text:
    William H. RODGERS, Jr., Plaintiff-Appellant, v. FEDERAL TRADE COMMISSION, Defendant-Appellee.
    No. 71-2859.
    United States Court of Appeals, Ninth Circuit.
    Feb. 25, 1974.
    William H. Rodgers, Jr., in pro per.
    Harold D. Rhynedance, Jr., Asst. Gen. Counsel (argued), Nicholas S. Reynolds (on the brief), Robert E. Duncan, Federal Trade Commission, Washington, D. C., Stan Pitkin, U. S. Atty., Albert E. Stephan, Asst. U. S. Atty., Seattle, Wash., for defendant-appellee.
    Before: KOELSCH and TRASK, Circuit Judges, and JAMESON, District Judge.

       Honorable William J. Jameson, Senior United States District Judge, from the District of Montana, sitting by designation.

   PER CURIAM:

William H. Rodgers, Jr., an assistant professor of law at the University of Washington School of Law, appeals from a final judgment of the United States District Court that dismissed his complaint for a declaratory judgment and equitable relief in a proceeding which had originated before the Federal Trade Commission (Commission). The judgment was pursuant to a motion to dismiss filed by the Commission.

This litigation is an outgrowth of a proposal which was taken to the voters of the State of Washington as Initiative 256, an “anti-litter” measure. If adopted, it would have forbidden the sale in Washington of beer and soft drinks in containers not having a refund value of at least five cents. It was rejected by the voters on November 3, 1970, by a margin of 51 percent to 49 percent. By letter dated December 11, 1970, appellant wrote to the Secretary of appellee Federal Trade Commission, and requested that the Commission investigate what appellant described as “unfair and deceptive practices in commerce” arising out of that campaign.

The letter with documentation attached set forth the “facts upon which allegations are based.” Appellant’s letter then concluded that on the basis of those alleged facts the Commission could find that the opponents of the initiative measure had combined “in both vertical and horizontal agreements, to make price representations to the public that constituted unfair and deceptive trade practices.”

On January 26, 1971, Mr. Charles A. Tobin, the Secretary of the Commission, responded to appellant’s letter and stated that the Commission found no actionable violation “even assuming a wrongful motive, for purposes of consideration of your complaint, and the willful use of distortion or deception.”

With administrative relief denied, the appellant, repeating and embellishng the allegations in his earlier letter, filed an action against the Commission in the District Court on April 8, 1971.

The complaint requested a judgment ordering the Commission to undertake an investigation under what it alleged was a correct interpretation of the law and asked for a declaration that the practices which the plaintiff described were violations of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, and of the Sherman Act, 15 U.S.C. § 1 et seq. After oral argument upon the memoranda filed, the District Court denied appellant’s motion for summary judgment and granted the Commission’s motion to dismiss upon the grounds (1) that it was a matter committed to the discretion of the Federal Trade Commission ; and (2) that the action was barred by the Supreme Court’s decision in Eastern R. R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961).

Assuming without deciding that the decision of the Commission in this case is reviewable under the Administrative Procedure Act, 5 U.S.C. §§ 701-706, we go directly to the merits of appellant’s claim. The Federal Trade Commission, in rejecting his contentions, pointed out that although this was not activity designed to influence a legislative body, the people, acting directly through either the initiative or referendum, are exercising the same power of sovereignty as that exercised by the legislature in passing laws. The Washington courts have so held:

“In this case we have, instead of statute, an initiative measure limiting the taxing power. That, however, can make no difference, for the latter is as much a legislative act as is the former. By Article 2, § 1, Amendment 7 to the state Constitution, it is provided that the legislative authority of the state shall be vested in the Legislature, with an express reservation in the people of the power to propose bills and laws and to enact or reject the same at the polls. The first power so reserved is the initiative. The passage of an initiative measure as a law is the exercise of the same power of sovereignty as that exercised by the Legislature in the passage of a statute.” Love v. King County, 181 Wash. 462, 44 P.2d 175, 178 (1935).

The Commission noted:

“The proscriptions of Section 5 of the FTC Act, as we view them, like the proscriptions of the Sherman Act, are tailored for the business world, not for the political arena. We fail to perceive in the allegations any situation involving unfair methods of competition or business combination characterized by express or implied agreement or understanding that the participants will jointly give up their trade freedom, or undertake to take away the trade freedom of others. The cited • representations, even if jointly made, alluding to higher prices, increased costs, economic hardships, and the like, which would assertedly be occasioned by passage of the subject legislative measure, appear to us to have been, at most, joint efforts to influence legislation.
“Even assuming a wrongful motive, for purposes of consideration of your complaint, and the willful use of distortion or deception, it is our view that actionable violation of Section 5 of the FTC Act is not indicated due to the overriding public interest in preservation of uninhibited communication in connection with political activity, particularly in connection with legislative processes. Nor would illegality attach because joint action may have been here undertaken on the premise of economic advantage, not merely political interest.” Letter of Charles A. Tobin, Secretary, Federal Trade Commission, to William H. Rodgers, Jr., Jan. 26, 1971, in Brief of Appellant, Appendix at 10, 11-12.

The Commission then decided that action on the complaint of appellant under the Federal Trade Commission Act was not warranted. It relied upon Eastern R. R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 139, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961).

Appellant strenuously argues that the Commission and the District Court which reviewed the Commission’s order incorrectly construed the reach of the Noerr doctrine. He places the issue which he raises in perspective by stating in his opening brief:

“[I]t is urged on this appeal that the allegations to the FTC make out a case of overwhelming political influence in bringing about anti-competitive results from governmental action so complete and so thorough as to constitute an illegal instance of monopolization under the antitrust laws. Insofar as appellant is aware, this issue is being'presented to an appellate court for the first time. The case presents an appealing occasion for application of the laws against monopoly to political campaigns.” Brief of Appellant at 6.

Whatever appeal the facts of this case hold out to appellant, we have neither the inclination nor the authority to discard the rationale and the decision of the Supreme Court in Noerr. That case, upon which the Federal Trade Commission and the District Court principally relied, was a private antitrust action by the motor truck operators against the railroads. The substance of the Sherman Act violation charged was that the rail carriers had mounted a far reaching and “vicious, corrupt and fraudulent” publicity campaign against the truckers which was designed to foster the adoption and retention of laws and law enforcement practices intended to damage and destroy the truckers as competitors. The Court held that the Sherman Act did not apply to the activities of the railroads at least insofar as those activities comprised mere solicitation of governmental action with respect to the passage and enforcement of laws. A contrary holding, said the Court, would impute to the Sherman Act a purpose to regulate not business activity but political activity, a purpose which would have no basis in its legislative history. Such a construction would also interfere with the right to petition.

Said the Court:
“Indeed, it is quite probably people with just such a hope of personal advantage who provide much of the information upon which governments must act. A construction of the Sherman Act that would disqualify people from taking a public position on matters in which they are financially interested would thus deprive the government of a valuable source of information and, at the same time, deprive the people of their right to petition in the very instances in which that right may be of the most importance to them. We reject such a construction of the Act and hold that, at least insofar as the railroads’ campaign was directed toward obtaining governmental action, its legality was not at all affected by any anticompetitive purpose it may have had.” 365 U.S. at 139-140, 81 S.Ct. at 530-531.

Noerr was followed a few years later by United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). There the unlawful conspiracy alleged was one between mine owners and unions to cause the Secretary of Labor to establish unreasonably high wages to force the complainant out of business. Thus the improper influence was not to cause passage of legislation but to cause executive action. The Court upheld the position it had announced in Noerr:

“Joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition. Such conduct is not illegal, either standing alone or as part of a broader scheme itself violative of the Sherman Act.” 381 U.S. at 670, 85 S.Ct. at 1593.

More recently California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972), reaffirmed the rationale of Noerr and of Pennington. That case, however, involved allegations that the conspiracy was to deter the competitors in their use of administrative and judicial proceedings so as to deny them the right to free and unlimited access to those tribunals. The result would be to discourage and ultimately prevent the competitors from invoking the processes of the administrative and judicial tribunals. This, the Court said, could bring the situation within the “sham” exception of Noerr which would apply where the activity complained about is a mere screen for what in fact is an attempt to interfere with the business relationships of a competitor. Eastern R. R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 144, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961).

Neither Trucking Unlimited nor Pennington lends support to appellant’s arguments here. Both the supporters of Initiative 256 and its opponents had equal right to submit their arguments to the electorate at large. No charge is made of interference with voters at the polls or any infirmity in the election tabulation. The arguments of appellant fall directly within the rule of Noerr and the cases following it. Cases relied upon by appellant such as Sun Valley Disposal Co. v. Silver State Disposal Co., 420 F.2d 341 (9th Cir. 1969), and Harman v. Valley National Bank, 339 F.2d 564 (9th Cir. 1964), are not apposite.

One other argument that appellant made orally was that Washington State law was violated because that law “forbids corporations with a majority of out-of-st'ate shareholders from making contributions in local initiative campaigns.” No such charge was made in the complaint to the Federal Trade Commission except as it was referred to in “an unpublished draft of a paper describing the initiative campaign which I have prepared for possible publication.” An examination of this document fails to'disclose any direct charge of violation of Washington State law and no facts were submitted to the Commission which would support any charge of illegality.

An examination of the complaint filed indicates that there was nothing before the trial court which would require it to engage in a substantial inquiry. Taking the letter presented to it and the exhibits attached, the issue was whether Noerr controlled or, at the most, whether the allegations presented a matter within the Noerr exception. We believe that the Commission acted within the scope of its authority and that its action was not “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.” 5 U.S.C. §§ 706(2) (A), (C); see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). The trial court correctly decided the issue and its decision is affirmed.

      . “Simply stated, the illegality here alleged is that the grocery chain stores and the manufacturers of beer and soft drink combined, in both vertical and horizontal agreements, to make price representations to the public that constituted unfair and deceptive trade practices. At times these representations were made through the coordinating medium of Citizens Committee Against 256, at times they were made directly — for example, through the use of the stickers promising price increases. No doubt exists that if these dire threats to raise prices were implemented in a joint move by the affected industries after passage of the initiative a prima facie case of price fixing would be established. No less a violation has occurred when the industries join together with a threat of price increases to coerce the consumer to reject a ballot proposition. What happened was that the manufacturers and chains, in the course of the campaign, announced a joint price move to take effect after the election and upon the condition of the passage of 256. Saying that there is an agreement to fix prices established the violation. If there was no agreement, then the representation was false and unlawful on that separate ground. My own view is that the agreement was proven by the concerted, massive and planned move to threaten the consumer with a ... 48 cent increase for each six-pack of a number of different products.” C.T. at 35.

      . Appellant in his brief stated that in making his allegations in his complaint he had “repeated and refined” the allegations that were made to the Federal Trade Commission. Among the “refinements” was an allegation not made to the Federal Trade Commission that the conspiracy “was accomplished in part in violation of Washington State law which forbids corporations with a majority of out-of-state shareholders from making contributions in local initiative campaigns.”

      . Sun Valley and Harman involved the possible loss of antitrust immunity, relative to a concerted attempt to influence executive action, since the official whose favorable decision was sought was himself alleged to be acting unlawfully, i. e., as a member of the conspiracy. Similarly, the result in this case is not controlled by Sacramento Coca-Cola Bottling Co. v. Chauffeurs Local 150, 440 F.2d 1096 (9th Cir.), cert. denied, 404 U.S. 826, 92 S.Ct. 57, 30 L.Ed.2d 54 (1971). In that case, which also involved administrative decisionmaking, the Noerr exemption was held inapplicable because the_ defendants sought to influence “public officials engaged in purely commercial dealings” and employed tactics including “threats and other coercive measures.” 440 F.2d at 1099. Neither condition is satisfied here.
      Appellant’s reliance upon Israel v. Baxter Labs, Inc., 151 U.S.App.D.C. 101, 466 F.2d 272 (1972), and Semke v. Enid Automobile Dealers Ass’n, 456 F.2d 1361 (10th Cir. 1972), is also misplaced. Each of these cases involved alleged attempts to misuse administrative processes in order to further primary anti-competitive objectives. Such activity, if proved, would fall within the “sham” exception of Noerr as interpreted by the Court in Trucking Unlimited. 404 U.S. at 515-516, 92 S.Ct. 609. The case before us here, however, is distinguishable in two respects. First, the allegedly unethical conduct of the “conspirators” herein occurred solely within the “political arena,” not within an administrative or judicial context. See Trucking Unlimited supra, at 513, 516, 92 S.Ct. 609. Secondly, the materials brought to the attention of the Commission did not indicate that the opponents of Initiative 256 had acted primarily to attain anticompetitive goals or that their actions had resulted in an abuse of the initiative proceedings.

      . C.T. at 14-15.


source: Caselaw Access Project

author: SPRECHER, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America ex rel. Melvin TOBE, Petitioner-Appellee, v. Peter B. BENSINGER, Director Department of Correction of State of Illinois, and John J. Twomey, Warden, Illinois State Penitentiary, Joliet, Illinois, Respondents-Appellants.
    No. 73-1331.
    United States Court of Appeals, Seventh Circuit.
    Argued Dec. 5, 1973.
    Decided Feb. 12, 1974.

      Jayne A. Carr, Asst. Atty. Gen., Chicago, Ill., for respondents-appellants.
    James R. Bronner, Chicago, Ill., for petitioner-appellee.
    Before SWYGERT, Chief Judge, SPRECHER, Circuit Judge, and POOS, District Judge.

       District Judge Omer Poos of the Southern District of Illinois is sitting by designation.

   SPRECHER, Circuit Judge.

This appeal raises the question of whether the district court properly granted a writ of habeas corpus to a state prisoner based on a finding that unauthorized jury communications to the effect that the jury had to keep deliberating and reach a verdict involved such a probability of prejudice that they must be deemed to have resulted in an inherent lack of due process.

I

The defendant, Melvin Tobe, was found guilty in an Illinois state court of voluntary manslaughter on February 27, 1970 by a petit jury. At that time, the jury was polled and each juror stated that the verdict “was and is’’ his or her verdict.

At the prosecutor’s request, the attorneys were permitted to speak to the jurors about the case. As a result of such conversations, defense counsel’s post trial motions included a motion for a hearing on inquiries made by the jury in the course of their deliberations (hearing on inquiries) “in order to determine the number and substance of inquiries made by the jury to the Court in the course of their deliberations . . .” Attached to the motion was defense counsel’s affidavit stating that in telephone conversations with the forelady and two other jurors he had learned that “three inquiries made of the Court by the jury never reached the Court.’’ The inquiries all concerned the possibility of reaching a nonunanimous verdict. The responses were to the effect that the jury must keep deliberating and reach a unanimous verdict.

In ruling on the motion for a hearing on inquiries, the trial judge questioned the bailiff, Thomas Goe, under oath who testified that he knew of only one inquiry made by the jury and that inquiry was answered by the court. The trial judge added that his notes showed only one inquiry was directed to him. The court denied the motion for a hearing on inquiries on the basis that assuming ar-guendo that the communications between the bailiff and the jury occurred, they were not prejudicial.

On April 7, 1970, defense counsel filed a motion to reconsider the original motion for a hearing on inquiries. The motion was supported by the affidavits of seven jurors and two bailiffs. Subsequently, the affidavit of a deputy sheriff was filed. The affidavits of the jurors indicated that three or four inquiries concerning the alternatives to a unanimous verdict had been made about 3% hours into deliberations when the jury stood nine for acquittal, two for guilty of voluntary manslaughter and one for guilty of murder. Some of the jurors indicated that these communications had influenced the verdict. The affidavit of Bailiff Domitila Rodriquez stated that the buzzer had been rung at least two or three times and Thomas Goe had responded on these occasions. The affidavit of the deputy sheriff Grover Weiss, stated that two or three times during the course of deliberations “the jury made inquiries to the effect: ‘What happens if we cannot reach a verdict? ’ ” and that the bailiff “Toni” (Bailiff Rodriquez) had answered that “they should keep deliberating until they reached a decision.”

At the April 15, 1970 hearing, defense counsel cross examined Bailiff Goe who reaffirmed his prior testimony but also admitted that it was possible that another bailiff could have answered a jury call. The State did not present any evidence contrary to the affidavits but argued that portions of the affidavits were attempts to impeach the jury’s verdict. The court then announced that it was considering the proceedings on the motion for a hearing on inquiries as a hearing itself for the purpose of determining whether defendant was entitled to a new trial. Indicating that it had considered the trial court record, all the affidavits filed by the defense except those portions which referred to the effect of the alleged communications on the jury deliberations, the testimony of Bailiff Goe, the written instructions given to the jury, arguments of counsel, the polling of the jury, and the court’s own knowledge of certain events during deliberations, the court denied the motion for a new trial. The court specifically found that the evidence clearly established the defendant’s guilt beyond a reasonable doubt, that Goe’s communication with the jurors was not intended to influence the deliberations, that the polling of the jury conclusively established that the communication did not affect the verdict, and that the defendant had not been prejudiced. In response to a question from defense counsel, the court additionally stated:

“The Court finds that the only evidence of any communication established here is the communication testified to by Mr. Goe in the manner and form as stated by Mr. Goe.”

On direct appeal, the Supreme Court of Illinois affirmed the conviction. People v. Tobe, 49 Ill.2d 538, 276 N.E.2d 294 (1971). The court in pertinent part found:

“The trial court did not err in not setting aside the verdict because the defendant was not present at the time of the communication, as the defendant says was necessary. As was stated in Mills, [People v. Mills, 40 Ill.2d 4, 237 N.E.2d 697 (1968)] if there was a communication to the jury by the court outside the presence of the defendant and it is apparent that no prejudice resulted, the verdict will not be set aside. We do not judge that the communication between the jurors and the bailiffs was coercive and prejudicial as the defendant claims. Considering the length of the trial [5 days] and the time the jury spent in deliberating [approximately 7 hours], we do not believe it can be reasonably said that the statements of the bailiffs, that the jurors should continue to deliberate until they reached a verdict can be regarded as coercive.”

People v. Tobe, 49 Ill.2d at 543-544, 276 N.E.2d at 298.

On June 9, 1972, defendant filed a petition for a writ of habeas corpus in the federal district court together with a supporting memorandum seeking issuance of the writ or alternatively an evi-dentiary hearing on the ground that the alleged jury communications violated his sixth amendment right to a fair and impartial jury. On September 26, 1972, respondents filed a Fed.R.Civ.P. 12(b) (6) motion to dismiss. By Memorandum Opinion and Order on December 18, 1972, 352 F.Supp. 218, the district court denied the motion to dismiss on the grounds that the state trial court’s finding of a single communication was not supported by the record and that although the Illinois Supreme Court considered all the alleged communications in determining the question of prejudice, it failed to evaluate them in light of the principles set forth in “Allen charge” cases. The court allowed the parties time to submit any additional documentary evidence or to request a hearing for the presentation of testimonial evidence. Based on the trial record and the only additional evidence submitted, a further affidavit of the forelady of the jury, the district court issued a second Memorandum Opinion and Order granting the petition for writ of habeas corpus (February 22, 1973). The court found that:

“(1) on more than one occasion, a bailiff or bailiffs responded, without the trial judge’s knowledge, to inquiries from the deliberating jury as to what they should do if they were deadlocked ;
(2) the essence of these responses was that the jury had to keep deliberating and reach a verdict;
(3) none of the responses contained the admonition that no juror should relinquish his conscientiously held convictions to join in a majority verdict;
(4) respondents have failed to show that the responses were not coercive;
(5) the nature of the responses involved such a probability of prejudice that they must be deemed to have caused an inherent lack of due process.”

II

In Illinois, a jury verdict will not be set aside upon the occurrence of a communication between the jury and the court or some third person outside the presence of the defendant where it is apparent that no prejudice has resulted. People v. Mills, 40 Ill.2d 4, 14-15, 237 N.E.2d 697, 702-703 (1968); People v. Tilley, 411 Ill. 473, 477-478, 104 N.E.2d 499, 501-502 (1952); People v. Brothers, 347 Ill. 530, 548, 180 N.E. 442, 447-448 (1932). In an attempt to make a showing of prejudice based on the affidavits of jury members, actual evidence of the nature of outside influences exerted on the jury during deliberations will be considered, but evidence relating to the effect of such influences on the mental processes of jury members is inadmissible. People v. Pulaski, 15 Ill.2d 291, 300, 155 N.E.2d 29, 34 (1958). Because the actual effect of the conduct on the minds of the jury cannot be proved, the Illinois Supreme Court has held that the standard to be applied is whether the “conduct involved ‘such a probability that prejudice will result, that it is [to be] deemed inherently lacking in due process.’ Estes v. State of Texas, 381 U.S. 532, 542-543, 85 S.Ct. 1628, 1633, 14 L.Ed.2d 543.” People v. Tobe, 49 Ill.2d at 544, 276 N.E.2d at 298.

In Parker v. Gladden, 385 U.S. 363, 87 S.Ct. 468, 17 L.Ed.2d 420 (1966), the Supreme Court of the United States reversed the Oregon Supreme Court’s approval of the defendant’s conviction where the trial court bailiff told one juror that the “wicked fellow was guilty” and told another, juror that the Supreme Court would correct an erroneous guilty verdict. There one of the jurors testified that she was prejudiced by the statements. In the present case, one juror said that “she signed a verdict in which she didn’t believe” and another juror said he knew that the bailiffs statements “influenced others [of the jurors] to reach the verdict.” People v. Tobe, 49 Ill.2d 538, 542, 276 N.E.2d 294, 297 (1971).

In Parker, the Supreme Court said, 385 U.S. at 364 and 366, 87 S.Ct. at 470, 471:

“We believe that the statements of the bailiff to the jurors are controlled by the command of the Sixth Amendment, made applicable to the States through the Due Process Clause of the Fourteenth Amendment. It guarantees that ‘the accused shall enjoy the right to a . . . trial, by an impartial jury . . . ’
******
. . In any event, petitioner was entitled to be tried by 12, not 9 or even 10, impartial and unprejudiced jurors.”

The Parker court further pointed out “that the official character of the bailiff —as' an officer of the court as well as the State — beyond question carries great weight with a jury . . . .” (385 U.S. at 365, 87 S.Ct. at 470).

In Jenkins v. United States, 380 U.S. 445, 85 S.Ct. 1059, 13 L.Ed.2d 957 (1965), the defendant’s conviction was reversed because the jury after two hours sent a note to the trial judge that it was unable to agree upon a verdict whereupon the judge recalled the jury to the courtroom and said that “you have got to reach a decision in this case.” The Supreme Court said, 380 U.S. at page 446, 85 S.Ct. at page 1060:

. . [W]e conclude that in its context and under all the circumstances the judge’s statement had the coercive effect attributed to it.”

In the present case, it is immaterial whether the jurors believed that the bailiffs were or, as is more probable, the judge through the bailiffs was telling them over and over again in one form or another that “You must reach a decision.” In either ease the statements were not only probably but were presumptively coercive and prejudicial.

Evidence of communications during deliberations concerning the case on trial outside the presence of defendant and his counsel are presumptively prejudicial. This presumption must be rebutted by evidence showing that the communications were harmless or lacked prejudice. Remmer v. United States, 347 U.S. 227, 229, 74 S.Ct. 450, 98 L.Ed. 654 (1954) (citing Mattox v. United States, 146 U.S. 140, 148-150, 13 S.Ct. 50, 36 L.Ed. 917 (1892); Wheaton v. United States, 133 F.2d 522, 527 (8th Cir. 1943)).

In the instant case, the question of whether the alleged communications were harmless was never confronted by the state trial judge inasmuch as he denied the occurrence of all inquiries except the one that actually reached the court. This determination in the face of uncontradicted affidavits was erroneous. The Supreme Court of Illinois, while not directly commenting on this erroneous finding, nevertheless considered the question of lack of prejudice in light of all the alleged occurrences. This assumption that all the alleged inquiries took place is inconsistent with its determination that the defendant was given a meaningful hearing on this point. A hearing cannot be “meaningful” when the judge ignores uncontradicted evidence. By denying that other inquiries took place, the judge did not “determine whether the bailiffs prejudiced the defendant’s right . , .” People v. Tobe, 49 Ill.2d at 542, 276 N.E.2d at 297. Consequently, this error resulted in the question of prejudice never having been adequately determined and the presumption that prejudice did exist was never rebutted.

Finally, the answers to the . jury’s questions were all, as the district judge found, “akin to an ‘Allen charge’ instruction, without the admonition that no juror should relinquish his conscientiously held convictions to join in a majority verdict.” These statements have a coercive effect resulting in prejudice to the defendant where they are void of such an admonition.

The peculiar circumstances of this case do not expunge these communications of the coercive effects of variations of the Allen charge of this ilk. The fact that the answers came from bailiffs rather than a judge is irrelevant (see discussion of Parker v. Gladden, supra). The fact that the majority’s view of the case was not reinforced by the responses does not show, as the prosecution argued, that Allen-type coercion was lacking. Although the Allen charge cases generally have been concerned with pressure exerted on the minority, any influence which emphasizes the importance of agreement to the exclusion of the dictates of conscience is coercive and prejudicial. See United States v. Thomas, 146 U.S.App.D.C. 101, 449 F.2d 1177, 1187 (1971) (enbanc).

Finally, although the jury was polled, we do not think that circumstance by itself established a lack of prejudice foreclosing further inquiry. United States v. Grosso, 358 F.2d 154, 160 (3rd Cir. 1966). In eases where the coercion is not obvious, such as a bribe or threat, this approach would leave the question of coercion to the jury members and they are not empowered to determine what amounts to legal coercion.

Under all the circumstances of this case, the district court’s grant of the petition for writ of habeas corpus was not clearly erroneous.

Affirmed.

      . The affidavit detailed the following questions and answers as' related by the fore-lady:
      Q: “What happens if we cannot reach a decision?
      A: “Keep deliberating, you must reach a verdict.”
      Q: “We think we have a decision; We can’t sway a couple of people; Does the majority rule?”
      A: “You must reach a unanimous verdict.”
      Q: “Are there any other alternatives than the ones we have if we cannot come up with a decision?”
      A: “Keep deliberating, you must reach a decision.”
      The fourth question “was a reiteration of a combination of the first three inquiries” and the answer “was essentially the same as the first three answers.”

      . “The Court has, in its notes, as I have stated, an indication that at 3:17 p. m. the buzzer did ring and there was then an inquiry from the Bailiff advising me that the jury had made inquiry, ‘What would happen if they did not reach a verdict?’ and the Bailiff was told to tell them, ‘Everything was in the instructions.’
      * * :|: * *
      “. . . [T]he Court does follow the practice of recording every buzzer that rings While a jury is out.
      “The Court does not permit people back in the back area because I want to hear what is going on ... .
      “And I record those things. And, as I say, these are the records that I have. I was gone while the jury was gone. I came back perhaps about five minutes after the jury came back . . . after dinner, and there is no other indication, other than what X have indicated, and you heard the Bailiff, and he keeps no date book.”

      . “COURT: . . . [A]fter considering the communications which have been alleged and which this Court is aware of, this Court cannot see, in good conscience, how this defendant was in any way prejudiced by those communications.
      * * * * *
      “DEFENSE: Are you assuming, for the purpose of denying a hearing, that everything Mrs. Bradfield [the forelady] says is true?
      “COURT: The Court has made whatever statement it cares to make. I think I have covered all the facts — all the phases that I would care to state at this time.”

      . Questions and answers summarized by the jurors included the following:
      Q: “[W]e asked Judge Downing if there were any more alternatives than the ones we liad been given and what we should do if we could not reach a decision.”
      A: “[T]lie answers we received from Judge Downing through the bailiff were ‘to follow the instructions, to keep deliberating, and that we had to reach or come to a decision.’ ”
      Q: “ ‘What do we do if we are deadlocked? and ‘Are there any more alternatives than the ones we have?’ ”
      A: “ ‘You must continue to deliberate. You have to reach a verdict,’ ”
      Q: “[E]ach of the questions we asked were concerned with what would happen if we could not agree oil a verdict.”
      A: “[A]fter the first question we were told to reread the instructions and keep deliberating. [A]fter the next question we were told by a bailiff: ‘You’ll have to stay in there until you come up with a decision.’ ”

      . Insofar as the instructions are pertinent, they included the following :
      “Court’s Instruction No. 1. Any verdict you reach must be unanimous. And in your deliberations you should examine the questions submitted with a proper regard and consideration for the opinions of each otiier. You should listen to each other’s arguments with an open mind, and you should make every reasonable effort to reach a verdict.
      “People’s Instruction No. 13.
      Your agreement upon a verdict must be unanimous. Your verdict must be in writing and signed by all of you . . . . ”

      . The Court reiterated the measures it takes during deliberations and that it had recorded only one communication, supra n. 2.
      “The notes of the Court indicate the following : the jury retired in this case at 11:23. The jury went to lunch at 11:30. At 12:15 the jury returned from lunch. At 3:17 the Court notes a buzzing from the jury and then an inquiry as advised by Mr. Goe .... 5:25 the jury went to dinner. 6 :05 the jury returned from dinner. 6 :10 the Court returned from dinner. 6 :30 there was a jury buzz. The bailiff advised after being directed by the Court to inquire what the buzz was about that the jury had reached a verdict — at 6:43 the jury came into the court room and returned its verdict of guilty of voluntary manslaughter.”

      . “Petitioner claims that the judge’s finding that there was only one communication with the jury while it deliberated is clearly erroneous. Under 28 U.S.C. § 2254(d), he has the burden of rebutting the presumption in favor of the correctness of this finding with convincing evidence, unless one of the circumstances set forth in paragraphs (1) to (8) appears or is established. After careful consideration, this Court is forced to conclude that the finding of a single inquiry and response is contrary to the record.
      “The affidavits of the jurors, bailiffs, and deputy sheriff all state that more than one inquiry was made and responded to, and several state that these additional inquiries were made after the jury knocked on the door of the jury room rather than after sounding the buzzer connected with the judge’s chambers. Although Goe testified that he did not know of and had not been told of any further communications, he also testified that he was not present outside of the jury room at all times during the deliberations. And although the judge recalled only one inquiry, he could not be expected to know of others made after the jury knocked on the door. No reason for the jurors, bailiffs, and deputy to have lied in their affidavits w.as suggested. Yet, for the trial judge to reach his finding of but a single inquiry and response, he had to disregard them completely.”

      . Although some jurisdictions have adopted a conclusive presumption of prejudice under these circumstances, the weight of authority recognizes only a rebuttable presumption. Rice v. United States, 356 F.2d 709, 715-718 (8th Cir. 1966); Chamber v. United States, 237 F. 513, 520-521 (8th Cir. 1916). See People v. Brothers, 347 Ill. 530, 552, 180 N.E. 442, 450 (1932) (Dunn & DeYoung, J.J., dissenting).

      . A full hearing is appropriate to “determine the circumstances, the impact thereof upon the juror[s], and whether or not it was prejudicial. . . .” Remmer v. United States, 347 U.S. 227, 230, 74 S.Ct. 450, 451, 98 L.Ed. 654 (1954).

      . One obvious effect of the trial judge’s error was to remove the burden from the prosecution to establish that the conduct was harmless to the defendant. Id. 347 U.S. at 229, 74 S.Ct. 450, 98 L.Ed. 654.

      . For a history of ‘ the “Allen charge,” see United States v. Bailey, 468 F.2d 652, 661-669 (5th Cir. 1972). Although the Allen charge itself has not been held to be unconstitutional, its exact language or a close paraphrase thereof is the ultimate permissible constitutional limit. Cf. Green v. United States, 309 F.2d 852 (5th Cir. 1962).

      . It is error even for the judge to communicate with the jury through the medium of the bailiff. United States v. Grosso, 358 F.2d 154, 158 (3rd Cir. 1965); Henderson v. United States, 204 F.2d 126, 127 (6th Cir. 1953).


author: WEIS, Circuit Judge.

text:
    UNITED STATES of America v. Robert Otha JONES, Appellant.
    No. 73-1844.
    United States Court of Appeals, Third Circuit.
    Argued Jan. 8, 1974.
    Decided Feb. 20, 1974.

      Robert E. J. Curran, U. S. Atty., Joseph M. Fioravanti, Asst. U. S. Atty., Philadelphia, Pa., for appellee.
    Harry E. Tischler, Defender Assn. of Philadelphia, Philadelphia, Pa., for appellant.
    Before ADAMS, HUNTER and WEIS, Circuit Judges.
   OPINION OF THE COURT

WEIS, Circuit Judge.

The life of a trial lawyer is a hectic one at best, and when defense counsel in a criminal case is required to try the case at the same time that efforts must be made to locate a missing witness or secure important information, duodenal lesions may result. More importantly, when prosecutorial errors lead to unsuccessful last minute scurrying by the defendant’s lawyer, basic rights may be impaired. We approach this case with that consideration in mind.

The defendant Robert Jones was convicted of possessing heroin with intent to distribute in violation of 21 U.S.C. § 841(a)(1). The offense stemmed from negotiations for the sale of heroin which had been arranged by and conducted through a government informer who did not testify at the trial.

The prosecution presented its case through two agents of the Bureau of Narcotics and Dangerous Drugs. The testimony of these men revealed that the informant, acting on behalf of Agent Brown and another agent, made the necessary arrangements for them to meet with defendant Jones on August 26, 1971. On that evening the agents and informant sat at the bar of the Wanda Inn in Philadelphia, Pennsylvania and were soon joined by the defendant. After some discussion, Agent Brown agreed to buy an ounce and a half of heroin if it could be “cut” five times. He refused to make any payment until he was given the opportunity to test a sample.

After stating that he had to make a phone call, Jones left the Inn and returned in about ten minutes to where the agent was seated. The defendant said that the sample would be arriving in about fifteen minutes and again left the bar.

When he re-entered some time later, the defendant seated himself on the opposite side of the oval shaped bar and called the informant over. The two conversed, and Brown testified that he then observed the defendant and the informer move their hands under the bar. Because of the obstruction of the bar and the dim lighting in the Inn, the agent could not see any objects being transferred.

The Informant then walked around the bar to Brown and gave him two glassine envelopes containing heroin. After being summoned by the agent, the defendant came over to Brown, and in response to his feigned confusion, Jones pointed to one of the envelopes saying it was ready for the “street” and to the other saying that it could be “cut.” The defendant then gave Brown a telephone number which was to be used to make further arrangements for the purchase of heroin.

There is nothing in the record to indicate that the informant had been searched before the meeting took place, an omission which has some bearing on the defense claim that the missing testimony might be very important.

The defendant was arrested on December 22, 1971, some four months later, and charged with possession, distribution, and possession with intent to distribute heroin. After the district court dismissed the simple possession count for reasons not shown on the record, the jury returned a verdict of guilty of possession with intent to distribute and not guilty to the count of distribution. Defendant’s motions for a new trial and for acquittal were denied.

The evidence of guilt is hardly overwhelming, and although we recognize that constructive possession may be be shown by circumstantial evidence, United States v. Crippen, 459 F.2d 1387 (3rd Cir. 1972), it is necessary also that the government surmount the hurdle posed by United States v. Pratt, 429 F.2d 690 (3rd Cir. 1970). Since a new trial must be had, however, we do not pass upon those issues here.

The paucity of the government’s evidence does demonstrate the importance of the informant’s knowledge and underlines our concern with the fact that the prosecution did not make him available for trial.

While defense counsel was advised at a pretrial conference that an informer was in the case, no disclosure of the name was made at that time in accordance with the policy of the Bureau of Narcotics. It was not until after testimony had commenced that the Assistant United States Attorney conceded to the trial judge that the name of the informer should be revealed to the defense.

We are well aware of the very practical problems connected with premature disclosure and do not wish to be understood as being unduly critical of the government’s conduct in this particular. The difficulty here is that defense counsel was not told until July 31, 1972, the day on which the jury was selected, that the government did not intend to call the informant as a witness. Furthermore, it was not until this day that the case agent (not Brown) made a telephone call to the informant’s residence in an effort to learn of his whereabouts. The call was not productive, and on the following day (when testimony actually commenced in the courtroom) two agents were dispatched to the informant’s presumed residence and later to his place of employment. Neighbors indicated that he had not been in the residence for two or three months, and the employer stated that the informant had been discharged some four months previously.

The able trial judge found that the government had made reasonable efforts to make the witness available to the defense, and we do not find error in that determination as applicable to the period July 31-August 1, 1972, the days of trial. Cf. United States v. Clarke, 220 F.Supp. 905 (E.D.Pa.1963). But here, more was required.

The case agent admitted that in the preceding two months he had had no response from his other sources when he asked them of the whereabouts of the informer. Thus, the Bureau knew more than two months before the trial date that there might be some difficulty in locating and producing the witness but took no steps to find him other than making casual inquiries of other informants. It was not until the trial had commenced that serious efforts were made, but obviously, it was then too late to make a thorough search.

To further compound the problems of the defense, the case agent at one point in his testimony gave the informant’s address as 2908 “West Montgomery” Street. On another occasion a corrected portion of the transcript shows that the agent referred to the address as 2829 “Westmont” Street. Apparently both defense counsel and the court reporter (originally, at least) thought that the second reference was also to “West Montgomery.” A post trial affidavit filed by the defense was to the effect that there was no such address in Philadelphia as 2908 West Montgomery and residents at 2829 West Montgomery had' never known the informant to live there.

It is apparent that confusion could arise in the use of the two not dissimilar street names, particularly if abbreviations were used by counsel .and the court reporter in making notes during the trial. There is nothing to indicate that' the failure of communication was other than the result of inadvertence, but the additional burden imposed upon the defense in its literally last minute attempts to locate the witness is obvious.

At another point in the trial, the case agent provided counsel with information as to the informant’s prior criminal record and cases pending against him at the time of the incident at the Wanda Inn. The Assistant United States Attorney made it quite clear that the government did not warrant that the record was complete. Nevertheless, it was read to the jury in the form of the stipulation.

After trial the defense was able to verify that the information was in fact incomplete, particularly as to a second pending narcotics charge against the informer in August of 1971. Again, we do not find any impropriety on the part of the prosecution, but nevertheless, there was some detriment to the defense as a result of the lack of thorough investigation by the government. When the name of the informant was not disclosed to defense counsel until the last day of trial, it was not realistic to expect him to be able to verify the government’s information or make an independent check of criminal records at that late hour.

Whether an informant’s identity should be disclosed depends on the circumstances of each case and requires a balancing of the public’s right to the flow of information against the requirements of providing a fair trial to the defendant. Roviaro v. United States, 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639 (1957). If for legitimate reasons, the government decides not to identify the informant in advance of trial, then absent special circumstances, it must take reasonable steps to have him available when the case is called, should a ruling in favor of disclosure be made. United States v. Leon, 487 F.2d 389 (9th Cir. 1973); United States v. Barnes, 486 F.2d 776 (8th Cir. 1973); Velarde-Villarreal v. United States, 354 F.2d 9 (9th Cir. 1965); United States v. D’Angiolillo, 340 F.2d 453 (2d Cir. 1965); United States v. Clarke, supra. In this case the failure of the government to undertake a serious search for the informant in advance of the date set for trial has not been explained, and hence in the circumstances here we do not consider that the obligation to produce the witness has been met.

We do not hold that any one of the unfortunate trial incidents, standing alone, was so prejudicial as to require a new trial, but the accumulation of mishaps so hampered the defense that fairness requires a new trial. United States v. Moore, 446 F.2d 448 (3rd Cir. 1971) and United States v. Jackson, 384 F.2d 825 (3rd Cir. 1967), cert. denied 392 U.S. 932, 88 S.Ct. 2292, 20 L.Ed.2d 1390, are distinguishable on that basis and are not inconsistent with our decision here.

We know that to be successful in the fight against unlawful narcotics traffic, the agents of the Bureau of Narcotics must rely extensively upon the use of informants. It is no secret either that often these informants are not pillars of the community and are most reluctant to make themselves available for testimony in court. Nonetheless, the burdens we impose upon the government officers are justified by the necessity of preserving the integrity of the trial process. The invaluable contribution made to society by the difficult and dangerous work of the narcotics agent cannot be diluted by a conviction obtained by other than a fair trial.

The judgment of the district court will be reversed and a new trial will be granted.

      . The docket shows that Count III was dismissed on motion of the government. However, there is nothing in the trial transcript which explains the reason for this action or whether it was with the consent of the defendant. While on appeal, Jones contends that dismissal of the count of simple possession requires similar treatment for the charge of possession with intent to distribute, the point was not raised in the trial court. We do not have sufficient information to pass on the defendant’s contention here, but it may be raised in the district court where this case will be remanded for a new trial,

      . See United States v. Day, 384 F.2d 464 (3rd Cir. 1967).


author: FIELD, Circuit Judge:

text:
    CAROLINA FREIGHT CARRIERS CORPORATION for the Use and Benefit of Liberty Mutual Insurance Company, Appellant, v. PITT COUNTY TRANSPORTATION COMPANY and Old Republic Insurance Company, Appellees.
    No. 73-1812.
    United States Court of Appeals, Fourth Circuit.
    Argued Nov. 8, 1973.
    Decided Feb. 21, 1974.
    Nathan H. Smith, Richmond, Va. (Sands, Anderson, Marks & Clarke, Richmond, Va., on brief), for appellant.
    Robert E. Payne, Richmond, Va. (Alexander H. Slaughter, McGuire, Woods & Battle, Richmond, Va., on brief), for appellees.
    Before WINTER, BUTZNER and FIELD, Circuit Judges.
   FIELD, Circuit Judge:

Finding an indemnification provision in a lease of motor carrier equipment to be violative of a pertinent regulation of the Interstate Commerce Commission, the district court granted defendant’s motion for judgment on the pleadings and the plaintiff has appealed.

The facts are not in dispute. Carolina Freight Carriers Corporation [Carolina] leased a tractor-trailer truck accompanied by its driver from Pitt County Transportation Company [Pitt]. During the rental period the driver allegedly parked improperly on a highway wayside and the truck moved backwards striking one Robert Powers and his infant daughter. The infant was killed and Powers was seriously injured. Thereafter, Carolina’s insurer compromised the claims by payment of $50,000, and Carolina now seeks indemnity on behalf of its insurer from Pitt, the lessor.

The issue presented to the court below was whether Pitt owed a duty to indemnify Carolina under the provisions of the lease, a copy of which was incorporated in the complaint as an exhibit thereto and which reads in pertinent part as follows:

Carolina Freight Carriers Corporation, Lessee, hereby acknowledges receipt of and leases from Pitt County-Trucking Co., Lessor, of Farmville, North Carolina * * * for its exclusive possession, control, and use, and assumes complete responsibility in respect thereto for the duration of this Motor Vehicle Trip Agreement, the following vehicular equipment to be used by said lessee beginning at 1 PM o’clock on 6/19/69 in its interstate service to transport merchandise. # # * * * *
2. LESSEE will assume and pay all costs of public liability and property damage insurance on the vehicle while operating at the direction of the Lessee and provide insurance covering cargo being transported at the direction of the Lessee. However, in the event any loss or damage to cargo or property damage or personal injury to any third person takes place by reason of negligence or dishonesty of the owner, its Agents, servants, or employees, then the owner does hereby agree to assume and be fully responsible for any such damage and, in the event payment shall be made by the Lessee herein, Lessor does hereby agree to indemnify the Lessee and hold the Lessee harmless for any and all claims. In the event that Lessee’s insurance company is required to make payment therefor, then, and in that event, the insurance company shall be subrogated to the rights of the Lessee against the Lessor herein.
* * * * •>:- *
5. LESSOR agrees that during the term of this lease the motor vehicle equipment described above shall be under such control of the LESSEE as required by the rules and regulation of the Interstate Commerce Commission and for the limited purpose of safety to the public and safe delivery of shipment.
* -X- *X- * -X- *
7. LESSOR agrees to be fully responsible for the above described equipment maintaining said equipment in accordance with the “safety” regulations and specifications set forth by the Interstate Commerce Commission to keep said equipment in good operating condition and appearance; to maintain such records as shall be required by the Interstate Commerce Commission, Government, State, or any other regulatory authority. LESSOR agrees to provide at his sole and own expense all necessary oil, gasoline, fuel, tires, repairs, accessories, and/or other items required for the operation and maintenance of said vehicle during the term of this lease. LESSEE may require LESSOR to store his equipment when not in use on the LESSEE’S premises.
* * * * * *
9. LESSOR agrees that during the term of this lease:
(a) He will be solely responsible for the payment of his own Social Security Taxes, Old Age Benefits, Unemployment compensation, Taxes, Workmen’s Compensation Insurance, Federal Income Taxes, license fees, and payment of all payroll deductions and taxes for employees furnished by the LESSOR.
(b) To pay fines, costs and expenses incurred in the operation of the equipment leased herein in the performance of this lease are to be borne by and be the sole responsibility of the LESSOR.
(e) To indemnify LESSEE against loss or liability, if any resulting from the injury or death of the driver or drivers of the vehicle above described or any helpers employed by such drivers in connection with the loading or unloading of said vehicles.
(d) To indemnify LESSEE against any loss or damage resulting from the negligence, incompetence or dishonesty of said drivers or helpers.
(e) To indemnify LESSEE against any loss or damage to or destruction of the trailer or other such equipment of the LESSEE towed by the LESSOR or his employee.
(f) To indemnify the LESSEE against any loss resulting from claims brought against the LESSEE for any property damage and bodily injury sustained by the public while the tractor is detached from a trailer.
•* * * -X- -X- *
11. The LESSOR shall perform this contract in a safe, competent and workmanlike manner and shall be responsible to the LESSEE for complying and together with his employees, agents and servants shall comply with all applicable requirements of federal, state and local government including but not limited to the rules and regulations of the Interstate Commerce Commission.
12. The LESSOR shall at its expense employ all necessary drivers, driver’s helpers, and laborers who shall be experienced, competent, and qualified to carry out work to be performed by the LESSOR under this contract. Such employees shall also be qualified under and meet all the requirements of applicable federal and state laws and municipal ordinance and the rules and regulations of the Interstate Commerce Commission and other regulatory authorities.
->:• * -x- •» -x* *
18. This is the entire agreement of the parties. No alteration, amendment or future understanding shall be binding unless in writing and signed by both parties. This agreement shall be governed by the laws of the State of North Carolina. This Motor Vehicle Equipment Lease supercedes and cancels all prior agreements and leases entered into by the parties.

(Emphasis supplied)

In its answer to the complaint Pitt did not dispute the execution or terms of the lease agreement, but.alleged that the provisions with respect to indemnification and the responsibility of Pitt are unenforceable since they are contrary to the regulations of the Interstate Commerce Commission. The relevant regulatory section, 49 C.F.R. 1057.4, reads:

“(a) Contract requirements. The contract, lease, or other arrangement for the use of such equipment:
•X- * -X- -X- -X- -X-
(4) Exclusive possession and responsibilities. Shall provide for the exclusive possession, control, and use of the equipment, and for the complete assumption of responsibility in respect thereto, by the lessee for the duration of said contract, lease or other arrangement, * *

Although acknowledging that North Carolina law, designated as controlling in the agreement, recognizes the validity of such an indemnification provision, the district judge concluded that the effect of the provision was to relieve the lessee from responsibility for damages to third parties and, accordingly, it was “violative of the spirit and letter” of the federal regulation and therefore unenforceable.

In all deference, we think the district court misread the lease agreement for there is nothing in it which purports to relieve Carolina from any responsibility to third parties for damages resulting from the operation of the leased equipment. On the contrary, the agreement specifically provides that Carolina was taking exclusive possession and control of the equipment and assuming “complete responsibility in respect thereto.” Recognizing the regulatory obligations, the instrument states that the equipment should be under “the control of the LESSEE as required by the rules and regulations of the Interstate Commerce Commission” for the purpose of safety to the public.

Nor do we find the indemnification provision violative of either the spirit or letter of the I.C.C. regulation. “The use of non-owned equipment by authorized carriers is not illegal, either under the Act or the rules under consideration,” American Trucking Assns. v. United States, 344 U.S. 298, 303, 73 S.Ct. 307, 311, 97 L.Ed. 337 (1953), and the right, of a carrier to augment its equipment by a lease arrangement such as we have before us is specifically authorized by statute, 49 U.S.C. § 304(e), and the regulations, 49 C.F.R. 1057.1-1057.6. While such lease arrangements must, of course, be in bona fide compliance with the regulations, which were promulgated primarily for the protection of the pub-lie, we agree with the Fifth Circuit that there is nothing in the language of the regulations “which would prohibit two freely contracting parties from determining, as between themselves, which party will ultimately bear the costs of damages done to a third person.” Allstate Insurance Co. v. Alteraran Transport Lines, Inc., 465 F.2d 710, 713 (5 Cir. 1972).

In granting defendant’s motion, the court below placed primary reliance on the ease of Alford v. Major, 470 F.2d 132 (7 Cir. 1972). We, however, do not find Major persuasive for the reason, among others, that the lessee in that case conceded a prima facie violation of the regulation in that the lessor had, in fact, retained full custody and control over the truck and driver during the term of the lease. Nor is the conclusion we reach discordant with our decision in Carriers Insurance Exchange v. Truck Insurance Exchange, 310 F.2d 653 (4 Cir. 1962), where at trial there was abundant evidence that the parties “used the written lease to give the appearance of compliance with the law while actually ignoring it, * * The basis of that decision was succinctly stated:

“In short, the parties deliberately entered into a transaction in violation of the law and of the regulations which had been promulgated to insure the safe transportation of a dangerous substance for the protection of the general public.” P. 657.

Since there is nothing in the indemnification provision facially violative of the Commission’s regulations, it was error to grant defendant’s motion for judgment on the pleadings. The judgment of the district court is reversed and the case remanded for further proceedings consistent herewith.

Reversed and remanded.

      . For the purpose of clarity, this opinion will refer to. the parties as “Carolina” and “Pitt.’

      . S & N Freight Line, Ine. v. Bundy Truck Lines, Inc., 3 N.C.App. 1, 164 S.E.2d 89 (1968); Newsome v. Surratt, 237 N.C. 297, 74 S.E.2d 732 (1953).

      . The operation of equipment incident to such a lease by a person other than a regular employee of the lessee is recognized and countenanced by 49 C.F.R. 1057.4(e).


author: PECKHAM, District Judge:

text:
    TRANSDUCER PATENTS COMPANY, Appellee, v. The RENEGOTIATION BOARD, Appellant.
    Nos. 72-2792, 72-2798.
    United States Court of Appeals, Ninth Circuit.
    Sept. 18, 1973.
    As Modified on Denial of Rehearing March 27, 1974.
    Voegelin & Barton, Robert M. Barton, Richard F. Oetting, Los Angeles, Cal., for appellee.
    Irving Jaffe, Acting Asst. Atty. Gen., Irwin Goldbloom, Raymond D. Battocchi, Dept. of Justice, Washington, D. C., for appellant.
    Before BROWNING and WALLACE, Circuit Judges, and PECKHAM, District Judge.

       Honorable Robert F. Peckham, United States District Judge, Northern District of California, sitting by designation.

   OPINION

PECKHAM, District Judge:

The question raised by this appeal is whether the Tax Court’s characterization of a transaction aS’ a sale rather than a license and accordingly outside the purview of the Renegotiation Act of 1951, 50 U.S.C.A.App. § 1211 et seq. (1970), was an arbitrary and capricious finding or otherwise inconsistent with law. See Act of July 3, 1962, Pub.L. No. 87-570, 76 Stat. 134. For the reasons set forth below we affirm the decision of the Tax Court.

The Renegotiation Act created the Renegotiation Board (the Board). 50 U.S.C.A.App. § 1217(a) (1970). It empowered the Board to renegotiate certain contracts or subcontracts between Departments of the federal government and defense contractors, and to recoup thereby certain excessive profits. As the Act was originally written an appeal from a determination by the Board was reviewed de novo by the Tax Court. The Renegotiation Act was amended on July 1,1971, 50 U.S.C.A.App. §§ 1218 and 1218(a) (Supp. I, 1971) to provide that an appeal from the Board’s determination be taken to the United States Court of Claims. By the savings provision of that amendment and the determination of the Chief Judge of the United States Tax Court, this case was retained by the Tax Court.

The original Act provided for a very narrow scope of review of the Tax Court’s decisions, if such matters could be reviewed at all by this court. Cf. French v. War Contracts Price Adjustment Board, 182 F.2d 560 (9th Cir. 1950). In 1962, after an extensive survey of the scope of review, Congress decided to broaden the scope of review. Act of July 3, 1962, Pub.L. No. 87-520, 76 Stat. 134; 1962 U.S.Code Cong. & Admin.News, pp. 1828, 1832. This amendment, which governs the scope of review in this case, provided that Tax Court decisions should be reviewed in the same manner as that of a district court in a civil ease tried without a jury, except that findings of fact by the Tax Court shall be conclusive unless arbitrary and capricious. Thus it was the intent of Congress to provide a scope of review of factual determinations still narrower than that required by Rule 52(a) of the Federal Rules of Civil Procedure, the familiar clearly erroneous standard. Congress further provided that the existence or extent of excess profits is a question not subject to review. This in the words of the Senate Report is because:

Your committee believes that the ultimate question of the extent of the ex-cessiveness of profits or the existence thereof, requires the exercise of judgment which is of such a nature that the appellate courts should not be permitted to substitute their judgment for that of the Tax Court. 1962 U.S. Code Cong. & Admin.News, p. 1833.

From an adverse determination in the Tax Court the Board appeals. It asserts as error the Tax Court’s determination that the transaction in question was a sale. The Board claims first that viewing the transaction as a whole, the Tax Court’s determination was incorrect. The Board’s second claim is that as a matter of law if the transferor of a patent retains a right to recapture the patent upon default of payment, that such a transaction is subject to renegotiation. For this proposition the Board cites one of its interpretive rulings to that effect.

The factual context of the transaction is fully set forth in the Tax Court’s opinion. Briefly stated the transaction was as follows: Statham Instruments, Inc. was the licensee of five patents owned by Curtiss-Wright. Because Statham Instruments was without sufficient funds to purchase the patents, its major shareholders formed a limited partnership called Transducer Patents Company (Transducer), and purchased the patents. Transducer and Statham then entered into an agreement on November 4, 1952 granting to Statham a nonexclusive temporary license in the patents and provided Statham with three options for the future.

Option A would grant Statham license on some, but not all, of the patents. Option B would grant Statham, reserving full legal title in Transducer, an exclusive license of all five patents. Option C gave Statham the right to purchase Transducer’s entire right, title and interest in the patents by paying a lump sum. On May 27, 1953 Statham exercised Option A. All parties agree that this was a mere license. Option B was exercised on November 4, 1953. The agreement entitled “Exclusive License Agreement” is the crux of the case. Transducer granted to Statham an exclusive right to make, to sell, and to use the patented transducers in return for 8% of the licensed gross income, later reduced to 5%. Statham agreed to abide by all the terms of the earlier (1952) agreement “not superseded hereby.” Transducer reserved to itself a “lien” upon the licenses granted and could terminate the agreement upon default by Statham.

The Tax Court held that this agreement, though in terms a license, was in actuality a sale. In so holding, it applied well-settled case law. In Waterman v. Mackenzie, 138 U.S. 252, 11 S.Ct. 334, 34 L.Ed. 923 (1891), the court said an agreement which grants an exclusive license to make, to sell, and to use, is a sale of the patent even if it is called a license. An agreement which purports to be a sale which does not grant all three rights is, on the other hand, a mere license. The case of Littlefield v. Perry, 88 U.S. 205, 22 L.Ed. 577 (1874) holds specifically that the fact that compensation is to be paid by a percentage of the gross licensed income, or the existence of a term providing for recapture of the patents in default of payment does not convert an otherwise valid assignment into a license. The Third Circuit Court of Appeals in Hook v. Hook & Ackerman, 187 F.2d 52 (3d Cir. 1951), was an even clearer illustration. That case involved an agreement termed on its face a license, which granted an exclusive license to make, use, and sell the patented item. The agreement was held a sale, not a license, although it contained provisions for payment of royalties and recapture on default.

The Board urges that the Tax Court failed to give proper weight to the fact that Option B allowed Transducer to retain legal title to the patents, that Transducer retained a right to recapture the patents in the event of default of payment, and to the fact that Option C was not exercised. Option C would have allowed Statham to purchase Transducer’s entire interest in the patents. The Tax Court found that the exercise of Option B vested in Statham the exclusive right to make, sell, and use under the patents, the right to grant licenses to others, to make, sell or use without the consent of Transducer, the right to assign exclusive rights, the right to sue for infringement in its own name without the joinder of Transducer, and the right to exclude Transducer from making, selling, or using the patented devices. (C.T. 515, 516, 517).

The Tax Court, upon weighing all of the factors, concluded that the transaction was a sale and therefore not a contract subject to renegotiation.

In Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960) the court found that the question of whether or not a transfer was “a gift” and taxable as such within the meaning of the tax statutes “must be based ultimately on the application of the fact finding tribunal’s experience with the mainsprings of human conduct to the totality of the facts of each case.” Id. at 289, 80 S.Ct. at 1198. Accord, Commissioner of Internal Revenue v. Heininger, 320 U.S. 467, 475, 64 S.Ct. 249, 88 L.Ed. 171 (“ordinary and necessary business expense”). The Court went on to hold that because of the nature of the finding, it should not be disturbed unless clearly erroneous. 363 U.S. at 291, 80 S.Ct. 1190. See Fed.Rules Civ.Proc., 52(a).

We believe that the characterization of a transaction as a sale is a question which also must ultimately turn on the fact-finding tribunal’s experience in light of the totality of the facts in each case. Additionally, we note that Congress provided for even more deference to the Tax Court’s ability to make such findings in Renegotiation Act cases. Act of July 3,' 1962, Pub.L. No. 87-520, 76 Stat. 134. The Tax Court’s finding that the transaction in question was a sale cannot be set aside unless arbitrary and capricious. This standard is not altered merely because the evidence presented to the trial court was largely documentary. Lundgren v. Freeman, 307 F.2d 104 (9th Cir. 1962); W. S. Shamban & Co. v. Commerce & Industry Insurance Co., 475 F.2d 34 (9th Cir. 1973). We cannot find that the Tax Court’s careful analysis of all the factors resulted in a determination which was arbitrary and capricious.

The Board, however, argues that it has promulgated Renegotiation Ruling No. 5, 39 C.F.R. § 1499.1-5, which is dispositive of the case.

The pertinent provisions of the Ruling are as follows:

“(b) for renegotiation purposes, different rules prevail. The renegotia-bility of transactions involving patents is determined exclusively by the provisions of Section 103(g)(2) of the Act. As indicated in paragraph (a)(2) of this section, retention of legal title or of a right of recapture causes the transaction to fall short of a present unconditional transfer of title, and such a transaction is subject to renegotiation. On the other hand, retention of a vendor’s lien is not inconsistent with an absolute sale and will not of itself subject the transaction to renegotiation.”

We must recognize that these transactions involved the conveyance of rights to five patents where the purchase price was measured by a percentage of gross income attributable to sales of the patented devices by Statham Instruments over a finite period, the life of the patents. The purchase price was not a sum certain payable in installments over, a stated period of time. The Renegotiation Ruling permits a vendor’s lien in connection with a sale of patents but differentiates “a right of recapture”. The Board here, and the Tax Court below, assumed that the phrase “right of recapture” relates to a situation where the vendor has the right to revest in himself title to the patents in the event of a failure by vendee to perform its covenant to pay the purchase price. The Board here contends that such a right is distinguished from a vendor’s lien which limits the security interest in the patents to insure the payment of the balance of the purchase price. However, where the purchase price is payable in terms of the percentage of gross income based upon exploitation of the patented devices for the balance of the life of the patents, the concept of vendor’s lien has no meaning unless it is construed as permitting the vendor, upon default by the vendee, to recover the exclusive right to make, use and sell the patented devices so as to be able to resell such right.

In California, a “vendor’s lien” is limited to a transaction involving the sale of real property. California Civil Code § 3046. Furthermore, a vendor’s lien does not exist unless there is an ascertained, fixed consideration of money whereby there arises a certain absolute debt of the purchaser to the vendor. Gard v. Gard, 108 Cal. 19, 40 P. 1059 (1895). Thus, under circumstances involving a sale of a patent for a price dependent upon a percentage of sales of the patented invention, there could be no “vendor’s lien” as such in California. To give effect to the Board’s Ruling, the term “vendor’s lien” cannot be limited to the strict definition of vendor’s lien as applied in California, but rather must be given a broader interpretation so as to permit a vendor to retain a security interest in the patent to protect himself against possible default by the purchaser in the payment of the royalties based upon sales of the inventions.

An examination of the provisions of the November 4, 1953, exclusive license agreement demonstrates that the parties intended to, and did, accomplish nothing more than the reservation of security interest in the patent to the licensor— Transducer. Paragraph 9 of that agreement states specifically:

LICENSOR reserves unto itself and is hereby granted by LICENSEE a lien upon all the rights, privileges and licenses hereby granted to secure the prompt payment by LICENSEE of the royalties herein reserved . . .” (Emphasis added). [C.T. 517],

A realistic and proper interpretation of paragraph 9, and the one we assume was given it by the Tax Court leads to the conclusion that it was intended to reserve a security interest in the patents for the benefit of the licensor to protect itself in the event of the failure of the licensee to make the royalty payments provided therein. Further, this construction is consistent with the interpretation of the Renegotiation Board’s Ruling No. 5 insofar as it permits a security interest in the nature of a vendor’s lien. The provisions of paragraph 9 which state the remedies of the licensor upon breach by the licensees of the royalty payment provisions are incidental to and in furtherance of the lien created in favor of the licensor as security of payment of the royalties. This construction is particularly appropriate in light of the comment of the Supreme Court in Littlefield v. Perry, 88 U.S. (21 Wall.) 205 at 220, 22 L.Ed. 577 at 579 (1874), where the Court stated:

The agreement to account and pay formed part of the consideration of the assignment, and was in effect an agreement to pay at a future time a sum to be determined by the number of articles made and sold. For the nonpayment or other nonperformance a forfeiture might be enforced as for condition broken, but until it was enforced the title granted remained in the assignees.

In light of the above this court cannot determine the Tax Court’s findings to be arbitrary and capricious. Nor can this court find that the decision below was other than consistent with law.

The decision of the Tax Court is affirmed.