author: HEANEY, Circuit Judge.

text:
    UNITED STATES of America, Appellant-Appellee, v. CITY OF BLACK JACK, MISSOURI, Appellee-Appellant.
    Nos. 74-1345 and 74-1378.
    United States Court of Appeals, Eighth Circuit.
    Submitted Oct. 15, 1974.
    Decided Dec. 27, 1974.
    Rehearing and Rehearings En Bane Denied Jan. 20, 1975.

      Frank E. Schwelb, Atty., Dept, of Justice, Washington, D. C., for appellant-ap-pellee.
    Roy W. Bergmann, Clayton, Mo., and Sheldon K. Stock, Clayton, Mo., for ap-pellee-appellant.
    Before HEANEY, BRIGHT and ROSS, Circuit Judges.
   HEANEY, Circuit Judge.

This action was brought by the United States against the City of Black Jack, Missouri, under Title VIII (Fair Housing) of the Civil Rights Act of 1968. 42 U.S.C. § 3601 et seq. The complaint alleged that the City had denied persons housing on the basis of race, in violation of § 3604(a), and had interfered with the exercise of the right to equal housing opportunity, in violation of § 3617, by adopting a zoning ordinance which prohibited the construction of any new multiple-family dwellings. In particular, it alleged that the ordinance operated to preclude construction of a low to moderate income integrated townhouse development known as Park View Heights. The District Court recognized that,

United States v. City of Black Jack, Missouri, 372 F.Supp. 319, 327 (E.D.Mo.1974).

* * * where a municipality exercises its zoning powers in a racially discriminatory manner and thereby excludes housing which provides rental opportunities for significant numbers of non-white persons, such conduct constitutes a violation of 42 U.S.C. § 3604(a). * * *

However, it held that the United States had failed to prove that there was any racially discriminatory effect or that the City had operated with racially discriminatory motives, and that, therefore,

* * * [t]his Court’s review of the validity of the zoning ordinance is limited to whether the ordinance is arbitrary, unreasonable or without a rational basis * * *.

Id. at 328.

Finding that the ordinance had none of those qualities, the court held that there was no violation of Title VIII and denied relief. We reverse.

The factual background of the litigation is set forth in the District Court’s reported opinion. We repeat here those facts relevant to this appeal. In 1970, the Black Jack area was unincorporated and was governed locally by St. Louis County. The county had adopted a master plan in 1965 which embraced the 1,700 acres which were later to become the City of Black Jack. That plan designated sixty-seven acres for multiple-family construction. In 1970, 15.2 of those acres were occupied by 321 apartments, 483.1 acres were occupied by single-family dwellings, and the rest of the land was undeveloped.

In 1969, the Inter Religious Center for Urban Affairs (ICUA) began planning Park View Heights to create alternative housing opportunities for persons of low and moderate income living in the ghetto areas of St. Louis. After a search for an appropriate site, ICUA settled on 11.9 acres on Old Jamestown Road, then in an unincorporated area, but now within the City of Black Jack. The site was designated for multiple-family structures. An option was obtained on the land, and in March, 1970, the sponsors filed a preliminary application with the Federal Housing Administration for initial approval of a proposed § 236 development. The original plans envisioned 108 units comprised of two-story townhouses. Within a month, the proposal became a matter of public knowledge, and public opposition was swift and active.

On June 5, 1970, HUD issued a “feasibility letter,” which amounted to a green light for federal funding, and which was accompanied by a reservation of federal funds for the development. As stated in Park View Heights Corp. v. City of Black Jack, 467 F.2d 1208, 1211 (8th Cir. 1972):

Upon learning of the “feasibility letter,” area residents began a drive to incorporate the area including the site of the proposed Park View Heights apartments. On June 26, 1970, the Citizens for the Incorporation of Black Jack presented two petitions requesting incorporation with 1,425 signatures to the St. Louis County Council. Between June 26, 1970 and August 6, 1970, the St. Louis County Department of Planning reported to the St. Louis County Council that they “strongly opposed the act of incorporation on fiscal, planning, and legal grounds.” Despite this opposition, the St. Louis County Council incorporated the City of Black Jack, Missouri, on August 6, 1970.
Between the date of the municipal incorporation and September 15, 1970, the municipal authority of the City of Black Jack was suspended by a Writ of Prohibition issued by a state court. Within six days after the writ was dissolved, the city Zoning Commission issued notices of hearings on a zoning ordinance * * *.

The ordinance was enacted by the City Council on October 20, 1970. It prohibited the construction of any new multiple-family dwellings and made present ones nonconforming uses.

The racial composition of Black Jack and the surrounding area was set forth by the District Court in its opinion, and is not contested by the parties:

Statistical information submitted shows that at the relevant time the area which is now the City of Black Jack was virtually all white, with a black population of between 1% and 2%. The area of St. Louis County north of Interstate Highway 270, which includes. Black Jack, is approximately 99% white. * * *
The virtually all-white character of Black Jack was in marked contrast to the racial composition of other parts of the St. Louis area. In 1970, the pupil population of the City of St. Louis School District was 65.6% black. * *
In 1970, the Kinloch School District, which is only two miles from the nearest boundary of the Hazelwood School District [of which Black Jack is a part], had 1,245 students, all of whom were black.
The percentage of blacks in St. Louis County has increased only slightly overall from 4.1% in 1950 to 4.8% in 1970. During the same period, the percentage of blacks in the City of St. Louis more than doubled from 17.9% to 40.9%.
Between 1950 and 1970, the population of the city declined * * * [by] 27%, while the population of the county more than doubled * * *. From 1960 to 1970, there were approximately 102,298 new housing starts in the county, and 15,348 in the city, a ratio of almost 7 to 1. During the same period, the city had a net decrease of 24,548 housing units, while the county had a net increase of 84,169. * * *
The concentration of blacks in the city and in pockets in the county is accompanied by the confinement of a disproportionate number of them in overcrowded or substandard accommodations. The 1970 census reveals that in St. Louis city and county approximately 40% of the black families, as compared with 14% of the white families, lived in overcrowded units. * *

United States v. City of Black Jack, Missouri, supra 372 F.Supp. at 325.

The District Court further found that the average cost of a home in the City of Black Jack in 1970 was approximately $30,000, and that the average income of Black Jack families is approximately $15,000 per year. It found that Park View Heights was designed to meet the housing needs of families making between $5,528 and $10,143 per year.

Two peripheral issues raised by the City on appeal may be summarily disposed of. First, Black Jack asserts that a municipality may not be sued under Title VIII because it is not a “person” within the meaning of §§ 3602 and 3613. It urges that the analogous cases of City of Kenosha v. Bruno, 412 U.S. 507, 93 S.Ct. 2222, 37 L.Ed.2d 109 (1973), and Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), which dealt with § 1983, are controlling. The District Court properly rejected this claim. Both Monroe and Kenosha emphasized explicit legislative history peculiar to § 1983. Title VIII, on the other hand, was passed almost one hundred years after the initial enactment of § 1983, and there is no similar legislative history. To hold that local government is immune from the proscriptions of Title VIII

* * * turns the old “state action” controversy on its head. * * * It is simply too late in the day now to say that judicial control is impossible for the very reason that the state is involved. Whatever one thinks of state action as a viable limiting principle on the constitutional. command of equality, it should at least be clear that the most outrageous deprivations of equal rights are those perpetrated by the state itself. * * * We are unwilling to believe that the legislators who voted for [Title VIII] intended to exempt the most serious offenses from its coverage.

Mayers v. Ridley, 151 U.S.App.D.C. 45, 465 F.2d 630, 635 (1972) (en banc) (J. Skelly Wright, J., concurring). See also Citizens Committee for Faraday Wood v. Lindsay, 362 F.Supp. 651, 653 (S.D.N.Y.1973).

Second, Black Jack asserts that the District Court erroneously refused to abstain, and that the matter was one properly left to the state courts. However,

* * * Congress [has] imposed the duty upon all levels of the federal judiciary to give due respect to a suitor’s choice of a federal forum for the hearing and decision of his federal constitutional claims. * * *

Zwickler v. Koota, 389 U.S. 241, 248, 88 S.Ct. 391, 395, 19 L.Ed.2d 444 (1967). Although this action was brought under a federal statute rather than under the Constitution, the statute was enacted as an aid to enforcement of the Thirteenth Amendment. We see no sound reason upon which to justify denying the plaintiff a federal forum. See Kennedy Park Homes Ass’n v. City of Lackawanna, 436 F.2d 108, 112 (2nd Cir. 1970), cert. denied, 401 U.S. 1010, 91 S.Ct. 1256, 28 L.Ed.2d 546 (1971).

We turn then to the merits of the decision below. Congress has declared that the purpose of the Fair Housing Act of 1968 is “to provide, within constitutional limitations, for fair housing throughout the United States.” 42 U.S.C. § 3601. The Act was passed pursuant to congressional power under the Thirteenth Amendment to eliminate the badges and incidents of slavery. In construing the Civil Rights Act of 1866, also founded on that power, the Supreme Court has declared that

* * * when racial discrimination herds men into ghettos and makes their ability to buy property turn on the color of their skin, then it too is a relic of slavery.

Jones v. Mayer Co., 392 U.S. 409, 442-443, 88 S.Ct. 2186, 2205, 20 L.Ed.2d 1189 (1968).

Title VIII is designed to prohibit “all forms of discrimination, sophisticated as well as simple-minded.” Williams v. Matthews Co., 499 F.2d 819, 826 (8th Cir. 19J4). Just as Congress requires

* ' *■ the removal of artificial, arbitrary, and unnecessary barriers to employment when the barriers operate invidiously to discriminate on the básis of racial or other impermissible classification[,]

Griggs v. Duke Power Co., 401 U.S. 424, 430-431, 91 S.Ct. 849, 853, 28 L.Ed.2d 158 (1971), such barriers must also give way in the field of housing. The discretion of local zoning officials, recently recognized in Village of Belle Terre v. Boraas, 416 U.S. 1, 94 S.Ct. 1536, 39 L.Ed.2d 797 (1974), must be curbed where “the clear result of such discretion ip the segregation of low-income Blacks from all White neighborhoods.” Banks v. Perk, 341 F.Supp. 1175, 1180 (N.D.Ohio, 1972), aff’d in part & rev’d in part without opinion, 473 F.2d 910 (6th Cir. 1973).

The burden of proof in Title VIII cases is governed by the concept of the “prima facie case.” Williams v. Matthews Co., supra 499 F.2d at 826. To establish a prima facie case of racial discrimination, the plaintiff need prove no more than that the conduct of the defendant actually or predictably results in racial discrimination; in other words, that it has a discriminatory effect. See id.; United Farmworkers of Florida Housing Project, Inc. v. City of Delray Beach, 493 F.2d 799, 808 (5th Cir. 1974); Hawkins v. Town of Shaw, Mississippi, 461 F.2d 1171, 1172 (5th Cir. 1972) (en banc); Kennedy Park Homes Ass’n v. City of Lackawanna, supra 436 F.2d at 114; Dailey v. City of Lawton, Oklahoma, 425 F.2d 1037, 1039 (10th Cir. 1970); Norwalk CORE v. Norwalk Redevelopment Agency, 395 F.2d 920, 931 (2nd Cir. 1968). The plaintiff need make no showing whatsoever that the action resulting in racial discrimination in housing was racially motivated. See Williams v. Matthews Co., supra 499 F.2d at 826; United Farmworkers of Florida Housing Project, Inc. v. City of Delray Beach, supra 493 F.2d at 808; Kennedy Park Homes Ass’n v. City of Lackawanna, supra 436 F.2d at 114; Citizens Committee for Faraday Wood v. Lindsay, supra 362 F.Supp. at 658; Banks v. Perk, supra 341 F.Supp. at 1180. Effect, and not motivation, is the touchstone, in part because clever men may easily conceal their motivations, but more importantly, because

* * * [wjhatever our law was once, * * * we now firmly recognize that the arbitrary quality of thoughtless-

ness can be as disastrous and unfair to private rights and the public interest as the perversity of a willful scheme. Hobson v. Hansen, 269 F.Supp. 401, 497 (D.D.C.1967), aff’d sub nom. Smuck v. Hobson, 132 U.S.App.D.C. 372, 408 F.2d 175 (1969) (en banc).

Once the plaintiff has established a prima facie case by demonstrating racially discriminatory effect, the burden shifts to the governmental defendant to demonstrate that its conduct was necessary to promote a compelling governmental interest. See United Farmworkers of Florida Housing Project, Inc. v. City of Delray Beach, supra 493 F.2d at 809; Gautreaux v. City of Chicago, 480 F.2d 210, 216 (7th Cir. 1973) (Swygert, J., concurring), cert, denied, 414 U.S. 1144, 94 S.Ct. 895, 39 L.Ed.2d 98 (1974); Kennedy Park Homes Ass’n v. City of Lackawanna, supra 463 F.2d at 114; Hawkins v. Town of Shaw, Mississippi, 437 F.2d 1286, 1288 (5th Cir. 1971), aff’d en banc, 461 F.2d 1171 (1972). See also Village of Belle Terre v. Boraas, supra 416 U.S. at 5, 94 S.Ct. at 1539, 39 L.Ed.2d at 802 (dictum).

The District Court concluded that the ordinance had no discriminatory effect. It based this conclusion on its finding that, because Park View Heights was designed to meet the needs of families earning between $5,000 and $10,000 per year — a class including 32 percent of the black population in the metropolitan area and 29 percent of the white population — the ordinance had no measurably greater effect on blacks than on whites. The court’s conclusion was in error. It failed to take into account either the “ultimate effect” or the “historical context” of the City’s action. See United Farmworkers of Florida Housing Project, Inc. v. City of Delray Beach, supra 493 F.2d at 810; Kennedy Park Homes Ass’n v. City of Lackawanna, supra 436 F.2d at 112. The ultimate effect of the ordinance was to foreclose 85 percent of the blacks living in the metropolitan area from obtaining housing in Black Jack, and to foreclose them at a time when 40 percent of them were living in substandard or overcrowded units.

The discriminatory effect of the ordinance is more onerous when assessed in light of the fact that segregated housing in the St. Louis metropolitan area was

* * * in large measure the result of deliberate racial discrimination in the housing market by the real estate industry and by agencies of the federal, state, and local governments. * * *

United States v. City of Black Jack, Missouri, supra 372 F.Supp. at 326.

Black Jack’s action is but one more factor confining blacks to low-income housing in the center city, confirming the inexorable process whereby the St. Louis metropolitan area becomes one that “has the racial shape of a donut, with the Negroes in the hole and with mostly Whites occupying the ring.” Mahaley v. Cuyahoga Metropolitan Housing Authority, 355 F.Supp. 1257, 1260 (N.D.Ohio, 1973) , rev’d, 500 F.2d 1087 (6th Cir. 1974). See also Crow v. Brown, 332 F.Supp. 382, 384 (N.D.Ga., 1971), aff’d per curiam, 457 F.2d 788 (5th Cir. 1972). Park View Heights was particularly designed to contribute to the prevention of this prospect so antithetical to the Fair Housing Act. The Board of Directors of the Park View Heights Corporation was one-half white and one-half black. Affirmative measures were planned to assure that members of the black community would be aware of the opportunity to live in Park View Heights. There was ample proof that many blacks would live in the development, and that the exclusion of the townhouses would contribute to the perpetuation of segregation in a community which was 99 percent white.

It having been established that the ordinance had a discriminatory effect, it follows that the United States had made out a prima facie case under Title VIII, and the burden shifted to the City to demonstrate that a compelling governmental interest was furthered by that ordinance. We turn to that question. The City asserted primarily the following governmental interests to justify the ban on further apartments:

(1) Road and traffic control;

(2) Prevention of overcrowding of schools;

(3) Prevention of devaluation of adjacent single-family homes.

Several other interests were also alluded to in the record, including exclusion of apartments where there were already too many and where, there was no need for them.

In determining whether any of these rise to the level of a compelling governmental interest, we must examine: first, whether the ordinance in fact furthers the governmental interest asserted; second, whether the public interest served by the ordinance is constitutionally permissible and is substantial enough to outweigh the private detriment caused by it; and third, whether less drastic means are available whereby the stated governmental interest may be attained. See Shapiro v. Thompson, 394 U.S. 618, 637, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969); Note, Exclusionary Zoning and Equal Protection, 84 Harv.L.Rev. 1645, 1651 (1971).

We need not go beyond the first step in the inquiry, for we find that there is no factual basis for the assertion that any one of the three primary interests asserted by the City is in fact furthered by the zoning ordinance, and we find that the other asserted interests — at least on the facts of this case — are clearly not substantial in relation to the housing opportunities foreclosed. To paraphrase the Supreme Court in Shapiro v. Thompson, supra at 638, 89 S.Ct. 1322, we conclude that the City does not use and has no need to use the ordinance for the governmental purposes suggested.

On the subject of roads and traffic, Mr. Barbero, the City’s former mayor and lead witness, conceded on cross-examination that his opposition to Park View Heights on the basis of its impact on traffic and roads was based on incorrect information and was, therefore, wrong. The evidence amply supports his concession. Park View Heights was to be located next to Old Jamestown Road, which is the most direct route from Black Jack to Jamestown Mall, a large shopping center in the process of construction which is to have ninety-five stores and is to employ approximately 2500 persons. The City did not oppose the construction of the Mall, despite the fact that it would generate far more traffic than would Park View Heights. Moreover, there was uncontradicted evidence that construction of single-family homes on the proposed site would result in numerous driveways leading onto Old Jamestown Road, creating a serious traffic hazard on the shopping center’s main access road which would be avoided by a multiple-family dwelling with a single driveway.

The asserted community interest in preventing overcrowding of the schools also was not furthered by the ordinance. The St. Louis County Planning Department had determined that, in the school district which embraced Black Jack, apartments produced approximately one schoolchild for every five families, while single-family houses produced almost three schoolchildren, or fifteen times as many. In the light'of that evidence, several defense witnesses conceded that the desire to prevent overcrowding of the school system could not supply a rational basis for the ordinance, and defense counsel stated at one point in the trial that school impaction was not an issue in the case. Moreover, there was nothing in the record to indicate that the school facilities were already overcrowded.

The third asserted justification of preventing devaluation of adjoining single-family homes was also not furthered by the ordinance. The St. Louis Planning Department, after conducting a study, concluded that apartment complexes in the St. Louis metropolitan area had not had such an effect on property values. This conclusion was buttressed by the testimony of expert witnesses, and was not contradicted by any competent evidence.

None of the other reasons advanced by the City is a substantial one on the basis of the record. The assertion that there were already “too many” apartments in Black Jack was not borne out by the evidence. Under the original plan set up by St. Louis County for the Black Jack area, less than four percent of the land was set aside for apartments. The expert testimony was that this was a conservative allocation and that Black Jack’s topography and work force could accommodate different types of residential dwellings. The effect of the ordinance was to slash the conservative four percent figure to less than one percent. There was no expert testimony that this was necessary to prevent unacceptable density. The assertion that there was no “market” or “need” for Park View Heights in the Black Jack area was also unsupported. The evidence was to the contrary, for it demonstrated a strong demand for suburban apartments in St. Louis County.

We hold that Zoning Ordinance No. 12 of the City of Black Jack violates Title VIII, because it denies persons housing on the basis of race, in violation of § 3604(a), and interferes with the exercise of the right to equal housing opportunity, in violation of § 3617. The remedy for this violation of the Fair Housing Act is provided in § 3615:

* * * any law of a State, a political subdivision, or other such jurisdiction that purports to require or permit any action that would be a discriminatory housing practice under this subchapter shall to that extent be invalid.

We, therefore, reverse and remand with instructions to the District Court to enter a permanent injunction upon receipt of this Court’s order, enjoining the en-' forcement of the ordinance. The mandate of this Court shall be issued forthwith.

Reversed and remanded.

      . Similar allegations were made in an earlier unrelated action brought by the developer, a sponsor, and prospective residents of Park View Heights. See Park View Heights Corp. v. City of Black Jack, 467 F.2d 1208 (8th Cir. 1972), reversing 335 F.Supp. 899 (E.D.Mo.1971).

      . This holding is consistent with cases involving racial discrimination in other areas. See Wright v. Council of City of Emporia, 407 U.S. 451, 462, 92 S.Ct. 2196, 33 L.Ed.2d 51 (1972) (schools); Griggs v. Duke Power Co., 401 U.S. 424, 432, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971) (employment); Burton v. Wilmington Parking Authority, 365 U.S. 715, 725, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961) (restaurant); Hawkins v. Town of Shaw, Mississippi, 461 F.2d 1171, 1174 (5th Cir. 1972) (en banc) (Wisdom, X, concurring) (municipal services).

      . The United States contends that the ordinance ought also be enjoined because it was enacted for the purpose of excluding blacks. There is evidence in the record to support that contention. Opposition to Park View Heights was repeatedly expressed in racial terms by persons whom the District Court found to be the leaders of the incorporation movement, by individuals circulating petitions, and by zoning commissioners themselves. Racial criticism of Park View Heights was made and cheered at public meetings. The uncontradicted evidence indicates that, at all levels of opposition, race played a significant role, both in the drive to incorporate and the decision to rezone. We agree with the Tenth Circuit’s conclusion that improper purpose may be shown circumstantially:
      * * * If proof of a civil right violation depends on an open statement by an official of an intent to discriminate, the Fourteenth Amendment offers little solace to those seeking its protection. In our opinion it is enough for the complaining parties to show that the local officials are effectuating the discriminatory designs of private individuals. * * *
      Dailey v. City of Lawton, 425 F.2d 1037, 1039 (10th Cir. 1970).
      Nevertheless, we do not base our conclusion that the Black Jack ordinance violates Title VIII on a finding that there was an improper purpose.

      . The requirement that a governmental defendant demonstrate that its conduct is necessary to further a compelling governmental interest is most often expressed in cases involving equal protection challenges to statutes or ordinances creating “suspect classifications,” see In re Griffiths, 413 U.S. 717, 93 S.Ct. 2851, 37 L.Ed.2d 910 (1973); Korematsu v. United States, 323 U.S. 214, 65 S.Ct. 193, 89 L.Ed. 194 (1944), or impinging on “fundamental rights.” See Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969); Skinner v. Oklahoma, 316 U.S. 535, 62 S.Ct. 1110, 86 L.Ed. 1655 (1942). Even though this case is based on a federal statute, rather than on the Fourteenth Amendment, we believe that, once the United States established a prima facie case of racial discrimination, it became proper to apply the compelling governmental interest requirement of the equal protection cases.

      . The parties stipulated to this at trial.

      . This portion of the analysis is essentially a qualitative one. For example, Shapiro v. Thompson, supra 394 U.S. at 629-631, 89 S.Ct. 1322, 22 L.Ed.2d 600, held that it was constitutionally impermissible for a state to inhibit migration by needy persons into the state, because such migration was a constitutional right. That case further held that limiting payment of welfare benefits to those who had “contributed” to the state in the past through taxes was constitutionally impermissible. Id. at 633, 89 S.Ct. 1322.

      . This portion of the analysis is essentially quantitative. For example, preservation of the public peace and welfare by avoiding racial conflict was held insufficient to validate a zoning ordinance restricting racial integration in Buchanan v. Warley, 245 U.S. 60, 38 S.Ct. 16, 62 L.Ed. 149 (1917).

      . Since we award relief to the United States, ■ the defendant’s contention that the District Court erred in refusing to award attorney fees to the defendant is without merit.


source: Caselaw Access Project

author: PHILLIPS, Chief Judge.

license: Public Domain

text:
    Jean Whitehouse RAMEY, Plaintiff-Appellee, v. The CINCINNATI ENQUIRER, INC., and American Financial Corporation, Defendants-Appellants. Angiolina MORELLI, Plaintiff-Appellee, v. The CINCINNATI ENQUIRER, INC., and American Financial Corporation, Defendants-Appellants. Albert HARRIS, Plaintiff-Appellee, v. The CINCINNATI ENQUIRER, INC., and American Financial Corporation, Defendants-Appellants. Jean W. RAMEY et al., Plaintiffs-Appellees, v. The E. W. SCRIPPS COMPANY et al., Defendants-Appellants. Cecil F. SCHOEN, a.k.a. Cecile F. Schoen, Plaintiff-Appellant and Cross-Appellee, v. The CINCINNATI ENQUIRER, INC., et al., Defendants-Appellees and Cross-Appellants (3 cases).
    Nos. 74-1110 to 74-1116.
    United States Court of Appeals, Sixth Circuit.
    Dec. 26, 1974.

      John A. Lloyd, Jr., Frost & Jacobs, John L. Muething, Louis F. Gilligan, Cincinnati, Ohio, for appellants in Nos. 74— 1110 to 74^1113.
    Jerome Goldman, Douglas G. Cole, C. R. Beirne, Cincinnati, Ohio, for appellee in No. 74H110.
    Arnold Morelli, Cincinnati, Ohio, for appellee in No. 74 — 1111.
    Irving Harris, Cincinnati, Ohio, for ap-pellee in No. 74 — 1112.
    James W. Henglebrok, Cincinnati, Ohio, Richard F. Stevens, H. Stephen Madsen, Baker, Hostetler & Patterson, Cleveland, Ohio, for appellants in Nos. 74 — 1114, 74 — 1115 and appellees in No. 74-1116.
    C. R. Beirne, Cincinnati, Ohio for ap-pellees in No. 74-1114.
    Ambrose H. Lindhorst, Gene Mesh, Cincinnati, Ohio, David C. Bayne, Professor of Law University of Iowa College of Law, Iowa City, Iowa, for appellees in No. 74-1113.
    Ambrose H. Lindhorst, Gene Mesh, Cincinnati, Ohio, for appellees in No. 74— 1115 and appellants in No. 74 — 1116.
    Before PHILLIPS, Chief Judge, and EDWARDS and McCREE, Circuit Judges.
   PHILLIPS, Chief Judge.

These are appeals from an order granting attorneys’ fees in four stockholder derivative suits that were dismissed on grounds of mootness after trial but before adjudication. The District Judge’s order awarded a total of $865,-000 in attorneys’ fees and $35,115.96 in expenses to be paid to plaintiffs’ attorneys in four cases by defendants Enquirer and Scripps, with a contribution of $145,375.00 on the part of the minority shareholders to be paid by American Financial Corporation.

This litigation had its genesis in an antitrust action filed against the E. W. Scripps Company by the Department of Justice in 1964. The Scripps-Howard interests, while owning Cincinnati’s only evening newspaper, The Cincinnati Post and Times Star, also acquired the majority interest in the stock of The Cincinnati Enquirer, Cincinnati’s only morning newspaper. The antitrust action was tried before the same District Judge who rendered the judgment involved in the present appeal and was terminated by a consent decree requiring that Scripps divest itself within 18 months of its controlling interest in the Enquirer.

Early in 1970 the management of the Enquirer, ultimately supported by a majority of the minority shareholders, put together a bid to Scripps-Howard to purchase Scripps-Howard’s 60 per cent share of the Enquirer stock. A stock acquisition agreement was signed which provided that the Enquirer would purchase all of the Enquirer stock owned by Scripps-Howard at $35 per share, IIV2 million dollars to be paid in cash and the balance to be paid by the issuance of 60,000 shares of preferred stock.

The details of the plan and its proposed financing by the Prudential Life Insurance Co. of America were as follows:

1) The Enquirer would purchase directly from the Scripps group 330,558 Enquirer shares at $35 a share, totalling $11,569,530.

2) Of this sum the Enquirer was to borrow $10,500,000 from the Prudential Life Insurance Co., to be repaid at 12 per cent interest over 16 years.

3) The balance of 171,428 shares owned by the Scripps group would be purchased by the Enquirer by issuance and exchange of 60,000 newly authorized shares of convertible preferred stock that Scripps then agreed to sell (and Prudential by separate contract agreed to buy) for $6,000,000 in cash. The Enquirer would be obligated to pay a yearly dividend of $7.65 on each share of preferred stock and to redeem a minimum of 3,000 shares a year at $110 per share.

4) Under this arrangement the Prudential Life Insurance Co. would have invested $16,500,000, on which the Enquirer would be required to pay a return of 12 per cent on the loan and about ten per cent on the preferred stock. On default of the Enquirer’s obligation on either the preferred stock or the debt, Prudential could acquire the entire assets of the Enquirer.

5) The Enquirer was able to contribute only one million dollars from its working capital to accomplish this purchase.

6) The redemption of preferred stock, plus the interest on the loan, would equal about one and one-half million dollars a year. Previously the Enquirer had been netting about two million dollars each year after taxes.

7) No provision was made for any offer to the minority stockholders of the Enquirer. At a stockholders’ meeting on October 23, 1970, the stock acquisition plan described above was approved by a vote of 222,930 to 75,307, with the Scripps’ 60 per cent of the shares not voting.

In October 1970 three stockholders’ derivative suits (Ramey, Morelli and Harris) were filed to set aside this stock purchase plan, alleging, among other things, that the proxy statement contained untrue and misleading statements of material fact and that the plan violated various provisions of both federal and Ohio law. Two of these suits (Ramey and Morelli) were filed before the stockholders’ meeting and resulted in the order of the District Court on October 22 enjoining the execution of the purchase agreement until further order. The derivative action of Harris was filed on October 26. Later in November an action was filed on behalf of a stockholder named Schoen. This suit also attacked the acquisition agreement, essentially contending that the proposed transaction was fraudulent.

The cases were tried for about two months, concluding January 18, 1971. Ten days after the trial and before any opinion had been announced, the litigation was mooted when Scripps, making use of an escape clause in the acquisition agreement, terminated its proposed deal with the Enquirer group. This termination by Scripps was prompted by a bid of $35 a share (the same figure as the Enquirer bid, but extended to all minority shareholders) from a California-based trading stamp company called Blue Chip Stamps. Thereafter, and before the court had acted on a petition by the United States and the Enquirer to require the Scripps group to extend the Enquirer agreement, the American Financial Corporation offered Scripps-Howard $40 per share for its 60 per cent interest in the Enquirer’s stock and offered the same amount per share to all of the minority shareholders. This offer was accepted by Scripps-Howard. AFC proceeded to acquire the entire Scripps-Howard interest and ultimately all of the minority shares.

The District Judge subsequently issued an informal opinion disclosing the findings of fact that he would have made and the conclusions of law that he would have entered had the case not been1 mooted. He then heard and decided the ■ requests by the different attorneys for attorneys’ fees.

In his fee opinion, the District Judge described the Enquirer-Scripps deal, as originally proposed, in the following language:

“However, it is to be noted that the transaction would have changed the Enquirer stock from ‘safe’ to ‘risky’ or ‘high leverage.’ And the Enquirer-Scripps deal was accurately described as ‘thin.’ As stated by one of the Enquirer directors, it was no deal for ‘widows or orphans.’ ”

In the same opinion he also said in part:

“The purchase by a corporation of its own shares has a potential for abuse, and restrictive legislation has therefore grown up to meet the need to prevent such abuse. Hence, any time a corporation attempts to purchase its own shares, especially on a shoestring, the transaction has to be cast in a form which meets the legal requirements and a number of extremely difficult questions in the area of corporate law and finance arise. One restriction on purchase by a corporation of its own shares is the Impairment of Capital Statute, Ohio Revised Code 1701.35, which provides that after such purchase the ‘debts’ of the corporation must not exceed its assets plus ‘stated capital.’ That explains why only so much money could be borrowed from Prudential and the balance had to be raised by sale of preferred stock which could be determined to be ‘equity’ and not ‘debt.’ In this case the preferred stock had warrants, voting powers, conversion privileges, redemption .and other rights, and a difficult and serious question was presented as to whether, though cast in the form of ‘equity,’ it was not in law and in fact ‘debt.’ If the shares were ‘debt,’ the assets of the Enquirer after the purchase of the Scripps shares would not have exceeded debts plus stated capital as required by ORC 1701.35, and the deal would have been illegal.
“That was just one of many complex questions. Another involved the corporate power and many others arose in connection with the proxy statement and the claims that statements therein were materially misleading. One of these was it was not accurate in its portrayal of the effect of the deal on the Enquirer’s ability to pay dividends and its dividend policy. Another was that in describing the effect of the plan on the book value of the Enquirer stock (proxy statement, p. 6) instead of a drop from plus $15.42 per share to ‘none,’ the proxy statement should have shown a drop from $15.42 to minus $13.07.
****:{::(:
“[I]n the Enquirer case, by deciding to change stated capital as proposed from $5 per share to $1 per share, the shareholders were saying in effect they chose to embark on the proposed corporate venture and in order to do so to completely change the capital structure of the Enquirer, eliminate the shareholders’ equity, change its stock from ‘safe’ to ‘risky,’ and agreed to pay for the outstanding shares out of future earnings.
* * * * * *
“We also considered the commentary and the chapter on the Model Corporation Act — the commentary to § 5, ‘Right of corporation to acquire and dispose of its own shares.’ This points out that most statutes, like the Model Act, provide in substance that á corporation’s own shares shall be purchased only out of surplus except in special situations specified in the statute. And of the many cases, one which we found noteworthy is Mountain States [State] Steel Foundries, Inc. v. C.I.R., 284 F.2d 737 (5 [4] Cir., 1960), where an impairment statute similar to Ohio’s was under the glass.
“This should suffice to underline that a proposed acquisition of the Enquirer of its own shares, cast in the form it was, was not only ‘thin’ financially, but legally as well.
í(í S}C ifc S(! Sj! #
“As to economic benefit, while there is dispute, this much can be said. If the Enquirer had purchased the Scripps shares, that is, if the plan had not been restrained, the Enquirer would have paid out $17.5 million in principal and would have lost the income on investments owned by it which had to be liquidated to apply on the purchase price of the stock in the sum of $1,026,748. In addition, the Enquirer would have obligated itself to interest payment on the loan of $15,975,000, and dividend payments on preferred stock of $4,590,000, and payment of premiums on required preferred stock redemption of- $600,000, which payments would have totaled $22,191,748, in addition to the $17.5 million in principal previously stated. Also, as to economic benefit, it can be said that the corporation, as Mr. Goldman contended, received nothing for the $17.5 million it paid for its own stock, or would have paid. If the deal had gone through, the book value of the stock would have gone from plus to minus, and it is probable the market value would have gone way down, at least temporarily. An incidental benefit conferred on the shareholders was that in the time it took to litigate Scripps kept its option open, and along came the Blue Chip offer to all shareholders for $35 a share, and the AFC offer to all shareholders of $40 a share, the difference between $40 and $35 being about $2.5 million or more to Scripps alone.
“Nevertheless, in fixing the fee we have not gone on the assumption that there is an identifable fund, such as the interest on the obligation to Prudential. We have concluded that as far as economic benefit and other ways this case is unique, and, while we conclude that a significant service was performed by the applicants, and there is strong evidence of economic benefit, especially in the testimony . . . ”

The District Judge then proceeded to decide the claims of the different attorneys for fees. He noted that the claims had totaled a maximum of $1,750,000. His award was less than half of that sum, $750,000, augmented by $115,000 of prejudgment interest, an item contended by appellants to be unprecedented on these facts. The District Judge also ordered that ten per cent of the fee be awarded to Mesh, the attorney for Schoen, with the balance to be divided one-third each to the three law firms representing Ramey, Morelli and Harris, respectively. He also ordered that $326,-290.90 be paid by the Scripps-Howard group, $393,333.60, plus $35,115.95 expenses, by the Enquirer, and $145,375.50 by American Financial Corp., which had, by court order, withheld $2.00 a share for legal fees when it bought the shares of the minority stockholders.

The principal appellate issues appear to us to be these:

1) Did this litigation produce such a benefit for the corporation (The Cincinnati Enquirer, Inc.) as to justify the award of fees?

2) Did the District Judge abuse his discretion by awarding excessive fees?

3) Was the award of prejudgment interest legally justified?

4) Assuming attorneys’ fees were justified in some sum, could they legally be awarded against any party other than the Enquirer?

5) Did the District Judge commit error in dismissing the Scripps-Howard indemnity cross-claim against the Enquirer and AFC?

1) The Corporate and Stockholder Benefit

The District Court’s proposed findings of fact and conclusions of law in the original derivative actions found violations of state and federal laws that would have required preparation of an amended proxy statement and resubmission of the acquisition plan to the Enquirer shareholders. It is clear to this court that the District Judge made no findings of deliberate concealment or fraud. It also is clear that although appellants describe the violations found by the District Judge as “technical,” nonetheless they would have served to require disclosures that would have alerted the Enquirer’s minority stockholders further concerning the financial burden that their corporation was undertaking to assume.

There was testimony before the District Judge from which he could have concluded, as he did, that the Enquirer’s management was proposing a high-risk plan. The cash payment of over one million dollars would have depleted the Enquirer’s working capital, thereby impairing liquidity. The $16,500,000 obligation to Prudential, including the loan and the preferred stock, was about equal to the total asset value of the Enquirer. The plan would have raised the Enquirer’s debt ratio to about 90% from a relatively low 21%. It is clear that such a highly leveraged capital structure could bring about a financial disaster if the Enquirer suffered even a temporary decline in revenues. The District Judge had ample reason to doubt that Enquirer earnings could service the Prudential loan and at the same time meet the preferred stock dividend and redemption requirements. Finally, we note that the plan of acquisition would have produced no corporate benefit for the Enquirer commensurate with the substantial debt that it would have assumed.

As we see the matter, plaintiffs’ derivative suits succeeded in delaying consummation of the risky repurchase plan until two other companies made offers that would have accomplished the Scripps-Howard divestiture without the adverse effect upon the Enquirer’s capital structure. Further, insofar as the derivative actions exposed inaccuracies and misleading statements in the proxy materials, this litigation constituted “corporate therapeutics,” which benefits both the corporation and its stockholders. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 396, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970). The plaintiffs’ efforts also conferred an incidental benefit upon all of the Enquirer’s shareholders. Had the initial repurchase plan not been delayed, the more attractive AFC offer presumably would not have been made.

On the record before us, we cannot hold clearly erroneous the findings of the District Court that the plaintiffs’ suits resulted in a substantial benefit to the Enquirer. Fed.R.Civ.P. 52(a).

We conclude that the services performed by plaintiffs’ attorneys justify an award of fees, even though no fund has been brought into court and even though it may be impossible to assign an exact monetary value to the benefit conferred upon the corporation. In this respect the present case is controlled by Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970), in which the Supreme Court outlined the following definitive view on the award of attorneys’ fees when no specific fund has been produced by the litigation:

“While the general American rule is that attorneys’ fees are not ordinarily recoverable as costs, both the courts and Congress have developed exceptions to this rule for situations in which overriding considerations indicate the need for such a recovery. A primary judge-created exception has been to award expenses where a plaintiff has successfully maintained a suit, usually on behalf of a class, that benefits a group of others in the same manner as himself. See Fleischmann Corp. v. Maier Brewing Co., 386 U.S. [714], at 718-719 [87 S.Ct. 1404, at 1408, 1409, 18 L.Ed.2d 475]. To allow the others to obtain full benefit from the plaintiff’s efforts without contributing equally to the litigation expenses would be to enrich the others unjustly at the plaintiff’s expense. This suit presents such a situation. The dissemination of misleading proxy solicitations was a ‘deceit practiced on the stockholders as a group,’ J. I. Case Co. v. Borak, 377 U.S. [426], at 432 [84 S.Ct. 1555, at 1560, 12 L.Ed.2d 423], and the expenses of petitioners’ lawsuit have been incurred for the benefit of the corporation and the other shareholders.
“The fact that this suit has not yet produced, and may never produce, a monetary recovery from which the fees could be paid does not preclude an award based on this rationale. Although the earliest cases recognizing a right to reimbursement involved litigation that had produced or preserved a ‘common fund’ for the benefit of a group, nothing in these cases indicates that the suit must actually bring money into the court as a prerequisite to the court’s power to order reimbursement of expenses.
“Other cases have departed further from the traditional metes and bounds of the doctrine, to permit reimbursement in cases where the litigation has conferred a substantial benefit on the members of an ascertainable class, and where the court’s jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them. This development has been most pronounced in shareholders’ derivative actions, where the courts increasingly have recognized that the expenses incurred by one shareholder in the vindication of a corporate right of action can be spread among all shareholders through an award against the corporation, regardless of whether an actual money recovery has been obtained in the corporation’s favor. For example, awards have been sustained in suits by stockholders complaining that shares of their corporation had been issued wrongfully for an inadequate consideration. A successful suit of this type, resulting in cancellation of the shares, does not bring a fund into court or add to the assets of the corporation, but it does benefit the holders of the remaining shares by enhancing their value. Similarly, holders of voting trust certificates have been allowed reimbursement of their expenses from the corporation where they succeeded in terminating the voting trust and obtaining for all certificate holders the right to vote their shares. In these cases there was a ‘common fund’ only in the sense that the court’s jurisdiction over the corporation as nominal defendant made it possible to assess fees against all of the shareholders through an award against the corporation.
“In many of these instances the benefit conferred is capable of expression in monetary terms, if only by estimating the increase in market value of the shares attributable to the successful litigation. However, an increasing number of lower courts have acknowledged that a corporation may receive a ‘substantial benefit’ from a derivative suit, justifying an award of counsel fees, regardless of whether the benefit is pecuniary in nature.
“In many suits under § 14(a), particularly where the violation does not relate to the terms of the transaction for which proxies are solicited, it may be impossible to assign monetary value to the benefit. Nevertheless, the stress placed by Congress on the importance of fair and informed corporate suffrage leads to the conclusion that, in vindicating the statutory policy, petitioners have rendered a substantial service to the corporation and its shareholders.” Id. at 391 — 396, 90 S.Ct. at 625 — 627.) (footnotes omitted.)

Moreover, the fact that these suits became moot does not preclude recovery of attorneys’ fees. So long as a substantial benefit is conferred upon the corporation, it is not necessary that the litigation be brought to a successful completion. Kahan v. Rosenstiel, 424 F.2d 161, 167 (3d Cir.), cert. denied, 398 U.S. 950, 90 S.Ct. 1870, 26 L.Ed.2d 290 (1970); see Blau v. Rayette-Faberge, Inc., 389 F.2d 469, 473-474 (2d Cir. 1968).

We have no doubt that the District Court was warranted in awarding counsel fees to plaintiffs’ attorneys.

2) Reasonableness of Fees

The trial judge in determining the value of services rendered by lawyers who have tried a case before him ordinarily has an infinitely better opportunity to evaluate those services than does an appellate court. Therefore, appellate courts hold that the trial judge’s determinations on legal fees should not be set aside unless there is a clear abuse of discretion.

In an early case the United States Supreme Court stated this principle clearly:

“The conclusion to which we have come is that, under the circumstances of this case, the Circuit Court had the power, in its discretion, to allow to the complainant, Yose, his reasonable costs, counsel fees, charges, and expenses incurred in the fair prosecution of the suit, and in reclaiming and rescuing the trust fund and causing it to be subjected to the purposes of the trust. The allowances made for these purposes we have examined, and do not find anything therein seriously objectionable. The court below should have considerable latitude of discretion on the subject, since it has far better means of knowing what is just and reasonable than an appellate court can have.” Trustees v. Greenough, 105 U.S. 527, 537, 26 L.Ed. 1157 (1881) (Emphasis added.)

This circuit over the years has pointed out the considerations that enter into the fixing of reasonable fees by the court. They include 1) the value of the benefit rendered to the corporation or its stockholders, 2) society’s stake in rewarding attorneys who produce such benefits in order to maintain an incentive to others, 3) whether the services were undertaken on a contingent fee basis, 4) the value of the services on an hourly basis, 5) the complexity of the litigation, and 6) the professional skill and standing of counsel involved on both sides. Denney v. Phillips & Buttorff Corp., 331 F.2d 249 (6th Cir.), cert. denied, 379 U.S. 831, 85 S.Ct. 61, 13 L.Ed.2d 39 (1964); Pergament v. Kaiser-Frazer Corp., 224 F.2d 80 (6th Cir. 1955); In re Detroit Int’l Bridge Co., 111 F.2d 235 (6th Cir. 1940).

Denney presents a fact situation quite similar to the instant case in that no cash fund ever was developed from which fees could be paid:

“The derivative action concerned the purchase by the respondent of 60,000 shares of stock, owned by the controlling stockholders, in Wm. R. Moore Dry Goods Company for $2,700,000. While the derivative action was pending and before it was assigned for trial, the officers and directors rescinded the purchase of the Moore stock. On the former appeal we held that the purchase of the stock, at least, constituted constructive fraud. On remand we instructed the District Court to require the defendants (officers and directors of the respondent) to pay to the respondent interest on $2,700,000 from the date of the commencement of the action to the date of rescission and to fix attorneys’ fees for the petitioners. We held that the fact that the defendants rescinded the transaction before the court had an opportunity to pass upon the merits of the case would not defeat the right of counsel to compensation.
“The trial judge entered judgment for interest in the sum of $40,800. Counsel for the respondent claim that this was the only fund recovered for the corporation. They further claim that under Tennessee law an allowance of attorneys’ fees must be limited to an amount commensurate with this recovery. In support of this theory, counsel cite Southern v. Beeler, Atty. Gen., 183 Tenn. 272, 195 S.W.2d 857. More relevant to the issue in this case is Grant v. Lookout Mountain Co., 93 Tenn. 691, 28 S.W. 90, 27 L.R.A. 98. There the court held that since the minority stockholders by their action had benefited the corporation, it was therefore responsible for proper and reasonable attorneys’ fees. The court further determined that the attorneys were entitled to a lien for their fees upon the land conveyed by the deeds which were canceled by the action of the minority stockholders.
“It cannot be said that the cancellation of the purchase of the Moore stock did not result from the action of the minority stockholders. Its cancellation inured to the benefit of the corporation by restoring $2,700,000 in assets in lieu of the Moore stock. After the rescission of the purchase of the Moore stock, or its resale, the trial judge entered an order impounding $270,000 of the corporation’s funds out of which attorneys’ fees might be paid. This order was made without prejudice to the contentions of any of the parties.
“The court granted judgment in favor of the petitioners for $235,000 attorneys’ fees and for $6,227.98 expenses. The trial judge found that the services were of vast proportions and that they were effective. He took into consideration the time spent by the lawyers, the complexity of the legal questions involved, the results accomplished, the professional standing of petitioners, and the professional standing of respondent’s lawyers. He viewed the transaction in its entirety based upon all the facts in the case. The judge also took into account the public policy aspect to stockholders’ derivative actions, i. e., that they serve a good purpose and should be encouraged rather than discouraged.” Id. 331 F.2d at 250-251.

The District Judge in the instant case found on substantial evidence that this was difficult and complex litigation, that the public had a stake in this and similar litigation, that the lawyers on both sides were competent and of high standing in their profession, and that plaintiffs’ lawyers had contingent agreements that could not possibly compensate them (or encourage others) in relation to the services performed.

On the subject of amount of fees, the plaintiffs relied upon three witnesses, Mr. Jerome Goldman, Mr. James D. St. Clair, and Mr. Henry P. Jeffrey — all capable and experienced attorneys of excellent reputation. Their opinions as to fees earned in the subject litigation were $1,750,000, $1,500,000 and $1,250,000, respectively.

It does not appear to this court that the defendants ever really anticipated escaping from payment of substantial attorney fees. They called as expert witnesses the Honorable Earl Morris, former President of the American Bar Association, and Mr. Thomas Conlan, a prominent member of the Cincinnati Bar. Morris’ total estimate of an appropriate fee was just under $400,000 and Conlan’s was $465,000. While the $750,-000 awarded by the District Judge exceeds the defendants’ estimates, it is approximately half of the plaintiffs’ claims. As we have pointed out, the District Judge found that defendants’ benefit from this litigation was substantial. He did not pin a specific figure upon the benefit, but he had before him testimony that would have allowed a finding of between $7,500,000 and $17,500,000. We find no abuse of discretion in the District Court’s award of the sum total of fees.

We have considered the subsidiary argument between the attorneys for plaintiffs in the consolidated cases, who had stipulated to an equal division of fees between three firms representing Ra-mey, Morelli and Harris, and attorney Mesh in the Schoen case. Similarly, we find no abuse of discretion, and no basis in law or fact for either setting aside or increasing the ten percent of the total fee awarded to Mesh, the attorney for plaintiff Schoen.

3) Prejudgment Interest

This court, however, finds no legal grounds for the $115,000 award of “prejudgment interest.” The District Court said:

“In fixing the amount of the award now the Court must also take into account the fact that it should have been fixed sixteen months ago, and would have been but for the fact that the Enquirer’s application to have Scripps pay part or all of the fee was delayed and much time was taken to try to get the matter settled.
“As a result the Enquirer and AFC have had use of the money, and, in that connection, a representative of AFC testified that they expected to make 15% per annum from their capital. The money paid into a fund at the Court’s direction when AFC offered to buy the minority shareholders has been on interest.”

We recognize that some courts have regarded prejudgment interest as being justified by the need for adequate compensation so as to make the injured party whole. See United States v. Michael Schiavone & Sons, Inc., 450 F.2d 875 (1st Cir. 1971); Louisiana & Arkansas Ry. v. Export Drum Co., 359 F.2d 311 (5th Cir. 1966).

In the instant case, however, we feel that the attorneys involved have been compensated amply for their services by the District Judge’s fee award. Obviously, the District Judge allowed fees based not on quantum meruit alone but in substantial part upon the favorable results of their labors. As we have noted, he made no findings of fraud or overreaching that might justify punitive damages. We find no evidence of dilatory tactics or purposeful delay on the part of defendants.

In the instant case the attorneys’ fees ultimately allowed were not a liquidated sum or a sum certain until the entry of the District Court’s judgment for fees filed on October 10, 1973. In a recent case the Ninth Circuit stated:

“True, claims for ‘reasonable’ attorneys’ fees, being unliquidated until they are determined by a court, are not entitled to pre-judgment interest as would be certain liquidated claims. But once a judgment is obtained, interest thereon is mandatory without regard to the elements of which that judgment is composed. Cf. United States v. Michael Schiavone & Sons, Inc., 450 F.2d 875 (1st Cir. 1971).” Perkins v. Standard Oil Co., 487 F.2d 672, 675 (9th Cir. 1973).

The judgment of the District Court is modified to allow interest on the award of $750,000 in fees from October 10, 1973.

4) Liability for the Attorneys’ Fees

We now turn to the question of whether the attorneys’ fees can be awarded legally against any party other than the Enquirer.

This appeal grows out of derivative actions filed on behalf of the Enquirer by four of its minority stockholders. The Enquirer itself was named as a nominal defendant, but the real defendants were Scripps-Howard and individual officers and directors of the Enquirer. As the Ramey complaint makes clear, it was a corporate right of the Enquirer that the suits sought to enforce:

“This action is filed on behalf of Enquirer for its benefit and the benefit of its shareholders as a shareholder’s derivative action to enforce a right and cause of action of Enquirer which should be enforced by said corporation, but on which said corporation refuses to act because it is being prevented from so doing by the Board of Directors of Enquirer . .

Thus it appears that this case presents typical derivative actions within the meaning of the conventional hornbook definition:

“In legal effect, a stockholders’ suit is one by the corporation conducted by the stockholder as its representative. The stockholder is only a nominal plaintiff, the corporation being the real party in interest.
“The suit is a derivative one, and is to be distinguished from a representative action brought by a stockholder as an individual and for his own benefit in behalf of himself and other stockholders similarly situated. Where plaintiff does not seek to enforce relief for the benefit of the corporation, it is not derivative and not a stockholders’ suit.” 13 W. Fletcher, Private Corporations § 5939 (perm. ed. 1970) (footnotes omitted).

It is a general principle of corporate law that a minority stockholder who proceeds at his own expense in a derivative action resulting in a substantial benefit to the corporation is entitled to recover reasonable counsel fees from the corporation that has benefitted from his efforts. See 19 Am.Jur.2d Corporations § 588, at 111 (1965); 13 W. Fletcher, Private Corporations § 6045 (perm. ed. 1970); 10 C. Wright & A. Miller, Federal Practice and Procedure § 2675 (1973); Annot., Litigation Expense — Corporate Charge, 39 A.L.R.2d 580, 583 (1955); An-not., Litigation Expense — Corporation Liability, 152 A.L.R. 909, 914 (1914).

The cases make it clear ' that “[t]he obligation to reimburse a shareholder who brings a successful derivative suit is an obligation of the corporation.” Levine v. Bradlee, 378 F.2d 620, 622 (3d Cir. 1967). See Mills v. Electric Auto-Lite Co., 396 U.S. 375, 389-390, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970) (assessing fees against corporation); Kahan v. Rosenstiel, 424 F.2d 161, 167 (3d Cir.), cert. denied, 398 U.S. 950, 90 S.Ct. 1870, 26 L.Ed.2d 290 (1970) (“In derivative suits . the corporation which benefits from the suit ... is directed to pay [attorneys’ fees].”); Denney v. Phillips & Buttorff Corp., 331 F.2d 249 (6th Cir.), cert. denied, 379 U.S. 831, 85 S.Ct. 61, 13 L.Ed.2d 39 (1964) (assessing fees against corporation). Counsel fees in such cases are not awarded individually against other stockholders who may have profited from the derivative litigation, but against the corporation. Speaking for the court in Jones v. Uris Sales Corp., 373 F.2d 644, 648 (2d Cir. 1967), Judge Friendly explained the rationale for this rule as follows:

“[T]he reason for the award of such fees in a stockholder’s derivative suit [is] that the plaintiff’s efforts have conferred on the corporation a benefit for which the corporation would otherwise have had to pay itself.”

The present derivative actions were filed by minority stockholders of the Enquirer, not by minority stockholders of Scripps. There was no attorney-client relationship, derivatively or otherwise, between Scripps and the attorneys representing the four plaintiff minority shareholders.

Absent a finding that Scripps or the minority stockholders acted fraudulently or “in bad faith, vexatiously, wantonly, or for oppressive reasons,” Hall v. Cole, 412 U.S. 1, 5, 93 S.Ct. 1943, 1946, 36 L.Ed.2d 702 (1973), there is no legal basis for awarding any part of the attorneys’ fees against the Scripps group or against the minority shareholders. Under the controlling law set forth above, the entire fee must be assessed against The Cincinnati Enquirer, Inc., the corporation whose stockholders initiated the derivative action.

The fact that the Scripps group and the minority stockholders profited from the sale of their stock at higher prices than those provided in the original contract is no basis for assessing against them any part of the attorneys’ fees awarded to counsel who filed the derivative actions on behalf of the Enquirer. Incidental benefits to Scripps or minority stockholders, in the absence of an adjudication of fraud or misconduct on their part, does not justify a judgment against them for any part of the attorneys’ fees. See Schleit- v. British Overseas Airways Corp., 133 U.S.App.D.C. 273, 410 F.2d 261, 262 (1969); Preston v. United States, 284 F.2d 514, 515-516 (9th Cir. 1960); Jett v. Merchants and Planters Bank, 228 F.2d 156, 159 (4th Cir. 1955).

Accordingly, the judgment of the District Court filed October 10, 1973, is vacated insofar as it awards any part of the attorneys’ fees therein adjudicated to be paid by any party other than The Cincinnati Enquirer, Inc.

It appears that, pursuant to an order of the District Court, $2.00 per share was withheld from the purchase price received by some of the minority shareholders who accepted the AFC tender offer. This fund was to be used for payment of, plaintiffs’ attorneys’ fees. In view of the foregoing opinion, it is clear that the sums so withheld must be paid to the shareholders affected. To the extent, however, that AFC contributed its own money to this fund, it may, if it wishes, make this fund available for payment of the attorneys’ fees assessed against the Enquirer, its wholly-owned subsidiary.

5) Scripps Cross-Claim

Scripps filed a cross-claim against the Enquirer on the basis of pendent jurisdiction, seeking to recover $291,-842.29 in attorneys’ fees and other expenses incurred by Scripps in the trial of these cases and $173,029.75 in attorneys’ fees .and other expenses incurred by Scripps in connection with the application for fees filed by plaintiffs’ counsel. The District Court declined to accept pendent jurisdiction of this cross-claim. We hold that the District Court did not abuse its discretion in this respect.

6) Conclusion

The case is remanded to the District Court for further proceedings not inconsistent with this opinion, including modification of the judgment of October 10, 1973, so as to require payment by The Cincinnati Enquirer, Inc., of the fees allowed to the respective counsel, plus interest from October 10, 1973.

The costs of this appeal are taxed against The Cincinnati Enquirer, Inc.

      . Enquirer in this opinion will refer to the Cincinnati Enquirer, Inc., the owner of the newspaper, The Cincinnati Enquirer.

      . Scripps or Scripps-Howard will be used in this opinion to refer to the Scripps group of defendants, consisting of the E. W. Scripps Co., Scripps-Howard Investment Co. and Jack Howard.

      . Subsequently American Financial or AFC.

      . E. g., §§ 10(b) and 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78n(a) (1970), and the rules thereunder, 17 C.F.R. §§ 240.10b-5, 240.14a-9 (1974); Ohio Rev.Code Ann. § 1701.35 (Page’s Supp. 1973).

      . The District Judge said on this point:
      “As the Court understands it, there is no dispute among the parties that the attorneys are entitled to fees. There is a dispute as to the amount to which they are entitled. In any event we conclude that the applicants are entitled to substantial fees and expenses herein.”

      . The only authority directly supporting an assessment against Scripps and the minority shareholders appears to be one law review article. Cole, Counsel Fees in Stockholders’ Derivative and Class Actions — Homstein Revisited, 6 U. Richmond L.Rev. 259, 279-81 (1972). Suffice it to say that we do not agree with the author’s conclusions.


author: BRIGHT, Circuit Judge. HEANEY, Circuit Judge

text:
    UNITED STATES of America, Appellee, v. Steve THOMAS, Appellant. UNITED STATES of America, Appellee, v. Frank SCHULLO and Anthony Petrangelo, Appellants.
    Nos. 73-1490, 73-1544.
    United States Court of Appeals, Eighth Circuit.
    Submitted Feb. 12, 1974.
    Decided Jan. 3, 1975.
    Certiorari Denied April 28, 1975.
    See 95 S.Ct. 1677.

      Ronald I. Meshbesher, Minneapolis, Minn., for appellants Schullo and Petran-gelo.
    Robert J. Milavetz, Minneapolis, Minn., for appellant Thomas.
    Thorwald H. Anderson, Jr., Asst. U. S. Atty., for appellee.
    Before HEANEY and BRIGHT, Circuit Judges, and WANGELIN, District Judge.

       H. KENNETH WANGELIN, District Judge, Eastern and Western Districts of Missouri, sitting by designation.

   BRIGHT, Circuit Judge.

Appellants Steve Thomas, Frank Schullo, and Anthony Petrangelo were tried before a jury in the United States District Court for the District of Minnesota (the late Judge Philip Neville, presiding), and convicted of a single violation of 18 U.S.C. § 1955, which prohibits conducting an “illegal gambling business.” This appeal followed.

At trial, the Government’s evidence consisted primarily of recordings of wiretapped conversations between the appellants and three co-defendants not then on trial — Messrs. Wolk, Capra, and Fish-man — who admittedly conducted an illegal “bookmaking” operation in Minneapolis. Based on these telephonic communications and on the physical evidence of gambling paraphernalia found in appellants’ possession, the Government painted a picture of the appellants as bookmakers who played an integral part in the conduct of the Wolk book by “laying off” bets and by exchanging “line” information with the Wolk book on sporting events.

On appeal, appellants raise the following issues:

(1) The contents of the intercepted oral communications should have been suppressed because the wiretap application was signed by a Deputy Assistant Attorney General and not the Attorney General or his specially-designated Assistant Attorney General as required under 18 U.S.C. § 2516;

(2) An evidentiary hearing should have been held to examine the truth of the Attorney General’s affidavit in which he asserted that he personally approved a request for authority to apply for a wiretap order by initialing a memorandum to that effect;

(3) The evidence is insufficient to establish that defendants participated in the Wolk gambling business to the extent required to sustain a conviction under 18 U.S.C. § 1955;

(4) The trial court erred in instructing the jury that a violation of 18 U.S.C. § 1955 is established if the Government shows that a defendant who is a bookmaker “exchanges line or other information, or places or accepts layoff bets with another bookmaker;”

(5) The trial court erred in instructing the jury that the $2,000 per day gross revenue requirement of 18 U.S.C. § 1955(b)(l)(iii) is met by counting the total amount of wagers placed in any single day; and

(6) The statute, 18 U.S.C. § 1955, as construed by the trial court: (a) is an illegal Bill of Attainder, (b) is unconstitutionally vague, (c) contravenes the first, fifth, and sixth amendments, (d) is an improper delegation of legislative power under Article I, and (e) is an illegal usurpation of power specifically reserved to the states by the tenth amendment.

We find it unnecessary to fully discuss appellant’s contentions numbered above as (1), (2), (5), and (6). We agree with the late Judge Neville’s excellent discussion and proper determination of these issues in his district court opinion. United States v. Schullo, 363 F.Supp. 246 (D.Minn.1973). As to the validity of the wiretap (issue 1), we note that United States v. Cox, 462 F.2d 1293 (8th Cir. 1972), on which Judge Neville relied, is in accord with the Supreme Court’s decision in United States v. Chavez, 416 U.S. 500, 94 S.Ct. 1849, 40 L.Ed.2d 336 (1974), which affirmatively answered the question of whether Justice Department procedures, such as those in the instant case, comply with the wiretap authorization requirements of 18 U.S.C. § 2516. We have discussed this issue extensively in United States v. Brick, 502 F.2d 219 (8th Cir. 1974). Since the initials of Attorney General Mitchell appear on the authorization for the wiretap and his affidavit filed in this case recites that he “approved a request for authority to apply for an interception order in this matter,” the appellants’ challenge to the wiretap must be rejected as similar challenges were rejected in Chavez and Brick.

We now turn to a consideration of the sufficiency of the evidence to sustain the conviction of each of the appealing defendants. The statute, 18 U.S.C. § 1955, defines “illegal gambling business” to mean, among other things, an operation which “involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business * * *.” As noted, the government’s case rested on transcribed logs of wiretapped conversations ■ between each appellant and the Wolk gambling establishment and on proof that all three defendants were bookmakers.

The appellants strongly argue that the evidence is insufficient to bring them within the purview of the statute. They claim that, even assuming they were laying off bets and giving line information to the Wolk organization, they were not “involved” in the “conduct” of the Wolk business. They assert that lay off bets, if actually made, constitute a form of insurance in which one bookmaker passes the risk of loss to another and that the interests of appellants, in fact, directly conflicted with the interests of the Wolk book.

As to Anthony Petrangelo, the taped telephone conversations disclose that he furnished the Wolk book with his “line” (point spreads on various sporting events) and received Wolk’s lay off betting on a regular and consistent basis. In addition, the two parties discussed opportunities for Petrangelo to further lay off a particular bet to an unnamed third party bookmaker.

The evidence against Frank Schullo indicates that he frequently called the Wolk operation inquiring of Wolk’s line and that he placed bets on selected athletic contests with Wolk on a fairly regular basis. The taped conversations indicate that some bets were lay offs although others may have been either lay offs or personal bets. In addition, the telephonic record indicates that Wolk made frequent lay off bets with Schullo based on Schullo’s line.

The evidence shows that Steve Thomas functioned as an intermediary in placing Wolk’s bets with an unnamed third party bookmaker. The transcribed conversations establish that Thomas complied with the requests of the Wolk book to obtain the line from the third party bookmaker on frequent occasions. If the odds were deemed favorable, Thomas placed Wolk’s bets with this bookmaker. In addition, Thomas placed some of his own personal bets with this same bookmaker.

In examining the insufficiency of the evidence claims we must determine whether the activities of the appellants fall within the statutory term “illegal gambling business.” Neither Congress nor the courts have precisely delineated the reach of the term “business” within the phrase “illegal gambling business.” Common usage does not offer a precise standard for the word “business” since it may encompass anything from a single profit-seeking transaction to the overall activity of an entire industry. The statutory requirement that the “business” must involve “five or more persons who conduct, finance, manage, supervise, direct, or own” some portion of the business limits the definition somewhat but still leaves the term nebulous and elastic in scope. Thus, it is necessary to examine the legislative history in order to further narrow the definition.

Section 1955 of Title 18 was enacted as part of the Organized Crime Control Act of 1970. Title VIII of the Act was aimed at syndicated gambling which Congress found to have a pervasive effect upon interstate commerce. 1970 U.S.Code Cong. & Admin.News at 4028. Although Congress, with this special finding, could arguably have proscribed all illegal gambling, it evidently intended by use of the term “business” to signify an organized operation or enterprise involving at least five or more persons similar to a single firm engaged in any other field of commerce. The House Judiciary Committee Report on this portion of the Crime Control Act states:

The intent of section 1511 and section 1955, below, is not to bring all illegal gambling activity within the control of the Federal Government, but to deal only with illegal gambling activities of major proportions. It is anticipated that cases in which their standards can be met will ordinarily involve business-type gambling operations of considerably greater magnitude than simply meet the minimum definitions. The provisions of this title do not apply to gambling that is sporadic or of insignificant monetary proportions. It is intended to reach only those persons who prey systematically upon our citizens and whose syndicated operations are so continuous and so substantial as to be of national concern, * * * [H.R.Rep.No.1549, 91st Cong., 2d Sess. (1970), 1970 U.S. Code Cong. & Admin.News at 4029 (hereinafter “House Report”).]

Similarly, the Senate Judiciary Committee Report emphasizes that the standards of § 1955(b)(1) were designed to bring the federal power to bear only against “illegal gambling activities of major proportions.”

It is anticipated that cases in which this standard can be met will ordinarily involve business-type gambling operations of considerably greater magnitude than this definition would indicate, however, because it is usually possible to prove only a relatively small proportion of the total operations of a gambling enterprise. [S.Rep.No.91-617, 91st Cong., 1st Sess. 73 (1969).]

Thus, given the congressional emphasis on fairly large organized gambling operations and the exclusion of small-scale operations through the five-person minimum, it appears that Congress intended some gambling businesses to remain beyond the scope of the statute. Initially, proposed § 1955(b)(l)(ii) defined “illegal gambling business” to mean in part an operation which “involves five or more persons who participate in the gambling activity.” (Emphasis added). It was subsequently amended and the bill reported by the House Judiciary Committee contains the final language of § 1955(b)(l)(ii) (“conduct, finance, manage, supervise, direct, or own all or part”). House Report at 12-13, 1970 U.S.Code Cong. & Admin.News at 4029. The amendment was apparently the result of objections by the Committee on Federal Legislation of the New York City Bar Association. The word “participate,” it was argued, could include even the customers of a gambling business, thereby bringing the federal power to bear against such small scale operations as “Mom and Pop” bookmaking businesses having two owners and three customers. House Hearings at 325-326. The final language was intended to exclude customers from the count of “five or more.” House Report at 53, 1970 U.S. Code Cong. & Admin.News at 4029. See United States v. Riehl, 460 F.2d 454, 459 (3d Cir. 1972).

Although it is clear that Congress was concerned with large organized gambling operations, it is often difficult to determine whether a particular operation or individual is a part of a large gambling organization. In discussing this problem, Attorney General Mitchell observed:

In areas in which the criminal syndicates operate, franchises are allocated on a territorial basis to nominally independent bookmakers and numbers operators. * * * The. Cosa. Nostra, on its part, provides services essential to the conduct of large-scale illegal gambling — such as providing the capital needed for “laying off’ or reinsuring bets, and arranging for protection from law enforcement agencies — and collects its share of the profits. In an area which organized crime has invaded, there are few independent gamblers. [House Hearings at 152-53 (emphasis added).]

A system of lay off betting constitutes the cement which can weld widely scattered operations into an effective gambling organization. The President’s Commission on Law Enforcement and Administration of Justice states:

Organization is also necessary to prevent severe losses. More money may be bet on one horse or one number with a small operator than he could pay off if that horse or number should win. The operator will have to hedge by betting some money himself on that horse or that number. This so-called “layoff” betting is accomplished through a network of local, regional, and national layoff men, who take bets from gambling operations. [The Challenge of Crime in a Free Society 189 (1967).]

In evaluating the appellants’ claims of insufficiency of the evidence, we are cognizant of the congressional intent to bring federal power to bear against gambling operations organized into a business network and not against small, independent operators. A close examination of the record, including the transcribed conversations, convinces us that the activities of each appellant were of such a nature that a jury could have found that each appellant was involved in a network of gambling operations intertwined with the Wolk business to an extent sufficient to bring them within the purview of 18 U.S.C. § 1955. The activities of both Petrangelo and Thomas played a substantial part in the conduct of the Wolk book. Petrangelo aided the Wolk operation by providing a regular and consistent market for Wolk’s lay off betting. Thomas served as an agent for or collaborator with the Wolk book in arranging bets under circumstances assumed to be favorable under the line offered by an unnamed third party bookmaker.

The case against Schullo discloses a somewhat loose arrangement between the Wolk organization and Schullo. Schullo made at least some lay off bets with the Wolk book on a fairly regular basis and apparently also received some lay off bets from Wolk. Although the nature of the relationship between Schullo and the Wolk book is not as clearly established by the transcribed conversations as in the case of Petran-gelo and Thomas, these conversations do indicate that Schullo and the Wolk book frequently exchanged lay off bets. From this evidence, a jury could conclude that in providing a regular market for Wolk’s lay off bets, Schullo assisted the Wolk operation in the balancing of its books on various athletic contests. As such, a jury could conclude that Schullo conducted or financed a part of the Wolk operation.

Since the evidence establishes that more than five persons (including the appellants) were involved in the conduct and financing of the Wolk operation, the activities of each appellant in the Wolk gambling business fall within the reach of 18 U.S.C. § 1955. See United States v. Brick, 502 F.2d 219 (8th Cir. 1974); United States v. Ceraso, 467 F.2d 647 (3d Cir. 1972); United States v. Harris, 460 F.2d 1041 (5th Cir.), cert. denied, 409 U.S. 877, 93 S.Ct. 128, 34 L.Ed.2d 130 (1972).

Finally, we turn to appellants’ claim of error in the instructions. Judge Neville instructed the jury in terms of the statute, adding in explanation:

Now, the words, “Conduct, finance, manage, supervise, direct or own all or part of” are to be given their normal, customary meaning. If it is proven beyond a reasonable doubt that a defendant here on trial is a bookmaker himself, and exchanges line or other information, or places or accepts layoff bets with another bookmaker, you may consider that defendant as conducting, financing, managing, directing or owning all or part of a gambling business of the other bookmaker.
On the other hand, if a person is merely a customer placing a bet with a bookmaker, he does not fit within the definition of these words.
So, if a person is merely a customer placing a bet or bets with a bookmaker, without being a bookmaker himself or being an employee, agent, or runner of a bookmaker, then the defendant is not a person who conducted, financed, managed, supervised, directed, or owned all or part of an illegal gambling business. (Emphasis added).

The appellants focus on that part of the instruction that we have emphasized above. This portion of the instruction, standing by itself, appears to be somewhat broader in reach than the statute since isolated and casual lay off bets and an occasional exchange of line information may not be sufficient to establish that one bookmaker is conducting or financing the business of a second bookmaker. However, the court clearly stated that “ ‘conduct, finance, manage, supervise, direct or own all or a part of’ are to be given their normal, customary meaning.” Moreover, the court, in explaining the contentions of the parties to the jury, emphasized appellants’ contention that their exchange of line information or lay off betting with the Wolk book did not constitute the “conducting, financing, managing, supervising, or directing” of all or part of an “illegal gambling business.”

The evidence discloses a consistent rather than an isolated pattern of conduct between the Wolk-Capra-Fishman book and each appellant. Under such circumstances and viewing the instructions as a whole, we conclude that Judge Neville did not commit any prejudicial error in instructing the jury.

Accordingly, we affirm.

HEANEY, Circuit Judge

(dissenting).

I respectfully dissent. I agree with Judge Lay’s dissent in United States v. Schaefer, et al., 510 F.2d 1307 (8th Cir. 1974), with respect to the “five or more” requirement of 18 U.S.C. § 1955, and would hold that the requirement was not met here. Also, I do not believe that Chavez forecloses a remand for an evi-dentiary hearing to examine the truth of the Attorney General’s affidavit.

      . 18 U.S.C. § 1955 provides in relevant part:
      (a) Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined not more than $20,000 or imprisoned not more than five years, or both.
      (b) As used in this section—
      (1) “illegal gambling business” means a gambling business which—
      (1) is a violation of the law of a State or political subdivision in which it is conducted;
      (ii) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and
      (iii) has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.
      (2) “gambling” includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein.

      . For the uninitiated, a brief lexicon of gambler’s terms may be useful to understanding this case. A “bookmaker,” of course, is one who accepts wagers, most commonly on sporting events.
      A bettor, in addition to the total bet, pays the bookmaker ten percent, which is the bookmaker’s commission, the “vigorish” or “vig” or, sometimes, “juice,” in the vernacular. Ideally, a bookmaker has an equal amount wagered on both sides of each event with the result that he has a ten percent profit, less expenses, and, ideally, loses nothing. In truth, betting is rarely equal on both sides and bookmakers may lose money, even to the point of their businesses being destroyed.
      To protect against losses, a bookmaker normally engages in “lay off” betting whereby he passes on to another bookmaker the amount of bets by which his own “book" is unbalanced; thus to the extent he loses to his own customers, he wins back from the other bookmaker, or vice versa. The “lay off’ bet is therefore, in effect, bookmaker’s insurance or reinsurance. Bookmakers, however, can and commonly do place personal wagers with one another which are not “lay off’ bets.
      The “line” constitutes the “odds” or “handicaps” or “point spreads” on the wagered contests. This is a list of the teams and events with a certain number of points attributed to the nonfavored team. To win a bet on the favored team, therefore, that team must win by a score exceeding the point spread given to the nonfavored team. The “line” is subject to change as a given event approaches and a bookmaker may alter the “line” on a particular event in order to try and even out the money wagered on each side.
      Bookmakers may cooperate with one another by keeping their “lines” consistent in order to avoid “middling,” whereby a bettor, because there are two different point spreads on a single event, may bet and win on both competing teams. Yet bookmakers also compete, and one may use a “beard,” or bettor not identifying himself with his principal, to bet heavily with the other in an effort to make a “killing,” particularly where “middling” is possible because of a discrepancy in the point spread.

      . Thomas does not specifically argue insufficiency of the evidence as a reason for reversal of his conviction, but rather adopts the arguments of insufficiency of the evidence made by his co-appellants, Petrangelo and Schullo.

      . Organized Crime Control Act of 1970, 84 Stat. 922 (codified in scattered sections of 18 U.S.C.).

      . A special congressional finding of a similar nature was used by the Court in Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686 (1971), as a justification for upholding Title II of the Consumer Credit Protection Act, 18 U.S.C. § 891 et seq., dealing with “loan sharking.” See United States v. Hunter, 478 F.2d 1019 (7th Cir.), cert. denied, 414 U.S. 857, 94 S.Ct. 162, 38 L.Ed.2d 107 (1973); Schneider v. United States, 459 F.2d 540 (8th Cir.), cert. denied, 409 U.S. 877, 93 S.Ct. 129, 34 L.Ed.2d 131 (1972).

      . Hearings on S. 30 and related proposals before Subcomm. No. 5 of the House Comm. on the Judiciary, 91st Cong., 2d Sess., ser. 27 at 41 (1970) (hereinafter “House Hearings”).