author: CRAVEN, Circuit Judge:

text:
    Thelma JOY, Individually and on Behalf of all others similarly situated, Appellant, v. Holland DANIELS, Chairman, et al., Appellees.
    No. 72-2479.
    United States Court of Appeals, Fourth Circuit.
    Submitted March 27, 1973.
    Decided June 11, 1973.

      Frank Epstein, Charleston, S. C., on brief for appellant.
    No counsel for the appellees.
    Before CRAVEN, BUTZNER and RUSSELL, Circuit Judges.
   CRAVEN, Circuit Judge:

By this action for declaratory and in-junctive relief under 42 U.S.C. § 1983, plaintiff challenges, as violative of the fifth and fourteenth amendments, her threatened eviction from the Joseph Paul Apartments. The apartments are quasi-public, having been constructed and now being operated by defendant, Joseph Paul Apartments, Inc., under Section 221(d)(3) of the National Housing Act. The district court held that the^ plaintiff could properly be evicted since her tenancy had expired under the terms of the lease, and that no other cause need be assigned for the eviction. We reverse.

I.

The plaintiff, Thelma Joy, is the head of her household and with her four minor children constitutes a “family” within the statutory scheme. Her effective monthly income of $222.20 is a “low income” for purposes of the federal housing programs, and she thus qualifies for occupancy in the Joseph Paul Apartments. On September 2, 1970, plaintiff leased one of defendant’s apartments. The standard form lease provided in relevant part:

At the end of one year, lease is automatically renewed from month to month, rent to be payable in advance without demand on first day of each month. Either party may terminate lease at end of term or any successive term by giving 30 days’ notice in advance to other party.

On September 11, 1971, the defendant gave plaintiff 30 days’ notice to vacate, no cause being assigned. It appears that the plaintiff has continued to occupy her apartment on a month-to-month basis, with her tenancy dependent on the outcome of this litigation.

Section 221(d)(3) of the National Housing Act, 12 U.S.C. § 17151(d)(3) (1971), is a statutory scheme for encouraging housing for low income families. To participate in this program, defendant was required to conform to a regulatory agreement with the Federal Housing Administration governing, inter alia, the construction, occupancy, and daily operations of the project. The FHA also grants defendant rent supplements for the plaintiff and other tenants under Section 101 of the Housing and Urban Development Act of 1965, 12 U.S.C. § 1701s(b) (1971). Plaintiff, for example, enjoys occupancy of an apartment worth $157.00 per month at a cost to her of $48.00. FHA pays the difference, i.e., $109.00 per month, directly to defendant. As a prerequisite to participation in the rent supplement program, there must be local government approval. 24 C.F.R. § 5.15(c) (1971). The County Council specifically approved rent supplements for Joseph Paul Apartments on August 6, 1968.

II.

Initially we must determine if the fourteenth amendment is applicable, i.e., whether the action of defendant in seeking to evict plaintiff can be said to be “state action” since it is well settled the fourteenth amendment does not inhibit the conduct of purely private persons in their ordinary activities. Adickes v. S. H. Kress & Co., 398 U.S. 144, 169, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). The Supreme Court has never attempted to fashion a precise formula of what constitutes “state action” and the question frequently is difficult to determine. Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 172, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972); Burton v. Wilmington Parking Auth., 365 U.S. 715, 722, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). “State action” may result from administrative, regulatory, legislative, and judicial action. Moose Lodge No. 107, 407 U.S. at 179, 92 S.Ct. 1965. The determination must be made on a case-by-ease basis. “Only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance.” Burton, 365 U.S. at 722, 81 S. Ct. at 860.

In the present case the defendant receives mortgage benefits from the FHA and is thus subject to the attendant FHA regulations. Additionally, the defendant has undertaken to utilize the eviction procedures authorized by South Carolina. While these factors, either separately or combined, have been held insufficient to constitute “state action” they are relevant and material in the assessment of other evidence of state involvement.

The defendant receives rent supplements from the FHA. Prerequisite to obtaining these supplements, the defendant received specific authorization from the County Council. We view this involvement of the state (power delegated to local government) in this case as similar to the zoning power which, with state eviction proceedings, resulted in a holding of “state action” in Lavoie v. Bigwood, 457 F.2d 7 (1st Cir. 1972).

The participation of the federal government in such housing projects is conditioned upon state approval. The state is thus involved for there would otherwise be no federal direct funding through rent subsidies and indirect funding through mortgage benefits. We think that these factors coupled with utilization of state eviction procedure have “so far insinuated [the state] into a position of interdependence” with the defendant that the challenged activity “cannot be considered to have been so ‘purely private’ as to fall without the scope of the Fourteenth Amendment.” Burton, 365 U.S. at 725, 81 S.Ct. at 862. See McQueen v. Druker, 438 F.2d 781, 784 (1st Cir. 1971). Accordingly, we hold there is sufficient state involvement to constitute “state action” for pui’poses of the fourteenth amendment. We also hold that the facts are sufficient to satisfy the “under color of” law clause of 42 U.S.C. § 1983. See Adickes, 398 U.S. at 161-172, 90 S.Ct. 1598; Lavoie, 457 F.2d at 15; McQueen v. Druker, 317 F.Supp. 1122, 1133 (D.Mass.) (Wyzanski, C. J.), aff’d in part, 438 F. 2d 781 (1st Cir. 1971). Accordingly, the district court had jurisdiction under 28 U.S.C. § 1343(3).

III.

The district court concluded that plaintiff had no right of occupancy upon expiration of the term of the lease. Plaintiff contends that despite expiration of the term she may be evicted only for “good cause” and is entitled to the protection of procedural due process in the determination of whether cause exists. Since procedural due process applies only to the deprivation of interest protected by the fourteenth amendment, i.e., liberty and property, we must first determine plaintiff’s substantive rights. See Board of Regents v. Roth, 408 U.S. 564, 569, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); McQueen, 317 F.Supp. at 1128.

As stated in Board of Regents v.# Roth:

Certain attributes of ‘property’ interests protected by procedural due process emerge from [the Court’s] decisions. To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims. Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law —rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.

408 U.S. at 577, 92 S.Ct. at 2709.

A person’s interest in a benefit is a ‘property’ interest for due process purposes if there are such rules or mutually explicit understandings that support his claim of entitlement to the benefit and that he may invoke at a hearing.

Perry v. Sinderman, 408 U.S. 593, 601, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972). Thus we must now look to applicable statutes, governmental regulations, and the custom and understandings of public landlords in the operation of their apartments to determine if a public tenant has a “property interest” in a tenancy beyond the term of the lease except for cause.

When Congress legislated with regard to mortgage insurance benefits which defendant receives, it provided: “The Congress affirms the national goal, as set forth in section 1441 of Title 42, of ‘a decent home and suitable living environment for every American family’.” 12 U.S.C. § 1701t. This policy of improving the “living environment of urban areas” was also the policy of Congress in enacting the Housing and Urban Development Act of 1965. Pub.L. 89-117, 79 Stat. 451 (Aug. 10, 1965). “This [policy] includes adequate, safe, and sanitary quarters. But it also implies an atmosphere of stability, security, neighborliness, and social justice.” McQueen, 317 F.Supp. at 1130. Cf., Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 93 S.Ct. 364, 34 L.Ed. 2d 415 (1972).

In addition to the policy statements contained in the relevant funding statutes, Congress has also expressed itself in part on how these programs should be run. “No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” 42 U.S.C. § 2000d. The policy of this statute, a person’s right to be free of invidious discrimination in federally assisted programs, is contained in many statutes, see, e.g., 42 U.S.C. § 2000a.

This legislative establishment of policy carries significance beyond the particular scope of each of the statutes involved. The policy thus established has become itself a part of our law, to be given its appropriate weight not only in matters of statutory construction but also in those of decisional law.

Moragne v. States Marine Lines, Inc., 398 U.S. 375, 390-391, 90 S.Ct. 1772, 1782, 26 L.Ed.2d 339 (1970).

Not only the statutes, but also FHA regulations authorized under 12 U.S.C. § 1701s(f), imply a right to be free from arbitrary and discriminatory action. For example, 24 C.F.R. § 221.-536 (1971) provides that a landlord in a § 221(d)(3) apartment may not discriminate against any family because of children.

The House Report dealing with the Housing and Urban Development Act of 1965 said, with regard to the rent supplement program:

If his income increases sufficiently so that he can pay the full economic rent with 25% of his income, rent supplement payments on his behalf would cease to be made. The tenant could, however, continue to live in the project and would not be required to pay more than the full economic rent.

H.R. Rep. No. 365, 89th Cong., 1st Sess. (1965), 1965 U.S.Code Cong, and Ad. News, pp. 2614, 2618. This suggests the Congress was contemplating more occupancy entitlement than limited leasehold terms.

The tenant’s expectation of some degree of permananey, seemingly shared by the Congress, if not by the landlord, is bolstered by “custom.” Just\ as there may be a “common law” of tenure at a college or university, there may be a common law of tenancy in public housing projects. See Perry, 408 U.S. at 602, 92 S.Ct. 2694.

The actual workings of the subsidized housing program must be examined to determine whether there is a reasonable basis for tenants to expect that in normal circumstances they will be permitted to remain in the housing indefinitely. And indeed one finds that the normal practice in subsidized housing, as in private housing, is to permit tenants to remain beyond the expiration of a lease unless a reason has arisen for eviction; termination is the exception, not the rule. Thus, tenants do have a reasonable expectation deserving of protection.

Note, Procedural Due Process in Government-Subsidized Housing, 86 Harv.L.Rev. 880, 905 (1973).

In view of. the congressional policies of providing a decent home (with stability and security) for every American family, and of prohibiting arbitrary and discriminatory action, bolstered by the FHA regulations and custom, we find in the scheme of the National Housing Act and the Housing and Urban Development Act of 1965 a property right or entitlement to continue occupancy until there exists a cause to evict other than the mere expiration of the lease. We therefore hold that the lease provision purporting to give the landlord power to terminate without cause at the expiration of a fixed term is invalid. Accord, Rudder v. United States, 226 F.2d 51, 96 U.S.App.D.C. 329 (1955); Brown v. Housing Auth., 340 F.Supp. 114 (E.D.Wisc.1972); McQueen, 317 F.Supp. at 1131.

In Caulder v. Durham Housing Auth., 433 F.2d 998 (4th Cir. 1970), cert. denied, 401 U.S. 1003, 91 S.Ct. 1228, 28 L.Ed.2d 539 (1971), we stated:

The “privilege” or the “right” to occupy publicly subsidized low-rent housing seems to us to be no less entitled to due process protection than entitlement to welfare benefits which were the subject of decision in Goldberg or the other right and privileges referred to in Goldberg.

433 F.2d at 1003. The court then held tenants entitled to notice, confrontation of witnesses, counsel, and a decision by an impartial decision maker based on evidence adduced at a hearing. 433 F.2d 1004. As stated by the court below, it could be inferred that the plaintiff here was to be evicted for cause. If so, she would be entitled to the same procedural safeguards set forth in Caulder. To allow a quasi public landlord to evict upon expiration of a fixed term is to enable secret and silent discrimination and would wholly emasculate the procedural safeguards of Caulder. See Robinson v. Diamond Housing Corp., 150 U.S.App. D.C. 17, 463 F.2d 853, 860 (1972). Cf. Ohio Bell Tel. Co. v. Public Util. Comm’n, 301 U.S. 292, 302, 57 S.Ct. 724, 81 L.Ed. 1093 (1937).

Indeed, the entitlement of plaintiff to continue occupancy of public housing, like the interest of a covered employee under the Social Security Act, is, we think, “of sufficient substance to fall within the protection from arbitrary governmental action afforded by the Due Process Clause.” Flemming v. Nestor, 363 U.S. 603, 611, 80 S.Ct. 1367, 1373, 4 L.Ed.2d 1435 (1960). A position beyond that espoused in Flemming has been urged.

But that under appropriate circumstances one’s interest in his government job, his publicly financed home, his food stamp meals, or his state university educational opportunities may indeed be constitutional rights in the positive-law sense ought no longer be denied.

Van Alstyne, The Demise of the Right-Privilege Distinction in Constitutional Law, 81 Harv.L.Rev. 1439, 1463-64 (1968). However, in view of our holding that the congressional scheme and custom give plaintiff a right to remain in her apartment we need not decide whether her claim is also protected by equal protection and “substantive” due process.

Finally we must determine what procedural due process requires by way of protection of plaintiff’s right to tenancy except for cause. In Johnson v. Tamsberg, 430 F.2d 1125 (4th Cir. 1970), we noted that the South Carolina eviction scheme requires the landlord to prove in court his allegations, allows trial by jury, and we concluded that “public housing tenants are not actually ejected until basic due process requisites are satisfied.” 430 F.2d at 1127. That is enough. A prior administrative hearing is not required so long as the tenant may at some stage receive a plenary judicial hearing. 430 F.2d 1127. Since we now hold that a Section 221(d)(3) landlord must before eviction give his tenant a good-cause notice and prove such cause exists, and since the South Carolina eviction procedure is constitutionally adequate, we perceive no reason for retention of jurisdiction in the federal court to consider the question of good cause for eviction. Landlord-tenant law is traditionally the province of the states. State judges are bound as are we by the due process clause of the fourteenth amendment. U.S.Const, art. VI; Glover v. Housing Auth., 444 F.2d 158, 161-62n.4 (5th Cir. 1971); McQueen, 317 F.Supp. at 1131.

On remand the district court will enter its decree invalidating the lease expiration clause and enjoining the defendant from attempting to evict the plaintiff except for cause under the procedural and substantive law of South Carolina.

Reversed and remanded.

      . It consists of a welfare benefit in the amount of $122.20, plus $126.00 worth of food stamps at a cost to her of $26.00.

      . In its answer to the complaint the defendant alleged that the plaintiff “maintained a slovenly and ill-kept apartment;” had destroyed window screens; failed to pay rent on time; and, used excessive electricity. The district court found that it could be inferred that these were the reasons defendant sought eviction, but that such a finding was unnecessary to decision and thus no such inference was drawn.

      . The principal benefit is a lower rate of interest than available commercially. The court in McGuane v. Chenango Court, Inc., 431 F.2d 1189 (2d Cir. 1970) cert. denied, 401 U.S. 994, 91 S.Ct. 1238, 28 L.Ed.2d 532 (1971), held that the mere receipt of benefits under Section 221(d) (3) was insufficient to make the recipient an agency of the state and to thus establish “state action.”

      . Since such laws are applied neutrally, they will not generally ariee to a level of state action. Wiegand v. Afton View Apartments, 473 F.2d 545 (8th. Cir. 1973); McGuane, 431 F.2d at 1190.

      . See Shelley v. Kraemer, 334 U.S. 1, 68 S.Ct. 836, 92 L.Ed. 1161 (1948).

      . See also Note, Procedural Due Process in Government-Subsidized Housing, 86 Harv.L.Rev. 893, 895-96 (1973).

      . Since the pleadings do not raise the issue we need not decide if there is also “federal question” jurisdiction on the theory the defendant is an agency of the United States. But we note that if plaintiff’s life expectancy is as much as a decade (or less) the “bargain” value of her lease would seem to have a value greater than $10,060.00. 28 U.S.C. § 1331.

      . Indeed, the Court has held with regard to eviction from private housing:
      We do not denigrate the importance of decent, safe, and sanitary housing. But the Constitution does not provide judicial remedies for every social and economic ill. We are unable to perceive in that document any constitutional guarantee of access to dwellings of a particular quality or any recognition of the right of a tenant to occupy the real property of his [wholly private] landlord beyond the term of his lease, without the payment of rent or otherwise contrary to the terms of the relevant agreement.
      Lindsey v. Normet, 405 U.S. 56, 75, 92 S.Ct. 862, 874, 31 L.Ed.2d 36 (1972).

      . Expanding notions of “property,” sometimes defined as “entitlement,” are noted in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970):
      It may be realistic today to regard welfare entitlements as more like “property” than a “gratuity.” Much of the existing wealth in this country takes the form of rights that do not fall within traditional common-law concepts of property. It has been aptly noted that ‘[s]ociety today is built around entitlement. The automobile dealer has his franchise, the doctor and lawyer their professional licenses, the worker his union membership, contract, and pension rights, the executive his contract and stock options; all are devices to aid security and independence. Many of the most important of these entitlements now flow from government: subsidies to farmers and businessmen, routes for airlines and channels for television stations ; long term contracts for defense, space, and education; social security pensions for individuals. Such sources of security, whether private or public, are no longer regarded as luxuries or gratuities; to the recipients they are essentials, fully deserved, and in no sense a form of charity. It is only the poor whose entitlements, although recognized by public policy, have not been effectively enforced.’ Reich, Individual Rights and Social Welfare: The Emerging Legal Issues, 74 Yale L.J. 1245, 1255 (1965). See also Reich, The New Property, 73 Yale L.J. 733 (1964).
      397 U.S. at 262 n. 8, 90 S.Ct. at 1017.

      . See also Note, 82 Yale L.J. 258 (1972).

      . Indeed, early common law provided that even an estate at will could be transformed into an estate similar to a life estate by continuous custom. “This custom, being suffered to grow up by the lord, is looked upon as the evidence and interpreter of his will: his will is no longer arbitrary arid precarious; but fixed and acertained . . . . ” 2 Blackstone, Commentaries *147.

      . See also Slochower v. Board of Higher Educ., 350 U.S. 551, 555-556, 559, 76 S.Ct. 637, 100 L.Ed. 692 (1956); Cafeteria and Restaurant Workers Union v. McElroy, 367 U.S. 886, 898, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961); Wieman v. Updegraff, 344 U.S. 183, 192, 73 S.Ct. 215, 97 L.Ed. 216 (1952); Cole v. Housing Auth., 435 F.2d 807 (1st Cir. 1970); Holmes v. New York City Housing Auth., 398 F.2d 262, 265 (2d Cir. 1968): Hornsby v. Allen, 326 F.2d 005 (5th Cir. 1964); Rudder v. United States, 96 U.S.App.D.C. 329, 226 F.2d 51 (D.C. Cir. 1955); McDougal v. Tamsberg, 308 F.Supp. 1212, 1214 (D.S.C.1970); Colon v. Tompkins Square Neighbors, Inc., 294 F.Supp. 134, 138 (S.D.N.Y.1968).

      . See James v. Strange, 407 U.S. 128, 140, 92 S.Ct. 2027, 32 L.Ed.2d 600 (1972); Rinaldi v. Yeager, 384 U.S. 305, 86 S.Ct. 1497, 16 L.Ed.2d 577 (1966).

      . Van Alstyne, supra at 1462.

      . The South Carolina scheme is thus unlike that of New York and North Carolina, where eviction in state court is summary in nature and full administrative hearings must be afforded. Caulder v. Durham Housing Auth., 433 F.2d 998, 1002 (4th Cir. 1970); Escalera v. Nsw York City Housing Auth., 425 F.2d 853 (2d Cir. 1970).


source: Caselaw Access Project

author: TIMBERS, Circuit Judge.

license: Public Domain

text:
    DUNLOP TIRE AND RUBBER CORPORATION, Plaintiff-Appellant, v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Defendant-Appellee.
    No. 626, Docket 72-2296.
    United States Court of Appeals, Second Circuit.
    Argued April 11, 1973.
    Decided June 5, 1973.
    Alexander C. Cordes, Buffalo, N. Y. (Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N. Y., on the brief), for plaintiff-appellant.
    Mark N. Turner, Buffalo, N. Y. (Brown, Kelly, Turner, Hassett & Leach, Buffalo, N. Y., on the brief), for defendant-appellee.
    Before SMITH, HAYS and TIMBERS, Circuit Judges.
   TIMBERS, Circuit Judge.

The essential issue on this appeal involves the application of the standard inventory exclusion clause in a fidelity insurance policy and bond to a claim for loss of property alleged to have been sustained by reason of fraudulent or dishonest acts of an unidentified employee of the insured.

Plaintiff Dunlop Tire and Rubber Corporation (Dunlop) brought this action in the New York Supreme Court, Erie County, in June 1970 to recover under a fidelity policy and bond issued by defendant Fidelity and Deposit Company of Maryland (Fidelity). The complaint alleged that a $57,002.50 loss of sporting goods from Dunlop’s warehouse in Carl-stadt, New Jersey, had been sustained in 1968 by reason of fraudulent or dishonest acts of an unidentified employee of Dunlop acting alone or in collusion with others; and that Fidelity had refused to indemnify Dunlop for the loss.

The action was removed to the District Court for the Western District of New York. After a non jury trial before John T. Curtin, District Judge, the court filed an opinion on October 19, 1972 dismissing the complaint on the ground that Dunlop had failed to prove that the loss was sustained by reason of fraudulent or dishonest acts of Dunlop employees.

We affirm.

I.

The critical facts as found by the district court are largely undisputed.

Dunlop discovered the loss here involved on July 8, 1968 during an inventory by its employees. After comparing an actual physical count of goods on hand in its Carlstadt warehouse against its inventory records, it made a determination that the following items of sporting goods had disappeared from its warehouse between April 2, 1968 and July 8, 1968: 4,970 dozen golf balls; 820 dozen tennis balls; 114 golf clubs (woods); 127 golf clubs (irons); and 117 tennis frames and rackets. The total value of the lost property was estimated to be $57,002.50. The accuracy of the inventory and the determination of the quantity and type of goods lost is not challenged. The district court so found.

At the trial, no employee of Dunlop who was familiar with the daily routine of its sporting goods warehouse facilities at Carlstadt testified. Nor did Dunlop adduce evidence that any particular employee was responsible for the loss. Rather, it relied upon inventory records and other circumstantial evidence intended to show that only Dunlop employees could enter the area where the loss occurred.

For example, Harold Petnode, Operating Manager for the New York division of Dunlop, testified to the layout of the warehouse, its security system, and other relevant circumstances. Dunlop was the sole occupant of the Carlstadt warehouse. The warehouse contained its tire and sporting goods divisions. These were two independent units separated from each other by a cinder block wall but sharing a common office with connecting doors. There were locks on these connecting doors, as well as on the doors leading to the outside from each of the separate units. Inside the sporting goods unit, the goods that were lost were stored in a floor-to-ceiling locked wire cage.

The warehouse was operated only during the day. It was locked at night. During the day, only authorized Dunlop employees were allowed in the sporting goods area. Three or four such employees had keys to the wire cage during the day, but all keys were turned in to the sporting goods manager at night. It was not established what the manager did with the keys at night. No Dunlop employees were on the premises at night.

Night security was maintained by ADT through the use of an alarm system with electric eye beams. ADT employees had access to the sporting goods area but not to the locked wire cage. The alarm system was activated at the end of each day by a Dunlop employee before he went off duty.

During the period of time that the loss occurred, no break-ins were reported by ADT, nor did anyone notice any physical evidence of burglary. After the loss was discovered, there was a substantial turnover of Dunlop personnel at its Carlstadt warehouse. Since that turnover, there were no appreciable shortages.

Dunlop concluded from these circumstances that the loss disclosed by its inventory computation was caused by dishonesty of its employees. It filed a claim under the Comprehensive Dishonesty, Disappearance and Destruction Policy and the Commercial Blanket Bond, both of which had been issued by Fidelity to Dunlop in 1966. The policy and bond each included five separate Insuring Agreements. Only Insuring Agreement I (Employee Dishonesty Coverage) in the policy and bond is here involved. Pursuant thereto, Fidelity bound itself to reimburse and indemnify Dunlop against loss of money and other property sustained through the fraudulent or dishonest act or acts of any of its employees, acting alone or in collusion with others. Under the “Conditions and Limitations” part of the Insuring Agreement, two sections, set forth in the margin of this opinion, bear directly on the issue here involved: Section 2(b), the Inventory Exclusion Clause; and Section 4, the clause relating to Loss Caused By Unidentifiable Employees.

Judge Curtin’s well reasoned opinion, while accepting the accuracy of Dunlop’s inventory and its determination of the quantity and type of goods lost, nevertheless held that the inventory, standing alone, was not sufficient to show that the loss was caused by any unlawful acts of Dunlop employees. He held that Dun-lop’s other circumstantial evidence was without probative force:

“Giving plaintiff every benefit of the facts and the law in this case, it is the court’s belief that the circumstantial evidence produced was not sufficient to sustain plaintiff’s burden. The plaintiff failed to show that no one else had the ability to enter the cage except its own employees. . . . Plaintiff has failed to rule out the possibility that ADT employees had access to the manager’s keys and were able to enter the cage.”

Although we affirm the district court’s dismissal of the complaint for failure of proof, we do so on a slightly different ground. We hold that since Dunlop failed to establish with evidence other than the inventory computation that a loss in fact was sustained as a result of employee dishonesty, its claim is excluded by Section 2(b) of the policy and bond.

II.

The issue on appeal is whether Dunlop proved that it was entitled to recover under the policy and bond. Dunlop contends that it sustained its burden of proof by showing through its inventory computation that a loss of property was sustained and by showing through circumstantial evidence that this loss must have been caused by the dishonest acts of an' employee or employees. Fidelity argues that, since Dunlop’s claim is wholly dependent upon inventory computations to prove the existence of a loss and its amount, the claim is excluded by Section 2(b) of the policy and bond.

Section 2(b) has been a standard inventory exclusion provision of most fidelity policies and bonds for a number of years. It was designed to protect insurers against claims based on erroneous or falsified inventory or profit and loss computations. Paramount Paper Products Co. v. Aetna Casualty & Surety Co., 182 Neb. 828, 157 N.W.2d 763 (1968). Inventory records and other business records are less reliable than other evidence in proving that a loss of goods has been sustained or that a loss is attributable to employee dishonesty. Mid-Continent Stores v. Central Surety & Insurance Corp., 377 S.W.2d 567 (Ct. App., Mo.1964).

On its face, Section 2(b) appears to permit only one proper interpretation. The language preceding the first semicolon clearly indicates that a claim at all dependent upon an inventory or profit and loss computation is to be excluded from the coverage of the policy. The insured cannot depend upon such evidence to establish his prima facie case. The language following the first semicolon indicates, however, that where the insured has some independent evidence that a loss was caused by employee fraud or dishonesty, the inventory or profit and loss computation will be admitted as corroborative evidence to help the insured meet his burden of proof. But there must be some evidence “wholly apart from such computations” both as to the existence and amount of loss; otherwise the claim is excluded.

Section 4 of the “Conditions and Limitations” of the policy and bond, captioned “Loss Caused by Unidentifiable Employees”, imposes a requirement in addition to that prescribed by Section 2(b) under certain circumstances. Where the insured claims that a loss was caused by employee dishonesty, but the dishonest employee or employees cannot be identified, the insured must submit evidence which “reasonably proves” that the loss was caused by the fraud or dishonesty of undesignated employees. Therefore, before inventory computations will be admitted as evidence in the insured’s casein-chief, it must be reasonably proven that a loss caused by employee dishonesty has been sustained. This requires more than “some independent evidence” but less than a prima facie case as a condition to the use of inventory computations.

The standard inventory exclusion clause has been the subject of considerable adjudication. In the typical case, the insured has evidence, other than inventory computations, of the factual existence of a loss due to employee dishonesty. The insured, however, does not have independent evidence indicating the full extent of the claimed loss. The courts are divided as to whether, under such circumstances, inventory computations may be introduced to prove the full amount of the loss.

We need not decide, however, which of these lines of decisions is correct, for the issue before us is substantially different. Here, there is a complete absence of proof of employee dishonesty independent of the inventory computations. In support of its allegation that its loss was due to employee dishonesty, Dunlop has attempted to prove that only its employees could have taken the lost goods. It has adduced evidence to show that the lost property was separately stored and locked in a warehouse occupied only by it; that most of the articles were stored in a separately locked floor-to-ceiling cage; that nonemployees were not permitted access; that a burglar system was operational; that there was no physical evidence of burglary; and that since the turnover of employees following discovery of the loss, no similar losses have occurred.

This is circumstantial evidence that, if a loss in fact was sustained, Dunlop employees were the perpetrators. But this so-called evidence of employee dishonesty presupposes the factual existence of the loss. The evidence merely tends to foreclose the possibility of theft by persons other than employees. It does not prove the existence of any loss. There are no confessions, actual or implied, from employees who had been stealing goods. Dunlop has not shown suspicious circumstances indicating that employees were pilfering goods. The only evidence that a loss occurred at all is the inventory computations. Such computations alone are insufficient to prove the existence of the loss in light of the prohibition of the inventory exclusion clause.

Every court that has been confronted with the situation presently before us has concluded that the claim must be excluded. The only reported New York decision where this precise issue has been raised, so far as we know, is Kernwood Mfg. Corp. v. Home Indemnity Co., 65 Misc.2d 354, 317 N.Y.S.2d 113 (N.Y. City Civ.Ct.1970), aff’d, 67 Misc.2d 888, 326 N.Y.S.2d 682 (App.Term, 1st Dept. 1971). There the plaintiff’s proof consisted of “showing limited access to the premises, the nature of its business, and that the loss was possible only by its employees or through their connivance.” 65 Misc.2d at 356, 317 N.Y.S.2d at 115. The only evidence that a loss had occurred was provided by an inventory computation. The court granted defendant’s motion to dismiss at the end of plaintiff’s case on the ground that plaintiff had failed to prove a prima facie case:

“In a word, the plaintiff’s cause of action ‘is dependent upon an inventory computation’, but the plaintiff did not offer any proof, ‘through evidence wholly apart from such computations’ that the loss was sustained ‘through any fraudulent or dishonest act or acts committed by any one or more’ of its employees.” Id.

A case closely parallel to the instant one is York Lumber Co. v. Fidelity & Deposit Co. of Maryland, 331 F.Supp. 1131 (E.D.Pa.1971). There the lumber company’s profit and loss computation showed a sudden and unexplained decrease in profits. This was traced to a decrease in profits on roofing shingles. After a private investigator was assigned to guard the shingles, profits returned to normal levels. At trial, York sought on these facts to prove that only an employee or employees could have caused the loss reflected on the books. The court, in noting that York had failed to produce any evidence independent of the profit and loss computation to show that a loss had been sustained, stated:

“York’s theory of employee dishonesty is premised upon the assumption that roofing shingles have been removed from the lumber yard. Such removal constitutes the factual existence of the loss. York, however, has presented only its own computations as evidence that roofing shingles have been stolen. Its allegations that only its employees had access to the roofing shingles and affidavits in support thereof merely attempt to exclude the possibility of theft by other individuals by creating a negative inference. Such evidence of employee dishonesty, however, presupposes the factual existence of the loss and adds nothing by which its existence can be proved. And the computations alone, even if accurate, are insufficient to prove the existence of the loss and support a claim under Section 2(b).” 331 F.

Supp. at 1133. (emphasis added).

The court therefore concluded that, because of the lack of independent evidence, York’s claim was excluded by the terms of the insurance contract. Accord, TriMotors Sales v. Travelers Indemnity Co., 19 Wis.2d 99, 119 N.W.2d 327 (1963).

Dunlop failed to adduce any evidence, aside from its inventory computation, that it sustained a loss through the fraudulent or dishonest acts of its employees. Since Section 2(b) of Insuring Agreement I clearly provides that the policy does not apply to losses whose existence are proven solely by inventory computations, Dunlop failed to prove a prima facie case.

Affirmed.

“The judicial problem, therefore, is one of fair accommodation of the general right of an insurer to fix his undertaking (citing cases) and that of the general public, in buying insurance containing frozen, unbargained-for policy limitations, to get the degree of coverage it reasonably envisages.
Such accommodation, in our judgment, should preclude recovery by the insureds under this bond if they had no proof whatever of an employee-connected loss other than inventory or profit and loss computations, no matter how reliable in the particular case.”

      . ADT is an abbreviation for American District Telephone Co., a well known supplier of electrical burglary protection devices, including central station alarm systems. See Brink’s Inc. v. American District Telegraph Co., 413 F.2d 359, 360 (7 Cir. 1969); United States v. International Telephone & Telegraph Corp., 324 F.Supp. 19, 40-41 (D.Conn.1970), appeal dismissed, 404 U.S. 801 (1971).

      . “Section 2. This Policy does not apply: * * *
      (b) under Insuring Agreement I, to loss, or to that part of any loss, as the case may be, the proof of which, either as to its factual existence or as to its amount, is dependent upon an inventory computation or a profit and loss computation; provided, however, that this paragraph shall not apply to loss of Money, Securities or other property which the Insured can prove, through evidence wholly apart from such computations, is sustained by the Insured through any fraudulent or dishonest act or acts committed by any one or more of the Employees; >>

      . “Section 4. If a loss is alleged to have been caused by the fraud or dishonesty of any one or more of the Employees and the Insured shall be unable to designate the specific Employee or Employees causing such loss, the Insured shall nevertheless have the benefit of Insuring Agreement I, subject to. the provisions of Section 2(b) of this Policy, provided that the evidence submitted reasonably proves that the loss was in fact due to the fraud or dishonesty of one or more of the said Employees, . "

      . No profit and loss computation is here involved.

      . For decisions requiring independent evidence as to both the existence and amount of the loss, see Gillette Company v. Travelers Indemnity Co., 365 F.2d 7 (7 Cir. 1966); Paramount Paper Products Co. v. Aetna Casualty and Surety Co., 182 Neb. 828, 157 N.W.2d 763 (1968); Locke Distributing Co. v. Hartford Accident and Indemnity Co., 407 S.W.2d 658 (Ct.App., Mo.1966); Mid-Continent Stores, Inc. v. Central Surety and Insurance Corp., 377 S.W.2d 567 (Ct.App., Mo.1964). For decisions allowing the introduction of such computations as the only proof as to extent of loss, where there is some independent proof of employee dishonesty, see Sommer v. General Insurance Co. of America, 22 Ohio App.2d 149, 259 N.E.2d 142 (1970); American Fire and Casualty Co. v. Burchfield, 285 Ala. 358, 232 So.2d 606 (1970); Meyer Jewelry Co. v. General Insurance Co. of America, 422 S.W. 2d 617 (S.Ct., Mo.1968); Hoboken Camera Center, Inc. v. Hartford Accident and Indemnity Co., 93 N.J. Super. 484, 226 A. 2d 439 (1967); Tri-Motors Sales Inc. v. Travelers Indemnity Co., 19 Wis.2d 99, 119 N.W.2d 327 (1963).

      . Dunlop recovered against Fidelity in an earlier action in the New York Supreme Court, Erie County, on a claim involving a similar loss at its Los Angeles warehouse. Dunlop argues that, under the doctrine of collateral estoppel, Fidelity should be barred from relying on Section 2(b) as a defense. We agree with the district court’s determination that in the earlier case there was substantial evidence that the manager of the warehouse had stolen or embezzled the goods from the warehouse. We hold that Dunlop’s claim of collateral estoppel is wide of the mark.

      . No choice of law issue having been raised on this appeal, we assume that New York law applies. And since this issue has not received extensive consideration by the New York courts, we also look to other decisions for guidance.

      . See also Hoboken Camera Center, Inc. v. Hartford Accident and Indemnity Co., 93 N.J.Super. 484, 496, 226 A.2d 439, 447-48 (1967):

      . In light of our holding that Dunlop has not established a prima facie case, we do not reach the issue of the appropriate measure of damages.


author: PER CURIAM.

text:
    John C. SCHUMACHER, Appellant, v. Lowell SCHMIDT, Commissioner of Revenue, State of South Dakota, et al., Appellees.
    No. 73-1206.
    United States Court of Appeals, Eighth Circuit.
    July 5, 1973.

      Andrew G. Kohlan, Minneapolis, Minn., and Ramon A. Roubideaux, Rapid City, S. D., for appellant.
    M. T. Woods, Sioux Falls, S. D., for appellees.
    Before GIBSON, LAY and STEPHENSON, Circuit Judges.
   PER CURIAM.

This appeal is before the screening panel pursuant to appellees’ motion for affirmance under Local Rule 8.

The appeal is from an order by the Honorable Andrew W. Bogue granting summary judgment dismissing appellant-plaintiff’s complaint upon the merits. A review of the record and briefs filed herein leads us to conclude that the issue presented for review is so unsubstantial as not to need further argument and that summary affirmance is appropriate.

Appellant brought this action under 42 U.S.C. §§ 1983, 1985 and 28 U.S.C.A. § 1343 for the alleged deprivation of civil rights, naming as defendants the Commissioner of Revenue of the State of South Dakota, the Director, Other Taxes and Licensing, and the Deputy Commissioner of Revenue of South Dakota. Appellant complained that the actions of the. defendants in refusing to grant him an on-sale liquor license (retail sales) were arbitrary and capricious and a denial of due process and equal protection. Defendants moved for dismissal and summary judgment which was granted, and this appeal followed.

The material facts are not in dispute. In September 1971, the City Commissioners of the City of Huron, South Dakota, under the impression that newly enacted legislation authorized them to issue additional on-sale liquor licenses, adopted a resolution to approve seventeen on-sale licenses during the calendar year 1972 and scheduled public hearings thereon in November 1972.

As a result of the hearings, Huron approved and forwarded to the Commissioner of Revenue for his approval 15 applications for on-sale licenses, which included 13 renewals and two new applications, one of which was appellant’s. Shortly thereafter appellee, Peterson, Director, Other Taxes and Licensing, advised the Commissioners of Huron that the 15 on-sale license applications exceeded the statutory limitations of the current statute by two, i. e., no more than 13 such licenses could be issued. As a result the Commissioners of Huron again met and voted to re-submit the 13 existing on-sale licenses for renewal; thus the application of appellant was not included. Appellant then brought this action.

Judge Bogue found that although the Commissioner of Revenue is given discretion to approve or disapprove applications for licenses submitted by the municipality (S.Dak.Compiled Laws Ann. § 35-2-5.2 (1972))' the record shows that here there was no matter of discretion involved. The Court stated:

“All fifteen applications were returned to the city for a final determination as to which thirteen applications would be approved. The City Commission of Huron made the decision as to preferences and priorities of applications, not the Department of Revenue. While the Court does not intend to infer such, if any deprivation of Constitutional rights occurred, it necessarily occurred at the municipal and not the state level.”

Appellant does not charge deprivation of rights at the municipal level. He charges that the state officials misinterpreted the statute — that more on-sale licenses should be available to the City of Huron. The matter of statutory interpretation is for the state courts. In fact, there is support under South Dakota decisions for the position taken by appellees. See, Asmussen v. Schmidt, 202 N.W.2d 857, 859 (S.Dak.1972). In any event there is no showing of a deprivation of civil rights under 42 U.S.C. §§ 1983, 1985.

Affirmed.

      . “The number of on-sale licenses issued shall not exceed three each and for the first one thousand of population and not exceed one each of such licenses for each additional one thousand of population or fraction thereof, provided, however, the number of such licenses shall not exceed the total number of such licenses allowable or issued prior to July 1, 1971.” Ch. 211, 1971 Laws of S.D.; S.D.Comp. Laws Ann. 35-4-11 (Supp.1972).

      . The population of Huron was 14,299.

      . The original files show that one of the appellees, Lowell H. Schmidt, Commissioner of Revenue, State of South Dakota, in an affidavit accompanying the motion to dismiss and for summary judgment below, stated that counsel for appellant in another action in behalf of another applicant unsuccessfully sought mandamus against appellees in the State Court of South Dakota wherein the State Circuit Court held the City of Huron was only entitled to a total of 13 on-sale licenses. This action apparently was not appealed to the South Dakota Supreme Court.


author: PER CURIAM:

text:
    Lester J. LEGER, Plaintiff-Appellant, v. AMERADA HESS CORPORATION, Defendant-Appellee, Consolidated Underwriters, Intervenor.
    No. 72-348
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    June 13, 1973.

      W. D. Atkins, Jr., Lafayette, La., for plaintiff-appellant.
    John Pitts, Alexandria, La., for defendant-appellee.
    William H. de Launay, Jr., Alexandria, La., for intervenor.
    Before WISDOM, AINSWORTH and CLARK, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N. Y., 431 F.2d 409, Part I (5th Cir. 1970).

   PER CURIAM:

The sole issue on this appeal in this diversity case is whether Lester J. Leger was the statutory employee of Amerada Hess for purposes of exclusive liability under the Louisiana Workmen’s Compensation statutes, La.Rev.Stat.Ann. § 23:-1032 and § 23:1061. The court below granted summary judgment for the defendant. We affirm.

Leger’s general employer was Townsend Brothers, a firm which supplied labor to Amerada on a daily basis. At the time of his injury, Leger was engaged in cleaning up oil spilled from a separator at Amerada’s work site under the direction of a supervisor supplied by Amerada.

The coverage of the “trade, business, or occupation” clause of § 23:-1061 has been the subject of extensive judicial interpretation which is summarized in a series of recent opinions of this court. See, e. g., Arnold v. Shell Oil Company, 419 F.2d 43 (5th Cir. 1969); Cole v. Chevron Chemical Company-Oronite Division, 427 F.2d 390 (5th Cir. 1970), on appeal after remand, 477 F.2d 361 (5th Cir. 1973). As we stated in Arnold, citing numerous Louisiana cases, the test for determining whether the work of employees of independent contractors is within the regular “trade, business, or occupation” of the principal employer is “whether the particular activity is essential to the business.” 419 F.2d at 50. The application of this test was further explained in Cole I thus:

. the fact that the employer or the industry as a whole always contracts out the activity is not controlling. . Similarly not controlling is the fact that the employer hires workers of its own to perform activity related to the activity it contracts out. Instead, the decisive factors are the nature of the activity being contracted out, the nature of the principal employer’s business, and the relationship between the particular activity and the broader business operation. In this regard, the basic inquiry is not whether the activity contracted for is helpful or necessary to the operation of the business enterprise, for we may presume that businessmen in the normal conduct of their affairs will not contract for work that is neither helpful nor necessary. Rather, we inquire whether the particular activity is so related to the principal employer’s conduct of his trade, business, or occupation that it should be considered as an essential part thereof. .

427 F.2d at 393-394. One important indicia of whether the independent contractor’s employee falls within the scope of § 23:1061 is whether “the work contracted out was so necessary to the principal’s operations that, if it were not performed by the independent contractor, the principal would have had to hire workers of its own to perform the task.” Cole II, All F.2d 361. This alternative-employee test reflects the basic purpose of § 23:1061 which is to prevent the principal employer from evading his obligations under the Workmen’s Compensation Statutes by contracting out work which would otherwise be performed by its own employees. See Arnold v. Shell Oil Company, supra, 419 F.2d at 50; Foster v. Western Electric Co., 258 So.2d 153, 156 (La.App.1972); Malone, Principal’s Liability for Workmen’s Compensation to Employees of Contractor, 10 La.L.Rev. 25 (1949). While the essentiality of a particular activity to a given business enterprise may involve disputed facts, e. g., Cole v. Chevron Chemical Co.—Oronite Division, supra, 427 F.2d at 394; Gorsalitz v. Olin Mathieson Chemical Corp., 429 F.2d 1033 (5th Cir. 1970), where the factual picture of the principal employer’s operations and the part the activity in issue played in those operations is clear, summary judgment is appropriate, e. g., George v. Home Indemnity Co., 420 F.2d 782 (5th Cir. 1969); Fontenot v. Stanolind Oil & Gas Co., 243 F.2d 574 (5th Cir. 1957); Arnold v. Stupp Corp., 249 So.2d 276 (La. App.1971); Allen v. United States Fire Ins. Co., 222 So.2d 887 (La.App. 1969).

In Arnold and Fontenot, this court held that the maintenance of oil separation equipment at field work sites is part of the regular operation of an integrated oil company, so that those engaged in the maintenance of such equipment are as a matter of law statutory employees of the oil company under § 23:1061. In the present case, Leger’s job — the removal and destruction of inflammable spillage from an oil separator —was part of the routine maintenance necessary to the continued safe operation of Amerada’s work site. We find no reason to distinguish the legal status of employees supplied by independent contractors who repair separation equipment from that of those who clean up spillage surrounding such equipment. Both types of maintenance are essential to the operation of the oil company’s enterprise. Whether Amerada chose, as a matter of practice, to perform this necessary function with its own employees or through servants obtained from independent labor contractors, those engaged in the clean-up operation are as a matter of law its statutory employees under the Louisiana Workmen’s Compensation Act.

Since there were no disputed issues of material fact, a summary judgment was proper.

Affirmed.

      . La.Rev.Stat. § 23:1032 provides:
      The rights and remedies herein granted to an employee or his dependent on account of a personal injury for which he is entitled to compensation under this Chapter shall he exclusive of all other rights and remedies of such employee, his personal representatives, dependents, or relations.

        Nothing in this Chapter shall affect the liability of the employer to a fine or penalty under any other statute.
      La.Rev.Stat. § 23 :1061 provides:
      Where any person (in this section referred to as principal) undertakes to execute any work, which is a part of his trade, business, or occupation or which he had contracted to perform, and contracts with any person (in this section referred to as contractor) for the execution by or under the contractor of the whole or any part of the work undertaken by the principal, the principal shall be liable to pay any employee employed in the execution of the work or to his dependent, any compensation under this Chapter which he would have been liable to pay if the employee had been immediately employed by him; and where compensation is claimed from, or proceedings are taken against, the principal, then, in the application of this Chapter reference to the principal shall be substituted for reference to the employer, except that the amount of compensation shall be calculated with reference to the earnings of the employee under the employer by whom he is immediately employed. Where the principal is liable to pay compensation under this Section, he shall be entitled to indemnity from any person who independently of this Section would have been liable to pay compensation to the employee or his dependant, and shall have a cause of action therefor.

      . In its recent opinion in Cole, this court affirmed a judgment N.O.V. limiting the plaintiff to his compensation remedies where, as an employee of an independent contractor, he was engaged in expansion and renovation work necessary to the continued operation of the defendant’s oil refinery.

      . We do not reach or decide whether the court below was correct in its alternative holding that as a matter of law Leger was a borrowed-servant of Amerada Hess, and therefore within the exclusive remedy provision of § 23:1032 and § 23:1035, as interpreted in Humphreys v. Marquette Casualty Co., 235 La. 355, 103 So.2d 895 (1958).


text:
    GOVERNMENT OF the CANAL ZONE, Plaintiff-Appellee, v. Luis Alberto Rios C. (Corrella), Defendant-Appellant.
    No. 72-3292
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    June 22, 1973.

      W. J. Sheridan, Jr., Federal Public Defender, Balboa Heights, Canal Zone, for defendant-appellant.
    Lester Engler, U. S. Atty., Balboa, Canal Zone, for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Rule 18, 5 Cir., see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York, et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

This 17 year-old appellant, Luis Alberto Rios C. (Corrella), was convicted below in a non jury trial for the nighttime burglary of a residence which re-suited in his being sentenced to three years at hard labor in the penitentiary. Notice of appeal was timely filed with this Court on September 22, 1972 but on December 4, 1972 the record was returned to this Court by the public defender of the Canal Zone with a cover letter stating that “I am unable to find in the record any appealable error and am of the same opinion as the trial judge . . . that the appeal is frivolous.” This Court, by Chief Judge’s order, ordered the public defender to comply with the prescribed procedure set out in Anders v. California, 1967, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 for withdrawing as appointed counsel for a defendant in a criminal appeal. The public defender responded by filing a brief on the merits in appellant’s behalf.

Though this brief raises a close question as to whether there was sufficient corroborative evidence supporting the testimony of appellant’s alleged accomplice in the burglary to satisfy the requirement of 6 C.Z.Code § 42(a), we decline to decide that issue at this time. Instead, we reverse the judgment of the court below and remand for a new trial. We take this course because our review of the record leaves us entirely unconvinced that this defendant was accorded the quality of representation which the Sixth Amendment guarantees an accused in a criminal trial. Our reading of —tfee-roeeiM. reveals serious questions regarding the legality of appellant’s detention, search, and arrest, none of which were objected to below by counsel. Also, we note certain conflicts in the testimony which were not pursued below by counsel during cross-examination. In short, here we conclude in our supervisory powers that the dictates of fairness require that appellant be tried again. There it ends.

Reversed.

      . Title 3, § 10 of the Canal Zone Code makes the following provision for appointed counsel in criminal cases:
      “The Governor shall appoint a qualified member of the Canal Zone as a public defender. The public defender shall receive such compensation and such of the privileges of a Canal Zone Government employee as are fixed and granted by the Governor.
      The public defender shall represent, in the district court, any person charged with the commission of a crime within the original jurisdiction of the district court who is unable to obtain counsel for his defense, unless, in an exceptional ease, the court assigns other counsel. 76A Stat. 53.”

      . Title 6, § 42 of the Canal Zone Code provides in part:
      “(a) A conviction can not be had on the testimony of an accomplice unless his testimony is corroborated by other evidence which in itself and without the aid of the testimony of the accomplice, tends to connect the defendant with the commission of the offense. The corroboration is not sufficient if it merely shows the commission of the offense or the circumstances thereof.”

      . We express no opinion regarding the legality of these stages of the proceedings below nor as to the admissibility of the evidence resulting therefrom. We only point to a pattern of pro forma, almost passive, performance by counsel throughout the trial. This was, of course, further evidenced by counsel’s characterization of the appeal initially as frivolous. Then, after our admonishment, suddenly merit appeared.

      . An example of conflict, apparently unnoticed by counsel, occurred when the complaining witness testified that after being awakened by his barking dogs he was alerted that someone was in his house when he saw a flashlight light in his living room. The accomplice testimony was that no light was used during the burglary.


text:
    UNITED STEELWORKERS OF AMERICA, LOCAL 1104 et al., Plaintiffs-Appellants, v. UNITED STATES STEEL CORPORATION, Defendant-Appellee.
    No. 72-1979.
    United States Court of Appeals, Sixth Circuit.
    Argued April 10, 1973.
    Decided June 5, 1973.
    George H. Cohen, Washington, D. C., Darryl J. Anderson, Bredhoff, Barr, Gottesman, Cohen & Peer, Washington, D.' C., Joseph E. Finley, Melvin S. Schwarzwald, Metzenbaum, Gaines, Finley & Stern, Cleveland, Ohio, on brief, for plaintiffs-appellants; Bernard Klei-man, Gen. Counsel, United Steelworkers of America, AFL-CIO, Pittsburgh, Pa., of counsel.
    Charles F. Clarke, Cleveland, Ohio, Thomas H. Barnard, Cleveland, Ohio, on brief, for defendant-appellee; Squire, Sanders & Dempsey, Cleveland, Ohio, of counsel.
    Before EDWARDS and CELE-BREZZE, Circuit Judges, and O’SULLIVAN, Senior Circuit Judge.
   PER CURIAM.

This civil rights case charging discrimination on grounds of sex, in violation of Title VII of the Civil Rights Act of 1964, § 706(e), 42 U.S.C. § 2000e-5(e) (1970), was filed by appellants, United States Steelworkers of America, Local 1104, against United States Steel Corporation. Acting on behalf of female employees of the Lorain Works, appellant union sought to recover wages over a two-year period (1967 to 1969) during which the women were not compensated for their one-half hour lunch period while male employees were. The case was fully tried before a District Judge in the United States District Court for the Northern District of Ohio who entered judgment in favor of the defendant.

The union charged sex discrimination in the company’s lunch rules whereby men were paid for their lunch period while women were not. The company explained its policy by saying that the men’s lunch period could, by contract, be varied as to time and place, and interrupted by the management when company tasks needed immediate attention, while the women’s lunch period was required by Ohio law to be fixed and uninterrupted. O.R.C. § 4107.46(E).

In 1969 the Equal Employment Opportunity Commission announced that compliance with state female protective laws would not be a valid defense to an otherwise unlawful employment practice based on sex discrimination. The company thereupon began paying its women employees for their half-hour lunch period.

In 1971 and 1972 both the Ohio and federal courts ruled the former female protective statutes void as against federal civil rights laws. Jones Metal Products Co. v. Walker, 29 Ohio St.2d 173, 281 N.E.2d 1 (1972); Ridinger v. General Motors Corp., 325 F.Supp. 1089 (S.D. Ohio 1971).

After trial of the issues, the District Judge entered a Memorandum and Order containing extensive findings of fact. He concluded:

The difference between the meal periods received by female employees as required by Ohio law and the lunch period allowed to the men is definite and material. The Ohio law makes it clear that the female meal period must be uninterrupted by any work and a place to enjoy it must be available away from the work station of the female employee. The defendant company observed and complied with these requirements of the Ohio law. Its male employees, however, were granted a lunch period that was subject to company direction as to its length, timing, and location. Moreover, the company reserved and exercised the right to interrupt the male employee’s lunch period whenever the continuous operation of the Lorain Works required the elimination of a mill breakdown, or the immediate performance of some other emergency repair or essential work.

The appellant union does not claim that the District Judge’s findings are “clearly erroneous” and we believe they are well supported by the record. The appellant union does dispute the materiality of the lunch policy differences found by the District Judge and does dispute the company’s “good faith” in the premises, since it could have paid the female employees.

The District Judge cited and relied upon a District Court case which this court subsequently affirmed, saying in part:

The defendant, General Motors, did not have the benefit of any judicial determination of the validity of the Ohio female protective laws until 1971, and the enforcing agency had not handed down any definitive administrative interpretation which would assist in resolving the conflict between any such state statutes and the provisions of Title YII until August 19, 1969. Under all the circumstances of this case we cannot conclude that the District Judge abused his discretion in denying back pay to these plaintiffs. Manning v. General Motors Corp., 466 F.2d 812, 816 (6th Cir. 1972), cert. denied, 410 U.S. 946, 93 S.Ct. 1366, 35 L.Ed.2d 613 (1973).

We conclude that this appeal is governed by the decision in Manning v. General Motors Corp., supra.

The judgment of the District Court is affirmed.


author: SETH, Circuit Judge.

text:
    Catherine H. HITCHCOCK, Appellant, v. PETER KIEWIT & SONS COMPANY, INC., Appellee.
    No. 72-1609.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted March 28, 1973.
    Decided June 19, 1973.
    Rehearing Denied July 27, 1973.

      William B. Rogers, Oklahoma City, Okl., for appellant.
    Gene Stipe, Oklahoma City, Okl. (Carl Hughes, Oklahoma City, Okl., with him on the Brief), for appellee.
    Before SETH and BARRETT, Circuit Judges, and TALBOT SMITH, Senior District Judge.

       Of the Eastern District of Michigan, sitting by designation.

   SETH, Circuit Judge.

Appellant, plaintiff below, appeals from a judgment of the district court entered on a jury verdict in her favor in the sum of $829.16 as damages in a diversity suit against appellee for a breach of contract.

Appellee, which is engaged in the business of highway construction, entered into a contract with appellant under the terms of which appellee was to remove certain quantities of sand from the appellant’s property or pay a minimum amount. After the sand had been removed, the contract required appellee to slope the land toward a creek running through the property so that the land would drain properly, and to replace the topsoil.

Appellee removed the sand and paid for it according to the terms of the contract. However, several attempts by ap-pellee to grade the land and replace the topsoil failed to satisfy appellant and she brought this suit seeking damages in the sum of $32,950.00. This was the amount alleged by her to be necessary to put the property into the condition called for by the contract. As mentioned, the jury found in favor of appellant, but awarded only $829.16 as damages.

Mrs. Hitchcock on this appeal asserts that the trial court committed error in that it applied the wrong measure of damages, and did not permit appellant to develop her theory of the case as it related to the principal purpose of the contract.

Very early in the trial, and during the testimony of a witness, the court read portions of the syllabus and opinion of the Oklahoma Supreme Court to the jury. The opinion is in Peevyhouse v. Garland Coal & Mining Co., Okl., 382 P.2d 109. Other than the fact that it involved strip mining for coal instead of mining for sand, Peevyhouse is very similar to the instant case. In Peevyhouse, the Oklahoma Supreme Court agreed that grading the land and replacing the topsoil were provisions merely “incidental” to the main purpose of the contract there in issue, and because of this allowed as damages only the diminution in value of the property. The court also said in the opinion that had the restoration work been one of the main purposes of the contract the cost of completion of such work would have been the proper measure of damages.

Although in the instant case it appears that the question of whether the work was an “incidental” or “main” purpose of the contract was indirectly submitted to the jury, the trial court, by reading from Peevyhouse with the admonition that it was binding, gave the jury the impression that the Oklahoma Supreme Court had already decided that the provisions in question were “incidental” as a matter of law, and that they could not be a “main” purpose of the contract.

At this early point, the trial court also seemed of this opinion. However, appellant’s counsel objected to this interpretation of Peevyhouse,. and the court took a recess, apparently to study the case. Immediately after the recess, the trial court once more read from Peevyhouse, this time attempting to explain to the jury that provision of the case which requires that the owner of the land be awarded the cost of completion of the uncompleted work as damages, if those costs are not grossly disproportionate to the economic benefit to be gained by such full performance, once more apparently assuming that there was no question but what the provisions in issue were “incidental” as opposed to “main” purposes of the contract. The trial court then allowed testimony regarding what it would cost to complete the work called for by the contract, and left undone by the appellee.

At no time does it appear that the jury was told that even though Peevyhouse was to be followed if applicable, it was their duty to determine whether the provisions relative to sloping the land and replacing the topsoil were “main” purposes of the contract here concerned, or merely “incidental.” They were only told that if they found that the provisions were incidental, they were to apply the rule as to damages set forth in Peevyhouse. Thus the jury never decided this question. The court seemingly read Peevyhouse to them as having made that determination as a matter of law. The result of the injection of the state court opinion into the case as a direct instruction to the jury resulted inadvertently in taking from the jury the determination of whether or not the restoration of the land surface was incidental to the agreement or not. This is a fact question for the jury.

A careful reading of the transcript convinces us that there was at least a strong probability that the jury thought that they were foreclosed from deciding this issue because of the Oklahoma Supreme Court’s decision in Peevyhouse. Further remarks regarding the Peevy-house rule and the instructions to the jury, adequate in themselves, were not clear enough and unequivocal enough to clear up the initial misdirection.

Additionally, we believe that Mrs. Hitchcock should have been allowed to testify as to the negotiations surrounding the execution of the contract, and her intent in entering into it. This testimony, though normally inadmissible, is admissible in this case as an exception to the parole evidence rule since the contract does not reveal whether the provisions in question were considered to be “main” purposes or merely “incidental” purposes, and the jury must decide this question. The use of the word “consideration” on several different occasions with a different meaning added to the confusion.

Since it is necessary to remand this case for a new trial, it is not necessary in our view to discuss points (d), (e) and (f), except to say that we expect that any confusion which might have occurred because of the pretrial order in the original trial will, we trust, be cleared up before this ease is retried.

Reversed and remanded for a new trial.


text:
    Jordan Jay KING et al., Plaintiffs-Appellants, v. KANSAS CITY SOUTHERN INDUSTRIES, INC., et al., Defendants-Appellees.
    No. 72-1734.
    United States Court of Appeals, Seventh Circuit.
    Argued and Decided June 12, 1973.

      Lowell E. Sachnoff, Chicago, 111., for plaintiffs-appellants.
    A. Bradley Eben, George B. Christensen, Edward H. Hatton and Joan M. Hall, Chicago, 111., Landon H. Rowland, Kansas City, Mo., Marvin Schwartz, New York City, Arthur Susman, Harry Schulman, Harry A. Young, Jr., Chicago, 111., for defendants-appellees.
    Before PELL and STEVENS, Circuit Judges, and ESCHBACH, District Judge.

       Honorable Jesse E. Eschbach is sitting by designation from the United States District Court for the Northern District of Indiana.

   PER CURIAM.

This is an appeal by a group of plaintiffs in only one of six consolidated cases pending in the district court. In the instant case, the district court on June 22, 1972, 56 F.R.D. 96, entered its order denying plaintiffs’ motion to have this action designated as a class action. Plaintiffs filed their notice of appeal to this court from that order and concede that they base their right of appeal, if any, on 28 U.S.C. § 1291.

Defendant-appellee Kansas City Southern Industries, Inc., has filed its motion to dismiss the appeal for the reason that the order below was an interlocutory order not appealable under 28 U. S.C. § 1291. We agree.

The question before the court on the motion to dismiss involves a much disputed question as to whether the dismissal of a class action portion of a complaint is appealable. In Thill Securities Corp. v. New York Stock Exchange, 469 F.2d 14, 17 (7th Cir. 1972), this court held that the denial of a motion to strike a class action was not an appealable order under 28 U.S.C. § 1291. We now hold that the present order is not ap-pealable under § 1291, necessitating the dismissal of the appeal for lack of jurisdiction.

In so holding, we follow Hackett v. General Host Corp., 455 F.2d 618 (3d Cir. 1972), cert. denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812; Gerstle v. Continental Airlines, Inc., 466 F.2d 1374 (10th Cir. 1972); and our analogous prior decision in Jumps v. Leverone, 150 F.2d 876 (7th Cir. 1945). We decline to adopt and accordingly reject the so-called “death knell” theory originally enunciated in Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966), cert. denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967). Likewise we do not find the “collateral order” doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), applicable to the type of order here involved.

On June 11, 1973, the plaintiffs below purported to secure an order from the district court amending, on a nunc pro tunc basis, the order of June 22, 1972, which amended order would have permitted, pursuant to 28 U.S.C. § 1292(b), an appeal on the class action status as involving a controlling question of law as to which there is a substantial ground for difference of opinion. Our present disposition does not reach the issues raised by that action and we express no opinion as to whether the power existed in the district court to amend its previous order on a nunc pro tunc basis while an appeal was pending in this court, nor do we express an opinion as to whether this court in its discretion should permit an appeal to be taken from such order in the event it was properly entered below.

Appeal dismissed.


text:
    Charles KIESEL and Hilbert Kiesel, as owners of the S/V “CORAL SANDS”, Plaintiffs-Appellees, v. The STATE OF FLORIDA, DEPARTMENT OF NATURAL RESOURCES and Frank Fernandez, Defendants-Appellants.
    No. 72-3018.
    United States Court of Appeals, Fifth Circuit.
    June 25, 1973.
    Jerry E. Okner, Asst. Atty. Gen., Dept, of Legal Affairs, Robert L. Shevin, Atty. Gen., Tallahassee, Fla., for defendants-appellants.
    William C. Norwood, Richard M. Gale, Miami, Fla., for plaintiffs-appellees.
    Before WISDOM, DYER and INGRA-HAM, Circuit Judges.
   PER CURIAM:

The case on appeal is an admiralty action for damages. Plaintiffs-appellees, the owners of a shrimping vessel, sued the State of Florida, the Department of Natural Resources and Frank Fernandez, a marine patrol officer of the Department of Natural Resources. The vessel was operating in navigable waters near Everglades City, Florida, when patrol officer Fernandez boarded the vessel and found eight crawfish tails in the hold. Since the vessel had no craw-fishing permit, Captain Russell, the master of the vessel, was cited and an appearance bond in the amount of $35 was set, which the Captain was unable to satisfy. In default of bond, Captain Russell was ordered to accompany Officer Fernandez to Everglades City. When advised he would not leave the boat, Officer Fernandez ordered the vessel into Everglades City through the nearest available channel. In the course of navigating the channel the vessel ran aground on a mud flat. While waiting for a high tide to clear the vessel from the flat Officer Fernandez and Captain Russell negotiated a lower bond in the amount of $25 which the vessel was able to make, and with the coming of high tide the vessel proceeded on its appointed rounds and sank shortly thereafter in clear seas. A more detailed account of the maneuverings is found in the findings of fact of the court below.

We find no merit to the appellants’ claim that the federal court was without jurisdiction. Jurisdiction is vested under the admiralty and maritime laws of the United States pursuant to 28 U.S.C.A. § 1333 and F.R.Civ.P. 9(h). And the State of Florida had given its consent to be sued, Florida Statutes, § 768.15, as follows:

“Torts by public officers and employees.
(1) Waiver of immunity.- — The state, for itself and its counties, agencies, and instrumentalities, waives immunity for liability for the torts of officers, employees, or servants committed in the state. The state and its counties, agencies, and instrumentalities shall be liable in the same manner as a private individual, but no action may be brought under this section if the claim:
(a) Arises out of the performance or the failure to perform a discretionary function;
(b) Arises out of a riot, unlawful assembly, public demonstration, mob violence, or civil disturbance;
(c) Arises out of the issuance, denial, suspension, or revocation of, or by the failure to issue, deny, suspend, or revoke, a permit, license, certificate, approval, order, or similar authorization ; or
(d) Arises out of the collection or assessment of taxes.
(2) Punitive damages. — Punitive damages shall not be allowed in an action brought under this section.
(3) Venue. — Actions under this section shall be brought in the county where the cause of action arose.
(4) Remedies cumulative. — The rights and remedies under this section are cumulative to all others.
(5) Effective date. — This section shall become effective on July 1, 1969 and shall not apply to acts or omissions occurring before that date.”

The appellants contend that a statute waiving immunity from suit is strictly construed and that the failure of the statute to specifically waive immunity in federal court conclusively shows that there was no such waiver. We believe the district court was correct in rejecting such contention. If the legislature had intended to limit the forums in which the state might be sued it could easily have done so. This it did not do. We believe and hold that the provisions of paragraph (3) of the Act relating to venue should be construed to extend to any court exercising competent jurisdiction over the designated area and certainly would include the admiralty court in an admiralty case.

Upon the issues of liability and damages, we are of the opinion that the standards of McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20, are clearly met and we must affirm. We cannot conclude, from the record, that the findings of the district court are “clearly erroneous”. We are of the opinion that such findings are fully supported and correct.

The judgment of the district court is affirmed.


author: DUNIWAY, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Peter Scott CLIFFORD, Defendant-Appellant.
    No. 72-2082.
    United States Court of Appeals, Ninth Circuit.
    May 25, 1973.
    Sull Lawrence (argued), Beverly Hills, Cal., for defendant-appellant.
    Joel Levine, Asst. U. S. Atty. (argued), William D. Keller, U. S. Atty., Eric A. Nobles, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff-appellee.
    Before BROWNING and DUNIWAY, Circuit Judges, and BURNS, District Judge.

       Honorable James M. Burns, United States Dis iet Judge, District of Oregon, sitting by designation.

   DUNIWAY, Circuit Judge:

OPINION

Clifford was convicted of failing to submit to induction into the armed forces, 50 U.S.C. App. § 462(a). We affirm.

The pertinent facts are these:

Over a period of about a year, Clifford completed 20 hours of study at a junior college in Bakersfield, California. On November 3, 1970, he was classified I-A by his local board. He did not appeal this classification. Shortly thereafter, the board received a certificate from Pierce College in Los Angeles, stating that Clifford was enrolled for 12% units as a first year student. The certificate states “Submission of this form does not constitute a request for deferment.” On November 27, 1970, Clifford requested a Form 150 for conscientious objectors which he returned, completed, on January 6, 1971. On February 2 the board reopened his classification and retained him in I-A. The minutes of the board for that date contain the notation. “I-A ■ — -Late Filing. Moral Background poor.” Again, Clifford did not appeal.

Clifford’s only argument in this court is that his induction order was invalid because his board did not consider the Pierce College certificate. There is nothing in Clifford’s selective service file that shows whether or not the board considered it. But it did reopen and reconsider his classification. It is presumed that the local board complies with its duty to review the registrant’s entire file when it classifies him. United States v. Gress, 9 Cir., 1972, 464 F.2d 1002, 1005; Skinner v. United States, 9 Cir., 1954, 215 F.2d 767, 768. It follows from these cases that if Clifford’s board was required to look at the certificate by 32 C.F.R. § 1622.1 or any other regulation, we must presume that it did so. Our recent decision in United States v. Kelly, 9 Cir., 1973, 473 F.2d 1225 is not to the contrary. There, the board did not reopen after it received new information from Kelly. Here, the board did reopen.

Clifford does not claim that the information in the Pierce College certificate was sufficient to require reopening. It did not make out a prima fade case. If Clifford had thought it sufficient, he had a remedy by appeal from the February 2, 1971 reclassification. He did not appeal.

Nor are 32 C.F.R. §§ 1625.2 and 1625.4, as interpreted in United States v. Norman, 9 Cir., 1969, 412 F.2d 629 of any help to Clifford. Clifford argues that these regulations give a local board only two alternatives upon receipt of new information relating to a registrant’s classification: it can either reopen on the basis of that information or send the registrant a letter stating that the information does not warrant reopening. Its failure to do either lifts the presumption of administrative regularity and ambiguities regarding what the board actually did will be resolved in favor of the registrant.

The rule in this circuit is that neither section 1625.2 nor section 1625.4 is triggered unless “a written request to reopen and consider anew the registrant’s classification” is submitted. Shaw v. United States, 9 Cir., 1959, 264 F.2d 118. Moreover, in this circuit the request cannot be implicit. The leading case on the point is Taylor v. United States, 9 Cir., 1960, 285 F.2d 703 (in banc), in which the registrant submitted information that he had taken a position as a part-time minister which could lead to full-time ministerial work. The court rejected his argument that the board should have reopened on the basis of this information, not because it did not establish a prima fade case, but because: “Taylor did not request that the classification be reopened. He advised, but did not request.” 285 F.2d at 704. To the same effect are United States v. Currier, 9 Cir., 1972, 453 F.2d 1242; United States v. Robley, 9 Cir., 1970, 423 F.2d 613; United States v. Weldon, 9 Cir., 1969, 422 F.2d 800, 801; Hoapili v. United States, 9 Cir., 1968, 395 F.2d 656; Storey v. United States, 9 Cir., 1966, 370 F.2d 255; Shaw v. United States, supra. See also Comment, Judicial Development of the Law of Selective Service Reopening, 69 Mich.L.Rev. 1074, 1089-95 (1971) (remarking upon this court’s restrictive reading of the written request requirement and rejection of implicit requests for reopening).

Although none of the above cases discusses the issue in depth, their cumulative effect is to make it clear that the certificate sent by Pierce College was not a written request to reopen. It was merely new informaton provided by a third party without a specific statement regarding reclassification. Indeed, the form itself states that it did not constitute a request for a deferment. The case thus falls within the language of Taylor: there was advice but no request. It follows that Clifford is not entitled to the benefit of the regulations upon which he relies, the presumption of regularity prevails, and his conviction should be affirmed. In Norman, supra, there was a written request to reopen.

So far as appears from the opinion in Kelly, supra, neither the presumption of regularity nor the requirement that there be a specific request to reopen were even considered in that case.

Affirmed.


text:
    UNITED STATES of America, Appellee, v. Leslie Gene UNTIEDT, Appellant.
    No. 72-1752.
    United States Court of Appeals, Eighth Circuit.
    June 8, 1973.
    Rehearing and Rehearing En Banc Denied July 18, 1973.

      Robert C. Gross, Cedar Rapids, Iowa, for appellant.
    Evan L. Hultman, U. S. Atty., and Robert L. Sikma, and Alan H. Kirshen, Asst. U. S. Attys., Sioux City, Iowa, filed printed brief for appellee.
    Before HEANEY, BRIGHT and ROSS, Circuit Judges.
   PER CURIAM.

Leslie Gene Untiedt appeals from the denial of his motion to vacate sentence. On September 5, 1972, he pleaded guilty to stealing, receiving, possessing and concealing goods of a value of more than $100 which were part of an interstate shipment, in violation of 18 U.S.C. § 659. On appeal, Untiedt alleges that he was coerced into pleading guilty by the government’s threat to try him as a dangerous and special offender under 18 U.S.C. § 3575, and that the government did not fulfill its part of the plea bargain.

In viewing the transcript of the guilty plea proceeding, we questioned whether F.R.Crim.P. 11 had been complied with. As this Court has previously stated, we have a duty to review compliance with Rule 11 even where that issue is not presented to the trial court. United States v. Briscoe, 428 F.2d 954, 957 (8th Cir. 1970), cert. denied, 400 U.S. 966, 91 S.Ct. 378, 27 L.Ed.2d 386 (1970).

We hold that the judge at the guilty plea proceeding did not adequately establish on the record that there was a factual basis for the plea as required by Rule 11. At this proceeding, the prosecutor first stated what was charged by the indictment. The following then took place:

“Q. Leslie Gene Untiedt, did you in fact commit this offense?

“A. Yes.

•x ■y.■ * * -x- *

"The Court: Mr. Untiedt, what were the goods that you have either possessed or concealed or received or stolen in this case?

“The Defendant: It was meat, Your Honor.

“The Court: What form was it?

“The Defendant: I really don’t know. I didn’t see the inside of the truck. “The Court: It was in a truck, trailer, the meat?

“The Defendant: Yes.”

This brief exchange does not sufficiently establish a factual basis for the plea. There was no discussion of the acts Un-tiedt actually performed. There was no showing that the goods stolen were part of an interstate shipment.

The purpose of Rule 11 is to assure that the defendant is pleading guilty to committing acts which do in fact constitute the offense charged. As the Supreme Court in McCarthy v. United States, 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969), stated:

“Requiring this examination of the relation between the law and the acts the defendant admits having committed is designed to ‘protect a defendant who is in the position of pleading voluntarily with an understanding of the nature of the charge but without realizing that his conduct does not actually fall within the charge V ”

Id. at 467, 89 S.Ct. at 1171.

The court below could have asked Untiedt to describe what he did and intended, or could have asked the government to outline its proof. As our Court stated in United States v. Cody, 438 F.2d 287, 289 (8th Cir. 1971), thorough judicial inquiry is required to determine that the elements of the offense were present, therefore establishing a factual basis for the plea. The inquiry which took place here was far from thorough. The sentence and guilty plea must be vacated, and Untiedt must be allowed to plead anew. McCarthy v. United States, 394 U.S. at 463-464, 89 S.Ct. 1166.

Reversed.


text:
    John GILBERT, Appellant, v. UNITED STATES of America, Appellee.
    No. 559, Docket 72-2116.
    United States Court of Appeals, Second Circuit.
    Argued March 15, 1973.
    Decided June 5, 1973.
    Steven Thaler, New York City (Richard Markowitz, Philadelphia, Pa., and Joel C. Glanstein, New York City, of counsel), for appellant.
    James B. Magnor, New York City (Charles N. Fiddler, New York City, Gilbert S. Fleischer, Atty., in Charge, Admiralty & Shipping Section, Dept, of Justice, and Whitney North Seymour, Jr., U. S. Atty., S. D. N. Y., on the brief), for appellee.
    Before HAYS, MULLIGAN and OAKES, Circuit Judges.
   PER CURIAM:

Where a settlement is agreed upon among clients and counsel, the terms are conveyed to the court by counsel and judgment entered accordingly, may the judgment be set aside on the complaint of one party that his counsel coerced him into agreement? The answer we give is in the negative, in this, a case which could so easily have been avoided by a precautionary letter of authorization from counsel to client.

Appellant here, a licensed maritime officer, had a personal injuries claim arising under the Jones Act, 46 U.S.C. § 688, out of his service on a United States vessel. His counsel was Paul C. Matthews, who we are told is experienced and skilled in handling such matters. With trial scheduled in the District Court for the Southern District of New York for May 21, 1971, appellant returned from Japan to New York a week before, having refused by mail to agree to settle his claim for a sum in the area of $30-35,000, and apparently with hopes of obtaining $70,000 or so. Parenthetically, it is indicative, perhaps, of the strength (or weakness) of appellant’s case that he now complains that he was not met by counsel at Kennedy Airport “[a]lthough he had advised Paul C. Matthews by telegram to meet him at the Airport upon his arrival . . ..” Appellant complains also that he did not really have the chance to discuss the case in detail with Mr. Matthews until the day before trial, May 20, and that the discussions of the 20th extended until 3:00 a. m. of the 21st, the day of the trial, “to exhaustion.”

It was found below by a magistrate and confirmed by District Judge Brieant, after hearing the evidence of appellant and his attorney, that Matthews “did have the approval to settle this action. . . . ” when he accepted by telephone between 2:00 and 3:00 a. m. on the 21st the United States’ offer of $32,500. Appellant’s brief admits as much, though with a qualification, in saying, “Upon further coaxing from his attorney, appellant without intent to accept the offer of settlement and against his will stated that he would take the $32,500.” (Brief for the Appellant at 11-12). As stated, this ease could have been avoided (and counsel indeed protected) had he secured a letter of authorization before confirming the settlement, but then he may have been concerned lest the client back out.

According to appellant’s testimony he asked his lawyer to obtain an adjourned date for the trial, but the magistrate found that appellant went to Florida on the 21st without having ascertained the adjourned date. The magistrate accordingly credited the lawyer’s testimony that talk as to an adjournment occurred before the settlement, not after. Attorney Matthews assured Judge Bonsai (the judge to whom the case was assigned for trial) and opposing counsel on the morning of the 21st that the case had been settled for $32,500 net and an order of discontinuance was entered some two weeks later, on June 4, 1971.

The findings below that the settlement was expressly authorized are supported by the evidence and not clearly erroneous. Fed.R.Civ.P. 52(a). Even if appellant had a claim against his own counsel for coercion or overbearing, this would not permit the settlement, one which is not claimed to have been unfair, here to be overturned. McKenzie v. Boorhem, 117 F.Supp. 433, 435 (W.D. Ark.1954); Smith v. Washburn & Condon, 38 Ariz. 149, 297 P. 879 (1931) (“. . . where express authority is given, the attorney may compromise any matter, and his action in so doing is binding upon his principal”); Allen v. Fewel, 337 Mo. 955, 87 S.W.2d 142 (Sup. Ct.1935). Cf. United States v. Kenner, 455 F.2d 1, 3-5 (7th Cir. 1972); Thomas v. Colorado Trust Deed Funds, Inc., 366 F.2d 136, 139 (10th Cir. 1966); Hot Springs Coal Co. v. Miller, 107 F.2d 677, 680 (10th Cir. 1939). See also Davis v. United Fruit Co., 402 F.2d 328,, 331 (2d Cir. 1968), cert. denied, 393 U.S. 1085, 89 S.Ct. 869, 21 L.Ed.2d 777 (1969); Beirne v. Fitch Sanitarium, Inc., 167 F. Supp. 652 (S.D.N.Y.1958). As was said in The S.S. Standard, 103 F.2d 437, 439 (2d Cir)., cert. denied sub nom. Standard Oil Co. v. Bonici, 308 U.S. 560, 60 S.Ct. 106, 84 L.Ed. 471 (1939), “Fair settlements are in the interest of the men, as well as of the employers.”

It is unnecessary for us to determine whether the case could also be put on the somewhat narrower ground, supported by the language of some cases, that while the general rule is that an attorney may not settle his client’s ease without express authority, he is presumed to have that authority, and a party seeking to show that his attorney of record did not have the actual authority to compromise carries the burden of proof to vacate any judgment entered upon the attorney’s agreement. United States v. Beebe, 180 U.S. 343, 352, 21 S.Ct. 371, 45 L.Ed. 563 (1901); Thomas v. Colorado Trust Deed Funds, Inc., supra, 366 F.2d at 139.

Accordingly, we affirm the judgment below denying appellant’s motion under Fed.R.Civ.P. 60 to vacate Judge Bonsai’s order of June 4, 1971, discontinuing the original action.

Judgment affirmed.


text:
    In the Matter of Laurence SEMEL, Bankrupt, Appellant in No. 72-2058. Appeal of FEDERAL, SUPPLY COMPANY, Appellant in No. 72-2059.
    Nos. 72-2058, 72-2059.
    United States Court of Appeals, Third Circuit.
    Submitted Under Third Circuit Rule 12(6) May 22, 1973'.
    Decided June 27, 1973.
    See also 3 Cir., 427 F.2d 651.
    Laurence Semel, Lyndhurst, N. J., for Laurence Semel.
    David M. Hoffman, Eckhaus, Guston & Hoffman, Wayne, N. J., for Federal Supply Co.
    Before KALODNER, ALDISERT and ADAMS, Circuit Judges.
   OPINION OF THE COURT

PER CURIAM:

These appeals require us to review an order of the district court vacating an order of the referee in bankruptcy granting appellant Semel’s discharge.

After the referee granted Semel’s voluntary petition, Federal Supply Company filed seven specifications of objections to discharge. The referee dismissed all seven specifications. The district court, however, sustained specification number two, vacated the referee’s order, and denied discharge. Federal Supply contends that the court erred in affirming dismissal of specifications one, four and seven, and Semel claims that the court erred in sustaining specification number two.

We find no error in the court’s ultimate disposition of this matter, and will affirm the judgment.

We do, however, wish to clarify the facts surrounding specification number two, which charges a violation of 18 U. S.C. § 152. Section 152 subjects to criminal liability anyone who “knowingly and fraudulently makes a false oath of account in or in relation to any bankruptcy proceeding.” The Bankruptcy Act provides that a discharge will be denied whenever the court determines that the petitioner has violated section 152. See 11 U.S.C. § 32(c)(1). In sustaining this specification, the district court observed that in a “prior” bankruptcy proceeding, Semel avoided bankruptcy by testifying that his assets included over $250,000 in accounts receivable, and that he was in possession of records and books indicating that there existed some possibility of collection. Yet, in the present voluntary bankruptcy proceeding, Semel admitted that he never kept records of accounts receivable, that any amounts owed to him could be ascertained only by reviewing individual files, and that virtually all of these debts were uncollectible. Thus, in the instant proceeding, Semel’s schedule of assets listed nothing under “debts due petitioner on open account,” and under “unliquidated claims of every nature,” reported “[pjossible claims for professional services rendered, damages, possible fees on legal matters . . . costs and disbursements advanced for clients” with an estimated value of $100.00.

During cross-examination, Semel admitted that he “was in error” when he failed to list outstanding debts owed to him, and conceded that “if somebody undertook to check out these people now, institute suits, prosecute them, that money would be recovered.” Soon thereafter, upon order of the referee, Semel submitted a lengthy list of these debts. See, In re Semel, 427 F.2d 651, 654 (3d Cir. 1970). Thus, at the inception of the instant proceeding, Semel denied the existence of debts owed to him, whereas under cross-examination' — in the same proceeding — he admitted that monies were owed him, that certain of these might prove collectible and furnished a list of these debts.

We agree with the district court that “Semel’s palpable untruths cannot be overlooked,” and recite the foregoing only to demonstrate that these untruths occurred in the present proceeding, and not a prior proceeding.

The order of the district court will be affirmed.