text:
    Frank X. SCHIRTZINGER, t/a Charlestown West 76 Auto/Truck Stop, Inc., Hurricane, West Virginia, on behalf of himself and others similarly situated, Plaintiff-Appellant, v. John T. DUNLOP et al., Defendants-Appellees.
    No. DC-15.
    Temporary Emergency Court of Appeals.
    Dec. 10, 1973.
    Mac S. Dunaway, Gall, Lane & Powell, Washington, D. C. (William H. Willcox and Bernard J. Casey, Washington, D. C., on the brief), for plaintiff-appellant.
    William C. White, Atty., U. S. Dept, of Justice (Irving Jaffe, Acting Asst. Atty. Gen., William E. Nelson, and Alien W. Hausman, Attys., Dept, of Justice, on the brief), for defendants-appellees.
    Before TAMM, Chief Judge, and VAN OOSTERHOUT and HASTINGS, Judges.
   PER CURIAM.

This is a class action challenging the legality of Subpart L of the Cost of Living Council (CLC) Phase IV regulations as applied to a class of approximately 2,500 independent truck stop operators who sell No. 2-D diesel fuel. The single named plaintiff, Frank X. Schirtzinger, operates such a truck stop in Hurricane, West Virginia. In essence, plaintiff complains that he and his class cannot withstand the absorption of product and non-product cost increases required by Subpart L, and that many members of the class will be forced out of business if the regulations are permitted to stand. Plaintiff particularly objects to his inability under the regulations to increase the retail price of diesel fuel to cover product cost increases occurring after August 1, 1973, while his suppliers (refiners and wholesalers) allegedly are free to pass through their own product cost increases in the form of higher wholesale prices.

The complaint was filed in the district court on August 27, 1973, and a hearing was scheduled for August 29 on plaintiff’s motion for a temporary restraining order and a preliminary injunction. At that hearing, the district court on its own motion decided to certify the entire action in both this case and National Petroleum Refiners Association v, Dunlop, 486 F.2d 1388 (Em.App.1973), to this court for consideration of constitutional questions, pursuant to § 211(c) of the Economic Stabilization Act of 1970, as amended. Unlike National Petroleum, the plaintiff here does not contest the propriety of the certification inasmuch as constitutional arguments figure prominently in his attack on the regulations.

Subsequent to oral argument of this case on September 17, the CLC has on three separate occasions significantly amended the regulations here involved, as follows:

SEPTEMBER 28, 1973 AMENDMENTS

On September 28, the Council replaced the ceiling price formula contained in the original regulations with a wholly different method of computation. New § 150.355(d) defined ceiling price as the sum of (1) the weighted average price at which the product was sold by the retailer on May 15, 1973; and (2) product cost increases occurring between May 15 and September 27, 1973. 38 Fed.Reg. 27290 (Oct. 2, 1973). The new formula in effect extended the date for full product cost recovery for diesel fuel retailers from August 1 to September 27. In addition, the effective date for determining permissible markup over cost was moved forward from January 10, 1973, to May 15, 1973, which eliminated a prior distinction in this regard between independent retailers and refiner-retailers. In issuing the new regulations, the Council stated that it was implementing a “commitment to make upward adjustments in ceiling prices charged by retailers of gasoline, No. 2-D diesel fuel and No. 2 heating oil to re-fleet increased costs of imports and domestic crude petroleum.”

OCTOBER 15, 1973 AMENDMENTS

On October 15, the Council further amended the regulations to permit retailers to recover product cost increases occurring between September 27 and October 14. 38 Fed.Reg. 28836 (Oct. 17, 1973). In addition, prices charged by refiners and resellers were frozen at their October 14 levels; thus, retailers such as plaintiff would experience no product cost increases during the freeze period. The October 15 freeze was to remain in effect until October 31. At the same time the freeze was announced, the Council issued notice of proposed regulations to take effect at the expiration of the freeze, and invited comment. 38 Fed.Reg. 28845 (Oct. 17, 1973).

NOVEMBER 1, 1973 AMENDMENTS

Upon careful consideration of comments received and further self study, the Council on November 1 adopted its proposed amendments to the regulations, with some modification, the same to become effective on that date. 38 Fed. Reg. 30267 (Nov. 2, 1973). The ceiling price rule now governing plaintiff and his class is found in § 150.359(c) of the regulations. In pertinent part, this section provides:

(c) Price rule. — (1) A seller may not charge a price for any item subject to this section which exceeds the weighted average price at which the item was lawfully priced by the seller in transactions with the class of purchaser concerned on May 15, 1973, plus an amount which reflects on a dollar-for-dollar basis, increased costs of the item.

(2) Notwithstanding subparagraph (1) of this paragraph, with respect to special products, a seller may not increase its May 15, 1973 selling prices to each class of purchaser more than once in any calendar month to reflect increased costs, but may implement the increase on any day during that month.

The above rule applies to wholesalers (“resellers”) as well as retailers, and new § 150.355(d) applies a similar “one increase per month” rule to refiners. Thus, all sellers of No. 2-D diesel fuel, plaintiff and his class included, are now permitted to pass through increased product costs on a once-monthly basis.

In its October 15 notice the Council summarized its proposed new rules as follows :

* * * These new rules are designed to establish an orderly, more simplified system by which sellers of the special petroleum products determine maximum price levels and pass through costs from one sales level to another. This new system insures that no discrimination will exist among petroleum marketers in the method of establishing prices for petroleum products. The proposed rules would in no manner alter the general principle that all increased costs of imports and domestic crude petroleum may be passed through at every level of distribution in order to encourage a maximum expansion of supplies of petroleum products.

In light of the foregoing three amendments of the regulations, and the district court having certified the entire action to this court, we shall exercise our discretion to finally determine this proceeding pursuant to § 211(c) of the Act, supra note 1. Cf. National Petroleum Refiners Association v. Dunlop, supra.

It seems clear to us that the subsequent amendments of September 28, October 15 and November 1, 1973, have mooted the material issues raised by the complaint.

In memoranda filed subsequent to oral argument, the parties now agree that the issue of product cost pass through is, in light of these amendments, now moot. Plaintiff still contends, however, that the regulations unlawfully discriminate against truck stop operators by failing to permit automatic pass through of non-product cost increases allocable to the sale of diesel fuel.

We have considered the arguments raised by plaintiff’s brief and supplementary memorandum and conclude that they are without merit. Under the new regulations, the single remaining pricing feature within the petroleum industry which plaintiff regards as discriminatory is the different manner in which refiners, on the one hand, and wholesalers and retailers, on the other, are treated with respect to non-product cost increases. Refiners may pass through such increases on a dollar-for-dollar basis, provided they prenotify the Cost of Living Council and the Council does not act to set aside the increase. See §§ 150.355(d), 150.154, 150.155. Of course, once such increases are passed through by refiners, they become product costs to wholesalers and retailers and may be automatically passed through to consumers. Wholesalers and retailers may pass through their own non-product cost increases only if they apply for and are granted an exception, based on “serious hardship or gross inequity,” pursuant to § 155.41.

This remaining “discrimination,” such as it is, does not constitute a denial of due process of law or a violation of § 211(d)(1) of the Economic Stabilization Act. We find no grounds for holding that the CLC has exceeded its authority or has acted in a manner that was arbitrary or capricious in adopting the regulations here challenged. See Western States Meat Packers Association, Inc. v. Dunlop, 482 F.2d 1401 (Em.App.1973); Pacific Coast Meat Jobbers Association, Inc. v. Cost of Living Council, 481 F.2d 1388 (Em.App.1973). Any individual hardships or inequities caused by locally severe increases in allocable non-product costs may be appealed first to the Council pursuant to § 155.41, and then, if necessary, to the courts. See Anderson v. Dunlop, 485 F.2d 666 (Em.App.1973).

It is accordingly ordered that this action be and the same is now dismissed.

Dismissed.

      . “ § 211 Judicial review
      »}s * ;¡{ >Jí
      (c) In any action commenced under this title in any district court of the United States in which the court determines that a substantial constitutional issue' exists, the court shall certify such issue to the Temporary Emergency Court of Appeals. Upon such certification, the Temporary Emergency Court of Appeals shall determine the appropriate manner of disposition which may include a determination that the entire action be sent to it for consideration or it may, on the issues certified, give binding instructions and remand the action to the certifying court for further disposition.” 12 U.S.O. § 1904 (Supp. II 1972).

      . The original Subpart L, issued August 19, 1973, is found at 38 Fed.Reg. 22536 (Aug. 22, 1973).

      . “Special products” are defined in § 150.352 to mean gasoline, No. 2 heating oil and No. 2-D diesel fuel.

      . “(d) (1) * * * no regulation of any agency exercising authority under this title shall be enjoined or set aside, in whole or in part, unless a final judgment determines that the issuance of such regulation was in excess of the agency’s authority, was arbitrary or capricious, or was otherwise unlawful under the criteria set forth in section 706(2) of title 5, United States Code sfe Hi # >t


source: Caselaw Access Project

author: OAKES, Circuit Judge:

license: Public Domain

text:
    The ISLAND TERRITORY OF CURACAO, Appellee, v. SOLITRON DEVICES, INC., Appellant.
    No. 99, Docket 73-1664.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 15, 1973.
    Decided Dec. 26, 1973.

      Paul Windels, Jr., New York City (Windels, Merritt & Ingraham, Francis E. Koch, New York City, of counsel), for appellant.
    Edward C. Wallace, New York City (Weil, Gotshal & Manges, Harold Klap-per, New York City, of counsel), for ap-pellee.
    Before KAUFMAN, Chief Judge, and SMITH and OAKES, Circuit Judges.
   OAKES, Circuit Judge:

This appeal is by an American manufacturer, the respondent below, from a judgment of the district court granting a petition by The Island Territory of Curacao (Curacao) to confirm an arbitration award made in its favor and to enforce a judgment entered thereon in the courts of Curacao. The arbitration itself arose out 'of a dispute over a contract, the parties to which were the Central Government of the Netherlands Antilles and The Island Territory of Curacao, both of these political entities being a part of the Kingdom of the Netherlands, and Solitron Devices, Inc. (Soli-tron), a manufacturer of electronic products from Rockland County, New York, relative to the construction of an industrial park in Curacao and the installation of a Solitron manufacturing facility in the park. Solitron did not participate in the arbitration proceeding in Curacao or in the judicial proceedings in confirmation of the award in Curacao, as to which it had a right under the law of Curacao to bring an action to annul the award. Assorted defenses were urged below and found wanting by the district court, which held that the arbitration award was enforceable under the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, implemented by Title 9 of the United States Code Chapter 2 (§§ 201-208 inclusive), and that the judgment of Curacao was enforceable under Article 53 of the New York Civil Practice Law and Rules, CPLR §§ 5301-5309 McKinney’s Consol.Laws c. 8 inclusive, entitled Recognition of Foreign Country Money Judgments.

Because the facts are set forth in extensive detail in Judge Wyatt’s capable opinion below, The Island Territory of Curacao v. Solitron Devices, Inc., 356 F. Supp. 1 (S.D.N.Y.1973), we will state them only generally for purposes of ease of comprehension here. Suffice it to say that the underlying written agreement between Curacao and Solitron which was executed in Curacao on January 12, 1968, provided basically that, because Solitron wanted an electronics plant there and Curacao and the Netherlands Antilles wanted to attract industry to the islands and create jobs, Curacao agreed to establish an industrial park of about 60 acres and to construct two factory buildings pursuant to Solitron-ap-proved plans and to build an access road and sea water pipes to the building sites; Solitron was to lease the buildings for 20 years at a specified rent and to operate in the larger building and to use or sublease the smaller one, agreeing to put its electronic manufacturing industry into operation within 12 months of completion of the larger building and to “create” at least 100 jobs. Solitron also undertook to “establish itself or otherwise prior to January 1, 1974 manufacturing industries not yet established in the Netherlands Antilles which will in total provide employment for at least 3,000 persons” (including Solitron’s own employees). It was agreed that the laws of the Netherlands Antilles would be applicable to the agreement and that all disputes as a consequence of or in connection with it, legal as well as factual, should be submitted to a board of arbitration, the decision of which would be binding. The usual provisions were made for designation of one arbitrator by Solitron and Curacao; they were in turn to designate a third arbitrator or, fáiling an appointment, to have one designated or appointed by the president of the Court of Justice of the Netherlands Antilles. The arbitrators were enjoined to give an award “like good men and true” — “ex aequo et bono.” There was a provision that Solitron would “invariably” — retranslate as “irrevocably” — fix as its domicile for everything pertaining to the execution of the agreement as well as “for all acts of judicial execution,” the office of a notary public who also was Solitron’s attorney in Willemstad, Curacao.

Exchanges of correspondence incorporated as appendices to the affidavit of counsel for Curacao in the district court and statements in the opposing affidavit executed by the president of Solitron indicate that by April 13, 1970, Curacao had completed the two buildings as agreed, but that Solitron had failed to enter into a lease agreement, had failed to pay the costs of maintenance or to insure the buildings as required, and had otherwise treated the agreement as unilaterally terminated by Curacao. Soli-tron declined to proceed to arbitration on the basis that there had been express representations made regarding the favorable economic climate of Curacao particularly in respect to wage rates and availability of labor at those rates, namely, approximately 45 United States cents per hour. What had happened was a change in government and a revision upward of the minimum hourly rate of wages to $1.10 (U.S.) in January of 1970. Solitron conceded that the electronics industry was exempted from the minimum wage increase but, quoting from counsel’s letter to Curacao of May 15, 1970, claimed that as a practical matter “there is no prospect of our being able to hire employees for less than it” and this “new wage rate destroys the economic advantage of manufacturing in Curacao.” Other claims are set forth in the opposing affidavit of Solitron’s president, but these are what might be called window dressing, since the real claim was, as the letter of May 15 stated, that “By its own act, therefore, your government made it impossible for us to perform the agreement in question, thereby terminating the agreement and any obligation to arbitrate that we may have under it.” These “window dressing” claims were based on the eruption of “violent riots in Curacao” with the “business areas of Willemstad ... in flames” and the riots being directed “immediately against foreign interests,” etc.

The arbitration proceeded without So-litron’s participation, but Solitron was duly informed at all times of the time and dates of hearings and the other procedures followed. The award was made and signed by the arbitrators in Curacao on August 13, 1970, and in substance, as the district court pointed out, 356 F. Supp. at 8, was in favor of Curacao’s position but by no means accepted all of the claims of Curacao as to damages. Thus, while the arbitrators found that Solitron was in breach of contract by omission to lease the completed buildings, they also found that Curacao could not recover as damages its 1,521,000 Netherlands Antilles guilders (NAfls) investment costs in respect to the buildings, although they did allow 53,602 NAfls as the cost of an acid neutralization plant because it was intended uniquely for Solitron. On the theory that it was virtually certain that Curacao could not find another lessee before July 1, 1971, at the earliest, the arbitrators allowed 192,482 NAfls for loss of rent on the two buildings for the period from December 1, 1969, to July 1, 1971, and a small amount as damages on account of fire insurance premiums paid.

The only item that really is complained about by Solitron in its brief, and which strikes us as unusual, is the award of 375,000 NAfls as reflecting the present value discount of an award of 423,671.35 NAfls for the period December 1, 1970, to December 31, 1973, as damages for Solitron’s failure to create 100 jobs as agreed. The basis of this award was that Curacao would have had 100 more unemployed in the period than otherwise and, under its laws, Curacao had to pay unemployment benefits and medical assistance to these unemployed persons. This award was computed by using 1969 statistics, with percentage increases for later years as could be expected. In turn, the unemployment benefits payable were computed on the basis that, of the 1,000 registered unemployed seeking a job with Solitron, some 75 per cent were “breadwinners with dependents,” 10 per cent were “breadwinners without dependents,” and 15 per cent were “non-breadwinners.” Under Cura-caoan law in 1969 apparently, “breadwinners” were entitled to 800 NAfls ‘‘financial assistance” and “non-breadwinners” were entitled to none, but each “breadwinner” and each dependent was entitled to 175 NAfls by way of “medical assistance.’?

Expenses to the amount of 90,000 NAfls covering foreign travel to establish industries regarding the buildings were allowed, but Solitron was granted an overall set-off for the value of its structural steel and air conditioning plant to the extent of 266,424.05 NAfls. The arbitrators rejected a claim for the costs of prosecuting the arbitration but awarded interest and, as the original contract provided, one-half of the fees and expenses of the arbitrators. The arbitrators disallowed any claim of Curacao for damages for Solitron’s failure to establish 3,000 jobs by January 1, 1974, on the ground that it “depends on so many factors at present entirely unknown and not readily predictable,” even on the basis of expert advice, but left this question open for future submission. Similarly the arbitrators made no allowance for damages for failure to create the original 100 jobs beyond December 31, 1973, on the basis that it was not known whether there would be “structural unemployment” after January 1, 1974. As the district court found, “The award gives every indication of able, careful, and impartial work by the arbitrators.” 356 F.Supp. at 10.

As the district court also found, after the award was made the law of the Netherlands Antilles was fully complied with in terms of filing the award, Curacao seeking the issuance of a “writ of execution” on the basis of the award, which was declared enforceable in the “Court of First Instance.” While Soli-tron had the opportunity to take advantage of the provision in the Antilles law to bring an action to annul the arbitral award within three months from the filing of the award in court, it did not exercise it. The award and the judgment entered thereon were, as the district court held, final under the law of Antilles and a marshal “served” by mail to Solitron a writ based upon the award and judgment in Curacao. The district court went on to hold that objections by Solitron on the basis of lack of jurisdiction were frivolous because it had agreed in the original agreement to submit to arbitration in Curacao and that the laws of the Antilles should be applicable and, indeed, had agreed that it had a domicile in Curacao and an irrevocable agent for service of notice and process there. In this respect the district court was clearly correct. National Equipment Rental Ltd. v. Szukhent, 375 U.S. 311, 315-316, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964); Reed & Martin, Inc. v. Westinghouse Electric Corp., 439 F.2d 1268, 1276-1277 (2d Cir. 1971); Gilbert v. Burnstine, 255 N.Y. 348, 174 N.E. 706 (1931).

Neither the jurisdictional point, nor that one of the arbitrators was a judge of a court in Curacao and hence was not impartial as a matter of law, is urged here. Rather, Solitron claims that the arbitral award is not enforceable under the Convention on Recognition and Enforcement of Arbitral Awards (Convention on Recognition), as implemented in 9 U.S.C. § 201 et seq., for the following reasons: (1) the construction of an industrial park is a “governmental” and not a “commercial” function, so that the Convention does not apply; (2) the arbitration award is not final and definite and is contrary to the public policy of the United States; and (3) the contract and the arbitration agreement terminated by reason of impossibility and, as a result of this termination, there was lack of jurisdiction in Curacao over Solitron. The claim is also made here, as it was below, that the judgment on the arbitral award is not enforceable under Article 53, the New York statute, because the Convention on Recognition and its implementing legislation have preempted the New York statute and because, under the terms of the New York statute as it has been construed, enforcement is not permitted here. In its reply brief Solitron also argues for the first time that the whole matter is governed by the Convention on the Settlement of Investment Disputes between states and nationals of other states which was ratified and adhered to both by the United States, [1966] 1 U.S.T. 1270, TIAS No. 6090, and the Netherlands, [1966] 1 U.S.T. 1355; 55 U.S. State Dept.Bull. 596 (1966) .

We deal first with the question under New York law, whether the foreign judgment is enforceable. The first question is whether Article 53, permitting the enforcement of a foreign money judgment, has been preempted by the overriding federal law implementing the Convention and relating to the enforcement of foreign arbitral awards, 9 U.S.C. § 201 et seq. The Convention on Recognition in no way purports to prevent states from enforcing foreign money judgments, whether those judgments are rendered in the enforcement of an arbitration award or otherwise. This is not to say that Solitron’s argument is not, indeed, ingenious, since it apparently was not made in the sole case decided under Article 53 or any prior thereto in which the courts of New York State have granted enforcement to foreign judgments based upon foreign arbitration awards arising after the United States Senate’s accession to the Convention, albeit with reservations, on October 4. 1968; and the adoption by the Congress of 9 U.S.C. ch. 2 on July 31, 1970. New Central Jute Mills Co. v. City Trade & Industries, Ltd., 65 Misc.2d 653, 318 N.Y.S.2d 980 (Sup.Ct.1971).

It is not insignificant that the Federal Arbitration Act itself makes a very clear distinction between action on an award and action on a judgment enforcing the award, pointing out that application for an order confirming the award may be made only when “the parties in their agreement have agreed that a judgment of the court shall be entered upon the award . . .” and on certain other conditions, subject to certain other qualifications. 9 U.S.C. § 9. This very important difference was, indeed, the key to our own recent decision in Varley v. Tarrytown Associates, Inc., 477 F.2d 208 (2d Cir. 1973), where we held that, because the parties in their contract to arbitrate had not agreed that a judgment of the court could be entered upon the award, there was no consent to the entry of judgment thereon. We hold, then, that, since the Convention on Recognition itself and its enforcing legislation go only to the enforcement of a foreign arbitral award and not to the enforcement of foreign judgments confirming foreign arbitral awards, New York state law is not preempted to the extent that it permits, regulates and establishes a procedure for the enforcement of the foreign money judgment. Thus it cannot be dqubted that the policy of New York State to recognize foreign judgments “prevails in the absence of interference with the federal regulatory scheme.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 94 S.Ct. 383, 396, 38 L.Ed.2d 348 (Dec. 4, 1973).

It remains then to be seen whether under New York law the Curacaoan judgment may be enforced and, in this respect, it is helpful to recall, see note 6 supra, that Article 53 itself represents a codification of pre-existing common law on the subject. Thus, for example, the district court was plainly correct in its holding, not contested on appeal, that a claim of fraud in the inducement of the contract generally — alleged here on the basis of supposed representations that the wage structure in Curacao would remain stable — is a question for the arbitrators. Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967); Weinrott v. Carp, 32 N.Y.2d 190, 194, 344 N.Y.S.2d 848, 298 N.E.2d 42 (1973). This carries with it as the district court quite properly held the claims that the contract itself terminated or was frustrated by virtue of the changes in wage rates in Curacao and legislation changing the minimum wages for non-electronic industry employees as well as by the supposed riots and change in personnel of government.

We thus turn to the other points on the basis of which the appellant claims that under New York law and under Article 53 enforcement of the Curacaoan judgment would not be granted. Concededly one of the bases on which New York would not enforce a foreign judgment would be if it were made without jurisdiction. NYCPLR § 5304(a)2. Appellant argues that jurisdiction over it ended in March of 1970, but the basis for this argument is that the contract terminated as a matter of law by reason of impossibility of performance, and this again goes to the change of the minimum wage law imposed by Curacao. The March, 1970, date for “termination” is based upon Solitron’s counsel’s self-serving letter of May 15 to the effect that performance had by then become economically impossible. We would point out again that this was, under the broad arbitration clause, initially a question for the aribtrators and was ruled upon and rejected by them. There is nothing in the contract to indicate that Solitron’s obligations were predicated on the continued existence of any particular wage rate. Only recently the Fifth Circuit held in Eastern Marine Corp. v. Fukaya Trading Co., 364 F.2d 80, 84-85 (5th Cir.), cert. denied, 385 U.S. 971, 87 S.Ct. 508, 17 L.Ed.2d 435 (1966), that, as a matter of federal substantive law, an arbitration clause survives the frustration of a contract for the purposes of settling, among other things, whether the contract has in fact been frustrated. See also Heyman v. Warwins, [1942] A.C. 356, 366, relied upon by Judge Augustus Hand in In re Pahlberg, 131 F.2d 968 (2d Cir. 1942); Prima Paint Corp. v. Flood & Conklin Manufacturing Co., supra. In re Kramer & Uchitelle, 288 N.Y. 467, 43 N.E. 2d 493 (1942), heavily relied upon by appellant for the proposition that, at least as a matter of New York law, a proceeding to enforce an arbitration contract presupposes the existence of a valid and enforceable contract at the time the remedy is sought, has been limited, In re Exercycle Corp., 9 N.Y.2d 329, 335-336, 174 N.E.2d 463, 465-466, 214 N.Y.S.2d 353, 356-358 (1961), to the situation in which public policy as embodied in a statute forbids the performance which is the subject of dispute, a policy and statute which are as binding upon the arbitrators as upon the courts. That, of course, is not the situation here, where the defense of frustration is one asserted purely as a common law contractual defense.

On its jurisdictional point, Solitron also argues, however, that its contractual concession of jurisdiction on the basis of the provision that it “invariably” or irrevocably chose domicile at the offices of its attorney-notary public in Willemstad cannot of itself be sufficient. The argument is not that its consent to jurisdiction was revoked, and indeed could not be because Curacao had already invoked arbitration under the agreement by the time of Solitron’s attempted revocation of its consent to jurisdiction on May 12, 1970. Rather, the Solitron argument is to the effect that the document in the nature of a “marshal’s writ,” which was issued after the “Court of First Instance” “declared executed” the “arbitral verdict,” contained language to the effect that “respondent [Solitron] is no longer domiciled in the Netherlands Antilles,” and that this language represents a concession on the part of Curacao that Solitron’s domicile terminated no later than March, 1970. There are at least three answers to this argument:

1. If Solitron’s domicile had terminated in March of 1970, why did it wait until May 12, 1970, to cable its agent for service of process to revoke “such authority if any as you may still retain to represent us,” confirming this by cable and letter dated May 13, 1970 ?

2. Solitron’s attempt to claim that its domicile was terminated because of impossibility of performance assumes, incorrectly, that it, rather than the arbitrators, had the power to decide that issue, a matter which we have already held adversely to Solitron above.

3. The language of the Curacaoan marshal’s writ in context at most constitutes an acknowledgment of the fact that the attempted revocation in May of 1970 had become effective by the date of the marshal’s writ in April of 1971 (a matter which we need not and do not affirmatively decide here). That is to say, the marshal’s language to the effect that the respondent is no longer domiciled in the Netherlands Antilles relates to the time of the issuance and presentation of the writ in April, 1971.

Appellant argues strenuously, and on two different bases, that — to the extent that the arbitral award consists of damages in lieu of welfare payments that Curacao would have had to make as a result of Solitron’s breach of the obligation to create 100 jobs — the award is unenforceable and, therefore, a judgment based upon it is unenforceable under' New York law. These two bases urged are, first, that New York will vacate an arbitral award if the arbitrators’ construction of a document is “completely irrational.” Lentine v. Fundaro, 29 N.Y.2d 382, 385, 278 N.E.2d 633, 635, 328 N.Y.S.2d 418, 422 (1972). The other is that there are some matters, such as the custody of children, Hill v. Hill, 199 Misc. 1035, 104 N.Y.S.2d 755 (Sup. Ct.1951), and the distribution of decedents’ estates, Swislocki v. Spiewak, 273 App.Div. 768, 75 N.Y.S.2d 147 (1st Dep’t 1947), leave to appeal denied, 273 App. Div. 808, 76 N.Y.S.2d 269 (1948), which are simply not subject to arbitration under New York law. It is Solitron’s point that Solitron did not accept a delegation to it by Curacao of the “sovereign duty to provide social welfare payments to any part of the unemployed on the island.” But this, of course, entirely misses the point that what the arbitrators were doing — and in a very cautious way they did it, with basis in fact — was attempting to fix damages for the purpose of ascertaining the extent of Solitron’s liability for breach of its conceded obligation under the agreement to create 100 jobs. While an American court in similar circumstances, or an American board of arbitrators, might not necessarily follow the same route, in ascertaining damages, here it must be remembered that this was obviously an underdeveloped country with a large number of unemployed; indeed the basis of the award was that there were 1,000 unemployed people seeking the 100 new jobs with Solitron and there was expert testimony by the head of the unemployment service of the Island Territory adduced before the arbitrators that for 1969 the Island Territory would have had to pay in respect to those employees sums pursuant to its laws relating to financial and medical assistance, the sums varying as above pointed out. It may be that the arbitrators improperly assumed that the same payments by way of financial aid had to be made for 1970 and 1971, 1972 and 1973, and indeed pursuant to the expert testimony the arbitrators took into account a 10 per cent increase for “financial assistance” and 6% per cent for “medical assistance.” The arbitrators’ findings were also based upon “the expected increase in population, the time required for preparing for the establishment of new businesses and the extent of the structural unemployment existing in Curacao.” Any objections to this method of computing damages or to the assumptions made by the arbitrators could have been presented to them or, indeed, might well have been presented in judicial proceedings which could have been brought by Solitron to annul the arbitration award in Curacao. They come too late here, however, and they by no means take into account the proposition to the contrary — which we need not pass upon — that, by virtue of the institutional nature and commercial relationship of the parties, remembering that Curacao itself was a government with large numbers of unemployed people, the method of ascertaining damages may well have been a fair and proper one. Solitron points to no New York statutory law that adopts a policy contrary to that agreed to by the parties here in their contract and implemented by the arbitrators. In this posture, Solitron’s argument under state law must fail, see In re Exercyele Corp., supra; New Central Jute Mills Co. v. City Trade & Industries, Ltd., supra, in this concluded arbitration proceeding. Cf. Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir.), cert. denied, 363 U.S. 843, 80 S.Ct. 1612, 4 L.Ed.2d 1727 (1960).

The next argument by appellant is that it is contrary to the public policy of New York to permit a person to derive an advantage from his own wrong, see Riggs v. Palmer, 115 N.Y. 506, 22 N.E. 188 (1889), and violation of New York public policy is a ground for refusing to enforce the Curacaoan judgment under NYCPLR § 5304(b) 4. The claim is, once again, that Curacao is attempting to take advantage of its own wrong in that if altered the prevailing wages after having induced Solitron to establish a plant on the basis that the wage rates would be stable so that Solitron would be in a competitive position with other “offshore” manufacturers of semi-conductors. While undeniably Curacao had the power to fix wages, Soli-tron says, the power to hold Solitron in breach of an agreement after Curacao had made it “impossible” for it to perform the agreement is something else again. Of course, this is just another way of restating the same argument which was rejected factually by the district judge. In the light of the papers submitted we cannot help but agree with Judge Wyatt. There was clearly no representation or warranty in the agreement itself that the wages would remain stable. This may well have been Soli-tron’s hope and, indeed, this conceivably may have been the hope of the Cura-caoan government — though it could be doubted — at the time the contract was entered into. But it is absurd to suppose that a sophisticated American manufacturer would expect a 45-cent an hour wage rate to last indefinitely on the Island. In no way, despite more than adequate legal advice, did Solitron attempt to make the wage-rate factor one of the terms or conditions of the agreement. It is interesting to note that the arbitrators considered this argument as having been put forth — despite Solitron’s failure to participate in the arbitration — by Solitron’s counsel by letter to the Island Territory of May 15, 1970. The arbitrators conceived of it as a defense amounting to a plea of mistake as to the identity of the thing contracted for, and they indicated that under the law of the Netherlands Antilles such a mistake may lead to judicial annulment of the contract in question,'but only when there are both reasonable grounds for believing that the party under the mistake would not have entered into the contract had he known the circumstance assumed to be present was in fact absent, and that the other party, in this case Curacao, ought to have realized that the presence of the circumstance- — here the low wage rate — was the real reason for entering into the contract. As the arbitrators themselves pointed out, “that the wage level prevailing at the time of concluding the Agreement was attractive to Solitron is understandable; but it is quite unacceptable that, on the basis of that wage level, So-litron could have felt able to commit itself to operating a business for twenty years, let alone that the Island Territory ought to have realized this.” Apparently witnesses testified before them to the effect that indeed no assurance was given that the low wages would be maintained or that Solitron would not have to deal with labor unions. The finding of the arbitrators certainly seems sound on the basis of our independent review of the documents and affidavits submitted to the court below, as it did to the district court itself. It is absurd to think that, if the maintenance of the wage rate were a condition or term of the agreement, it would not have been incorporated into the agreement by way of warranty, covenant or otherwise in light of the fact that Solitron was in a perfectly strong bargaining position, well represented by skilled and learned counsel, with presumably sophisticated and worldly business management at the helm. We see nothing to justify the claim that Curacao was “deriving an advantage from its own wrong.” Higher wage rates, whether or not as a result of the change in governmental personnel (and there is no indication that the government as such was overthrown), and whether or not as the result of agitation, were a business risk that Solitron took; it ill behooves the company now to claim otherwise.

The last point made in reference to the Curacaoan judgment is that under NYCPLR § 5302 only a final and conclusive judgment may be enforced in New York. The judgment, it is claimed, is not conclusive or final since the arbitration award left it open to either party, after January 1, 1974, to demand further arbitration and possibly to obtain further and more extensive damages. But this is a point that was not raised before the Curacao courts. By the very terms of the New York statute, the question before us, as it would be before a New York court, is whether the judgment obtained in Curacao is “final . where rendered.” NYCPLR § 5302. We have already noted that the potential for appellate review of the award in the courts of Curacao ceased when Solitron failed to seek such review within three months of the award. Logic would seem to compel the conclusion, as the district court found, that the judgment rendered on the award in Curacao would be viewed in Curacao as “final” and Solitron presents no evidence to the contrary. Indeed, it is still open to the appellant to raise the question whether further damages may be awarded in the event that further arbitration or confirmation of another arbitral award is sought in the courts of the Netherlands Antilles. For all we know, those courts may very well take the view that any claim for breach of the contract, whether pertaining to present, past or future damages, must be made and proved with sufficient particularity at the time of the arbitration, in the absence of which the party seeking damages for breach of contract will be precluded. The courts of Curacao may, as a matter of Netherlands Antilles law, take the position that the breach of contract was merged in the arbitration award, the arbitration award merged in the judgment, and that any further arbitration is not permissible. See note 4 supra. They may take quite the opposite view, of course, and we are not ourselves sufficiently versed in the law of the Netherlands Antilles, nor have the parties attempted to aid us in this respect, that we can with any assurance predict what the Curacao courts will do. We must recognize that the judgment itself is definite in amount, was conclusive and enforceable in Curacao, and, indeed, is final to the extent that it specifies precisely what Solitron is to pay; nothing remains to be calculated.

Thus we conclude that the judgment of Curacao was enforceable under Article 53 of the New York Civil Practice Law and Rules and affirm the district court on this ground. In so holding we need not determine the correctness of the alternative ground advanced by the district court that the arbitration award was independently enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, by virtue of 9 U.S.C. § 201 et seq. The argument that Solitron may counterclaim for its investment in Curacao is absurd, since credit was already given for this in the arbitral award.

Judgment affirmed.

      . In short, the arbitration clause was of the broadest type, reserving no issues for resolution in the first instance by any tribunal, judicial or otherwise. See generally Note, The Consequences of a Broad Arbitration Clause Under the Federal Arbitration Act, 52 B.U.L. Rev. 571 (1972).

      . This claim can be read as an allegation of fraud in the inducement to the contract or as “impossibility” of performance of the contract due to the acts of one party, Curacao, to the contract. On appeal, Solitron has chosen to characterize the question along “impossibility” lines in order to avoid tlie inescapable impact of Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 397, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (fraud in the inducement is a matter to be determined by the arbitrators), should the case be disposed of under the Federal Arbitration Act.

      . This afterthought we find to have no merit whatsoever, since the Convention in its preamble points out that it applies only where there is “mutual consent by the parties to submit . . . disputes to conciliation or to arbitration through . . . facilities” established under the Convention and the jurisdiction of the “International Center for Settlement of Investment Disputes” constituting such facilities under Article 25 of the Convention, [1966] 1 U.S.T. 1280, only extends to “any legal dispute . . . which the parties to the dispute consent in writing to submit to the center . . . .” That is to say, this Convention, which operates under the auspices of the International Bank for Recovery and Development, is purely a voluntary device for arbitration and is by no means intended to preclude other forms of arbitration or settlement of international disputes, investment or otherwise.

      . We need not deal with the question — not argued by the parties and not touched upon in the briefs — whether the action on the arbitration award was merged in the Cura-caoan judgment. See Restatement of Judgments § 47. See also Pepper v. Bankers Life & Casualty Co., 414 F.2d 356 (8th Cir. 1969). This would presumably be a matter of Curacaoan law in the first instance. See Restatement (Second) of Conflict of Laws §§ 218, 187(2) & 188. By first addressing ourselves to the question whether or not the Curacaoan judgment confirming or enforcing the award is enforceable qua judgment, we avoid the question — raised implicitly, if not directly by the appellant — whether the cause of action or, more particularly, the nature of damages awarded for breach of the covenant to create jobs by way of equating such damages with welfare payments that are required to be paid in Curacao, is so contrary to the strong public policy of the forum — a question which we need not decide and on which we express no opinion — that the award might not be enforceable qua award (whether under the Federal Arbitration Act or otherwise). Cf. Benton v. Singleton, 114 Ga. 548, 40 S.E. 811 (1902) (gambling contract) .

      . For some of the legislative history in connection with the adoption of 9 U.S.C. Ch. 2, see H.R.Rep. 1181, reprinted in 1970 U.S. Code Cong. & Ad.News p. 3601 et seq. The Committee points out that “so far as is known, there is no opposition to the bill” and “in the Committee’s view, the provisions of S. 3274 will serve the best interests of Americans doing business abroad by encouraging them to submit their commercial disputes to impartial arbitration for awards which can be enforced in both U.S. and foreign courts.” Id. at 3602. The Committee, of course, recognized the obvious distinction between an award as such and the enforcement of an award, whether in a United States or foreign court, and to that extent, at least, appears to recognize the distinction between suing on the award and suing on a foreign judgment confirming or enforcing the award. It would appear that the Convention itself, and the United States enabling legislation, is addressed to the situation in which there may not be jurisdiction over the United States person or corporation for purposes of awarding a foreign judgment even though there may be jurisdiction for the making of a foreign arbitral award.

      . Article 53 was principally a codification of pre-existing New York case law permitting the enforcement of foreign country money judgments. See Judicial Conference Report, 2 McKinney’s Session Laws of New York 2784 (1970). There were a number of decisions of the courts of New York granting enforcement to foreign judgments based upon foreign arbitral awards. See, e. g., Gilbert v. Burnstine, 255 N.Y. 348, 174 N.E. 706 (1931); Johnston v. Compagnie Generale Transatlantique, 242 N.Y. 381, 152 N.E. 121 (1926); Coudenhove-Kalergi v. Dieterle, 36 N.Y.S.2d 313 (Sup.Ct.1942); von Engelbrechten v. Galvanoni & Nevy Bros., 59 Misc.2d 721, 300 N.Y.S.2d 239 (Civ.Ct.1969).

      . The same argument might be rejected on the basis that Curacao having acted by granting judgment on tlie arbitral award was engaged in an act of state which, under Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964), and related cases, we should not and indeed may not go behind to determine the validity of the judgment or whether we should give, credit to it. See Restatement (Second) of Foreign Relations Law of ‘the United States § 41.

      . We emphasize that whether the award would be enforced under New York law, a question not before us here, and whether the judgment would be recognized under Article 53 are entirely separate and distinct questions. Indeed, some of the arguments advanced by Solitron with respect to New York “policy” might well be persuasive were this an action to enforce the award under New York law.

      . Should the arbitrators in a subsequent proceeding decide that further damages are warranted, and should appellee have to bring another action in a federal court to enforce the judgment on such an award, a federal court would then be in a position to gauge the “finality” accorded to the instant judgment by the courts of Curacao. What Soli-tron asks us to do here is to look behind the present judgment and either deny its recognition or resolve in its favor the question whether Curacao will be entitled to recognition of a hypothetical judgment for future damages; the time is simply not ripe for such a determination. Even were we to take the view that future proceedings in Curacao might lead to “modification” of the present judgment, our concern would be limited to due process considerations :
      considerations of due process probably require that enforcement be refused to the extent that modifications could be sought in the rendering jurisdiction, unless the requested court allows the defendant to litigate the issues which would entitle him to modification.
      von Mehren & Trautman, Recognition of Foreign Adjudications: A Survey and a Suggested Approach, 81 Harv.L.Rev. 1601, 1658 (footnote omitted). Cf. Griffin v. Griffin, 327 U.S. 220, 66 S.Ct. 556, 90 L.Ed. 635 (1946).


author: PER CURIAM.

text:
    Gavin A. RUOTOLO et al., Plaintiffs-Appellants, v. Jay GOULD et al., Defendants-Appellees.
    No. 73-1326.
    United States Court of Appeals, First Circuit.
    Heard Jan. 7, 1974.
    Decided Jan. 17, 1974.
    Robert H. Schroeder and David S. Sands, Ossipee, N. H., on brief for appellants.
    Stanley M. Brown and McLane, Graf, Greene & Brown, Manchester,. N. H., on brief for Jay Gould, appellee.
    Before COFFIN, Chief Judge, ALD-RICH and McENTEE, Circuit Judges.
   PER CURIAM.

Plaintiffs’ bank account was attached by trustee process on January 15, 1973, without prior hearing, under the provisions of New Hampshire Revised Statutes Ann., Chapter 512. This suit, filed August 3, 1973, which alleges that the attachment is illegal for failure to provide due process protection in light of Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), and its family of cases, was dismissed by the district court sua sponte. The court relied upon Trapper Brown Construction Co., Inc. v. Electromech, Inc., 358 F. Supp. 105 (D.N.H.1973) (three judge court) which found Chapter 512 unconstitutional but held that its ruling was not to be applied retrospectively to “actions which were commenced by trustee process in New Hampshire state courts prior to the effective date of our judgment; nor to later New Hampshire state court orders in such actions charging trustees and making them pay over to plaintiffs sums held on attachments made prior to the effective date of our judgment.” 358 F.Supp. at 108.

Plaintiffs concede that they are in the class expressly denied relief in Trapper Brown, but argue that the district judge erred in dismissing this suit because the quoted language in Trapper Brown was mere dicta, and was in any event bad law. Both parties have waived oral argument. We agree with the district court that this case is frivolous and affirm.

It is clear that constitutional decisions may be made prospective only, Linkletter v. Walker, 381 U.S. 618, 85 S.Ct. 1731, 14 L.Ed.2d 601 (1965). This form of judgment is particularly appropriate where retroactive application would cause severe hardship to those who have relied upon the prior law in arranging their affairs. See IB Moore’s Federal Practice at 200-201. In this circuit courts called upon to declare invalid statutory schemes similar to the one in issue here have found that giving retroactive effect to their rulings would be unduly harsh and have therefore denied relief to those whose attachment proceedings had commenced prior to the effective date of the judgment. They have done so in terms very similar to those used in Trapper Brown. See Bay State Harness Horse Racing and Breeding Ass’n., Inc. v. PPG Industries, Inc., 365 F.Supp. 1299 (D.Mass.1973) (three judge court), Gunter v. Merchants Warren National Bank, 360 F.Supp. 1085 (D.Me.1973) (three judge court), Schneider v. Margossian, 349 F.Supp. 741 (D.Mass.1972) (three judge court). Whether the language in Trapper Brown relied upon by the district court here be denominated dicta or holding is immaterial. The district court was effectuating a policy fully supported by case law and reason to which, in our view, no serious challenge can be made.

Plaintiffs argue in their brief that the decisions in Bay State and Gunter “seemed clearly to leave open the question whether a plaintiff may challenge trustee process attachments made prior to the date of the decision striking down the statute in issue.” But in view of the fact that in Gunter it was said that, “Since a retrospective judgment would cast doubt on the validity of all real estate attachments in actions now pending in the Maine courts and would create a cloud on the title to any property hitherto sold pursuant to a real estate attachment, our decree will be prospective only and will have no effect on any attachments, other than the two attachments presently before us, which have been made prior to the date of this opinion.”, and that in Bay State the court expressly followed Schneider and Gunter on this point, the assertion made by plaintiffs is disconcertingly in error.

In all of the cases mentioned the denial of retroactive effect naturally did not extend to the actual plaintiffs in each suit. In Bay State the court also accorded retroactive effect to those who had filed similar constitutional challenges to the same statute and whose cases were still pending in the district court. This is not inconsistent with the rationale of the other cases, and would not help this plaintiff in any event.

Affirmed.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Charles Bennie HORNBECK, Defendant-Appellant.
    No. 73-1662.
    United States Court of Appeals, Seventh Circuit.
    Argued Oct. 24,1973.
    Decided Dec. 28, 1973.
    Certiorari Denied April 1, 1974.
    See 94 S.Ct. 1614.

      Irving M. Wiseman, Joseph Alan Bacus, Alton, 111., for defendant-appellant.
    J. Kenneth Lowrie, Organized Crime & Racketeering Section, U. S. Dept, of Justice, St. Louis, Mo., Donald Maekay, U. S. Atty., Springfield, 111., for plaintiff-appellee.
    Before SWYGERT, Chief Judge, SPRECHER, Circuit Judge, and GRANT, Senior District Judge

       Senior District Judge Robert A. Grant of the Northern District of Indiana is sitting by designation.

   PER CURIAM.

Defendant appeals from a conviction upon a plea of guilty of dealing in firearms without a license in violation of 18 U.S.C. § 922(a)(1). That section provides :

(a) It shall be unlawful—

(1) for any person, except a licensed importer, licensed manufacturer, or licensed dealer, to engage in the business of importing, manufacturing, or dealing in firearms or ammunition, or in the course of such business to ship, transport, or receive any firearm or ammunition in interstate or foreign commerce; . . .

Defendant admittedly sold firearms without a federal license. He contends, however, that he cannot be convicted under section 922(a)(1) absent a showing of a nexus between his transactions and interstate commerce. He asserts that Congress does not possess the power to regulate purely intrastate transactions such as his. The Government stipulated that defendant’s transactions were intrastate and that no evidence would be introduced at trial that the guns were manufactured in another state or shipped in interstate commerce. This appeal raises two issues: (1) does 18 U.S.C. § 922(a)(1), prohibiting unlicensed dealing, manufacturing, or importing of firearms or ammunition, apply to intrastate as well as interstate firearm activities; and (2) can Congress regulate purely intrastate dealing in firearms when such activity by its very nature affects interstate commerce.

Turning to the first issue, we find that defendant’s reliance on United States v. Bass, 404 U.S. 336, 92 S.Ct. 515, 30 L.Ed.2d 488 (1971), is misplaced. Unlike the statute in Bass, section 922(a)(1) is not ambiguous nor is its underlying legislative history equivocal. That it applies to intrastate as well as interstate firearm activities is quite clear. See Mandina v. United States, 472 F.2d 1110 (8th Cir. 1973), cert. denied 412 U.S. 907, 93 S.Ct. 2299, 36 L.Ed.2d 972 (1973); United States v. Redus, 469 F.2d 185 (9th Cir. 1972); United States v. Ruisi, 460 F.2d 153 (2d Cir. 1972), cert. denied, 409 U.S. 914, 93 S.Ct. 234, 34 L.Ed.2d 176 (1972). Accordingly, proof of an interstate nexus was not necessary for conviction under the statute.

With respect to the second issue, defendant’s constitutional challenge to section 922(a)(1) must fail for it is well established that Congress may impose criminal sanctions for the purpose of regulating purely intrastate activities which substantially affect interstate commerce. Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686 (1971). We find section 922(a)(1) to be a valid exercise of Congress’ Commerce Clause power. See Mandina v. United States, 472 F.2d 1110, 1113 (8th Cir. 1973), cert. denied, 412 U.S. 907, 93 S.Ct. 2299, 36 L.Ed.2d 972 (1973).

The judgment of the district court is affirmed.


author: ALDRICH, Senior Circuit Judge.

text:
    In re ESTATE of Joseph F. ABELY, Deceased. William F. ABELEY, co-executor, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 73-1332.
    United States Court of Appeals, First Circuit.
    Heard Jan. 7, 1974.
    Decided Jan. 17, 1974.
    Donal O’Callaghan, Boston, Mass., with whom Condon, O’Callaghan & Doyle, Boston, Mass., was on brief, for petitioner.
    Wesley J. Filer, Atty., Tax Div., Dept, of Justice, with whom Scott P. Cramp-ton, Asst. Atty'. Gen., Meyer Rothwacks, and Loring W. Post, Attys., Tax Div., Dept, of Justice, were on brief, for ap-pellee.
    Before COFFIN, Chief Judge, ALD-RICH and CAMPBELL, Circuit Judges.
   ALDRICH, Senior Circuit Judge.

Joseph F. Abely died domiciled in Massachusetts in March 1969, leaving a gross estate of $365,114. He was survived by a widow and three sons. The legacies to the widow were substantially less than what would have been allowed as a marital deduction for federal estate tax purposes. Internal Revenue Code of 1954, § 2056. A year and a half later the widow petitioned the probate court for a widow’s allowance, Mass.G.L. c. 196, § 2, and in February 1971 a decree was entered awarding her $50,000. No appeal was taken, and the payment was made. The Commissioner refused to allow a marital deduction therefor, claiming that a Massachusetts widow’s allowance is contingent within the meaning of section 2056(b). Litigation followed in the Tax Court. The Commissioner was sustained, 60 T.C. 120 (1973), and the executor appeals.

Appellant’s citation of cases arising out of states where a widow’s allowance is a vested right is misplaced. See discussion in Hamilton Nat’l Bank of Knoxville v. United States, 6 Cir., 1965, 353 F.2d 930. In Massachusetts the widow must survive the date of the decree of allowance. Adams v. Adams, 1845, 10 Metc. (51 Mass.) 170. This is consistent with its purpose, which is “to provide for the necessities of the widow for such a period after the death of her husband as will give her an opportunity to adjust herself to her new condition.” Hooker v. Porter, 1930, 273 Mass. 316, 173 N.E. 588. Obviously, if she does not survive, she will not need the payment —a payment so special that it takes precedence even over creditors. Mass.G.L. c. 196, § 2. Since, viewed as of the date of the husband’s death, the payment is contingent, it does not qualify for the marital deduction. Jackson v. United States, 1964, 376 U.S. 503, 84 S.Ct. 869, 11 L.Ed.2d 871.

The limited nature of a widow’s allowance in Massachusetts compels a further conclusion in the case at bar, viz., that the award of $50,000, both as to amount and as to the date applied for, could not qualify as a bona fide widow’s allowance within the Massachusetts statute. “This allowance [is] . . •. merely to furnish her with a reasonable maintenance for a few weeks, . always ... of small amount,” Dale v. Hanover Nat’l Bank, 1891, 155 Mass. 141, 143, 29 N.E. 371; “necessaries for ... ‘a short time,’ ” Townsend v. Wood, 1961, 342 Mass. 481, 483, 174 N.E .2d 420. This could not be $50,000, sought a year and a half after the husband’s death. Hooker v. Porter, ante. Whatever the motives of the heirs in perhaps assenting to, and in any event not appealing from a probate decree conspicuously outside of the scope of the statutory provision, the taxing powers of the government are not to be avoided by private arrangements contrary to the will even though they receive the gloss of a probate court decree. See Estate of Peyton v. Commissioner, 8 Cir., 1963, 323 F.2d 438; First-Mechanics Nat’l Bank of Trenton v. Commissioner, 3 Cir., 1940, 117 F.2d 127. Cf. Commissioner v. Estate of Bosch, 1967, 387 U.S. 456, 87 S.Ct. 1776, 18 L.Ed.2d 295. By “will” we of course include the concept of statutory law, but only to the extent that the statute provides. Even if a statutory Massachusetts widow’s allowance were to qualify for the marital deduction, a proposition we reject, the instant payment could not.

Affirmed.


text:
    McCANN STEEL COMPANY, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 73-1598.
    United States Court of Appeals, Sixth Circuit.
    Argued Dec. 10, 1973.
    Decided Jan. 8, 1974.

      Charles Hampton White, Cornelius, Collins, Higgins & White, Nashville, Tenn., for petitioner.
    Robert F. Dashiell, N.L.R.B., for respondent; Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, Vivian A. Miller, Atty., N.L. R.B., Washington, D. C., on brief.
    Before WEICK, and McCREE, Circuit Judges, and CECIL, Senior Circuit Judge.
   PER CURIAM.

We consider a petition for review and a cross-application for enforcement of a supplemental order of the National Labor Relations Board.

On May 12, 1972, we ordered enforcement of a Decision and Order of the Board reported at 190 N.L.R.B. No. 2, finding, inter alia, that the Company violated Section 8(a)(1) of the Act by discharging J. C. Hindsley, a draftsman, because he refused to perform work normally done by other employees who were engaged in an unfair labor practice strike.

The supplemental order involved' in this petition is reported at 203 N.L. R.B. No. 115. In it, the Board found the Company to be indebted to J. C. Hindsley in the amount of $4,967, with interest, less tax withholdings, for back-pay. The Company contended that Hindsley willfully incurred a loss of earnings by failing to work the full number of hours he could have for his interim employer and by taking a leave of absence from that employer. The Board correctly imposed the burden of proof upon the Company to show the amount by which the gross backpay should be diminished because of the claimed willful loss of earnings, and found that it had failed to meet its burden of showing that Hindsley’s interim employer had work available that Hindsley declined to perform.

From the record, viewed as a whole, it is unclear whether the Board considered the fact that Hindsley’s fellow draftsmen worked overtime during several pay periods when he failed to work the basic 40 hours, and whether any credit against the gross backpay was allowed for self-employment when the same activity would be compensated if performed for another employer.

In view of our uncertainty, our proper course is to deny enforcement of the Board’s order pending remand to the Board for clarification. See NLRB v. Austin Powder Company, 350 F.2d 973 (6th Cir. 1965).

Enforcement denied pending clarification for which purpose the case is remanded.


author: SPRECHER, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Jesse R. SMITH, Defendant-Appellant.
    No. 73-1182.
    United States Court of Appeals, Seventh Circuit.
    Argued Oct. 31, 1973.
    Decided Nov. 30, 1973.
    Arthur J. O’Donnell, Chicago, 111., for defendant-appellant.
    James R. Thompson, U. S. Atty., William T. Huyck, Asst. U. S. Atty., Scott Baskin, Justice Dept, legal intern, Chicago, 111., for plaintiff-appellee.
    Before KILEY, PELL and SPRECHER, Circuit Judges.
   SPRECHER, Circuit Judge.

This appeal calls upon us to align this circuit on the question of the nature of the scienter element under 18 U.S.C. § 641, stealing or converting government property. Some circuits hold it to be sufficient for the government to show that it owned the property and that the defendant merely knew that he was stealing or converting someone’s property, while other circuits require the government to prove that the defendant knew that the stolen or converted property was owned by the government.

The facts in this case make it an ideal vehicle for deciding the issue. The defendant ran off with $12,000 in government funds handed to him by an undercover agent trying to make a drug purchase. As defendant urged, the agent’s “dress, car, everything he did, was to assure that his true identity would not be revealed” as a federal agent using recorded federal funds.

I

On July 11, 1972, defendant Jesse R. Smith met Juan Juarez (who “was working as a cooperating individual with the Bureau of Narcotics”) through a long-time friend of defendant, Michael Watkins, at Watkins’ house. According to the defendant, Juan told him that he had a brother-in-law who was a' drug distributor and “couldn’t get anything”; that Juan suggested that they could sell the brother-in-law mostly milk sugar with a little heroin in it and that Juan, Watkins and defendant could divide the purchase price in some way; that defendant agreed to the arrangement but intended to deliver milk sugar only; and that Juan left Watkins’ house but telephoned defendant there later, saying that “they wanted to spend about $9,000.”

On July 12, 1972, agent Yarbrough withdrew $12,000 in government funds, recorded the serial numbers and drove to the parking lot of the Prince Castle Restaurant in Chicago Heights, Illinois, where he met Juan and Watkins. The three men walked to another automobile where defendant was sitting, at which time Yarbrough and defendant were introduced to each other. Defendant offered to sell Yarbrough 10 ounces of “the stuff” for $9,000 but Yarbrough asked for 16 ounces for $12,000. Yar-brough testified that in the narcotics trade “stuff” means heroin.

After defendant made several telephone calls, Juan and Watkins remained behind while Yarbrough and defendant drove in Yarbrough’s car to 84th and Wabash Streets, Chicago, where they stopped near a green Buick automobile with two occupants whom defendant categorized as “my people.” Defendant asked for the $12,000 which Yarbrough gave to him. Defendant then started to walk toward the Buick, which began to drive away with defendant jogging along after it. Yarbrough-drove abreast of defendant and said “Come back with the money,” whereupon defendant ran across a yard and disappeared between two houses as the Buick sped away. Other government agents in three automobiles who had been surveilling Yar-brough captured defendant and recovered the $12,000.

Defendant was charged in the indictment as follows:

“On or about July 12, 1972, at Chi-ca'go . . . [defendant] knowingly and unlawfully did embezzle, steal, purloin and convert to . . . [his] own use property of the United States . . ., to wit: $12,000; [i]n violation of Title 18, United States Code, Section 641.”

18 U.S.C. § 641 provides in part that “Whoever embezzles, steals, purloins, or knowingly converts to his use . . . money ... of the United States [s]hall be fined not more than $10,000 or imprisoned not more than ten years, or both . . . . ”

The parties stipulated that the $12,-000 taken from the defendant on July 12, 1972 was the property of the United States.

Defendant was convicted upon a jury trial and sentenced to three years’ imprisonment. Upon appeal his two principal contentions were that the government failed to prove that he knew that the money belonged to the United States and that the trial court erred in giving the following instructions:

“To convict the defendant, the government must prove beyond a reasonable doubt that the defendant unlawfully took without authority property owned by the United States and with the specific intent to permanently deprive the government of its use.
* * * *- * «•
“It is not necessary, ladies and gentlemen, for the government to prove that the defendant knew that the money belonged to the United States.”

II

In contending that the government failed to prove a necessary element that he knew that he was stealing or converting government property, defendant has relied primarily on Morissette v. United States, 342 U.S. 246, 72 S.Ct. 240, 96 L.Ed. 288 (1952).

Morissette was hunting deer on what he knew was government property when he encountered heaps of rusting metal simulated-bomb casings which had been cleared away from ground targets where they had been dropped by the Air Force in practice bombings. Believing the casings to be abandoned, he loaded three tons of them on his truck, flattened them with a tractor on a nearby farm, and sold them for $84. Morissette was indicted under 18 U.S.C. § 641. At his trial he testified that he did not intend to steal the casings but only to salvage what he thought was cast-off and abandoned property.

The district court charged the jury in part that Morissette knew he was on government property and “[t]he question on intent is whether or not he intended to take the property. He says he did.” He was convicted and sentenced. The Court of Appeals affirmed.

The Supreme Court reversed, holding that “mere omission from § 641 of any mention of intent will not be construed as eliminating that element from the crimes denounced” and finding no grounds “for inferring any affirmative instruction from Congress to., eliminate intent from any offense with which this defendant was charged.” 342 U.S. at 263, 273, 72 S.Ct. at 250, 255.

It is clear not only from the facts of the case but also from the Court’s opinion that the intent element found to be required in § 641 was the criminal intent to steal and not the intent to steal property known to be government property. Morissette’s knowledge that he was dealing with governmental property was not at issue; what was involved was whether his intent to take.what he believed to be abandoned property was equivalent to an intent to steal. The district court had taken the position that since he intended to take the property, it could be presumed that he intended to steal it. The Supreme Court said at 271, 72 S.Ct. at 254:

“. . . [I]t is not apparent how Morissette could have knowingly or intentionally converted property that he did not know could be converted, as would be the case if it was in fact abandoned or if he truly believed it to be abandoned and unwanted property.”

The Court concluded at 275-276, 72 S.Ct. at 256 :

“Moreover, the conclusion supplied by presumption in this instance was one of intent to steal the casings, and it was based on the mere fact that defendant took them. The court thought the only question was, ‘Did he intend to take the property?’ That the removal of them was a conscious and intentional act was admitted. But that isolated fact is not an adequate basis on which the jury should find the criminal intent to steal or knowingly convert, that is, wrongfully to deprive another of possession of property.”

The scienter required by Morissette was knowledge or belief as to whether the property was abandoned or not and hence capable of being stolen or converted. In the present case, there is no question in regard to that kind of scien-ter — defendant here knew that the $12,000 had not been abandoned and was to be the consideration for 16 ounces of heroin.

However one circuit supports defendant's contention squarely and another circuit supports it by analogy. In Fin-dley v. United States, 362 F.2d 921, 922-923 (10th Cir. 1966), without authority other than a preliminary reference to Morrissette, the Tenth Circuit held in a § 641 case that “it was incumbent upon the trial judge to advise the jury ... it was necessary for the government to prove beyond a reasonable doubt that the defendant knew that the property involved belonged to, and was stolen from, the government.” Fin-dley was cited as binding authority in United States v. Baltrunas, 416 F.2d 401 (10th Cir. 1969).

In Mitchell v. United States, 129 U.S. App.D.C. 292, 394 F.2d 767 (1968), where the offense was stealing property belonging to the District of Columbia under the District Code, the District Circuit held that scienter as to ownership was necessary. The Court took pains to distinguish the District situation from a § 641 case, pointing out that Congress intended to create a greater deterrent to theft of government property than non-government property because of the former’s greater vulnerability (park benches and so forth) and that the Congressional intent would be realized only if potential wrongdoers were aware that they were contemplating stealing government property. The Court also acknowledged that “the analogy to Findley and section 641 is weak.” 394 F.2d at 771, 773-774. Nevertheless, the Court gave some support to defendant’s position in the present case by adding at 774:

“This reasoning [greater deterrence], coupled with the rule of construction for criminal statutes endorsed by the Supreme Court in Morissette, provides substantial grounds for holding that knowledge of government ownership is . a necessary element . . . . ”

On the other side of the question are the Fifth and Ninth Circuits. In United States v. Howey, 427 F.2d 1017 (9th Cir. 1970), the Ninth Circuit in holding that ownership scienter was not an essential element of § 641, said at 1017-1018:

“We think that Findley is wrong, and we decline to follow it.

“Findley does not explain how the conclusion was reached that such knowledge is essential, other than to cite Morissette v. United States and Souza v. United States (9th Cir. 1962) 304 F.2d 274, neither of which is authority for the point.”

After distinguishing Morissette and its own prior case of Souza, the Ninth Circuit concluded at 1018:

“It was not an essential part of the common law larceny-type offense that the thief knew who owned the property he took; it was endtigh that he knew it did not belong to him. The legislative history provides no support for an assumption that Congress intended in section 641 to add to the common law offenses a new requirement that a thief know who owned the property he was stealing.
“The reason for including the requirement that the property, in fact, belongs to the Government was to state the foundation for federal jurisdiction. A defendant’s knowledge of the jurisdictional fact is irrelevant, as we have held in many cases interpreting analogous statutory provisions.”

Howey was reaffirmed by the Ninth Circuit in Baker v. United States, 429 F.2d 1278 (9th Cir. 1970).

In United States v. Boyd, 446 F.2d 1267, 1274 (5th Cir. 1971), the Fifth Circuit, in holding that “we do not think that 18 U.S.C. § 641 requires that the accused be aware that the stolen property belongs to the United States or to one of its departments or agencies,” concluded that “we think the Ninth Circuit Tin Howey] has the better of the argument.”

We agree with the Fifth and Ninth Circuits. The Supreme Court’s lengthy analysis of § 641 and of the pertinent common law in Morissette convinces us that the defendant’s knowledge of government ownership is wholly irrelevant in a § 641 prosecution. The common law required only that the accused know that the property is stolen property, belonging to someone other than the thief.

In United States v. Schaar, 437 F.2d 886 (7th Cir. 1971), the defendant and some accomplices intended to break into a tavern but in entering through a coal chute théy took a wrong turn and wound up in a bank, the deposits of which were insured by the Federal Deposit Insurance Corporation. Defendant appealed his conviction under 18 U.S.C. § 2113(a), stealing property belonging to a federally-insured banking institution. In affirming, we held that “[p]rior knowledge that the building was a bank is not a sine qua non to a conviction” any more so “than prior actual knowledge of the bank’s insured status.” 437 F.2d at 887. In Schaar we analyzed Morissette, and distinguished Mitchell but also held that “if Mitchell dictates . . . [a contrary] result we decline to follow it.”

Ill

Our problem is somewhat complicated by the fact that the Manual on Jury Instructions in Federal Criminal Cases, popularly known as the LaBuy instructions and adopted by the Judicial Conference of the Seventh Circuit in May, 1962, 36 F.R.D. 457, contains four recommended instructions which refer to knowledge of ownership of government property:

Section 19.01 — Offense of Stealing Government Property: “[W]ith knowledge that the property belonged to the United States” (36 F.R.D. at 634).

Section 19.02- — Offense of Unauthorized Sale of Government Property: “[W]ith knowledge that the property was owned by and was stolen from the United States” (634).

Section 19.03 — Offense of Receiving Stolen Government Property: “[W]ith knowledge that it has been stolen from the United States” (634).

Section 19.05 — Requisite Intent (638):

“An essential element of the crime of theft of government property is the specific intent by defendant to defraud the United States by appropriating to his own use, or the use of another, property which he knew belonged to the United States. If the defendant did not have this specific ■ intent he cannot be found guilty of this crime.”

The Comments following these four recommended instructions rely for the ownership scienter requirement wholly upon Morissette and Souza, which, as we have seen, do not support that requirement. Thus, insofar as Sections 19.01, 19.02, 19.03 and 19.05 are contrary to the conclusions reached in this case, they are inoperative.

The instruction given and hereby approved in this case is substantially similar to that- given and approved by the Ninth Circuit in Baker v. United States, 429 F.2d 1278 (9th Cir. 1970).

IV

Defendant has raised two other contentions: The refusal of the trial court to instruct the jury on entrapment and the denial of defendant’s motion to reassign the case to another judge.

Defendant, testifying on his own behalf, said that Juan Juarez “told me that he had a brother-in-law that dealt in drugs . . . and that he couldn’t get anything, so I told him that I could that Juan suggested “mostly milk sugar, probably a little stuff in it” and that defendant was “going to give him milk sugar” (Tr. 105, 107). When defendant ran off with the money, he had delivered neither heroin nor milk sugar. His own testimony revealed no reluctance whatever to agree to sell heroin or milk sugar with heroin or plain milk sugar and he needed no inducement to engage in any of these possible crimes.

In United States v. Bradley, 426 F.2d 148, 150 (7th Cir. 1970), we held that the trial court did not err in failing to give an entrapment instruction, where

“The instant case discloses only the existence of bare requests — mere opportunities for Bradley to violate the law if he were so inclined, ready and willing and able to produce the requested narcotic. There is no evidence of persuasion, importuning, play on sympathy or other emotion, or other factor which would serve to clothe a mere request with the indicia of inducement.”

In United States v. Russell, 411 U.S. 423, 435-436, 93 S.Ct. 1637, 1644, 36 L. Ed.2d 366 (1973), the Supreme Court said:

“Sorrells and Sherman both recognize ‘that the fact that officers or employees of the Government merely afford opportunities or facilities for the commission of the offense does not defeat the prosecution,’ [Sorrells v. United States] 287 U.S., at 441 [53 S.Ct. at 212, 77 L.Ed. 413;] [Sherman v. United States] 356 U.S. at 372 [78 S.Ct. 819, at 820, 2 L.Ed. 2d 848].”

The trial judge did not err here in refusing to give an entrapment instruction.

Defendant’s last contention is based on the fact that Judge Austin convicted defendant on a bench trial, granted a new trial and then heard the second trial before a jury despite defendant’s motion for reassignment to a different judge, citing Circuit Rule 23. Rule 23 applies only to reassignment for a new trial after remandment upon appeal. “We do not see how the exercise of . discretion in one trial, without more, could necessarily result in prejudice against an accused in a second trial.” United States v. Bolden, 355 F. 2d 453, 456 (7th Cir. 1965).

The judgment for conviction is affirmed.

Affirmed.

      . The Court said that “this element of the crime may be shown either by specific knowledge of District of Columbia ownership or by the establishment of sufficient facts to put a reasonable person on notice of the District ownership.” 394 F.2d at 774.

      . This opinion has been circulated among all judges of this court in regular active service and no judge has voted that the matter of adopting a position concerning which a conflict exists between the circuits or of modifying existing rules be reheard en lane.