author: TALBOT SMITH, Senior District Judge.

text:
    JOHNSON, DRAKE & PIPER, INC., Appellant, v. UNITED STATES of America, Appellee.
    No. 72-1736.
    United States Court of Appeals, Eighth Circuit.
    Submitted May 17, 1973.
    Decided Aug. 23, 1973.
    Phillip H. Martin, Minneapolis, Minn., for appellant.
    John A. Townsend, Atty., Tax Div., U. S. Dept, of Justice, Washington, D. C., for appellee.
    Before VAN OOSTERHOUT, Senior Circuit Judge, HEANEY, Circuit Judge, and TALBOT SMITH, Senior District Judge.

       Hon. Talbot Smith, United States Senior District Judge, Eastern District of Michigan, sitting by designation.

   TALBOT SMITH, Senior District Judge.

The case before us is a tax refund suit. It involves an effort by Johnson, Drake and Piper (hereafter the taxpayer) to increase its net operating loss for the year 1960, and, on the basis of such increase in loss, and the net operating loss carryback provisions of the Internal Revenue Code, to obtain a refund of income taxes paid for 1957. The losses themselves are not in dispute. The controversy concerns the taxpayer’s belated attempt to amend its 1960 return.

During I960 the contractor was engaged in the business of general contracting. It constructed buildings,' highways, marine bridges, docks, and industrial foundations. Starting in about 1960 taxpayer commenced suffering serious reverses and it ceased doing construction work in about 1966.

The issue presented to us is whether the taxpayer erroneously reported its taxable income from certain long-term construction contracts in its federal income tax return for the said calendar year 1960. The alleged mistakes made by the taxpayer in so erroneously reporting such income fall into two different categories, as follows:

1) On Jobs 431, 429, and 426, preliminary book figures showing total net losses of about $553,000 were adjusted (“zeroed out”) when the taxpayer originally computed its 1960 income.

2) On Job 413 the taxpayer reported a profit of some $89,000. It now seeks to report a loss of $35,000 in 1960 principally on the ground that Mr. Baeher, its chief accountant, had projected a “possible loss” of such sum.

It is the taxpayer’s claim that under its method of accounting its full book losses were reported under such circumstances as were presented by the jobs in question. This, it asserts, was its consistent practice. It argues that the accounting entries made (except for the jobs in question) during the years 1953 to and including 1959 and 1960 establish that the book profit or loss reported by the taxpayer on all jobs during these years conforms with its accounting method, which includes the application of certain “rules” as to zeroing out, or the reporting, of book profits and losses, specifically, among others, that it was taxpayer’s consistent practice to report the book loss on a job when that job was about 10% complete. It follows, argues the taxpayer, that since the reporting of the jobs in question did not conform to the said rules consistently theretofore followed, but rather diverged therefrom, through in large part, their auditors’ use of the methods set forth in Accounting Research Bulletin No. 45, rather than taxpayer’s former methods, such reporting involved errors which should now be corrected.

In support thereof the taxpayer, going back through the years, introduced evidence as to the accounting on job after job, which, assertedly, supported its position. The government, on the other hand, analyzing the same jobs, reached contrary conclusions, namely, that there was no inconsistency in the accounting, that book losses were zeroed out “when circumstances showed that no reasonable estimate of an overall profit or loss on the job could have been made” and that book losses stood unadjusted when, “because of serious uncertainties, leaving such book losses unadjusted resulted in the most reasonable reflection of operations to date on the percentage of completion method.”

The 1960 jobs in question were highway construction contracts and were what is known as “unit-price contracts.” Such contracts are to be distinguished from lump-sum contracts. A unit-bid contract is one wherein the contractor submits a price per unit (the cement work, for example, may be a unit) for each of the various categories involved. This type of contract is used where the final quantities of work cannot be determined with accuracy until final completion. Payments are made to the general contractor on a periodic basis for the work performed during the preceding period, normally a month. Since the contractor is paid only on completed construction units, termed “pay items,” it is necessary that such units share not only the direct material inventory and labor involved but also the overhead costs and profit (margin) on the job. These latter elements may be apportioned ratably among all units, or, because of the inherent uncertainty as to precisely how many units in each category may ultimately be utilized, certain units may be “loaded.” That is, units apt to be most certainly predictable, for instance, as to quantity, may be “loaded” with a disproportionate share of overhead and margin, thus resulting in what is termed an “unbalanced” bid. There are many reasons why a contractor would prepare and submit an unbalanced bid, e. g., “shrinkage.” As Mr. Larson, senior accountant for Ernst & Ernst, testified, “The money is put on items that we know will not — should not shrink in quantity.” (App. 479.) Although plaintiff’s witness, Mr. Jesson, testified that taxpayer “tended to frown on that practice because it was too risky,” there was, we find, unbalancing to which we will later advert, in certain of the taxpayer’s bids causing the periodic progress payments in such cases to bear a distorted relationship to the amount of work actually performed during the period.

As the job progressed it received constant scrutiny. The taxpayer used the calendar year, and the accrual method of accounting in reporting its income for tax purposes. Income for each job was reported according to the percentage of completion method. At year-end a “book profit or loss” was computed. This figure was then submitted to taxpayer’s senior officials involved in accounting matters, particularly Mr. Gallagher (in the years after 1954) for analysis to determine whether such book profit or loss should be adjusted in the light of a re-estimation of the overall job profit, and of the impressions gained and conclusions reached from consultations and interviews with responsible officials close to the actual performance of the operation, as well as consideration, at times, of an independent “monitor” of the job, that is, an independent home office reestimation of the anticipated profit or loss, on the progress so far made on the job, whether significant or insignificant. The book profit or loss so determined was then subject to review by the taxpayer’s independent auditors, Ernst and Ernst. The function of such auditors, as described by Mr. Kelly, the Ernst supervisor, was a review “to determine whether or not we could express an opinion on the fairness of the financial statement” We are cited to no exceptions taken as to the fairness of any statement or report before us. The reports and statements were those of the taxpayer. Mr. Larson testified that “all of the adjustments that we proposed are actually client’s adjustments” and that “Somebody in the client’s office would be aware of them and would either make them and we would approve them or would make them perhaps upon our suggestion, but it is a matter of the client’s adjusting entries, not the auditors’ adjusting entries,” although it was agreed, as well, that in event of disagreement income would be reported in accordance with the auditors’ views.

Obviously, at this juncture, estimates have necessarily been involved, together with a high degree of professional judgment exercised with respect thereto. There must be a judgment made as to the “percentage of completion” profit based upon the most accurate estimate possible, at the time, as to the overall profit or loss to be expected from the job. Taxpayer concedes that “where a significant amount of work has not been completed” book profit or loss is not meaningful and it is zeroed out. Yet the line between significant and non-significant work is itself a matter of judgment. Similar exercise of judgment is involved in the projection of costs and in the estimation of ultimate profit or loss. We agree that the trial court’s finding that “the zeroing out of losses was bottomed upon the good-faith judgment of those employees charged with that responsibility and its public accountant” and find it amply supported in the record.

Application of the judgmental principle prior to 1960 rather than any hard and fast “rule” of percentage of completion is illustrated by the Michigan Bell Telephone job in Grand Rapids in 1954, Job 335, where a book loss of over sixteen thousand dollars at approximately 24% completion, was zeroed out (employing an entry of “Adjustment to Deferred Costs — to Zero out”). This was done, testified Mr. Larson, of Ernst and Ernst, because the underbalanced or low-margin units had been produced first, a profit on the job was expected upon completion of the remaining pay units, and moreover, Bergstrom felt confidence in Mr. Victorson, “the man who was doing the job” and who was predicting an ultimate profit, not loss, on the job. It is clear from this record that judgmental factors as to the many imponderables in an on-going contract were exercised in and controlled the zeroing out process, rather than the application of “rules” urged upon us by the taxpayer.

We turn now to an analysis of the particular jobs in controversy in the first category, supra, Jobs 431, 429 and 426. Job 431, the Rochester, New York, Inner-City Loop, when about 38% compete, at the end of 1960, showed u book loss of $138,380.48. This loss was not reported but, rather, zeroed out. The Ernst and Ernst work papers indicated a possible ultimate profit due to unbalance in the bidding, whereby “most of the profit is in the concrete and paving, most of which is yet to be done.” Mr. Gallagher in reviewing the situation, and after consultation with those on the job, had come to the conclusion, expressed in his memorandum Ex. C-9; that:

“Our year-end audit indicates a loss of approximately $138,000 on this job. We propose to zero this out as of 12/31/60 in expectation that the job will show a profit on completion in 1961.”

It was thus his decision that “in spite of what the book figure says there’s no loss to report at that time.” Such decision reflected the judgmental factors hereinabove described and applied.

Job 429, the Highbridge Interchange job, was zeroed out at approximately 21% completion at the end of 1960 although the job reflected a book loss of $129,766.51. Bacher’s “monitor” (which apparently Mr. Larson did not see) indicated a possible $16,500 loss on the job (Ex. D-10). Ex. D-9, however, indicated that the high profit items were yet to be produced. “Under these [described] conditions,” it states, “it was not possible to ‘loadup’ good items on early items, which contributes to the large spread between earnings and costs to date.” The decision reached is found on a sheet apparently attached to Ex. D-12 (“Inter Office” on taxpayer’s stationery, from New York Office to Gallagher) stating “Balance out to -0-.” It was the opinion of Mr. Larson that the job (in spite of a field re-estimate of $100,046 profit) was more likely to be a break-even job at best, and that, based upon his understanding of the percentage of completion method, it would have been improper to leave the loss under all of the circumstances, since “if a job was projected to break even and end up with zero profit or loss” no profit or loss for that job for that particular year should be reported.

Finally, of this job category, Job 426 was a road constructed in Honduras, contracted for by the United States Bureau of Public Roads. A book loss of $285,206.36 was effectively zeroed out to show a small profit, $5,285.90 at about 22% completion. A great deal of difficulty had been experienced on this job in ascertaining the true profit picture. Mr. Jesson had written to Mr. Fred-richs, the divisional chief on the job, that “On this job we have a very large excess of expense over income to date. We are carrying the difference as work-in-progress so that we will not show any profit or loss.” Mr. Fred-richs urged that “the job would show a profit of at least $100,000 on completion,” pointing out that “they show a loss to date because they have already incurred a large part of their mobilization costs” (emphasis in original). For the auditors, Mr. Larson felt, because of “the uncertainty of the information relative to the job and the lack of information as to what the ultimate profit would be” that an effective zeroing out was in order. Mr. Gallagher also was of the opinion that uncertainties clouded accurate estimations of the profit or loss on the job, and the book loss was accordingly zeroed out.

The situation with respect to Job 413, the single job in the second category, supra, does not involve a zeroing out. Rather the taxpayer now seeks to “correct” the book profit actually reported for the year 1960 to reflect a loss of $35,000. It seeks to do this principally on the ground that a monitor prepared by Bacher bore the entry “Possible loss, $35,000.” The government, on the other hand, stresses Gallagher’s notations on the monitor, stating “Increase in quantity income per 2-1-61 Recap, $241,728. Revised profit $206,728, compares favorably to 2-1-61 Recap.” It is argued by the taxpayer that the revised income figure does not take into account the cost of generating such income, casting doubt on the validity of Gallagher’s conclusions. But Gallagher, not his subordinate, Bacher, was the authoritative representative charged with making definitive determinations of projected losses. Mr. Gallagher’s responsibilities in this area were made clear by Mr. Jesson’s testimony: “Well, in this kind of a situation where we had a monitor showing a loss, and a difference of opinions shown by the field, it would have been Mr. Gallagher’s responsibility to make an evaluation of both documents” and come to a conclusion. Gallagher, then, after reviewing the various records, made his determination, based upon the totality of the best information available, and in so doing rejected his subordinate’s “possibility.” This he did in good faith (no fraud is charged) and we share the opinion of the trial court that the judgmental factors at the root of decisions made in 1960 are difficult of accurate and persuasive resurrection some seven years later. Such was not accomplished to the extent either of convincing the trial court that a mistake was made or this court that there is substantial error in the trial court’s determination.

It is obvious that the evidence thus reviewed presented sharp conflicts among the various ^witnesses. Differences were not confined to the lay witness. The taxpayer’s experts, Professor Berryman and Mr. Ross, testified that it was the taxpayer’s method, consistently followed, to report book- losses in full when the job was more than 10% complete. The government sought to discredit the conclusion by arguing that the experts’ review of the taxpayer’s practices prior to 1960 was wholly inadequate to apprise them of how the taxpayer’s accounting practices actually were implemented during the period critical to this case, and, moreover, that the “latest analysis estimated gain figures” employed by them were deficient as a basis for the conclusions reached. Similarly illustrative of conflicting testimony, the taxpayer criticizes Mr. Larson, Ernst’s senior on the job who actually approved the taxpayer’s accounting entries here in question, whereas the government supports his expertise and credibility. Mr. Jesson, on the other hand, who testified in support of the taxpayer’s position, is criticized by the government as having “very little to do with implementing accounting practices” during the period under consideration.

It was the finding of the trial court, after consideration of a lengthy stipulation, exhibits, and testimony from both lay and expert witnesses, as well as voluminous records of past jobs and their accounting treatment, that taxpayer’s method of accounting was a percentage of completion method, employing an adjustment of the accrual book profit or loss by the taxpayer’s responsible accounting officials and auditors. Such adjustment was made when, in their good faith judgment, considering all of the pertinent circumstances, the said book profit or loss did not adequately or reasonably reflect the operations of the taxpayer. Accordingly, the adjusting entries to Jobs 431, 429, 426, as well as the non-adjustment of Job 413, were all consistent with the taxpayer’s method of accounting, and, as well, reflected income for income tax purposes, and cannot now be changed. We agree.

It would serve no useful purpose and would only prolong this opinion for this court to consider in further detail the pro’s and con’s of the decisions reached in Jobs 335, 344, 345, 352, 347, 356, 358, 368, 401 and 406, among others. We have reviewed the arguments presented with respect to them but it is a legal truism that it is peculiarly the function of the trial court to resolve such conflicts as are here presented, and the court below, after weighing the competing versions of the taxpayer’s accounting procedures, hearing lengthy testimony from many witnesses, reviewing a myriad of accounting worksheets, and engaging several witnesses in perceptive colloquies, made its findings of fact. They are presumptively correct. Wilson v. N. Y. Life Ins. Co., 250 F.2d 649 (8th Cir. 1958). We may, of course, set aside the judgment below if clearly erroneous, McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20 (1954); Logan Charter Service, Inc. v. Cargill, 373 F.2d 54 (8th Cir. 1967). But upon the record before us, which we have reviewed in detail, we find no substantial error in the trial court’s findings on the controverted issues, particularly that, “as a practical matter the profit or loss at the end of the year would be merely a question of judgment.” Moreover, we are constrained to record, also, our agreement with the trial court’s finding that “It seems clear from the evidence that the belated claim of losses during the year 1960 discovered by re-estimates was an afterthought of plaintiff’s officials when subsequent to that year it became apparent that the four’ jobs in question, as well as other projects, were going to be heavy losers.”

Under the view we have taken of the case it is unnecessary to discuss the additional issues argued by the parties.

Affirmed.

      . The taxpayer contends that losses should have been reported on its tax returns as follows:
      Job Number Percentage of Completion Alleged Book Loss Not Reported for 1960
      431 About 38% $138,380.48
      429 About 21% $129,766.51
      426 About 22% $285,206.36 (net income reported $5,285.90)
      413 About 59% $ 35,000.00 (net income reported $95,257.87-
      $6,036.23 reported in 1959, error, $130,257.87)
      Total $588,353.35

      . “We must emphasize that we are not seeking to deny taxpayer the ultimate losses that were sustained on these jobs. We only say that taxpayer was not, under its method of accounting, required to take them in 1960 and may not belatedly do so now. Taxpayer could take losses on these jobs in years subsequent to 1960, but because of its serious business reversals they do not benefit taxpayer in those years.” (Government’s brief, pp. 56-57.)

      . The taxpayer’s home office accounting department hierarchy comprised D. P. Jesson, Secretary-Treasurer and Financial Vice-President, E. R. Gallagher, Controller, E. F. Baeher, Chief Accountant, and Mrs. Carol Nordstrom, General Ledger Accountant. Of these individuals, testified Mr. Jesson, it was “Gene Gallagher who would have the best information from the job or from his own analysis as to whether these were other elements that should be taken into account” with respect to reporting profits or losses on jobs. App. 74.

      . I.R.C § 446(a) provides that taxable income shall be computed under the method of accounting on the basis of which the taxpayer regularly computes its income in keeping its books. It is further provided in the Treasury Regulations that a method of accounting which “reflects the consistent application of generally accepted accounting principles in a particular trade or business” will ordinarily be regarded as clearly reflecting income. Treas.Reg. § 1.446-1 (a) (2). It is specifically provided that all items of gross income and expense are to be treated consistently from year to year. As to the accrual method," employed in the case before us, it is further provided that the “method used by the taxpayer in determining when income is to be accounted for will be acceptable if it accords with generally recognized and accepted income tax accounting principles and is consistently used by the taxpayer from year to year.” Treas.Reg. § 1.446-l(e) (1) (ii).

      . “I. Book profit or book loss, as the case may be, was reported, without adjustment, except only where one of the specific exceptions listed below applied.”
      “II. Where a job was less than about 10% completed, neither a profit nor a loss was reported and the book profit or the book loss, as the case may be, was zeroed out.”
      “III. Where a job was more than about 10% complete but less than 25% complete a book profit was ordinarily zeroed out and no profit or loss was reported.”
      “IV. Where thete was a book profit on a job more than 25% complete, taxpayer reported the book profit, not in excess of the approximate amount of the projected profit upon completion multiplied times the percentage of completion.”
      “V. Where the projected final profit or loss upon completion of a job was a loss which was greater than the book loss (or where there was a book profit), taxpayer reported the full projected loss in that year.”

      . See Herwitz, Accounting for Long-Term Construction Contracts, 70 Harv.L.Rev. 449, 450 (1957) : “Accounting Research Bulletins are promulgated by the Committee on Accounting Procedure of the American Institute of Accountants” and have been “long a source of thoughtful guidance to the accounting profession.”

      . Shrinkage, as used in this context, is a concept to describe the following condition: The contractor, in preparing individual unit-bid contract prices, estimates the need to remove and replace with sand 2,000 cubic yards of soil. However, after completion actual removal and replacement totaled only 900 cubic yards. Thus shrinkage causes a reduction in profit realized and overhead distributed.

      . App. 89.

      . Herwitz, Accounting for Long-Term Construction Contracts, supra.

      . From the gross income, comprised of the owner’s payment estimates, plus un-billed estimates, less advance collections, was subtracted a cost figure, namely, the costs allocable to the year (including accrued costs) less inventory on hand at the end of the year, and less costs deferrable to a later accounting period. The result was (Stip. B-15) internally called the “book profit or loss” for the year. It was also referred to as a “preliminary working_ trial balance” since it might later be adjusted. At this point if we divide the total estimated contract price into the periodic payments made to that time the resulting figure will be the percentage of completion from the owner’s standpoint, based upon the pay units completed.

      . “During all years herein involved and for many years prior thereto including 1953, plaintiff, as part of its year-end accounting procedures, requested from each job superintendent or other job office personnel a current estimate of the projected profit or loss upon final completion of such job. Such projections would usually be prepared by the job superintendent, although in some cases they would be prepared by office engineers associated with the divisional office . . . [S]uch projections were usually prepared by job engineers or by office engineers using the estimate Summary form and were commonly called ‘Job Recaps’.” (Stip. B-16)

      . The Ernst employees who reviewed taxpayer’s accounting entries and conferred with Mr. Gallagher, were George Kelly, supervisor from 1953 through 1960, Warren D. Bergstrom, senior on the job for the accounting years 1954 through 1956, and Willis E. Larson, the senior on the job for the accounting years 1958 through 1960.

      . App. 206.

      . App. 320-321.

      . Stip. B-19.

      . “Problems [with respect to'the meas-urability of percentage of completion] can occur in four areas: (1) Objective and certain determination of total revenue, (2) uncertainty regarding collection, (3) measurement of percentage of completion, and (4) cost estimation.” Spiller, Financial Accounting. Rev.Ed.1971, p. 184.

      . Appellant’s Brief, p. 15; Jesson, App. 47, places this point of completion as “about” ten per cent.

      . The term zeroing out simply means making a wholly arbitrary entry without any support and underlying documents in order to fall in line with established practices. (Jesson, Apt). 75). Larson stated as a purpose “to adjust the recorded profit or loss that should be reported, based on the estimated profit on completion.” (App. 462.) It may be made in deferred costs, unbilled estimates, or through entries similar in purpose.

      . Finding No. 18, App. 534. Stipulation H-l.

      . The taxpayer urges that except for the zeroing-out on the three controverted jobs in 1960, no jobs were “ever zeroed out by the taxpayer” except where less than about 10% of the work had been completed.

      . Job 335, Stip. II-4.

      . Ex. L-4: “Sixty per cent of the billings worked to date have been on items with relatively low profit, steel, plumbing, electrical. We appear to have a start-up cost which can be justifiably deferred. Part of the contract calls for tearing down existing structures bid at a low margin.”

      . App. 451.

      . Ex. L-4.

      . See, also, Stip. 11-14, where a book loss at seven per cent completion was taken (“Torrential rains and floods have caused loss to date,” Ex. L-18), and Stip. II-8 where a book loss at 12 per cent completion was zeroed out. In addition, Mr. Gallagher testified that up to between ten and thirty per cent “it was impossible to tell because of mobilization costs and other types of expense, possibly early return on unbalanced bid as to whether there was any income in the job.” (App. 482.) Mr. Kelly was of the opinion that rather than any arbitrary percentage, zeroing out depended upon whether or not the job had had “a full season of operation by the end of the year” (App. 219) and Mr. Bergstrom testified that “I think it is primarily judgment. I never heard anybody fix a percentage.” (App. 428.)

      . “At the end of calendar year 1960, on the basis of estimates allowed compared to the original contract price, Job 431 was 37.6% complete .... At that date, on the basis of costs incurred to date (excluding work in progress) compared to estimated total costs to completion (per 1/1/61 Recap) Job 431 was 46.6% complete” . . . (Stip. C-7).

      . Ex. G-28 (first and fourth pages).

      . App. 475.

      . App. 498.

      . Mr. Larson’s testimony is explanatory of the procedures employed in the making of an adjustment:—
      “As indicated in the memo, that adjustment was made, and I might say it was made not necessarily by us as auditors but by the client in connection with closing their year-end books — this entry and entries similar to this would be reviewed and discussed with the client before it was made. But the entry was made because without making the entry, there would have been a loss recorded on the job of approximately $129,000. Under the percentage of completion method of accounting, it would not be proper to leave the adjustment unmade. The memo indicates that the final job profit as shown in the 2/1/61 estimate of $100,000 was not necessarily reliable and although the job was 28 percent complete because of uncertainty on the estimate, the job was adjusted to show neither profit nor loss for that year.” (App. 317.)
      It was also his testimony (App. 321 and 328) that the entry made corresponded with the method of accounting used by the taxpayer, and that it was consistent with past practices.

      . Ex. P-5.

      . Ex. G-23.

      . App. 384.

      . The situation with respect to Jobs 420 and 421, also 1960 jobs, wherein book losses were permitted to stand without adjustment, is not inconsistent with that reached in the jobs hereinabove discussed, since as “a matter of reasonableness” and “realistic and reasonable judgment” it was decided to let the losses stand.

      . Ex. E-ll.

      . App. 151. See, also, Gallagher’s letter, Jan. 20, 1961 (Ex. E-8), expressing the view that the job was in the black and the trend was good.

      . App. 145. In preparing the monitor Bacher did not have the field recap (Stip. E-17) available to him, as it was to Gallagher in making his determination.

      . Spiller, Financial Accounting (Rev.Ed. 1971) p. 163:
      “The accounting for construction contracts actually can be quite complicated.”

      . See App. 424-435, Cf., W. F. Trimble & Sons Co., 1 T.C. 482 (1943).

      . App. 531, Finding No. 14.

      . Id.


source: Caselaw Access Project

author: BRIGHT, Circuit Judge.

license: Public Domain

text:
    NATURAL RESOURCES BEFENSE COUNCIL, INC., a non-profit New York corporation, et al., Petitioners, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent, Iowa Wildlife Federation, Inc., a nonprofit Iowa corporation; and Joel D. Benson, Intervenors.
    No. 72-1380.
    United States Court of Appeals, Eighth Circuit.
    Submitted April 9, 1973.
    Decided July 27, 1973.

      Richard E. Ayres, New York City, for petitioners.
    Alfred T. Ghiorzi, Atty., Dept, of Justice, Washington, D. C., for respondent.
    Before GIBSON, BRIGHT, and ROSS, Circuit Judges.

      . Iowa Code Ann. § 136B.13. These procedures define circumstances under which and the manner whereby an individual pollution source can defer compliance with state air quality standards.

   BRIGHT, Circuit Judge.

Petitioners, under 42 U.S.C. § 1857h— 5(b)(1), seek review of the decision of the Administrator of the Environmental Protection Agency (EPA) approving portions of Iowa’s Air Pollution Control Implementation Plan (Iowa Plan) adopted pursuant to § 110 of the Clean Air Act Amendments of 1970, 42 U.S.C. § 1857c — 5.

The 1970 Amendments require the Administrator to establish primary and secondary ambient air quality standards which specify maximum amounts of pollutants to be allowed in the ambient air. Primary standards establish allowable máximums consistent with protection of the public health; secondary standards delineate máximums consistent with protection of the public welfare from any known or anticipated adverse effects associated with the presence of pollutants. The 1970 Amendments require each state to submit to the Administrator a plan for implementation, maintenance, and enforcement of the federal standards, § 1857c — 5(a)(1). The plan must be designed to achieve primary standards as expeditiously as practicable, but in no case later than three years from the date of approval of such plan, and secondary standards within a reasonable time, § 1857c — 5(a) (2) (A). The Administrator is to approve or disapprove each portion of the plan depending on whether it conforms with the prescribed deadlines for attainment of national standards and with other criteria set out in § 1857c — 5(a)(2). If any plan or portion thereof fails to conform to statutory requirements, the Administrator ultimately is directed to promulgate such regulations as may be necessary to cure the deficiency, § 1857c — 5(c).

Petitioners allege four deficiencies in the Iowa Plan as approved by the Administrator.

I.

Petitioners argue that the Iowa Plan fails to make adequate provision for intergovernmental cooperation to prevent interstate pollution which would interfere with the attainment and maintenance of national standards. The 1970 Amendments require that state plans contain:

[A]dequate provisions for intergovernmental cooperation, including measures necessary to insure that emissions of air pollutants from sources located in any air quality control region will not interfere with the attainment or maintenance of such primary or secondary standard in any portion of such region outside of such State or in any other air quality control region[.] [42 U.S.C. § 1857c — 5(a) (2) (E).]

The Administrator, seeking to clarify the statutory requirement, promulgated a regulation providing that:

Each plan shall provide assurances that the State agency having primary responsibility for implementing national standards in any region, or portion thereof, will promptly transmit to other State agencies having similar or related responsibility in the same or other States, information on factors (e.g., construction of new industrial plants) which may significantly affect air quality in any portion of such region or in any adjoining region. [40 C.F.R. § 51.21(c).]

Petitioners contend that the mere exchange of information endorsed by the regulation will preclude the establishment of “binding enforcement agreements” which the statute allegedly requires. Respondent answers that § 1857c — 5(a)(2)(E) does not require state plans to contain interstate compacts regulating interstate pollution.

We agree with respondent. The exchange of information called for in 40 C.F.R. § 51.21(c) constitutes a form of “intergovernmental cooperation” which will provide a basis for evaluating the impact of pollutants in interstate regions. Based on such information, states, or the Administrator if necessary, can set emission standards and compliance requirements which will insure the timely attainment and maintenance of national standards.

We believe that Congress has left to the sound discretion of the Administrator the determination of what degree of governmental cooperation and other measures are necessary to insure noninterference with the attainment and maintenance of national standards. Cf. Natural Resources Defense Council, et al. v. Environmental Protection Agency, 478 F.2d 873, 883-884 (1st Cir. 1973). Absent evidence to the contrary, we are satisfied that the proposed information exchange is a viable means for accomplishing the statutory end.

II.

Petitioners contend that state variance procedures incorporated in the approved Iowa Plan are inconsistent with the 1970 Amendments in that (1) they circumvent the federal postponement provisions of 42 U.S.C. § 1857c— 5(f), allegedly intended to be the sole avenue for deferring compliance with any requirement of a state plan, and (2) they allow for the consideration of such economic factors as technological feasibility in the granting of variances, contrary to the intent of Congress.

Respondent replies that the federal postponement procedures were not intended to be the sole means of deferring compliance with requirements of a state plan. It further argues that the practice by the EPA Administrator of treating variances concurred in by state agencies as requests for plan “revisions,” makes these proposed changes subject to plenary review by the Administrator under § 1857c — 5(a)(3). Since such revisions come under the Administrator’s jurisdiction on review, the attainment and maintenance of national standards will not be undermined.

The First Circuit in Natural Resources Defense Council, supra, 478 F.2d 873, at 884-888 (1973), dealt with this identical issue. It held that states could apply their variance procedures during the “preattainment” period when states were striving to bring themselves into initial compliance with national standards, but that the federal postponement procedures of § 1857c — 5(f), with limited exceptions, must govern in the “post-attainment” period when states would be required to maintain national’standards. The court further concluded that the Administrator must require the revision of defective portions of a state plan (such as provisions allowing for considerations of economic cost and hardship in the granting of variances), even though the plan is based on state statutes or regulations, because the 1970 Amendments take precedence over state law.

The First Circuit directed:

With respect to the Rhode Island variance provision, the Administrator is directed to take the following action:

The Administrator shall publish his disapproval of the portion of the Rhode Island implementation plan consisting of the variance statute (G.L. R.I. § 23-25-15) insofar as the statute permits the granting of any variance after the federal compliance dates for attainment of national primary and secondary standards (except minor deferrals as hereinabove described); insofar as it permits the granting of any variance prior to these dates not first approved by the Administrator; and insofar as it permits the granting of any variance other than one conforming to requirements set forth in regulations to be promulgated as part of the Rhode Island plan by the Administrator. After issuing such disapproval, the Administrator shall promptly promulgate regulations, as part of the Rhode Island plan, specifying the limited terms, conditions and circumstances under which state variances may still be issued. Such terms, conditions and circumstances shall be consistent with this opinion and may include additional more restrictive provisions as deemed appropriate by the Administrator. [National Resources Defense Council, supra, 478 F.2d at 888.]

Although respondent administratively • would require review of variances granted by a state, we think it proper that provisions of the Iowa Plan be in specific accord with federal statutory requirements. Accordingly, we adopt the remedy outlined in the First Circuit opinion and direct the Administrator to take similar action, as necessary, in regard to the variance provisions incorporated in the Iowa Plan.

III.

Petitioners’ next argument challenging provisions of the Iowa Plan allowing consideration of economic costs in the issuance of state abatement orders is closely related to the second alleged defect in Iowa’s variance procedures. However, the respondent agency notes that such economic considerations will not enable Iowa to postpone its compliance with national ambient air quality standards beyond the three-year deadline of May 31, 1975. Accordingly, this objection is resolved against petitioners in light of our comments in part II of this opinion relating to state variance procedures and the further elaboration of the First Circuit on the identical objection in its opinion in Natural Resources Defense Council, supra, 478 F.2d at 888-889.

IV.

Petitioners, finally, argue that Iowa’s new-source review procedure does not fulfill requirements of the 1970 Amendments pertaining to such sources. They allege that the Iowa permit system is deficient in three respects:

First, it fails to require the denial of a permit where a source would prevent the attainment or maintenance of a National Air Quality Standard. Second, it fails to contain procedures for reviewing the location of new sources. Third, it fails to ensure that a source granted a permit must comply with all applicable portions of the control strategy. [Petitioners’ Br. at 42.]

Respondent concedes the validity of the first contention and will take steps to compel Iowa to submit a revision of its plan to remedy the defect in its regulation. Respondent, however, argues that the Iowa permit system (a) inherently requires consideration of source location and (b) provides for compliance with all applicable portions of the control strategy-

We agree with respondent. It is logical to assume that a rational permit system would inherently require consideration of the location of pollution sources. However, we need not decide whether the statute requires that a state plan specifically mention location as a consideration. The Iowa Plan states that a permit is not transferrable from one “location” to another, § 3.1(2)a.(2) (Vol. I, p. 35). We believe that this indicates explicitly that location is an overriding concern in the granting of a permit under the Iowa Plan.

Petitioners’ argument that the procedures governing the review of new sources and modifications do not require continuing compliance with the State’s control strategy as contemplated by EPA regulations is similarly without merit. 40 C.F.R. § 51.12 makes clear that the control strategy for a given state is its rules and regulations designed with the approval of the EPA Administrator to implement the purposes of the 1970 Amendments. Section 2.1(1) of Iowa’s Rules and Regulations relating to Air Pollution Control, incorporated in the Iowa Plan as the procedure applicable to the review of new sources, § 9.1.0 (Vol. II, p. 446), provides :

2.1(1) New equipment. All new equipment and all new control equipment, as defined herein, installed in this state shall perform in conformance with applicable emission standards specified in chapter 4 of these rules and regulations. [Vol. I, p. 32 (emphasis added).]

We are satisfied that this comports with the requirements of 40 C.F.R. § 51.-18(d).

We affirm the Administrator’s approval of provisions of the Iowa Plan regarding (1) intergovernmental cooperation and (2) source location and continuing compliance with the control stategy under the Iowa permit system for new and modified sources.

Variance procedures and considerations of economic feasibility in the issuance of abatement orders insofar as they are applicable under the Iowa Plan to maintenance of clean air in the post-attainment period following May 31, 1975, are disapproved in their present form and respondent should take appropriate action to remedy these deficiencies.

      . This jurisdictional provision states: A petition for review of the Administrator’s action in approving or promulgating any implementation plan under section 1857c — 5 of this title or section 1857c — 6(d) of this title may be filed only in the United States Court of Appeals for the appropriate circuit. Any such petition shall be filed within 30 days from the date of such promulgation or approval, or after such date if such petition is based solely on grounds arising after such 30th day.

      . A general critique of the federal regulations promulgated pursuant to these criteria is found in Note, Clean Air Act Amendments of 1970: A Congressional Cosmetic, 61 Geo.L.J. 153, 172-184 (1972).

      . The Iowa Plan, in conformity with the regulation, provides:
      All applicable air quality and emission inventory information available has been transmitted to the States of Illinois, Nebraska, South Dakota and Wisconsin. The States of Nebraska, South Dakota, and Wisconsin have forwarded similar information relative to those states. It is the intent of the State of Iowa to continue to furnish , any available data needed, including control strategy development, to implement control plans to the states included jointly in interstate air quality control regions. [§ 10.2.0 (Vol. II, p. 450)].

      . Section 10.2.0 of the Iowa Plan (Vol. II, p. 450) further states that:
      Information obtained to date through conferences and other means indicates rather definitely that no organized regional control agencies or boards will be developed for any of the interstate air quality control regions affecting the State of Iowa. Therefore, it is the intent for the State of Iowa to conduct the applicable and, appropriate control activities in all portions of the State; and to continue to develop and to expand the mutual interchange of basic information on control strategies and enforcement actions with the surrounding states involved. [Emphasis added.]
      We think this language evidences a clear resolve within the framework of the Iowa Plan to control interstate pollution effectively.

      . The court’s reasoning was based primarily on the greater need for flexibility which it saw in the preattainment period and its conclusion that the Administrator’s review of variance requests would preserve the integrity of the long-term compliance deadlines provided by statute.
      In a post-argument memorandum directed to the First Circuit’s decision, petitioners argue that states should not be allowed to utilize their variance procedures even in the preattainment period since compliance schedules tailored to the needs of individual pollutors pursuant to § 1857c — 5(a) (2) (B) are the appropriate means for, and provide flexibility in, deferring compliance during the preattainment period. While compliance schedules do interject some flexibility tailored to individual need, we do not agree with petitioners’ implication that variance procedures are either surplus-age or somehow inconsistent with the compliance-schedule framework of the statute. Such procedures seem rather to complement that general framework of flexibility within the mandatory compliance deadlines for achieving national standards.

      . 40 C.F.R. § 51.18(d) states:
      Sucli procedures shall provide that approval of any construction or modification shall not affect the responsibility of the owner or operator to comply with applicable portions of the control strategy,


author: NEESE, District Judge.

text:
    SANDUSKY FOUNDRY AND MACHINE COMPANY, Plaintiff-Appellee, v. CITY OF WICKLIFFE et al., Defendants-Appellants.
    No. 73-1104.
    United States Court of Appeals, Sixth Circuit.
    Argued June 15, 1973.
    Decided Aug 24, 1973.

      James W. McDonnell, Jr., Memphis, Tenn., for defendants-appellants; Canada, Russell & Turner, Memphis, Tenn., and Wheeler & Boaz, Paducah, Ky., on brief.
    Edgar A. Zingman and A. Wallace Grafton, Jr., Wyatt, Grafton & Sloss, Louisville, Ky., William L. Shadoan, Wickliffe, Ky., Taft, Stettinius & Hollis-ter, Cincinnati, Ohio, for plaintiff-appel-lee.
    Before PHILLIPS, Chief Judge, ED-' WARDS, Circuit Judge, and NEESE District Judge.

       The Honorable C. G. Neese, United States District Judge for the Eastern District of Tennessee, sitting by. designation.

   NEESE, District Judge.

This action for the enforcement, under Kentucky law, of a claimed material-man’s lien, resulted in a judgment for the appellee Sandusky Foundry and Machine Company (Sandusky) against the appellants City of Wickliffe (City) and Westvaco Corporation (Westvaco) for $130,054 with interest from December 12, 1969. An appeal was taken by the appellants. We affirm.

The simplified facts are that Sandus-ky contracted with Rice Barton Corporation (R-B) to fabricate for $157,659 elements (rollers) of a 3,300-ton pa-permaking machine, costing about $7,-000,000, which R-B had agreed on September 7, 1967 to manufacture to specifications and deliver to Westvaeo for its use in a plant to be constructed on realty owned by the City and to be leased for operations to Westvaeo. This was a public improvement project, financed by the issuance and sale by the City, pursuant to a Kentucky statute, of about $80,000,000 in industrial building revenue bonds.

The major part of Sandusky’s contract was completed on November 5, 1968. On July 14, 1969, before the completion by R-B of the prime contract with West-vaco, acting as agent for the City, R-B petitioned for an arrangement under the Bankruptcy Act, chapter XI, in the District Court for Massachusetts. The original contract between R-B and the City and Westvaeo was disaffirmed, but another contract was executed, which called for the same machinery and an additional payment to R-B. By stipulation, Sandusky was permitted to file this action to enforce an inchoate lien which it had to the proceeds of the bonds in the City’s hands. R-B afterward billed the appellants for $609,000 under the new contract.

R-B contended that one of the rollers fabricated and delivered by Sandusky was not to specification and, although the warranty period thereon had expired, Sandusky agreed to substitute a new roller (replacement shell) at no cost to R-B. This replacement part was received by R-B in Wickliffe on November 25, 1969.

Sandusky filed its first notice of a lien claim on July 22, 1969. An amended claim was filed on October 10, 1969. Both of these notices were filed more than 30 days after November 5, 1968. No payment under the contract between Sandusky and R-B was made, and on December 13, 1969 Sandusky filed with the appropriate official a second amended claim of a materialman’s lien against funds in the hands of the City owing to R-B, stating that the last furnishing of materials for the project had been accomplished on November 25, 1969. Attested copies of such amended claim were sent to the City by Sandusky by letter of January 8, 1970. R-B, the prime contractor, did not, within 30 days from December 13, 1969, file with the City a written protest putting in issue the liability of the fund due R-B in the hands of the City.

The appellants contend that the District Court erred in holding that a statement of the lien was filed with the appropriate official within the time required by KRS 376.230. The District Court properly construed the broad language of KRS 376.195(2) as encompassing within the definition of “materials” the rollers supplied by Sandusky for this public improvement. KRS 376.210 clearly gave to Sandusky, for supplying such materials, a lien “ * * * on the funds due the contractor [R-B] from the owner of the property involved [City] * * * ,” which such lien attached only to any unpaid balance due the contractor from the time an attested copy of the lien statement was delivered to the City or its agent. KRS 376.210(3). The City held sufficient funds owing to R-B on January 8, 1970, to satisfy Sandus-ky’s lien. The District Court found factually that Sandusky’s contract with R-B was not completed until November 25, 1969, due to faulty work, citing Akers & Co. v. Weil, 251 Ky. 689, 65 S.W.2d 712 (1933), and City of Ashland v. Ben Williamson & Co., 294 Ky. 446, 171 S.W.2d 968 (1943), and that finding is not clearly erroneous. Rule 52(a), Federal Rules of Civil Procedure.

In Akers it was stated with reference to a mechanic’s lien:

* * * In Henry Koehler & Co. v. Hines, 185 Ky. 270, 214 S.W. 906, upon the authority of several other cases, it is declared that the time for giving notice of a lien of this class cannot be prolonged by furnishing labor or material that is trivial and unnecessary for the completion of the contract. That is good law. But the facts of that case are different from those here, in that it appeared there that the sole purpose for which the material had been furnished was to bring the claim under the statute, as it was not necessary. Here it is clearly shown that the claimant’s work and materials had not been accepted. It realized that its contract had not been complied with, and, upon the demand of the owner, went ahead and completed the job in an acceptable manner. This was necessary in order for the contractor to recover under his contract, and it was all in good faith. It had the effect of extending the time for claiming the lien. * * *

251 Ky. at 690, 65 S.W.2d at 712 Akers is cited in City of Ashland for the proposition that, where a subcontractor supplied, after the expiration of the lien period, materials which were included and specified in the contract but had been overlooked or forgotten and were necessary to complete the contract, a materi-alman’s lien was valid. 294 Ky. at 452-453, 171 S.W.2d 968.

The appellants urge also that, after the filing by R-B of the aforementioned arrangement in bankruptcy, no funds remained in the City’s hands due R-B against which Sandusky could enforce a lien because such funds had theretofore passed into the hands of the receivers in bankruptcy. The language of the Bankruptcy Act, 67(c), (1)(B), 11 U.S.C. § 107(c)(1)(B), reveals that there is no merit to this argument. The statute provides:

§ 107. Liens and fraudulent transfers

* * * -X- -x- *

(e)(1) The following liens shall be invalid against the trustee:

•X- -X- -X- -X- -X- -X-

(B) every statutory lien which is not perfected or enforceable at the date of bankruptcy against one acquiring the rights of a bona fide purchaser from the debtor on that date, whether or not such purchaser exists: Provided, That where a statutory lien is not invalid at the date of bankruptcy against the trustee under subdivision (c) of this Act [11 U.S.C. § 110(c)] and is required by applicable lien law to be perfected in order to be valid against a subsequent bona fide purchaser, such a lien may nevertheless be valid under this subsection if perfected within the time permitted by and in accordance with the requirements of such law * * *. (Emphasis supplied.)

Under the Kentucky Public Improvement Lien Law, KRS 376.195 et seq.,'no judgment creditor, unsatisfied execution creditor or contract lien creditor is given any right against the public authority. Therefore, under the first proviso of 11 U.S.C. § 107(c)(1)(B), Sandusky’s statutory lien was not invalidated by the existence of any superior creditors at the date of bankruptcy under 11 U.S.C. § 110(c). Under the Kentucky Public Improvement Lien Law, supra, the perfected materialman’s lien of Sandusky was superior to all other claimants except earlier perfected claims of other materialmen, of which there were none. Under the factual finding of the District Court, Sandusky’s lien was perfected within the time permitted by and in accordance with the requirements of such law. For such reasons, Sandusky’s lien is valid against the receivers, notwithstanding other provisions of 11 U.S.C. § 107(c)(1)(B). Further, the City and Westvaco had no standing to raise this defense herein, because R-B failed, within 30 days from the delivery of an attested copy of the statement of Sandusky’s lien, as required by KRS 376.230, to file with the City a written protest putting in issue the liability of the fund in the City’s hands for payment of Sandusky’s lien. KRS 376.250(2).

Finally, there was no error in the District Court’s denying the appellants’ motion to reopen the proof for the introduction of an additional exhibit. Reopening the case for further proof is a matter which addresses itself to the wide discretion of the District Court, Kitchen v. United States, 95 U.S.App.D. C. 277, 221 F.(2d) 832, 835[5] (1955), and we find no abuse of discretion here.

The judgment of the District Court is affirmed.

      . 376.230 [2494] Lien dissolved unless statement filed with county clerk within thirty days; form of statement; duty and fees of clerk.
      (1) The lien provided for in KB.S 376.210 shall be dissolved unless the person who furnishes the labor, materials or supplies shall, within thirty days after the last day of the last month in which any labor, materials or supplies were furnished, file in the county clerk’s office of each county in which labor, materials or supplies were furnished, except as hereinafter provided, a statement in writing verified by affidavit of the claimant or his authorized agent or attorney, setting forth the amount due for which the lien is claimed and the name of the canal, railroad, bridge, public highway or other public improvement upon which it is claimed.
      (2) In all eases where a lien is claimed for labor, materials or supplies furnished for the improvement of any bridge, public highway or other public property owned by the state or by any county or city, the statement of lien shall be filed only in the county clerk’s office of the county in which the seat of government of the owner of the property is located.
      (3) The county clerk, upon the filing of the statement, shall make an abstract and entry thereof as now provided by law in case of mechanics’ liens in the same book used for that purpose, and shall make proper index thereof. The clerk shall be paid one dollar by the party filing the claim, and twenty-five cents for attesting any copy of the lien statement. If he is required to make the copy, he may make an additional charge as provided by law. All of these charges may be recovered by the lien claimant as dosts from the party and out of the fund against which the claim is filed.

      . 376.195 Definitions for KRS 376.195 and 376.210.
      As used in this section and in subsection (1) of KRS 376.210 :
      (2) “Materials” * * includes all materials of every kind or character used in the public improvement which shall remain as a part of the completed improvement, and all the materials substantially consumed or the value thereof substantially destroyed in making the public improvement, including explosives, gasoline, oil, grease, form lumber and other similar articles * * *.

      . 376.210 [2492] Lien for labor, material or supplies furnished on public improvement ; assertion, filing and enforcement.
      (1) Any person, firm or corporation who performs labor or furnishes materials or supplies for the construction, maintenance, or improvement of any canal, railroad, bridge, public highway or other public improvement in this state by contract, express or implied, with the owner thereof or by the subcontract thereunder shall have a lien thereon, and upon all the property and franchises of the owner, except property owned by the state, a subdivision or agency thereof, or by any county or city. If the property improved is owned by the state or by any subdivision or agency thereof, or by any county or city, the person furnishing the labor, materials or supplies shall have a lien on the funds due the contractor from the owner of the property improved. Except as provided in section 376.195, the lien shall be for the full contract price of the labor, materials and supplies furnished, and shall be superior to all other liens thereafter created.
      (1966 c 255, § 262. Eff. 6-16-66)
      (2) Any person undertaking or expecting to furnish labor, materials or supplies as provided in this section may acquire the lien herein provided by filing in the clerk’s office of each county in which he has undertaken to furnish labor, materials or supplies, except as provided in subsection (3), a statement in writing that he has undertaken and expects to furnish labor, materials or supplies and the price at which they are to be furnished, and the lien for labor, material or supplies furnished thereafter shall relate back and take effect from the date of the filing of the statement. In all cases of original construction the liens shall be prior to all liens theretofore or thereafter created on the part so constructed and on no other part.
      (1966 c 255, § 262. Eff. 6-16-66)
      (3) In all cases where the labor, materials, or supplies are furnished for the improvement of any public highway or other public property owned by the state or by any county or city, the statement shall be filed in the county clerk’s office of the county in which is located the seat of government of the owner of the property improved, and the lien shall attach only to any unpaid balance due the contractor for the improvement from the time a copy of the statement, attested by the county clerk, is delivered to the owner or the owner’s authorized agent with whom the contract for improving the public highway or other public property was made.
      (1966 c 255, § 262. Eff. 6-16-66)

      . Unless the contractor, within thirty days from the date of the delivery of the attested copy, files with the public authority a written protest putting in issue the correctness of the amount due the lien claimant or the liability of the funcl for payment thereof, the amount withheld shall be paid by the public authority to the lien claimant and charged to the account of the contractor * * *. KRS 376.250(2).


author: HEANEY, Circuit Judge.

text:
    Mary DALY et al., Appellees, v. UNITED STATES of America et al., Appellants.
    No. 73-1248.
    United States Court of Appeals, Eighth Circuit.
    Submitted June 12, 1973.
    Decided Aug. 23, 1973.

      Keith A. Tidball, Pierre, S. D., for appellants.
    Mark V. Meierhenry, Rosebud, S. D., for appellees.
    Before CLARK, Associate Justice, Retired, and HEANEY and BRIGHT, Circuit Judges.

       United States Supreme Court, sitting by designation.

   HEANEY, Circuit Judge.

This class action was brought on February 22, 1972, by three enrolled members of the Crow Creek Sioux Tribe against the Tribe, the incumbent Tribal Council members, the United States of America, the Secretary of the Interior and the Commissioner of the Bureau of Indian Affairs. The plaintiffs complained that the Tribal Council was mal-apportioned and that they, and those they sought to represent, were underrepresented on the Council. They urged that the alleged malapportionment violated the one-man, one-vote principle and, thus, denied to them equal protection of the laws as guaranteed by the Indian Civil Rights Act, 25 U.S.C. § 1302(8).

The Crow Creek Tribe adopted a Constitution and By-Laws in 1949. The provisions set forth below are those which were in effect at the time this action was initiated. The Constitution provided for a six-member Tribal Council. It was to be the governing body of the Tribe. Two eouncilmen were to be elected from each of three districts— Crow Creek, Big Bend and Ft. Thompson. The Constitution provided that Council members elected after the first election were to have staggered two-year terms, with one of the two members from each district elected in each annual election. A chairman and other officers were to be elected by the Tribal Council from its own number. Resident members of the Tribe of at least eighteen years of age at the time of election were eligible to vote. Membership in the Tribe and eligibility for office were restricted by blood quantum requirements. The eligibility requirement was designed to insure that at least one of the two members from each district would be of one-half, or more, Indian blood. No amendments relevant to the issues raised here have been enacted.

The plaintiffs alleged that the number of eligible voters in each district was: Crow Creek, 75; Big Bend, 47; Ft. Thompson, 350. As residents of Ft. Thompson, the plaintiffs maintained that they were under-represented on the Council and that the districts were mal-apportioned. They brought this action under the Indian Civil Rights Act, 25 U.S.C. § 1302(8), and sought: (1) a temporary injunction restraining the defendants from conducting the annual tribal election for members of the Tribal Council during the pendency of the action; (2) a declaratory judgment that the districts, as then constituted, denied the plaintiffs equal protection of the laws; and (3) a permanent injunction prohibiting any future elections under the then existing procedures, coupled with a mandatory injunction requiring the defendants to submit to the District Court a new apportionment plan for the Reservation which would provide the plaintiffs with fair representation on the Tribal Council.

On April 14, 1972, the District Court ruled that it had jurisdiction over the action. It held that the existing districts were malapportioned and deprived the plaintiffs of equal protection of the laws. It denied the request for a preliminary injunction and ordered that the election, scheduled for April 20, 1972, should be held as scheduled, but that it should be at-large, rather than by districts. The court gave the Tribal Council six months to submit an acceptable and reasonable apportionment plan which would comport with the spirit of the one-man, one-vote doctrine.

The Tribal Council submitted an apportionment plan to the District Court on September 29, 1972. The plan was in the form of proposed amendments to the Constitution, the amendments to be submitted to the people of the Tribe for ratification after approval by the court. The plan provided for an at-large election of the Tribal Council Chairman, with five eouncilmen being elected from the three existing districts. The Big Bend and Crow Creek districts were to each have one councilman and the Ft. Thompson district was to have three eouncilmen. The Chairman and at least one councilman from each district were required to be of one-half, or more, Indian blood. The plan also provided for a primary election to be held prior to the general election.

The District Court issued its “Findings of Fact and Conclusions of Law” and “Order” on February 14, 1973. It found that at the time of the April 1972 election, the districts had the following number of eligible voters: Crow Creek, 77; Big Bend, 47; and Ft. Thompson, 355. The court, again, held that the voting districts, as then constituted, were violative of the one-man, one-vote doctrine, and the concept of equal protection of the laws guaranteed by the Indian Civil Rights Act, 25 U.S.C. § 1302(8). The court declared that the plaintiffs did not have an adequate remedy at law and that immediate relief was appropriate. It vacated all six seats on the Tribal Council as of April 19, 1973, and ordered a general election to fill those seats on that date. The court ruled that the districts were to elect the following number of councilmen: Crow Creek, 1; Big Bend, 1; and Ft. Thompson, 4. It further ordered the Superintendent of the Bureau of Indian Affairs to supervise the election, and directed him to apply the Tribal rules regarding qualifications and eligibility of candidates “except that there should be no blood quantum requirement for any enrolled member of the tribe who meets the other qualifications for eligibility as tribal councilman.” Finally, the court indicated that its apportionment plan was binding only for the 1973 election, and that the newly-elected Tribal Council could adopt an alternative plan which would comply with one-man, one-vote principles. The court did not discuss the plan submitted by the Tribal Council, but a rejection of the plan is implicit in its order.

On April 5, 1973, the defendant Tribal Council members (those who were in office when the suit was initiated) petitioned the District Court for a rehearing and a stay of execution; both motions were denied by the court in an order of April 12, 1973. On that date, the same defendants filed a Notice of Appeal in the District Court, and also filed a Motion for Stay of Execution with this Court. We denied the latter motion on April 18, 1973, and the election was held on April 19, 1973, as the District Court had ordered.

The only appellants are the defendant Tribal Council member’s who were in office on the date plaintiffs initiated this action in the District Court. They contend, on this appeal, that the District Court:

(1) was without jurisdiction over the subject matter;

(2) erred by allowing the Tribe and its officials to be sued despite their sovereign immunity;

(3) erred by striking out the blood quantum requirement for membership on the Tribal Council ;

(4) erred by extinguishing the terms of the three councilmen who were elected at-large pursuant to its order of April 14, 1972;

(5) ordered implementation of a plan which fails to comply with the one-man, one-vote doctrine; and

(6) erred by summarily denying the appellants’ petition for rehearing.

We deal with these contentions in the order raised.

SUBJECT MATTER JURISDICTION

The appellants contend that the District Court was without subject matter jurisdiction for three reasons. First, the equal protection clause in the Indian Civil Rights Act, 25 U.S.C. § 1302(8), does not extend the one-man, one-vote doctrine to tribal council elections. That position was rejected in Melvin White Eagle, etc., et al. v. Philomene One Feather et al., 478 F.2d 1311 (8th Cir. 1973). In One Feather, we held that where a tribe has adopted election procedures analogous to those found in Anglo-American culture, the equal protection clause of the Indian Civil Rights Act required that the election procedures comply with the one-man, one-vote principle established by Baker v. Carr, 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962), and its progeny. We follow One Feather here and hold the District Court was correct in assuming jurisdiction:

“ * * * [0]nce the applicability of Section 1302(8) is established as comprehending the one-man, one-vote principle * * * the cause of action * * * is clearly within the jurisdiction of the District Court * * * under 28 U.S.C. § 1343(4) * * (Citation omitted.)

Melvin White Eagle, etc., et al. v. Philo-mene One Feather, et al., supra, 478 F. 2d at 1314.

Second, the District Court lacked jurisdiction because the Tribe did not consent to the Indian Reorganization Act of 1934, 25 U.S.C. § 461, et seq. There is no merit to this argument. This action was brought únder the Indian Civil Rights Act, 25 U.S.C. §§ 1301-1303, and the provisions of that Act apply to all Indian tribes subject to the jurisdiction of the United States which possess powers of self-government. See, 25 U.S.C. §§ 1301-1302. The Crow Creek Sioux Tribe possesses these powers and its consent to the 1934 Act is unnecessary.

Third, the District Court was without subject matter jurisdiction because the plaintiffs failed to show that they had exhausted their tribal remedies. The plaintiffs, in short, reply that there were no tribal remedies available for them to exhaust. We are satisfied that the plaintiffs’ position is accurate and, accordingly, the District Court properly assumed jurisdiction. See, e. g., McCurdy v. Steele, 353 F.Supp. 629, 636 (D.Utah 1973).

SOVEREIGN IMMUNITY

The appellants contend that the Crow Creek Sioux Tribe and, hence, the Council members, have sovereign immunity and may not be sued absent Congressional authorization. We disagree. While the Indian Civil Rights Act does not abrogate the sovereign immunity of Indian tribes by specific language, we read the Act to do so by implication. We are convinced that this interpretation is consistent with Congressional intent as without such a reading, enforcement of the Act’s provisions could not be effected. Therefore, we hold that the District Court properly allowed this suit against the Tribe and its officials. See, McCurdy v. Steele, supra at 636; Seneca Constitutional Rights Organization v. George, 348 F.Supp. 48 (W.D.N.Y. 1972); Loncassion v. Leekity, 334 F. Supp. 370 (D.N.M.1971).

BLOOD QUANTUM REQUIREMENT

The Tribe’s Constitution was designed to insure that at least one-half of the councilmen from each district were of one-half, or more, Indian blood. See, n.2, supra. We believe that such a requirement, if applied uniformly, is not in conflict with the Indian Civil Rights Act’s guarantee of equal protection of the laws. In our view, this is one of those “respects [in which] the equal protection requirement of the Fourteenth Amendment should not be embraced in the Indian Bill of Rights.” Groundhog v. Keeler, 442 F.2d 674, 682 (10th Cir. 1971). But see, Note, “The Indian Bill of Rights and the Constitutional Status of Tribal Government,” 82 Harv.L.Rev. 1343, 1360-1363 (1969). In the instant case, we also are convinced that the Tribe has a sufficient cultural interest in setting a higher blood quantum requirement to hold office than for mere membership in the Tribe if it so desires. However, once the requirements are established, they must be applied uniformly to avoid violating 25 U. S.C. § 1302(8).

Normally, it would have been improper for the District Court to alter a blood quantum requirement. Yet, at the same time, we understand the trial court’s plight. It was faced with the practical difficulty of designing an apportionment plan which would alter the representation from the various districts, if not the districts themselves, and which, at the same time, would comport with a blood quantum requirement that was designed for two-member districts. The blood quantum provision in the Tribe’s Constitution simply did not fit the plan which the trial court adopted — viz, two single-member districts and one four-member district. The trial court chose to meet the problem by eliminating the blood quantum requirement for the impending election, and providing that its plan was to be used only for that election. In view of the circumstances faced by the trial court, we cannot say that it acted improperly in eliminating the blood quantum requirement for the April 1973 election, and we will not disturb the election on that basis. We make clear, however, that the Indians, in designing their own apportionment plan and election rules, are entitled to set those requirements they find appropriate so long as they are uniformly applied.

EXTINGUISHING TERMS OF TRIBAL COUNCILMEN

The District Court did not err by declaring all six seats on the Tribal Council vacant as of April 19, 1973, even though in the prior year the court had ordered that three of those seats were to be filled in the April 20, 1972, at-large election. The April 14, 1972, ruling was an interim order designed to give immediate relief pending a more thorough revamping of the election processes. The court was acting under severe time pressures in 1972, and we are convinced that it acted properly in vacating all six seats to effect its final plan in 1973:

“Application of interim remedial techniques in voting rights cases has largely been left to the district courts. Reynolds v. Sims, [377 U.S. 533], at 585 [84 S.Ct. 1362, at 1393, 12 L.Ed.2d 506]. The courts are bound to apply equitable considerations and in Reynolds it was stated that ‘[i]n awarding or withholding immediate relief, a court is entitled to and should consider the proximity of a forthcoming election and the mechanics and complexities of state election laws. . . . ’ Ibid.”

Mahan v. Howell, 410 U.S. 315, 332, 93 S.Ct. 979, 989, 35 L.Ed.2d 320 (1973).

ONE-MAN, ONE-VOTE

The appellants’ fifth contention is that the District Court’s plan should be set aside because it allows for too much variation between the number of eligible voters per councilman in the districts — one per seventy-seven in Crow Creek, one per forty-seven in Big Bend, and one per ninety in Ft. Thompson. This variation far exceeds that permitted to state legislatures by the Supreme Court, see, Mahan v. Howell, supra, and cannot be tolerated. Moreover, the District Court based its apportionment plan on the number of eligible voters in each district. This was improper. The apportionment plan must be based on the population of the Tribe and not solely those eligible to vote. See, Melvin White Eagle, etc., et al. v. Philomene One Feather et al., supra, 478 F.2d at 1315. In so holding, we express no opinion as to whether or not the Tribe should take into account members of the Tribe who do not reside on the Reservation. That is a purely internal decision which must be made by the Tribe itself. We note, however, that the Constitution, as currently written, limits eligibility for voting to those residing on the Reservation at the time of the election.

PETITION FOR REHEARING

Finally, in view of the fact that it is necessary to remand this action to the District Court for further proceedings on other issues, we need not decide whether the court erred by summarily denying the appellants’ petition for rehearing.

ACTIONS ON REMAND

Consistent with our rulings above, the District Court shall on remand:

1. Permit the present Tribal Council to remain in office pending the adoption of a satisfactory reapportionment plan.

2. Permit the present Tribal Council and the parties participating in this appeal to submit plans for reapportioning the Reservation to the District Court at a date reasonably in advance of the next scheduled election — the third Thursday of April, 1974. It is contemplated by this Court that in developing a plan, amendments to the Constitution will be necessary to clarify voting and candidacy qualifications. It would also be appropriate to incorporate provisions within the Constitution which would provide for periodic review of the apportionment of the Reservation and the machinery to effect necessary adjustments.

3. The apportionment plan, in substance, should be one which would di-' vide the Tribe’s population to comply with the general principle of population equality with due regard to other factors expressed by the Supreme Court in Mahan v. Howell, supra, and this Court in Melvin White Eagle, etc., et al. v. Philomene One Feather et al., supra, at 705. We are aware that with the small population involved, precise mathematical equality will be difficult to achieve, but that is the goal which the plan must be designed to attain. Any deviations from population equality must be justified in the record by legitjr mate tribal considerations. See, Abate v. Mundt, 403 U.S. 182, 91 S.Ct. 1904, 29 L.Ed.2d 399 (1971).

Recognizing that there are practical difficulties associated with meeting the constitutional standards by either dividing the Reservation into equally-populated districts or electing the councilmen-at-large, we note that another permissible alternative would be a weighted voting plan under which each councilman would be accorded voting strength which would reflect the share of the population he represents.

4. Finally, we note that there is a responsibility on the part of the United States Government to provide prompt and appropriate aid to the parties in development of the data necessary to permit an acceptable plan to be adopted prior to the April 1974 election. To meet this date, it will also be necessary for the Bureau of Indian Affairs to act expeditiously if it is necessary to review any amendments to the Tribe’s Constitution and By-Laws.

Costs of this appeal will be taxed to the United States Government.

Affirmed in part, reversed in part and remanded to the District Court for action consistent with this opinion.

      . “ARTICLE II — MEMBERSHIP
      “SECTION 1. All persons of Indian blood whose names appear on the official census roll of the Crow Creek Reservation as of July 1, 1948, shall be members of the Tribe, Provided, that the Tribal Council shall have power to revise said roll, with the approval of the Secretary of the Interior or his authorized representative, at any time within five years from the date of the approval of this Constitution.
      “SEC. 2. (a) Any child, of ’one-fourth (14) or more Indian blood born to any member of the Tribe who at the birth of such child resided on the reservation shall be entitled to membership.
      “(b) Any child of one-half (%) or more Indian blood born to any member shall be entitled to membership regardless of his parents’ residence.
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      “(d) Applications for membership shall be submitted by the applicant or his parent or guardian to a Committee on Membership, which shall pass upon them and present them to the Tribal Council for final action.” Crow Creek Sioux Tribe Constitution.

      . “At the first election the candidate from each district receiving the highest number of votes shall be certified for the two-year term. The candidate receiving the next highest number of votes shall be certified for the one-year term unless both candidates are of less than one-half Indian blood in which case the candidate of one-half or more Indian blood receiving the highest number of votes shall be certified for the one-year term. Thereafter one member from each district shall be elected each year.
      “After the first election no member of less than one-half Indian blood shall be permitted to file as a candiate unless the Council member whose term does not expire is of one-half or more Indian blood.”
      Crow Creek Sioux Tribe Constitution, Art. Ill, Sec. 4.

      . In Charles O’Neal et al. v. Cheyenne River Sioux Tribe, etc. et al., 482 F.2d 1140 (8th Cir., 1973), this Court ruled that the individual Indian plaintiffs must exhaust tribal remedies in civil disputes before “bringing suit in federal court on an action predicated essentially upon the Indian Bill of Rights. 25 U.S.C. § 1302. * * * ” Id., at 1142.

      . In reaching this conclusion, we are mindful of the fact that the United States Constitution provides that only a “natural born citizen, or citizen of the United States, at the time of the adoption of this Constitution, shall be eligible to the Office of President * * United States Constitution, Art. II, § 1, cl. 4.

      . Whatever rules are adopted, they must have the same effect in all districts. For example, a rule which in operation would allow those of less than one-half Indian blood to be councilmen in one or more districts but not in others would be impermissible.

      . If the parties wish to alter the manner of selecting a Tribal Chairman, they should also spell this out in an amendment.