application was filed by Ditson and James F. Cantrel with the verified explanation that Cantrel had conceived and reduced a portion of the invention to practice. This joint application eventuated in the grant of the 479 patent to Ditson and Cantrel. The claims in issue here (see footnote 3 above) taught the construction of a drill rod which had a continuous roll-formed thread with a groove in its crest over the entire length of the rod. Illustrative diagrams from the patent grant are appended to this opinion.

Pertinent to the claims involved here, the specifications of the patent provided that among the objects of the invention was to provide a system which would enable the use of high strength rods that could be reconditioned in the field. Other advantages in greater inherent strength and more efficient transmission of energy were said to result from the manner in which the rod and its accompanying coupling member would operate. Specifically, the uniformity of cross-section was described as advantageous in eliminating stress raising factors and possible causes of premature rod failure associated with points of variation in rod cross-section. The process of reconditioning a failed or broken rod was stated to be simplified because it required only the cutting off of the failed or broken portion with a steel saw. This was said to enable the rod manufacturer to initially employ special materials and unusual heat treatment and finishing processes in the fabrication of the rod without consideration of the field reconditioning problems that had previously limited use of such strengthening processes and materials.

The Standard of Review

Graham v. John Deere Co., 383 U.S. 1, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966), blocks out the equation to guide our detailed fact-law analysis of the trial court’s conclusion that claims 4 and 5 of the 479 patent were erroneously allowed upon an obvious device.

While the ultimate question of patent validity is one of law, Great A. & P. Tea Co. v. Supermarket Equipment Corp., supra, 340 U.S. at 155, 71 S.Ct. at 131, the § 103 condition, which is but one of three conditions, each of which must be satisfied, lends itself to several basic factual inquiries. Under § 103, the scope and content of the prior art axe to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background, the obviousness or nonobviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented. As indicia of obviousness or nonobviousness, these inquiries may have relevancy.

Here the controlling facts are undisputed. Our task is to set them into the formula standard and calculate the result.

The Prior Art

The art involved is that of metallurgy, in general, and the formation of steel rods for percussion drilling, in particular.

Early in the history of development of percussion drilling systems, practitioners used a rod constructed of twisted steel which could be sharpened on one end to serve the function of a bit. Many of such twisted rods were commonly twisted throughout the length of the rod. The nearest example is U.S. Patent No. 236,774 issued to Butler, et al in 1881. The diagrams accompanying this patent are set out in the appendix. The specifications of the Butler patent taught that the rod could be initially formed by rolling before being twisted. It was further provided that the spiral form would aid in freeing the hole of chips, and that the uniformity of rod contour and strength would enable the continued use of any unbroken portion either as a bit end or for insertion into the hammer without forging. Other patents covering or describing twisted drill rods are British Patent No. 26810 to Christiansen and U.S. Patent No. 2,733,943 to Nater. However, no twisted drill rods are shown to have taught any twisting process accurate enough to permit the use of the resulting twists for threading to other drill rod sections and no such twisted rods were shown to now be in use in the particular area of percussion drilling here involved.

Drilling rods with threaded sections at each end to accommodate coupling to hammer, bit, and each other were previously patented. An early example is Patent No. Re. 17,557 to Thurston which shows end threading of a sinuous or un-dulatory contour, designed for use with a straight coupling so as to seat each rod end snugly against its opposite piece. This thread and coupling configuration is similar to that illustrated by Ditson and Cantrel but was specified to extend only for the length of the coupling or a thread width beyond. Nevertheless, both Thurston and the No. 1,952,996 U.S. Patent to Landgx’af illustrated threads which extended beyond the length of the coupling. Karlsson had also obtained U.S. Patent No. 3,211,484, which taught the utility of a rod with two separate sections of threads interrupted by an unthreaded interval of the same diameter as the adjacent rod. The diagrams accompanying Karlsson are appended.

The technique of roll-forming threads on regular piping and the technique of applying an external thread throughout the length of a piece of such piping had also been patented to Finch (U.S. No. 2,669,469) and Boyer (No. 1,904,675), respectively. Boyer’s diagram is appended. His patent also emphasized the advantage of easy reconditioning at remote sites by the use of only a saw to square off ends of the lengths to be fitted together.

It was known in the art of roll-forming threads that as the dies of the forming machine were pressed into the material on which the threads were to be formed, metal was pushed (plastically deformed) from the valley of the thread toward the peak during the process. On some materials this displaced metal was known to move from the valley toward each adjacent peak in waves, which could be left at each side of the peak to form a groove — by interrupting the rolling process, or could be pushed on to close and fold inward at the peak.— thereby leaving only a barely visible or microscopic seam at the peak upon completion of rolling.

The provision for lubrication of the coupled joint by means of a groove on the thread surface had previously been patented to Roehrenwerke A. G. by Italian Patent No. S13,952. Heat treating and a finishing technique known as car-burizing, which greatly strengthen streel rods, were well known to the prior art and both procedures had been widely applied to drill rod manufacture.

Expressed in terms of the claims here involved, each of the following elements or processes in drill road manufacture had been disclosed by patents or in practice: (1) an elongated body, with (2) a full length axial bore; (3) a roll-formed helical attachment thread, with (4) a helix angle of less than 15 degrees; and (5) a groove on the thread to carry lubricant.

The Presumption of Patent Validity

One otherwise an infringer who assails the validity of a regularly issued patent bears a heavy burden of persuasion. We have variously recognized this burden to be akin to the fraud standard of clear and convincing evidence and to the criminal law standard of proof beyond a reasonable doubt, but, at a minimum, greater than a mere preponderance of the evidence. Hobbs v. United States Atomic Energy Commission, 451 F.2d 849 (5th Cir. 1971); Stamicarbon, N. V. v. Escambia Chemical Corp., 430 F.2d 920 (5th Cir.), cert. denied 400 U.S. 944, 91 S.Ct. 245, 27 L.Ed.2d 248 (1970).

This presumption of patent validity is weakened and may be overcome where the evidence discloses that the examiner did not have the best prior art before him during the prosecution of the application. Beckman Instruments, Inc. v. Chemtronics, Inc., 439 F.2d 1369 (5th Cir.), cert. denied 400 U.S. 956, 91 S.Ct. 354, 27 L.Ed.2d 264 (1970). However, where, as here, it is shown that the patent office considered prior art as close to the patented invention as any suggested to the court, the court should be extremely reluctant to substitute its opinion for the expertise of the patent office. Hobbs, supra, 451 F.2d at 863.

The Nonobviousness of the Differences

Uniquely, the drilling rod disclosed by the 479 patent was to be continuously threaded from end to end and its geometry was required to be uniform. In addition, an incomplete roll-forming process was to be used to form the continuous thread on the rod in which the thread was to be formed, so as to leave a gap or groove at its peak rather than the usual closed seam produced when this process of thread formation is carried to completion. Such combination uniformity of cross-section and unusual thread formation produced the synergistic result which must obtain when combinations of known elements are brought together in a new nonobvious combination. Anderson’s Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57, 90 S.Ct. 305, 24 L.Ed.2d 258 (1969). Ag Pro, Inc. v. Sakraida, 474 F.2d 167 (5th Cir. 1973).

This novel configuration not only enabled the rod manufacturer to strengthen the rod by post-manufacturing treatment at his plant without precluding easy field reconditioning, it also increased the rod’s resistance to fatigue failure by eliminating any point of change in cross-section dimension at which the unique stresses of percussion drilling could concentrate to crack and destroy the rod.

Despite the fact that most of the principal elements of the 479 rod were well known in the prior art, to combine them and add the novelty of full length threading, as did Ditson and Cantrel, required that a person ordinarily skilled in the prior art must ignore that most rod failures occurred in the threaded sections and that the design of a rod with threads throughout its length would probably aggravate rather than lessen its tendency to fail in heavy use. Such a known disadvantage in old devices that would naturally discourage the search for a new invention in this direction, is a reliable indicator of nonobviousness. United States v. Adams, 383 U.S. 39, 86 S.Ct. 708, 15 L.Ed.2d 572 (1966).

While the art of roll-forming threads contained the knowledge that this process could be stopped at an early stage of completion and that the result would be to leave a gap or groove at the crest of the threads, it also taught that normal use of his thread-forming process called for it to be carried further to the point which left only a barely visible, or invisible seam or crevice. The trial court held that the patent examiner was apparently not aware that this was a necessary result of the roll-threading technique. Such an attribution of lack of expertise to patent office examiners without support in the record is error. Hobbs v. United States Atomic Energy Commission, supra, 451 F.2d at 863. In any event, the strengthening effect of the inventors’ choice to require that the roll formation be stopped short, leaving a visible gap or groove at the thread crest for this application, was the essence of the invention here. There is no showing whatsoever that this technique of applying the roll-forming art to produce the strength desired should have been obvious to one of ordinary skill.

The district court also concluded that the threading of a drill rod for its full length merely carried the prior art concept of creating one or two sets of threads at each end of a rod to the next obvious stage. The problem for this conclusion is that no proof was adduced that this had ever been done, attempted or suggested. Cf. Laitram Corp. v. Deepsouth Packing Co., 443 F.2d 928, 934 (5th Cir. 1971). On the other hand, the proof of frequent failure in the threaded portions of the rods clearly negates the court’s unsupported conclusion.

All of the secondary considerations similarly tend to establish nonobviousness. The acceptance of the fully threaded rod was rapid and widespread. Assuming that imitation is the sincerest form of flattery converts Brunner & Lay’s president to Ingersoll-Rand’s best witness, for he conceded that promptly upon learning of the widespread use and acceptance of Ingersoll-Rand’s rod he attempted to copy it. His first attempt at imitation was unsuccessful because he bought equipment which cut rather than rolling the thread form. However, when he finally perfected his infringement, he then reproduced Ingersoll-Rand’s advertising copy almost verbatim to extol the virtues of his new product. The record is uncontradicted that commercial success was the immediate consequence of the marketing of this device. Similarly the record demonstrates that there was both a need for this type rod and a failure of others to develop it. These factors reenforce the conclusion of nonob-viousness. Hobbs v. United States Atomic Energy Commission, supra 451 F.2d at 864.

File Wrapper Estoppel

In the course of the prosecution of this patent application, the patent examiner on more than one occasion disallowed claims reading on drill rods which were roll-threaded throughout the length of the rod. Ditson and Cantrel took no appeal from this decision but rather, continued to modify their rod claims until the examiner finally allowed the present Claims 4 and 5, which provided not only for the fully roll-threaded rod but for the thread to be so formed as to have a continuous groove along its crest. The court held the plaintiff, as assignee, estopped to contend that the formation of a thread on a drill rod throughout its length, which was formed by the roll threading process, was a patentable, nonobvious advance in the art. This deduction of estoppel was erroneous.

It is, of course, well-settled that an invention is to be construed not only in light of the claims but also with reference to the file wrapper or prosecution history in the patent office. Graham v. John Deere Co. of Kansas City, supra, 383 U.S. at 33, 86 S.Ct. at 702. An estoppel may arise from the applicant’s conduct during the prosecution of his patent application. The essence of this doctrine of file wrapper estoppel is that an applicant who has limited or modified a claim in order to avoid its rejection by the patent office may not thereafter expand the claim by including subject matter thus excluded or any equivalent thereof, or by omitting limitations he has thus been caused to add. 60 Am.Jur.2d 534, Patents § 384.

Normally file wrapper estoppel is invoked when the holder of a valid patent claims infringement by a device which reads only upon the claim as disallowed. That is not the case here. The purpose of amendments required by the patent office is to limit and define the scope of the invention in the light of the prior art cited by the patent office against it. When the amendatory language is accepted by the patent office and a patent is issued thereon, the language of the specification and claims, as thus modified, approved by the patent office, defines the invention and constitutes the grant. Williams Bit and Tool Co. v. Christensen Diamond Products Co., 399 F.2d 628 (5th Cir. 1968).

In sum, a patentee who is estopped from attempting to enlarge the scope of his monopoly by asserting infringement by a competitor’s product which is only covered by the rejected patent claim, is not precluded from contending that the patent claim before amendment was erroneously rejected by the patent office for the purpose of showing that his patent as issued is non-obvious. The action of a patent applicant in voluntarily narrowing his claim to conform to the opinion of the patent examiner furnishes no basis in fact or reason for inferring that he has admitted the invalidity of the patent as issued, in whole or in part. International Cellucotton Products Co. v. Sterilek Co., 94 F.2d 10 (2nd Cir. 1938).

Invention by Cantrel

The finding by the district court that Cantrel contributed nothing to the device described in Claims 4 and 5 is clearly erroneous. Not only does the presumption of patent validity carry the initial burden of establishing his standing as a co-inventor, but also an examination of the file wrapper and the deposition and testimonial evidence discloses his participation in the creation of the patented device. No contrary evidence appears in the record.

Conclusion

The judgment of the district court is reversed and the cause is remanded for further proceedings not inconsistent with this opinion.

Reversed and remanded.

      . 35 U.S.C.A. § 103:
      A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the i>rior art are .such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made.

      . 35 U.S.C.A. § 2S5.

      . Disregarding slight semantic differences, the claims are substantially identical. Claim 4 reads:
      A drill rod comprising an elongated body including a bore axially therethrough and having a single, spiral, single pitch, attachment thread which is roll formed on said body to extend circumferentially therearound continuously throughout the length of said body, the helix angle of said attachment thread being less than 15 degrees, and a single continuous groove on the crest of said attachment thread continuously throughout its length.

      . 35 U.S.C.A. §§ 101, 102.

      . Brunner & Lay stipulated that at least a portion of its production fell within all the parameters of the claims in issue. The court made no finding on the extent of this infringement because of its conclusion that the patent was invalid.


text:
    DIXIE FINANCE COMPANY, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. EMPIRE MORTGAGE & INVESTMENT CO., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. Ernest STEWART, and Harriet B. Stewart et al., PetitionersAppellees, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.
    Nos. 72-1417, 72-1509 and 71-3602.
    United States Court of Appeals, Fifth Circuit.
    Feb. 5, 1973.

      E. Michael Masinter, Kent E. Mast, Atlanta, Ga., for Dixie Finance Co., Inc.
    John W. Stokes, Jr., U. S. Atty., Julian M. Longley, Jr., Asst. U. S. Atty., Atlanta, Ga., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Gordon S. Gilman, Attys., Tax Div., Dept, of Justice, Washington, D. C., for the United States.
    Edward R. Kane, Atlanta, Ga., for Empire Mortgage & Investment Co.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Atty., Tax Div., U. S. Dept, of Justice, Lee H. Henkel, Jr., Acting Chief Counsel, Bobby D. Burns, Gordon S. Gilman, Attys., Internal Revenue Service, Washington, D. C., for United States.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Gordon Gilman, Attys., Tax Div., Dept, of Justice, K. Martin Worthy, Chief Counsel, Chris J. Ray, Internal Revenue Service, Washington, D. C., for C. I. R.
    Edward R. Kane, Atlanta, Ga., for Stewart.
    Joseph B. Brennan, Atlanta, Ga., for Whitehurst and others.
    Before MORGAN, CLARK and IN-GRAHAM, Circuit Judges.
   CLARK, Circuit Judge:

These three appeals (one from the district court and two from the Tax Court) arise from two separate purchases by Dixie Finance Co., Inc., [Dixie] of the stock of small loan companies. All three appeals involve the same question — the proper allocation of the price paid to the stockholders between that which was paid for their stock and that which was paid for agreements not to compete. Since Dixie made the separate purchases from unrelated sellers, the facts of each transaction are set out separately.

The Empire Transaction

Dixie agreed to purchase from Empire Mortgage & Investment Co. [Empire] the capital stock of its four loan company subsidiaries. In addition, Empire and its officers gave to Dixie certain covenants not to compete. The price, based upon a formula applied to the accounts receivable of the four loan companies, as determined before the sale, was 312,497.41 dollars, of which 152,952.40 dollars was allocated to the stock, and the remainder, 159,545.01 dollars was allocated to the covenant not to compete and goodwill. Shortly after the agreement was executed Dixie reviewed the accounts receivable of the four companies and concluded that accounts in the amount of approximately 33,000 dollars were worthless. Thereupon, Dixie began negotiations with Empire for a reduction of the purchase price by a like amount. Dixie’s success in these negotiations, however, was limited, since Empire agreed to a reduction of the price only in the amount equal to one-half of the amount by which the accounts receivable were over-valued. Moreover, Empire required as the price of its consent a modification of the purchase and sale agreement so as to reduce the value formerly assigned to the covenant not to compete to no more than one dollar.

Empire, proceeding on the theory that the modified contract was controlling as to the amount paid for the covenant not to compete, did not include in its tax return for the year at issue any amount of ordinary income as proceeds from its covenant not to compete. Dixie, on the other hand, assigned on its books the amount of 159,545.01 dollars to Empire’s covenant not to compete. Thus, on its income tax returns filed for the fiscal years ended March 31, 1961 through March 31, 1964, it claimed significant deductions based on the amortization of the amounts assigned to the covenant.

The Commissioner, in the separate proceedings below, took the inconsistent positions that both of the taxpayers were in error, and prevailed in each. On this appeal, the Government, though it has now in effect taken the position of a stakeholder, advances as its preferred position the decision of the district court in the Dixie Finance case, which concluded that no more than one dollar should be allocated to the covenant.

The Stewart Transaction

The second transaction, wholly separate from the Empire transaction discussed above, involved the purchase by Dixie of all of the outstanding stock of Friendly Loan Company and its subsidiaries and affiliates. The stock was purchased from a number of individuals, including Ernest Stewart. Though the total consideration paid to the stockholders was only 650,000 dollars, Dixie contends that, of this amount, 526,150 dollars was allocated by contract to the covenant not to compete. Stewart and the other selling stockholders contend, however, that the allocation of such a large amount to the covenant not to compete does not accord with economic reality. They further contend that Dixie never told the Friendly stockholders that any part of the 650,000 dollars was being paid for other than the Friendly stock, that the covenant not to compete was passed around to the stockholders for execution only after the execution of the stock purchase agreement, that most of the stockholders did not read it, and that there was no discussion of the income tax consequences of the agreement not to compete.

As in the Empire transaction, Dixie amortized that amount which was allocated under its construction of the contract to the covenant not to compete, thus receiving a deduction for income tax purposes. Stewart and the other selling shareholders, on the other hand, reported the entire proceeds of the sale as proceeds from the sale of a capital asset, and allocated no part of the sales price to the ordinary income-producing covenant.

Once again, the Government took inconsistent positions in separate proceedings, and contested each taxpayer’s allocation. The Government prevailed as to Dixie, since the district court found that no portion of the 650,000 dollar purchase price should be allocated to the covenant not to compete. The Government was unsuccessful in the Tax Court, however, since that court likewise found that no part of 650,000 dollars should be allocated to the covenant. Thus, Stewart and the other selling shareholders were allowed to treat the entire amount they received for the sale of the Friendly stock as the proceeds from the sale of a capital asset. Though the Government appeals from the Tax Court decision in favor of the selling shareholders, it takes the position on this appeal that the Tax Court decision should be reversed only if the judgment of the district court in the Dixie case is reversed as to this issue.

The Merits

The Government’s position, simply stated, is that while the Commissioner is not bound by the form in which the taxpayer chooses to cast his transaction, but for tax purposes may look to the substance, the taxpayer must generally accept the tax consequences which follow from the form he has chosen. Thus, the Government would bind Dixie to the terms of the modified contract with Empire which assigned not more than one dollar to the covenant not to compete and at the same time would challenge Dixie’s contractual allocation as to the Stewart transaction, where the agreement recited that 526,150 dollars was paid for the covenant not to compete. Of course, under a strict interpretation of its theory, the Government could also attempt to hold Stewart and the other selling shareholders to the allocation of 526.150 dollars by urging the reversal of the Tax Court decision without regard to this court’s decision as to Dixie, but it chooses not to do so reasoning that it only seeks to prevail on one construction of each transaction. Similarly, the Government has used its prerogative to successfully challenge the contractual allocation as to Empire in the Tax Court, but is now willing for its victory in that forum to be reversed if this court will affirm its success over Dixie in the district court.

Initially, we note our agreement with the first half of the Commissioner’s statement of the applicable law. The parties cannot contractually preclude the Commissioner from attacking an allocation which has no basis in economic reality. See, e.g., Comm’r v. Court Holding Co., 324 U.S. 331, 65 S.Ct. 707, 89 L.Ed. 981 (1945); Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935); Redwing Carriers, Inc. v. Tomlinson, 399 F.2d 652 (5th Cir. 1968); Schulz v. Comm’r, 294 F.2d 52 (9th Cir. 1961).

The district court in the Dixie case found that there was no substantial economic basis for the allocation of 526.150 dollars to the Stewart, et al. (Friendly) covenant not to compete. The following more-than-sufficient evidence was presented to support this finding. The consideration for the alleged non-competition agreement was distributed to the stockholders in proportion to their stock holdings. No extra consideration was given to those persons whose competition would be expected to have the most adverse effect on Dixie Finance; indeed, two stockholders who had refused to sign the noncompetition document were paid on the same basis as those who signed. There was no effort to police the agreement to insure that Dixie received the benefit contracted for. While the amount allocated to the covenant was far in excess of any reasonable value which the covenant might have to Dixie, the amount allocated to stock purchase was less than its fair market value. The court further found that there was no evidence in the record to support its restructuring of the covenant in any smaller amount. On the basis of this clear showing that the contractual allocation had no basis in economic reality, we affirm the determination of the district court in Dixie’s case that no part of the 650,000 dollars should be allocated to the Stewart, et al. covenant not to compete.

On the same reasoning we also affirm the decision in the case of Stewart, et al. which refused to allocate any part of the 650,000 dollars to the value of the “covenant” given by Stewart and the other selling shareholders. In addition we would note that the Tax Court’s decision on the merits in the Stewart, et al. case is consonant with this court’s decisions in Barran v. Comm’r, 334 F.2d 58 (5th Cir. 1964), and Balthrope v. Comm’r, 356 F.2d 28 (5th Cir. 1966).

We also accept as substantially correct the Commissioner’s statement of the second half of the rule as to the tax consequences of contractual obligations • — -the taxpayer must generally accept the tax consequences which follow from the form he has chosen. This court has said that “when parties to this type of transaction specifically contract for the covenants and give them an assigned value, strong proof must be adduced to overcome the declaration.” Barran v. Comm’r, supra, 334 F.2d at 63; Balthrope v. Comm’r, supra, 356 F.2d at 32. In this ease it is uncontradicted that Dixie and the Empire stockholders in arms-length dealings allocated, 51,419.17 dollars to a covenant not to compete and 108,125.29 dollars to “covenant not to compete and goodwill.” The complicating factor is that eight months later that agreement was amended so that not more than one dollar was allocated to the covenant not to compete.

In this situation where the parties have expressed not one but two different allocations, how is one to be chosen over the other? This court opts for that allocation which most truly reflects the intention of the parties in an arms-length, good faith bargaining situation. Here there is no showing that the initial bargain was a subterfuge nor is it shown that any event occurred in the eight-month interval between the execution of the agreement and its modification which would have reduced the initial value of the covenant to virtually nothing. The modification, as found by the Tax Court in the Empire ease, was no more than “an afterthought and a sham and bears no relationship to the realities or substance of the situation.” Moreover, the contemporaneous allocation of the purchase price seems to be more nearly in accord with economic reality. The only evidence adduced to support the district court’s conclusion that the parties’ agreement allocating 51,419.17 dollars to the covenant was unrealistic is the later modification of that agreement.' We have already rejected the basis for this post hoe reasoning. The district court erred in rejecting Dixie’s claim based on the original contractual allocation of 51,419.17 dollars.

This court must also resolve the ambiguity which the parties constructed into their original document. In addition to the 51,419.17 dollars allocated to the covenant not to compete, 108,125.29 dollars was allocated to “covenant not to compete and goodwill.” Though Dixie has succeeded in showing that the district court was in error in concluding that the allocation of 51,419.-17 dollars to the covenant had no basis in fact, it has made no such showing that the court was in error as to the claimed 108,125.29. On this appeal Dixie has not attempted to meet its burden of breaking this lump sum down into its separate component parts, nor has it shown why two allocations were made to a single covenant not to compete. We affirm the district court’s decision that no part of the 108,125.29 is allocable to any covenant not to compete.

It follows from the discussion above that the Tax Court’s determination that Empire received 51,419.17 dollars for the covenant not to compete should likewise be affirmed.

Our reversal in part of the district court’s decision as to Dixie requires that we remand the cause to that court for consideration of the other claims raised by the Government which that court found unnecessary to consider in light of its decision that Dixie take nothing.

The decision of the Tax Court appealed from in Ernest Stewart v. Comm’r, No. 72-3602, is affirmed.

The decision of the Tax Court appealed from in Empire Mortgage Co. v. Comm’r, No. 72-1509, is affirmed.

The decision of the District Court for the Northern District of Georgia appealed from in Dixie Finance Co. v. United States, No. 71-1417, is affirmed in part, reversed in part, and remanded.

      . The covenant not to compete agreement breaks down the total of $159,545.01 into two separate categories as follows:

        Item Amount

      Covenant not to compete $ 51,419.17
      Covenant not to compete and goodwill 108,125.29
      The breakdown of these categories totals $159,544.46. The difference of 55 cents between this amount and the' amount set forth in the sales agreement apparently results from a mathematical error.

      . Dixie chose to litigate in the District Court for the Northern District of Georgia, while Empire sought relief in the United States Tax Court.

      . Stewart and the other selling shareholders raised their contentions in consolidated proceedings in the United States Tax Court. As stated in n. 2 above, Dixie litigated in the District Court.

      . For the purpose of this decision we need not decide whether the decision in Comm’r v. Danielson, 378 F.2d 771 (3d Cir.), cert. denied 389 U.S. 358, 88 S.Ct. 94, 19 L.Ed.2d 123 (1967), is consistent with the decisions of this court in Barran and Balthrope, supra. Danielson holds that a party to an agreement fixing an explicit amount for the covenant not to compete may not attack the agreement “absent proof of the type which would negate it in an action between the parties.” 378 F.2d at 775. The Tax Court found that the agreement in this case did not constitute an enforceable contract not to compete.

      . Goodwill is a capital asset, and amounts received therefor in excess of the seller’s basis are treated as capital gains. Comm’r v. Killian, 314 F.2d 852 (5th Cir. 1963). Since the good will is deemed to have no measurable useful life, the purchaser is not allowed to amortize and deduct the purchase price of the goodwill. See Treasury Regulation, 26 C.F.R. § 1.167 (a)-3.


author: TUTTLE, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Omer Thomas CARON, Defendant-Appellant.
    No. 72-2049.
    United States Court of Appeals, Fifth Circuit.
    Feb. 28, 1973.
    Rehearing Denied March 29, 1973.

      Henry Gonzalez, Tampa, Fla., for defendant-appellant.
    John L. Briggs, U. S. Atty., Jacksonville, Fla., Bernard H. Dempsey, Jr., Claude H. Tison, Jr., Asst. U. S. Attys., Tampa, Fla., for plaintiff-appellee.
    Before TUTTLE, WISDOM and SIMPSON, Circuit Judges.
   TUTTLE, Circuit Judge:

The sole issue in this case is whether evidence procured by means of a wiretap may be introduced by the government for impeachment purposes without a prior determination by the trial court that the wiretap was lawful. We affirm on the basis of Walder v. United States, 347 U.S. 62, 74 S.Ct. 354, 98 L.Ed. 503 (1954).

The facts are as follows. On June 10, 1971, a two count indictment was returned against appellant Caron, charging that he had on two occasions given false testimony in an appearance before a federal grand jury on April 7, 1971. Count One of the indictment alleged that Caron had committed perjury by denying that he had ever done any bookmaking, Count Two, that Caron had perjured himself by denying that he knew a Howard Gardner.

Trial of the case commenced on March 27, 1972. Following the prosecution’s case in chief Caron took the stand as the sole witness in his defense. Although he admitted that at the time of his appearance before the grand jury he was well-acquainted with Howard Gardner, he stated that if he had denied knowing him, it had been a mistake. As to the allegation in Count One of the indictment, Caron, on direct examination, testified as follows:

“Q: Mr. Caron, you are a gambling man, aren’t you?
A: Yes.
Q: What is it that makes you want to gamble? Why do you gamble?
A: It is a form of relaxation.
Q: Is it your business ?
A: No, sir.
Q: Have you ever been engaged in the business where you take bets from anybody that comes along ?
A: No.
Q: Did you ever take any bet that you can remember that you ever laid off, in the meaning of the expression ‘Lay off’?
A: No.
Q: You didn’t. Did you deal with anybody else?
A: Yeah.
Q: —In laying off bets or dividing up a bet?
A: No, sir.
Q: Were these man-to-man or head-to-head bets?
A: Yeah, they were.
Q: Was there any charge, ‘vigo-rish,’ percentage with any of those men?
A: No. No charge.
•X- *X* * *X* -X- *
Q: Mr. Caron, are you a bookmaker?
A: No, I am not.”

On cross-examination Caron further denied that he was engaged in bookmaking, though he admitted that he knew one alleged bookmaker, a Louis Figuere-do, and that he had placed two or three wagers with Figueredo during the 1971 football season. Thereafter, the prosecutor, on the basis of tape recordings which the government had procured by means of a wiretap on Figueredo’s telephone in November and December, 1971, asked Caron a series of questions as to whether Caron, on specified dates, had had telephone conversations with Figu-eredo in which they discussed the current lines on games, laying off wagers, and the like. Caron was unable to recall many of the alleged conversations, but he denied having engaged in at least three of them as to which he had been questioned.

In rebuttal and for impeachment purposes the government then sought to introduce into evidence the tape recordings of the intercepted telephone conversations. The district court, over Caron’s objection, ruled that the government would be permitted, without a prior evi-dentiary hearing on the validity of the wiretaps, to introduce in rebuttal the recordings of any conversation about which Caron had been asked and which he had denied having engaged in. Recordings of conversations which he had professed not to remember would not be admitted. Under this limitation the government played to the jury the tapes of two conversations, one on November 13, 1971, the other on December 8, 1971. The two voices were identified as those of Caron and Figueredo and an expert witness testified that the substance of their conversations consisted of the argot of professional bookmakers.

The jury found Caron guilty on both counts of the indictment and he now appeals, contending that the procedure followed in admitting the tapes into evidence was constitutionally infirm.

We note at the outset that by categorically denying on direct examination that he was a bookmaker, Caron effectively opened the door to the questions which the prosecutor put to him concerning his connections with Figueredo. Thus, it is evident that if the tape recordings were the product of a valid wiretap, their use for impeachment purposes would have been proper. The question here, of course, is whether such use is nonetheless proper in the absence of any determination by the trial court that the wiretap in question was lawful. In the light of Walder v. United States, supra, we must answer that question in the affirmative, for, under the holding in that case, even if it had been found that the wiretap was unlawful, use of the tape recordings solely for impeachment purposes would not have been proscribed.

In the Walder case the petitioner had been indicted in 1950 on a narcotics charge, but the indictment was dismissed when his motion to suppress the physical evidence, on the grounds that it had been procured through an illegal search and seizure, was granted. Subsequently in 1952 Walder was again indicted for violations of the narcotics laws. He testified on direct examination that he had never possessed any narcotics and the government sought to impeach this broad assertion by introducing the testimony of one of the officers who had participated in the prior illegal search and seizure and also of the chemist who had analyzed the narcotics seized at that time. The trial court admitted the evidence solely for impeachment purposes and thus, the question which eventually reached the Supreme Court was whether the defendant’s assertion “on direct examination that he had never possessed any narcotics opened the door, solely for the purpose of attacking the defendant’s credibility, to evidence of the heroin unlawfully seized in connection with the earlier proceeding.” 347 U.S. at 64, 74 S.Ct. at 355. The Court said:

“It is one thing to say that the Government cannot make an affirmative use of evidence unlawfully obtained. It is quite another to say that the defendant can turn the illegal method by which evidence in the Government’s possession was obtained to his own advantage, and provide himself with a shield against contradiction of his untruths. Such an extension of the Weeks doctrine would be a perversion of the Fourth Amendment.
Take the present situation. Of his own accord, the defendant went beyond a mere denial of complicity in the crimes of which he was charged and made the sweeping claim that he had never dealt in or possessed any narcotics. Of course, the Constitution guarantees a defendant the fullest opportunity to meet the accusation against him. He must be free to deny all the elements of the case against him without thereby giving leave to the Government to introduce by way of rebuttal evidence illegally secured by it, and therefore not available for its case in chief. Beyond that, however, there is hardly justification for letting the defendant affirmatively resort to perjurious testimony in reliance on the Government’s disability to challenge his credibility.”

347 U.S. at 65, 74 S.Ct. at 356.

We think that the case before us falls squarely within the holding of Walder. Caron contends, notwithstanding, that the Walder rationale was effectively discredited by the decision in Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), but whatever doubts we might at one time have entertained in this respect were put to rest by the Court’s more recent holding in Harris v. New York, 401 U.S. 222, 91 S.Ct. 643, 28 L.Ed.2d 1 (1971) in which Walder, if ever it had been faltering, was revitalized.

We consider then whether the result in this case should be affected by the fact that, unlike Walder, evidence procured pursuant to an invalid wiretap is subject to a statutory exclusion under Title III of the Omnibus Crime Control Act of 1968. 18 U.S.C. §§ 2510 et seq. Section 2515 of the Act provides:

“Whenever any wire or oral communication has been intercepted, no part of the contents of such communication and no evidence derived therefrom may be received in evidence in any trial ... if the disclosure of that information would be in violation of this subchapter.”

We note that in the legislative history of the Act Congress made it clear that the above-quoted provision should not be construed as requiring exclusion of the evidence in circumstances such as those before us. The Senate Report on the bill states:

“Section 2515 of the new chapter imposes an evidentiary sanction to compel compliance with the other prohibitions of the chapter. It provides that intercepted wire or oral communications or evidence derived therefrom may not be received in evidence in any proceeding before any court. .
* * * * * *
The provision must, of course, be read in light of section 2518(10) (a) discussed below, which defines the class entitled to make a motion to suppress. It largely reflects existing law. It applies to suppress evidence directly or indirectly obtained in violation of this chapter, [citations omitted]. There is, however, no intention to change the attenuation rule, [citations omitted]. Nor generally to press the scope of the suppression role [sic] beyond present search and seizure law. See Walder v. United States, 347 U.S. 62, 74 S.Ct. 354, 98 L.Ed. 503 (1954).” S.Rep.No.1097, U.S.Code Cong., and Admin.News (90th Cong., 2d Sess., 1968), pp. 2184-2185. (Emphasis added).

We conclude, therefore, that there was no error in the procedure followed by the district court.

The judgment is affirmed.

      . Compare Walder v. United States, supra, with Agnello v. United States, 269 U.S. 20, 46 S.Ct. 4, 70 L.Ed. 145 (1929). We would point out that the questions concerning Figueredo and the telephone conversations of November and December, 1971 were plainly as to matters collateral to the issues raised by the indictment and for which Caron was on trial, to wit, whether Caron had given false testimony to the grand jury in April, 1971.


author: MULLIGAN, Circuit Judge:

text:
    UNITED STATES ex rel. Frank L. FERRARI, Relator-Appellant, v. Robert J. HENDERSON, Superintendent, Auburn Correctional Facility, Respondent-Appellee.
    No. 567, Docket 72-2233.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 30, 1973.
    Decided Feb. 23, 1973.

      Meredith M. Brown, New York City (Debevoise, Plimpton, Lyons & Gates, New York City, of counsel), for relator-appellant.
    llene J. Slater, Asst. Atty. Gen., New York City (Louis J. Lefkowitz, Atty. Gen. and Samuel A. Hirshowitz, First Asst. Atty. Gen., New York City, of counsel), for respondent-appellee.
    Before ANDERSON, FEIÑBERG and MULLIGAN, Circuit Judges.
   MULLIGAN, Circuit Judge:

This is an appeal from an order dated January 21, 1972 of the United States District Court for the Western District of New York, Hon. Harold P. Burke, District Judge, which denied the relator’s application for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. On October 30, 1972, this court granted appellant’s motion for a certificate of probable cause, for leave to proceed in forma pauperis and for the assignment of counsel.

The appellant Ferrari was indicted on June 17, 1966 in Monroe County, New York, for two separate burglaries. Under Indictment No. 250 appellant and two others were charged with two counts of burglary in the first degree and one count of petit larceny in violation of the former New York Penal Law. The incident involved the breaking and entering of a dwelling in the night time, armed with a gun, while there were occupants within. After a jury trial, the appellant was convicted on all counts.

On the day of sentencing, January 12, 1967, appellant pleaded guilty to Indictment No. 251 which charged him and the same two confederates with burglary in the third degree and grand larceny in the first degree, in violation of the Penal Law of the State of New York. This incident, involving the breaking and entering of a store and the larceny of some $2500 in cash and clothing, was committed in a different town three days after the first burglary, and involved different victims. There is no question that these were separate transactions and that indictments 250 and 251 charged separate and unrelated crimes.

Hon. John J. Conway, the County Court Judge who had presided at Ferrari’s trial, first sentenced the appellant for the crime charged in Indictment No. 251. As a second felony offender, Ferrari received a sentence of 5 to 15 years’ imprisonment. As to Indictment No. 250, he was given a suspended 15 to 30 year sentence on one count of first degree burglary. Sentence was suspended on the remaining two counts of that indictment. The 15 year minimum sentence was mandatory under section 1941(1) of the former Penal Law since Ferrari had been previously convicted of burglary in third degree, and Judge Conway had imposed a three year suspended sentence on him in 1964.

Ferrari successfully attacked his conviction under Indictment No. 251 in a New York State habeas corpus proceeding on the theory that his plea had been stricken prior to the imposition of sentence. On June 27, 1968 the assistant district attorney moved for the dismissal of Indictment No. 251 on the ground that the only inculpatory evidence was the defendant’s confession which was deemed inadmissible under Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). The prosecutor immediately moved for the resentencing of Ferrari under Indictment No. 250. Re-sentencing under this indictment was mandated since the suspended sentence initially imposed by Judge Conway was illegal under section 2188(c) of the former Penal Law which provided that a sentence may not be suspended if the conviction was for a felony committed with a weapon. Judge Conway resen-tenced Ferrari to a term of 15 to 30 years’ imprisonment on the first count, a suspended sentence of 15 to 30 years on the second count and a suspended sentence on the third count.

Appellant appealed the resentencing procedure but the Appellate Division, Fourth Department, affirmed without opinion. (People v. Ferrari, 31 A.D.2d 890, 299 N.Y.S.2d 122 (1969)), and on April 1, 1969 leave to appeal to the Court of Appeals was denied. Appellant had also appealed his actual conviction under Indictment No. 250, but this conviction was affirmed on December 4, 1969. (People v. Ferrari, 33 A.D.2d 893, 308 N.Y.S.2d 325 (4th Dep’t 1969)) and leave to appeal was denied on March 20, 1970. Appellant then sought a writ of habeas corpus in the state courts alleging that his resentenc-ing under Indictment No. 250 violated his right against double jeopardy and denied him due process of law. By order entered on March 13, 1970 Justice Blauvelt, Supreme Court, Cayuga County, denied the application on the merits. This order was affirmed on October 22, 1970 (People ex rel. Ferrari v. Deegan, 35 A.D.2d 781 (4th Dep’t 1970)) and permission to appeal to the Court of Appeals was denied on December 9, 1970.

Appellant’s next step was to seek ha-beas corpus relief in the United States District Court for the Western District of New York, which relief was denied by the order of Judge Burke which is appealed here.

On appeal principal reliance is placed on the argument raised in the state courts and below that appellant was denied due process by being resentenced to a prison term in place of the suspended sentence. The theory of appellant is that Judge Conway’s resentencing was prompted by his vindictiveness against Ferrari who had successfully attacked his conviction under Indictment No. 251 in the state habeas corpus proceeding. The authority relied upon is North Carolina v. Pearce, 395 U.S. 711, 89 S.Ct. 2072, 23 L.Ed.2d 656 (1969), where the Supreme Court announced :

Due process of law, then, requires that vindictiveness against a defendant for having successfully attacked his first conviction must play no part in the sentence he receives after a new trial. And since the fear of such vindictiveness may unconstitutionally deter a defendant’s exercise of the right to appeal or collaterally attack his first conviction, due process also requires that a defendant be freed of apprehension of such a retaliatory motivation on the part of the sentencing judge.
In order to assure the absence of such a motivation, we have concluded that whenever a judge imposes a more severe sentence upon a defendant after a new trial, the reasons for his doing so must affirmatively appear. Those reasons must be based upon objective information concerning identifiable conduct on the part of the defendant occurring after the time of the original sentencing proceeding. And the factual data upon which the increased sentence is based must be made part of the record, so that the constitutional legitimacy of the increased sentence may be fully reviewed on appeal.
395 U.S. at 725-726, 89 S.Ct. at 2080-2081 (footnote omitted).

The rationale of Pearce is patent. A defendant is entitled to attack his conviction without fear of retaliation by the judge’s imposition of a harsher sentence on retrial. The inapplicability of Pearce to this case is evident. After Ferrari successfully attacked his conviction under Indictment No. 251, the charge was dismissed by Judge Conway on the motion of the assistant district attorney because his confession was inadmissible under Miranda. This was hardly evidence of malice. The assistant district attorney then moved to resentence Ferrari under Indictment No. 250. This motion had to be granted since the suspended sentence for the armed burglary was illegal under then section 2188(c) of the Penal Law. Judge Conway had no alternative and the record clearly indicates this as his first reason for revoking the suspended sentence. Moreover, the initial 15 year minimum sentence was, as we have pointed out, mandated by statute. In short, Judge Conway exercised no discretion and his action cannot be termed retaliatory. In Tipton v. Baker, 432 F.2d 245 (10th Cir. 1970), which appellant urges is closely in point, the court indicated that it doubted that due process would be violated if the higher sentence involved no exercise of the court’s discretion, but was the result of a requirement of law. 432 F.2d at 249-250.

Appellant urges that this first announced reason of the court is really a “makeweight” and argues in his reply brief “Indeed, it is entirely likely that the sentencing judge knew of the possible illegality of the suspended sentence all along, but did not wish to raise the point unless and until appellant challenged his other conviction.” (footnote omitted) While ardor in behalf of a client is commendable, in this case the Machiavellian conduct suggested on the part of this respected jurist is insupportable and illogical. Judge Conway could have sentenced Ferrari to 15 to 30 years in jail under Indictment No. 250 in the first place — in fact it was mandated. His sentencing him to the lesser term of 5 to 15 years’ imprisonment under Indictment No. 251 was assuredly an act of benevolence not malevolence. To suggest now that it was all a clever ploy to keep Ferrari from attacking his conviction, is in the mildest possible terms, totally incredible.

Judge Conway further announced that his second reason for resentencing Ferrari to a jail term was that he had originally suspended the sentence because the defendant was simultaneously sentenced to imprisonment for another burglary, but that guilty “plea turned out to be an invalid plea.” This of course merely states the obvious — Judge Conway would not have suspended sentence if Ferrari was not to go to jail at all. The belief of a judge, that a defendant whose sentence for burglary he had suspended three years before, who had not been found guilty by a jury of an armed burglary and larceny, and who had pleaded guilty to another separate burglary, should spend time in prison is hardly to be characterized as “vindictive” or “retaliatory.” This, in combination with the unquestioned fact that the suspended sentence was illegal and the sentence later imposed was mandated, convincingly demonstrate that there are no Pearce due process problems here.

Appellant next argues that the resentencing under Indictment No. 250 constitutes a violation of his Fifth Amendment right against double jeopardy. We find no double jeopardy problem here since the correction of an illegal sentence by the imposition of a legal sentence, even when this increases punishment, cannot be considered as multiple punishment for the same offense. Bozza v. United States, 330 U.S. 160, 166-167 & n. 2, 67 S.Ct. 645, 91 L.Ed. 818 (1947); United States v. Solomon, 468 F.2d 848, 852 n. 8 (7th Cir. 1972); United States v. Evans, 459 F.2d 1134, 1136 (D.C.Cir. 1972). Appellant also contends that his imprisonment under Indictment No. 251 was in effect a punishment for both burglaries since the sentencing was a “package deal” and therefore the resentencing under Indictment No. 250 constitutes an impermissible increase of sentence on a term he had already begun to serve. Appellant offers no authority for this proposition. Ferrari’s sentence to imprisonment was specifically and unambiguously for his burglary third conviction under Indictment No. 251 and not for the separate and unrelated crimes under Indictment No. 250 where the heavier sentence was improperly suspended.

Appellant’s final point is that having served time from January 12, 1967 until June 27, 1968 in State prison for the crime charged in Indictment No. 251, the time served should be credited toward his sentence under Indictment No. 250. The procedural difficulty for the court is, as the respondent State of New York points out, that the appellant has not raised this point in the State Court or indeed in the court below. He cannot appropriately raise it here for the first time. 28 U.S.C. § 2254(b); Picard v. Connor, 404 U.S. 270, 92 S.Ct. 509, 30 L.Ed.2d 438 (1971); United States ex rel. Nelson v. Zelker, 465 F.2d 1121, 1123-1125 (2d Cir. 1972). We suggest that he address this argument, which has strong equitable appeal, to the State Court.

Affirmed.