author: FRIENDLY, Circuit Judge:

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ROLLINS TELECASTING, INC., Respondent.
    No. 332, Docket 73-1888.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 14, 1974.
    Decided Feb. 25, 1974.
    Rehearing Denied April 16, 1974.

      Warren C. Ogden, N. L. R. B. (Peter G. Nash, Gen. Counsel, N. L. R. B., John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Asst. Gen. Counsel, Charles N. Steele, N. L. R. B., of counsel), for petitioner.
    James M. Walters, Atlanta, Ga. (Fisher & Phillips, John Baeheller, Jr., and James B. Rhoads, Atlanta, Ga., of counsel), for respondent.
    Before MOORE, FRIENDLY and ANDERSON, Circuit Judges.
   FRIENDLY, Circuit Judge:

This petition to enforce an order of the National Labor Relations Board, 199 N.L.R.B. No. 92, involves the recurring pattern of a union organizational drive, concomitant discharges of employees known to be active in it, and efforts of a company executive to persuade employees not to support the union. Unlike many such cases, this controversy went to a Board-conducted election. In light of the Board’s rulings with respect to challenges, Teamsters Local Union No. 648 may have won the election; the company does not deny that it must recognize the union in that event. However, the Board confirmed the ruling of Administrative Law Judge Blackburn that even if the union should turn out to have lost the election, it had achieved an authorization card majority. In consequence, the Board authorized a bargaining order under § 8(a)(5) because of the discriminatory discharges of two leaders in the union’s campaign. NLRB v. Gissel Packing Co., 395 U.S. 575, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969). We have no quarrel with this conclusion, the findings of discriminatory discharges, and the relief accorded for them. On these points we see nothing that can usefully be added to the thorough discussion by the Administrative Law Judge, who rejected many of the General Counsel’s claims, and the Board’s decision, which rejected another. Our concern is rather with the finding that the respondent violated § 8(a)(1) by making coercive statements in the midst of a union organizational campaign. In considering that finding, we face the familiar tension between § 8(a)(1) and the protection accorded an employer by § 8(c) of the Act. See NLRB v. Gissel Packing Co., supra, 395 U.S. at 616-620, 89 S.Ct. 1918, 23 L.Ed.2d 547. Two incidents are involved, a speech by a high company official and an informal remark by a middle-level supervisor.

The more important of the two incidents was the talk and question-and-answer session conducted by James Rod-dey, vice-president of Rollins, Inc., respondent’s parent corporation. As the head of Rollins’ media division, Roddey was in charge of the company’s various media outlets, including WPTZ, the Plattsburgh, N. Y., television station with which we are here concerned. The Board found that the speech “was understood by the employees to mean in its totality that it would be futile for them to vote for [the union].” This rested on three subordinate findings:

(1) That Roddey had in effect threatened plant closure by saying that Rollins had previously closed a business enterprise rather than deal with the Teamsters ;

(2) That he warned the employees that if the Teamsters called a strike, they would lose their jobs “temporarily or permanently,” through replacements; and

(3) That he suggested the employees organize a committee to deal with Rollins and indicated they would benefit by such a procedure. Chairman Miller did not agree that the first two statements violated § 8(a)(1). He concluded that the third statement was unlawful, however, because it “contained a veiled promise of benefit for foregoing unionization and dealing directly with Respondent.”

There is no dispute that Roddey made statements on each of the three topics on which the Board focused, but his version of his remarks differed substantially from the Board’s characterization. On the first point, he testified that in an endeavor to counter reports circulated by the union that the Teamsters were very tough and could put pressure on Rollins through other contracts with it and other companies, he had said only that he also was a hard bargainer and that the only connection Rollins had ever had with the Teamsters concerned an office in Florida they had organized. Subsequently, he said, “it had been the Company’s decision that rather than submit to the demands that we felt were unreasonable, we would prefer to close that office.” On the other hand, four employees who attended the meeting gave a significantly different version of Roddey’s remarks. As one of them put it, “He told us . . . that the union did have at least one [unionized shop] in Florida and rather than bargain with the union, they [Rollins] closed the plant.” The other three recalled Roddey’s remark in similar terms.

If Roddey’s testimony stood alone, we would have difficulty in finding a violation of § 8(a) (1). See NLRB v. River Togs, Inc., 382 F.2d 198, 201-202 (2 Cir. 1967), quoted with approval in NLRB v. Gissel Packing Co., supra,, 395 U.S. at 619, 89 S.Ct. 1918, 23 L.Ed.2d 547; Snyder Tank Corp., 177 N.L.R.B. 724, 730-31 (1969), enforced, 428 F.2d 1348 (2 Cir. 1970); Federal Prescription Service, Inc., 203 N.L.R.B. No. 145 (1973); Sanders Leasing System, Inc., 204 N.L.R.B. No. 68 (1973). But here there is the testimony of what four employees understood Roddey to have said. The Administrative Law Judge, not attempting to resolve the conflict between the two versions of the speech, apparently went on the ground that it sufficed if employees reasonably understood, or more accurately misunderstood, Roddey to have threatened closure in the event of a union victory. The Board’s statement is so cryptic that we cannot tell whether it resolved the conflict against Roddey, as it permissibly could have, or, as seems more likely, followed the reasoning of the Administrative Law Judge. Assuming that it took the latter course, we cannot fault the decision. An employer who goes so close to the brink takes the risk that employees may honestly misunderstand him; Roddey could easily have avoided the likelihood of being misunderstood by adding that Rollins would not close simply because of a Teamster victory but only if the union’s demands made continuation impracticable. Gissell, supra, 395 U.S. at 620, 89 S.Ct. 1918, 23 L.Ed.2d 547.

On the second point, Roddey testified that he had “told the people that if they did strike under certain circumstances, that they could be replaced temporarily or in other circumstances they could be replaced permanently.” Three of the employees who attended the meeting confirmed that account. Both the Administrative Law Judge and the Board, however, characterized his comment as a threat that the company would replace any strikers. We see no basis for the Board’s interpretation, and conclude that Roddey’s statement that economic strikers could lose their jobs “temporarily or permanently” was within the protection of § 8(c). NLRB v. Herman Wilson Lumber Co., 355 F.2d 426 (8 Cir. 1966). If the Board meant to suggest that an employer resisting organization must deliver a lecture on the reinstatement rights of economic strikers under Laidlaw Corp., 171 N.L.R.B. 1366 (1968), enforced, 414 F.2d 99 (7 Cir. 1969), cert, denied, 397 U.S. 920, 90 S. Ct. 928, 25 L.Ed.2d 100 (1970), that goes too far, as the Board recently held, Mississippi Extended Care Center, 202 N.L. R.B. No. 139 (1973).

Finally, with respect to the third point, Roddey testified that, in answer to complaints that the cost of living in Plattsburgh was high and the pay ■ at WPTZ was low, he said that if the employees “would like to get something together, either individually or as a group or committee” and talk to him, he would be willing to listen; he added that at another station where a union attempting organization had lost an election, “the Company had formed a committee of employees, and this was working very successfully.” Once again, if his testimony had stood alone, we would be unable to agree with the Administrative Law Judge and the Board that he had crossed the forbidden line between merely soliciting complaints and promising benefits if the union organizational drive was defeated. As in the case of the threat to close the plant, however, the employees’ version of the speech differed sharply from Roddey’s. One of them testified:

He said that the Company had overlooked the employees of WPTZ; that he realized that we were underpaid; that he didn’t feel we had to bring a Union in; that he didn’t feel we needed a third party to negotiate on the salaries. He said that if we did bring a union in, that he was the man they had to bargain with, and he was tough to bargain with.

Another testified that Roddey had said that “these were some of the things that the Company could do for the employees without the Union, and one would be to look at comparable markets to find out the salary rates and the different positions, and also to set up a grievance committee; that if an employee had a grievance he could take it to the committee, and they would throw it around and make a decision.” A third commented, “He did express that he didn’t know things were this bad at Station WPTZ .... He said that he thought things could be worked out better.”

The Administrative Law Judge found that the employees understood these remarks as a veiled promise of benefits if they rejected the union. In addition, he found that Roddey had attempted to persuade the employees that organizing a committee to deal with him “would be better for them than going union by assuring them he would act if their claim that they were grossly underpaid proved accurate by area standards.” The Board agreed, concluding that Roddey had “suggested that the employees organize a committee to deal with Respondent and indicated that they would benefit by such a procedure.”

We see no basis for upsetting the Board’s resolution of the conflict in the testimony. There is sufficient evidence in the record to support the view that Roddey’s talk, both in intent and effect, suggested that the employees could expect wage increases and other benefits if they formed a grievance committee within the station, whereas these benefits would not be so readily available through collective bargaining. The closer question is whether that suggestion unlawfully interfered with the employees’ § 7 organizational rights and fell outside the protection of § 8(c).

It is plainly not unlawful for an employer to hold a “gripe session” during a union campaign; an organizational drive often comes as a rude shock to an employer, and a simple offer to hear any complaints the employees may have, or to set up machinery to that end, is a natural and non-coercive response. Fair-child Camera Corp. v. NLRB, 404 F.2d 581 (7 Cir. 1968); Furr’s, Inc., 157 N. L.R.B. 387 (1966); ITT Telecommunications, 183 N.L.R.B. No. 115 (1970); Golden Arrow Dairy, 194 N.L.R.B. No. 81 (1971). It is only when this is accompanied by an employer’s promises of benefits contingent on rejection of the union that it becomes suspect under § 8 (a)(1). To be sure, the promise of benefits in this case is far milder than the direct wage increases conferred in NLRB v. Exchange Parts Co., 375 U.S. 405, 84 S.Ct. 457, 11 L.Ed.2d 435 (1964). Nonetheless, courts have upheld Board findings of implied promises of benefits in situations very similar to this one. In NLRB v. Drives, Inc., 440 F.2d 354, 364 (7 Cir.), cert, denied, 404 U.S. 912, 92 S.Ct. 229, 30 L.Ed.2d 185 (1971), the court upheld the Board’s ruling that an employer had violated § 8(a)(1) when he distributed a survey shortly before a representation election requesting employees to make specific suggestions for improvements in working conditions and implying that the improvements would come only if the union were defeated. Similarly, in H. L. Meyer v. NLRB, 426 F.2d 1090 (8 Cir. 1970), the court agreed with the Board that the employer had violated § 8(a)(1) by installing a suggestion box during an organizational campaign and implying, through its answers to the questions submitted, that the employees would get a wage increase if the union lost the election. In NLRB v. Flomatic Corp., 347 F.2d 74, 76-77 (2 Cir. 1965), this court held that various promises of benefits and an invitation to deal directly with the company violated § 8(a)(1). While the promises in Flomatic were somewhat more explicit than those in this case, Roddey’s promise to look into the employees’ wage complaints, if presented through a committee, together with his characterization of himself as a hard bargainer with unions, strongly suggested that they could expect wage increases if, and perhaps only if, they dealt directly with the company. See also NLRB v. S & H Grossinger’s, Inc., 372 F.2d 26, 28 (2 Cir. 1967); Conolon Corp. v. NLRB, 431 F.2d 324 (9 Cir. 1970), cert, denied, 401 U.S. 908, 91 S.Ct. 866, 27 L.Ed.2d 806 (1971); . Texaco, Inc. v. NLRB, 436 F.2d 520, 524 (7 Cir. 1971); Vaughan Printers, Inc., 196 N.L.R.B. No. 32 (1972); Aldon, Inc., 201 N.L.R.B. No. 75 (1973); Coleman Co., 203 N.L.R.B. No. 160 (1973). Thus, in light of the Board’s factual findings, we agree that Roddey made unlawful promises of benefits to the WPTZ employees, which were implicitly contingent on their rejecting the union.

Besides Roddey’s talk, the Administrative Law Judge pointed to another incident of allegedly unlawful employer speech. Early in the union’s organizational campaign, Chief Engineer Lincoln Dixon told one of the employees that “it was too bad the only people that would get hurt would be the employees . that the Company was already making arrangements to bring people in in the event of a strike and they could keep running a lot longer than the employees could who would go out on strike.” Considering the remark in context, the Administrative Law Judge deemed it coercive because it helped convey the message that it would be futile for the employees to vote for the union. Although Dixon’s comment was apparently an off-hand remark rather than a formal expression of company policy, he spoke in terms of the company’s plans and actions, and the employees could reasonably conclude that he spoke as an informed member of management on that point. See Irving Air Chute Co. v. NLRB, 350 F.2d 176, 179 (2 Cir. 1965); Trey Packing, Inc. v. NLRB, 405 F.2d 334 (2 Cir. 1968), cert, denied, 394 U.S. 919, 89 S.Ct. 1191, 22 L.Ed.2d 452 (1969); NLRB v. Patent Trader, Inc., 415 F.2d 190 (2 Cir. 1969). Unlike Roddey, Dixon paid no heed to the critical line between a prediction of the probable economic consequences of unionism and a threat of employer reprisal, see NLRB v. Gissel Packing Co., supra, 395 U.S. at 618, 89 S.Ct. 1918, 23 L.Ed.2d 547; NLRB v. Taber Instruments, Division of Teledyne, Inc., 421 F.2d 642, 644 (2 Cir. 1970); NLRB v. General Stencils, Inc., 438 F.2d 894, 900 (2 Cir. 1971); NLRB v. Erie Marine, Inc., 465 F.2d 104 (3 Cir. 1972); NLRB v. Roselyn Bakeries, Inc., 471 F.2d 165 (7 Cir. 1973); Amalgamated Local Union 355 v. NLRB, 481 F.2d 996, 1004 & n. 13 (2 Cir. 1973). Dixon did not merely say that the company would be able to replace strikers, he warned that it fully intended to do so, and that plans were already afoot to provide replacements in the event of strike. Accordingly, we conclude that the Administrative Law Judge could reasonably find that Dixon’s comment constituted a threat of reprisal which-violated § 8(a) (1) and was not protected by § 8(c). Cf. Lake City Foundry Co. v. NLRB, 432 F. 2d 1162 (7 Cir. 1970).

We shall therefore direct that paragraph 1(e) in the Board’s order be modified to read: “Threatening employees with loss of their jobs if they vote for union representation.” This modification does not require remand with respect to the bargaining order since that order rested on the discriminatory discharges rather than the § 8(a) (1) violations.

Enforced as modified. The Board may recover two-thirds its costs.

      . The Board did not explain its ruling on this point, although Chairman Miller wrote in dissent: “The Board, in Texaco, Inc., 178 N.L.R.B. 434, found similar statements did not exceed the bounds of propriety afforded by Sec. 8 (c) of the Act.”

      . There is no indication anywhere in the record that the company was, in fact, making any such plans or that the proposed action was based on an analysis of economic necessities in the light of available facts.


source: Caselaw Access Project

author: PELL, Circuit Judge. STEVENS, Circuit Judge, with whom SWYGERT, Chief Judge, and KILEY, Senior Circuit Judge, SWYGERT, Chief Judge

license: Public Domain

text:
    Juan G. MORALES, Plaintiff-Appellee, v. Wilbur J. SCHMIDT, Defendant-Appellant.
    No. 72-1373.
    United States Court of Appeals, Seventh Circuit.
    Reheard En Banc May 29, 1973.
    Decided March 22, 1974.
    Stevens, Circuit Judge, filed concurring opinion in which Swygert, Chief Judge and Kiley, Senior Circuit Judge, joined; Swygert, Chief Judge, filed additional concurring opinion.

      Robert D. Repasky, Asst. Atty. Gen., Dept, of Justice, Madison, Wis., for Wilbur J. Schmidt.
    Anthony J. Theodore, Corrections Legal Services Program, Madison, Wis., amicus curiae.
    Paul A. Hahn, Madison, Wis., for plaintiff-appellee.
    Before SWYGERT, Chief Judge, KIL-EY, Senior Circuit Judge, and FAIR-CHILD, CUMMINGS, PELL, STEVENS, and SPRECHER, Circuit Judges.
   PELL, Circuit Judge.

This is an appeal from the entry of a preliminary injunction by the District Court for the Western District of Wisconsin enjoining Wilbur J. Schmidt, the Secretary of the Department of Health and Social Services of the State of Wisconsin, and his agents from restricting correspondence between Juan Morales and his wife’s sister. Morales v. Schmidt, 340 F.Supp. 544 (W.D.Wis. 1972). A decision by a panel of this court was handed down on January 17, 1973. Morales v. Schmidt, 489 F.2d 1335 (7th Cir. 1973). The facts are adequately stated in the above mentioned opinions. A majority of the active judges having so voted, this appeal was reheard en banc.

The general background of the situation in which the courts find themselves in litigation of the type in which the present case falls is aptly summarized by Judge Doyle of the Western District of Wisconsin:

“This is but one of the flood of constitutional lawsuits by prisoners. These suits have heavily burdened correctional authorities by requiring them to gather and to organize factual information for court pleadings, and to appear occasionally in court. The federal courts are also heavily burdened by this radical addition to their caseloads, and the absence of plaintiffs’ counsel in most cases and the physical restraints upon the plaintiffs frequently render judicial administration unusually difficult. Many of these suits by indigent prisoners are wholly without merit under any view of the facts or the law; many are mischievous; some malicious. The plaintiffs are uninhibited by financial pressures. For many of these plaintiffs, that the very bringing of the suits in such numbers creates a serious problem for correctional authorities and the courts is a matter of indifference, and, perhaps, of wry satisfaction.” 340 F.Supp. at 547.

Because of the volume of such cases, the problems of differentiating those presenting valid claims from those wholly lacking any cognizable basis for relief, the lack of guidelines in definitive Supreme Court opinions, and the understandable variances in individual judicial philosophies in the present fluxional area of constitutional law, difficulty has been experienced in articulating a disposition of the present case in a manner satisfactory to a majority of the active judges of this court. The problem is not in an acceptable enunciation of the basic guidelines applicable to controls that may properly be exercised by correctional authorities on the correspondence of those in their charge. Therefore, so that the disposition of this particular case may be no longer delayed, we address ourselves only to the narrow issues raised by this specific ease.

(1) Although at the time of hearing in this court Morales had been released on parole, the case was not moot. We adopt the reasoning as to mootness set forth in the original opinion.

(2) The district court erred in its holding that governmental differentiation of treatment between (a) those who have been convicted of a crime and (b) those who have not been convicted of a crime must be justified by applying the principles developed under the constitutional guaranty of equal protection of the laws.

(3) The district court erred in its holding that the standard which the state was required to meet to justify its restriction on Morales’ engaging in correspondence with his sister-in-law was to demonstrate a compelling interest.

(4) The proper standard for consideration of the regulation or practice which restricted the right of free expression that a convicted person such as Morales would have enjoyed if he had not been convicted of a crime is that the State must show on challenge that such restriction is related both reasonably and necessarily to the advancement of a justifiable purpose of imprisonment.

It may well be that the same result which was reached by the district court in the particular facts here involved could have been reached if the standards we have herein determined to be appropriate had been applied. Error does not necessarily mandate reversal.

Because of the uncertainty inherent in the disposition of litigation upon an infirm predicate it is deemed necessary that the proceedings be remanded for further determination in accordance with this opinion. We also note that the posture of the case before the district court involved consideration of Morales as a prisoner rather than as a parolee, which he in fact then was, and presumably now is.

Because of the substantial lapse of time since the initiation of this appeal, during all of which time the defendant has been enjoined from interfering with correspondence between Morales and his wife’s sister, we, as a discretionary matter, do not vacate the injunction, which will remain in effect pending further disposition of the case in the district court.

Remanded.

STEVENS, Circuit Judge, with whom SWYGERT, Chief Judge, and KILEY, Senior Circuit Judge,

join (concurring).

As I stated in the opinion which I filed on January 17, 1973, notwithstanding my disagreement with Judge Doyle’s equal protection analysis, I am persuaded that he correctly entered an injunction on April 6, 1972. I also agree with Judge Pell that the state may not abridge an inmate’s right to communicate with others if the restriction is not “related both reasonably and necessarily to the advancement of a justifiable purpose of imprisonment.”

Because no general statement can really be understood until it has acquired meaning through ease by case application, a few additional comments may be helpful.

First, I would emphasize the point that “[wjhether we view the issue from the standpoint of the prisoner’s right to communicate with others, or from the standpoint of society’s right to know what is happening within a penal institution, it is perfectly clear that traditional First Amendment interests are at stake.”

Second, I am not convinced, and I do not think the general statement of a useful standard implies, that every prior restraint on an inmate’s right to communicate is necessarily justified by a showing which meets the standard. I think the standard will be primarily useful in testing the validity of rules adopted by prison authorities relating to mail and like matters.

Third, the state’s burden of justification is much heavier when it acts on an ad hoc basis (as it did in this ease) than when it implements a carefully drawn regulation.

Fourth, the state has not met its burden of justifying the ad hoc determination disclosed by the record in the case before us, in part, because the record contains no evidence of consideration of less drastic alternatives than a total ban upon communication between Morales and Steffes.

Fifth, as I previously stated, if the state does adopt relevant guidelines which evidence awareness of the conflicting considerations that should influence particular decisions in this area, those guidelines would be presumptively valid. In view of the fact that First Amendment interests are at stake, it is important to remember that an excessively general or vague regulation may be tantamount to no rule at all. The factors — the impact which the fear of punishment may have upon one’s willingness to communicate and the public interest in not interfering with the exchange of information and ideas in the intellectual marketplace — which gave rise to the overbreadth exception to traditional doctrines of constitutional adjudication are clearly applicable within the prison walls as well as without. I am not sure whether an overbroad regulation of an inmate’s speech is invalid because it is not entitled to the presumption of validity or because its over-breadth will readily overcome the presumption. That is clearly the kind of nice question of interpretation of a general guideline that can await a proper case for consideration.

With these caveats, I concur in Judge Pell’s disposition of the appeal.

SWYGERT, Chief Judge

(concurring).

I join with Judge Stevens in his concurrence, but desire to express some additional views.

Judge Pell would require “that the State must show on challenge that such restriction [of First Amendment rights] is related both reasonably and necessarily to the advancement of a justifiable purpose of imprisonment.” I would add to Judge Pell’s formulation by requiring the State to assume a heavy burden of justification. This, in my opinion, would require that prison officials demonstrate the restriction is not only reasonable but there is a substantial necessity for it. This more forceful standard would be less than a compelling State interest but clearly more than a rational relationship between the restriction and prison discipline and rehabilitation.

While agreeing with Judge Stevens as to the desirability of regulations rather than ad hoc determinations in this area, I suggest that prison regulations covering procedure in addition to rules relating to mail and other means of communication might help answer the question posed by Judge Stevens concerning the difficulty of formulating rules that would not be subject to constitutional attack. If the State prescribed regulations that permitted the prisoner or parolee to challenge either ad hoc decisions or decisions under prescribed rules in an administrative proceeding, such procedure could have the effect of avoiding the risk of a constitutional attack on the rules themselves and at the same time afford the prisoner or parolee the right to challenge such decisions at an administrative level. A regulation of this sort would aid the prisoner or parolee, the State, and the courts since less resources would be required for all concerned if a matter such as here be first considered at an administrative level rather than in a court.

      . See 489 F.2d at 1346 (1973).

      . I note that my somewhat laborious reaction to the state’s ad hoc approach to this -case is not unlike the recent reaction of the Supreme Court (in quite a different context, of course) to “what amounts to an unpubished ad hoc determination,” see Morton v. Ruiz, 415 U.S. 199, 94 S.Ct. 1055, 39 L.Ed.2d 270 (1974).

      . Professor Hart has identified the kinds of situation where such regulation is appropriate. “Sometimes the sphere to be legally controlled is recognized from the start as one in which the factors of individual cases will vary so much in socially important but unpredictable respects, that uniform rules to be applied from case to case without further direction cannot usefully be framed by the legislature in advance.” Administrative regulations of industry under a “fair rate” standard, or the adjudication of negligence cases on the standard of “due care” are discussed as examples of legal situations where precise regulation by rule is impossible. See H.U.A. Hart, The Concept of Law, 127-130 (1961). Manifestly, the concern with not deterring protected speech in the regulation of the unprotected makes ad hoc regulation on the basis of overly broad standards inappropriate to the First Amendment context. See, e. g., N.A.A.C.P. v. Button, 371 U.S. 415, 432-433, 83 S.Ct. 328, 9 L.Ed.2d 405; see also Harlan, J., dissenting, 371 U.S. at 453-155, 83 S.Ct. 328, 9 L.Ed.2d 405.


author: FIELD, Circuit Judge:

text:
    James M. PROCTOR, Appellant, v. COLONIAL REFRIGERATED TRANSPORTATION, INC., Appellee.
    No. 72-1211.
    United States Court of Appeals, Fourth Circuit.
    Argued Nov. 6, 1973.
    Decided March 27, 1974.

      Henry Hammer, Columbia, S. C. (James W. Cothran, William P. Baskin, Bishopville, Lawerenee M. Gressett, Jr., St. Matthews, S. C., on brief), for appellant.
    Ronald E. Boston, Columbia, S. C. (H. F. Padget, Jr., and Turner, Padget, Graham & Laney, Columbia, S. C., on brief), for appellee.
    Before CRAVEN, RUSSELL and FIELD, Circuit Judges.

      . The agreement between Colonial and Bales recognized Colonial’s responsibilities under the regulations:
      “3. The CARRIER shall have such exclusive possession, control and use of the CONTRACTOR’S equipment and shall assume responsibility in respect thereto to the extent required by the rules and regulations of the Interstate Commerce Commission.”

   FIELD, Circuit Judge:

James M. Proctor sustained serious injuries in an accident while riding as a passenger in a tractor-trailer being driven by one, E. O. Bales, under a lease arrangement with the defendant, Colonial Refrigerated Transportation, Inc. (Colonial). Proctor instituted this diversity action to recover damages from Colonial. Pursuant to a jury verdict, judgment was entered in the district court in favor of the defendant and the plaintiff has appealed.

Colonial is a certified interstate motor carrier, and about a year before the accident in question had entered into a written agreement with Bales under which he agreed to furnish a tractor and driver to transport commodities in trailers owned by Colonial. Colonial had also entered into an identical agreement with the plaintiff Proctor. Several days prior to the accident Proctor’s tractor became disabled and was placed in a Maryland garage for repairs. Thereafter, Proctor was hired by Bales as an assistant driver in transporting a trailer of Colonial to Florida. While driving through South Carolina the tractor was involved in a collision with another truck killing Bales and seriously injuring Proctor.

Proctor’s complaint alleged negligence on the part of Bales as an agent of Colonial, and also charged that Colonial permitted the tractor-trailer rig to be operated when it knew or should have known that the trailer had a defective coupler assembly.

The primary issue upon this appeal is whether a motor carrier operating under a certificate from the Interstate Commerce Commission is liable to an employee of a lessor for injuries resulting from the negligence of the lessor in the operation of his equipment in the business of the lessee-carrier. Incident to this issue the plaintiff challenges that part of the district court’s charge which told the jury that if they determined the relationship between Bales and Colonial was that of independent contractor-employer at the time of the accident, they should return a verdict for the defendant.

In support of his position, plaintiff relies heavily on the South Carolina case of Reed v. Southern Ry.-Carolina Division, 75 S.C. 162, 55 S.E. 218 (1906). In that case the plaintiff’s intestate had been injured by the negligence of the Southern Railway Company which had leased the railway lines and equipment from the defendant Southern Ry.-Carolina Division. The operating lessee Southern Railway Company, by whom plaintiff’s intestate was employed, was originally made a party defendant to the action. When the case was removed to the federal court the plaintiff dismissed the action against Southern Railway Company, had the case remanded to the state court, and proceeded solely against the lessor Southern Ry.-Carolina Division. In recognizing that the plaintiff had a cause of action against the lessor-carrier the court stated:

“When a railroad company accepts a charter, it assumes the performance of all the duties to the public which are imposed upon it by the charter or the general laws of the state, and it cannot be permitted to escape from the obligations thus imposed upon it by transferring its chartered rights and privileges either to an individual or to another corporation. A corporation must of necessity always act through individuals, and whether such individuals are called its officers, or agents, or its lessee, cannot affect the question of its liability to perform the obligations which it has incurred, in consideration of its chartered rights and privileges. It cannot be permitted to enjoy the benefits conferred by its charter, without incurring the responsibilities incident thereto.” 55 S.E., supra, at 221.

Upon consideration of Proctor’s motion for a new trial the district judge concluded that the Reed decision was inapplicable to the present case since it was based to some degree upon the provisions of a legislative act as well as a section of the Constitution of the State of South Carolina. The legislation, which was designed to permit the consolidation of railroad companies and authorized leasés of railroad lines within the state, provided that the lessor railroad should be and remain subject to suit for all causes of action arising out of the operation of the .lines notwithstanding any lease thereof. The constitutional section extended to every employee of a railroad company the same rights and remedies for any injury sustained by him as were allowed by law to other persons who were not employees of the railroad. While we agree with the district court that th'e advertence to the legislative and constitutional provisions in Reed dilute its authority somewhat, nevertheless, we are of the opinion that the plaintiff’s contention is supported by the underlying rationale of the case which was stated by the court as follows:

“A railroad company has the power to enter into a great many special agreements, but it cannot make a valid contract whereby it will be exempt from liability for negligence. * * * This principle is applied, even when the action is by an employé based on negligence. * * * The reason for the rule is that such contracts are against public policy.” (citations omitted)
55 S.E. supra at 221.

However, aside from Reed, we think there is a more compelling reason which supports Proctor’s position. As a certified interstate carrier Colonial was subject to the supervision and control of the Interstate Commerce Commission, and in augmenting its equipment through the lease agreement with Bales it was required to be in compliance with the Commission’s Regulations, 49 C.F.R. §§ 1057.1-1057.6. These regulations and the statute under which they were promulgated require and provide that under such lease arrangements the lessee-carriers “will have full direction and control of such [leased] vehicles and will be fully responsible for the operation thereof * * * as if they were the owners of such vehicles * * These regulations were promulgated by the Commission to correct widespread abuses incident to the use of leased equipment by the carriers, see American Trucking Assns. v. United States, 344 U.S. 298, 303, 73 S.Ct. 307, 97 L.Ed. 337 (1953), and “the intent [of the regulations] was to make sure that licensed carriers would be responsible in fact, as well as in law, for the maintenance of leased equipment and the supervision of borrowed drivers.”, Alford v. Major, 470 F. 2d 132, 135 (7 Cir. 1972). The statute and regulatory pattern clearly eliminates the independent contractor concept from such lease arrangements and casts upon Colonial full responsibility for the negligence of Bales as driver of the leased equipment. Any language to the contrary in the lease agreement would be violative of the spirit and letter of the federal regulations and therefore unenforceable.

In its brief Colonial concedes its responsibility to the shipping or traveling public, but contends that this responsibility does not extend to Proctor in his posture as an employee of the lessor Bales. In support of this contention Colonial relies upon our decision in War Emergency Co-op Association v. Widenhouse, 169 F.2d 403 (4 Cir. 1948). In that case Widenhouse, owner-lessor of the truck, sustained damages as a result of the negligent conduct of the driver who was his employee. In declining to countenance a claim by Widenhouse against the lessee-carrier, this court found that the regulations of the Commission furnished no basis “for allowing Widenhouse to recover from defendant for damages caused by the negligence of his [Widenhouse’s] own employee.”, P. 407. However, the anomaly of Widen-house is not present in the case before us. The equipment, of course, was not owned by Proctor, and in his position as an employee of Bales there was no contractual relationship between Ppoctor and Colonial. In the context of Colonial’s responsibility under the Commission’s Regulations, Proctor was as much a stranger to Colonial as a shipper or a member of the traveling public, and to deny him recovery upon the independent contractor theory would undercut the primary purpose of the regulatory design. The submission of the case to the jury upon this theory was error and requires that the judgment of the district court be set aside and a new trial awarded to the plaintiff. Upon the retrial the district court should direct the jury that under the regulations Colonial was responsible for Bales’ conduct in operating the equipment, and negligence on his part would require a finding of liability with respect to Colonial.

Two other issues raised on this appeal require our attention. Paul Chesley Proctor, a brother of the plaintiff, was tendered as an expert upon the issue of the alleged defective coupler assembly. To demonstrate his qualifications as an expert this witness testified that he had been the owner and operator of a truck stop for a number of years and in such capacity serviced tractors and trailers, greasing and gassing them and doing minor repair work, and that thereafter he had served as a licensed inspector in the State of Kentucky for a period of four years. However, the nature of such inspections was not entirely clear. The record indicates that the district court had serious reservations with respect to the expertise of Proctor, but nevertheless permitted his testimony to be presented to the jury. Proctor theorized that the coupler assembly was not properly secured to the trailer and it was this defect which permitted the trailer to crush the cab in the collision. Upon this issue the defendant called as witnesses its maintenance director and a former mechanic as well as two representatives of Fruehauf, the manufacturer of the trailer. The testimony of these witnesses contradicted Proctor’s testimony relative to the construction of the trailer and the coupler assembly, and tended to show that even if the coupler assembly had been defective in the manner detailed by Proctor, such a condition would not have been apparent to Colonial through an inspection of the trailer. In addition to these witnesses, J. A. Johnson, a research engineer in the area of transportation, testified as an expert on behalf of the defendant. Basing his opinion upon the evidence relative to the collision and the assumption that the trailer coupling was not defective, Johnson stated that the minimum load forces created by the impact could only have been dissipated by crushing the cab back into the trailer.

At the close of all of the evidence the district court directed a verdict in favor of Colonial upon this issue. The ruling was based upon the latent nature of any defect in the coupler assembly as well as the lack of its causative role in regard to Proctor’s injuries. We find ample support in the record for the court’s action. First of all, we share the district court’s reservations about Proctor’s experience and the area of his expertise, and in the exercise of his discretion the district judge might well have declined to recognize the witness as qualified to state an opinion upon the issue. Bryant v. Sears, Roebuck & Company, 435 F.2d 953 (4 Cir. 1970), Krizak v. W. C. Brooks & Sons, Incorporated, 320 F.2d 37 (4 Cir. 1963). In any event, the clear and convincing evidence presented by Colonial and the tenuous nature of Proctor’s testimony warranted a directed verdict in favor of the defendant upon this issue. “The test on directing a verdict - * * * is not whether there is any evidence, but whether ‘there are no controverted issues of fact upon which reasonable men could differ.’ ” Pogue v. Retail Credit Company, 453 F.2d 336, 338 (4 Cir. 1972), cert, denied 409 U.S. 1109, 93 S.Ct. 910, 34 L. Ed.2d 689 (1973). In ruling upon the motion, the district judge observed that he did not consider the plaintiff’s testimony creditable enough “for me to let a verdict stand on it.” Under this well recognized criterion his action was appropriate. Wachovia Bank and Trust Company v. United States, 288 F.2d 750, 757 (4 Cir. 1961).

Finally, Proctor challenges the action of the district court in permitting Colonial’s counsel to question him upon cross-examination in regard to a statement signed by him. Proctor identified his signature but testified that he could not remember giving the statement and denied certain portions of it. Proctor contends that under these circumstances Colonial’s use of the statement was improper Unless the party taking the statement was first called as a witness in regard thereto. The statement was not introduced as a substantive admission by Proctor but was merely used a prior inconsistent statement for purposes of impeachment. With the authenticity of the signature admitted, the statement was proper impeachment material. See Squires v. Henderson, 208 S.C. 58, 36 S.E.2d 738 (1946). The question is of little moment, however, since substantially the same statements were made by Proctor in his pretrial deposition which was also used during the course of his cross-examination. Proctor was a party-litigant and his deposition was, of course, admissible either as substantive evidence or for impeachment purposes. See Community Counselling Service, Inc. v. Reilly, 317 F.2d 239, 243 (4 Cir. 1963).

The judgment of the district court is reversed and the case remanded for a new trial consistent herewith.

Reversed and remanded.

      . The court’s charge on this point was as follows:
      I charge you that if you determine that the relationship between Mr. Bales, the driver of the defendant vehicle, and the defendant, was that of independent contractor-employer at the time of the accident in question, you must return a verdict for the defendant, because under the law this defendant is not responsible for negligent, or reckless, or willful or wanton acts committed by persons it has engaged or employed to perform independent services.
      However, should you determine that the relationship between Bales and the defendant was that of master-servant, or principle or agent, or employer-employee, plaintiff would be entitled to recover, if plaintiff has proved by a preponderance of the evidence that the deceased, Bajes, operated the defendant’s vehicle in a negligent, or reckless manner which proximately contributed to and caused the wreck in issue.

      . 49 U.S.C. § 304(e) (2); 49 C.F.R. § 1057.4(a) (4).

      . Colonial argues that since Proctor had a contract with it identical to that of Bales, Proctor was aware of the relationship between the parties and such knowledge on his part precludes him from asserting liability against Colonial. We find this contention of no merit since Proctor’s contract was operative only when he was furnishing and/or driving his own equipment for Colonial pursuant to his lease agreement.


author: McENTEE, Circuit Judge.

text:
    In the Matter of INTACO PUERTO RICO, INC., Debtor. Appeal of GABRIEL ALVAREZ & ASSOCIATES.
    No. 73-1377.
    United States Court of Appeals, First Circuit.
    Argued Feb. 7, 1974.
    Decided March 29, 1974.

      Edward S. Kanbar, Santurce, P. R., with whom Jose R. Fournier, Bayamon, P. R., was on brief, for appellant.
    Jorge Bermudez Torregrosa, San Juan, P. R., for appellee.
    Before COFFIN, Chief Judge, Me-ENTEE and CAMPBELL, Circuit Judges.
   McENTEE, Circuit Judge.

This case presents difficult questions concerning the relative rights and responsibilities of the various participants in a Chapter X reorganization proceeding. Because of the rather unusual history of this matter, the facts must be stated in some detail.

On January 18, 1971, Intaco Puerto Rico, Inc. (“the Debtor”) filed a petition for reorganization in the district court pursuant to Chapter X of the Bankruptcy Act, 11 U.S.C. § 501 et seq. (1970). The court approved the petition the next day. As part of its order of approval, the court, acting under the authority of 11 U.S.C. § 516(4), enjoined creditors from commencing suits against the Debtor, or its Trustee. The intended purpose of this injunction was, of course, to restrict all outstanding claims by creditors to the reorganization proceeding.

In April 1971 the Trustee, acting to preserve the assets of the Debtor, instituted a civil suit against Gabriel Alvarez & Associates (“the Creditor”) for recovery of certain monies allegedly due. Shortly thereafter, on May 10, 1971, the Creditor, in apparent violation of the bankruptcy court’s prior injunction, counterclaimed against the Trustee for damages based on the Debtor’s alleged breach of contract. Subsequently, under a threat of contempt of court for violating the injunction, the Creditor was compelled on June 30, 1971, to withdraw his counterclaim. In accepting the withdrawal, the district court reserved the question whether such “withdrawal of the claim for damages was with or without prejudice.”

In the meantime, the reorganization proceedings were progressing rapidly, and on October 20, 1971, a Plan of Reorganization was confirmed by the bankruptcy court. However, despite the Trustee’s obvious awareness, at least since May 10, 1971, of the Creditor’s claim against the Debtor, no formal notice of any kind concerning the pendency of those proceedings, the developments therein, or the time and manner in which to file claims, was ever given to the Creditor. For his part, though the Creditor was presumably cognizant of the pending reorganization by virtue of the required withdrawal of his counterclaim, he never directly intervened in that matter nor made a formal offer of proof of his claim.

Nearly a year after confirmation of the Plan of Reorganization, the Creditor moved in district court, in the Trustee’s still unresolved civil suit, for leave to refile his counterclaim. This motion was denied. The Creditor then, for the first time, went into bankruptcy court and offered the substance of his rejected counterclaim, with certain amendments, as a Proof of Claim against the Debtor. Without any analysis of the merits, the court dismissed the Proof of Claim on the grounds that (1) as a counterclaim, its prior withdrawal under pain of contempt was intended by the district court to be taken with prejudice and consequently “it follow [ed] that a proof of claim which is simply the same counterclaim in disguise cannot be entertained,” and that (2) in any case, the Proof of Claim was untimely. From this determination the Creditor appeals.

Initially, we must decide whether the bankruptcy court was correct in considering the counterclaim withdrawal as having been made with prejudice. This will depend, in large part, upon whether, under these facts, the district court could have properly imposed such a contempt sanction for the Creditor’s violation of the § 516(4) injunction. We have no doubt that under appropriate circumstances, a § 516(4) injunction against existing creditors can legitimately be enforced by contempt proceedings. See, e. g., In re 4145 Broadway Hotel Co., 131 F.2d 120 (7th Cir. 1942). It is also possible that, in a proper situation, the price a party could be forced to pay in order to purge himself of such contempt may well be a dismissal of his claim with prejudice. However, dismissal of a claim with prejudice, with all its attendant substantive consequences, is to be regarded as the proper remedy for violation of a § 516(4) injunction only in the most flagrant of cases. Cf. id.; Converse v. Highway Const. Co., 107 F. 2d 127 (6th Cir. 1939). Normally, dismissal of the claim with leave to file in the bankruptcy proceeding will suffice to accomplish the policy objectives underlying the injunction.

The record before us indicates that the Creditor was completely unaware of the bankruptcy’s court injunction, since no notice of its issuance had been affirmatively communicated to him. And, although the older cases suggest that lack of notice of such an injunction is, by itself, insufficient to form a defense to contempt proceedings, e. g., Converse v. Highway Const. Co., supra; In re Cleveland & Sandusky Brewing Co., 11 F.Supp. 198 (D.Ohio 1935), it is at least arguable that the many recent Supreme Court pronouncements in the area of procedural due process would compel the conclusion that the older cases are of questionable continued validity. However, that is a matter which we need not presently decide. For, in any case, we believe that, at least where no notice has been given so that the breach of the injunction may not be deemed to have been willful, something, more than just the mere filing and prompt (withdrawal of a prohibited claim must be shown to justify the contempt-based sanction of dismissal of the. claim with prejudice. Cf. In re Burns Bros., 50 F. Supp. 53 (S.D.N.Y.1943). The primary function of a § 516(4) injunction is to prevent undue interference either with the Debtor’s property or the bankruptcy court’s exclusive jurisdiction over the matter. 6 Collier on Bankruptcy § 3.30 (Moore & Oglebay ed. 1972). In the instant case, the Creditor’s filing and subsequent withdrawal of his counterclaim, had, in fact, very little, if any, adverse impact upon these important policy considerations. If, in a future case, such adverse interference were to occur, we would then of course have a very different question. However, under the present facts, we believe that the district court could not have properly required the Creditor’s withdrawal of his counterclaim, under threat of contempt, to have been taken “with prejudice.” Consequently, in determining otherwise and in relying on that ground as a basis for dismissing the Proof of Claim, the bankruptcy court committed error. ■

We next turn to the court’s further holding that the Creditor’s claim was untimely. The Creditor urges that since the bankruptcy court never actually complied with the requirements of 11 U.S.C. § 596 by setting a final date for the entry of claims, his offer of proof was still timely, despite the ultimate confirmation of the plan. While it is apparently true that the court, for reasons unknown, neglected to specifically comply with § 596 in this respect, we would nonetheless hesitate, on that ground alone, to permit the filing of claims after confirmation of the plan, had. the Creditor been given full and adequate notice respecting the pendency and outcome of the bankruptcy proceedings and the manner for filing of claims therein. Consequently, we must examine the nature of the notice actually transmitted to the Creditor, and the extent of the Trustee’s duty to communicate such notice to him.

In this regard, we note that while there can be no doubt that the Trustee was fully cognizant of the Creditor’s claim, note 3, supra, actual notice of the various Chapter X proceedings had not been mailed to him as it had to other identifiable creditors. The only notice which can be said to have been, in part, for the benefit of the Creditor, was the general notice by publication offered in local newspapers. See note 4, supra. However, despite the Creditor's lack of receipt of formal notice, he apparently did have actual knowledge at least of the general existence and pendency of the Chapter X proceeding, though presumably not of each significant development therein.

In In re Harbor Tank Storage Co., 385 F.2d 111 (3d Cir. 1967), the petitioner had filed a proof of claim in a Chapter X proceeding some time after the court had confirmed a plan of reorganization. Although the petitioner had actual knowledge that reorganization proceedings had been instituted, he never attempted to intervene in that matter prior to confirmation. However, the trustee in bankruptcy, while completely aware of the petitioner’s claim, had never directly given him formal notice of the various reorganization developments, although general notice by publication had been made. The appeals court, in reversing a dismissal of the claim, ruled that the petitioner had the right to file and prove its claim in bankruptcy court. Relying on the fact that adequate notice had not been given, the court rejected the contention that pursuant to 11 U.S.C § 624(1), “the entry of the order confirming the reorganization plan cut off [petitioner’s] right to file a claim.” 385 F.2d at 114. Where the creditor was known or identifiable, the court ruled, proper notice would have to be mailed to him, and notice by publication was, with respect to such creditors, entirely insufficient. Id. at 115. In addition, the court dismissed the trustee’s further argument that since the petitioner had actual knowledge of the pending reorganization proceedings, he had the affirmative obligation to file his claim without waiting for notice to do so:

“[T]he fact that a creditor knows of the initiation of reorganization proceedings does not of itself place a burden on the creditor to file an appearance or claim in the proceeding before receiving notice to do so: a creditor has every right to assume that he will he sent all the notices to which he is entitled under the Act.” Id. (Emphasis supplied).

In reaching this result, the court placed heavy emphasis on the Supreme Court’s opinion in New York v. New York, N. H. & H. Rr., 344 U.S. 293, 73 S.Ct. 299, 97 L.Ed. 333 (1953). In that case, the respondent railroad, after undergoing a reorganization pursuant to § 77 of the Bankruptcy Act, sought to bar enforcement of certain city liens which had not been claimed in the reorganization proceeding. Though the city had actual knowledge that reorganization of the railroad was pending, it never attempted to file its claims. Conversely, although the railroad was aware of these claims, it neglected to mail any notice to the city, though various notices had been mailed to other known creditors. Instead, the railroad sought to rely on notice by publication. After holding that such notice was insufficient where the creditor was known, the Court ruled that notwithstanding the entry of a final reorganization decree, the city’s claimed liens could still be enforced. This would be the case, the Court noted, despite the “city’s knowledge that reorganization of the railroad was taking place,” since “even creditors who have knowledge of a reorganization have a right to assume that the statutory ‘reasonable notice’ will be given before their claims are forever barred.” 344 U.S. at 297, 73 S.Ct. at 301.

In our view, the decision in New York v. New York, N. H. & H. Rr. requires us to conclude, as did the Third Circuit under essentially equivalent circumstances, In re Harbor Tank Storage Co., supra, that the Creditor’s claim in the instant action was still timely. Indeed, the New York case would be directly on point with ours were it not for the fact that the reorganization there was a proceeding under § 77 and not Chapter X. However, “the essential issue — what is the effect of the failure to give notice to a known creditor — is identical to both cases, and there is nothing in the language or structure of Chapter X to suggest that a different result should be reached.” In re Harbor Tank Storage Co., supra, 385 F.2d at 116.

We therefore hold that the failure of the Trustee, knowing of the Creditor’s claim, to mail the various notices required by Chapter X, precludes a finding that the Creditor is barred by confirmation of the reorganization plan from presenting his claim to the bankruptcy court. Mere notice by publication, though, of necessity, sufficient where a creditor is either unknown or of uncertain identity, New York v. New York, N. H. & H. Rr., supra; Standard Oil Co. v. New Jersey, 341 U.S. 428, 71 S.Ct. 822, 95 L.Ed. 1078 (1951), cannot be considered adequate under the circumstances here presented. The importance of active creditor participation in reorganization proceedings, which Chapter X explicitly encourages, see note 9 supra, coupled with the practical dangers to substantive creditor rights posed by the lack of such participation, will admit of no other conclusion. Moreover, the fact that the creditor may, as here, be generally aware of the pending reorganization, does not of itself impose upon him an affirmative burden to intervene in that matter and present his claim. The trustee can not avoid his statutory responsibility under Chapter X, to formally provide the required notice, simply because of a creditor’s possible familiarity with general aspects of the proceedings. As the Supreme Court has stated, the creditor has a right to assume that proper and adequate notice will be provided before his claims are forever barred.

Our decision in this matter is a limited one. In reversing the judgment below, we do not require the bankruptcy-court to accept the Creditor’s claim, but merely to consider it on the merits. We naturally recognize that if the claim is eventually approved, some problems would be created with respect to the administration of the present reorganization plan. However, such problems as may develop, if any, are certainly not beyond the ken of the court on remand.

Reversed and remanded for proceedings not inconsistent with this opinion.

      . There is no evidence in the record to suggest that prior to the filing of his counterclaim, the Creditor was in any way aware of the earlier bankruptcy court injunction.

      . Since a dismissal with prejudice was not explicitly ordered, it is unclear whether the district court actually intended to punish the Creditor for contempt.

      . The Trustee’s apparent argument that, since the Creditor had withdrawn his counterclaim, there was no longer any reason to believe that any such claims would be made against the Debtor, simply will not wash. Clearly, the only reason that the counterclaim was withdrawn was because it had been brought, in effect, in the wrong forum. Certainly, the Creditor’s compelled decision to withdraw his claim could not have been reasonably interpreted by the Trustee as an abandonment of his stated position that the Debtor owed him money.

      . Although the record is somewhat hazy on this point, it appears that notice of various aspects of the proceedings, including the confirmation of the plan and the right to file claims, had been actually mailed by the Trustee to various other known creditors of the Debtor. Additionally, such notice was given by publication in a local newspaper.

      . By deciding that the withdrawal was with prejudice, the bankruptcy court concluded that the district court had actually imposed a contempt sanction, though the latter court had itself previously reserved this matter, see note 2 supra. In so doing, the bankruptcy court relied primarily on the fact that the district court had subsequently rejected the Creditor’s motion to refile his counterclaim, deeming such a rejection as “tantamount to a determination that the withdrawal of the counterclaim had been with prejudice.” However, the district court order denying the motion does not specifically support this conclusion. In relevant part, the order merely stated :
      “Having examined the above mentioned documents, and in view of the fact that in a Pre-Trial Memorandum filed and entered on June 30, [1971], the moving defendant [the Creditor] withdrew a previous counterclaim filed in this case, this Court hereby denies defendant’s motion.

      . Of course, even if tlie district court co«W have appropriately imposed a withdrawal with prejudice sanction, we would still be faced with the question of whether, as the bankruptcy court found, it did, in fact, do so in this matter. See note 5, supra.

      . 11 U.S.O. § 596 provides, in relevant part, that
      “After the approval of the petition the judge shall prescribe the manner in which and fix the time within which the proofs of claim of creditors . . . may be filed and allowed.”

      . After confirmation of the plan, its provisions “shall be binding . . . upon all creditors . . . , whether or not such creditors . . . are affected by the plan or have accepted it or have filed proof of their claims or interests and whether or not their claims or interests have been scheduled or allowed or are allowable.” 11 U.S.C. § 624(1). However, in our view, the binding nature of the confirmation does not attach if adequate notice iiad not been given to a creditor seeking to establish his claim. See In re Harbor Tank Storage Co., 385 F. 2d 111 (3d Cir. 1967). The nature and adequacy of the required notice will generally depend upon whether or not the creditor is known or specifically identifiable. See text infra.

      . Chapter X of the Bankruptcy Act requires that notice be given to creditors of virtually every significant development in the reorganization proceeding, including, inter alia, notice of hearings to consider the reorganization plan, 11 U.S.C. § 571, notice of the outcome of such hearings, 11 U.S.C. § 575, notice of a hearing on the confirmation of the plan, 11 U.S.C. § 579, and notice of the right and manner of the filing of claims, 11 U.S.C. § 596.

      . Those cases suggesting that failure to give proper notice will not affect the validity of a confirmation order, e.g., Evans v. Dearborn Movers Co., 200 F.2d 125 (6th Cir. 1953); North American Car Corp. v. Peerless Weighing & Vending Mach. Corp., 143 F.2d 938 (2d Cir. 1944); Mohonk Realty Corp. v. Wise Shoe Stores, Inc., Ill F.2d 287 (2d Cir.), cert, denied, 311 U.S. 654, 61 S.Ct. 47, 85 L.Ed. 418 (1940), were all decided prior to New York v. New York, N. H. & H. Rr., and consequently cannot be considered good authority for this proposition.

      . We might arguably have reached a different result had the Creditor possessed actual knowledge, not merely of the general pendency of the Chapter X reorganization, but of each particular development therein to which formal notice would be required. Of. In re DCA Development Corp., 489 F.2d 43 (1st Cir. 1973). In such a situation, it is not entirely clear that New York or Harbor Tank would necessarily apply. We need not decide that issue, however, because the Creditor in the instant case possessed only the most general knowledge respecting the institution of the reorganization proceedings.


author: ROSS, Circuit Judge. GIBSON, Circuit Judge

text:
    Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellee, v. STATE OF IOWA, Appellant.
    No. 73-1500.
    United States Court of Appeals, Eighth Circuit.
    Submitted Dec. 12, 1973.
    Decided Feb. 26, 1974.
    Gibson, Circuit Judge, filed a dissenting opinion.

      Loma Lawhead Williams, Special Asst. Atty. Gen. of Iowa, Des Moines, Iowa, for appellant.
    Jacob Karro, Atty., U. S. Dept, of Labor, Washington, D. C., for appellee.
    Before GIBSON and ROSS, Circuit Judges, and TALBOT SMITH, Seftior District Judge.

       The Honorable TALBOT SMITH, Senior District Judge, Eastern District of Michigan, sitting by designation.

   ROSS, Circuit Judge.

This action by the Secretary of Labor seeking enforcement of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (FLSA), was filed in the district court for the District of Iowa against the State of Iowa. Through its agency, the Department of Social Services, the State of Iowa owns and operates several institutions wherein persons are employed at less than the minimum and overtime wages prescribed by 29 U.S.C. §§ 206 and 207. Upon stipulated facts the district court held that the State of Iowa was subject to the provisions of the Act. This appeal followed.

The undisputed facts show that each of the nine institutions is either a hospital, an institution primarily engaged in the care of the sick, the aged, mentally ill or defective who reside on the premises, or a school for mentally or physically handicapped or gifted children. Each of the institutions purchases or or- ■ ders some of its goods and supplies directly from manufacturers, producers or suppliers located outside the state. Each institution has employees in the following categories regularly handling, selling, or otherwise working on, or with, merchandise and supplies received from out-of-state suppliers:

(1) professional, medical, psychiatric and nursing employees who, in the treatment of patients, administer medicines and drugs and use therapeutic equipment and other medical supplies and equipment, substantial amounts of which are manufactured or produced outside the state;

(2) nursing service employees, aides, attendants, and orderlies who, in providing patient care, handle cleaning supplies, medical supplies and equipment, bedding, linens, towels and hospital clothing, substantial amounts of which are manufactured or produced outside the state;

(3) food service and dietary service employees who prepare, serve and dispense food to patients, residents, employees and visitors, substantial amounts of which foods are grown, processed or produced outside the state;

(4) housekeeping, maintenance and custodial employees who, in the regular course of their duties, use cleaning supplies, equipment and appliances, substantial amounts of which are manufactured or produced outside the state;

(5) laundry employees who use and handle cleaning supplies, bedding, linens, towels and hospital clothing, substantial amounts of which are manufactured or produced outside the state;

(6) office and administrative employees who use office supplies and equipment, substantial amounts of which are manufactured or produced outside the state.

Section 6 and Section 7 of the Fair Labor Standards Act, 29 U.S.C. §§ 206 and 207, provide that every employer shall pay minimum and overtime wages to each of his employees who is engaged in commerce or in the production of goods for commerce or is employed in an enterprise engaged in commerce or in the production o.f goods for commerce. An “enterprise engaged in commerce or. in the production of goods for commerce” is defined to be:

[A]n enterprise which has employees engaged in commerce or in the production of goods for commerce, including • employees handling, selling, or otherwise working on goods that have been moved in or produced for commerce by any person, and which—
* •» * * * *
(4) is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, the mentally ill or defective who reside on the premises of such institution, a school for mentally or physically handicapped or gifted children, a preschool, elementary or secondary school, or an institution of higher education (regardless of whether or not such hospital, institution, or school is public or private or operated for profit or not for profit).

29 U.S.C. § 203 (s).

The adoption of the “enterprise concept” in 1961 by Congress has been held to be clearly within the power of Congress under the Commerce Clause. Maryland v. Wirtz, 392 U.S. 183, 188-193, 88 S.Ct. 2017, 20 L.Ed.2d 1020 (1968). Similarly, the amendment modifying the definition of “employer” to remove the exemption of the states with respect to the employees of certain hospitals, institutions, and schools was upheld. For the federal government, when acting within a delegated power, may override countervailing state interests. Maryland v. Wirtz, supra, 392 U.S. at 195, 88 S.Ct. 2017. See also Sanitary District v. United States, 266 U.S. 405, 45 S.Ct. 176, 69 L.Ed. 352 (1925). Thus, if a state engages in economic activities that are validly regulated by the federal government when engaged in by private persons, the state too may be forced to conform its activities to federal regulation. Maryland v. Wirtz, supra, 392 U.S. at 197, 88 S.Ct. 2017. See also United States v. California, 297 U.S. 175, 56 S.Ct. 421, 80 L.Ed. 567 (1936). Yet a state may assert its sovereign immunity in suits brought by private individuals under 29 U.S.C. § 216(b) to enforce the Act. Employees of the Department of Public Health and Welfare of Missouri v. Department of Public Health and Welfare of Missouri, 411 U. S. 279, 285, 93 S.Ct. 1614, 36 L.Ed.2d 251 (1973) [Employees v. Missouri Public Health Dept.]. The vehicle to enforce a state’s conformity to the Act is at issue in this case. Based upon reasons expressed hereafter, we find that the extension of FLSA coverage to state employees is not made totally meaningless by the availability of a sovereign immunity claim.

Section 216(c) and Section 217 give the Secretary of Labor the authority to bring suits for violations of the Act. Cf. Employees v. Missouri Public Health Dept., supra, 411 U.S. at 285-286, 93 S.Ct. 1614. Such suits by the Secretary of Labor in enforcing the FLSA, though brought in public interest, are suits by the United States. See Mitchell v. Robert DeMario Jewelry, 260 F.2d 929, 932 (5th Cir. 1958), rev’d on other grounds, 361 U.S. 288, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960) (and eases cited therein). Suits by the United States against a state are not barred by the eleventh amendment. United States v. Mississippi, 380 U.S. 128, 140-141, 85 S.Ct. 808, 13 L.Ed.2d 717 (1965). Thus, this suit against the State of Iowa is not barred by a claim of sovereign immunity. The only remaining question here is whether the particular institutions are subject to the Act. This question must be answered in the affirmative if we can find that these institutions are enterprises engaged in commerce or in the production of goods for commerce, or, more simply put, if these institutions employ any employees who are engaged in commerce or in the production of goods for commerce. See 29 U.S.C. § 203(s).

Under both of the two criteria established by the Act, these institutions must be said to be enterprises within the purview of the Act. First, courts have repeatedly held on previous occasions that activities of the nature performed by some of the employees of the institutions are activities in interstate commerce. Specifically, the activities of employees in sending, preparing, and receiving purchase orders, shipment orders, invoices, bills, and checks; in receiving direct deliveries of goods transported interstate and in handling, storing and moving such goods after their delivery but before disposition to the ultimate consumer; in regularly transporting or accompanying patients or residents to points outside the state for treatment, diagnosis, and other purposes; and in placing interstate telephone calls as a part of a regular course of business must be held to be activities performed in interstate commerce. Due to the interstate nature of the employees’ activities, each of the institutions is an enterprise engaged in commerce. 29 U.S.C. § 203(s).

Secondly, as defined by 29 U.S.C. § 203 (s), an enterprise engaged in interstate commerce may be one where the employees simply handle, sell or otherwise work on goods that have moved in interstate commerce. According to the undisputed facts, many employees handle articles which have moved in interstate commerce. Those activities bring the particular institutions involved within the purview of the Act if the articles handled by the employees can be determined to be “goods” as defined by the Act. 29 U.S.C. § 203 (i). In other words, if the articles are wares, products, commodities, merchandise, or articles or subjects of commerce of any character, or any part or ingredient thereof, that have not reached their delivery into the actual physical possession of the ultimate consumer thereof, then they are goods within the definition of the Act and the mere handling of those goods by some institution employee prior to their delivery to the ultimate consumer renders the institution an enterprise engaged in commerce. Many cases have held that the institution itself is not the ultimate consumer of the articles set forth in the margin above. See, e. g., Brennan v. Dillion, 483 F,2d 1334 (10th Cir. 1973); Wirtz v. Melos Construction Corp., 408 F.2d 626 (2nd Cir. 1969). The constitutionality of 29 U.S.C. § 203(s) was upheld by the Court in Maryland v. Wirtz, supra. Thus, we conclude that each of the institutions are enterprises engaged in commerce.

Finally, we review the appropriateness of the relief granted by the district court. Section 17 of the Act provides:

The district courts . . . shall have jurisdiction, for cause shown, to restrain violations of section 215 of this title, including in the case of violations of section 215(a)(2) of this title the restraint of any withholding of payment of minimum wages or overtime compensation found by the court to be due to employees under this [Act] ....

29 U.S.C. § 217. The State of Iowa argued that a restitution award of the nature described above should not have been awarded by the district court.

Accordingly, first we note that the State of Iowa may not assert its sovereign immunity in a suit brought by the United States against the state. United States v. Mississippi, supra. Secondly, we have held that the financial hardship caused by the order is not a valid basis on which to deny the employees their remedy or to allow a wrong against the public to go uncorrected in a suit brought under the FLSA. Hodgson v. Taylor, 439 F.2d 288, 290 (8th Cir. 1971). Next, we find no merit in the argument that this action is, in substance, an action by the employees against the state to which the holding of the Second Circuit in Rothstein v. Wyman, 467 F.2d 226 (2nd Cir. 1972), cert, denied, 411 U.S. 921, 93 S.Ct. 1552, 36 L.Ed.2d 315 (1973) should be applicable. Rather:

[T]he purpose of the injunction is not to collect a debt owed by an employer to his employee but to correct a continuing offense against the public interest. It is true that as a result, money may pass from the employer into the pocket of the employee or, if he is not available, then into the coffers of the United States)/Treasury, but that enforced payment, which must be made even if the employee or his representatives or heirs ño longer exist to claim it, is simply a part of a reasonable and effective means which Congress, after trial and error, found it necessary to adopt to bring about general compliance with [the Act].

Wirtz v. Jones, 340 F.2d 901, 904-905 (5th Cir. 1965). Finally, we note that the parties to this suit have entered into a stipulation that “should the questions presented be resolved in favor of [the Secretary of Labor], the parties will attempt to compute and agree upon the amount of any unpaid minimum wages and overtime compensation due defendant’s employees.” Due to the foregoing considerations, we find that the.restitution order is appropriate.

For the reasons hereinbefore expressed, the judgment of the district court is affirmed.

GIBSON, Circuit Judge

(dissenting).

I respectfully dissent. I think the majority takes the final step in adopting an all-encompassing rationale of what constitutes interstate commerce. While recent cases in this field lend support to the majority in the broad language employed, the facts of those cases do not support the absolute denigration of State sovereignty that this case accomplishes. Admittedly, many prior decisions have taken great liberty with the concept of interstate commerce, but surely the framers of our Constitution never thought it would be so expansively construed as to reach the sovereign activities of a state. States engaged in performing their necessary, proper and sovereign governmental functions are now enmeshed within the concept’s all-inclusive tentacles.

The concept of interstate commerce is now expanded to nullify the constitutional and sovereign rights of States, not only in the handling of their business activities, but in the conduct of their manifest governmental activities as well. The time has come when courts should take a realistic approach and accord to the states their remaining vestiges of sovereignty, presently being ground to ashes under the expansive interpretations now in vogue as to what constitutes interstate commerce. The result here can only be justified if we accept a premise that everyone employed in these United States is engaged in interstate commerce.

It is a fiction, albeit a legal fiction widely accepted, to hold that the State of Iowa, by its operation of these nine institutions as part of its sovereign power to provide for the general welfare of its citizens, is engaged in interstate commerce. Moreover, the resultant effect of our decision is so disruptive of and harmful to legitimate state interests that the courts should not require compliance by a state as an employer with the Fair Labor Standards Act (FLSA) unless clearly mandated to do so. I do not believe the result reached by the majority is mandated by the FLSA.

First, I disagree with the majority’s conclusion that the institutions involved are not the ultimate consumers of the goods allegedly a part of interstate commerce. If the institution is the ultimate comsumer, then it has no employees engaged in handling goods that have moved in interstate commerce.

As support for its conclusion that an institution is not the ultimate consumer, the majority relies upon Brennan v. Dillion, 483 F.2d 1334 (10th Cir. 1973) and Wirtz v. Melos Construction Corp., 408 F.2d 626 (2d Cir. 1969). Neither of these cases involved institutions, state or private. In Dillion, the defendant was an individual who operated three apartment complexes. The court held that maintenance employees using various supplies were covered by FLSA as the tenants were said to be the ultimate consumers of the supplies, not the defendant, relying inter alia upon the rationale that there was a resale of the supplies because their cost was passed on to the tenants as part of their rental. The existence of a resale has been an important factor in the courts’ determination of who is the ultimate consumer for purposes of 29 U.S.C. § 203(i). Brennan v. Dillion, supra; see also, Goldberg v. Furman Beauty Supply, Inc., 300 F.2d 16, 19 (3rd Cir. 1962); Mitchell v. Sherry Corine Corp., 264 F.2d 831 (4th Cir. 1959), cert, denied, 360 U.S. 934, 79 S. Ct. 1453, 3 L.Ed.2d 1546 (1959).

Melos, which involved the coverage of a building contractor’s employees, makes no mention at all of 29 U.S.C. § 203 (i) and the “ultimate consumer” exemption contained therein. It seems obvious that a building contractor is not an institution. Further, he may well be considered an ultimate consumer. In Barbe v. Cummins Const. Co., 49 F.Supp. 168 (D.Md.), aff’d 138 F.2d 667 (4th Cir: 1943), the court held that a building contractor was the ultimate consumer of building materials, not the purchaser of the building in which the materials were incorporated.

I would hold that these State institutions are ultimate consumers. A contrary holding necessarily implies that the patients of these State-operated and State-financed institutions are the ultimate consumers. This conclusion is untenable when talking about the use of cleaning supplies, laundry items, office supplies and medical equipment. The State is the user of these items, not the patient, and its employees using these items thus are not handling “goods” as defined in § 203(i).

It is possible to consider the patient as the ultimate consumer of the drugs, medicines and food supplies, but in the circumstances of this case I believe it erroneous to do so. “Ultimate consumer” is employed in the Act as a means of determining when articles have ceased their movement in interstate commerce. The concept provides protection from the “hot goods” liability provisions contained in 29 U.S.C. § 215(a)(1). The drugs and medicines are dispensed by State employees in the course of State treatment of State patients residing in State institutions. These drugs and medicines have ceased their movement in commerce upon delivery to the State and the State is entitled to the benefit of the ultimate consumer exception.

The same rationale is equally applicable to those food items served to patients. However, it was stipulated that in two of the institutions canteens were operated which for a charge served visitors. This is not enough to find that interstate commerce is involved. As the State of Iowa correctly argues, such activities must be related to the business purpose of the enterprise. This service, provided only as a convenience to visitors, is not related to the primary purpose of the institutions. Cf., Shultz v. Travis Edwards, Inc., supra, 320 F. Supp. at 839-840.

Nor do I think that the second part of the enterprise test, whether there are any employees engaged in commerce, is met by these institutions. It is stipulated that employees at all of these institutions did make use of interstate facilities in carrying out their duties. This alone is not enough. The operation of these institutions by the State of Iowa is a purely local operation, a service provided for its residents out of purely local, not interstate considerations. The mere use of interstate facilities by employees as an incident of carrying out a purely local business does not constitute engaging in commerce. Stevens v. Welcome Wagon International, Inc., 390 F. 2d 75, 77 (3rd Cir. 1968); Chambers Const. Co. v. Mitchell, 233 F.2d 717, 722 (8th Cir. 1956); Hodgson v. Hyatt Realty, 353 F.Supp. 1363, 1373-1374 (M.D.N.C.1973), aff’d sub nom. Brennan v. Hyatt Realty, 489 F.2d 754 (4th Cir. 1974); Wirtz v. Sherman Enterprises, Inc., 229 F.Supp. 746, 752 (D.Md.1964).

The test is whether the work is directly and vitally related to the functioning of an instrumentality or facility of interstate commerce as to be, in practical effect, a part of it, rather than isolated local activity.

Mitchell v. C. W. Vollmer & Co., Inc., 349 U.S. 427, 429, 75 S.Ct. 860, 862, 99 L.Ed. 1196 (1955).

It is only when engaging in interstate communication is a material portion of an employer’s business activity that the employee engaging in the communication should be considered to be engaging in interstate commerce.

If the actions of the State in providing food, shelter, and treatment for its public charges constitutes interstate commerce, then nothing is left of a state’s sovereignty. The heavy hand of the federal government, with its gigantic bureaucracy practicing suffocating paternalism, reaches all things and all people.

While recognizing the remedial purpose of the Act and the number of cases holding that the Act should be liberally construed to effectuate its beneficent purpose, the remedial purpose of the Act should not be utilized to emasculate the sovereign rights of the states unless there is a clear constitutional basis for imposition of federal control on a state’s sovereignty.

I would reverse the decision of the District Court and hold that the State of Iowa is not subject to the provisions of the Fair Labor Standards Act, 29 U.S. C. § 201 et seq., in its operation of these nine institutions.

      . Wirtz v. First State Abstract & Ins. Co., 362 F.2d 83, 87 (8th Cir. 1966).

      . Walling v. Jacksonville Paper Co., 317 U.S. 564, 567, 63 S.Ct. 332, 87 L.Ed. 460 (1943); Walling v. Mutual Wholesale Food & Supply Co., 141 F.2d 331 (8th Cir. 1944).

      . Mitchell v. Kroger Co., 248 F.2d 935 (8th Cir. 1957).

      . Durkin v. Joyce Agency, 110 F.Supp. 918 (N.D.Ill.1953), rev’d, 211 F.2d 241 (7th Cir. 1954), rev’d per curiam, 348 U.S. 945, 75 S. Ct. 436, 99 L.Ed. 740 (1955).

      . For example, it was agreed that medical employees administer drugs that have moved interstate, that employees that provide patient care handle cleaning supplies that have moved interstate, that food service employees dispense food that has moved interstate, and that housekeeping and laundry employees handle supplies that have moved interstate.

      . The profit-seeking nature of the enterprises at issue in the preceding authority does not distinguish them from the State of Iowa which in some instances does not impose any additional charge in the delivery of the goods to the patient or resident. The Act specifically rejects profitability as a criterion for inclusion under tlie enterprise concept. 29 U.S.C. § 203 (r) (1). Thus, the absence of profitability does not render the State of Iowa the ultimate consumer with respect to the goods.

      . There can be no doubt that the import of this decision will require an adjustment in the State’s fiscal policy, either by forcing a reduction of services in this or other areas or an increase in its citizens’ tax burden.
      “It is one thing to force a state to purchase safety equipment for its railroad and another to force it to spend several million more dollars on hospitals and schools or substantially reduce services in these areas.”
      Maryland v. Wirtz, 392 U.S. 183, 203, 88 S. Ct. 2027, 20 L.Ed.2d 1020 (1968) [Douglas, J. dissenting].

      . 29 U.S.C. § 203 (i).

      . But see, Shultz v. Travis Edwards, Inc., 320 F.Supp. 834 (W.D.La.1970), rev’d on other grounds sub nom. Hodgson v. Travis Edwards, Inc., 465 F.2d 1050 (5th Cir.), cert, denied, 409 U.S. 1076, 93 S.Ct. 685, 34 L.Ed.2d 665 (1973); Shultz v. Arnheim & Neely, Inc., 324 F.Supp. 987 (W.D.Pa.1969), rev’d on other grounds sub nom. Hodgson v. Arnheim & Neely, Inc., 444 F.2d 609 (3rd Cir. 1971), rev’d 410 U.S. 512, 93 S.Ct. 1138, 35 L.Ed.2d 463 (1973); and Shultz v. Wilson Building, Inc., 320 F.Supp. 664, 669 (S.D.Tex.1970), aff’d sub nom. Brennan v. Wilson Building, Inc., 478 F.2d 1090 (5th Cir. 1973), where the owners of rental space were found to be the ultimate consumers of supplies used in their business.

      . This has been recognized in the regulations promulgated by the Secretary of Labor. See, 29 C.F.R.. § 779.240(a) (1970) which provided in part :
      However, the mere fact that employees in conducting the business of the enterprise or establishment, are using machinery, equipment, work tools, and the like, which may have been moved in or produced for commerce, does not mean that they are handling, selling; or otherwise working on “goods” that have been moved in or produced for commerce within the meaning of section 3(s).

      . See 29 C.F.R.. § 776.21 (1973) which in essence provides that the “hot goods” provision creates a liability for anyone transporting, delivering or selling in commerce, goods in the production of which the minimum wage and overtime provisions of the Act were violated.

      . 29 U.S.C. § 203(r).

      . See, e. g., Stevens v. Welcome Wagon International, Inc., 390 F.2d 75 (3rd Cir. 1968); Wirtz v. First State Abstract & Ins. Co., 362 F.2d 83 (8th Cir. 1966).


author: HAYS, Circuit Judge:

text:
    Joanne FREDA, on behalf of herself and her infant children Steven White, et al., Plaintiff-Appellee, v. Abe LAVINE, Individually and as Commissioner of the Department of Social Services of the State of New York, Defendant-Appellant, Jule M. Sugarman, Individually and as Commissioner of the Department of Social Services of the City of New York, Defendant.
    No. 180, Docket 73-2010.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 29 1973.
    Decided March 29, 1974.

      John C. Gray, Jr., Brooklyn, N. Y. (Douglas J. Kramer and Brooklyn Legal Services, Brooklyn, N. Y., on the brief), for plaintiff-appellee.
    David R. Spiegel, Deputy Asst. Atty. Gen. (Louis J. Lefkowitz, Atty. Gen., of N. Y. and Samuel A. Hirshowitz, First Asst. Atty. Gen., on the brief), for defendant-appellant.
    Before MOORE, HAYS and TIMBERS, Circuit Judges.
   HAYS, Circuit Judge:

In February, 1972 plaintiff applied on behalf of her three children for benefits under the program for providing Aid to Families with Dependent Children (AFDC). Pursuant to a New York regulation, 18 N.Y.C.R.R. § 352.31(a)(2), defendant included in its computations of the children’s needs a credit consisting of all the income of Freda, the children’s stepfather, without inquiring whether that income was actually available to the children. Plaintiff brought this action to challenge this regulation and the denial of benefits.

Plaintiff asserted three claims under the constitution and invoked jurisdiction under 28 U.S.C. § 1343(3) and (4) (1970). A fourth claim alleged a conflict between the state regulation and a federal regulation. The district court held that this claim did not fall within 28 U.S.C. § 1343(3) and (4), but that it could hear the claim under the doctrine of pendent jurisdiction. The district court held that the New York regulation did contravene the federal regulation and therefore enjoined defendants from applying the New York regulation.

On this appeal we do not reach the merits, but hold that the district court should have abstained pending clarification of state law by the state courts.

The attitude of the Supreme Court toward the abstention doctrine has changed markedly from time to time. Often the Court has failed to elaborate its reasons for its decisions on crucial aspects of the doctrine. See H. M. Hart & H. Wechsler, The Federal Courts and the Federal System 991 (Bator et al. 2d ed. 1973). It is clear, however, that abstention is a discretionary power of a court of equity faced, as was the district court here, with a prayer for an injunction. Railroad Commission v. Pullman Co., 312 U.S. 496, 500-501, 61 S.Ct. 643, 85 L.Ed. 971 (1941).

Appellee contends that abstention is unnecessary because the state law is clear. However, several recent New York state court decisions involving the identical issues presented here seem to contradict that claim. In In re Slo-chowsky, 73 Misc.2d 563, 342 N.Y.S.2d 525 (Sup.Ct., Nassau Co., 1973), the court described the New York provisions for support of children by stepparents as “a confusing statutory scheme.” Id. at 564, 342 N.Y.S.2d at 527.

Three other recent New York cases have dealt with the same claims presented here. In Uhrovcik v. Lavine, No. 72-232 (Sup.Ct., Tompkins Co., 1973) (unreported), aff’d, App.Div., 352 N.Y. S.2d 529 (3rd Dep’t 1974), the court noted the Commissioner’s claim that New York law does impose a general support obligation on stepparents and rejected that position. However, in two other cases New York courts apparently held that the New York law imposes on stepparents an obligation of support. Crawford v. Sugarman, 169 N.Y.L.J. Jan. 4, 1973, at 19, col. 2 (Sup.Ct., Bronx Co., 1973); Wallace v. Lavine, 170 N.Y.L.J. Aug. 10, 1973, at 2, col. 3 (Sup.Ct., N.Y. Co., 1973). The absence of written opinions makes it difficult to determine the bases for these decisions. We cannot assume that they do not entail interpretations of state law which might eliminate or modify the federal question before us.

Furthermore, the state courts of New York have exhibited a willingness to interpret the state’s statutes so as to avoid any doubts about their constitutionality. See Spahn v. Julian Messner, Inc., 21 N.Y.2d 124, 127, 286 N.Y.S.2d 832, 834, 233 N.E.2d 840, 842 (1967); People v. Kaiser, 21 N.Y.2d 86, 103, 286 N.Y.S.2d 801, 815, 233 N.E.2d 818, 828 (1967); Bell v. Waterfront Commission, 20 N.Y. 2d 54, 62-63, 281 N.Y.S.2d 753, 760-761, 228 N.E.2d 758, 763 (1967); People v. Epton, 19 N.Y.2d 496, 505-506, 281 N.Y.S.2d 9, 16-17, 227 N.E.2d 829, 834 (1967); People v. Finkelstein, 9 N.Y.2d 342, 344-345, 214 N.Y.S.2d 363, 364-365, 174 N.E.2d 470, 472 (1961).

Thus the relevant New York law is at least somewhat cloudy. The lack of clarity is central to this case. State appellate courts may interpret statutes on which the Commissioner relies to impose a general support obligation on stepparents, thereby eliminating the federal issue. Short of this they may still modify the federal issue. The Supreme Court has often authorized abstention where it might modify or alter the federal question or present it in a different posture. Zwickler v. Koota, 389 U.S. 241, 248-249, 88 S.Ct. 391, 19 L.Ed.2d 444 (1967); Harman v. Forssenius, 380 U.S. 528, 534, 85 S.Ct. 1177, 14 L.Ed.2d 50 (1965); County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 189, 79 S.Ct. 1060, 3 L.Ed.2d 1163 (1959). The parties here disagree as to what degree of support obligation the state must impose on a stepparent in order to satisfy the federal regulation. If forced to rely on our own interpretation of state law, we may face a difficult federal question in resolving this disagreement. A state court may interpret state law so as to render the federal question considerably easier.

Abstention will not impose any additional expense on plaintiff. Plaintiff need not institute an independent action in state court. Others have already commenced state suits raising the same claims. Compare County of Allegheny v. Frank Mashuda Co., supra. In Reid v. Board of Education, 453 F.2d 238, 243 n. 9 (2d Cir. 1971), this court said that “[although the abstention doctrine does not depend upon the pendency of a state court action . . . there is greater reason to abstain when a state court decision may be imminent.”

We therefore vacate the decision of the district court and remand. We direct the district court to retain jurisdiction of the case pending resolution of the state law issues by state courts. See Zwickler v. Koota, supra, 389 U.S. at 244 n. 4, 88 S.Ct. 391 (1967); Reid v. Board of Education, supra, 453 F.2d at 244.

      . The regulation reads in pertinent part:
      “352.31 Estimate of need and application of income, (a) For applicant or recipient.

      “ (2) All available and unrestricted income of an applicant or recipient and of the spouse, if in the home, including support payments required to be made by a parent pursuant to an order of the family court or other appropriate court, shall be prorated and apx>lied against the needs of the applicant, the spouse and the minor children of either or both. ...”

      . The federal regulation, 45 C.F.R. § 233.-90(a), reads:
      “§ 233.90 Factors specific to AFDC. “(a) State plan requirement. A State plan under title IV-A of the Social Security Act [relating to AFDC grants] must provide that the determination whether a child has been deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent, or (if the State plan includes such cases) the unemployment of his father, will be made only in relation to the child’s natural or adoptive parent, or in relation to the child’s stepparent who is ceremonially married to the child’s natural or adoptive parent and it legally obligated to support the child under State law of general applicability which requires stepparents to support stepchildren to the same extend [sic] that natural or adoptive parents are required to support their children. Under this requirement, the inclusion in the family, or the presence in the home, of a ‘substitute parent’ or ‘man-in-the-liouse’ or any individual other than one described in this paragraph is not an acceptable basis for a finding of ineligibility or for assuming the availability of income by the State. In establishing financial eligibility and the amount of the assistance payment, only such net income as is actually available for current use on a regular basis will be considered, and the income only of the parent described in the first sentence of this paragraph will be considered available for the children in the household in the absence of proof of actual contributions.” [Emphasis added.]

      . During the era of the Warren Court application of the doctrine was narrowly limited. See Reid v. Board of Education, 453 F.2d 238, 241 (2d Cir. 1971); Note, Federal-Question Abstention: Justice Frankfurter’s Doctrine in an Activist Era, 80 Harv.L.Rev. 604, 606 (1967). But cases like Reetz v. Bozanich, 397 U.S. 82, 90 S.Ct. 788, 25 L. Ed.2d 68 (1970), and Askew v. Hargrave, 401 U.S. 476, 91 S.Ct. 856, 28 L.Ed.2d 196 (1971), indicate a greater tendency to resort to abstention. See Reid v. Board of Education, supra, 453 F.2d at 242; H. M. Hart & H. Wechsler, The Federal Courts and the Federal System 993 n. 3 (Bator et al. 2d ed. 1973).