author: TALBOT SMITH, Senior District Judge.

text:
    UNITED STATES of America, Appellee, v. Jon D. IVERS, Appellant.
    No. 74-1916.
    United States Court of Appeals, Eighth Circuit.
    Submitted Feb. 11, 1975.
    Decided March 11, 1975.

      Mark R. Fraase, Wegner, Fraase & Cooke, Fargo, N. D., for appellant.
    Harold O. Bullis, U. S. Atty., Fargo, N. D., for appellee.
    Before BRIGHT and STEPHENSON, Circuit Judges, and TALBOT SMITH, Senior District Judge.

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

   TALBOT SMITH, Senior District Judge.

Jon D. I vers appeals his conviction of misappropriating, in violation of 18 U.S.C. § 153, the funds of an estate in bankruptcy which came into his charge as custodian. He challenges the sufficiency of the indictment, the sufficiency of the evidence and the admissibility of certain evidence. We affirm.

The evidence shows that Continental Mortgage Company was adjudged a bankrupt and defendant appointed trustee. The only asset of Continental was an unsecured claim against another bankrupt, Dalco American Enterprises, Inc. On November 24, 1971, after a dividend received from Dalco in partial satisfaction of this obligation was distributed, the Continental bankruptcy was closed and defendant was discharged as trustee. In December, 1971, however, Dalco discovered additional assets, and the bankruptcy court authorized an additional dividend to Continental. A check in the amount of $466.51 payable to “Continental Mortgage Co., John Ivers, Trustee” was delivered to defendant. In February, 1972 the Continental bankruptcy was reopened to administer this asset, and on September 28, 1972 the bankruptcy judge countersigned checks drawn on the bankruptcy trust account of Continental, distributing the additional funds. All but one of the checks (payable to the clerk of the court for the referee fee) were retained by defendant for mailing to the payees. The checks were not mailed despite the court’s requests of March 5 and August 28, 1973 and, on November 12, 1973, its order that defendant submit proof that the checks had been honored. On December 11, 1973, over a year after they had been signed, the defendant mailed the checks back to the court. Investigation disclosed that the defendant had deposited the original Dalco check to his own business account on January 10, 1972. He did not credit the Continental bankruptcy trust account in full until December 10, 1973 when $457 was deposited.

The indictment was returned September 25, 1974, charging that:

On or about January 10, 1972, at Fargo, in the District of North Dakota, JON D. IVERS did knowingly and fraudulently appropriate to his own use Check No. 4122 in the amount of $466.51 dated December 22, 1971, from Dalco American Enterprises, Inc., to Continental Mortgage Company, a bankrupt (Bankruptcy No. 68-2) and which had come into his charge as custodian.

The defendant urges two related points based on the theory that it is possible for a trustee to abandon property belonging to an estate in bankruptcy, in which case title reverts to the bankrupt. The misappropriation of such abandoned property would not be an offense against the United States, it is urged, because it would no longer belong to the “estate of a bankrupt” within the meaning of 18 U.S.C. § 153. Thus it is first argued that the indictment should have been dismissed because it charges that the misappropriated property belonged to “a bankrupt” and not that it belonged to the “estate of a bankrupt.”

This argument was not presented to the court in defendant’s motion to dismiss the indictment. In these circumstances an indictment “will ordinarily be held sufficient unless it is ‘so defective that by no reasonable construction can it be said to charge the offense for which the defendant [was] convicted.’ Muench v. United States, 96 F.2d 332, 335 (8th Cir. 1938).” It is not necessary that the indictment follow the exact wording of the statute. Rudin v. United States, 254 F.2d 45, 48 (6th Cir.), cert. denied, 357 U.S. 930, 78 S.Ct. 1374, 2 L.Ed.2d 1371 (1958). Thus it has been held that an indictment charging that “only a part of the assets [of a bankrupt corporation] were made available to the officers of the Court” was sufficient to allege for purposes of 18 U.S.C. § 152 (concealment of “any property belonging to the estate of a bankrupt”) that the property was part of the bankrupt estate. United States v. Arge, 418 F.2d 721, 723 n. 2, 725 (10th Cir. 1969). Similarly, an indictment under 18 U.S.C. § 152 charging the concealment from the trustee in bankruptcy of a named corporation of certain cash and inventory “which were the property of said corporation” was held sufficient. Rudin, supra, 254 F.2d at 47, 48.

Since it was the intent of Congress to secure to creditors the same property rights which the bankrupt owned, it is usual to speak of the property of the bankrupt as synonymous with property of the estate in bankruptcy. Here the indictment charged defendant with misappropriating a check payable to “Continental Mortgage Company, a bankrupt (Bankruptcy No. 68-2)” which came into his charge as “custodian.” We think this language, reasonably construed, is sufficient to allege that the misappropriated property belonged to the estate of a bankrupt.

Defendant next urges that the court erred in denying defendant’s motions for judgment of acquittal in that “the government should have been required to prove that the [Dalco check was] the property of the estate in bankruptcy of Continental Mortgage Company and in custodia legis in the Bankruptcy Court and not the property of a bankrupt.” At oral argument this second point was modified or explained by the defendant as predicated on the trial court’s failure to instruct the jury that the misappropriated funds must be proved beyond a reasonable doubt to be the property of the estate in bankruptcy. Again, defendant’s argument is based on the proposition that a trustee may abandon property belonging to an estate in bankruptcy. However, it is clear from the record that the Dalco cheek, payable to “Continental Mortgage Co., John Ivers, Trustee” was an asset of the estate in bankruptcy at the time it came into defendant’s possession. Abandonment is not to be lightly inferred. The mere closing of bankruptcy proceedings does not effect an abandonment of unadministered assets. After the discharge of the trustee such assets remain in custodia legis of the bankruptcy court. There simply is no evidentiary basis to suggest that the outstanding claim against Dalco was abandoned; indeed, the additional funds were ultimately administered by the bankruptcy court as an asset of the bankrupt estate. We conclude the court properly overruled defendant’s motions for judgment of acquittal.

Further, we find that the instructions contain no plain error affecting substantial rights. Defendant did not object to the instructions on the grounds here urged, and we are satisfied no prejudice has resulted. The argument of abandonment is based on an hypothesis having no relation to the facts in the case and is clearly raised here as an afterthought.

The remaining contentions of the defendant are without sufficient merit to warrant extended discussion. We are satisfied from our review of the briefs and record that there is substantial evidence to support the verdict and that no prejudicial error appears in the admission of evidence.

The judgment is

Affirmed.

      . 18 U.S.C. § 153 provides:
      Whoever knowingly and fraudulently appropriates to his own use, embezzles, spends, or transfers any property or secretes or destroys any document belonging to the estate of a bankrupt which came into his charge as trustee, receiver, custodian, marshal, or other officer of the court, shall be fined not more than $5,000 or imprisoned not more than five years, or both.

      . See Bankruptcy Act § 2(a)(8), 11 U.S.C. § 11(a)(8).

      . In September, 1972 defendant had deposited $20, which covered the referee’s check.

      . Citing Stanolind Oil & Gas Co. v. Logan, 92 F.2d 28, 31 (5th Cir.), cert. denied, 302 U.S. 763, 58 S.Ct. 409, 82 L.Ed. 592 (1937).

      . United States v. Murray, 492 F.2d 178, 192 (9th Cir. 1973), cert. denied, 419 U.S. 942, 95 S.Ct. 210, 42 L.Ed.2d 166 (1974); accord, Hagner v. United States, 285 U.S. 427, 433, 52 S.Ct. 417, 76 L.Ed. 861 (1932); see Fed.R. Crim.P. 12(b)(2).

      . See also Paszkiewicz v. United States, 3 F.2d 272 (7th Cir. 1924); United States v. Comstock, 161 F. 644 (C.C.D.R.I.1908); but cf. United States v. Grant, 1 F.2d 723 (E.D.Mich. 1924).

      . Segal v. Rochelle, 382 U.S. 375, 379, 86 S.Ct. 511, 15 L.Ed.2d 428 (1966); Bankruptcy Act § 70, 11 U.S.C. § 110.

      . See United States v. Comstock, 161 F. 644, 647 (C.C.D.R.I.1908); see also Rudin v. United States, 254 F.2d 45, 48 (6th Cir.), cert. denied, 357 U.S. 930, 78 S.Ct. 1374, 2 L.Ed.2d 1371 (1958).

      . United States v. Arge, 418 F.2d 721, 725 (10th Cir. 1969); Rudin v. United States, 254 F.2d 45, 48 (6th Cir.), cert. denied, 357 U.S. 930, 78 S.Ct. 1374, 2 L.Ed.2d 1371 (1958); see United States v. Debrow, 346 U.S. 374, 376, 74 S.Ct. 113, 98 L.Ed. 92 (1953); Rood v. United States, 340 F.2d 506, 509-10 (8th Cir.), cert. denied, 381 U.S. 906, 85 S.Ct. 1452, 14 L.Ed.2d 287 (1965); Fed.R.Crim.P. 7(c)(1).

      . See generally 4A W. Collier, Bankruptcy H 70.42 [3] (14th ed. 1971).

      . Stanolind Oil & Gas Co. v. Logan, 92 F.2d 28, 31 (5th Cir.), cert. denied, 302 U.S. 763, 58 S.Ct. 409, 89 L.Ed. 592 (1937); 4A W. Collier, Bankruptcy ¶ 70.07 [2] (14th ed. 1971).

      . Stanolind Oil & Gas Co. v. Logan, 92 F.2d 28, 31 (5th Cir.), cert. denied, 302 U.S. 763, 58 S.Ct. 409, 89 L.Ed. 592 (1937); 4A W. Collier, Bankruptcy ¶ 70.07 [2] (14th ed. 1971).

      . Fed.R.Crim.P. 52(b).

      . While the court in its charge did not spe- ' cifically emphasize that the misappropriated funds must belong to the estate in bankruptcy, we note that the relevant portions of 18 U.S.C. § 153 were quoted to the jury and that “custodian” was defined as “a person other than a trustee or receiver into whose custody or charge any property belonging to a bankrupt estate comes.”


source: Caselaw Access Project

author: GEWIN, Circuit Judge:

license: Public Domain

text:
    INTERNATIONAL ASSOCIATION OF MACHINISTS & AEROSPACE WORKERS et. al., Plaintiffs-Appellees, v. Franklin W. NIX, Defendant-Appellant.
    No. 74-1659.
    United States Court of Appeals, Fifth Circuit.
    April 28, 1975.
    Rehearing Denied June 9, 1975.

      Franklin R. Nix, Atlanta, Ga., for defendant-appellant.
    J. R. Goldthwaite, Jr., Atlanta, Ga., for plaintiffs-appellees.
    Before GEWIN and SIMPSON, Circuit Judges, and NICHOLS , Associate Judge.

       Of the U. S. Court of Claims, sitting by designation.

   GEWIN, Circuit Judge:

This appeal involves a crucial issue of federalism: under what circumstances

may a federal court enjoin a proceeding in a state court? Our analysis turns on the applicability to the suit before us of the pivotal law in this area, the Anti-Injunction Act, 28 U.S.C. § 2283:

A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.

This court has reviewed various aspects of the dispute between Nix and his Union and local lodge on four separate occasions. Nix v. Grand Lodge of Int’l Ass’n of Machinists and Aerospace Workers, 479 F.2d 382 (5th Cir. 1973), cert. denied, 414 U.S. 1024, 94 S.Ct. 449, 38 L.Ed.2d 316 (1973); Nix v. Fulton Lodge No. 2, 452 F.2d 794 (5th Cir. 1971), cert. denied, 406 U.S. 946, 92 S.Ct. 2044, 32 L.Ed.2d 332 (1972); Nix v. NLRB, 418 F.2d 1001 (5th Cir. 1969); Fulton Lodge No. 2 v. Nix, 415 F.2d 212 (5th Cir. 1969). While our earlier opinions have exhaustively analyzed the facts of this continuing litigation, the importance in the present suit of the principles of res judicata and collateral estoppel necessitates a careful recitation of the precise facts and holdings of the earlier cases.

I. Facts

This litigation is complicated by Nix’s dual status as an employee and rank- and-file member of the International Association of Machinists and Aerospace Workers, AFL-CIO (the Union). While employed as a press representative of the Union in 1965, he attempted to organize his fellow staff employees, theretofore unrepresented, into an independent bargaining unit. In this capacity he founded the IAM Representative Association. The Union, abandoning its customary posture, staunchly resisted its employees’ organizational efforts, but by 1966 the Representatives Association had won an election and secured NLRB certification as bargaining representative of all staff employees.

Shortly after the Board’s certification of the new representative, the Union discharged Nix, alleging simply that it had no work for him,. In response, Nix filed Section 8(a)(1), 8(a)(3) and 8(a)(5) unfair labor practice charges with the NLRB. The Union, in turn, offered as an additional reason for Nix’s discharge that he had pilfered the confidential papers of his immediate superior, a Union regional vice-president. Nix freely admitted taking the papers but claimed that he did so to prove that the vice-president was defrauding the Union. His action, he argued, was therefore consistent with his duty as a Union member to protect Union funds. The NLRB held that Nix was discharged for pilfering documents from his superior and not because of his organizational activity. International Ass’n of Machinists and Aerospace Workers v. Nix, 172 NLRB No. 239, 1968-2 CCH NLRB H 20,187. We affirmed in Nix v. NLRB, 418 F.2d 1001 (5th Cir. 1969), stating:

We hold that substantial evidence on the record considered as a whole supports the Board’s finding that IAM’s [employee Nix was] . . . discharged for cause and not because of [his] union membership and activity. Nix’s discharge for pilfering his superior’s personal papers . . . [was] legitimate grounds for discharge. The Board properly concluded that the General Counsel failed to sustain his burden of proof that the discharge of Nix . . . was only a pretext to conceal dismissal for membership and activities in IAM’s staff representatives’ Association.

The next spate of litigation arose from the Union’s efforts to oust Nix from membership. Shortly after the Board’s certification of the Representatives Association, the Union and the local lodge expelled Nix, claiming that he had slandered a Union official during the course of the representation campaign. Nix filed suit in federal district court based on the right to the exercise of free speech, protected by the union member’s “Bill of Rights” of the Labor-Management Reporting and Disclosure Act (LMRDA), 29 U.S.C. § 411. The district court’s order enjoining Nix’s expulsion from the Union and Lodge and any further interference with the exercise of free speech, Nix v. Fulton Lodge No. 2, IAM, 262 F.Supp. 1000 (N.D.Ga.1967), was affirmed in part by this court. 415 F.2d 212 (5th Cir. 1969).

At this point, Nix sought to gain reinstatement as an employee via the LMRDA, having failed to secure such relief in the unfair labor practice action before the NLRB. As the LMRDA protects union members, not employees, Nix was compelled to characterize his discharge as an infringement on union membership status, not merely on the rights of an employee. He therefore initiated a new action in the district court, arguing that under the LMRDA he had both a right and a duty to expose the corrupt Union vice-president. The Union, he urged, violated Section 609 of the LMDRA, 29 U.S.C. § 529, in discharging him- from employment for an act which was no more than the fulfillment of a Union duty. Nix further sought declaratory and injunctive relief on behalf of all .union members on the theory that the provisions of the Union constitution permitting disciplinary action against members for false or malicious statements against other members conflicted with the LMRDA provisions safeguarding the right of free expression.

The district court rejected Nix’s contention that his right to employment as a union member was in any way distinctive from his right to continued employment under the Labor Management Relations Act, 29 U.S.C. § 141 et seq., and therefore concluded that the controlling issue of fact concerning the discharge had already been litigated before the NLRB. This court affirmed the trial court’s conclusion that principles of res judicata barred further litigation on the issue of Nix’s discharge. Nix v. Fulton Lodge No. 2, 452 F.2d 794 (5th Cir. 1971), cert. denied, 406 U.S. 946, 92 S.Ct. 2044, 32 L.Ed.2d 332 (1972).

Nix now seeks in state court the remedy which three federal tribunals — the NLRB, the United States District Court for the Northern District of Georgia, and this court — have already denied. Nix presses his state court action for reinstatement in his job on a contract theory, contending that the Union and the Lodge breached the contract of union membership by firing Nix for performing a legitimate union duty. The Union and Lodge initially sought to avoid litigation in the state forum by removing the suit to federal district court, but the district court, finding neither diversity of citizenship nor federal question jurisdiction, granted Nix’s motion to remand the case to the Superior Court of Fulton County, Georgia. The Union and Lodge then filed the instant suit in federal district court to enjoin the state court proceedings pursuant to the explicit exceptions to the Anti-Injunction Act. Specifically, the Union argues that an injunction against the state court action is necessary both to protect the jurisdiction of the federal court and to effectuate its judgments since the issue under consideration in state court has already been litigated and resolved in several federal forums. The relitigation of the issues presented in the state court claim, the Union asserts, is barred by principles of res judicata and collateral estoppel.

The district court, concluding that three of the five issues raised in the state court complaint, all relating to Nix’s discharge from employment, were governed by the rules of res judicata, issued a partial injunction against further proceedings in state court. The district court did not enjoin state court litigation of Nix’s remaining two issues, namely whether the Union and Lodge are required to assist Nix in obtaining work and whether the continuing attack by the Lodge on Nix’s union membership rights constitutes a breach of the Lodge’s contractual duty. Because we find that issues vital to some of Nix’s state court claims have been thoroughly litigated and finally decided in prior actions in various federal forums, we affirm the district court’s injunctive order.

II. The Relitigation Exception

In view of the clear considerations of federalism supporting the Anti-Injunction Act, federal courts must proceed with caution in enforcing injunctions against state court proceedings. See American Radio Assoc, v. Mobile Steamship Assoc., Inc., 483 F.2d 1 (5th Cir. 1973). The purpose of § 2283 is to “avoid unseemly conflict between the state and the federal courts.” NLRB v. Nash-Fineh Co., 404 U.S. 138, 146, 92 S.Ct. 373, 378, 30 L.Ed.2d 328, 335 (1971). See also Mitchum v. Foster, 407 U.S. 225, 92 S.Ct. 2151, 32 L.Ed.2d 705 (1972); Oklahoma Packing Co. v. Gas Co., 309 U.S. 4, 60 S.Ct. 215, 84 L.Ed. 537 (1940); Signal Properties, Inc. v. Farha, 482 F.2d 1136 (5th Cir. 1973); Vernitron Corp. v. Benjamin, 440 F.2d 105 (2d Cir. 1971); Euge v. Smith, 418 F.2d 1296 (8th Cir. 1969) (Blackmun, J.): The Act does not embody a mere “principle of comity” but rather mandates an express and unequivocal limitation on the power of federal courts. Atlantic Coast Line R. R. Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970); Amalgamated Clothing Workers v. Richman Bros., 348 U.S. 511, 75 S.Ct. 452, 99 L.Ed. 600 (1955). Furthermore, the sensitive nature of federal interference with state court proceedings requires that the statute be strictly construed. Atlantic Coast Line R. R. Co. v. Brotherhood of Locomotive Engineers, supra; Leiter Minerals, Inc. v. United States, 352 U.S. 220, 77 S.Ct. 287, 1 L.Ed.2d 267 (1957); Signal Properties, Inc. v. Farha, supra. Cf. Southern California Petroleum Corp. v. Harper, 273 F.2d 715 (5th Cir. 1960).

In this case, the district court enjoined Nix “from proceeding on claims (1), (2), and (3) in Fulton County [Georgia] Superior Court.” That the injunction is directed to an individual litigant rather than the state court itself — an entity obviously not a party before the district court — is irrelevant to our considerations. The party seeking injunctive relief from federal court may not, of course, circumvent the clear prohibitions of the Anti-Injunction Act by naming as defendant the state court plaintiff rather than the state court itself. Oklahoma Packing Co. v. Gas Co., supra; Tampa Phosphate R. R. Co. v. Seaboard Coast Line R. R. Co., 418 F.2d 387 (5th Cir. 1969), cert. denied, 397 U.S. 910, 90 S.Ct. 907, 25 L.Ed.2d 90; Joseph L. Muscarelle, Inc. v. Central Iron Mfg. Co., 328 F.2d 791 (3d Cir. 1964); 1 Barron & Holtzoff, Federal Practice and Procedure, § 46, p. 235. In order to affirm the district court’s injunction, we must determine that it falls within one of the three Congressional exceptions to the Act. Atlantic Coast Line R. R. Co. v. Brotherhood of Locomotive Engineers, supra; Amalgamated Clothing Workers v. Richman Bros., supra; Tampa Phosphate R. R. Co. v. Seaboard Coast Line R. R. Co., supra. The injunction, in other words, must be “expressly authorized by Act of Congress,” “necessary in aid of [the district court’s] jurisdiction,” or [necessary] “to protect or effectuate [the district court’s] judgments.”

As there is clearly no Congressional statute granting jurisdiction in these circumstances, the Union argues that the injunction of state court proceedings is necessary to “protect or effectuate” the judgments of federal courts in prior cases. This argument states, in effect, that various federal forums have already considered and decided the precise issues presented to the state court and that principles of res judicata and collateral estoppel preclude relitigation of them.

The “relitigation exception” — an aspect of the “protect or effectuate its

judgments” exception to the Anti-Injunction Act — has been evaluated by this court in some detail. See Donelon v. New Orleans Terminal Co., 474 F.2d 1108 (5th Cir. 1973); Woods Exploration and Producing Co. v. Aluminum Co. of America, 438 F.2d 1286 (5th Cir. 1971); Teas v. Twentieth Century-Fox Film Corp., 413 F.2d 1263 (5th Cir. 1969); Jacksonville Blow Pipe Co. v. Reconstruction Finance Corp., 244 F.2d 394 (5th Cir. 1957). A consistent theme of our opinions is that federal courts may enjoin the relitigation in state court of issues that federal courts have fully and finally adjudicated. These cases recognize that the modern version of the Anti-Injunction Act, enacted as part of the Judicial Code of 1948, was expressly intended to codify the “relitigation doctrine” which had been eroded by judicial construction. See Woods Exploration and Producing Co. v. Aluminum Co. of America, supra; IB Moore’s Federal Practice H 0.408[3], p. 961. Rather than doing violence to principles of federalism, this exception, when applied in a proper case, enhances them. As we observed in Jacksonville Blow Pipe, supra, “nothing would be as productive of friction between the state and the federal courts. as to permit a state court to interpret and perhaps to upset such a judgment of a federal court.” 244 F.2d at 400. We advanced an even more practical justification for this doctrine in the Woods Exploration case: the relitigation exception “prevents multiple litigation of the same cause of action and it assures the winner in a federal court that he will not be deprived of the fruits of his victory by a later contrary state judgment which the Supreme Court may or may not decide to review.” 488 F.2d at 1312, citing Note, Federal Power to Enjoin State Court Proceedings, 74 Harv.L.Rev. 726, 734 (1961).

The success of Nix’s appeal thus hinges on a finding that adjudication of the issues raised in his state court complaint is not precluded by a prior ruling of a federal court. In other words, litigation in state court must not be barred by principles of res judicata or collateral estoppel. Upon consideration of the issues presented in prior litigation, we conclude that the district court properly enjoined certain phases of the pending state proceedings.

The doctrine of res judicata “makes a final, valid judgment conclusive on the parties, and those in privity with them, as to all matters, fact and law, that were or should have been adjudicated in the proceedings.” IB Moore’s Federal Practice U 0.405[1] at 624. Such a judgment becomes an absolute bar to a subsequent suit between the parties on matters that were necessarily decided as part of the first litigation.

The Union contends that those state court issues enjoined by the district court have been conclusively determined by two federal forums. First, it contends, the NLRB decided that Nix’s discharge was based not on his organizational activities but on his unauthorized pilfering of confidential records of a Union official. The Board’s decision was affirmed by this court. Second, when Nix attempted to contest the validity of his discharge in federal district court under the LMRDA, the district court, also affirmed by this court, concluded that relitigation of the validity of his discharge was barred by the doctrine of res judicata. Consequently, the Union argues that the pending state court suit, with respect to those issues covered by the injunction, is barred by prior decisions in federal forums and that an injunction against further proceedings is therefore proper under § 2283.

The fallacy of this argument is that the doctrine of res judicata is applicable only when the cause of action in the second suit is identical to the cause of action in the first. Lawlor v. National Screen Service Corp., 349 U.S. 322, 75 S.Ct. 865, 99 L.Ed. 1122 (1955); IB Moore’s Federal Practice K 0.405[1]. In the instant case, Nix may be seeking substantially similar relief — reinstatement in his job — but he has initiated two separate causes of action which required litigation in two different forums. He could only have brought the unfair labor practice charges before the NLRB. Since he was unable to bring the contract claim based on state law in that forum, he did not “split his cause of action” by bringing it in state court.

But Nix’s foundation of his state court action on independent theories of state law does not necessarily extricate his suit from the relitigation exception to the Anti-Injunction Act, for while the doctrine of res judicata may not prohibit this new action, the principle of collateral estoppel does constitute a bar. The requisites of collateral estoppel are in a sense less stringent than those of res judicata since in the former, relitigation of any particular legal or factual issue between two parties (or their privies) which was necessarily litigated and actually decided in the first suit is barred. American Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3 (5th Cir. 1974). As the Supreme Court noted in Lawlor v. National Screen Service Corp., supra:

under the doctrine of res judicata, a judgment “on the merits” in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action. Under the doctrine of collateral estoppel, on the other hand, such a judgment precludes relitigation of issues actually litigated and determined in the prior suit, regardless of whether it was based on the same cause of action as the second suit.

349 U.S. at 326, 75 S.Ct. at 867, 99 L.Ed. at 1126-27. See also Cromwell v. County of Sac, 94 U.S. 351, 24 L.Ed. 195 (1878). This court has observed that the doctrine of collateral estoppel embodies three requirements: “(1) the issue to be concluded must be identical to that involved in the prior action; (2) in the prior action the issue must have been ‘actually litigated’; and (3) the determination made of the issue in the prior action must have been necessary and essential to the resulting judgment.” Port Arthur Towing Co. v. Owens-Illinois, Inc., 492 F.2d 688, 692, n. 6 (5th Cir. 1974); James Talcott, Inc. v. Allahabad Bank, Ltd., 444 F.2d 451, 458-59 (5th Cir. 1971).

These principles of collateral estoppel preclude Nix from relitigating in state court certain issues already decided in federal tribunals. The NLRB, affirmed by this court, ruled that Nix stole confidential documents to which he was not entitled. The parties directly confronted this question before the Board and the Board’s resolution of it was necessary to the conclusion that the Union had legitimate reasons for discharging Nix which were unrelated to union activity. Relitigation of the issue of whether Nix was justified in taking the official’s documents is therefore precluded by the doctrine of collateral estoppel. Thus, even though Nix frames his state court action in terms of state contract law rather than federal labor policy, he may not relitigate the very issue which lies at the core of his claim — the legitimacy of his taking an official’s papers. In these circumstances, a federal court need not stand idly by and hope that the state court perceives that the issues before it formed the basis of prior federal court litigation. Rather the federal court may intervene, pursuant to § 2283, “to protect or effectuate its judgments.”

Nix contends that this analysis has been undermined by Atlantic Coast Line which permits splitting causes of action between state and federal courts. He relies heavily on the following statement:

While the railroad could probably have based its federal case on the pendent state law claims as well, United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), it was free to refrain from doing so and leave the state law questions . to the state courts. Conversely . [the railroad] was also free to restrict the state complaint to state grounds alone.

398 U.S. at 295, 90 S.Ct. at 1747, 26 L.Ed.2d at 246. This argument misperceives the thrust of the Atlantic Coast Line decision. In that case, the railroad had secured a state court injunction against a union picketing at a railroad yard after failing to gain an injunction in federal court. Two years later, the union requested that the state court dissolve its injunction in view of a recent Supreme Court decision affirming the union’s right to picket at a nearby railyard. The state court refused, and the union thereafter obtained a federal court order restraining enforcement of the state court injunction. On appeal, the Supreme Court dissolved the district court injunction, concluding that it was not authorized by any of the three exceptions to the Anti-Injunction Act. Nix draws our attention to that portion of the Court’s opinion which expressly recognizes that the initial federal district court decision not to enjoin union picketing did not consider whether federal law precluded an injunction based on state law. 398 U.S. at 290, 90 S.Ct. at 1744, 26 L.Ed.2d at 243. Thus, he suggests, an independent state court decision, based on state law, could not undermine the earlier judgment of a federal court construing federal labor law. While Atlantic Coast Line did leave open the possibility of state court litigation of certain issues, the facts of that case were significantly different from the present suit. In this case, the federal tribunals reviewing Nix’s discharge expressly determined that he pilfered confidential documents without justification and that the Union did have legitimate cause to discharge him. Nix may not relitigate this fundamental issue in state court merely because he clothes his cause of action in terms of state contract law rather than federal labor law.

Finally, we reject Nix’s contention that the district court’s partial injunction will, as a practical matter, render adjudication of the two remaining state law issues unfeasible. All the issues in this case, he asserts, are so inextricably interwoven that no single claim can be adjudicated apart from the whole controversy. Nix suggests that the Union and the Lodge will attempt to undermine the state court proceedings on the remaining issues by contending that introduction of relevant evidence in the dispute violates the district court injunction. The result, he argues, will be a series of interruptive resorts to the district court in an effort to frustrate litigation of the remaining state law claims. We find these arguments to be entirely speculative and decline to overturn a legally valid injunction because of the mere spectre of complications. We conclude, however, that in issuing a partial injunction, the district court was not prescribing a rule of evidence binding on the state court. In this complicated litigation, the state court, of course, remains free and independent to develop whatever facts it deems vital to the resolution of the remaining questions of Georgia law. Moreover, on oral argument the Union has assured this court that it does not intend to interfere with a thorough development of the evidence relating to the remaining state court issues and has even volunteered to stipulate as to facts revealed in the background evidence in this litigation which are relevant to those questions. In these circumstances, Nix’s contention concerning the practical pitfalls of the district court’s injunction is without merit.

The district court’s order partially enjoining Nix from proceeding with his suit in Fulton County Superior Court is affirmed.

Affirmed.

      . The district court issued its injunction against the International as well as Fulton Lodge No. 2, although Nix’s complaint named only the local lodge. On appeal, this court ruled that the district court’s reinstatement order was binding only as to the local lodge, but noted that on remand Nix should be entitled to amend his complaint to seek relief against the International as well. 415 F.2d at 220.

      . '29 U.S.C. § 529 provides in part:
      It shall be unlawful for any labor organization, or any officer, agent, shop Stewart, or other representative of a labor organization, or ány employed thereof to fine, suspend, expel, or otherwise discipline any of its members for exercising any right to which he is entitled under the provisions of this chapter.

      . This court has reviewed Nix’s contentions in yet another instance after it declared that his LMRDA claim to employment was barred by res judicata. In Nix v. Grand Lodge of International Assoc, of Machinists and Aerospace Workers, 479 F.2d 382 (5th Cir. 1973), this court affirmed the district court’s decision voiding the disciplinary section of the union constitution because of its conflict with the LMRDA and granting reasonable attorney’s fees.

      . The district court accurately distilled the following five issues from Nix’s “Complaint in Contract”, filed in the Superior Court of Fulton County, Georgia (Civil Action No. B 78316, filed September 14, 1972):
      (1) Whether Nix’s discharge from his union office constituted: (a) a breach of his contract of union membership by the Union and Lodge, and/or (b) a violation of his contractual right and sworn duty to protect the union’s funds (paragraph 9, Nix’s state court complaint);
      (2) Whether the failure of the officers of the Grand Lodge of the Union to prefer charges of misconduct (pilferage of officials private papers) against him deprived him of his contractual right to a full and fair hearing on charges affecting his membership, employment, pension rights, and standing with fellow union members to participate fully and without coercion in the affairs of the union (paragraph 10, Nix’s state court complaint);
      (3) Whether in its attack on his union membership the Lodge breached its contractual duty to afford Nix a full and fair hearing as required by the trial procedure provision of the IAM & AW constitution (paragraph 11, Nix’s state court complaint); (4) Whether the Union and Lodge breached their contractual duty owed Nix, a union member, to try and obtain work for out-of-work union members especially in light of their successful efforts to have him discharged from employment with the Central Labor Council of Charleston, West Virginia (paragraph 12, Nix’s state court complaint); and,
      (5) Whether the continuing attack by the Lodge on Nix’s union membership rights in thwarting his participation in the affairs of the Lodge constitutes a breach of the Lodge’s contractual duty (paragraph 13, Nix’s state court complaint).

      . The district court offered as an alternative rationale for its decision the proposition that a party is barred from litigating in state court any pendent claim, once he has introduced some pendent claims in a federal court suit. In view of our conclusion that this case falls within the “relitigation” exception to the Anti-Injunction Act, we need not evaluate this second ground.

      . The second and third statutory exceptions embody much the same concept of protecting the jurisdiction of federal courts. As the Supreme Court stated in the Atlantic Coast Line case, the phrase “necessary in aid of” its jurisdiction implies something similar to the concept of injunctions to “protect or effectuate” judgments. Both exceptions to the general prohibitions pf § 2283 imply that some federal injunctive relief 'may he necessary to prevent a state court from so interfering with a federal court’s consideration or disposition of a case as to seriously impair the federal court’s flexibility and authority to decide that case. 398 U.S. at 295, 90 S.Ct. at 1747, 26 L.Ed.2d at 245-6.

      . In Woods Exploration, we expressly concluded that the so-called “relitigation” exception to the Act had not been eroded by Supreme Court pronouncements in Atlantic Coast Line and Donovan v. City of Dallas, 377 U.S. 408, 84 S.Ct. 1579, 12 L.Ed.2d 409 (1964).

      . In Toucey v. New York Life Ins. Co., 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100 (1921), the Supreme Court emphatically rejected the notion that federal courts had authority to enjoin state rglitigatipn of issues decided in prior federal cases. The “Reviser’s Note” accompanying the 1948 revision of the Act states that “[t]he exceptions specifically include the words ‘to protect or effectuate its judgments,’ for lack of which the Supreme Court held that the Federal courts are without power to enjoin relitigation of cases and controversies fully adjudicated by such courts.” Historical and Revision Notes following 28 U.S.C.A. § 2283.

      . The district court, in remanding Nix’s contract suit to the state court, explicitly noted that the defendants might raise the res judicata and collateral estoppel issues as defenses in the state court action.
      This court has recognized this potentiality. In affirming a district court’s denial of an injunction of state court proceedings, we have commented If we err [in denying the injunction], all is not lost. A state court is as well qualified as a federal court to protect a litigant by the doctrines of res judicata and collateral estoppel.
      Southern California Petroleum Corp. v. Harper, 273 F.2d 715 (5th Cir. 1960).


author: SWYGERT, Circuit Judge.

text:
    Charles HAYES and John Goebel and all other persons similarly situated, Plaintiffs-Appellants, v. Wayne A. STANTON, and Elizabeth Samkowski et al., Defendants-Appellees.
    No. 74-1795.
    United States Court of Appeals, Seventh Circuit.
    Argued Dec. 9, 1974.
    Decided March 4, 1975.
    As Amended March 21, 1975.

      Harold R. Berk, Indianapolis, Ind., Patricia A. Butler, Los Angeles, Cal., for plaintiffs-appellants.
    Theodore L. Sendak, Atty. Gen., Anna S. Rominger, Deputy Atty. Gen., Robert W. Geddes, Indianapolis, Ind., for defendants-appellees.
    Before HASTINGS, Senior Circuit Judge, SWYGERT and STEVENS, Circuit Judges.
   SWYGERT, Circuit Judge.

The question in this appeal is whether by enacting Pub.L. No. 93-233, § 13(c) Congress has mandated that states participating in the Medicaid program provide recipients of a mandatory State Supplemental Assistance payment with Medicaid coverage and benefits without the payment of a “spend down” or demonstration of need for any particular monetary amount of medical services. At issue is the legality of Indiana Department of Public Welfare Bulletin 285C issued on July 24, 1974 which requires such a “spend down.”

Plaintiffs’ class action complaint seeks declaratory and injunctive relief establishing that they are not required to make a “spend down” payment as a condition for receipt of Medicaid benefits. The complaint was dismissed for failure to state a claim upon which relief could be granted though plaintiffs construe the ruling as a grant of summary judgment since matters outside the pleadings were considered by the court. We reverse the judgment of the district court.

I

Plaintiffs are a class of severely disabled persons who are recipients of federal Supplemental Security Income and Indiana State Supplemental Assistance. Plaintiffs receive the federal Supplemental Security Income assistance pursuant to Title XVI of the Social Security Act, 42 U.S.C. § 1381 et seq. State Supplemental Assistance is paid to plaintiffs pursuant to Ind.Code 12-1 — 7.1-1 and Pub.L. No. 93-66, § 212, 87 Stat. 155. The federal statute makes such payments mandatory to any aged, blind, or disabled individual who would have less income under the newly federalized Supplemental Security Income program in January 1974 than they did under the prior Aid to the Permanently and Totally Disabled program in December 1973. Plaintiffs, as recipients of federal Supplemental Security Income and mandatory State Supplemental Assistance payments, contend that they are automatically eligible and entitled to Medicaid coverage without any further requirements.

Representing the class are Charles Hayes and John Goebel, Medicaid claimants who are both severely disabled and require an inordinate quantity of medical services and medications to control and treat their disabling conditions. Hayes’ total income per month amounts to two hundred fifty-six dollars and sixty cents ($256.60) which includes one hundred ninety-six dollars and ten cents ($196.10) in Old-Age, Survivors and Disability Insurance benefits and sixty dollars and fifty cents ($60.50) in State Supplemental Assistance for the disabled. Goebel’s total income per month is two hundred seventy-nine dollars and eighty cents ($279.80) which includes two hundred fifty-two dollars and ninety cents ($252.90) in Old-Age, Survivors and Disability Insurance benefits and twenty-six dollars and ninety cents ($26.90) in State Supplemental Assistance for the disabled.

Before July 24, 1974 the Medicaid standard of financial eligibility for Hayes, Goebel, and other aged, blind, or disabled persons who received a mandatory state supplemental payment was set at their individual standard of need established under the former categorical assistance program. Under this standard Hayes was determined to have needs of two hundred forty-five dollars and twenty-five cents ($245.25) per month, and Goebel to have needs of two hundred sixty-three dollars and ninety cents ($263.90) per month. Since their respective incomes were less than these respective individualized needs, they both received Medicaid benefits and coverage from early in the year 1972 through and including August 31, 1974. Medicaid coverage and benefits were provided to them without any cost during that entire period of eligibility.

On July 24, 1974 defendant-appellee Stanton issued Bulletin 285C of the Indiana Department of Public Welfare. The bulletin changed the procedure for determining financial eligibility for Medicaid coverage. Instead of calculating a recipient’s needs on an individualized basis, it required that a “flat maintenance allowance shall be used for all Medicaid recipients who are over age 65, blind or disabled.” The new flat maintenance allowance was set at one hundred forty-six dollars ($146.00) per month, the amount of a federal Supplemental Security Income payment, for a single individual or a married person not living with a spouse.

Under the new procedure, an aged, blind, or disabled person is eligible for Medicaid only if his total income, less standard allowances, does not exceed the flat maintenance allowance of one hundred forty-six dollars ($146.00). If his income exceeds the flat allowance of one hundred forty-six dollars ($146.00), he will only be eligible for Medicaid if he makes a spend down payment to the county department of public welfare representing the difference between his income and the flat maintenance level of one hundred forty-six dollars ($146.00). Eligibility for this spend down provision is further conditioned on the demonstration of monthly medical expenses being accrued by the recipient in an amount at least equal to the aforestated difference between his income and the maintenance allowance level.

Bulletin 285C thus substitutes $146.00 as the standard of financial eligibility for Medicaid for the individualized standards previously calculated for Hayes and Goebel. Under this new lower standard, the Medicaid claimants’ income exceeded the new standard and they were informed that a spend down payment reducing their available income to the $146.00 level would have to be made if they were to continue receiving Medicaid coverage and benefits.

Based on Bulletin 285C, Hayes was told by his caseworker that he would have to spend down thirty-four dollars ($34.00) per month to continue receiving Medicaid. Goebel was told by his caseworker that he would have to spend down ninety-two dollars ($92.00) per month in order to continue receiving Medicaid coverage and benefits. Satisfaction of the spend down payment provision would require that Hayes return part of his State Supplemental Assistance to the welfare administrators. It would require that Goebel return his State Supplemental Assistance to the welfare administrators and also pay part of his Old Age, Survivors and Disability Insurance benefits to the welfare administrators.

Since the Medicaid claimants could not afford (because of their poverty) to pay the required spend down amounts, they were not provided with Medicaid cards for September 1974. These cards are necessary to obtain drugs and medical services from suppliers under the Medicaid program, and without a Medicaid card plaintiffs could not purchase all of the multitude of medical services and medications that they must obtain to control and treat their disabling conditions.

The legality of defendants’ imposition of a spend down as a prerequisite to plaintiffs’ receipt of Medicaid benefits must be determined on the basis of the federal statutory scheme which regulates plaintiffs’ eligibility for Medicaid coverage.

II

Congress provides assistance to financially needy persons who are aged (65 or over), blind, or disabled through a complex statutory scheme. (This assistance flows through the state public welfare program.) Relevant to our case are those statutory provisions which determine the cash benefits to which the needy aged, blind, and disabled are entitled and also the Medicaid eligibility and coverage for this group. It is the combination and interrelationship of these provisions which underlie the present problem.

On October 30, 1972 Congress enacted Pub.L. No. 92-603, 42 U.S.C. § 1396a, effective January 1, 1974, which federalized the state cash assistance programs for the adult categories of the blind, aged, and disabled under Title XVI of the Social Security Act, 42 U.S.C. § 1381 et seq. This federal program, known as the Supplemental Security Income program, converted a myriad of state plans in the adult categories to one nationally uniform system by providing a flat maintenance allowance to all recipients. Thus, no longer were an individual’s “special needs” the criteria by which the amount of cash assistance was determined. All individuals eligible under the Supplemental Security Income program were to receive a sufficient sum to ensure an income equal to the program’s standardized income level of $140.00. Congress recognized the adverse impact the program would have on those recipients of state aid whose needs had been assessed previously at an amount in excess of the flat maintenance allowance, but determined that the states, through an optional State Supplemental Assistance program, could choose to supplement the federal payments so that the sum received by those on the state welfare rolls before January 1, 1974 would not be decreased as a result of the new federal program.

Congress, however, became apprehensive that .those persons who, having demonstrated special needs under state assistance programs, would receive decreased assistance under the federal program. It responded to this concern by enacting Pub.L. No. 93-66, § 212, 87 Stat. 155, which amends Pub.L. No. 92-603 by mandating the states to provide a supplemental payment to any recipient under a former state categorical assistance program whose income would be lower in January 1974 under the federal program than it was in December 1973 under the state program. The supplemental payment is calculated to be an amount by which the recipient’s December 1973 income exceeds the amount of his federal benefit plus other income. In accordance with this congressional mandate, the State of Indiana enacted Ind. Code 12-1-5-1, 12-1-6-1, and 12-1-7.-1 — 1 which provide for supplemental payments to the aged, blind, and disabled.

Neither the protective intent of Congress nor the mandate embodied in Pub.L. No. 93-66 is disputed by the parties to this litigation. They recognize that Congress sought to maintain the status quo of recipients of state categorical assistance who otherwise would be adversely affected by implementation of the new Supplemental Security Income program. In furthering this Congressional purpose, Indiana has complied with Congress’ mandate by providing plaintiffs (as members of the group that Congress sought to protect) with State Supplemental Assistance under the State Supplemental Assistance program. Plaintiffs contend that defendants, however, have frustrated this congressional purpose in their interpretation and application of statutory provisions pertinent to Medicaid coverage for the plaintiffs and the class of welfare recipients they represent. Whether this is true depends on whether Congress intended to extend its protective legislation so as to secure for plaintiffs special treatment with respect to Medicaid coverage as it had secured for them mandatory State Supplemental Assistance. That is the precise question presented by this case. To answer it we must examine the statutory provisions which determine Medicaid eligibility and coverage for participants in the Supplemental Security Income program.

Ill

When Congress established the Supplemental Security Income program in Pub.L. No. 92-603 it was concerned with providing recipients of this program medical assistance available under the Medicaid program. Therefore, Congress included in the statute three alternate standards upon which the states must determine Medicaid eligibility for the needy, blind or disabled. The standard adopted by the State of Indiana allows a state to restrict Medicaid eligibility only to those Supplemental Security Income recipients who are financially and categorically eligible under the state’s January 1, 1972 standards. Ind.Code 12-1-7-15(a)(4). This criterion for Medicaid eligibility was intended to allow states that had monetary eligibility levels below the Supplemental Security Income monetary standard to retain the lower pre-existing standard in order to limit Medicaid eligibility. H.Rep. 92-231, 92d Cong. 1st Sess., at 197, 300-01. 1972 U.S.Code Cong. & Admin.News at pp. 5182-83, 5286-87; S.Rep. 92-1230, 92d Cong. 1st Sess., at 222. Congress did not intend, however, to permit Supplemental Security Income recipients who did not meet their respective state’s January 1, 1972 financial standard to be precluded from participation in the Medicaid program. Congress, therefore, conditioned a state’s use of its January 1, 1972 financial standard on the inclusion of a spend down provision in the state Medicaid plan. See Pub.L. No. 92-603, § 209(f), 42 U.S.C. § 1396a(f). Under this provision a state using its January 1, 1972 Medicaid eligibility standard after January 1, 1974 is required to allow those recipients who have income above the eligibility level but who have high medical expenses to become eligible for Medicaid. Thus, the spend down provision is a device by which Congress has expanded Medicaid coverage to include recipients with high medical expenses who because of their income would not otherwise be eligible for medical assistance.

As noted above, the passage of Pub.L. No. 93-66, § 212 mandating State Supplemental Assistance payments to Supplemental Security recipients whose income in January 1974 would be lower than it was under categorical assistance programs in December 1973, amended Pub.L. No. 92-603 and created the group of recipients who constitute plaintiffs’ class in the present action. These recipients, by definition, receive income in excess of the Supplemental Security Income standardized level. On the basis of their income level, the bulletin under attack has cast plaintiffs into that group of recipients whose eligibility for Medicaid assistance depends on the spending down of income in excess of the state’s eligibility level. The rationale of a statutory scheme which grants supplemental financial assistance to aged, blind, or disabled individuals who have demonstrated special needs above and beyond those contemplated by the Supplemental Security Income flat maintenance allowance, and then requires these needy persons to return most of these supplemental payments in order to receive medical assistance, the demonstrated need of which justified the supplemental assistance in the first place, is dubious. Whether Congress intended such an anomaly was answered by the enactment of Pub.L. No. 93-233, § 13(c), 87 Stat. 965.

Pub.L. No. 93-233, § 13(c) provides that medical assistance shall be provided to any person who is receiving or is entitled to receive mandatory state supplemental payments. Section 13(c)(2) of this law requires that the mandatory medical assistance provided to State Supplemental Assistance recipients be provided “in like manner, and subject to the same terms and conditions,” as medical assistance provided to those receiving benefits under the federal Supplemental Security Income program established by Title XVI of the Social Security Act. A fair reading of the statute in light of its legislative history and subsequent HEW regulations requires us to conclude that, consistent with its protective intent in Pub.L. No. 93-66, § 212, Congress by passing Pub.L. No. 93-233, § 13(c) sought to further protect the group of aged, blind, or disabled persons whose special needs had entitled them to mandatory State Supplemental Assistance payments. Pub.L. No. 93-233, § 13(c) must be viewed as nothing less than a congressional mandate requiring the states to provide Medicaid coverage, not merely Medicaid eligibility, to all persons who are recipients of a mandatory payment pursuant to Pub.L. No. 93-66, § 212 without the condition of a spend down payment. The actions of defendants in requiring plaintiffs to spend down income in order to receive medical assistance, as prescribed in State Department of Public Welfare Bulletin No. 285C, is prohibited by this statute and constitutes conduct in violation of the Supremacy Clause of the U.S. Constitution. The legislative history of Pub.L. No. 93-233, § 13(c) dictates this conclusion.

IV

As already stated, the enactment of Pub.L. No. 93-66 mandating a State Supplemental Assistance payment to any aged, blind, or disabled person who was receiving in December 1973 more than . the federal Supplemental Security Income allowance, did not specifically require the states to continue Medicaid benefits to that class of recipients. In promulgating section 13(c) of this statute Congress recognized that state discretion regarding Medicaid coverage of such recipients created the risk of loss of such coverage for some of these people. To avoid this possibility and prevent any disadvantage resulting from the Supplemental Security Income program, Congress required that the states continue Medicaid coverage for persons who receive mandatory State Supplemental Assistance benefits until such time as the person becomes ineligible for the mandatory supplement. Given that- Congress enacted Pub.L. No. 93-233, § 13(c) to ensure the status quo of State Supplemental Assistance recipients under the new federal program, it is impossible to construe Indiana’s conduct in requiring a spend down payment as a prerequisite to Medicaid coverage as consistent with the purpose of this statute.

Further support for this position can be found in the regulations issued by the United States Department of Health, Education and Welfare governing the states’ implementation of Title XIX of the Social Security Act. The regulations address the issue of coverage and conditions of eligibility for medical assistance and distinguish between those who are categorically needy and those who are medically needy. The latter may be subject to the payment of a spend down because their income and resources which are insufficient to meet the costs of necessary medical and remedial care and services exceed the amount of income and resources allowed to the categorically needy. 45 C.F.R. § 248.1(a)(2), 39 Fed.Reg. 9514 (1974). For the categorically needy, Medicaid coverage is mandatory. 45 C.F.R. § 248.1 requires that a state plan under Title XIX of the Social Security Act, which must comply with the minimum coverage required by law, specify what groups are covered as categorically needy for Medicaid. While the states are free to select one of three alternatives upon which to base Medicaid coverage for the aged, blind, or disabled, all state plans must include as categorically needy every individual who receives a State Supplemental Assistance payment mandated pursuant to Pub.L. No. 93-66, § 212. See 45 C.F.R. § 248.-l(b)(2)(iv).

It is in this way that Pub.L. No. 93-233, § 13(c) should be viewed as a grandfather clause, securing for plaintiffs (so long as they are eligible for State Supplemental Assistance payments pursuant to Pub.L. No. 93-66) Medicaid eligibility and coverage. As beneficiaries of the protective legislation mandating payment of State Supplemental Assistance, plaintiffs are members of the class of categorically needy who are deemed financially eligible to receive Medicaid coverage and benefits, irrespective of income or other state requirements. This is the import and meaning of Pub.L. No. 93-233, § 13(c) which has been violated by enforcement of Bulletin 285C of the Indiana State Department of Public Welfare.

Defendants urge that a literal reading of § 13(c)(2) of Pub.L. No. 93-233 requires a contrary conclusion. Admittedly, the language of this section requiring Medicaid coverage to State Supplemental Assistance recipients in like manner and subject to the same terms and conditions as coverage for other Supplemental Security Income recipients creates ambiguity as to congressional intent. To conclude, as defendants do, however, that this section contemplates the conduct at issue, namely the conditioning of Medicaid coverage for State Supplemental Assistance recipients on the payment of a spend down, is to ignore the legislative history and regulations of Pub.L. No. 93-233, § 13(c) and to render this statutory provision a nullity. The language of Pub.L. No. 93-233, § 13(c)(2) concerns the nature of Medicaid coverage to mandatory State Supplemental Assistance recipients rather than conditions of eligibility. Subsection (c)(2) is consistent with the express intent of Congress to secure for plaintiffs automatic Medicaid eligibility and coverage in that the subsection imposes an obligation on the states to provide plaintiffs with the same quantity and quality of medical services, subject to the same administrative procedures, as are made available to Supplemental Security Income recipients.

The state’s conduct in conditioning plaintiffs’ Medicaid benefits on the payment of a spend down defies not only the legislative history and HEW regulations regarding Pub.L. No. 93-233, § 13(c), but also the statutory scheme developed by Congress to protect those aged, blind, or disabled persons whose pre-January 1, 1974 income and medical assistance would be diminished as a result of the new federalized Supplemental Security Income program. Congress mandated special treatment for these persons and that command cannot be ignored by the state. Plaintiffs, as recipients of a mandatory State Supplemental Assistance payment, are entitled to Medicaid coverage and are automatically eligible for it. Medicaid must be provided them without a spend down. Insofar as the State of Indiana Department of Public Welfare Bulletin 285C is in conflict, such bulletin is invalid.

The judgment of the district court is reversed and the cause is remanded with direction to enter judgment in accordance with this opinion.

      . The spend down payment required of a State Supplemental Assistance recipient is the amount by which his total income, less standard allowances, exceeds the flat maintenance allowance established under the federal Supplemental Security Income program.

      . Prior to implementation of the newly federalized Supplemental Security Income program on January 1, 1974, both Hayes and Goebel received Aid to the Permanently and Totally Disabled (APTD) pursuant to Title XIV of the Social Security Act, 42 U.S.C. § 1351 et seq. and Ind.Code 12-1-7-29 et seq.

      . This amount is presently $175.00. For the purpose of this discussion, however, the $146.00 figure as set forth in Bulletin 285C will be used since the amended maintenance allowance has little effect on the issue before this court.

      . The sum of $140.00 was increased to $146.00 as of July 1, 1974.

      . The January 1, 1972 standard for categorical assistance adopted by the State of Indiana pursuant to Pub.L. No. 92-603 for the purpose of determining Medicaid eligibility and coverage was an individualized standard based on the “special needs” of recipients of state assistance. After the implementation of Bulletin 285C a flat standardized income level was used as the basis for determining Medicaid eligibility and coverage.
      It should be noted that a state’s January 1, 1972 standard was intended to be the state’s eligibility standard for cash assistance or the medical assistance standard for the medically needy program, whichever is higher. S.Rep. 92-1230, 92d Cong. 1st Sess., at p. 22. Before January 1, 1974, any person who demonstrated the state’s standard of financial need and who satisfied the eligibility requirements of categorical assistance, was automatically eligible for Medicaid. Such persons were considered “categorically needy” — thereby entitling them to automatic Medicaid eligibility and coverage. For those whose income was in excess of the state financial standard, thereby precluding automatic eligibility for Medicaid, but who incurred high medical expenses sufficient to meet the state’s medical assistance standard, the state could, by adopting an optional program for the medically needy, provide them Medicaid coverage if the otherwise ineligible person would spend down his income which was in excess of the state’s financial standard of assistance. 42 U.S.C. § 1396a(a)(10), (a)(17). These claimants were labeled “medically needy.” Indiana never adopted the medically needy classification and, thus, never imposed a spend down as a prerequisite to Medicaid eligibility prior to Bulletin 285C.

      . Pub.L. No. 93-233, § 13(c) states:
      (c) In addition to other requirements imposed as conditions for the approval of any State plan under title XIX of the Social Security Act, there is hereby imposed (effective January 1, 1974) the requirement (and each such State plan shall be deemed to require) that medical assistance under such plan shall be provided to any individual—
      (1) for any month for which there (A) is payable to such individual a supplementary payment pursuant to an agreement entered into between the State and the Secretary of Health, Education, and Welfare under section 212(a) of Public Law 93-66, and (B) would be payable with respect to such individual such a supplementary payment, if the amount of the supplementary payments payable pursuant to such agreement were established without regard to paragraph (3)(A)(ii) of such section 212(a), and
      (2) in like manner, and subject to the same terms and conditions, as medical assistance is provided under such plan to individuals with respect to whom benefits are payable for such month under the supplementary security income program established by title XVI of the Social Security Act.
      Federal matching under title XIX of the Social Security Act shall be available for the medical assistance furnished to individuals who are eligible for such assistance under this subsection.

      . The district court conceded that Pub.L. No. 93-233, § 13(c) requires a state to grant a State Supplemental Assistance recipient eligibility for Medicaid without the condition of payment of a spend down. The court, however, upheld the conduct of the state in the present case by distinguishing between eligibility and coverage under the Medicaid program. The judge stated, “Thus, even though a recipient did not choose to pay in the spend down amount he would always be eligible for Medicaid, although for that month he would not receive coverage.” We find this distinction employed by the trial court wholly without merit and in contravention of the statutory scheme created by Congress to protect the plaintiffs’ class. (See part IV of this opinion.) Whether the spend down payment is reviewed as a condition to Medicaid eligibility or a prerequisite to Medicaid coverage, the result is the same — precluding plaintiffs’ class from Medicaid benefits.

      . See Rep. of Sen.Fin.Committee, S.Rep. 93-533, 93d Cong. 1st Sess. at p. 56. Section 13(c) of Pub.L. No. 93-233 was originally contained in H.R. 3153 § 171(c), 93d Cong. 1st Sess., which bill, consisting of comprehensive amendments to the Social Security Act, is still pending in the Congress. The language of § 171(c), however, was removed from H.R. 3153 and inserted in another bill, H.R. 11333. This latter bill, as amended and enacted on December 30, 1973, is Pub.L. No. 93-233. The language of § 171(c) of H.R. 3153 is identical to that of § 13(c) of Pub.L. No. 93 — 233 except for the deletion of the unnecessary word “a” from the line in part (1) of the bill which now reads “such supplementary payment.” Since the extracted language of § 171(c) of H.R. 3153 is otherwise identical to that enacted in § 13(c), S.Rep. 93-533 is proper legislative history for Pub.L. No. 93-233, § 13(c). See H.R. 3153, 93d Cong. 1st Sess., reported in CCH Unemp.Ins.Rptr., Extra Edition 635, Dec. 5, 1973 at 157-58.

      . S.Rep. 93-533, 93rd Cong. 1st Sess., at 56, states in part that:
      The Committee bill therefore requires states to continue Medicaid coverage for persons who receive mandatory state supplementary benefits until such time as the person becomes ineligible for the mandatory supplement. Since these are persons who are already covered under the current Medicaid program, this would not represent an increase in costs to the states.


author: CLARK, Circuit Judge:

text:
    AG PRO, INC., Plaintiff-Appellant, v. Bernard A. SAKRAIDA, Defendant-Appellee.
    No. 74-1712.
    United States Court of Appeals, Fifth Circuit.
    April 24, 1975.
    Rehearing Denied June 9, 1975.

      Frank H. Hunter, El Paso, Tex., J. Pierre Kolisch, Portland, Or., for plaintiff-appellant.
    J. F. Hulse, Stephen B. Tatem, Jr., El Paso, Tex., for defendant-appellee.
    Before BROWN, Chief Judge, and GODBOLD and CLARK, Circuit Judges.
   CLARK, Circuit Judge:

Today marks the third appellate appearance of this claim for infringement of a patented dairy barn flushing system. This suit for infringement of patent 3,223,070 was originally brought by Ag Pro, Inc., in 1968. A summary judgment on defendant Sakraida’s motion provoked the first appeal. This court reversed and remanded for trial on the merits. The second appellate go-around was an appeal from an adjudication of patent invalidity. We again reversed, but this time remanded specially for a trial court resolution of the defendant’s appellate court motion for a new trial under Fed.R.Civ.P. 60(b)(2) based on newly discovered evidence of patent invalidity. The district court granted the motion. Because in our view, the record on the motion establishes that defendant failed to exercise due diligence to discover the new evidence prior to entry of the former judgment, we once more reverse.

Our mandate in Ag Pro II directed the district court to enter a judgment holding the patent valid, hold a hearing on and determine Sakraida’s Rule 60(b)(2) motion and, without more, certify the motion hearing record to this court. These functions have been duly accomplished, and the matter is back with the record of those supplemental proceedings. At the conclusion of its hearing the district court found that the new evidence adduced by Sakraida standing alone would produce a different result, that Sakraida had exercised due diligence and could not have discovered the evidence in time to move for a new trial under Fed.R.Civ.P. 59(b).

The patent in suit relates to a dairy barn flushing system. It involves the construction of slightly sloping barn floors which incorporate a means for storing and quickly releasing a volume of water on the floor. When the floor is flooded, it is cleansed of manure and debris without hand labor. In Ag Pro II we found that this system met the requirements of novelty, usefulness, and nonobviousness to qualify as a valid patent.

Sakraida’s newly discovered evidence consists of alleged prior art which would purportedly invalidate the patent. At the hearing below Sakraida testified that purely by chance he met Hubert Meyer the owner of Mission Dairy after the time he could have moved for a new trial under Rule 59(b) had expired. After learning of Sakraida’s litigation, Meyer told Sakraida that Meyer’s Mission Dairy contained a flushing system which was substantially identical to the patented system. Meyer also furnished Sakraida at that time with the names of other persons who could testify to the state of the art in water flush systems. Sakraida testified that this was the first time he had full knowledge of these facts. However, the evidence clearly establishes that prior to the original trial Sakraida was aware that Mission Dairy was using a flushing system that was a possible source of prior art. In addition, Sakraida had requested W. C. Fairbank, an agricultural expert, to advise him on the state of the art. Fairbank testified that he told Sakraida or his attorney sometime before October, 1969 of the existence of the Mission Dairy and its possible importance. It is without dispute that Sakraida considered the Mission Dairy information important enough to request an associate, Aubrey Wisdom, to visit the Mission Dairy to examine the flushing system. Wisdom went to the dairy on Sakraida’s behalf and asked to see the system. The manager of Mission Dairy stated to Wisdom that he did not want to get involved, and that he did not think it was right for him to show Wisdom the flushing system. It is further undisputed that at that same time Mission Dairy was open to the general public. Meyer testified that he had asked the manager not to answer questions about the equipment, but that access to visit the dairy was never denied anyone. After learning of Wisdom’s rebuff, Sakraida abandoned further inquiry as to the Mission Dairy flushing system until his post-trial chance encounter with Meyer.

Sakraida contends that these facts demonstrate that he made a good faith effort to inquire into the facts surrounding Mission Dairy. He claims that the information given to him about this installation was based on rumor and hearsay, and that he could not pursue every possible lead to sources of prior art. The problem for Sakraida’s contention is the high standard of proof required to substantiate Rule 60(b)(2) relief.

A motion for a new trial under Fed.R.Civ.P. 60(b)(2) is an extraordinary motion, and the requirements of the rule must be strictly met. Strauss v. United States, 337 F.2d 853 (1964). The motion may not be granted unless (1) the evidence was discovered following the trial; (2) due diligence on the part of the movant to discover the new evidence is shown or may be inferred; (3) the evidence is not merely cumulative or impeaching; (4) the evidence is material; (5) the evidence is such that a new trial would probably produce a new result. Ledet v. United States, 297 F.2d 737, 739 (5th Cir. 1962).

This reasoning is apropos to patent litigation. See Valmont Industries, Inc. v. Enresco, Inc., 446 F.2d 1193 (10th Cir. 1971) in which the court held that a diligent search would have disclosed a prior German patent and, therefore, denied the Rule 60(b)(2) motion on the ground that due diligence was not exercised. See also, United States v. 41 Cases, 420 F.2d 1126 (5th Cir. 1970); Stiers v. Martin, 277 F.2d 737 (4th Cir. 1960); and Greenspahn v. Joseph Seagram & Sons, Inc., 186 F.2d 616 (2d Cir. 1951).

Sakraida’s expert suggested Mission Dairy as a possible source of prior art. Sakraida accorded sufficient soundness to this advice to send an associate to examine the dairy. Under the facts of this case, Sakraida’s duty did not end with the Mission Dairy manager’s refusal to show the flushing system to Wisdom. No effort was made to contact Meyer, the owner; and judging from his present full cooperation, there is no reason to believe that he would have been reluctant to give Sakraida the information. Even if Meyer had refused, discovery procedures could have been initiated. For that matter, Wisdom or Sakraida could have visited the dairy along with other members of the public who were then being permitted to view the premises. The invention would have been generally open and obvious. In short, the exercise of a reasonable amount of diligence would have armed Sakraida with the same information he belatedly seeks to put before the court.

That spirit of finality which is implicit in all judgments, commands that courts be cautious in exercising the discretion vested in them to reopen proceedings for a new trial based on newly discovered evidence. While the sound discretion of a district judge in granting such a motion is not to be reversed except for clear abuse of discretion, Lloyd v. Gill, 406 F.2d 585 (5th Cir. 1969), that exercise is not free from review. In the case at bar, the evidence produced to show due diligence by Sakraida, taken in a light most favorable to the finding by the court below that the judgment following a completed trial should be set aside, is insufficient. The “new” facts were easily available prior to the trial, and the defendant had reliable information that they were so available. His half-hearted effort to uncover them is legally not enough. Sakraida did not exercise due diligence in preparation of his prior art defense. The grant of a new trial accordingly must be reversed. Our prior determination of patent validity is reaffirmed, and the case is remanded for further proceedings on the issue of infringement in accordance with our mandate in Ag Pro II. Neither singly nor in solido should our reversals be taken as intimating any view on the merits of the remaining issue or upon the admissibility or probity of this “new” information in the trial thereof.

Reversed and remanded.

      . Ag Pro, Inc. v. Sakraida, 437 F.2d 99 (5th Cir. 1971). (Ag Pro I)

      . Ag Pro, Inc. v. Sakraida, 474 F.2d 167, rehearing denied, 481 F.2d 668 (5 Cir. 1973). (Ag Pro II)


author: ELY, Circuit Judge:

text:
    John S. MacDONALD, Plaintiff-Appellee, v. Caspar W. WEINBERGER, Secretary of the Department of Health, Education and Welfare, Defendant-Appellant.
    No. 74-2734.
    United States Court of Appeals, Ninth Circuit.
    March 4, 1975.

      Donald Etra (argued), Dept, of Justice, Washington, D. C., for defendant-appellant.
    No appearance for plaintiff-appellee’s attorney, the real party in interest.
    Before ELY, CARTER and GOODWIN, Circuit Judges.
   OPINION

ELY, Circuit Judge:

After unsuccessfully prosecuting a pro se claim for retroactive Social Security disability benefits through the Department of Health, Education and Welfare (HEW), MacDonald secured the professional services of an attorney. On MacDonald’s behalf, the attorney filed a suit against the Secretary of HEW in the District Court, but before the court heard the merits of MacDonald’s claim, the Secretary moved that the matter be remanded to HEW for further administrative consideration. MacDonald consented to the Secretary’s request, and the district judge granted the Secretary’s motion. After a new hearing within the agency, HEW allowed MacDonald’s claim and awarded him $9,748 in past-due benefits.

MacDonald’s attorney then filed a petition in the District Court for an allowance of $1,200 in attorney’s fees, to be paid from the benefits awarded MacDonald. In his petition, the attorney alleged that he had originally taken MacDonald’s case for a contingent fee of one-third of the benefits awarded, plus a $150 retainer, but that subsequently he had learned that the one-third fee exceeded the 25 percent maximum allowed by law. The attorney further stated that while he could not justify requesting 25 percent of MacDonald’s award, he believed that $1,200 would be reasonable in view of the contingent nature of his original contract with MacDonald, even though the amount of time he had spent on MacDonald’s case, if billed at his normal hourly rate, plus his expenses, would total only $663.

At a hearing on the petition for attorney’s fees, MacDonald testified that he and his attorney recently had agreed to a settlement of the attorney’s fee for $663 and that he had tendered payment in that amount. Although the attorney was present at the hearing, he neither testified nor in any other way refuted MacDonald’s testimony about the alleged settlement. Nevertheless, after the hearing, the district judge entered an Order granting a fee of $1,200 and specifying that the fee was for MacDonald’s representation both before the Secretary and in the District Court.

The Secretary appeals from the District Court’s order, contending that the District Court has no authority to award an attorney’s fee for representing a disability claimant in proceedings before HEW. The Secretary further argues that the district judge improperly awarded the claimed $1,200 fee without adequately questioning whether the fee was reasonable in the circumstances of the-case.

Under 42 U.S.C. § 406(b)(1), a District Court may award a reasonable fee to an attorney for representing a Social Security claimant before the court. The court has no authority to award an attorney’s fee for representation of a claimant before the Secretary, that power being granted by 42 U.S.C. § 406(a) to the Secretary alone. Whitehead v. Richardson, 446 F.2d 126 (6th Cir. 1971); Fenix v. Finch, 436 F.2d 831, 838 (8th Cir. 1971); McKittrick v. Gardner, 378 F.2d 872, 876 (4th Cir. 1967); Gardner v. Menendez, 373 F.2d 488 (1st Cir. 1967).

A district judge must determine in each case whether the fee an attorney requests for representing a Social Security claimant before the District Court is reasonable. The competing considerations before the court are that while the attorney’s compensation must be sufficient to encourage members of the bar to undertake representation of disability claimants, the disability award, from which the attorney’s fee is paid, is normally an already-inadequate stipend for the support and maintenance of the claimant and his dependents. Cf. Redden v. Celebrezze, 370 F.2d 373, 376 (4th Cir. 1966). While the district judge may consider the fact that a lawyer has taken a case on a contingent compensation basis, the judge may not unquestionably approve the award of the 25 percent maximum fee, or any other amount claimed on the basis of a contingent fee contract. Rather, in each case, the judge must assess the value of the lawyer’s services to the client, as the judge observes those services in the judicial proceedings. McKittrick v. Gardner, 378 F.2d 872 (4th Cir. 1967). It would appear that in cases such as MacDonald’s, in which the disability claim is ultimately upheld by HEW, not the District Court, the attorney should look primarily to the Secretary for the major part of his compensation.

Since the District Court’s Order awards MacDonald’s lawyer a fee for his work both before the court and the Secretary, the Order must be vacated. We remand the matter to the District Court for a determination of such fee award, if any, that should be allowed the attorney for his representation of MacDonald in the District Court only. Cf. Whitehead v. Richardson, supra. The attorney may apply, as he has already done, to the Secretary for an allowance of a fee for representing MacDonald before HEW.

Reversed and remanded, with directions.

      . 42 U.S.C. § 406(b)(1).

      . Apparently, this amount represents a charge for services rendered both before the District Court and the Secretary.

      . In Webb v. Richardson, 472 F.2d 529 (6th Cir. 1972), the court took a somewhat different view of 42 U.S.C. § 406(a) and (b)(1), holding that only the tribunal that ultimately upholds a claimant’s award may approve and certify payment of an attorney’s fee, and that the fee so awarded may compensate for representation before both the court and the Secretary. We note only that Webb, with which we disagree, does not support the District Court’s action here. MacDonald’s claim ultimately was approved not by the court, but by the Secretary.

      . The pertinent statutory provisions are as follows:
      42 U.S.C. § 406(a): * * *
      The Secretary may, by rule and regulation, prescribe the maximum fees which may be charged for services performed in connection with any claim before the Secretary under this subchapter, and any agreement in violation of such rules and regulations shall be void. Whenever the Secretary, in any claim before him for benefits under this subchapter, makes a determination favorable to the claimant, he shall, if the claimant was represented by an attorney in connection with such claim, fix (in accordance with the regulations prescribed pursuant to the preceding sentence) a reasonable fee to compensate such attorney for the services performed by him in connection with such claim.
      42 U.S.C. § 406(b)(1):
      Whenever a court renders a judgment favorable to a claimant under this subchapter who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled by reason of such judgment, and the Secretary may, notwithstanding the provisions of section 405(i) of this title, certify the amount of such fee for payment to such attorney out of, and not in addition to, the amount of such past-due benefits. In case of any such judgment, no other fee may be payable or certified for payment for such representation except as provided in this paragraph.

      . It is not clear from the record in this case why the District Court disregarded MacDonald’s sworn testimony that he and his attorney had agreed to settle, for $663, any dispute as to the appropriate amount of the attorney’s fee. The $663 amount was itemized in the attorney’s petition, and while the attorney had ample opportunity to refute MacDonald’s testimony, he did not do so. In the light of this uncontroverted testimony about a settlement, we believe that an appropriate award in the District Court would be that portion of the $663 that the Court finds reasonably is attributable to the time the attorney spent and the expenses he incurred in representing MacDonald before the District Court. See supra, n. 2.

      . jn additi0n to his petition for an allowance of fees in the District Courtj we learned dur_ ing oral argument that MacDonald’s lawyer has now petitioned the Secretary for a fee award of $1 200 Qur decision in this case relates only t0 the fee award in the District court. We express no view as to the proper disposition that should be made by HEW in respect to the new petition for fees that MacDonald’s lawyer has filed with that agency