text:
    INDIANA & MICHIGAN ELECTRIC COMPANY et al., Petitioners, v. ENVIRONMENTAL PROTECTION AGENCY, Respondent. COMMONWEALTH EDISON COMPANY, Petitioners, v. ENVIRONMENTAL PROTECTION AGENCY, Respondent.
    Nos. 72-1491 and 72-1498.
    United States Court of Appeals, Seventh Circuit.
    Argued May 22, 1973.
    Decided Jan. 23, 1975.
    As Amended Jan. 29, 1975.

      H. Edward Dunkelberger, Jr., Washington, D. C., Von E. Livingston, Fort Wayne, Ind., Charles W. Campbell, Plainfield, Ind., Ralph W. Husted, Indianapolis, Ind., David S. Richey, Lebanon, Ind., Frederick F. Eichhorn, Jr., Hammond, Ind., Frederick P. Bamberger, Evansville, Ind., for petitioners.
    Kent Frizzell, Asst. Atty. Gen., Glen R. Goodsell, Atty., Dept, of Justice, Washington, D. C., for respondent.
    Before CLARK, Associate Justice, KILEY, Circuit Judge, and CAMPBELL,'Senior District Judge.

       Associate Justice Tom C. Clark of the Supreme Court of the United States (Retired) is sitting by designation.

       Senior Circuit Judge Roger J. Kiley, deceased, did not participate in the decision in this case.

       Senior District Judge William J. Campbell of the Northern District of Illinois is sitting by designation.

   WILLIAM J. CAMPBELL, Senior District Judge.

In Appeal No. 72-1498, petitioner Commonwealth Edison Company (Edison) has sought review of the Environmental Protection Agency (EPA) Administrator’s approval of the Air Pollution Control Implementation Plan of Illinois (Illinois Plan), which approval was granted pursuant to Section 110(a) of the Clean Air Act (the Act), as amended, 42 U.S.C. § 1857c — 5(a). In Appeal No. 72 — 1491, petitioners Indiana and Michigan Electric Company, et al, have sought review of the Administrator’s approval of the Air Pollution Control Implementation Plan of Indiana (Indiana Plan). This court has exclusive jurisdiction to review the Administrator’s approvals pursuant to Section 307(b)(1) of the Act, 42 U.S.C. § 1857h — 5(b)(1).

The Clean Air Act Amendments of 1970

The Clean Air Act Amendments of 1970 “represented a drastic revision of earlier federal air quality control legislation,” Appalachian Power Company v. Environmental Protection Agency, 477 F.2d 495, 497 (4th Cir. 1973). The various provisions of this legislation provide an outline for the factual background of these appeals and comprise the foundation for our resolution of the issues which they present.

Section 108(a) of the Act, 42 U.S.C. § 1857c — 3(a), directs the Administrator to publish a list of air pollutants which in his judgment have an adverse effect on public health and welfare, the presence of which in the ambient air “results from numerous or diverse mobile or stationary sources.” Under Section 109 of the Act, 42 U.S.C. § 1857e-4, the Administrator is required to publish proposed national primary and secondary ambient air quality standards for each such pollutant. Primary standards are ambient air quality standards which the Administrator deems “requisite to protect the public health.” Secondary ambient air quality standards are those which, in the Administrator’s judgment, are “requisite to protect the public welfare from any known or anticipated adverse effects associated with the presence of such air pollutant in the ambient air.” 42 U.S.C. § 1857c-4(b).

For the purpose of these appeals, Section 110 of the Act, 42 U.S.C. § 1857c-5, is of particular importance. Under this section, each state is required, after reasonable notice and public hearings, to submit to the Administrator a plan which provides for the implementation, maintenance and enforcement of the aforementioned primary and secondary ambient air quality standards. The Administrator, in turn, is required to approve a state’s plan “if he determines that it was adopted after reasonable notice and hearing” and that it provides for the attainment of primary standards “as expeditiously as practicable but in no case later than three years from the date of approval . ,” and the attainment of secondary standards within a “reasonable time.” 42 U.S.C. § 1857c-5(a)(2)(A).

In addition to these findings, approval is contingent upon the Administrator’s determination that the plan comports with the requirements of Section 110(a)(2)(B) through (H). Without setting forth these requirements verbatim, they include the need for such a plan to provide (1) certain schedules and timetables for compliance, (2) provision for the establishment and operation of appropriate devices and procedures for monitoring and analyzing ambient air quality data, (3) procedures for reviewing the location of new sources to which the standards apply, (4) adequate provisions for intergovernmental cooperation, (5) assurance that the state will have adequate personnel, funding and authority to monitor and enforce compliance, and (6) provisions for modification of the plan to account for revisions in national ambient air quality standards or the availability of improved and more expeditious methods for achieving compliance.

Significantly, this substantially detailed list of findings which must be made by the Administrator prior to approval of a state’s plan does not include any requirement that he determine or consider the technological feasibility of the plan or the existence of alternative methods of attaining the national standards.

Section 113 of the Act, 42 U.S.C. § 1857c — 8, sets forth the procedures for federal enforcement of an approved plan. Upon determining that a violation has occurred, the Administrator must notify the party responsible for the violation. If the violation extends beyond the 30th day after such determination, the Administrator may issue an order requiring compliance with the requirements of the implementation plan or may bring a civil action in the district court for injunctive or other appropriate relief. The Act further provides for the imposition of fines against those who knowingly violate or refuse to comply with the requirements of a state plan or an order issued by the Administrator requiring compliance.

The Illinois and Indiana Plans

On April 7, 1971, the' Administrator published proposed guidelines for the submission of state plans, and on April 30, 1971, he promulgated national primary and secondary ambient air quality standards for six pollutants. Pursuant to Section 110 of the Act, the State of Illinois submitted its proposed implementation plan to the EPA in January of 1972 and filed several supplements to the plan within the following three month period. The Indiana Plan was submitted for the Administrator’s approval on January 31, 1972. Both plans established emission limitations for particulate matter, sulfur oxides and nitrogen dioxides from coal-fired steam generating plants, and with respect to the emission of these pollutants, both were approved by the Administrator on May 31, 1972. Pursuant to § 307(b)(1) of the Act, 42 U.S.C. § 1857h — 5(b)(1), petitioners seek review by this court of the Administrator’s approval of the Illinois and Indiana plans.

The present appeals challenge the legality of the Administrator’s approval of the Illinois and Indiana plans. The issues presented by petitioners may be summarized as follows:

1. Whether the provisions of Section 102(2)(C) of the National Environmental Policy Act are applicable to the Administrator’s approval of state implementation plans under Section 110 of the Clean Air Act.
2. Whether approval of the Illinois and Indiana plans was in violation of the criteria set forth in Section 110 of the Clean Air Act, or more specifically, whether Section 110 requires the Administrator to consider the technological feasibility and the economic impact of a proposed plan.
3. Whether those provisions of the Illinois and Indiana plans concerning emission limitations for particulate matter, sulfur oxides and nitrogen dioxides are arbitrary, capricious and an abuse of discretion, as applied to petitioners.
4. Whether the failure to provide petitioners an opportunity to submit their views and other data to the Administrator prior to his approval of the implementation plans in question violated the Administrative Procedure Act or established principles of due process of law.

Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C. § 4332(2)(C), provides that, with respect to an action by a federal agency which “significantly [affects] the quality of the human environment” a detailed statement shall be prepared concerning

“(i) the environmental impact of the proposed action,
(ii) any adverse environmental effects which cannot be avoided should the proposal be implemented,
(iii) alternatives to the proposed action,
(iv) the relationship between local short-term uses of man’s environment and theJ maintenance and enhancement of long-term productivity, and
(v) any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented.”

It is undisputed that in approving and adopting the Illinois and Indiana plans, the Administrator did not comply with Section 102(2)(C) of NEPA. The issue concerns whether he was required to do so. We hold, in accord with other courts that have considered this question, that, for the purposes of the approval of state implementation plans under Section 110 of the Clean Air Act, Section 102(2)(C) is inapplicable.

The basis for so holding was well expressed by the Third Circuit in Getty Oil Company v. Ruckelshaus, 467 F.2d 349 (1972) , the court noting that “the Administrator is given the responsibility of making policy reviews under 42 U.S.C. § 1857 h — 7, annual comprehensive economic cost studies under 42 U.S.C. § 1857 j — 1, and periodic reports to Congress under § 1857 j-2. It is apparent that the Clean Air Act itself contains sufficient provisions for the achievement of those goals sought to be attained by NEPA.” 467 F.2d at 359.

The views expressed by the Getty Court in this regard were later approved and followed by the Fourth Circuit in Appalachian Power Co. v. Environmental Protection Agency, 477 F.2d 495, 508 (1973) , and the Sixth Circuit in Buckeye Power, Inc. v. Environmental Protection Agency, 481 F.2d 162 (1973), and were reaffirmed by the Third Circuit in Duquesne Light Co. v. Environmental Protection Agency, 481 F.2d 1, 9 (1973). The Tenth Circuit, after considering the mission of the EPA, opined that to “compel the filing of impact statements could only serve to frustrate the accomplishment of the Act’s objectives,” and held that no such statement need be prepared. Anaconda Company v. Ruckelshaus, 482 F.2d 1301, 1306 (1973). The D.C. Circuit has at least twice so held, once on the basis of its careful review of legislative history, Portland Cement Association v. Ruckelshaus, 158 U.S.App.D.C. 308, 486 F.2d 375, 379-387 (1973), and once on the ground that “we see little need in requiring a NEPA statement from an agency whose raison d’etre is the protection of the environment ..” International Harvester Company v. Ruckelshaus, 155 U.S.App.D.C. 411, 478 F.2d 615, 650 n.130 (1973).

The foregoing decisions persuasively establish that in the present context, the Administrator’s consideration and approval of state implementation plans pursuant to Section 110 of the Clean Air Act is not conditioned upon compliance with Section 102(2)(C) of NEPA.

As previously noted, Section 110(a)(2) Of the Act prescribes certain criteria which any proposed implementation plan must satisfy in order to obtain approval by the Administrator. Petitioners contend that the Administrator’s failure to consider the technological feasibility and the economic impact of the Illinois and Indiana plans prior to their approval constituted a failure to comply with the statutory requirements of Section 110(a)(2).

Our review of the statute does not support petitioners’ contention that these factors should have been considered by the Administrator in approving or disapproving the plans. See, Buckeye Power, Inc. v. Environmental Protection Agency, 481 F.2d 162, 173 (6th Cir. 1973). The statute imposes upon the Administrator a mandatory obligation: he “shall approve” a proposed implementation plan if it was adopted by the State after reasonable notice and hearing, provides for the attainment of primary standards as expeditiously as practicable but “in no case later than three years from the date of approval,” provides for the implementation of secondary standards within a reasonable time, and satisfies the requirements of subparagraphs (B) through (H) of subsection 110(a)(2).

Both the Illinois and Indiana plans were formulated and adopted after full public hearings. Subparagraphs (B) through (H), as previously discussed, are concerned with whether the state submitting a plan is capable of enforcing it, i. e. whether schedules and timetables for compliance have been specified; whether sufficient machinery, methods, procedures, funding, personnel and authority will be available to monitor, inspect and enforce the plan; whether the plan contains adequate provisions for intergovernmental cooperation, etc. Petitioners do not contend that the Administrator failed to consider those factors when he approved the plans. Rather their claim centers on subparagraph (A) of subsection 110(a)(2), asserting that since compliance with these plans is alleged to be technologically infeasible and/or economically prohibitive, the plans do not provide for compliance “as expeditiously as practicable.”

The statute, however, requires compliance as expeditiously as practicable, but in no case “later than three years from the date of approval . . . ”. This limitation, in and of itself, reflects a limit beyond which Congress has chosen to disregard arguments of “impracticability”. Furthermore, in view of the numerous criteria which Section 110(a)(2) specifies for the Administrator’s consideration prior to approval of a state plan, we find the absence of any reference to economic or technological factors highly significant.

These facts, combined with the Administrator’s statutory obligation to approve a plan which satisfies the minimum criteria set forth in subsection 110(a)(2), even if the plan provides for emission standards which are stricter than those prescribed by the Administrator, precludes a construction of the Act which would impose upon the Administrator a duty, not specifically set forth in the Act, to consider technological and economic factors in determining whether an implementation plan should be approved.

This is not to say that technological and economic consideration are wholly irrelevant under the Clean Air Act. As the court held in Buckeye Power, Inc. v. Environmental Protection Agency, supra, and as will be more fully discussed herein, such factors may be of significance in connection with enforcement proceedings instituted pursuant to Section 113 of the Act. We hold, however, that a plan’s technological feasibility and economic impact are not among the factors which the Administrator is obliged to consider under Section 110(a)(2), and that where a state’s implementation plan satisfies the criteria set forth therein, the statute quite specifically requires the Administrator to approve it.

Petitioners further contend that the emission limitations set forth in the Illinois and Indiana plans are arbitrary, unreasonable and capricious, as applied to them. Again asserting that compliance is not technologically feasible, petitioners’ arguments of unreasonableness, “as applied,” center on such contentions as (1) low sulfur fuel is not available in sufficient quantities to satisfy their considerable needs; (2) costs which would result from petitioners’ attempts to comply would be so great as to be unreasonable, in view of the “minimum impact” which compliance would have upon ambient air quality; (3) equipment necessary for sulfur removal is not reliable; (4) given the nature of petitioners’ operations, the shut-down of operations which would be necessary to facilitate installation of new emission control equipment would result in a loss of vital power services to the public.

In our view, these contentions serve to underscore the appropriateness of considering technological and economic factors in the course of enforcement proceedings rather than in connection with approval of a state plan under Section 110. Many of the very arguments presented by petitioners demonstrate that the requirements of a state’s implementation plan might well be achievable as applied to most stationary facilities which emit the pollutants covered under the plan, and yet be technologically impossible to achieve as applied to a particular source. To hold that approval or adoption of a state’s plan is “unreasonable” or “capricious” on the basis of its application to a particular facility or company would undermine the purpose and intent of the legislation under consideration, and would require rejection of a state’s plan if any person arguably subject to the plan could demonstrate its inability to adapt to the emission limitations set forth therein. No fair reading of the Clean Air Act supports such a proposition.

Edison suggests in its brief that “review of the regulation is probably not available in an enforcement proceeding based upon that regulation”, citing Section 307(b)(2) of the Act, 42 U.S.C. § 1857h — 5(b)(2). However, since we hold that a plan’s technological feasibility and economic impact need not be considered by the Administrator in approving a state plan under Section 110(a)(2) and, a fortiori, that such factors do not form a basis for review of such approval by this court under Section 307(b)(1), it follows that Section 307(b)(2) does not preclude petitioners from presenting technological feasibility and economic impact arguments in the course of enforcement proceedings. In this regard, we follow the lead of the Sixth Circuit in Buckeye Power, Inc. v. Environmental Protection Agency, 481 F.2d at 173, and to the extent that Getty Oil Company v. Ruckelshaus, 467 F.2d 349 (3rd Cir. 1972) is inconsistent with this view, we respectfully decline to follow that decision.

We are not called upon to decide the extent to which technological and economic considerations should be considered by a district court in connection with enforcement proceedings instituted pursuant to Section 113(b), and we consider it inappropriate to do so here, except to offer a brief observation regarding good faith efforts to comply. Under Section 113(a)(4), any order issued by the Administrator directing compliance with the provisions of an implementation plan must “specify a time for compliance which the Administrator determines is reasonable, taking into account the seriousness of the violation and any good faith efforts to comply with applicable requirements.” 42 U.S.C. § 1857c-8(a)(4). This language provides a helpful guideline for district courts with respect to enforcement proceedings. It reflects Congressional intent that serious violations be corrected expeditiously, and yet recognizes that compliance may in some instances border on the impossible, despite the good faith efforts of a party subject to regulation. Where such is the case, the good faith efforts of that party are worthy of consideration in terms of compliance schedules as well as the imposition of penalties. The converse, of course, also applies. In view of the clear purpose behind enactment of the Clean Air Act Amendments of 1970, the absence of demonstrable good faith efforts toward compliance should serve to dampen any enthusiasm for technological and economic arguments advanced in defense of a claimed violation.

Petitioners’ final contention concerns the absence of any hearing before the EPA prior to the Administrator’s approval of the Illinois and Indiana plans. It is argued that prior to approval of the state plans, the Administrator should have complied with the Administrative Procedure Act (APA), 5 U.S.C. § 551 et seq., and that fundamental considerations of due process dictate that approval and adoption of a state’s implementation plan be preceded by an opportunity for opposing parties to submit their views.

Upon consideration of the procedural scheme reflected in Sections 109 through 113 of the Clean Air Act, we conclude that Congress did not intend that the informal rule making or the adjudicatory procedures set forth in §§ 553 — 557 of the APA should be applicable to approval and disapproval decisions of the Administrator under Section 110(a)(2) of the Act. Additionally, we find that approval of the Illinois and Indiana plans without first requesting the submission of opposing views by interested parties did not deny to petitioners due process of law.

At the outset we note that Section 110(a)(2) does not require the Administrator to hold hearings “on the record” (or words to that effect) prior to approval of a state plan. The Supreme Court has held that, in the absence of a specific requirement to this effect, Sections 556 and 557 of the APA are inapplicable, and formal adjudicatory hearings are not necessary. United States v. AlleghenyLudlum Steel Corp. et al., 406 U.S. 742, 756-757, 92 S.Ct. 1941, 32 L.Ed.2d 453 (1972). See also Duquesne Light Co. v. Environmental Protection Agency, 481 F.2d 1, 6 (3rd Cir., 1973).

Petitioners contend, however, that even if formal adjudicatory proceedings are not appropriate, the EPA is nevertheless an “agency” within the meaning of 5 U.S.C. § 551(1), approval of a state implementation plan constitutes “rule making” within the meaning of 5 U.S.C. § 551(5), and the Administrator is therefore obliged to comply with the informal rule making procedures prescribed by 5 U.S.C. § 553(b) and (c). Subsection (b) requires the publication of notice of proposed rule making, and subsection (c) requires that after publication of notice, “the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation.”

We reject petitioners’ contention that the informal rule-making procedures provided under Section 553 of the APA were intended to apply to the Administrator’s approval of state plans under Section 110(a)(2) of the Clean Air Act. Other sections of the Act provide, under appropriate circumstances, for hearings and/or the submission of written data and arguments by interested parties, a fact which renders the absence of a specific requirement to this effect under § 110(a)(2) significant. For example, prior to promulgation of primary and secondary ambient air quality standards, the Administrator is required under Section 109 of the Act to give “interested persons” an opportunity to “submit written comments thereon”. Similarly, Section 111(b)(1)(B) provides that interested persons be given an opportunity to submit written comments respecting proposed regulations establishing federal standards of performance for new stationary sources which emit air pollutants. Section 112 requires that public hearings be held (after publication of proposed regulations establishing emission standards for hazardous air pollutants) as a prerequisite to the adoption of the proposed standards.

In addition, before an order requiring compliance with an approved plan can take effect, Section 113(a)(4) requires that the party to whom the order is issued must be given an opportunity to confer with the Administrator. As previously noted, the order must take into account the seriousness of the violation and “any good fairth efforts to comply” —findings which could hardly be made without consideration of arguments and data submitted by the party affected.

Finally, under Section 110(c), prescribing procedures for the adoption of implementation plans by the EPA applicable to states which have failed to submit a proposed plan or who have submitted an unsatisfactory plan, the Administrator is required to hold a public hearing if “such State held no public hearing associated with respect to such plan . . . ”. This provision, contained in the same section of the Act as that which requires approval of implementation plans which satisfy the criteria of Section 110(a)(2), creates the reasonable inference that Congress was of the view that an adequate hearing at the state level would serve the purposes of Section 553 of the APA in giving interested persons an opportunity to submit their views. See, Appalachian Power Co. v. Environmental Protection Agency, 477 F.2d 495, 502-503 (4th Cir. 1973). This conclusion is reenforced by the fact that, while Section 110 of the Act is silent as to whether the APA’s informal rule-making procedure should be applicable to implementation plan approval decisions, it specifically requires the Administrator to find that the plan was adopted by the state “after reasonable notice and hearing . . .

The absence of any provision in Section 110(a)(2) requiring the Administrator to hold hearings or to provide an opportunity for the submission of views, considered in light of the various other sections of the Act which specifically require formal hearings or informal rule-making procedures, leads us to conclude that the informal procedures prescribed by Section 553 of the APA were not intended to apply to approval/disapproval decisions under Section 110(a)(2). Appalachian Power Co. v. Environmental Protection Agency, supra; Duquesne Light Co. v. Environmental Protection Agency, 481 F.2d 1, 8 (3rd Cir. 1973).

Nor can we accept the petitioners’ contention that the procedure employed by the Administrator in reviewing and approving the Illinois and Indiana plans deprived them of due process of law. First of all, the arguments advanced by petitioners in opposition to these plans center on assertions of technological infeasibility and economic impact. As we have indicated, these factors are not among the criteria which the Administrator is obliged to consider under Section 110(a)(2) in determining whether a state plan should be approved. The receipt of petitioners views and arguments respecting technology and economic impact thus would not have enhanced the decision making process.

More importantly, the procedural scheme prescribed by the Act offers adequate opportunity for the submission of views and for judicial appeal. Prior to the promulgation of ambient air standards, interested parties are afforded an opportunity under Section 109 to submit their views. Prior to the formulation of a state plan, full public hearings are required under Section 110(a), and where a proposed plan has been formulated without public hearings, it may not be approved by the Administrator. In such instances, the Administrator must formulate a plan applicable to the state which has submitted an unsatisfactory proposal, and such plan cannot be adopted without first holding public hearings. Section 110(c).

In addition, petitioners have a right to challenge the reasonableness of state plans in the state courts, and as the respondent concedes, if “part of a state implementation plan is held invalid by a state court, the state would have to revise that part. Should the state fail to do so, the Administrator must propose and promulgate a revision . : .. In either case, a hearing, or at least an opportunity for a hearing, is a prerequisite to adoption of the new regulation.” (Respondents’ brief, No. 72-1498).

Finally, as previously noted, arguments concerning technology and economic impact may be presented to the Administrator prior to the date on which a compliance order issued pursuant to Section 113(a)(4) takes effect, and may be raised in the course of enforcement proceedings under Section 113(b).

Viewing the procedures for promulgation, implementation and enforcement of ambient air quality standards and emission limitations as a whole, the failure of the Administrator to provide an opportunity for the submission of views, data and arguments by interested parties pri- or to his approval of the Illinois and Indiana plans did not deny petitioners due process of law.

In view of the foregoing, the motion for remand to the Environmental Protection Agency in No. 72-1491 is denied; this Court’s Order of August 20, 1974 enjoining enforcement of the Indiana Plan pending review is vacated; petitioners’ motion in 72 — 1491 and 73 — 1512 (a related appeal) for an order staying approval and enforcement of the Indiana Plan is denied; and the decisions of the Administrator of the Environmental Protection Agency approving the Illinois and Indiana Plans are affirmed.

Affirmed.

      . Section 110(a)(2)(B) requires that the Administrator determine whether the state plan “includes emission limitations, schedules, and timetables for compliance ... as may be necessary to insure attainment and maintenance . . . ” of federal ambient air quality standards. Petitioners suggest that the word “necessary” imposes upon the Administrator an obligation to consider whether the requirements of a state plan under consideration are in excess of those needed (necessary) to attain federal standards. We disagree. Subparagraph (B) imposes upon the Administrator an obligation to insure that the state plan provides, at a minimum, emission limitations sufficient (i. e. necessary) for the attainment of federal standards. That a state plan provides requirements which are more stringent than those necessary for the attainment of federal standards does not warrant disapproval of the plan. See, infra, n.2.

      . A state plan must meet the minimum criteria, but may exceed them. “Stated somewhat differently, the [1970] Amendments provided that states, in preparing their own plans for control, could be as tough on polluters as they wished, but that no state could allow industry to exceed the federal standards on smoke and dust, carbon monoxide and other common pollutants.” Appalachian Power Co. v. Environmental Protection Agency, 477 F.2d 495, 498 (4th Cir., 1973). See also, Getty Oil Company v. Ruckelshaus, 467 F.2d 349, 358 (3rd Cir., 1972).

      . Section 307(b)(2) provides as follows:
      “Action of the Administrator with respect to which review could have been obtained under paragraph (1) shall not be subject to judicial review in civil or criminal proceedings for enforcement.”

      . See, County of Cook v. Lloyd A. Fry Roofing Company, Ill., 319 N.E.2d 472, 476-477 (1974).


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    Henry GILER and all other present and former members of Locals 108, 420, 509, 206, 273, 152, 88, 26, and 426 of the Sheet Metal Workers International Association similarly situated, Plaintiff-Appellant, v. BOARD OF TRUSTEES OF SHEET METAL WORKERS PENSION PLAN OF SOUTHERN CALIFORNIA et al., Defendants-Appellees.
    No. 73-1149.
    United States Court of Appeals, Ninth Circuit.
    Sept. 3, 1974.
    As Amended Jan. 7, 1975.

      Emanuel Gyler (argued), of Gyler & Gottlieb, Long Beach, Cab, for plain tiff-appellant.
    Robert W. Filbert (argued), Beverly Hills, Cal., for defendants-appellees.
    Before HUFSTEDLER and CHOY, Circuit Judges, and SOLOMON, District Judge.

       Honorable Gus J. Solomon, Senior United States District Judge for the District of Oregon, sitting by designation.

   OPINION

PER CURIAM:

The District Court dismissed an action in which Giler (plaintiff) asserted that the “break-in-service” provision of his union’s pension plan was invalid. We affirm.

Giler voluntarily withdrew his membership in the Sheet Metal Workers Union in September, 1965, to become self-employed. On that date he had accumulated 17 years in pension credits. In December, 1966, when Giler reached the age of 50, he applied to the trustees of the pension plan for the vesting of his pension rights. The trustees rejected the request because the plan required 20 years of pension credits to vest a pension at that age.

In 1971, the pension plan was amended to permit pension rights to a member with 15 years of service when he attained the age of 55. In December, 1971, when plaintiff reached 55, he applied for pension benefits. His request was denied because there was a break in service of more than two years.

The pension plan provided that an employee’s previously accumulated pension credits would be cancelled if he failed to earn one quarter of pension credit in two consecutive calendar years. Plaintiff asserts that this rule violates 29 U.S.C. § 186(c)(5).

The trustees of a pension plan established under 29 U.S.C. § 186(c)(5) have broad discretion in setting eligibility rules. A court should interfere only when the rule is unreasonable or its enforcement arbitrary. Roark v. Lewis, 130 U.S.App.D.C. 360, 401 F.2d 425 (1968), adhered to sub nom. Roark v. Boyle, 141 U.S.App.D.C. 390, 439 F.2d, 497 (1970).

In Lee v. Nesbitt, 453 F.2d 1309 (9th Cir. 1972), the case upon which appellant relies, the employee had completed the minimum number of years of work credit in covered employment before he had a break in employment. And the break was involuntary; there was no work available for him.

Here Giler voluntarily left covered employment. He did not show that the trustees arbitrarily or capriciously enforced the rule. The break-in-service rule is reasonable as applied to him.

Affirmed.

      . The Employee Retirement Income Security Act of 1974 was enacted on September 2, 1974, Pub.L.No. 93-406, 88 Stat. 829. Under the Act all plans must provide for the immediate vesting of rights to benefits derived from employee contributions and 100 per cent vesting of all rights after 15 years of service.
      In addition, the “break-in-service” provisions under the Act are restrictive. If the 1974 Act had been in effect during the period of Giler’s employment, he would have been entitled to prevail in this case.


author: GIBSON, Chief Judge. LAY, Circuit Judge

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner. v. The COLONIAL PRESS, INC., Respondent.
    No. 74-1304.
    United States Court of Appeals, Eighth Circuit.
    Submitted Oct. 17, 1974.
    Decided Jan. 17, 1975.
    Rehearing and Rehearing En Banc Denied Feb. 26, 1975.

      Joseph Oertel, Atty., National Labor Relations Board, Washington, D. C., made argument for petitioner.

      Soren S. Jensen, Swarr, May, Smith & Andersen, Omaha, Neb., made argument for respondent.
    Irving M. King, Chicago, 111., made argument for intervenor.
    Before GIBSON, Chief Judge, and LAY and STEPHENSON, Circuit Judges.
   GIBSON, Chief Judge.

The National Labor Relations Board petitions, pursuant to Section 10(e) of the National Labor Relations Act as amended, 29 U.S.C. § 160(e), for enforcement of its decision and order issued November 30, 1973, and reported at 207 N.L.R.B. No. 114 (1973). Local 203, Graphic Arts International Union, AFL— CIO, the charging party in the proceeding before the Board, was granted leave to intervene. In its decision the Board ordered reinstatement of nine persons categorized as unfair labor practice strikers. Six of the persons ordered to be reinstated had previously been lawfully discharged on August 21 and 22, 1972, for engaging in “long union meetings on company time.” Unfair labor practice charges filed on their behalf were later found by the NLRB Regional Director and General Counsel to be without merit and were dismissed. The Company, on this appeal, is resisting enforcement of only that part of the Board’s order relating to reinstatement of the six workers lawfully discharged.

The organizational campaign from which this dispute arose commenced in late 1971 and continued into 1972. It concerned an organizational unit of nine employees in the pressroom of the Company’s Omaha, Nebraska, printing plant. The campaign was accompanied by employer conduct which was found by the Board in a prior proceeding to be violative of §§ 8(a)(1) and (3) of the Act. On August 23, 1972, the pressroom employees, including those who had been lawfully discharged, commenced a strike against the Company in response to those unfair labor practices. Replacements were hired by the Company. The Board eventually found that the Company committed further unfair labor practices during that strike, consisting .of telling employees to quit talking to the strikers, bad-mouthing the Union, engaging in surveillance of employees who talked to the picketers, and telling the employees that the Company would never sign a contract with the Union. During the course of the strike several of the lawfully discharged pressmen were asked by Company officials or straw bosses to come in to talk to the Company about going back to work. Most common among their invitations were statements such as, “My door is always open; any time you want to come down and talk to me you’re welcome.”

A contract agreement was finally reached between Company and Union in February, 1973. The Union, in two letters, promptly requested unconditional reinstatement of all strikers, including the six workers previously discharged for cause. When the strikers and former employees reported for work on February 23, the company president, Mr. Swoboda, refused to reemploy the six lawfully discharged workers. He told them they had been replaced, but offered to consider their applications for employment on a preferential basis if they wished to file them. In response, charges were filed alleging company unfair labor practices in violation of §§ 8(a)(1) and (3) of the Act. The Union complained that certain employees were threatened, and, without distinguishing between strikers and dischargees, claimed that the Company refused to reinstate unfair labor practice strikers and thereby discriminated against them because of their union activity.

The Administrative Law Judge concluded that the Company had in fact violated Section 8(a)(1) of the Act by coercively interrogating and threatening certain employees, thus inhibiting their rights to engage in concerted activity under Section 7 of the Act. The judge further determined that although the Company’s § 8(a)(1) violations had not prolonged the strike, its previous unlawful practices had in fact caused it. Thus, it was an unfair labor practice strike and those who were unfair labor practice strikers were entitled to reinstatement and back pay from the date they requested it. However, the judge also determined that because the six lawfully discharged workers were no longer employees and hence not unfair labor practice strikers, they were not entitled to reinstatement. In so doing, the judge rejected the Union’s argument that the Company had condoned or forgiven the six lawfully discharged workers’ misconduct by asking them to return to work, and that the six had thereby regained the status of employees who were on strike in response to the employer’s unfair labor practices, having refused its invitations to return to work.

On appeal the Board affirmed the Administrative Law Judge’s rulings, but, disagreeing with his findings on the issue of condonation, additionally found that the Company violated §§ 8(a)(1) and (3) by refusing to reinstate all strikers. The Board concluded that various informal statements made by Company managers were “unmistakable offers of reemployment and clear evidence of condonation by [the Company] * * * of the misconduct which had given rise to the earlier lawful discharges.” The Board rejected as insignificant factual distinctions drawn by the Administrative Law Judge between the instant case and prior cases of alleged postdischarge condonation. To draw such distinctions, the Board commented, would “invite abuses of the purposes of the Act and an unwarranted dilution of the doctrine of condonation.” The Board concluded that statements by Company representatives inviting the strikers to return to work rescinded their previous discharges and waived the Company’s right to rely on the discharge-provoking misconduct as a basis for denying reinstatement. In short, the Board concluded that the Company’s statements reestablished an employment relationship between the Company and the six workers, so that the workers might enjoy the status of unfair labor practice strikers who are entitled to reinstatement.

I. SECTION 10(b).

The Company argues, as a preliminary point on appeal, that the Board erred in considering evidence of events which occurred more than six months before the filing of the instant charges, March 6, 1973. It argues that Section 10(b) of the Act, 29 U.S.C. § 160(b), prevents the Board from labeling the strike as an unfair labor practice strike because that determination must rest upon evaluation of Company conduct which occurred before the six-month limitations period. Section 10(b) was enacted for the purpose of stabilizing existing bargaining relationships by barring “litigation over past events ‘after records have been destroyed, witnesses have gone elsewhere, and recollections of the events in question have become dim and confused’ * * *.” Machinists Local 1424 v. N.L.R.B., 362 U.S. 411, 419, 80 S.Ct. 822, 828, 4 L.Ed.2d 832 (1960). Those purposes would not be advanced by adoption of the Company’s argument in the instant case.

Granted, the Company’s unfair labor practices which caused the instant strike occurred prior to the § 10(b) limitations period. Those practices were themselves fully recorded in litigation and declared by the Board to be violations of the Act. This case fits within the first situation discussed in Machinists Local 1424 v. N.L.R.B., supra, 362 U.S. at 416-417, 80 S.Ct. 822. The Board’s ruling that the instant strikers were protesting unfair labor practices could not be said to be “inescapably grounded on events predating the limitations period * * *,” Machinists Local 1424, supra, 362 U.S. at 422, 80 S.Ct. at 829, as the current complaint rests on failure to reinstate unfair labor practice strikers. Otherwise, the Board would never be able to punish an employer’s refusal to reinstate unfair labor practice strikers after a strike lasting more than six months and in which the employer’s conduct complained of occurred before and after but not during the strike. N.L. R.B. v. Brown & Root, Inc., 203 F.2d 139, 145-146 (8th Cir. 1953).

II. CONDONATION.

On the condonation issue, we think the Board has expanded and stretched that concept beyond its basic purpose and proper utility. The principle of waiver by condonation used in the context of labor relations is that, if after an employee commits acts of misconduct lawfully justifying his discharge, and thereafter the employer, fully cognizant of the acts, agrees not to discipline him, the employer may not thereafter rely on the same misconduct as the basis for discharging or refusing to reinstate the employee. Thus, the doctrine is properly invoked “only where there is clear and convincing evidence that the employer has completely forgiven the guilty employee for his misconduct — and agrees to a resumption of [the] company-employee relationship as though no misconduct had occurred.” Packers Hide Association v. N.L.R.B., 360 F.2d 59, 62 (8th Cir. 1966).

Condonation may not be lightly presumed. Plasti-line, Inc. v. N.L.R.B., 278 F.2d 482, 486-487 (6th Cir. 1960); N.L.R.B. v. Marshall Car Wheel & Foundry Co., 218 F.2d 409, 414 (5th Cir. 1955). Thus, to order reinstatement on the basis that an employer has condoned an employee’s prior misconduct, the record must contain clear and convincing evidence that the employer has in fact agreed (1) to forgive the misconduct and “wipe the slate clean,” and (2) to resume the former employment relationship with the employee. Moreover, resumption of the employment relationship necessarily rests on a mutual agreement. N.L.R.B. v. Community Motor Bus Co., 439 F.2d 965, 968 (4th Cir. 1971); see N.L.R.B. v. Cast Optics Corp., 458 F.2d 398, 404-405 (3rd Cir.), cert. denied, 409 U.S. 850, 93 S.Ct. 58, 34 L.Ed.2d 92 (1972). Thus, as also found by the Administrative Law Judge, if the employment relationship was, in fact, terminated before the alleged condonation, something additional must be done by the former employee, in response to the Company’s reemployment offer, in order to reestablish the employer-employee relationship. If, however, the employer-employee relationship has not been terminated and the employee seeks to return to work, as is the conventional fact pattern in labor condonation cases, then the employer’s offer for the worker to return to work may be determinative.

Therefore, in applying the con-donation doctrine it is necessary to determine whether, before and after the employer’s alleged condonation, the worker was in fact an “employee” within the meaning of the Act. If he was not, then something evidencing the employee’s acceptance is needed — in addition to the employer’s agreement — to preclude the employer from refusing to reinstate him. In the normal predischarge condonation setting, however, such acceptance by the employee is not, strictly speaking, required because he is still an employee.

In applying these principles to the instant case, we think the Board’s order is unrealistic as it exaggerates the significance of the discharged employees’ picketing and the somewhat general and ambiguous statements of the Company’s representatives soliciting some of the dischargees to come in and talk to them about reemployment. The conversations appearing most frequently in the record utilized the phrase, “the door is always open.” This and similar communications can at best amount only to preliminary invitations to negotiate reemployment. Obviously, in the context of the strike and the picketing the Company implied that to return to work at the time would be to renounce the Union. The Company made no unconditional offers for dischargees to return to work without penalty. These instances fall far short of constituting positive acts manifesting both forgiveness and agreement to resume the former employment relationship. N.L.R.B. v. Community Motor Bus Co., 439 F.2d 965 (4th Cir. 1971); Packers Hide Association v. N.L.R.B., 360 F.2d 59 (8th Cir. 1966); Plasti-line, Inc. v. N.L.R.B., 278 F.2d 482 (6th Cir. 1960). An enlargement of the salutary condonation principle to embrace such nebulous and preliminary overtures toward former employees would be detrimental to the purposes of the National Labor Relations Act to promote more harmonious labor relationships between employers and employees, aside from ignoring contract principles relevant to establishing an employer-employee relationship.

The Company’s refusal to reemploy the six dischargees falls short of violating §§ 8(a)(1) and (3) of the Act in two important respects. First, as of August 22, 1972, the discharged workers were not employees of the Company and they did nothing thereafter to reestablish their employment prior to demanding reinstatement in February, 1973. Their joining of the picket line prior to the Company’s alleged offers of reemployment cannot be considered as acceptance of the Company’s offers. And the offers, if made at all, and in their most liberal interpretation, could only be to come back to work for the Company on the Company’s terms — one of the terms being that persons accepting employment would work and not merely picket. Irrefragably, no “incantation of carefully constructed legal phrases,” to use the Board’s language, is needed for a worker to manifest his willingness to work.

Second, the preliminary invitations by Company representatives for the six dischargees to “come in to talk” cannot be characterized as unconditional offers of reemployment. This court recognized in Packers Hide Association v. N.L.R.B., supra, 360 F.2d at 63, that,

[Cjondonation may not be lightly presumed from mere silence or equivocal statements, but must clearly appear from some positive act by an employer indicating forgiveness and an intention of treating the guilty employees as if their misconduct had not occurred.

The Board’s conclusion that the Company offered unconditional reemployment and condoned the six employees’ misconduct, thus overruling the decision of the Administrative Law Judge, is not supported by substantial evidence on the whole record. The Company’s making of informal overtures and eventual refusal to rehire the six dischargees was not fairly described by the Board when it characterized it as “misleadingly agreeing to return its employees to work and then taking disciplinary action for something already forgiven.”

The Board’s reliance on N.L.R.B. v. New England Tank Industries, Inc., 302 F.2d 273 (1st Cir.), cert. denied, 371 U.S. 875, 83 S.Ct. 147, 9 L.Ed.2d 114 (1962), to supply the basis for its condonation theory is not persuasive. In New England Tank, which was essentially a discriminatory refusal to hire 49 of a predecessor’s work force, the company had already offered three predecessor employees employment and the offer of employment had been accepted. Before the successor took over the operations the three men who had accepted employment learned of the discriminatory refusal to hire 49 of their co-workers because of union affiliation and joined in an unfair labor practice strike. The court held that since the three men had accepted the work offer and were working on September 30th and would have worked on October 1st, when the successor company took over, except for the protest of that company’s unfair labor practices, these three men were employees and should properly be considered unfair labor practice strikers. The essential difference between New England Tank and the instant case is that in New England Tank the employees had not been discharged; rather, they had accepted employment and then, after finding out that their former coworkers were discriminatorily being denied employment because of union affiliations, joined in the unfair labor practice strike. In the instant case, at the time of the alleged condonation the six workers had been discharged and no longer enjoyed the status of employees, nor had they accepted any offers of reemployment — such as the offers might have been. The mere offer of possible reemployment, without acceptance, could not have transformed the six dischargees into strikers and then, in turn, into unfair labor practice strikers entitled to reinstatement. The Company, after having lawfully discharged the six workers, stood absolved from any duty to reemploy them, and in refusing to do so was “simply exercising its normal right to select its employees.” N.L.R.B. v. Fansteel Metallurgical Corp., 306 U.S. 240, 259, 59 S.Ct. 490, 498, 83 L.Ed. 627 (1939).

We are unwilling to accept the dissent’s argument that acceptance of the offers of reemployment, if made, may be found in the continued picketing by the dischargees. The Company was obviously looking for employees to maintain its production and as all of its “offers” were refused it had to hire new employees to take the place of those discharged and on strike. Assuming, arguendo, that offers of reemployment were made to the dischargees, acceptance in these circumstances could only be accomplished by returning to work. It adds nothing but rhetoric to the analysis of this situation to say that in doing so they would be strikebreakers. So would anyone hired by Colonial as replacements whether previously employed there or not. The dischargees were not employees nor strikers, having lost their employment relationship with the Company, but unemployed workers having no greater rights under the Act than any other unemployed worker wishing to work for Colonial. The dissent would create a new status, separate from employees and strikers, of pickets for pay. While we do not wish to nor do we in this opinion require the “incantation of carefully constructed legal phrases” to determine a worker’s rights under the Act, neither do we think an employer must adopt and maintain an attitude of unmitigated hostility towards discharged employees to avoid legal penalties upon a refusal to rehire them.

Enforcement of the Board’s order finding the Company’s refusal to reinstate the six lawfully discharged workers to be in violation of §§ 8(a)(1) and (3) of the Act is denied. In all other respects the Board’s order is granted enforcement.

LAY, Circuit Judge

(dissenting).

I respectfully dissent.

The majority opinion adopts the Administrative Law Judge’s reasoning that there was no acceptance of the offers of reemployment and therefore there was no restoration of employee status to the discharged strikers. This reasoning is fallaciously premised on the supposition that the offer of reemployment sought a bilateral contract, i. e., a promise for a promise. On the contrary, the employment relationship between the employees and the company is formed by a unilateral contract, i. e., the promise to pay for the performance of services. The offers of reemployment sought acceptance by the resumption of employee services and did not depend on any formal bilateral agreement. Yet under the Administrative Law Judge’s rationale, as adopted by the majority, the dischargees were required first to vocally accept employment with the illegal condition of denouncing the union before they could legally assume the status of an employee. Under the facts presented this requirement is highly technical and unrealistic. It ignores the reality of the factual situation in which the offers were tendered.

As the Board so effectively stated in its opinion:

[T]he rationale offered by Respondent and adopted by the Administrative Law Judge would require persons such as those involved here either to forsake their legitimate protests evidenced by their picketing activity and to become strikebreakers, or else would require them to be so counseled by those trained in the law as to carefully recite that they were willing to resume employee status but that they were continuing to engage in concerted activity in support of the protests of the work force against the employer’s unfair labor practices. To force such persons to become strikebreakers would subvert the very purposes underlying the protection afforded to unfair labor practice strikers. To require an incantation of carefully constructed legal phrases seems to us to introduce wholly unnecessary and undesirable formalities and to make artificial our approach to problems of reality and substance.

Appendix at 29-30.

Assuming some form of acceptance of the offer of reemployment was necessary, that acceptance can be found in the resumption of the performance of employee functions. An unfair labor practice strike is a valid employee function. Continued participation in such a strike, after the offer of reemployment is made, can signify acceptance if it is accompanied by the mutual understanding that the employee desires to re-establish his employee status. Here, that understanding is readily apparent. There can be little doubt that the employees desired to return to their work unshackled by any illegal condition that they denounce the union and their protected rights under the Act. When the offers to reemploy them were made, the men continued as strikers along with the other unfair practice strikers. When the settlement was reached and all strikers offered to return to work the company was well aware that those previously discharged desired to return to their old jobs. The men were all seasoned workers and possessed good jobs; that their continued activity as strikers could be viewed by the employer as only detached and disinterested picketing is highly unreasonable.

The acceptance required by the majority could only be manifested by the dischargees’ returning to their jobs and thus becoming strikebreakers. This would deny them their right to protected activity as employees under the Act. They would be denied the right to lawfully protest an unfair labor practice, as the other employees were doing, by lawfully striking. Thus, when the offers of reemployment were made, the action required of the dischargees to demonstrate their assent to resume the status of employees was the assumption of the role of an unfair labor practice striker rather than that of a working employee. This they did.

To require the discharged employee to do more, to accept the illegal condition and return to work, is to require the employees to forgo their right to strike, guaranteed by § 7 of the Act. This is a clear violation of the Act. See Standard Aggregate Corp., 87 L.R.R.M. 1273 (September 3, 1974).

I find the Board’s analysis sound. I would enforce in full the Board’s order.

      . The Board’s order directed the respondent Company inter alia (1) to cease and desist from discouraging union activity or interfering with employees’ § 7 rights by means such as threatening and interrogating its employees, telling them not to talk with picketers, creating the impression of surveillance of employee union activity, or otherwise; and (2) to offer designated unfair labor practice strikers reinstatement to their former positions without prejudice to seniority or other rights, dismissing, if necessary, any employees hired as replacements, and to make the strikers whole for any loss of pay suffered.

      . In its prior order, reported as The Colonial Press, Inc., 204 N.L.R.B. No. 126 (1973), the Board found that the Company had violated § 8(a)(1) by interfering with, restraining, and coercing employees in the exercise of their § 7 rights when it made anti-union warnings, eliminated overtime work, and unilaterally changed rules. The Board also found that the Company had violated §§ 8(a)(1) and (3) by discriminatorily discharging employees because of their union activity.

      . Bernard Nice and Tom Murtaugh (a bindery employee outside the pressmen’s bargaining unit).

      . The decisions in Confectionery & Tobacco Drivers & Warehousemen’s Local 805 v. N.L. R.B. [M. Eskin & Son], 312 F.2d 108 (2d Cir. 1963), and N.L.R.B. v. E. A. Laboratories, Inc., 188 F.2d 885 (2d Cir. 1951), were distinguished by the Administrative Law Judge (1) because they involved broken strike settlement agreements to which workers had responded, reestablishing their employment relationships; or (2) because they, along with most conventional condonation cases, may have involved only “tactical” discharges which in fact did not terminate employment, while the discharges in the instant case were true discharges which did terminate the six workers’ status as employees.

      . The Colonial Press, Inc., 204 N.L.R.B. No. 126 (1973).

      . As noted in Machinists Local 1424, supra, 362 U.S. at 416, 80 S.Ct. at 826:
      It is doubtless true that § 10(b) does not prevent all use of evidence relating to events transpiring more than six months before the filing and service of an unfair labor practice charge. However, in applying rules of evidence as to the admissibility of past events, due regard for the purposes of § 10(b) requires that two different kinds of situations be distinguished. The first is one where occurrences within the six-month limitations period in and of themselves may constitute, as a substantive matter, unfair labor practices. [In the instant case, these were the Company’s refusals to rehire the strikers.] There, earlier events [the prior unfair labor practices] may be utilized to shed light on the true character of matters occurring within the limitations period; and for that purpose § 10(b) ordinarily does not bar such evidentiary use of anterior events.
      (Footnote omitted.)

      . Under 29 U.S.C. § 152(3) the term “employee” includes:
      [A]ny employee * * * not * * * limited to the employees of a particular employer, unless this subchapter explicitly states otherwise, and shall include any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice, and who has not obtained any other regular and substantially equivalent employment * * *.
      (Emphasis added.)
      Even under the Act, whether or not a worker is an “employee” is inter alia a contract issue, and thus rests on evidence of the parties’ mutually manifested intent.

      . The cases finding condonation after discharge contain evidence of acceptance by the workers in the form of some affirmative action in response to an unequivocal company settlement offer. Jones & McKnight, Inc. v. N.L.R.B., 445 F.2d 97, 101-102, 104 (7th Cir. 1971); Confectionery & Tobacco Drivers & Warehousemen's Local 805 v. N.L.R.B. [M. Eskin & Son], 312 F.2d 108, 112-113 (2nd Cir. 1963); N.L.R.B. v. Aladdin Industries, Inc., 125 F.2d 377, 382 (7th Cir.), cert. denied, 316 U.S. 706, 62 S.Ct. 1310, 86 L.Ed. 1773 (1942).

      . Union Twist Drill Co., 124 N.L.R.B. 1143, 1144 (1959); The Carey Salt Co., 70 N.L.R.B. 1099, 1100 (1946).

      . The Second Circuit’s comment that “the condonation principle * * * is more akin to the doctrine of waiver than to the technicalities of contract law,” Confectionery & Tobacco Drivers and Warehousemen’s Local 805 v. N.L.R.B. [M. Eskin & Son], 312 F.2d 108, 113 (2d Cir. 1963), should not be taken as an invitation to disregard contract principles entirely.

      . They are: Gary Baker, David Birdsong, Wayne Blenden, Gilbert Classen, Jeff Louden, and Russell Sass.

      . Contrary to the majority’s view the condo-nation, that is, the forgiveness of the dischargees’ prior misconduct, is clearly supported by substantial evidence on the record as a whole. Even the Administrative Law Judge credited the statements made as clear manifestation that the dischargees were still acceptable as employees and that their jobs were open to them provided they renounced the union. The statements made were not, as suggested by the majority, simply a casual suggestion that the “door was always open” for negotiations. The Brief of the Intervenor, Local 203, Graphic Arts International, well summarizes the substantiality of this evidence:
      —Bernard Nice, a striking employee and Union steward, testified that he was asked by Don Nice, about a month after the strike began on one of some fifteen similar occasions, to “come back in and bring your guys with you”; Don Nice admitted both the specific statement and the fact' of his frequent discussions with Bernard.
      —Bernard Nice testified that, in January, 1973, Don Nice told him in an Omaha bar, following a reference by Bernard to the fact that eight individuals were on strike, that he (Bernard) could tell the other strikers that “there was jobs open, come on in, the door was open”; that testimony is unchallenged.
      —Russell Sass testified that, in late September or early October, Don Nice told him that “the door was always open”; Nice admitted that he “possibly could have” made the statement.
      —David Birdsong testified that, the day following his discharge, Richard Henderson called his home and left a message that Birdsong’s job was there and all he had to do was tell the Company what he wanted within reason in terms of wages; this evidence is unrebutted.
      —Even adopting Jay Swoboda’s version of the conversation between he [sic] and Birdsong in the Marleybones Bar a week after the strike began, Swoboda told Birdsong that he could make up his own mind whether he wanted to stay out with the strikers or come back into the plant, asked Birdsong to call him when he made up his mind and offered to pay for any damage which might be done to his car if he decided to return to work. [Swoboda emphatically stated that at the time of his conversation with Birdsong he definitely had the right to come back to work if he wanted to.]
      —Birdsong testified that Swoboda talked to him on the picket line about a week after the beginning of the strike and told him his job was there and all he had to do was go in and talk to him (Swoboda) about it; this conversation is not denied by Swoboda.
      —Birdsong testified without contradiction that two or three weeks after the strike began, Richard Henderson spoke to Birdsong and Jeff Louden, and said they could have their jobs back and possibly a raise in pay.
      —Birdsong testified without contradiction that, in January, 1973, Keith Kile said to him that he wished Birdsong would come in and talk to him.
      —Jeff Louden testified that a few days after the picketing began, Richard Henderson, in one of at least ten such conversations, told him that he could have his job back, and possibly a raise in pay. This testimony was unrebutted.
      Brief of Intervenor at 19-20. (Emphasis deleted.)


author: LANE, Judge:

text:
    Jay F. SWANSON, Plaintiff-Appellant, v. Stan LEVY, Defendant-Appellee.
    No. 73-2657.
    United States Court of Appeals, Ninth Circuit.
    Jan. 22, 1975.

      Richard C. Brautigam (argued), McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for plaintiff-appellant.
    Yale H. Smulyan (argued), San Francisco, Cal., for defendant-appellee.
    Before CHOY and SNEED, Circuit Judges, and LANE, Judge.

       Honorable Donald E. Lane, Judge of the United States Court of Customs and Patent Appeals, sitting by designation.

   OPINION

LANE, Judge:

This case involves an action by appellant to recover monies paid in discharging appellee’s debt upon appellee’s default in the repayment thereof. Appellant and appellant’s brother employed appellee to establish a chain of restaurants. Appellant’s brother in a personal letter dated April 16, 1969 confirmed appellee’s employment. Appellee was principally employed by a corporation called “Johnny’s American Inn, Inc.” and also known as “Here’s Johnny’s.” In December 1969 appellant guaranteed a personal loan installment note for appellee. The parties arranged to repay the note from payroll deductions from appellee’s salary. Appellant, acting for “Johnny’s American Inn, Inc.,” advised appellee by letter of January 28, 1970 that in the absence of a definite plan for corporate financing, appellee’s salary was to be “furloughed.” By the express terms of this letter, the “furlough” was not an act of termination of employment but rather a temporary measure of economy. The letter requested appellee to continue to seek corporate financing from investors, and appellee did so. Appellant’s attorney advised appellee by letter of April 15, 1970 that appellee was no longer authorized to represent the corporation, appellant or appellant’s brother. Appellee replied that as he had continued to work without salary since February 1970 he was unable to pay the personal loan installment note, and requested appellant to honor the indebtness, and appellant did so.

Appellant then brought this action seeking reimbursement and appellee filed a counterclaim seeking damages for breach of a contract of employment. Both parties offered testimony. At the close of the trial, the district court rendered its oral decision that the appellant take nothing by his claim and the appellee take nothing by his counterclaim. The parties waived Findings of Fact and Conclusions of Law, and none are present in the record.

I.

Rule 52, Fed.R.Civ.P. requires the district court to make findings of fact and conclusions of law in all actions tried upon the facts without a jury. The Rule applies to any civil action tried without a jury, subject to limitations stated in Rule 81 and not present here. One purpose of requiring findings of fact is to aid this court by affording it a clear understanding of the basis of decision of the district court. United States v. Continental Oil Co., 377 U.S. 161, 162, 84 S.Ct. 1155, 12 L.Ed.2d 213 (1964), separate memorandum of Harlan, J. The requirement that the district court find the facts specially and state separately its conclusions of law must be fairly observed and may not be waived by the parties. Waialua Agr. Co. v. Maneja, 178 F.2d 603, 606-607 (9th Cir. 1949). When there is a failure to make the necessary findings this court will not dismiss the appeal, but ordinarily vacates the judgment and remands the case to the district court. Irish v. United States, 225 F.2d 3 (9th Cir. 1955). But a failure to make the necessary findings does not require remand if a complete understanding of the issues may be had without the aid of separate findings. United States v. Hudspeth, 384 F.2d 683, 686 (9th Cir. 1967). We think that a complete understanding of the issues herein may be had from the record on appeal. Remand of the case to the district court is therefore unnecessary. Riess v. Murchison, 384 F.2d 727, 736 (9th Cir. 1967).

II.

The question presented for review is whether there is substantial evidence to sustain the judgment of the district court. Substantial evidence has been defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. National Labor Relations Board v. Columbia Enameling & Stamping Co., 306 U.S. 292, 300, 59 S.Ct. 501, 83 L.Ed. 660 (1939). Thus if reasonable men may differ fairly as to whether certain evidence establishes a fact in issue, substantial evidence exists.

Appellant argues that appellee is not entitled to a setoff in a contract implied in law (quasi-contract) where the record is alleged to contain: (1) no evidence that anyone benefited from appellee’s services; (2) no evidence of the value of appellee’s services; and (3) no evidence that appellant (as opposed to Johnny’s American Inn, Inc.) received any benefit from appellee’s services. The fundamental defect in appellant’s argument is that the facts of this case fairly demonstrate an express contract, a contract which arose out of the expressed intention of the parties. There is ample evidence of record from which the district court could have found the following: appellee was employed under an express contract prior to appellant’s letter of January 28, 1970; appellant’s letter of January 28, 1970 did not purport to terminate this express contract; the express contract was terminated by the letter of April 15, 1970 from appellant’s attorney; and appellee’s damages by reason of the “furlough” of his salary and his efforts during the period of the “furlough” to seek corporate financing from investors were substantially equal to the value of appellant’s claim. An action does not lie on an implied contract where there exists between the parties a valid express contract which covers the same subject matter. Rogers v. American President Lines, Ltd., 291 F.2d 740, 742 (9th Cir. 1961). In our view of the case there is substantial evidence from which the district court could have found a valid express contract which covers the subject matter in dispute. We now consider whether from the evidence of record appellant could be a party to this express contract.

III.

Although a corporation and its shareholders are deemed separate entities for most purposes, the corporate form may be disregarded and the substance of the action dealt with in the interests of justice. Bangor Punta Operations v. Bangor & Aroostook R.R., 417 U.S. 703, 94 S.Ct. 2578, 2584, 41 L.Ed.2d 418 (1974). This court has noted that the question of whether piercing the corporate veil would be proper for the purpose intended is rarely articulated with any clarity. In principle, however, the disregarding of the corporate form of business should not rest on the manner of doing business in general, but should rest on the effect that the manner of doing business has on the particular transaction involved. Plumbers & Fitters, Local 761 v. Matt J. Zaich Const. Co., 418 F.2d 1054, 1058 (9th Cir. 1969).

Appellant argues that appellee’s efforts were to find financing for Johnny’s American Inn, Inc. and therefore that any benefit resulting from appellee’s efforts accrued to that corporation alone, and not to the appellant. We have carefully considered appellant’s argument and we are not persuaded to hold that the evidence compelled the finding for which the appellant contends. As we have discussed above there is evidence of record from which the district court could have found that the appellee represented the appellant as well as the corporate entity during the period in question. The district court after hearing the testimony of the parties reached a conclusion which we refuse to disturb. Cf. In re Black Ranches, Inc., 362 F.2d 19, 35 (8th Cir. 1966).

The judgment of the district court is affirmed.


author: PER CURIAM.

text:
    Truman TALK, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
    No. 74-1232.
    United States Court of Appeals, Tenth Circuit.
    Sept. 10, 1974.
    Certiorari Denied April 21, 1975.
    See 95 S.Ct. 1661.
    Winston Roberts-Hohl, Asst. Federal Public Defender, Albuquerque, N. M., for Truman Talk.
    Richard J. Smith, Asst. U. S. Atty., Albuquerque, N. M., for USA.
    Before PICKETT, Senior Circuit Judge, and SETH and McWILLIAMS, Circuit Judges.
   PER CURIAM.

Appellant was convicted by jury in the United States District Court for the District of New Mexico of the crime of rape on an Indian Reservation in violation of 18 U.S.C. § 1153, and was sentenced to twenty years imprisonment with parole eligibility set under 18 U.S.C. § 4208(a)(2). His conviction was affirmed on appeal. United States v. Talk, 418 F.2d 53 (10th Cir. 1969). He now appeals from a denial of post conviction relief by the district court. We affirm.

As grounds for relief in the district court, appellant alleged that: ' 1) 18 U.S.C. § 1153 is unconstitutionally vague and indefinite; 2) in view of Keeble v. United States, 412 U.S. 205, 93 S.Ct. 1993, 36 L.Ed.2d 844 (1973) the district court erred in not instructing the jury on lesser included offenses; and 3) the grand and petit juries in his case were not selected from a cross section of the community in which he resided.

Appellant’s contention that 18 U.S.C. § 1153 is unconstitutionally vague and indefinite is without merit: the offense for which appellant was convicted is clearly defined by reference to state law and the penalty which may be imposed for a conviction of such offense is prescribed in paragraph 2 of § 1153. Cf. United States v. Analla, 490 F.2d 1204 (10th Cir. 1974).

Similarly, appellant’s contention that under Keeble v. United States, 412 U.S. 205, 93 S.Ct. 1993, 36 L.Ed.2d 844 (1973) he was entitled to a lesser included offense instruction is without merit. We have carefully and thoroughly reviewed the record of appellant’s trial and, unlike Keeble, the evidence set forth in such record does not warrant a lesser included offense instruction.

Finally, the proper means by which to raise a challenge to both the grand and petit juries is a pre-trial motion filed pursuant to Rule 12 of the Fed.R.Crim.P. Failure to do so in the absence of exceptional circumstances constitutes a waiver of the right to challenge both the grand jury, Davis v. United States, 411 U.S. 233, 93 S.Ct. 1577, 36 L.Ed.2d 216 (1973) and the petit jury, Shotwell Mfg. Co. v. United States, 371 U.S. 341, 83 S.Ct. 448, 9 L.Ed.2d 357 (1963). See also, Louie v. United States, 426 F.2d 1398 (9th Cir. 1970), cert. denied 400 U.S. 918, 91 S.Ct. 180, 27 L.Ed.2d 158 (1970); United States v. Williams, 421 F.2d 529 (8th Cir. 1970). No such motion was filed in the present case, and accordingly, we find that appellant by such failure waived his right to challenge both the grand jury and the petit jury.

Upon docketing, the parties were notified that we were considering summary affirmance, and of their right to file a memorandum in support of their respective positions. Both parties took advantage of such opportunity, and we now have before us appellee’s memorandum in support of summary action and appellant’s memorandum in opposition to summary action. Nevertheless, after a careful and thorough review of the memoranda filed, and the records and files in this case, we are convinced that the judgment of the district court was correct.

Affirmed.

      . In Keeble, the appellant was charged with assault with intent to commit serious bodily injury and the nature of the appellant’s intent was very much in issue. The Court therefore concluded that the evidence warranted a lesser included offense instruction. In the present case, however, the evidence clearly established that the victim in fact had been raped and the real issue at trial was appellant’s culpability for such offense.