author: LEWIS R. MORGAN, Circuit Judge:

text:
    FLORIDA MINING & MATERIALS CORP. d/b/a McCormick Concrete Company, Petitioner-Cross Respondent. v. NATIONAL LABOR RELATIONS BOARD, Respondent-Cross Petitioner.
    No. 72-2810.
    United States Court of Appeals, Fifth Circuit.
    July 12, 1973.
    Rehearing and Rehearing En Banc Denied Oct. 24, 1973.
    Donald B. Harden, Charles Kelso, Atlanta, Ga., for petitioner.
    Elliott Moore, Acting Asst. Gen. Counsel, N.L.R.B., Washington, D. C., Harold A. Boire, Regional Director, Tampa, Fla., William L. Corbett, Washington D. C., for respondent.
    Before TUTTLE, GODBOLD and MORGAN, Circuit Judges.
   LEWIS R. MORGAN, Circuit Judge:

The National Labor Relations Board seeks enforcement of its finding that Florida Mining & Materials Corporation violated section 8(a)(5) and (1) of the National Labor Relations Act by refusing to bargain with the certified representative of the employees at its Jacksonville, Florida, plant. Following an election in an appropriate unit, Local 512 of the Teamsters Union had been selected as the bargaining representative. The company admits it refused to bargain, alleging that the refusal was necessary to obtain a court test of the propriety of the selection of Local 512. The challenge to certification was based on a single issue in connection with the representative election. If the Board resolved that issue properly, enforcement of this bargaining order must be granted.

This case turns on the resolution of a single extremely complex issue. The National Labor Relations Board has resolved the question in favor of the union, relying heavily on the burden to the administrative process which would allegedly follow from a contra result. We are faced with reviewing the Board’s determination to determine its propriety.

I

The union and the company agreed in August, 1971, that a Board supervised consent election would be held on September 23, 1971. On September 22, 1971, the day before the election, the local union received notice from the International Brotherhood that it. had been placed under temporary trusteeship pending a full hearing on whether the trusteeship should continue. The existence of this trusteeship and the underlying reasons therefor were not made known to the public, the company, or the voting employees prior to the election. Of the forty-one ballots cast, twenty-one were for the union, fifteen against the union, and five challenged.

The company filed timely objections to the election, alleging that concealment of the trusteeship invalidated the election results and required a rerun election. On November 16, 1971, the Regional Director recommended that the Board overrule the company’s objections and certify the union. The Board adopted the Regional Director’s report. The company has refused to bargain since that certification, resulting in this current enforcement proceeding.

II

To gauge the relevance of this imposed trusteeship on the needs and desires of the employees of the company it is necessary to understand the reasons for the trusteeship and the factual background leading to its imposition. The notice sent to the local union by International President Fitzsimmons clearly sets forth the reasons that this step was now being taken. Basically, this notice pointed out that there was an irreconcilable conflict between the top union officers which rendered the local unable to function. The notice further stated that the executive board members had chosen sides and failed to take any action to alleviate the situation. The principal cause of the conflict was alleged to be a racial dispute which was threatening to split the entire local into two distinct camps. The last paragraph of the notice stated:

Unless immediate action is taken, it cannot be assured that the Local Union will be able to fulfill its duties as bargaining representative or to carry out the other legitimate objects of a labor organization.

International Vice President Joseph Morgan was appointed as trustee.

A few days after assuming the trusteeship Morgan gave an interview to the local newspaper which served as the basis for an article included in the record. This interview showed that the trustee had replaced all officers and business agents of the union. In addition to stating that the union was getting to the point where it could not function and alluding to recent incidents illustrating the racial conflict, Morgan pointed out that the local also had a debt of at least $18,000.00, which he attributed to financial mismanagement. After pointing out that he had had to make several trips to Jacksonville in trying to settle these internal problems, Morgan stated, with regard to the local: “It has a history of internal political double crossing and now I wonder whether or not it can ever really be straightened out.” He also expressed doubt about the continued existence of the local.

The same newspaper article contained a picture and description of picketing at the union headquarters by union members who were greatly disturbed by both the imposition of the trusteeship and the firing of officers and agents. It is obvious that the trusteeship and the underlying causes therefor had a significant and direct impact on the local union members.

Ill

Thus, we are required to decide if the employees of Florida Mining were, on the facts of this case, in a position to exercise a full and free choice in the selection of their bargaining representative. Was the Board proper in holding this election free from taint because it found that the union under trusteeship could still carry on the functions of a labor organization? That is really the only question in this case.

The company tries to bring this case within the traditional realm of activity requiring rerun elections for the company suggests affirmative misrepresentations by the union. A union meeting was allegedly scheduled with the employees for the night before the election. This meeting was cancelled. The employer argues that the cancellation of this meeting was a deliberate attempt to keep the employees from learning about the trusteeship, because notice of the existence of the trusteeship would have had to be posted as required for all to see. The company contends that this deliberate attempt to conceal the trusteeship amounts to a misrepresentation.

As the Board points out, there is not sufficient evidence in the record to show that any scheduled meeting was can-celled. The only evidence consisted of form affidavits signed by three employees to the effect that the employees had heard there was going to be a meeting about the election on that night but that it had been cancelled. We agree that there is insufficient evidence to show an affirmative misrepresentation in this case.

The Board seeks to frame the issue posed by this case more precisely. It is their contention that the company is seeking to have the Board adopt a totally new standard which it has never considered in the past. The Board maintains that the only way to cast a suitable rule for this situation would be to inject an “affirmative disclosure” requirement. As the Board points out, such a rule has never been formulated or imposed in any reported ease.

The Board argues strongly against such a rule. Its primary reliance is bottomed on the assertion that such a rule would create an unbearable administrative burden in return for only marginal benefit. The Board points out the great difficulty in determining the scope and extent of an affirmative disclosure rule. They suggest that losing parties would be quick to take advantage of any such rule in an effort to avoid the consequences of a free election. In short, they seek to avoid endless litigation on a case by case basis as to what may or may not have been material and what may or may not have been subject to disclosure.

The Board suggests that it is not in a position to supervise and control full and complete disclosure of all facts which might affect a voting employee. Rather it sees its role as simply to ensure fair play and to act only where a party has affirmatively misrepresented a material fact under circumstances where it is important for the other party to make a meaningful response. Under the campaign processes as they now exist, the competing arguments pro and eon on unionization are left to be presented by the parties. The employer, because of supposed financial and entrepreneurial disadvantages flowing from unionization, is assigned the role of bringing the alleged negative aspects of unionization to the attention of the electorate. Likewise, the union is to stress its advantages. The Board, as referee, steps in only in the case of low blows, and even then only when the injured party does not have sufficient time to present a response.

Furthermore, the Board feels that any rule for affirmative disclosure would not return any real benefit. It argues that no one knows what diverse information the electorate might find useful in assessing the pros and cons of unionism. The Board actually admits that in all likelihood the voter’s choice is “too often inescapably non-rational,” relying on a noted law review article. Bok, The Regulation of Campaign Tactics in Representation Elections Under the National Labor'Relations Act, 78 Harv.L.Rev. 38, 65. Thus, the Board seems to be saying that specific information is rarely, if ever, important to an employee faced with a unionization vote.

Finally, the Board maintains that even if some sort of alternative disclosure should be required, this is not the appropriate case therefor. According to the Board, the consequences of a trusteeship are not of a type which will likely affect the voter’s choice. The Board feels that the only relevant factor to the voting employee is the hope of direct benefits flowing to the individual from the ability to deal collectively and thus more equally with management. As long as a union in trusteeship can function as a bargaining agent, the employees have all they want. The Board goes so far as to argue that studies of employee non-participation amply illustrate that democratic participation in union affairs is not an important concern óf voters. We do note, however, that the Board admits the revelation of the trusteeship would have brought to light all of the problems present in the administration of this local.

IY

At the outset, we must point out that the NLRB is given broad discretion in representation matters. NLRB v. A. J. Tower Co., 329 U.S. 324, 330, 67 S.Ct. 324, 91 L.Ed. 322 (1946); NLRB v. Waterman S. S. Co., 309 U.S. 206, 226, 60 S.Ct. 493, 84 L.Ed. 704 (1940); NLRB v. Golden Age Beverage Co., 5 Cir. 1969, 415 F.2d 26, 29. The party challenging the results of a representation election has the “heavy” burden (Shoreline Enterprises of America, Inc. v. NLRB, 5 Cir. 1959, 262 F.2d 933) of showing adequate reasons to set aside the election. Bush Hog, Inc. v. NLRB, 5 Cir. 1969, 420 F.2d 1266. We also agree that “the results of a secret ballot, conducted under government sponsorship and with all the safeguards which have been developed throughout the years, should not be lightly set aside.” Liberal Market, Inc., 108 NLRB 1481 (1954); accord, NLRB v. Zelrich Co., 5 Cir. 1965, 344 F.2d 1011.

The Board has decided that the employer has failed to show any affirmative misrepresentation by the union on the facts in this election. We are forced to agree with the Board that there was not sufficient evidence to show any such affirmative misrepresentation. Even if cancellation of a scheduled meeting could be a material misrepresentation under the circumstances of this case, a characterization which we seriously doubt, there is not sufficient evidence to show that such a meeting was scheduled and cancelled. As far as the claim that the union made affirmative misrepresentations about its ability to represent the employees while it was suffering from internal discord, we again must agree with the Board and Regional Director who found that a union in trusteeship, despite some interruption of normal operations, could still function as a viable union organization. Thus, we accept the Board’s finding that this union was able to represent these employees while in trusteeship and that any statements prior to the imposition of the trusteeship which indicated that the union could adequately represent these employees could not be considered material misrepresentations.

We come down to basically evaluating the probable impact of the imposition of the trusteeship and the underlying problems in the local which would be publicly disclosed on the choices to be made by the voting employees. In short, our only question is has the Board abused its discretion by holding that imposition of a trusteeship on the eve of an election is not such a significant event that the election must be set aside and a rerun election held? While this is a very close and complex issue involving significant policy judgments, we cannot say that the Board has abused its discretion in refusing to overturn the election and, therefore, we must enforce the bargaining order. We note at this point that this may well be a unique problem which arises only because of the close timing between the imposition of the trusteeship and the election.

Had the trusteeship been imposed a day or two sooner its existence would have almost certainly been publicly known prior to the election. The employees would have known of the trusteeship although they might not have had an opportunity to have it explained so that they would be able to put it in proper perspective vis-a-vis their reasons for voting for a union.

Had the notice of trusteeship been received on the day following the union’s victory at the polls, it would be highly unlikely that a rerun election would be proper. Furthermore, there would be no rerun available for employees one month, six months, and so forth, after election if their local were to be put in trusteeship. There would, of course, be the opportunity for decertification petitions once the certification year had elapsed. But for a significant period, these union members have to live with the trusteeship.

The employer argues that only with the trusteeship could the employees learn of the internal problems within this union. At least as far as this local goes, we find that difficult to accept. First, under the Board’s view of elections and election campaigns, the employer is charged with the responsibility of bringing factors adverse to unionization to the attention of the voters. Thus, in the normal case employers will have exploited all known weaknesses in a local union’s internal affairs. This local had been constantly beset by strife. Only a few years earlier it had been placed in trusteeship by the International for internal problems. There seems no doubt here that the company should have or should have had ample evidence of internal problems in this union to bring to the voters’ attention. Thus, the imposition of the trusteeship under these circumstances was somewhat anticlimactic.

The Board fears implementation of an affirmative disclosure rule would create a difficult administrative burden and be of doubtful value. We agree that there would be great difficulty in assessing what types of information should or should not have to be disclosed by either union or management during an election campaign. Furthermore, such a rule would give losing parties even more reason and a new method to fight an adverse outcome at the polls. This would also add even more to the great delay which often accompanies election of a bargaining representative because of drawn out court battles over oft-times frivolous claims.

While the imposition of a trusteeship has serious consequences which have resulted in strict controls being imposed by Congress, in many important ways the local membership is not affected. The former heads of a local are generally replaced but the membership still retains its vote on contract terms and strikes. The trusteeship is designed to be temporary in nature, ceasing when the local’s affairs have been sufficiently straightened out to allow it to return to a great degree of self-government.

The Board also seems to have relied on a feeling that election procedures and evaluation of various campaign propaganda statements illustrate that the choice of a local would be basically irrational. Furthermore, the Board maintains that generally the employees are only interested in obtaining better benefits and conditions from collective action while at the same time weighing possible harm from long strikes or loss of good relations with management. Therefore, the Board argues that the imposition of a trusteeship which still allows these basic roles to be maintained has relatively little impact on employee voting. To support this thesis the Board points to articles which have dealt with the difficulties of unions in getting members to attend meetings and take an active part in union affairs.

Thus, the Board has determined that imposition of a last-minute trusteeship prior to an election is such an insignificant occurrence that it will not justify a rerun election where the union prevails. Since this situation falls outside the Board’s normal rule involving affirmative misrepresentations with no time to reply, the Board, after weighing the many complex competing interests, has decided that a new rule requiring a rerun election under these circumstances is of doubtful value and would create undue hardship.

As noted, this is indeed an extremely close question. It appears to the court that employees should have the right to know prior to voting for a union that at least for a short time actual control of the day to day administration of the local was to be handled by a representative of the International, not by those people whom the employees had understood to be the heads of the local. On the other hand, we fully recognize the administrative difficulties which would follow from a rule designed to cover this case. Furthermore, we agree that recalcitrant employers would take advantage of the situation and file meaningless challenges in an effort to further delay implementation of the desires of the employees. Since ours is not a duty to resolve these intricate competing interests but only to review the initial decision of the administrative body, we do not feel we have to analyze and balance these competing factors in detail. The Board is given broad discretion in representation matters and in ordering rerun elections. We are convinced that the Board has given close consideration to the competing positions in this case and has exercised its broad discretion in making a policy decision based on a choice between fairly equal but competing considerations.

Since we find that the Board did not abuse its discretion in failing to require a rerun election, we must find that the refusal to bargain with the union was a violation of the National Labor Relations Act and the Board’s order is

Enforced.

      . It might be interesting to speculate about the Board’s reaction had the word of the trusteeship gotten out on election eve without the opportunity for an explanation of its scope by the union. In such a case, the Board might be tempted to order a rerun election to give the union time to explain. Such a position, however, would seem to conflict with this case.


source: Caselaw Access Project

author: BREITENSTEIN, Circuit Judge. WILLIAM E. DOYLE, Circuit Judge

license: Public Domain

text:
    TEXACO INC., a corporation, Plaintiff-Appellant, v. PHILLIPS PETROLEUM COMPANY, a corporation, Defendant-Appellee.
    No. 72-1758.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted May 23, 1973.
    Decided July 13, 1973.

      Elmer W. Adams, Tulsa, Okl. (Philip R. Wimbish, Tulsa, Okl., on brief), for plaintiff-appellant.
    Don L. Jemison, Bartlesville, Okl. (Kenneth Heady, Bartlesville, Okl., and Richard B. McDermott, Tulsa, Okl., on brief), for defendant-appellee.
    Before BREITENSTEIN, BARRETT and DOYLE, Circuit Judges.
   BREITENSTEIN, Circuit Judge.

The question is whether the complaint of plaintiff-appellant Texaco Inc. states a controversy arising under the laws of the United States. If it does, federal court jurisdiction lies under 28 U.S.C. § 1331(a). Otherwise, there is no federal jurisdiction. The district court sustained the motion to dismiss of defendant-appellee Phillips Petroleum Company and dismissed the action on the ground that there was no federal question jurisdiction. We reverse.

We have here another controversy over helium. The basic background is outlined in our decision in the Consolidated Helium cases. See Northern Natural Gas Company v. Grounds, 10 Cir., 441 F.2d 704, cert. denied, 404 U.S. 951, 92 S.Ct. 268, 30 L.Ed.2d 267, 404 U.S. 1063, 92 S.Ct. 732, 30 L.Ed.2d 751, and 404 U.S. 1065, 92 S.Ct. 732, 30 L.Ed.2d 754. We there held that lessee-producers of natural gas could recover the reasonable value of contained helium out of interpleader funds created by the government’s purchases of helium from helium extraction companies and parent pipeline companies. In Consolidated Helium, federal jurisdiction was invoked under the Federal Interpleader Act, 28 U.S.C. § 1335, the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 1402, and 2674, and the Tucker Act, 28 U.S.C. § 1346(a)(2). None of those jurisdictional grounds are found in the case at bar.

Diversity of citizenship is not present. More than the jurisdictional amount is admittedly at stake. The only basis for federal jurisdiction is 28 U.S.C. § 1331(a) which confers jurisdiction when ' “the matter in controversy * * * arises under the * * * laws * * 0f United States.” Phillips says that the complaint presents no more than a simple, common law, contract action and does not pertain to any right or immunity created by any law of the United States.

The complaint alleges that plaintiff, a lessee-producer, and defendant are natural gas companies within the scope of the Natural Gas Act; that plaintiff has made written contracts to sell gas to defendant for movement in interstate commerce; that for several years defendant has separated out the helium content of the gas and sold it; that defendant has not paid plaintiff for the helium contained in; and separated from, the gas; and that plaintiff has a right under the Natural Gas Act, 15 U.S.C. § 717 et seq., and under § 11 of the .Helium Act amendments, 50 U.S.C. § 167i, to be paid for the helium.

It is said in Wright, Fed. Courts 2d H.B., p. 55, that no “clear test has yet been developed to determine which cases ‘arise under’ the Constitution, laws, or treaties of the United States.” The leading case on the subject is Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70. The Court recognized these tests, Ibid, at 112-113, 57 S. Ct. 96: (1) a right or immunity created by the Constitution or laws of the United States must be an essential element of plaintiff’s cause of action; (2) the right or immunity must be such as will stand or fall on the construction or effect of the federal Constitution or laws; (3) the controversy must be genuine and present; and (4) the controversy must be disclosed on the face of the complaint, unaided by the answer or the petition for removal.

We have recognized and applied the Gully tests in Regents of New Mexico v. Albuquerque Broadcasting Co., 10 Cir., 158 F.2d 900 (jurisdiction upheld in suit asserting rights under Communications .Act of 1934 and regulations issued thereunder); Prairie Band of Pottawatomie Tribe of Indians v. Puckkee, 10 Cir., 321 F.2d 767 (jurisdiction denied in suit for declaration of rights in congressionally appropriated funds for payment of money judgment of the Indian Claims Commission); and Midwestern Developments, Inc. v. City of Tulsa, Oklahoma, 10 Cir., 333 F.2d 1009, cert. denied, 379 U.S. 989, 85 S.Ct. 702, 13 L. Ed.2d 610 (jurisdiction upheld in suit relating to right of way granted under the Enid-Anadarko Act). In Mountain Fuel Supply Company v. Smith, 10 Cir., 471 F.2d 594, a suit involving rights under land patents granted pursuant to the Act of July 17, 1914, we upheld jurisdiction without discussion of Gully.

In Consolidated Helium we considered the claims of the pipelines and helium separation companies that they were entitled under their gas purchase contracts to receive the entire gas stream at the Federal Power Commission service rate and said that “private contract law and the principles applicable thereto are not controlling.” 441 F.2d at 722. No good purpose would be served by repeating our analysis of the Natural Gas Act and the 1960 Helium Act amendments. We held that, Ibid, at 723:

“ * * the reconciliation of the Natural Gas Act and of the 1960 amendments to the Helium Act to attain a symmetrical whole requires the conclusion that the FPC service rates do not apply to deny recovery for the contained helium which is processed in the separation plants.”

In holding that it had no jurisdiction, the trial court said that the judgment in Consolidated Helium does not raise a federal question which will support jurisdiction under § 1331(a). We agree that the judgment will not itself support that jurisdiction. See Metcalf v. Watertown, 128 U.S. 586, 588, 9 S.Ct. 173, 32 L.Ed. 543, and Prairie Band of Pottawatomie Tribe of Indians v. Puckkee, 10 Cir., 321 F.2d 767, 770.

The trial court went on to say that the Natural Gas Act did not abrogate the contracts and that neither that Act nor the 1960 Helium Act amendments created any right in the plaintiff. In Consolidated Helium we recognized that the Natural Gas Act did not abrogate private rate contracts as such, 441 F.2d at 720, and pointed out that price and other provisions of contracts for the interstate sale of natural gas have largely been nullified by Federal Power Commission regulations and orders. The trial court construed our decision in Consolidated Helium as permitting recovery by lessee-producers “on principles of equity by a reconciliation of federal statutes which did not abrogate existing gas contracts.” We thought that we made plain that we did not allow recovery on the application of any principles of equity, see 441 F.2d at 719-720, but on the ground that satisfactory utility regulation does not permit a utility rate to be used to obtain a commodity which is not within the contemplation of that rate. 441 F.2d at 720 and 722-723.

We adhere to our decision in Consolidated Helium. Absent circumstances not present there or disclosed on the record now before us, recovery of the value of helium separated from gas moving interstate can be had only by reconciliation and application of the Natural Gas Act and the 1960 amendments to the Helium Act, not under contract law or principles of equity. We reject defendant’s assertion that Consolidated Helium was an interim decision. The Supreme Court denied certiorari, 404 U.S. 951, 92 S.Ct. 268, 30 L.Ed.2d 267, 404 U.S. 1063, 92 S.Ct. 732, 30 L.Ed.2d 751, and 404 U.S. 1065, 92 S.Ct. 732, 30 L.Ed.2d 754. The decision is final and is the law of this circuit. We say nothing on plaintiff’s claim that Consolidated Helium is res judicata on the issues presented here. We are concerned with jurisdiction, not with the merits.

We have here a genuine and present controversy disclosed on the face of the complaint and not asserted in anticipation of any defense. Plaintiff presents a substantial claim resting on a reasonable foundation. The right asserted under federal laws is an essential element of plaintiff’s case which must stand or fall on the construction or effect of the federal laws. The tests announced in Gully have all been met.

One further matter should be mentioned. In Consolidated Helium we pointed out that there are over 30,000 persons receiving income from helium-bearing natural gas produced by over 500 lessee-producers under thousands of leases. 441 F.2d 710 and 715. The Supreme Court said in Gully, 299 U.S. at 117, 57 S.Ct. at 100:

“This Court has had occasion to point out how futile is the attempt to define a ‘cause of action’ without reference to the context. * * * To define broadly and in the abstract ‘a case arising under the Constitution or laws of the United States’ has hazards of a kindred order. ' What is needed is something of that common-sense accommodation of judgment to kaleidoscopic situations which characterizes the law in its treatment of problems of causation. One could carry the search for causes backward, almost without end.”

The problems relating to the recovery of the value of the helium content of natural gas traveling in interstate commerce have arisen because of, and under, federal statutes. Plaintiff asserts rights under those statutes and is entitled to sue in federal court. We believe that the federal courts have jurisdiction under 28 U.S.C. § 1331(a).

The judgment is reversed and the case remanded for further proceedings.

WILLIAM E. DOYLE, Circuit Judge

(dissenting):

I respectfully dissent. Although the claim which is here presented bears a relationship to federal law, namely, the Natural Gas Act, 15 U.S.C. § 717 et seq. and the Helium Act, 50 U.S.C. § 167 et seq., the relationship is not sufficiently close to justify holding that this cause arises under federal law. The claim in question is based on a contract express or implied (in law) and the granting of relief does not require consideration, construction or interpretation of a federal statute. The fact that federal law is indirectly related to the controversy or that federal law may be an insubstantial ingredient of the claim is not sufficient.

The doctrine enunciated by Chief Justice Marshall in Osborn v. Bank of United States, 9 Wheat. 738, 6 L.Ed. 204 (1824), has long since been repudiated. See American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 36 S.Ct. 585, 60 L.Ed. 987 (1916) by Justice Holmes holding that libel and slander of a patent is lacking in federal jurisdiction since the state law governs and the patent law does not preempt merely because it involves a patent.

A similar result has been enunciated in a case involving the scope of a real estate patent where the dispute concerned accretion in an area bounded by the Mississippi River. Joy v. City of St. Louis, 201 U.S. 332, 26 S.Ct. 478, 50 L. Ed. 776 (1906). Shoshone Mining Co. v. Rutter, 177 U.S. 505, 507, 20 S.Ct. 726, 44 L.Ed. 864 (1900), an action to enforce a right arising under a patent issued in connection with a mining claim issued by the Commissioner of the General Land Office, is also illustrative. In Shulthis v. McDougal, 225 U.S. 561, 569, 32 S.Ct. 704, 706, 56 L.Ed. 12 (1912), the Supreme Court in an often quoted passage stated:

A suit to enforce a right which takes its origin in the laws of the United States is not necessarily, or for that reason alone, one arising under those laws, for a suit does not so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction or effect of such a law, upon the determination of which the result depends.

Professor Wright in his Law of Federal Courts (2d ed.) § 17 concedes that this area of the law is somewhat vague, but states unequivocally that federal law must be an essential element in the case. He recommends Professor Mishkin’s test “that for original federal jurisdiction there must be ‘a substantial claim founded directly upon federal law.’ ” The cases appear to support the concept expounded in this test.

Turning to natural gas cases, we find that jurisdiction has been refused where the subject matter was similar to that in the instant case. See, e.g., Pan American Petroleum Corp. v. Superior Court, 366 U.S. 656, 81 S.Ct. 1303, 6 L.Ed.2d 584 (1961), wherein a pipeline company had purchased gas from the petitioners. It was ordered by the Kansas Corporation Commission to pay higher rates. It did so under protest, alleging that since it was subject to Federal Power Commission jurisdiction the Kansas Commission could not exercise jurisdiction over it. The Supreme Court later sustained this contention. 355 U.S. 391, 81 S.Ct. 1303. Subsequently, Pan American brought suit in Delaware State Court to recover overpayments. The suppliers filed a petition for a writ of prohibition in the Delaware Supreme Court contending that the action fell within the exclusive jurisdiction of the federal courts under the Natural Gas Act. The Delaware court rejected this contention and the Supreme Court affirmed. The holding of the Supreme Court was that the action was governed by state law, not federal; that determination of the suit did not depend upon federal law. The fact that the prices to be paid were measured by rates filed with or promulgated by the Federal Power Commission did not create a question cognizable in a federal trial court.

The Supreme Court’s earlier decision in Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 70 S.Ct. 876, 94 L.Ed. 1194 (1950), dealt with contracts for the supply of gas reserves for a pipeline. The contracts provided that the supplier could terminate if the purchasers were unable to obtain a certificate of public convenience and necessity from the Federal Power Commission. A conditional certificate was issued. However, the supplier gave notice of termination stating that the certificate was not as contemplated. . Suit was brought in federal court seeking a declaratory judgment that the contracts were in effect. The district court and the court of appeals found that the action arose under federal law, but the Supreme Court reversed and ordered that the case be dismissed for lack of federal question jurisdiction. The basis for the Court’s decision was that the cause arose under state law. The Court pointed out that the claim did not present in and of itself a federal question involving as it did a question of substantive contract law. The presence of a federal question by way of defense did not suffice.

This court has also reached the same conclusion as was reached by the Supreme Court in Pan American Petroleum Corp. This was in Landon v. Northern Natural Gas Co., 338 F.2d 17 (10th Cir. 1964), cert. denied, 381 U.S. 914, 85 S.Ct. 1529, 14 L.Ed.2d 435 (1965). It was there stated that the claims involved were common law claims based on the substantive law of Kansas and were before the court only by reason of diversity jurisdiction.

In view of the foregoing, the case at bar is a simple action in the nature of quasi-contract or indebitatus assumpsit which is not dependent on federal law. At most it would call for a reference to rates promulgated by a federal agency. This is not enough of an ingredient to justify federal jurisdiction.

      . Mishkin, The Federal “Question” in the District Courts, 1953, 53 Col.L.Rev. 157, 165, 168.


author: HAYS, Circuit Judge:

text:
    MPC RESTAURANT CORP. and Hardwicke’s Plum Ltd. d/b/a Maxwell’s Plum, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    Nos. 638, 869, Dockets 72-1892, 72-2029.
    United States Court of Appeals, Second Circuit.
    Argued May 3, 1973.
    Decided July 5, 1973.

      Martin F. Payson, New York City (G. Harrison Darby, Philip S. Mortenson, Jackson, Lewis, Schnitzler & Krupman, New York City, on the brief), for petitioner.
    William R. Stewart, Washington, D. C. (John D. Burgoyne, Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, N.L.R.B., Washington, D. C., on the brief), for respondent.
    Before FRIENDLY and HAYS, Circuit Judges, and JAMESON, District J udge.

       Of the United States District Court for the District of Montana, sitting by. designation.

   HAYS, Circuit Judge:

Petitioner, MPC Restaurant Corp. and Hardwicke’s Plum Ltd., a joint venture, doing business as “Maxwell’s Plum,” a restaurant in New York City, has filed a petition to review and set aside a. decision and order of the National Labor Relations Board. The order directs the employer to cease and desist from certain unfair labor practices, to reinstate four discharged employees and to reimburse them for any loss of pay suffered by them as a result of what the Board determined to be their unlawful discharge, to post appropriate notices and to bargain with Union Local 89 upon request. The Board has filed a cross-application for enforcement of its order. We grant the Board’s cross-application for enforcement of its order and deny the employer’s petition for review.

I. The Facts

“Maxwell’s Plum” is a restaurant located in New York City. It employs approximately 100 to 120 kitchen and dining room employees. In September of 1970, the Chefs, Cooks, Pastry Cooks and Assistants Union, Local 89, Hotel and Restaurant Employees and Bartenders International Union of America, AFL-CIO, began organizational efforts among the kitchen employees of Maxwell’s Plum. At the same time Dining Room Employees Local 1, affiliated with the Hotel and Restaurant Employees and Bartenders International Union, AFL-CIO, undertook to organize Maxwell’s Plum’s dining room employees.

On October 22, 1970, a petition for election was filed with the National Labor Relations Board by Local 89. The petition stated that a demand for recognition and. bargaining had been made upon the employer the previous day and that the employer had not acceded to the demand. At the time of the Union’s demand for recognition, it claimed that it had authorization cards from almost two-thirds of the kitchen employees.

Meanwhile, Local 1 had continued its organizing campaign among the restaurant’s waiters and, as the Board found, the employer had responded to those efforts by discharging several employees active in the union, by threatening the waiters with reprisals if they persisted in the organization campaign, and by promising them benefits if they ceased.

In its representation petition Local 89 sought to represent a unit limited to “kitchen” employees. The employer argued that a unit confined to kitchen employees was an inappropriate bargaining 'unit in that it covered less than one-third of its total work force. A representation hearing was stayed when Local 89 filed charges alleging violations of Sections 8(a)(1), (3) and (5) of the National Labor Relations Act.

Local 1 had already filed charges against the company alleging violations of Sections 8(a)(1) and (3) of the Act. However, Local 1 did not at that time seek recognition as the bargaining agent for any of Maxwell’s Plum’s employees.

II. The Board’s Order .

The complaints of the two unions were consolidated for trial. The allegation that the employer had violated Section 8(a)(5) with respect to Local 89 again gave rise to the issue of the appropriateness of the bargaining unit for which Local 89 had made a bargaining demand. The trial examiner found that a unit limited to kitchen employees was appropriate for bargaining purposes and that the employer had violated Sections 8(a)(1), (3) and (5) of the Act.

The Board affirmed the trial examiner’s findings of fact and conclusions of law with minor modifications. The Board found that the employer had violated Section 8(a)(1) of the Act by coercively interrogating its employees about their union activities, by threatening employees with discharge if they persisted in their union activities, and by promising and granting pay increases and hospitalization and health benefits to its employees as inducements to persuade them to reject the union’s organizing efforts. The Board held that the company had violated Section 8(a)(3) and (1) by discharging certain employees because of their union activities and that it had violated Section 8(a)(5) and (2) by refusing to recognize and bargain with Local 89 as the exclusive representative of the company’s kitchen employees who, the Board found in agreement with the trial examiner, constituted an appropriate bargaining unit. The Board determined that a bargaining order was an appropriate remedy for the company’s unfair labor practices.

A. The Unfair Labor Practices.

There is ample evidence in the record to support the Board’s finding that” the company interfered with, restrained, and coerced its employees in violation of Section 8(a)(1) of the Act. In addition to surveillance and interrogation, see Bourne v. NLRB, 332 F.2d 47 (2d Cir. 1964), there were inducements in the form of increases in pay and other changes in working conditions which were all part of the company’s effort to cripple the union’s organization drive. See NLRB v. Exchange Parts Co., 375 U.S. 405, 409, 84 S.Ct. 457, 11 L.Ed.2d 435 (1964). Although there was some evidence that the grant of improved hospitalization and medical care insurance might not have been aimed at stifling union efforts, there is enough support in the record to afford substantial evidence that this, like the wage increase, was an effort to defeat the union’s attempts to organize the restaurant.

The evidence as to the incidents surrounding the discharges of certain employees was somewhat conflicting. In such a situation, it is for the trial examiner to resolve the issues of credibility and the examiner specifically addressed himself to that issue. We are not empowered to reject his findings on credibility. See NLRB v. A. & S. Electronic Die Corp., 423 F.2d 218, 220 (2d Cir.), cert. denied, 400 U.S. 833, 91 S.Ct. 66, 27 L.Ed.2d 65 (1970).

B. The Appropriate Bargaining Unit.

In seeking to set aside the order of the Board, the company places great emphasis on its contention that the Board erred in determining that a bargaining unit composed of only kitchen employees was appropriate. The company claims that the trial examiner based his determination on this issue primarily, or even entirely, on what he thought to be the pattern of bargaining in the New York City metropolitan area. It is argued that this in itself was error and, moreover, citing the quashing of its subpoenas by the trial examiner, the employer claims that the trial examiner could-not properly give weight to the area pattern of bargaining and at the same time prevent the employer from showing that the pattern was not what the examiner thought it to be.

As this court said in Wheeler-Van Label Co. v. NLRB, 408 F.2d 613, 616 (2d Cir.), cert. denied, 396 U.S. 834, 90 S.Ct. 90, 24 L.Ed.2d 84 (1969):

“[T]here can be no dispute that the Board has considerable leeway in exercising its judgment under Section 9(b) of the Act . . . as to the appropriateness of a given unit. A unit finding by the Board ‘involves of necessity a large measure of informed discretion,’ Packard Motor Car Co. v. NLRB, 330 U.S. 485, 491, 67 S.Ct. 789, 793, 91 L.Ed. 1040 (1947), and, where it is supported by substantial evidence, will not be reversed ‘in the absence of “arbitrary or capricious exercise of administrative discretion,” ’ Empire State Sugar Co. v. NLRB, 401 F.2d 559, 562 (2d Cir. 1968).”

The employer contends that the trial examiner relied primarily, and erroneously, on the case of Toffenetti Restaurant Co., 133 N.L.R.B. 640 (1961) for his conclusion that there was an area bargaining pattern of considering kitchen employees separately as an appropriate bargaining unit. However, the Toffenetti case, upon which the trial examiner did heavily rely, did not hinge entirely on the area bargaining pattern. It also mentioned other factors relevant to the determination of an appropriate unit such as the separate work functions of kitchen employees, their infrequent contact with restaurant clientele, and the lack of interchange between kitchen employees and other restaurant employees. In referring to Toffenetti the trial examiner was referring to those other factors as well as the area bargaining pattern. His report shows that he gave consideration to those other factors.

In any event, the emphasis placed on “area practice” by the employer is unwarranted. Area practice is only one factor — and surely not the most important factor — in determining the propriety of a unit. The trial examiner took into consideration, for example, the employees' "community of interests” which is a more important factor than area pattern.

The unit need not be the only appropriate unit nor even the most appropriate unit. It need only be an appropriate unit. See Wheeler-Van Label Co. v. NLRB, supra, 408 F.2d at 617.

The employer makes the procedural objection that it was denied due process by the trial examiner’s refusal to permit the presentation of certain evidence regarding the issue of the appropriate bargaining unit. At the request of the employer, the trial examiner issued subpoenas which were served on Local 89, Local 1 and eight other unions which represent restaurant employees in New York City. Each subpoena requested the named union to produce copies of their existing collective bargaining agreements Which the employer contended would establish the industry bargaining pattern in the New York City metropolitan area. Upon motion of the various unions, • the trial examiner quashed the subpoenas directed to the eight non-party unions and permitted only partial compliance with respect to those issued to Locals 89 and 1. The ruling was well within the examiner’s power to impose practical limitations on the amount of evidence to be considered, especially in the light of the abundant testimony that the contracts produced were typical of the whole volume of such contracts, and the employer’s failure to bring forward any substantial contrary evidence, although this would have been available from other sources.

C. The Bargaining Order.

Under the doctrine of NLRB v. Gissel Packing Co., 395 U.S. 575, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969), the determination of whether unfair labor practices are of such a nature as to warrant the issuance of a bargaining order is for the Board and not the courts. 395 U.S. at 612, fn. 32, 89 S.Ct. 1918. The Gissel order is appropriate where serious unfair labor practices have been committed which “interfere with the election process and tend to preclude the holding of a fair election,” 395 U.S. at 594, 89 S.Ct. at 1930.

.“If the Board finds that the possibility of erasing the effects of past practices and of ensuring a fair election . . . by the use of traditional remedies, though present, is slight and that the employee sentiment once expressed through cards would, on balance, be better protected by a bargaining order, then such an order should issue. ...” 395 U.S. at 614-615, 89 S.Ct. at 1940.

This is such a situation.

The company argues that the Board erred in basing its bargaining order on unfair labor practices occurring with respect to Local 1 as distinguished from Local 89. We find no error. The discharge of a Local 1 union organizer certainly could be thought to have an adverse effect on the rights of other employees of the same establishment although these others were subject to the potential jurisdiction of another local.

We grant the Board’s cross-application for enforcement and we deny petitioner’s request that we set aside the order.

      . Petitioner also contends that the Board’s unit determination cannot stand because “controlling weight” was given to the “extent of organization” of Local 89 contrary to the commands of Section 9(c)(5) of the Act. We disagree. The Act does not forbid consideration of extent of organization and there is no indication that the Board’s finding was based wholly or even principally on the extent of union organization. See NLRB v. Metropolitan Life Ins. Co., 380 U.S. 438, 442, 85 S.Ct. 1061, 13 L.Ed.2d 951 (1965).

      . Local 89 submitted 110 of approximately 750 contracts. In addition, the employer examined 147 of an additional 250 contracts offered and not submitted. Local 1 submitted 30 of 700 agreements as representative — none of which included kitchen employees in the bargaining unit.

      . The employer argues that, in issuing its bargaining order, the Board erroneously relied upon unfair labor practices — including the discharge of an employee— which occurred prior to the filing of the representation petition. The employer cites in support of its contention a Board rule which provides that the date that the petition is filed is the “cut-off” date. See Ideal Elec. and Mfg. Co., 134 N.L.R.B. 1275, 1278 (1961) ; Flight Safety, Inc., 197 N.L.R.B. No. 40, fn. 1 (1972). However, the rule appears to apply only to objections to an election and not to the issuance of a bargaining order.

      . The company further charges that Local 89 did not have valid authorization cards when it claimed a majority of the kitchen employees as adherents. It bases this Claim on the fact that although the union possessed 22 valid cards in a unit of 35 employees, the cards were undated when signed and hence, petitioner argues, invalid. The Board has found these conditions sufficient for validity. See, e. g., Henry Spen & Co., Inc., 150 N.L.R.B. 138 (1964).
      The cards were signed by the employees before they were dated. The employees clearly intended to designate Local 89 as their bargaining agent by signing the cards.


author: VAN DUSEN, Circuit Judge.

text:
    The TRAVELERS INSURANCE COMPANY, a corporation, Appellant, v. BLUE CROSS OF WESTERN PENNSYLVANIA, a corporation.
    No. 72-1209.
    United States Court of Appeals, Third Circuit.
    Argued April 24, 1973.
    Decided July 10, 1973.

      Frank L. Seamans, Donald C. Winson, Dale Hershey, David E. Tungate, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., and George D. Brodigan, Hartford, Conn., for appellant.
    Robert J. Bagdasarian, Charles Radish, Donald B- Da Parma, William B. Sneirson, Breed, Abbott & Morgan, New York City, and Edward L. Springer, Springer & Perry, Pittsburgh, Pa., for appellee.
    Before VAN DUSEN, ALDISERT and ROSENN, Circuit Judges.
   OPINION OF THE COURT

VAN DUSEN, Circuit Judge.

Travelers Insurance Company appeals from the January 6, 1972, district court order dismissing its complaint against Blue Cross of Western Pennsylvania, which order was entered after a trial to the court, 361 F.Supp. 774. Travelers had charged Blue Cross with restraining trade, in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1970) , and with monopolizing and attempting to monopolize, in violation of section 2 of that Act. To prevail, Travelers had also to establish that either Blue Cross’ conduct did not come within the protective umbrella provided by the language of the McCarran-Ferguson Act, 15 U.S. C. § 1011 et seq. (1970), or was excluded from the protection of that Act. by the presence of boycott, coercion, or intimidation, see 15 U.S.C. § 1013(b) (1970). After a lengthy non-jury trial, the district court, concluded that Blue Cross’ conduct was immunized by the McCarran-Ferguson Act and that, even absent such protection, the conduct did not violate the antitrust laws. See Travelers Ins. Co. v. Blue Cross of Western Penn., 361 F.Supp. 774 (W.D.Pa. 1972) (1972 Trade Cas. 73,311, at 91,428). We agree with the district court on both points.

The relevant market consists of 29 counties in Western Pennsylvania. Blue Cross provides hospitalization insurance for 51% of the population of this area; and during a relevant period Blue Cross accounted for 62% of all the patient days which were covered by commercial insurance.

Travelers objects to a standard contract which Blue Cross has with 101 hospitals in this area which prescribes the amounts and terms under which Blue Cross pays for the services rendered its subscribers. Blue Cross reimburses hospitals only for audited costs subject to a ceiling; and these costs do not include any portion of the general hospital expenses of capital construction, of providing free services to indigents, and of providing service to patients who default. Because of these limitations, Blue Cross pays some 14-15% less than the amounts that non-Blue Cross patients are charged. Consequently, Blue Cross quotes rates for hospitalization insurance correspondingly lower than the rates of private insurance companies such as Travelers.

Whether the McCarran-Ferguson Act exempts Blue Cross’ arrangement with these hospitals from antitrust scrutiny depends, first, on the scope of the statutory term “business of insurance,” second, on the extent of state regulation of this arrangement, and, third, on the presence or absence of boycott, coercion or intimidation.

The Supreme Court’s most recent interpretation of the McCarran-Ferguson Act appears in SEC v. National Securities, Inc., 393 U.S. 453, 457-461, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969), where the Court held that a state insurance department’s approval of a merger of insurance companies would not exempt the merger from the federal securities laws. The Court reasoned that regulation of the “business of insurance” meant control over the relationship between the insurance company and its policyholders ; the term did not encompass regulation of the relationship between the company and its shareholders. However, although the Court fashioned this dichotomy, it did not fix the exact contours of the term “business of insurance.” Rather, it indicated activities clearly covered — fixing rates, selling and advertising policies, licensing companies and agents, prescribing the types of permissible policies, etc. — and suggested the possibility of additional ones, using this language:

“Undoubtedly, other activities of insurance companies relate so closely to their status as reliable insurers that they too must be placed in the same class.” 393 U.S. at 460, 89 S.Ct. at 568.

Two district court cases which predated SEC v. National Securities, Inc., nevertheless are useful for comparison with the present case. In California League of Independent Insurance Producers v. Aetna Casualty & Surety Co., 175 F.Supp. 857, 860 (N.D.Cal.1959), the “business of insurance” was held to include the size of commissions paid by companies to agents, because commissions were a vital factor in the companies’ ratemaking structure. In contrast, the district court in Hill v. National Auto Glass Co., 293 F.Supp. 295 (N.D.Cal.1968), held that the McCarran-Ferguson Act would not protect Allstate, an automobile liability insurer, which allegedly secured installation jobs for selected automobile glass dealers. It can be surmised that the impact on Allstate’s rates of the expense of replacing automobile glass, while it might be direct, would not be substantial.

In the present case, the district court found that the interrelationship of hospital payments and subscribers’ rates was such that Blue Cross’ arrangement with hospitals should be considered part of the “business of insurance.” This conclusion is a sound construction of the law and is amply supported by the evidence.

Also, the evidence supports the district court finding that the state regulates the arrangement here in question. Section 4 of the Nonprofit Hospital Plan Act, Penn.Stat.Ann., tit. 40, § 1404, provides that:

“The rates charged to subscribers by nonprofit corporations, ... all rates of payments to hospitals made by such corporations pursuant to the contracts provided for in this act, . and any and all contracts entered into by any such corporation with any hospital, shall at all times, be subject to the prior approval of the Insurance Department.”

One recent case suggests that the mere existence of such a scheme of regulation, even if ineffective and unenforced, is sufficient to invoke the McCarran-Ferguson Act. Ohio AFL-CIO v. Insurance Rating Board, 451 F.2d 1178 (6th Cir. 1971), cert. denied, 409 U.S. 917, 93 S. Ct. 215, 34 L.Ed.2d 171 (1972). However that may be, the record here shows aggressive state regulation. In fact, as the district court found, the features of the contract which Travelers finds objectionable were mandated by Insurance Department guidelines designed to encourage high quality care at reasonable costs. Auditing hospital costs and establishing a ceiling were thought to help hold down rising hospital costs by forcing administrative efficiency. Blue Cross was not to contribute to the care of indigents because this responsibility belonged to the state, not to the subscribers of Blue Cross. Finally, Blue Cross was not to support hospital construction for two reasons: such construction was usually financed by the state, the federal government, or private philanthropyand, historically, hospitals serving the same area have needlessly duplicated expensive specialized services.

By its terms the McCarran-Ferguson Act does not protect “boycott, coercion, or intimidation.” Travelers has not challenged the finding of the district- court that Blue Cross at no time tried to influence the relationship between hospitals and other insurance companies. Instead, Travelers asserts that Blue Cross used “coercion” to extract concessions from the hospitals. The district court held, and we agree with its conclusion, that the economic inducements which made the Blue Cross contract acceptable to hospitals did not amount to “coercion.” Especially is that true where, as here, the hospitals negotiated jointly and the resulting contract was approved by the Insurance Department.

Even if the McCarran-Ferguson Act were inapplicable and Blue Cross was subject to antitrust scrutiny, we agree with the district court that Blue Cross could withstand such scrutiny. In arriving at this result, we have not reached the determination of whether Blue Cross possesses enough market power to have “monopoly power.” Even assuming that such power exists, we have concluded that Blue Cross’ arrangement with hospitals neither illegally restrains trade in violation of section 1 of the Sherman Act nor constitutes, in violation of section 2, “the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 570-571, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966).

Our section 1 analysis begins with the recognition that the situation here does not involve a vertical restraint which has achieved garden variety status. That is, it is not a tie-in, an exclusive dealing arrangement, etc. Consequently, as the district court indicated, it must be carefully looked at on its own facts, in order to reveal whether any restraint of trade it causes is “reasonable.” See Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4-5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958); cf. Chicago Board of Trade v. United States, 246 U. S. 231, 238, 38 S.Ct. 242, 62 L.Ed. 683 (1918).

In its negotiating with hospitals, Blue Cross has done no more than conduct its business as every rational enterprise does, i. e., get the best deal possible. This pressure encourages hospitals to keep their costs down; and, for its own competitive advantage, Blue Cross passes along the saving thus realized to consumers. To be sure, Blue Cross’ initiative makes life harder for commercial competitors such as Travelers. The antitrust laws, however, protect competition, not competitors; and stiff competition is encouraged, not condemned. It must be pointed out that the size of its competitors does not give Blue Cross the freedom to conduct other than fair competition for business. The dependence of the community on health facilities requires that anti-competitive practices not be tolerated.

We note that one case, United States v. New York Great A. & P. Tea Co., 173 F.2d 79 (7th Cir. 1949), seems to hold that it violates the Sherman Act for a seller to force suppliers to lower their prices to him. The A. & P. case, though, is distinguishable both as to the practices involved and as to the business context of these practices. In addition to its aggressive bargaining over price, A. & P. was also found to exert pressure on suppliers either not to deal or to alter their dealings with A. & P.’s competitors. No comparable conduct was shown here. In fact, the evidence does not support the proposition that Travelers or other companies could not have achieved some price reductions. Moreover, A. & P. was found to have engaged on several occasions in predatory pricing — selling at retail below its wholesale cost in order to drive competing retailers out of business. This predatory conduct would have been particularly serious due to the small size of many independent grocers: once forced out of business they would be unable to re-enter the market. Here, in contrast, there was no evidence of predatory pricing. Furthermore, there is no reason to suppose that, even if commercial insurers such as Travelers were currently unable to compete with Blue Cross, they could not immediately re-enter the hospitalization insurance business if it became profitable to do,so.

In regard to the Sherman Act § 2 question, we agree with the district court’s determination that Blue Cross achieved its present status in a permissible manner. It was first suggested in United States v. Aluminum Co. of America, 148 F.2d 416, 429-430 (2d Cir. 1945), that a monopoly may be “thrust upon” a producer “merely by virtue of his superior skill, foresight and industry,” and that such a result would not be violative of section 2. In United States v. Grinnell Corp., quoted above, the Supreme Court reaffirmed this position. The district court found, on ample evidence, that Blue Cross owes its success to the completeness of its coverage. From the time of its organization in the late 1930s, Blue Cross has reimbursed hospitals for all covered services rendered its subscribers. Private companies, on the other hand, have, until relatively recently, provided only that their policyholders would be indemnified up to a set dollar ceiling. Blue Cross thus has exposed itself to considerably greater risk because of the possibility that treatment would be extensive and because of the probability that hospital costs would rise. By shouldering the risk, Blue Cross has made itself considerably more attractive to consumers. The antitrust laws were not intended to condemn such conduct.

One final contention of Travelers may be disposed of quickly. Travelers now argues that if Pennsylvania grants a competitive advantage to Blue Cross via the operation of the Mc-Carran-Ferguson Act, Pennsylvania denies Travelers equal protection of the laws. Travelers concedes that it did not present this argument to the district court until, after the lengthy trial, Travelers submitted a list of requested findings of fact and conclusions of law. It is questionable whether such belated presentation properly raised the issue before the district court so as to make consideration here proper. See Andrews v. Chemical Carriers, Inc., 457 F.2d 636 (3d Cir. 1972). In any event, the argument has little merit. In view of our holding that, independent of the Mc-Carran-Ferguson Act, the antitrust laws were not violated, the state of Pennsylvania has not denied Travelers equal treatment in violation of the Fourteenth Amendment. Furthermore, even if McCarran-Ferguson Act protection were necessary to Blue Cross, the facts do not support the proposition that Pennsylvania’s regulation of the contract between Blue Cross and the hospitals was without rational purpose, see, e. g., James v. Strange, 407 U.S. 128, 92 S.Ct. 2027, 32 L.Ed.2d 600 (1972).

The judgment of the District Court will be affirmed.

      . “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States ... is declared to be illegal . . . . ”

      . “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States shall be deemed guilty of a misdemeanor . . . . ”

      . § 1012(b) provides:
      “ . . . the Sherman Act . shall be applicable to the business of insurance to the extent that such business is not regulated by State law.”

      . “Nothing contained in this chapter shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or any act of boycott, coercion, or intimidation.”

      . The findings in this opinion are not clearly erroneous. See F.R.Civ.P. 52. Earlier district court opinions in this case are Travelers Ins. Co. v. Blue Cross of Western Penn., 306 F.Supp. 219 (W.D.Pa. 1969), and Travelers Ins. Co. v. Blue Cross of Western Penn., 298 F.Supp. 1109 (W.D.Pa.1969).

      . There were also patients who qualified for Medicare or Medicaid, etc., or who wore not covered by any form of reimbursement for hospital or medical costs.

      . This ceiling varies for each of nine categories of hospitals.

      . The district court opinion makes clear that the volume of Blue Cross subscribers and its cooperative coverage of many poor risk subscribers (such subsidization amounted to $27,000,000. in the years 1960-1970; 700a~701a) are important factors in its ability to negotiate favorable contracts with the hospitals subject to the approval of the State Insurance Department, see 40 P.S. § 1404.

      . One witness, Herbert S. Denenberg, the present Insurance Commissioner, testified as follows at App. 766a:
      “Q. Commissioner, in carrying out the responsibilities of your office as you see them, what relation, if any, have you found to exist between a Blue Cross plan reimbursement contract with its hospitals and the Blue Cross plan subscriber rates ?
      “A. Well, these two things are really indivisible aspects reflecting the same economic forces. If you do not have a sound contract between Blue Cross and the hospitals that controls cost and quality then the Blue Cross rate to the subscriber is going to be unreasonable. So these are typically approached together.
      “Both at the hearings and in our adjudication, we made it crystal clear that we think that these two items, the contract with the hospitals and the rates to the subscribers are part of the same package and we have to regulate both of them together or that we cannot provide health delivery to the public at the most reasonable cost possible.”

      . We reject Travelers’ argument that, to exempt conduct from the federal antitrust laws, state regulation must parallel the Sherman Act. Had Congress desired this type of regulation, it could simply have continued the applicability to insurance companies of the Sherman Act itself. Moreover, that Congress intended to allow the states to .regulate insurance on the basis of factors other than competition is conclusively demonstrated by the McCarran-Ferguson Act’s immunization of rate-fixing.

      . See App. 761a-780a (testimony of Herbert S. Denenberg) ; App. 659a-684a (testimony of Francis R. Smith).

      . If a hospital refused to agree to the contract, Blue Cross would reimburse the hospital on a per diem basis by an amount insufficient to cover the hospital’s costs. A hospital would have to make up any deficiency by charging the patient directly. We note that this procedure is typical of the indemnification plans offered by private insurance companies.

      . In its brief at 14, Travelers calls our attention to tlie testimony of vai'ious of its witnesses at App. 862a-S63a; 890a-S91a; 936a-937a; 944a. However, almost all of this evidence suggests not that Travelers was unable to obtain any price reduction from hospitals, but rather that Travelers assumed its inability to do so and, therefore, did not press the matter. Moreover, it is not clear that Travelers was wiling to adopt a full-cost reimbursement scheme comparable to that of Blue Cross (as opposed to the typical indamnification arrangement) as a quid pro quo.

      . If this would be true for a monopolist, it would apply even more strongly to the present situation in which Blue Cross clearly does not have a monopoly.

      . The commercial companies are now willing to write complete coverage for at least large-group plans. It appears that Blue Cross is still alone in offering this arrangement to small groups and to high-risk individuals.


author: VAN OOSTERHOUT, Senior Circuit Judge.

text:
    Robert KELLEY, Appellant, v. Harold R. SWENSON, Appellee.
    No. 73-1077.
    United States Court of Appeals, Eighth Circuit.
    Submitted May 16, 1973.
    Decided June 22, 1973.
    Richard D. Sehreiber, Clayton, Mo., for appellant.

      Preston Dean, Asst. Atty. Gen., Jefferson City, Mo., for appellee.
    Before VAN OOSTERHOUT, Senior Circuit Judge, HEANEY, Circuit Judge, and TALBOT SMITH Senior District Judge.

       Eastern District of Michigan, sitting by designation.

   VAN OOSTERHOUT, Senior Circuit Judge.

This is an appeal in forma pauperis by petitioner Robert Kelley from order of the United States District Court filed January 8, 1973, denying without prejudice his petition filed pursuant to 28 U. S.C. § 2254, for his release from custody on a Missouri State conviction. Petitioner sought relief upon the ground that his constitutional rights were violated by the admission into evidence of confessions alleged to have been obtained as the result of an unlawful arrest not based on probable cause by the St. Louis police. The dismissal was based upon failure to exhaust state remedies. Certificate of probable cause was issued by the trial court.

Petitioner predicated his right to relief in the present action on the following basic allegation:

“Petitioner is being held unlawfully as a result of the criminal trial court denying petitioners Motion to' Suppress petitioners Written and Oral Confessions in That Same Were Obtained as a Result of an Arrest Not Founded on Probable Cause. Petitioner was arrested as the result of a bare suspicion on the part of the Officers Enright and Thornberry of the St. Louis Police Department and as the result of the self-serving, unreliable information of Donnie Winters.”

He elaborates upon his contention that he was illegally arrested by the St. Louis police and then goes on to set out the undisputed federal constitutional law that the product resulting from an illegal arrest cannot be used against him.

The identical issue was raised by Kelley in his state trial resulting in his conviction. The trial court held a JacksonDenno hearing out of the presence of the jury and determined the initial arrest was valid and that the confession which he made to the St. Charles County officers was voluntary and admissible. The conviction was affirmed by Division I of the Supreme Court of Missouri, State v. Kelley, 473 S.W.2d 707 (Mo.Sup.Ct.1971). In the course of its opinion, the Court states:

“The only point relied on by defendant upon this appeal is that ‘the court erred by denying appellant’s motion to suppress appellant’s written and oral confessions in that same were obtained as a result of an arrest not founded on probable cause. . . . ’ ” 473 S.W.2d 707, 708.

The Missouri Supreme Court states in detail the reason why it determined the initial arrest by the St. Louis police was based upon probable cause and was valid. The facts pertinent to this appeal are fully set out in the Missouri Supreme Court’s opinion.

The federal trial court states the threshold issue to be whether the petitioner has exhausted his state remedies and then goes on to say:

“However, the record is clear that the Missouri courts have never considered the issue of probable cause for arrest by the St. Charles County officers. This question may be of importance, since the interrogation which preceded the confessions did not commence until after petitioner was arrested and in the custody of the St. Charles County Sheriff’s office.”

It is quite true that the initial arrest of defendant was made by the St. Louis police without a warrant on a burglary committed in St. Charles County, and that Kelley was turned over to the St. Charles authorities who charged Kelley with the St. Charles burglary, and that the confession here involved was made to the St. Charles officers and included the St. Charles burglary and also the burglary upon which he was convicted, being the conviction to which his present petition is directed.

Turning over a person properly arrested to the proper officers of the county in which the crime was committed does not operate to alter the lawful character of the initial arrest where the defendant has not been released from custody. See Reed v. United States, 364 F.2d 630, 633 (9th Cir. 1966).

More significantly, Kelley did not either in the State court or in the present proceedings, challenge any arrest other than his initial arrest by the St. Louis police.

Possibly as intimated by the trial court in its opinion, petitioner could raise other issues in his habeas corpus proceeding. He has not done so. The exhaustion of remedy must be determined upon the basis of the issues fairly presented by the petition or tried by consent. Subject to the resolution of' the issue immediately hereinafter discussed, we hold that the court erred in dismissing the petition on the ground that state remedies were not exhausted.

The State in its brief before the trial court and in its brief before us urges that the highest court in Missouri is the Supreme Court of Missouri en banc and that a litigant in a case determined by a division of the Supreme Court has not exhausted his state remedies unless he has filed a petition for rehearing or transfer to the Supreme Court en banc. The Supreme Court of Missouri legally sits in two divisions. It is admitted that no motion for rehearing or transfer to the court en banc was made by petitioner on the decision of Division I. The trial court did not comment upon nor base its decision upon defendant’s failure to apply for an en banc hearing but since such issue is raised by the State, we feel that it must be met.

The State’s contention is based principally upon Gorman v. Washington University, 316 U.S. 98, 62 S.Ct. 962, 86 L. Ed. 1300 (1942). See also Osment v. Pitcairn, 317 U.S. 587, 63 S.Ct. 21, 87 L.Ed. 481 (1942). Under §§ 1 and 4 of Article VI of the 1890 amendments to the Missouri Constitution, “when a federal question is involved, the cause, on the application of the losing party, shall be transferred to the court for its decision.” Gorman held that the failure of the losing party to seek a transfer in a case in which a “federal question is involved” to the court en banc constituted a failure to exhaust available state remedies and hence that the United States Supreme Court was without jurisdiction to review the ease.

In Teamsters Local v. Lucas Flour Co., 369 U.S. 95, 82 S.Ct. 571, 7 L.Ed.2d 593 (1962) the Supreme Court held it had jurisdiction to review by certiorari a decision of a division of the Washington Supreme Court. In distinguishing Gorman from the case before it, the Court states:

“As the opinion in Gorman pointed out, the Constitution of the State of Missouri expressly conferred the right to an en banc rehearing by the Supreme Court of Missouri in any case orginally decided by a division of the court in which a federal question was involved. It was this provision of the state constitution which was the basis for the conclusion in Gorman that the State of Missouri did not regard a decision by a division of the court as the final step in the state appellate process in a case involving a federal question. ‘[T]he constitution of Missouri,’ it was said, ‘has thus provided in this class of cases for review of the judgment of a division. . . . ’ 316 U.S., at 100 [62 S.Ct. at 963].
“By contrast, a rehearing en banc before the Supreme Court of Washington is not granted as a matter of right. The Constitution and statutes of the State of Washington authorize its Supreme Court to sit in two Departments, each of which is empowered ‘to hear and determine causes, and all questions arising therein.’ Cases coming before the court may be assigned to a Department or to the court en banc at the discretion of the Chief Justice and a specified number of other members of the court. The state law further provides that the decision of a Department becomes a final judgment of the Supreme Court of Washington, unless within 30 days a petition for rehearing has been filed, or a rehearing has been ordered on the court's own initiative.
“We can discern in Washington’s system no indication that the decision in the present case, rendered unanimously by a majority of the judges of the Supreme Court of Washington, was other than the final word of the State’s final court. This case is thus properly before us, and we turn to the issues which it presents.” 369 U.S. 95, 99-101, 82 S.Ct. 571, 574-575.

In so far as the federal question language is concerned, Article V, § 9 of the present Missouri Constitution, V.A.M.S., is substantially the same as the former Article VI, § 4 quoted in Gorman. Subsequent to Gorman, however, the Missouri Supreme Court has held that the federal question language of Article V, § 9 creates a right to a transfer only when the construction or validity of a constitutional provision is involved. There is no right to a transfer where only the application of constitutional principles is involved. White v. State, 430 S.W.2d 144, 148 (Mo.Sup.Ct.1968); Ackerman v. Globe-Democrat Publishing Co., 368 S.W.2d 469, 479 (Mo.Sup.Ct. 1963); Robinson v. Swenson, 331 F.Supp. 483 (W.D.Mo.1971); Hegwood v. Swenson, 344 F.Supp. 226 (W.D.Mo. 1972), see State v. Harris, 321 S.W.2d 468 (Mo.Sup.Ct.1959).

While distinguishable in some respects, Corlew v. Swenson, 336 F.Supp. 592 (E.D.Mo.1971), and Caffey v. Swenson, 332 F.Supp. 624 (W.D.Mo.1971), could be construed as reaching a contrary result. To the extent that Corlew and Caffey cannot be reconciled with Robinson and Hegwood, we prefer the reasoning of the latter two cases.

The construction of a state constitution or statute is a matter of state law which rests with the Supreme Court of the state. The Missouri court in the cases just cited has clearly held that no absolute right exists to an en banc hearing in a case where the court applies established federal constitutional principles to the facts of a particular case. Such is the situation here. The Missouri Supreme Court in White v. State, supra, states the applicable law as follows :

“[I]f the arrest was with probable cause, and therefore lawful, the search and seizure made as an incident thereto admittedly was not unreasonable, and the evidence thus obtained was properly admitted. The only possible ‘construction’ of either the federal or state constitution would be whether a search and seizure without a warrant made as an incident to a lawful arrest violates the applicable constitutional provisions against unreasonable searches and seizures. However, it has long been decided that it does not. Ker v. State of California, 374 U.S. 23 [83 S.Ct. 1623, 10 L.Ed.2d 726]; State v. Phelps, Mo., 384 S.W.2d 616. This court does not take jurisdiction on the ground that the construction of the constitution is involved when the precise constitutional question has been priorly adjudicated by decisions of this court, Swift & Co. v. Doe, Mo., 311 S.W.2d 15, 20, and when that prior adjudication is not in good faith challenged. See State v. Harris, Mo., 321 S.W.2d 468. The issue for decision on appeal did not require the ‘construction’ of the federal or state constitution. At most, there was involved only the application of constitutional principles and not the construction of the federal or state constitution. ‘A real substantive federal question should exist for the transfer of a cause to Banc. The mere allegation of the existence of a federal question is not sufficient.’ State v. Johnstone, Mo., 335 S.W.2d 199, 207.” 430 S.W.2d 144, 148.

We are satisfied that under the facts of the case before us there is no absolute or automatic right to transfer to the court en banc by reason of the presence of a federal question as such term is construed by the Missouri court. Under the recent Missouri cases which we have cited, the rights of the present petitioner to an en banc hearing are no greater than those involved in the Lucas Flour case, supra, relating to the State of Washington.

The court erred in dismissing the petition upon the ground of failure to exhaust state remedies. The judgment appealed from is vacated and the case is remanded to the trial court with direction to vacate the dismissal and hear the petition on the merits. We leave to the trial court for initial determination the question of whether an evidentiary hearing is required.

      . It may be significant to note that the exhaustion issue decided in Gorman is not identical to the exhaustion issue presented here. Gorman involved certiorari jurisdiction for which the exhaustion requirement is satisfied if a judgment has been rendered “by the highest court of a State in which a decision could be had, . . . ” 28 U.S.C.A. § 1257. The instant case involves habeas corpus relief for which the exhaustion requirement is satisfied if there is no “right under the law of the State to raise, by any available procedure, the question presented” to the federal court. 28 U.S.C.A. § 2254.
      Although the two types of exhaustion appear on the surface to be substantially the same, it has been persuasively argued that the exhaustion test for purposes of habeas corpus relief is less rigorous than that for certiorari jurisdiction. Robinson v. Swenson, 331 F.Supp. 483, 484 (W.D.Mo.1971). We believe the argument has merit.

      . An additional reason may exist why petitioner oould not at the present time receive an en banc review by the Missouri Supreme Court.
      Prior to January 1, 1972, the Missouri Supreme Court’s jurisdiction over petitioner’s state appeals was clear. Article V, § 3, of the Missouri Constitution grants appellate jurisdiction “in all eases of felony.” Effective January 1, 1972, however, the Missouri Supreme Court’s jurisdiction over criminal appeals was narrowed to include only “appeals involving offenses punishable by sentence of death or life imprisonment.” This provision appears to apply to all appeals brought after the effective date of the constitutional revision, including those where the offense was committed prior to the effective date. See Garrett v. State, 481 S.W.2d 225 (Mo.Sup.Ct.1972) ; Parks v. State, 492 S.W.2d 746 (Mo.Sup.Ct.1973).
      Apparently, the petitioner could hope to secure review in the Missouri Supreme Court only by attempting to invoke the Court’s appellate jurisdiction over “cases involving the construction of the [federal or State] Constitution.” Mo.Const. Art. V, § 3. The teachings of State v. Harris, 321 S.W.2d 468 (Mo.Sup.Ct.1959), however, appear to extinguish this possibility. The section 3 language quoted above has been given the same narrow construction as that given the federal question transfer provision of section 9, discussed previously in the body of this opinion. The section 9 language “is to be ‘interpreted according to the standard’ contained in Section 3.
      . ” White v. State, supra, 430 S.W.2d at 148.


author: JOHN W. PECK, Circuit Judge.

text:
    AMERICAN POSTAL WORKERS UNION, AFL-CIO, DETROIT LOCAL, Plaintiff-Appellant, v. INDEPENDENT POSTAL SYSTEM OF AMERICA, INC., et al., Defendants-Appellees.
    No. 72-2016.
    United States Court of Appeals, Sixth Circuit.
    Argued April 12, 1973.
    Decided June 26, 1973.
    As Amended Sept. 27, 1973.

      Bernard J. Fieger, Southfield, Mich., for plaintiff-appellant; Craig, Fieger & Golden, Southfield, Mich., on brief.
    P. Joseph Pascoff, Detroit, Mich., for defendants-appellees; Kerr, Wattles & Russell, by Robert G. Russell, Detroit, Mich., on brief.
    Before PECK, MeCREE and KENT, Circuit Judges.

       Honorable W. Wallace Kent died on May 27, 1973.

   JOHN W. PECK, Circuit Judge.

The complaint herein sought a declaratory judgment, a temporary and permanent injunction and further relief relative to the operation by defendants-appellees of an operation allegedly repugnant to the grant of monopoly to the United States to carry and deliver mail. This appeal has been perfected from an order of the District Court granting a motion of the defendants-appellees for summary judgment, on the ground that plaintiff-appellant “lacks standing to institute this type of action.”

It is alleged in the complaint, accepted for present purposes as true, that the appellant union is the duly and legally authorized representative of employees in the United States Postal Service in the Metropolitan Detroit area, and that the appellee Independent Postal System and the two individual appellees, its local agents, hold themselves out as having the authority and legal right to perform, by private contract, the delivery of mails. It is further alleged that they are operating in the State of Michigan without authority to do so, “having failed to register in any manner whatsoever to do business in said state.” The action is founded on Article I, Section 8, Clause 7 of the Constitution, which confers upon the Federal Government the exclusive authority and right “to establish post offices and post roads,” and upon regulatory statutes enacted pursuant to such constitutional grant. These enactments are collectively referred to as the Private Express Statute, and are codified as 18 U.S.C. §§ 1693-99 and § 1724. Section 1696 reads in pertinent part as follows:

“(a) Whoever establishes any private express for the conveyance of letters or packets, or in any manner causes or provides for the conveyance of the same by regular trips or at stated periods over any post route which is or may be established by law, or from any city, town, or place to any other city, town, or place, between which the mail is regularly carried, shall be fined not more than $500 or imprisoned not more than six months, or both.”

It is to be noted in passing that a separate statute providing a means of avoidanee of these criminal sanctions (39 U. S.C. § 601) is without present application. It is also initially observed that the parties do not here contest that the material delivered by appellees, consisting of addressed newspapers (shopping guides) and magazines are “letters” within the meaning of the Private Express Statute.

Virtually the entire thrust of appellant’s main brief in this court is that it had standing to maintain the action in what has come to be referred to as the “Data Processing sense.” The reference is to Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970) wherein it was held that the data processors’ association was an aggrieved party with the right under the Administrative Procedure Act to main: tain an action for the review of a ruling of the Comptroller that national banks could make data processing services available to other banks and to banks’ customers. Mr. Justice Douglas therein stated the standing question to be. “whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.” 397 U.S. at 153, 90 S.Ct. at 830. Appellant sought to place itself within the “zone of interests” category by filing an affidavit in support of its complaint stating in part, “The threats of [appellee] to continue and to expand its illegal operations . . . imperils the livelihood, careers, annuities, benefits and guaranteed employment of the postal employees we represent . . . .” We need not here reach appellees’ responsive contention that appellant’s loss, if any, is di minimus and that for that reason alone no standing to sue under the “zone of interests” test appears, because we agree with the District Court that that test has relevance only where the action under attack is that of a governmental agency, whereas the present suit is one between private parties. In Data Processing, the opinion goes to great lengths to demonstrate that the “zone of interests” test has been expansively applied, finding standing to exist where “aesthetic, conservational, and recreational” interests, as well as economic values, were endangered. 397 U.S. at 154, 90 S.Ct. 827. However, neither Data Processing nor any of the cases cited therein concern controversies between private parties; indeed, most arose under the Administrative Procedure Act, which a fortiori dictates the involvement of a public agency.

Although Data Processing has been relied upon by plaintiffs in an attempt to clothe themselves with standing in actions against other private parties, another line of cases stands for the proposition that standing has not been established in such circumstances. In Solien v. Miscellaneous Drivers and Helpers Union, 440 F.2d 124 (8th Cir. 1971), the charging party in a National Labor Relations Board proceeding sought to intervene with full party status. In affirming the District Court’s conclusion that the charging party did not have and could not obtain the status of a full party litigant indirectly through intervention, the Court stated, “The decisions [in Data Processing and Barlow] can fairly be said to represent a trend ‘toward enlargement of the class of people who may protest administrative action’ where statutes are concerned. Since we are concerned with the issue of whether charging parties have the right to obtain appellate review from a judicial order in a Section 10(0 proceeding and not the right of judicial review of administrative action, Data Processing Service and Barlow are not controlling.” 440 F.2d at 132. In Colligan v. Activities Club of New York, 442 F.2d 686 (2d Cir.), cert. denied, 404 U.S. 1004, 92 S.Ct. 559, 30 L.Ed.2d 557 (1971), the plaintiffs urged that they were “arguably within the zone of interests to be protected” by the Lanham Act, but the Court held that Data Processing “does not bring these appellants under its protective wing.” 442 F.2d at 691. We conclude that in this action between private parties Data Processing and Barlow provide no basis for a determination that they possess the requisite standing to maintain this suit.

More fundamentally, perhaps, although appellants have directed little attention to this point, a serious question exists as to whether either 18 U.S.C. § 1696 or 39 U.S.C. § 601 or both provide a basis for a private right of action. Section 1696 is a criminal statute, and the general rule is that a private right of action is not maintainable under a criminal statute. “Equally important is the firmly established principle that criminal statutes can only be enforced by the proper authorities of the United States Government and a private party has no right to enforce these sanctions.” Bass Angler Sportsman’s Society of America v. United States Steel, 324 F. Supp. 412, 415 (N.D.Ala.), aff’d., 447 F.2d 1305 (5th Cir. 1971). “The reasons for placing exclusive enforcement of criminal statutes in the proper governmental officials are even more applicable to enforcement of such statutes by injunction.” 324 F.Supp. at 416.

In the limited areas in which private actions have been held to be maintainable under a criminal statute, the plaintiffs have been without exception clearly members of the public designed to be protected by the applicable statute. For example, although the Federal Safety Appliance Act provides criminal sanctions for noneompliance, its purpose is clearly to protect railroad employees, and private actions by employees for damages resulting from injuries caused by such noncompliance are maintainable. See, e. g., Texas and Pacific Railway Co. v. Rigsby, 241 U.S. 33, 36 S.Ct. 482, 60 L.Ed. 874 (1916). A private action for violation of a section of the Securities Exchange Act of 1934, which provides criminal sanctions, was permitted in J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964), where the Court observed that among the chief purposes of the Act is “ ‘the protection of investors’ which certainly implies the availability of judicial relief where necessary to achieve that result.” 377 U.S. at 432, 84 S.Ct. at 1559. It cannot be seriously contended that the Private Express Statute was enacted for the protection of a class which included the postal employees or a union representing them. We hold that the Private Express Statute, which is clearly a criminal statute, can only be enforced by the proper governmental authorities and that no right of action thereunder resides in the plaintiff-appellant.

Finally, we note that our conclusion herein is contrary to that reached by the Tenth Circuit in National Association of Letter Carriers, AFL-CIO v. Independent Postal System of America, 470 F.2d 265 (10th Cir. 1972), and to that extent we respectfully decline to follow that opinion.

The judgment of the District Court is affirmed.

      . Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970), was argued and decided on the same day, and the two opinions, which stand for the same proposition and were both written by Mr. Justice Douglas, are usually cited together as authority for the doctrine enunciated.

      . Subsequent cases finding standing to exist where governmental agency action is involved include: Kodiak Airways v. C.A. B., 144 U.S.App.D.C. 371, 447 F.2d 341 (1971) ; National Automatic Laundry and Cleaning Council v. Shultz, 143 U.S.App.D.C. 274, 443 F.2d 689 (1971) ; Shannon v. United States Department of Housing and Urban Development, 436 F. 2d 809 (3d Cir. 1970) ; Blackhawk Heating and Plumbing Co. v. Driver, 140 U.S.App.D.C. 31, 433 F.2d 1137 (1970).
      It should be noted that eases in which an attack was made upon the constitutionality of a state law or state action by a state official and in which standing in the Data Processing sense was found to exist are obviously without application. See, e. g., Moyer v. Nelson, 324 F.Supp. 1224 (S.D.Iowa, 1971) ; DiCenso v. Robinson, 316 F.Supp. 112 (D.R.I.1970), aff’d, 403 U.S. 602, 91 S.Ct. 2105, 29 L.Ed.2d 745 (1971) ; Crossen v. Breckenridge, 446 F. 2d 833 (6th Cir. 1971).