author: GIBBONS, Circuit Judge.

text:
    Aldine ROCHESTER, Individually and on behalf of her minor child; Rose Gibson, Individually and on behalf of her seven minor children; Individually and on behalf of all others similarly situated, Appellants, v. Herbert M. BAGANZ, Secretary of Health and Social Services, Individually and in his official capacity; and Jack B. White, Director of Social Services, Individually and in his official capacity, Defendants, Third-Party Plaintiffs, v. Elliott L. RICHARDSON, United States Secretary of Health, Education and Welfare and John D. Twiname, Administrator, Social and Rehabilitation Service, United States Department of Health, Education and Welfare, Third-Party Defendants.
    No. 72-1544.
    United States Court of Appeals, Third Circuit.
    Argued April 12, 1973.
    Decided May 29, 1973.

      John S. Grady, Community Legal Aid Society, Inc., Wilmington, Del., for appellants.
    Kent Walker, State Solicitor, Wilmington, Del., for Herbert M. Baganz and Jack B. White.
    E. Grey Lewis, Acting Asst. Atty. Gen., F. L. Peter Stone, U. S. Atty., Morton Hollander, Leonard Schaitman, Michael Kimmel, Attys., Dept, of Justice, Washington, D. C., Thomas Scarlet, Cade Morrow, Attys., U. S. Dept, of Health, Education and Welfare, Attys. for Elliott L. Richardson and John D. Twiname.
    Before ADAMS, GIBBONS and WEIS, Circuit Judges.
   OPINION OF THE COURT

GIBBONS, Circuit Judge.

By 31 Del.C. §§ 321-31 the State of Delaware has adopted the Aid to Families with Dependent Children (AFDC) public assistance program authorized by Title IV of the Social Security Act of 1935, 42 U.S.C. §§ 601-44, as amended. The defendants Baganz, Secretary of the Delaware Department of Health and Social Services, and Jack B. White, Director of the Division of Social Services in Delaware, (the state defendants) have state administrative responsibility for AFDC. The third-party defendants, the Secretary of Health, Education and Welfare and the Administrator, Social and Rehabilitation Service, Department of Health, Education and Welfare (the federal defendants) have federal administrative responsibility for AFDC. The plaintiffs, suing on their own behalf and on behalf of all others similarly situated, are eligible recipients of AFDC public assistance.

On October 27, 1971, as a result of conferences among the state defendants and the Governor of Delaware, it was determined that effective November 1, 1971 AFDC public assistance payments to plaintiffs and other members of the class should be reduced by 11.7% below the amounts theretofore paid under the same conditions of eligibility. On October 27, 1971 notices were sent to the plaintiffs and other class members which read:

“STATE OF DELAWARE Department of Health and Social Services

Division of Social Services

October 27, 1971

The Division of Social Services must adjust your assistance grant effective November 1971. This grant adjustment is a policy change necessitated by limitation of available funds and to correct an error made in September. You have the right to appeal and have a fair hearing; you may be represented by legal counsel or anyone of your choice; you have a right to informal conference in our Division which in no way affects your right to a formal hearing. Contact your worker if you wish to appeal.

John E. Hiland, Jr., Director”

This notice was received by plaintiffs, and presumably by most other class members, on October 29, 1971. Some class members, however, did not receive any prior notice of the reduction. On November 6, 1971 plaintiffs, and presumably most other class members, received their public assistance checks for the month of November which reflected the 11.7% reduction.

On November 4, 1971 the plaintiffs filed a complaint against the state defendants. The complaint sought a temporary restraining order and preliminary and permanent injunctions restraining the state defendants from enforcing the reduction in payments without adequate prior notice and directing them to issue new checks for the month of November in the amount of the original benefits. The complaint alleges two grounds for relief; (1) that in administering the program the state defendants are bound by the federal regulations and the provisions of the Delaware Public Assistance Manual concerning notice and hearing prior to reduction of benefits; and (2) that reduction of benefits without notice and hearing violated the due process clause of the fourteenth amendment. Preliminary injunctive relief was denied, 337 F.Supp. 350. The state defendants filed a third-party complaint against the federal defendants seeking a declaration that the federal regulations on which the plaintiffs rely are unlawful and unenforceable. Thereafter the plaintiffs and the state defendants made cross motions for summary judgment, and the federal defendants moved to dismiss the complaint. On May 12, 1972 the district court entered an order granting the state defendants’ motion for summary judgment and denying that of the plaintiffs. Plaintiffs appeal from that order.

The district court held (1) that the governing federal notice and fair hearing regulations and the parallel provisions of the Delaware Public Assistance Manual did not apply to an across-the-board percentage reduction carried out to keep expenditures within state appropriations, and (2) that the constitutional notice and fair hearing requirements announced in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), and Wheeler v. Montgomery, 397 U.S. 280, 90 S. Ct. 1026, 25 L.Ed.2d 307 (1970), were inapplicable to reductions as a result of a uniform statewide policy rather than as a result of individual circumstances of the recipient.

In administering the AFDC program, although the states have some latitude in determining standards of need, Dandridge v. Williams, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970), if they participate in the program they must do so in compliance with the provisions of Title IV of the Social Security Act of 1935. Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442, (1970); Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969); King v. Smith, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968). Moreover, the states must comply with valid regulations issued by the Secretary of Health, Education and Welfare governing the program. E. g., King v. Smith, supra at 333 n. 34, 88 S.Ct. 2128 n. 34; Serritella v. Engelman, 462 F.2d 601 (3d Cir. 1972) (per curiam), aff’g 339 F.Supp. 738 (D.N.J.); Almenares v. Wyman, 453 F.2d 1075 (2d Cir. 1971), cert. denied, 405 U.S. 944, 92 S.Ct. 962, 30 L.Ed.2d 815 (1972). The federal regulation on which plaintiffs rely was before this court in Serritella v. Engelman, supra, in another context, and was in that context sustained as a valid exercise of the Secretary’s rulemaking authority binding on the states. It is 45 C.F.R. § 205.10, dealing with notice and fair hearings, which in present form was published on February 13, 1971 to be effective on April 14, 1971. 36 Fed.Reg. 3034 et seq. At issue here is 45 C.F.R. § 205.10(a)(5):

“In cases of any proposed action to terminate, suspend or reduce assistance:
(i) The State or local agency will give timely and adequate advance notice detailing the reasons for the proposed action. Under this requirement:
(a) ‘Timely’ means that notice is mailed at least 15 days before the action is to be taken.
(b) ‘Adequate advance notice’ means a written notice that includes details of reasons for the proposed agency action, explanation of the individual’s right to conference, his right to a fair hearing and the cireumstanc-es undei' which assistance is continued if a fair hearing is requested.”

The notice given in this case did not comply. It was untimely. 45 C.F.R. § 205.10(a) (5) (i) (a). The state defendants urge, however, and the district court held, that this regulation was not intended to apply to a general reduction of the level of benefits. The regulation requires that, in case of any proposed action to terminate, suspend or reduce a beneficiary’s payments, the recipient must be given at least fifteen days notice, an opportunity for a conference and an opportunity to request a fair hearing. If a hearing is timely requested the regulation requires that assistance payments be continued at their previously established level until a fair hearing decision is rendered, unless the state agency makes a determination that the only issues involved are issues of state law or policy. 45 C.F.R. § 205.10(a) (5) (iii) (a)(1). Thus, an across-the-board reduction based on state law or policy may be put into effect prior to a fair hearing, but only after fifteen days notice, after a state agency determination that only such law or policy issues are involved and subject to a post-reduction fair hearing. 45 C.F.R. § 205(a)(5) (iii) (a)(1); Delaware Public Assistance Manual § 5100 et seq. The Secretary interprets his own regulations as requiring fifteen days prior notice even for across-the-board reductions and the regulation on its face is not susceptible of any other reading.

The State contends that so interpreted the regulation is inconsistent with the Act. Regulations issued pursuant to the broad rulemaking authority granted to the Secretary by 42 U.S.C. § 1302 must be sustained if reasonably related to the purposes of the Act, and are entitled to the usual deference afforded the agency charged with its administration. Lewis v. Martin, 397 U.S. 552, 90 S.Ct. 1282, 25 L.Ed.2d 561 (1970). The Act expressly requires that state plans;

“provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for aid to families with dependent children is denied or is not acted upon with reasonable promptness.” 42 U.S. C. § 602(a)(4)

The Secretary construes denial of benefits to include reductions which are treated as pro tanto denials. We have already upheld that construction in Ser-ritella v. Engelman, supra, which holds that 45 C.F.R. § 205.10 validly imposes a requirement for a state level fair hearing in advance of termination or reduction of benefits in individual cases. That case included class members as to which fact issues might be in dispute between the recipient and, the state agency. In such cases, we held, a fair hearing pri- or to termination may lawfully be required by regulation. Here we deal with class members as to which, individually, there may be no factual dispute. The regulation permits termination or reduction in such cases without a prior fair hearing, but only after fifteen days notice. The Secretary urges that even in cases of across-the-board reductions such advance notice is necessary, or at least appropriate, for the orderly administration of welfare programs. He urges that in a program designed to meet subsistence needs recipients ought to be informed in advance if their payments are to be cut for any reason, so that they may be able to plan for the cut, and to the extent possible adjust to it. We agree that it was well within the l-ange of the Secretary’s rulemaking authority to insist, as a condition for state participation in the AFDC program, that each state manage its fiscal affairs so as to be able to provide at least this minimum advance warning to beneficiaries about to be deprived of benefits upon which they may have been counting heavily.

The post-reduction fair hearing requirement, applicable to reductions or terminations based on law or policy, is based upon the Secretary’s concern that the state’s law or policy determination, when applied to an individual case, might be erroneous. An example, not presented in this case, might be a state law or policy such as a “man assuming the role of a spouse” rule, which was involved in Lewis v. Martin, supra, and which might well be erroneously applied in an individual case. The example applicable to this case is the potential miscalculation of the amount of a recipient’s reduced benefit as a result of a computer error. We conclude that the Secretary’s concern about the possibility of such cases justifies his insistence upon affording recipients an opportunity for a post-reduction fair hearing even for general reductions based upon law or policy.

Our conclusion that both the fifteen-day notice regulation and the post-reduction fair hearing regulation are consistent with the Act is reenforced by the statement of purpose for Title IV Part A found in § 42 U.S.C. § 601. The primary objects of congressional concern are needy dependent children and the parents or relatives with whom they are living. Clearly the Secretary’s paternalistic approach reflected in 45 C.F.R. § 205.10(a) is consistent with that concern.

Since we have concluded that the district court erred by ruling that the notice provision in 45 C.F.R. § 205.10 is inapplicable to across-the-board reductions, the case must be reversed on this ground. We have no occasion to reach the court’s treatment of the plaintiffs’ claim that notice prior to termination was also required by Goldberg v. Kelly, supra, and Wheeler v. Montgomery, supra, since the nonconstitutional statutory ground affords a sufficient basis for our decision.

Nor, in this appeal, do we determine the appropriate relief. Undoubtedly on remand the plaintiffs will contend for full retroactive reimbursement and the state defendants will contend for prospective or declaratory relief only. The matter is before us on cross motions for summary judgment rather than with a full record. We cannot balance the general public interest against the equities of the class members without such a record. That should, in any event, be done in the first instance by the district court.

The judgment will be reversed and the case remanded to the district court for further proceedings consistent with this opinion.

Each party to bear its own costs.

      . By an order of this court on August 25, 1972 Herbert M. Bagaras was substituted for Albert L. Ingrain and Jack B. White for John Hiland.

      . A class action order was entered by the district court.

      . The opinion of the district court also grants the motion of the federal defendants to dismiss the third-party complaint. No appeal has been taken from that determination. The federal defendants have tendered for filing a brief as appellee, but supporting the appellants’ position. Since they are not affected by the order appealed from we have considered the brief as if filed in an amicus curiae capacity.

      . See to the same effect, 42 U.S.C. § 302 (a) (4) (state old age and medical assistance plans); id. § 1202(a)(4) (state plans for aid to the blind); id. § 1352(a)(4) (state plans for aid to the permanently and totally disabled) ; id. § 1382(a) (4) (state plans for aid to aged, blind, or disabled or for medical assistance for the aged) ; id. § 1396a (a) (3) (state plans for medical assistance).


source: Caselaw Access Project

author: ROSENN, Circuit Judge.

license: Public Domain

text:
    PITTSBURGH NEWSPAPER PRINTING PRESSMEN’S UNION NO. 9, Appellant, v. PITTSBURGH PRESS COMPANY, a corporation. PITTSBURGH TYPOGRAPHICAL UNION NO. 7, AFL-CIO, an unincorporated labor organization by its President, John Feigel, and Trustee ad Litem, Appellant. v. The PITTSBURGH PRESS COMPANY.
    Nos. 72-1495, 72-1496.
    United States Court of Appeals, Third Circuit.
    Argued April 3, 1973.
    Decided May 25, 1973.

      Lloyd F. Engle, Jr., Kuhn, Engle & Blair and Richard D. Gilardi, Laughlin, Gilardi & Cooper, Pittsburgh, Pa., for appellant.
    Charles R. Volk, Thorp, Reed & Armstrong, Pittsburgh, Pa., and Don H. Pace, Baker, Hostetler & Patterson, James P. Garner, Cleveland, Ohio, for appellee.
    Before ROSENN and HUNTER, Circuit Judges, and BECHTLE, District Judge.
   OPINION OF THE COURT

ROSENN, Circuit Judge.

In this consolidated appeal, two labor unions challenge the denial in the District Court for the Western District of Pennsylvania, 343 F.Supp. 55, of preliminary injunctions to restrain appellee, The Pittsburgh Press, from reducing the number of shifts to be worked by union members. We find no abuse of discretion in the district court’s finding of insufficient proof of irreparable harm and therefore affirm its order denying the injunctions.

Appellee announced on May 10, 1972, plans to reduce the number of shifts worked by both its pressmen and typographers because of declines in the newspaper’s circulation and advertising pages. Appellants, Pittsburgh Newspaper Printing Pressmen’s Union No. 9 and Pittsburgh Typographical Union No. 7 objected to the new manning schedules, claiming the employer had no right under its collective bargaining agreements with the unions to impose such changes until an arbitrator had determined whether the changes were permissible. The unions pointed to clauses in each contract that they interpreted to require binding arbitration of the dispute and maintenance of the status quo pending arbitration.

When the Press refused to refrain from instituting the work schedule changes until arbitration was completed, each union obtained from the district court on May 19 a temporary restraining order against the changes. After a consolidated hearing on May 30, on each union’s motion for a preliminary injunction, the restraining orders were extended to June 9. On June 6, after consideration of the evidence presented and arguments made at the hearing, the district court dissolved the restraining orders and denied the motions for preliminary injunctions.

The district court in its opinion noted that it had jurisdiction to consider the question of maintaining the status quo pending arbitration, but declined to do so because a likelihood of irreparable harm had not been shown by the unions requesting the injunctions. In dictum it noted that the policy favoring arbitration, as expressed in Union of Operating Engineers, Local 150 v. Flair Builders, Inc., 406 U.S. 487, 92 S.Ct. 1710, 32 L.Ed.2d 248 (1972), might well require an arbitrator, rather than the court, to decide if the status quo should be maintained in the present case.

On appeal, we need not reach the issue of whether interpretation of the alleged status quo clauses in the two collective bargaining agreements here should have been for the court or the arbitrator, for we cannot find an abuse of discretion or clear mistake in the district court’s finding that a likelihood of irreparable harm had not been shown. In order for a federal court to issue an injunction to enforce a labor agreement containing binding arbitration and status quo maintenance clauses, it must find irreparable harm threatened and that the party seeking the injunction would suffer more harm without the injunction than would the enjoined party if it were granted. Boys Markets, Inc. v. Retail Clerks Union, Local 770, 398 U.S. 235, 254, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970). When a district court has found irreparable harm was not proven, “[i]t is for us [as the appellate reviewing court] to determine only whether there has been an abuse of that discretion, whether there was an error of law or whether a clear mistake was made in the consideration of the proof.” National Land & Investment Co. v. Specter, 428 F.2d 91, 95 (3d Cir. 1970).

The unions argue that the district court erred in finding here that no irreparable harm had been shown. Noting that the district court determined that “any wages [that] will be lost as a consequence of defendant’s action in either case . . . can be recouped should the Union receive a favorable award” from the arbitrator, the unions point to evidence presented that losses other than wages would be suffered were an injunction not granted. The unions emphasize testimony that (1) employees given shorter work weeks were likely to leave the profession and, even, the Pittsburgh area; (2) the loss of regular situations would also entail loss of apprenticeships ; (3) prospective pressmen and typographers would be discouraged from entering the trade; and (4) the union’s pension fund would suffer loss from loss of work shifts.

Although the unions elicited on cross-examination from the production manager of the Press a statement that he could not be sure that the proposed changes would not cause loss of a guaranteed five shifts per week per employee, the manager’s testimony that no loss of jobs by union members would be required in order to implement the changes stands uncontradicted. Officials of the two unions who testified admitted that none of their members would be discharged as a result of the scheduling changes.

In light of this evidence before the district court, we cannot accept the union argument that there was a clear misreading of the evidence in the district court’s finding. We have no grounds on which to question the court’s findings and judgment in light only of the somewhat speculative assertions by union officials that the union would suffer irreparable harm by its members leaving town, its lessened ability to attract and train new pressmen and typographers, and the diminishment of payments into the pension fund.

Appellants cite a number of cases in which injunctions have been granted to prevent employers from disturbing the status quo, but in most of them, employees were about to lose jobs, a situation quite different from the present case where the only evidence presented to the district court was that some employees would lose overtime hours and others might lose some regular time shifts. Nor is it altogether certain under the precise language of the contracts on which this litigation is predicated that the announced scheduling changes of the Press amounted to a change in the status quo. Moreover, none of the cases cited involved a finding by an appellate court that a trial court abused its discretion or made a clear mistake in not finding a likelihood of irreparable harm when jobs were threatened.

Appellants also contend that an injunction is not barred by the provisions of the Norris-LaGuardia Act, 29 U.S.C. § 101 et seq. Since the district court properly held that under ordinary equity principles this case is one in which an injunction would not be appropriate, we need not determine whether the case otherwise falls within the exception to Norris-LaGuardia carved out by Boys Markets. Detroit Newspaper Publishers Ass’n v. Detroit Typographical Union No. 18, 471 F.2d 872 (6th Cir. 1972), cert. denied, 411 U.S. 967, 93 S.Ct. 2149, 36 L.Ed.2d 687 (1973).

The judgment of the district court will be affirmed.

      . Since denial of the injunctions by the district court, this court granted, on June 23, 1972, appellants’ motion for restoration of the injunctions pending appeal, thus restraining the Press from making the scheduling changes. Arbitrators have in the meantime also ruled on each union’s claims. The Newspaper Printing Pressmen’s Union dispute resulted in a determination that 50 of the proposed 62 shift eliminations were justified under the contract. The Typographical Union dispute resulted in a determination by the arbitrator that the Press did not have a right under the contract to lay off any “situation holders,” i. e., job slots consisting of five full days for one individual. The arbitrator of the Pressmen’s dispute did not rule on the issue of maintenance of status quo pending arbitration because the union did not agree to submission of that issue to him. The arbitrator in the Typographical Union’s dispute did decide the issue; he held the status quo should have been maintained, i. e., the Press should not have implemented the changes (as it did not) until arbitration was completed.
      Although the underlying disputes between employer and unions have been resolved, and although the unions obtained from this court previously what they were unable to obtain from the district court originally, this appeal is not moot because the issues involved are “capable of repetition, yet evading review.” Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705, 713, 35 L.Ed. 2d 147 (1973); Avco Corp. v. Local 787, Autoworkers, 459 F.2d 968, 974 (3d Cir. 1972); Pacific Maritime Ass’n v. International Longshoremen’s and Warehousemen’s Union, 454 F.2d 262 (9th Cir. 1971).

      . Although one union official speculated that two pressman helpers would lose their jobs, we find this speculation insufficient to indicate the district court misinterpreted the evidence before it.

      . Brotherhood of Locomotive Engineers v. Missouri-Kansas-Texas R. Co., 363 U.S. 528, 80 S.Ct. 1326, 4 L.Ed.2d 1435 (1960); Local Lodge 2144 v. Railway Express Agency, Inc., 409 F.2d 312 (2d Cir. 1969); Westchester Lodge 2186 v. Railway Express Agency, Inc., 329 F.2d 748 (2d Cir. 1964); Dewey v. Reynolds Metal Co., 304 F.Supp. 1116 (W.D.Mich. 1969), reversed on other grounds, 429 F.2d 324 (6th Cir. 1970), aff’d per curiam, 402 U.S. 689, 91 S.Ct. 2186, 29 L.Ed.2d 267 (1971); Local Division 1098 v. Eastern Greyhound Lines, 225 F.Supp. 28 (D.D.C.1963) (Employees could have retained jobs but only by moving from Washington, D.C., to Chicago); Auto Workers v. Seagrave Division, 56 LRRM 2875 (E.D.Ohio 1964); I.U.E. v. Radio Corporation of America, 77 LRRM 2201 (D.N.J.1971); Mailers Union No. 6 v. New York News, 76 LRRM 2619 (N.Y.Sup.Ct. 1971). (Job losses not involved in last two cases.)


author: PER CURIAM.

text:
    UNITED STATES of America, Appellee, v. Byron E. PRUGH, Appellant.
    No. 72-1710.
    United States Court of Appeals, Eighth Circuit.
    Argued May 14, 1973.
    Decided June 8, 1973.
    Kenneth K. Simon, Kansas City, Mo., for appellant.
    Robert G. Ryan, Atty., Securities and Exchange Comm., Washington, D. C., for appellee.
    Before GIBSON, HEANEY and ROSS, Circuit Judges.
   PER CURIAM.

Defendant Byron Prugh, in a consent decree in the United States District Court for the Western District of Missouri entered October 18, 1968, was enjoined from further violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. By an order entered on September 28, 1971, Prugh was ordered to show cause why he should not be held in contempt for engaging in activities prohibited by that decree. Only July 31, 1972, the court found Prugh guilty of criminal contempt and sentenced him to four months imprisonment. This appeal followed.

Prugh was alleged to have violated the terms of the consent decree by selling securities in violation of the registration provision of the Securities Act of 1933.' Prugh held a 50 per cent interest in a controlled corporation, Mark V. Inc., which owned 950,000 shares of unregistered stock in W.I.D.E., Inc. He caused 500,000 shares of the W.I.D.E. stock to be exchanged for 700,000 shares of stock in the Continental Investment Corporation (CIC), an Arizona corporation which had been dormant since 1966. The shares of CIC stock were also unregistered. This exchange occurred on October 21, 1968. These shares were not issued in Prugh’s name but in the names of various nominees. At Prugh’s direction, certain of these unregistered shares were sold by George Smith and the proceeds divided between Smith and Prugh. The Court found, and it is not disputed, that as to the CIC stock Prugh had the status of an underwriter within the meaning of the Securities Act of 1933, and that as such, the distribution by him of the unregistered CIC stock was not exempt under Section 4(1) of the Act.

Prugh first contends that his acts did not constitute a contempt since at the time of the transactions in question he was acting under the belief that the shares in CIC were “free trading” shares. The Court made the factual finding that, “Prugh deliberately closed his eyes to facts which were plainly to be seen and failed to make such an investigation as would be made by a reasonably prudent man under the circumstances.” As a conclusion of law the Court held “Byron E. Prugh knowingly, wilfully and intentionally disobeyed the Court’s order of October 18, 1968, in violation of 18 U.S.C. § 401.” In view of Prugh’s prior experience in the securities field it seems reasonable to presume that he would know whether the securities he purchased were properly registered or not. If uncertain, he knew how to check on the registration. In view of the injunction which was entered against him it was incumbent on him to determine if his transactions were in violation of the terms of that injunction. United States v. Custer Channel Wing Corp., 376 F.2d 675, 682 (4th Cir.), cert. denied, 389 U.S. 850, 88 S.Ct. 38, 19 L.Ed.2d 119 (1967). In Custer Channel Wing Corp. the court stated:

“The appellants had already breached the law and had been enjoined not to do so again; yet they knowingly repeated the selfsame forbidden acts. It is not consonant with reason, in these circumstances, to demand a more explicit demonstration of an evil mind in order to sustain the conviction for criminal contempt. See Roe v. United States, 316 F.2d 617, 623 (5th Cir. 1963), a prosecution for violation of section 5, holding that the ‘best proof’ of the requisite willfulness ‘would be a prior conviction (defined by the court to include “other significant judicial actions such as an injunction”) of the very same defendant for acts substantially identical.’
“The facts cannot possibly be fitted into the pattern of an innocent stumbling into an unintended transgression. The injunction pointedly brought to the defendants’ attention their past infraction of the Securities Act and laid down a specific admonitory prescription to guide their future course. As the District Court noted, appellants, thus warned, should have been more than normally. careful in their behavior not to repeat the offense.” 376 F.2d at 682 (emphasis added).

Further that Court held that the elements which would constitute the offense of criminal contempt in the violation of an injunction under the Securities Act of 1933 are coextensive with the elements of a direct criminal violation of that Act. 15 U.S.C. § 77x, 376 F.2d at 681. We have held:

“ . . . the essential facts constituting a crime under § 77e(a)(2) [Section 5 of the Securities Act] are that ‘(1) a “security” was carried through the mails or in interstate commerce, (2) for the purpose of a sale or delivery after a sale, and (3) that no registration statement was in effect as to such security at the time thereof . . . . Kistner v. United States, 332 F.2d 978, 980-981 (8th Cir. 1964).

The Government was not required to show that Prugh knew that he was violating the terms of the injunction when he directed these transactions, but only to prove he intentionally conducted the proscribed stock transactions.

Prugh argues that he acted only in good faith reliance on the advice of counsel. His attorney did not issue an opinion letter and specifically stated that his informal opinion was based only on the information which Prugh himself had given to the attorney. The trial court found that Prugh did not act in good faith and such finding is fully supported by the record. Prugh’s excuses on the cold record are lame and emit a hollow ring.

Finally Prugh argues that the trial court erred in failing to disqualify himself. This contention is patently frivolous in.light of appellant’s failure to show how he was or could have been prejudiced by such failure. In Unger v. Sarafite, 376 U.S. 575, 84 S.Ct. 841, 11 L.Ed.2d 921 (1964), the Court considered a case where a state trial judge found guilty of contempt a witness in a trial who had refused to comply with the Court’s instruction regarding his testimony and who had refused to answer proper questions which had been asked. The Supreme Court held, “We cannot assume that judges are so irascible and sensitive that they cannot fairly and impartially deal with resistance to their authority. . . .” 376 U.S. at 584, 84 S.Ct. at 847. In the instant case we are not dealing with a direct attack on the authority of the court which would cause a personal involvement of the judge. Rule 42(b), Fed.R.Crim.P. provides that a judge is only disqualified when the contempt charged involved disrespect to or criticism of the judge. Where such criticism or disrespect was absent a majority in Nilva v. United States, 352 U.S. 385, 396, 77 S.Ct. 431, 1 L.Ed.2d 415 (1957), required that there be an abuse of discretion before the failure to assign the contempt case to another judge would be held to be error. Appellant made no showing of an abuse here.

Judgment affirmed.


text:
    HOLDEN FUEL OIL COMPANY, Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Appellant.
    No. 72-2031.
    United. States Court of Appeals, Sixth Circuit.
    Argued April 10, 1973.
    Decided June 22, 1973.

      Richard S. Halberstein, Dept, of Justice, Washington, D. C., for respondent-appellant; Scott P. Crampton, Asst. Atty. Gen., Tax Div., Dept, of Justice, Washington, D. C., Lee EL Henkel, Jr., Chief Counsel, I. R. S., Washington, D. C., of counsel; Meyer Rothwacks and Bennet N. Hollander, Attys., Tax Div., Dept, of Justice, Washington, D. C., on brief.
    Murray P. Greenblatt, Southfield, Mich., for petitioner-appellee.
    Before PECK, McCREE and MILLER, Circuit Judges.
   PER CURIAM.

The appellee taxpayer is engaged in the retail sale of fuel oil in the Detroit, Michigan, area. Prior to 1959, the Gulf Oil Corporation supplied oil to the ap-pellee, as well as to other local dealers, and also delivered oil to its own retail customers. When Gulf decided to get out of the retail market, it negotiated a contract with the appellee to sell its customer lists. The first of two contracts was signed on February 18, 1959, and provided that the total purchase price of the list of Gulf customers located within the appellee’s geographical service territory was to be equal to three cents per gallon actually delivered by the appellee to these former Gulf customers during the period June 1, 1961, through May 31, 1962, payable in 36 equal monthly installments beginning July 15, 1962. Credit was to be given for payments on account required by the contract to be made during the first three years of delivery (June 1, 1959, through May 31, 1962), at the rate of one-half cent per gallon so delivered.

On June 13, 1961, the appellee entered into another agreement with Gulf to purchase an additional customer list. This contract, with terms similar to the earlier one, provided that taxpayer would pay Gulf three cents per gallon actually delivered to these customers during the first year of delivery under this contract, June 1, 1961, through May 31, 1962, in 72 equal monthly installments commencing June 15, 1962. Payments on account totaling one-half cent per gallon delivered during that same period were to be made on or before June 15, 1962, 1963 and 1964.

Pursuant to the 1959 contract the appellee paid Gulf $22,665.38 and $15,-930.23 during its fiscal years ending May 31, 1960 and 1961. In its fiscal year ending May 31, 1962, appellee, pursuant to the 1959 contract, paid a total purchase price of $93,530.40. The bal-anee of that amount still due, $77,600.17, was deducted as an expense on the ap-pellee’s 1962 tax return.

During the fiscal year ending May 31, 1962, appellee computed the total contract price for oil delivered to customers obtained from the second list as $7,909.38. This amount was deducted that year as an expense on the appellee’s 1962 tax return, making the total 1962 expense deductions for the two lists equal to $85,509.55.

The Commissioner disallowed all the expense deductions claimed with regard to the purchase of both customer lists. The appellee filed a petition in the Tax Court for a redetermination of these deficiencies. Appellee then claimed deductions on its tax returns for fiscal 1964, 1965 and 1966 related to the purchase of the customer lists for “selling expense-amortization” based upon the number of customers lost each year. The Commissioner mailed a second notice of deficiency to the appellee for its fiscal years ending May 31 of 1963 through 1966, which disallowed these claimed amortization deductions. Appellee filed a petition in the Tax Court for a redetermination of these deficiencies; the two actions were consolidated in the Tax Court.

The Tax Court held that the customer lists were capital assets, and 'that their costs were not fully deductible in the years incurred as business expenses as claimed initially by the appellee. The Court also held that 75% of the cost of the lists was amortizable over a 15 year period commencing June 1, 1959, with 75% of the payments actually made in each of the first three years deductible for those years, and 75% of the balance deductible over the remaining twelve years. The Commissioner has perfected ;his appeal from that judgment.

The cost of an intangible asset may be annually depreciated or amortized for tax purposes if it can be established that the asset is of use in a business for only a limited period of time which can be estimated with reasonable accuracy. Int.Rev.Code of 1954, § 167(a); Blaine v. United States, 441 F.2d 917, 919 (5th Cir. 1971), cert. denied, 404 U.S. 952, 92 S.Ct. 286, 30 L.Ed.2d 269 (1972). However, if the intangible asset involved is goodwill, or is in the nature of goodwill, no depreciation or amortization deductions are permissible because such asset is either not wasting or has no reasonably ascertainable useful life. Treas.Reg. § 1.167 (a)-3.

The appellant’s first contention is that the lists are not amortizable because they are intangible assets in the nature of goodwill, and have no reasonably ascertainable useful lives. The appellant argues that the purchaser obtains not only a list of names, but also obtains an established clientele and an on-going business relationship, the value of which fluctuates as customers are dropped or acquired, and that therefore the lists have a business usefulness of a limited time which is not reasonably ascertainable.

We disagree. The appellee’s only guaranteed acquisition from this contractual arrangement was the list of names. Although Gulf did send a form letter to all of the customers on the list informing them • that the appellee was now distributing Gulf oil in the area and solicited their business, these customers were not obligated to purchase fuel oil from the appellee because there had been no contract between Gulf and its customers. The list contained over 5,000 potential customers, but only 3,007 accounts were sold fuel oil by the ap-pellee during the fiscal year ended May 31, 1962. On May 31, 1968, only 1,577 customers were still purchasing oil from the appellee.

Since the appellee initially acquired a list of 5,199 names, and was supplying only 1,577 of them with oil as of May 31, 1968, the lists were demonstrably wasting assets. Furthermore, evidence was introduced to show that the appellee would lose approximately 10% of its customers each year. Trade indicators calculated the life of a fuel oil account to be from 8 to 10 years. Furthermore, the parties stipulated that the appellee lost approximately 50% of its total fuel oil deliveries initially acquired from the list in a six year period following May 31, 1962, the year that the contract price was determined. Upon this evidence, the Tax Court determined that the list acquired by the appellee had a limited life and that life was reasonably ascertainable. This was in accordance with the regulations which provide that an intangible asset may be the subject of a depreciation allowance if it is known from experience or other factors to be of use in the business for only a limited period, the length of which can be estimated with reasonable accuracy. Treas.Reg. § 1.167(a)-3.

Although the record contains little if any support for the 15 year life period determined by the Tax Court, the appellant has stated that should this Court conclude that the cost of the lists was amortizable, he would not dispute the 15 year life. Finally, the appellant contends that the method of amortization allowed by the Tax Court is improper because it was based upon the method applied in Associated Patentees, 4 T.C. 979 (1945), which the appellant contends is not applicable to the present case because the annual percentage payments in the present case were not based upon a percentage of income derived from the lists over their entire alleged useful lives, and because the price, while based upon the volume of business generated during one fiscal year, was in no way dependent upon the income generated by the lists in later years.

We disagree, and affirm for the reasons stated by the Tax Court:

However the contract which initiated the sale of the list was effective as of June 1, 1959. Petitioner [appellee] serviced customers acquired from the list during that 3-year period. It is therefore manifest that the list had a value during this initial 3-year period prior to the determination of the total sales price. Amortization of the cost of the list over a 15-year period beginning as of June 1, 1959, is however inappropriate as the cost was uncertain in those initial 3 years.
Faced with this unusual situation we adopt the method of amortization applied in Associated Patentees, Inc., 4 T.C. 979 (1945). In Associated, the taxpayer purchased a patent. The total cost was indeterminable as the buyer was to pay a percentage of the income produced from the rental of the patent for a fixed number of years. This Court, so as to clearly reflect income, permitted the taxpayer to deduct as depreciation the amount paid in each year toward the cost of the patent. Applying that theory to the instant case, petitioner may deduct as an amortization deduction 75 percent of the amount paid to Gulf during the fiscal years ended May 31, 1960, 1961 and 1962. For the fiscal year ended May 31, 1963 and thereafter, the total contract price having been determined, petitioner must return to the traditional method of depreciation, amortizing 75 percent of the remaining unpaid cost of the list over its 12-year remaining life.

The judgment of the Tax Court is affirmed.