author: DYER, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellant, v. CROW, POPE AND LAND ENTERPRISES, INC., Defendant-Appellee.
    No. 72-2381.
    United States Court of Appeals, Fifth Circuit.
    Feb. 14, 1973.
    As Amended March 8, 1973.

      John W. Stokes, Jr., U. S. Atty., Atlanta, Ga., Kent Frizzell, Asst. Atty. Gen., Carl Strass, Atty., Raymond N. Zagone, Edmund B. Clark, Dept, of Justice, Washington, D. C., for plaintiff-appellant.
    Moretón Rolleston, Jr., Atlanta, Ga., for defendant-appellee.
    Before GODBOLD, DYER and CLARK, Circuit Judges.
   DYER, Circuit Judge:

This is an appeal from the district court’s decision, 340 F.Supp. 25, that the “Chattahoochee River between Peachtree Creek and Buford Dam is not a navigable water of the United States within the meaning of 33 U.S.C.A. §§ 403 and 407, and, therefore, the defendant . . is not subject to the provisions of those statutes.” We dismiss the appeal for want of jurisdiction.

The United States seeks to permanently enjoin Crow, Pope and Land Enterprises (CPLE) from polluting the Chattahoochee. Allegedly, pollutants are being dumped into the river as a result of CPLE’s expansion of an apartment complex known as Riverbend, which is located along the west bank at mile 306 of the Chattahoochee in Cobb County, Georgia. The Government argues that the river is a navigable water of the United States, that CPLE’s Riverbend construction on the floodplain of the Chattahoochee violates 33 U.S.C.A. § 403, and that as a result of the excavation and grading at the construction site CPLE is illegally depositing and discharging refuse into a navigable water in violation of 33 U.S.C.A. § 407. Moreover, the United States contends that an injunction should issue even if the Chattahoochee is not navigable between Peachtree Creek (mile 300) and Buford Dam (mile 348); for, notwithstanding its non-navigability, that segment of the river is a tributary of a navigable water and, therefore, the defendant’s conduct is still violative of § 407. It is undisputed that downstream from Peachtree Creek portions of the Chattahoochee are navigable.

At the hearing for a preliminary injunction, the parties stipulated that that single hearing “would constitute the final hearing on the issue of navigability”; CPLE entered into a consent order with the Government requiring the defendant to take certain affirmative measures to prevent further pollution of the Chattahoochee during the pendency of the suit; and both of the parties and the district court agreed to postpone consideration of the tributary issue. As a result of this agreement, neither of the parties submitted any evidence nor did either present legal argument on the Government’s tributary contention. Even though the parties had not yet had an opportunity to try this issue and despite the fact that the record was completely barren of any evidence on the question, the district court nevertheless entered an order not only determining that the stretch of the Chattahoochee in question was non-navigable, but also rejecting as without merit the Government’s tributary theory. Strangely, the court based its conclusion that CPLE was not liable under the tributary provisions of § 407 on the fact that there had been no showing that “what the defendant is depositing in the subject section of the river will either float or be washed downstream to a navigable portion of the river. . . . ”

Obviously, there had been no such proof because the court had, on the basis of the parties’ stipulation, agreed that it would reserve adjudication of this question for a later hearing to be held after it had concluded taking evidence on the navigability issue. Such a hearing on the tributary question was not held, and thus the court’s conclusion of law was impermissibly based on a total absence of evidence. There has been no adjudication of the tributary issue and consequently it remains open. Because the district court’s order can, therefore, in no way be construed as a final appeala-ble order within the meaning of 28 U.S. C.A. § 1291, this Court lacks jurisdiction to entertain the appeal.

The injunctive relief which the United States seeks is a single legal right or claim, although whether the Government is entitled to such relief depends on the resolution of alternative legal theories. In the case sub judice, the alleged unlawful acts and the two legal theories of relief are so intertwined as to constitute a single claim. The district court’s conclusion of non-navigability is not dispositive of the claim for an injunction. Whether or not the Chattahoochee is navigable from mile 300 to mile 348, and we intimate no opinion on that question, the United States may be entitled to the relief it seeks if it can prove the requisite facts to establish a violation of the tributary provisions of 33 U.S.C.A. § 407. While we recognize that, for the purposes of Rule 54(b) of the Federal Rules of Civil Procedure, a separate claim need not be predicated on acts entirely distinct from those on which all of the other asserted claims in the action are bottomed, a mere variation in legal theories is insufficient. See, e. g., Cott Beverage Corp. v. Canada Dry Ginger Ale, Inc., 2 Cir. 1957, 243 F.2d 795.

Furthermore, assuming arguendo that the navigability issue and the tributary question are separate claims, the district court failed to comply with the certificate requirement of Rule 54(b), which is a jurisdictional prerequisite for an appeal of less than all of the claims in an action. Accordingly, although the parties and the court agreed that the hearing on the navigability question would be on the merits, with the intention of making the court’s order an appealable one, this Court lacks jurisdiction of the appeal. A multiple claims action in its entirety is a jurisdictional unit, and a decision on one of the claims does not constitute a final appealable order unless the district court makes “an express determination that there is no just reason for delay and . an express direction for entry of the judgment.” Fed.R.Civ.P. 54(b) ; see e. g., Bache & Co. v. Taylor, 5 Cir. 1972, 458 F.2d 395; Coulter v. Sears, Roebuck & Co., 5 Cir. 1969, 411 F.2d 1189; Travelers Indemnity Co. v. Erickson, 5 Cir. 1968, 396 F.2d 134. Additionally, even if the district court had made a Rule 54(b) certificate, this Court is not bound by that determination and is free to decide for itself whether there were multiple claims or merely variants of a single claim. See e. g., Howze v. Arrow Transportation Co., 5 Cir. 1960, 280 F.2d 403, cert. denied, 364 U.S. 920, 81 S.Ct. 285, 5 L.Ed.2d 260.

In accordance with the historic federal policy against piecemeal appeal, this appeal is

Dismissed for lack of jurisdiction and the cause is remanded to the district court for further proceedings.


source: Caselaw Access Project

author: INGRAHAM, Circuit Judge:

license: Public Domain

text:
    POSEIDON SCHIFFAHRT, G.M.B.H., Plaintiff-Appellant, v. The M/S NETUNO, her engines, tackle, apparel, etc., Defendant-Appellee.
    No. 72-1636.
    United States Court of Appeals, Fifth Circuit.
    March 1, 1973.
    George H. Chamlee, Savannah, Ga., for plaintiff-appellant.
    W. Spencer Connerat, Jr., Savannah, Ga., Raymond A. Ballard, Detroit, Mich., for defendant-appellee.
    Before MORGAN, CLARK and IN-GRAHAM, Circuit Judges.
   INGRAHAM, Circuit Judge:

On August 27, 1971, the Brazilian owned M/S Netuno collided with the M/V TransMichigan, a German owned vessel, in the waters of Lake Huron. The present action began in late September 1971, when Poseidon Schiffahrt, the corporate owner of the TransMichigan, filed an in rem libel action in the federal district court for the Southern District of Georgia. Although it is undisputed that the district court had jurisdiction of the res, the court declined to exercise its jurisdiction because another suit between the same parties, involving the same issues, was pending in the admiralty courts of Canada, and also upon principles of forum non conveniens. The court accordingly dismissed the libel. The issue on appeal is whether the district court used the proper legal standard in declining to exercise jurisdiction. We hold that it did not, and therefore vacate the district court’s order dismissing the libel and remand for further proceedings.

The outcome of this appeal turns on the interpretation of the Supreme Court’s decision in The Belgenland, 114 U.S. 355, 5 S.Ct. 860, 29 L.Ed. 152 (1885). The jurisdictional issue there concerned a federal court’s exercise of in rem jurisdiction arising from a collision on the high seas between two foreign vessels of different nationalities. The Court stated the controlling principles:

“[Ajlthough the courts will use a discretion about assuming jurisdiction of controversies between foreigners in cases arising beyond the territorial jurisdiction of the country to which the courts belong, yet where such controversies are communis juris, — that is, where they arise under the common law of nations,- — special grounds should appear to induce the court to deny its aid to a foreign suitor when it has jurisdiction of the ship or party charged. The existence of jurisdiction in all such cases is beyond dispute ; the only question will be whether it is expedient to exercise it.
* * -X- -X- -X- *
“The subject has frequently been before our own admiralty courts of original jurisdiction, and there has been but one opinion expressed, namely: that they have jurisdiction in such cases, and that they will exercise it unless special circumstances exist to show that justice would be better sub-served by declining it.”

Id. at 366-367, 5 S.Ct. at 865-866.

In Motor Distributors v. Olaf Pedersen’s Rederi A/S, 239 F.2d 463 (5th Cir., 1956), cert. denied, 353 U.S. 938, 77 S.Ct. 816, 1 L.Ed.2d 760, this court was reviewing a district court’s decision not to exercise jurisdiction in an in rem libel involving foreign vessels of different nationalities. Applying the general principles articulated in The Belgenland, the court concluded:

“[T]he rule is, . . . that jurisdiction should be taken unless to do so would work an injustice.”

239 F.2d at 465. In formulating this rule from the general principles set out in The Belgenland, the Motor Distributors court relied on the Second Circuit’s decision in The Western Farmer, 210 F.2d 754, 755-756 (2nd Cir., 1954), which held :

“[I]n the case of a collision on the high seas, an alien plaintiff has the privilege of suing an alien defendant wherever he can serve him, or attach his property; and that, if the defendant would avoid the suit, he must show that he will be unfairly prejudiced, unless it be removed to some other jurisdiction.”

The standard for a federal court to use in determining whether to exercise its jurisdiction in an in rem libel involving foreign vessels of different nationalities is, therefore, that the court should exercise its jurisdiction unless the defendant can establish that to do so would work an injustice.

In our case the district court did not apply this standard. Instead, the court appears to have used a balancing test as the following statement illustrates :

“Taken in the round, the considerations favoring nonentertainment of jurisdiction outweigh those in support of retention. ... No injustice will result from abstention.”

In reaching this conclusion the district court thoroughly analyzed the circumstances in this case and cannot be faulted for the conclusion reached on the basis of its analysis. The problem is that the court did not apply the proper standard while making its analysis.

As the Motor Distributors court held, the question is not whether an injustice will result if the court does not exercise jurisdiction, but whether exercising jurisdiction will result in an injustice. See note 3, supra. The distinction is more than one of semantics. Under the proper standard, the court must begin with the assumption it will exercise jurisdiction unless it is established, by the defendant, that an injustice would follow. The Motor Distributors rule requires an affirmative conclusion that to exercise jurisdiction “would work an injustice.” This conclusion was not reached by the district court as a basis for dismissing the libel. The decision must therefore be vacated and the cause remanded for the court to reassess its conclusion not to exercise jurisdiction using the proper legal standard.

Vacated and remanded.

      . It appears that a substantial issue on the merits will be whether the collision oe-curred in United States or Canadian waters.

      . We agree with the district court that the pending Canadian action, which was also commenced by Poseidon, is not “a true in rem action.” Poseidon Schiffahrt, G.M.B.H. v. M/S Netuno, 335 F.Supp. 684, 687 (S.D.Ga., 1972).

      . We recognize, of course, that the decision to exercise jurisdiction is within the district court’s discretion. Canada Malting Co. v. Paterson Steamships Ltd., 285 U.S. 413, 419-420, 52 S.Ct. 413, 76 L.Ed. 837 (1932). This discretionary decision must, however, “be grounded upon correct legal principles.” Anglo-American Co. v. The S/T Mina D’Amico, 169 F.Supp. 908 (E.D.Va., 1959). See The Belgenland, 114 U.S. 355, 368, 5 S.Ct. 860, 29 L.Ed. 152 (1885).

      . 335 F.Supp. at 690. The quoted sentence is similar to that used by the district court which was reversed in Motor Distributors because it applied the -wrong principles in its discretionary decision not to exercise jurisdiction.
      “Instead of the rule being, as the trial court here stated, that jurisdiction should be denied unless such denial would work an injustice, the rule is, rather, that jurisdiction should be taken unless to do so would work an injustice.” Id., 239 F.2d at 465.

      . The following factors seem to be the most influential in the court’s decision not to exercise jurisdiction: (1) that another action involving the same parties and the same issues was pending in a Canadian court; (2) that a counterclaim had been filed in the Canadian action ; (3) that all parties involved were signatories of the Brussels Convention; (4) that matters of international comity were involved; and (5) that the Georgia forum was not the most convenient forum.
      This last factor is derived from the court’s reference to the doctrine of forum non conveniens. While this doctrine is applicable in admiralty cases and its application is peculiarly dependent on the facts present in a particular case, “unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.” Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947). The applicability of this doctrine to the case at bar should also be considered in light of the following statement by the Motor Distributors court at 467 of 239 F.2d:
      “Moreover, something’ deeply significant in the whole field of maritime law is here at stake. With respect to oceangoing carriers it seems that one of the most universally recognized rules of law is that which gives the right to libelant, possessing a maritime lien against a vessel, to proceed in rem in the jurisdiction where the vessel is found.”

      . The district court avoided applying the Motor Distributors rule by distinguishing that case on its facts. While this process of legal analysis is often a proper method for avoiding the application of a particular rule of law, the standard formulated in Motor Distributors is not to be restricted to the facts in that case. The purpose of the Motor Distributors rule is to furnish a framework — a method of analysis — to be used in all cases involving an in rem libel arising from a collision between foreign vessels of different nationalities. This, of course, does not mean that the decision of a district court must always be the same as that reached in Motor Dis-tribxitors; it only means that the decision must be reached by applying the Motor Distributors standard.


author: JOHN R. BROWN, Chief Judge.

text:
    OCHSNER CLINIC, Petitioner-Cross Respondent, v. NATIONAL LABOR RELATIONS BOARD, Respondent-Cross Petitioner.
    No. 72-1703.
    United States Court of Appeals, Fifth Circuit.
    Feb. 6, 1973.

      Andrew P. Carter, David E. Walker, New Orleans, La., for petitioner-cross respondent.
    Marcel Mallet-Prevost, Asst. Gen. Counsel, N.L.R.B., Washington, D. C., Charles M. Paschal, Jr., Regional Director, New Orleans, La., William R. Stewart, N.L.R.B., Washington, D. C., for respondent-cross petitioner.
    Before JOHN R. BROWN, Chief Judge, and MOORE and RONEY, Circuit Judges.

       Honorable Leonard P. Moore, Senior Circuit Judge of the Second Circuit, sitting by designation.

   JOHN R. BROWN, Chief Judge.

Ochsner Clinic challenges the order of the National Labor Relations Board certifying the Union as the bargaining representative of its 22 X-ray technicians on the grounds that (i) the activities of the clinic are not within the coverage of the Act and (ii) even if these activities were covered, the Board failed to choose the appropriate bargaining unit. Finding these contentions to be substantially without merit, we grant the Board’s petition for enforcement.

Coverage .

The Clinic asserts that the Board has departed from all prior practice in assuming jurisdiction over the employer-employee relations within a medical clinic. This is incorrect. It is true, as Ochsner asserts, that prior to the case of Mayo Clinic, 168 NLRB 557 (1967), the Board had declined to take jurisdiction over voluntary associations of physicians. Nevertheless, in that case, and in the subsequent case of Quain and Ramstad Clinic, 173 NLRB 1185 (1968), the Board did assume jurisdiction where the employer was not primarily engaged in education and research or operating a non-profit hospital and did have an impact upon interstate commerce.

Those criteria are met here. Ochsner is not engaged primarily in education and research so as to come within the purview of the congressional purpose in exempting non-profit hospitals from the Labor Management Relations Act. But Ochsner does have a substantial impact upon interstate commerce. Not only was it expressly stipulated by the parties that Ochsner did a gross volume during the preceding six months in excess of $250,000 and purchased materials and supplies in excess of $50,000 during the period, but the record indicates that the partnership of some 200 physicians employs over 500 nurses, technicians, clerks, and other medical assistants.

Ochsner asserts that Mayo Clinic is not valid authority for the Board’s asserting jurisdiction — ties to interstate commerce notwithstanding — because there both parties petitioned the Board to assert its jurisdiction. Clearly, this is irrelevant — the Board’s decision whether to assert power over the parties is one of administrative discretion. NLRB v. Marinor Inns, Inc., 5 Cir., 1971, 445 F.2d 538, 541; NLRB v. WGOK, Inc., 5 Cir., 1967, 384 F.2d 500. Indeed, the congressional purpose to allow the Board to decline jurisdiction in an appropriate case is embodied in the statute. Thus, any prior instance where the Board declined to assert jurisdiction —Ochsner cites no cases of such abstention — would not preclude the power here.

Appropriate Unit

The contention that the Board failed to choose the most appropriate unit is without merit. It is so well established that the Board has wide authority under Section 9(b) to determine the proper bargaining unit, we need only state a few of the facts which indicate the Board made an appropriate choice in this case. At Ochsner Clinic, there are approximately 150 skilled technicians whose fields range from audiology to urology, and perhaps two dozen other areas in between. The radiological technologists (or X-ray technicians), 22 in number, form a separate department from other technicians. They are supervised independently of other clinic employees. They are subject to hire and discharge by the Chief Radiological Technologist, not the Personnel Department. Their salaries are established independently of other departments in the Clinic. Each technician must be registered by the American Registry of Radiological Technologists, a process which usually requires about two years of specialized training. Also, the X-ray technicians generally work in a separate area of the clinic, and have only limited interaction with other departments. Clearly, there were enough factors present here to sufficiently distinguish the X-ray technicians from other departments as a separate unit, appropriate for bargaining purposes. The unit chosen need not be the most appropriate, but only one which is appropriate under the circumstances. NLRB v. Li’l General Stores, Inc., 5 Cir., 1970, 422 F.2d 571, 573; NLRB v. Zayre Corp., 5 Cir., 1970, 424 F.2d 1159, 1165.

Finally, there is no indication here that there is any other organization either in existence or likely to be formed which could or would take on representation of such a coterie of diverse technicians. We do not suggest this is decisive, but it is certainly a factor since the Act contemplates representation. There can be no representation unless there is one to do the representing.

With this inherent discretion vested in the Board, we need not attempt to pierce the reasoning of the Board with X-ray precision. Rather we only need to satisfy ourselves that no arbitrary or capricious action can be detected which infects the decision. See Spartans Industries, Inc. v. NLRB, 5 Cir., 1969, 406 F.2d 1002, 1005.

Enforced.

      . The Social Economic Organization of Staff Radiologic Technologists, apparently a purely local organization.

      . Coverage under the National Labor Relations Act is, of course, coextensive with the powers of Congress under the Commerce Clause. NLRB v. Reliance Fuel Oil Corp., 1963, 371 U.S. 224, 83 S.Ct. 312, 9 L.Ed.2d 279; Bob’s Casing Crews, Inc. v. NLRB, 5 Cir., 1970, 429 F.2d 261, 262.

      . 29 U.S.C.A. § 152(2).

      . “The Board, in its discretion, may, by rule of decision or by published rules adopted pursuant to the Administrative Procedure Act, decline to assert jurisdiction over any labor dispute involving any class or category of employers, where, in the opinion of the Board, the effect of such labor dispute on commerce is not sufficiently substantial to warrant the exercise of its jurisdiction * * 29 U.S.C.A. § 164(c)(1).

      . We find no merit in the contention that the Board was required by the Administrative Procedure Act to explain its assumption of jurisdiction. The actual assumption of jurisdiction in a real case is itself reviewable and no prior adjudication of the Board’s reversal of policy (if any there was) was necessary, particularly in the absence of a record. We have such a record in this case.

      . See NLRB v. WKRG-TV, Inc., 5 Cir., 1973, 470 F.2d 1302, 1311 [1973],

      . These specialties are Cardiovascular Technician, Claims Analyst, Clinic Coding Desk, Contact Lens Technician, Dietitian, Dispensing Optician, EEG Technician, EKG Technician, ENG Technician, Floating R.N. or L.P.N., Hospital Coding Desk, Interpreter, IVP Nurse, Kine Technician Licensed Practical Nurse, Life Insurance Analyst, Medical Photographer, Medical Secretarial Production and Work Flow Analyst, Nurse Technician, Ophthalmology Technician, Ophthalmology Technician and Secretary, Oral Surgery Technician, O.R. Technician, Orthopaedic Assistant, Ortho-paedic Technician, Photographic Quality Control Clerk, Registered Nurse, Training Director AOMF School of Radiological Technologists, X-Ray Dark Room Attendant, X-Ray Technician — Clinic Side, X-Ray Technician — Hospital Side.


author: JOHN R. BROWN, Chief Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Shelly TOWNSEND, Defendant-Appellant.
    No. 72-2100
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Feb. 13, 1973.

      John J. C. O’Shea, Lubbock, Tex. (Court appointed), for defendant-appellant.
    Eldon B. Mahon, U. S. Atty., W. E. Smith, Asst. U. S. Atty., Ft. Worth, Tex., for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge, and GOLDBERG and MORGAN, Circuit Judges.

       Rule 18, 5 Cir.; See Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir. 1970, 431 F.2d 409, Part. I.

   JOHN R. BROWN, Chief Judge:

Shelly Townsend, the leader of Cleo’s Funky Express, a rock and roll band operating on and around Reese Air Force Base, Texas, was convicted of receiving and concealing, within the special territorial jurisdiction of the United States, amplifying equipment stolen from another band, the Neal Ford Foundation. He was acquitted of the disjunctive charge of theft of the same property. The case finally turns on whether possession of the property off the military base can give rise to the inference that the property was received or concealed on the base. We answer in the negative and reverse for a new trial.

There is clearly sufficient proof that Appellant received the property and converted it to his own use. Likewise, the evidence that Appellant had knowledge that the property was stolen is convincing. In fact, if Appellant had been convicted of theft of the property in question we would affirm that conviction.

If the theft charge had resulted in a conviction, by affirming it, we would of necessity hold that under our cases, there was sufficient evidence that Appellant removed, or aided in the removal of, the purloined items from Reese Air Force Base. However, we are compelled to the seemingly anomalous conclusion that there was no evidence that Appellant received and concealed the stolen property within the special territorial jurisdiction — the confines of Reese Air Force Base — of the United States. The facts which prompt this determination are as follows.

The evening of September 3, 1971, found appellant Townsend and friends driving around and drinking on a presumably innocent week-end jaunt. Their erratic course took them to Reese Air Force Base in Lubbock County, Texas, where Neal Ford and his band, the Neal Ford Foundation, was entertaining at the Officers’ Club. At 1:00 a. m. the Neal Ford Foundation” left the bandstand for the evening and left behind most of their equipment.

Shortly after 1:00 a. m. Sergeant Lloyd Edwards, the night manager of the Officers’ Club, proceeded to make his usual fire check which would be followed by locking up the club. In the ballroom, where the Neal Ford Foundation had been playing, he discovered Appellant sitting alone at a table. He queried Appellant as to what he was doing there to which Appellant replied that he was waiting to see the bartender, Cliff Colley. Appellant did not talk to Colley that evening although the latter was working in the main bar until sometime after 1:00 a. m.

Sergeant Edwards informed Appellant that he would have to leave, a direction with which Appellant complied. Sergeant Edwards saw Appellant leave with no object or anything else in his possession. Thereafter he locked all • of the doors to the club at 1:45 a. m. at which time he did not notice any of the equipment missing.

The following afternoon, September 4, the Neal Ford Foundation returned to the Officers’ Club to move their equipment to the Non-commissioned Officers’ Club where they were to play the next night. When they arrived they found that some of their equipment was missing. The missing property consisted of an amplifier, two boom microphone stands, microphones, and one tambourine.

After notifying the proper authorities Neal Ford began making his own inquiries to determine the location of his band’s equipment. From the selective nature of the theft, he apparently believed that the equipment had been stolen by another band. He learned that Appellant’s band (Cleo’s Funky Express), which had recently played at the Reese Air Force Base Officers’ Club, was performing at the Log Cabin Club in Post, Texas, some 50 miles from the base. Ford and his band left for Post, Texas, to see if this other group was using their equipment. Ford and his band sought the help of the Garza County Sheriff and went with him to the Log Cabin Club where they confronted Appellant. Ford identified the stolen equipment which was being used by Appellant’s group and the Sheriff took Appellant and the property in tow. Appellant made incriminating statements during the course of his arrest and detention which were admitted at trial. None of these statements would have tended to prove that Appellant possessed, received and concealed the property within the confines of Reese Air Force Base. The upshot of these statements was that Appellant had purchased the equipment knowing it was stolen but that he did not steal it himself.

After stipulating that Reese Air Force Base was a government reservation within the exclusive jurisdiction of the United States, Appellant called Brenda Davis. She had been drinking and riding around with Townsend who was also in the company of Eva Lois Morin and Albert J. Thomas in Thomas’s car.

Brenda Davis testified that the other three picked her up that evening at about 9:30 and that they went to Ráese Air Force Base after having been drinking heavily. They first visited the Officers’ Club at 11:00 a. m. when all four went in. They stayed a short time and continued “riding around” until they went back the second time — at about 1:00 a. m. Appellant went in alone and stayed five or ten minutes. She saw Appellant as he came out of the Club empty-handed. He did not open the trunk of the car. However, Appellant had earlier stated to her that he was going to the Club to pick up some equipment, but that no equipment was ever picked up. The other occupants of the vehicle testified to substantially the same facts which included statements that they were together until 3:00 a. m. and that no equipment was picked up. None of them recalled having heard anything about any equipment being picked up.

The members of Cleo’s Funky Express testified that they first saw the stolen band equipment the evening of September 4 — the theft having occurred in the early a. m. of that day — as they were loading their cars in Lubbock, Texas, some ten miles from Reese Air Force Base, under Appellant’s direction. The only evidence that the government produced of Appellant’s having received and concealed the property on Reese Air Force Base is the statement of Brenda Davis that Appellant told' her he was going to pick up some equipment. If the question were Appellant’s knowledge of the stolen character of the property we would have no difficulty in concluding that a guilty verdict could stand. However, when considered in the context of all the evidence including that of Sergeant Edwards and Brenda Davis that no equipment was missing or picked up, this statement — which did not on its face imply that the “picking up” was to be by theft — is not sufficient to sustain the conviction. And if the presumption from possession is not available we are forced to conclude that the government produced no evidence that Appellant received and concealed the property while within jurisdiction of the United States.

The court properly instructed the jury that it could conclude on the basis of Appellant’s possession of the recently stolen property that he had participated in its theft and find him guilty of the theft. Under our cases the jury could permissibly infer that Appellant knew that the amplifier was stolen and was a participant in the theft. The court did not instruct the jury that any other inferences could be drawn. Appellant does not challenge this instruction, as the government seems by its response to believe, nor would there be any purpose since he was acquitted of the charge of theft.

The government tries to save the conviction by arguing that the admitted possession and ample basis for imputing knowledge of the stolen character permitted the jury to infer that Appellant received the property on the military reservation. The inference drawn from possession of recently stolen property which would allow us to affirm conviction for theft or for receiving stolen property is of ancient and venerable vintage. On request of the Court the parties have filed supplemental briefs on the specific question of whether to the permissible inference of receiving (or concealing) stolen property the further inference can be drawn that the receipt or concealment of the stolen property occurred within the confines of Reese Air Force Base. We hold that it cannot.

Although availability of such inferences should normally be defined in the jury charge we nevertheless believe that if we were to find the inference reasonable we would not consider the jury’s drawing the inference grounds for reversal simply because they were not instructed that they might draw it. A jury may draw the reasonable inferences which the evidence warrants. The inference is not less reasonable because the court fails to point out that it is one that can be drawn from the evidence. If the inference of participation in theft which is distilled from possession of recently stolen property were not a reasonable inference based on common experience it would have to be struck down in the light of present constitutional doctrine, which requires “that there be a rational connection between the facts proved and the fact presumed.” Tot v. United States, 1943, 319 U.S. 463, 467, 63 S.Ct. 1241, 1245, 87 L.Ed.2d 519; United States v. Romano, 1965, 382 U.S. 136, 86 S.Ct. 279, 15 L.Ed.2d 210; Leary v. United States, 1969, 395 U.S. 6, 89 S.Ct. 1532, 23 L.Ed.2d 57; Yaccaro v. United States, 5 Cir., 1972, 461 F.2d 626.

There is an important difference between the inference from possession to theft and the inference from possession outside the jurisdiction of the United States to possession inside the jurisdiction of the United States. It comes down, not to a question of law as such, but to a question of geography. The difference is simply this, if possession would, as we have held, support the inference of theft it must support the inference of the location of the theft, because this theft could occur at only one single location. That is, the theft had to occur at the Officers’ Club. On the other hand, the receiving and concealing of the stolen property could have occurred for the first time at any number of locations which were not within the special jurisdiction of the United States. In fact, the only evidence on the question first places Appellant in possession of the stolen equipment at Lubbock, Texas — ten miles from the scene of the crime.

Because of the difference between the two inferences and the necessity that the act of concealing or receiving take place on the Base the numerous cases which hold that possession of recently stolen property gives rise to an inference of participation in the theft do not aid us in the decision of this case. Where, for example, as in Young v. Wainwright, 5 Cir., 1971, 439 F.2d 426, the Court held that possession of recently stolen property would support an inference of breaking and entering with intent to steal, the Court was dealing with a crime which could occur only in a single location, i. e., the location where the property was stolen during a burglary. Many cases likewise deal with the inference of knowledge that the property was stolen when it is possessed by a defendant shortly after the theft. These cases are of no aid in deciding the ease now before us.

Faced then with what is in effect a question of first instance we must, and do, decide that such an inference may not be employed.

In summary, we cannot avoid an uneasiness that an injustice may be done by pushing this inference to a new geographical frontier. Although Shelly Townsend was most certainly guilty of some participation in the theft of the equipment of the Neal Ford Foundation, this inference, whether charged by the Judge to the jury or used by it or an appellate court, rests on no confident assurance that it is more likely than not that he received the property on - the Base. As Judge Godbold said “there is no substantial rational relationship between possession of stolen goods with knowledge of their illegal character and the facts surrounding the manner in which they were stolen” [emphasis in original]. United States v. Martinez, 5 Cir., 1972, 466 F.2d 679 (concurring).

The evidence here suggests that Appellant was aware of the manner in which the theft occurred. But this suggestion is not the basis from which we can support a legal inference that he received and concealed them at the location of the theft or at some other spot on the Base. And suspicion that he did so is not enough to support a conviction. Cf. United States v. Gainey, 1965, 380 U.S. 63, 85 S.Ct. 754, 13 L.Ed.2d 658.

Although the District Court should have, upon Appellant’s motion, granted directed verdict at the close of the government’s case this is obviously a case in which the interests of justice require a remand for a new trial, Bryan v. United States, 1950, 338 U.S. 552, 70 S.Ct. 317, 94 L.Ed. 335, which we may do under United States v. Musquiz, 5 Cir., 1971, 445 F.2d 963, 966, since a motion for new trial was filed. The government should have the opportunity to prove if it can, facts showing that Appellant received or concealed the goods while still on Reese Air Force Base.

Reversed and remanded for new trial.

      . 18 U.S.C.A. § 662.
      “Receiving stolen property within special maritime and territorial jurisdiction
      Whoever, within the special maritime and territorial jurisdiction' of the United States, buys, receives, or conceals any money, goods, bank notes, or other thing which may be the subject of larceny, which has been feloniously taken, stolen, or embezzled, from any other person, knowing the same to have been so taken, stolen, or embezzled, shall be fined not more than $1,000 or imprisoned not more than three years, or both; but if the amount or value of thing so taken, stolen or embezzled does not exceed $100, he shall be fined not more than $1,000 oi’ imprisoned not more than one year, or both.”

      . 18 U.S.C.A. § 661.
      “Within special maritime and territorial jurisdiction
      Whoever, within the special maritime and territorial jurisdiction of the United States, takes and carries away, with intent to steal or purloin, any personal property of another shall be punished as follows:
      If the property taken is of a value exceeding $100, or is taken from the person of another, by a fine of not more than $5,000, or imprisonment for not more than five years, or both; in all other cases, by a fine of not more than $1,000 or by imprisonment not more than one year, or both.
      If the property stolen consists of any evidence of debt, or other written instrument, the amount of money clue thereon, or secured to bo paid thereby and remaining unsatisfied, or which in any contingency might be collected thereon, or the value of the property the title to which is shown thereby, or the sum which might be recovered in the absence thereof, shall be the value of the property stolen.”

      . Appellant assails the judgment and commitment on a number of fronts. These include challenges to the indictment, the actions of the trial Judge in cautioning counsel on the need for candor by Appellant in making a pauper’s oath, and the sufficiency of the evidence on all points. Appellant’s charge that the indictment is insufficient in its allegations is without - merit. The allegedly prejudicial remarks by the trial Judge are unlikely to recur on retrial. The other claims of error are meritless.

      . The other minor but indispensable elements of the crime — such as the value of the stolen property exceeding $100.00— were adequately shown.

      . United States v. Cook, 5 Cir., 1969, 419 F.2d 1306; Thurmond v. United States, 5 Cir., 1967, 377 F.2d 448. Thurmond involves personal property stolen from a military base and a charge under 18 U.S. C.A. § 661, set out in note 2, supra.

      . The government concedes that receipt or concealment of the stolen property within the confines of Reese Air Force Base is a necessary element of the crime. Government’s brief at 22.

      . For all we can discern from the record it is possible — even likely — that someone would have had time to remove the equipment in the 30 to 40 minutes between Appellant’s being shown out and the securing of the doors. However, the simple answer to this is that the jury found Defendant-Appellant innocent of returning and stealing the equipment.

      . Post, Texas, is located in Garza County.

      . Because the evidence — which we need not detail — of Appellant’s control over the amplifier and other equipment is unequivocal, we are not troubled, as we might otherwise be, that at the time of the arrest he was probably not technically in sole possession of the property.

      . The record does not suggest — and we make no suggestion — that these persons knew the equipment was stolen. As the leader and manager Appellant took on the job of acquiring the equipment for the group. None of the other members inquired — so far as the record discloses— as to the source of the equipment.

      . See note 5, supra.

      . Drawing inferences from the evidence before it is, besides judging the credibility of witnesses, the major function that the jury performs. No tenable thesis can be maintained that before a jury can draw an inference in a courtroom that its members ■would make without hesitation in everyday life, that it must be instructed that the inference is one that the law specifically recognizes. Of course, failure to instruct may be, and often is, a ground for reversal where preserved or under circumstances constituting plain error.

      . Jenkins v. United States, 10 Cir., 1966, 361 F.2d 615; Hale v. United States, 5 Cir., 1989, 410 F.2d 147. Additional problems may arise -where possession is the crime, cf., United States v. Gordon, 5 Cir., 1970, 421 F.2d 1068, and United States v. Cameron, 5 Cir., 1972, 460 F.2d 1394.

      . The government’s suggestion that Girson v. United States, 9 Cir., 1937, 88 F.2d 358 is authority for the proposition that the Courts have entertained and allowed the inference which would uphold this conviction is incorrect. That case dealt with the theft of government property. The theft of government property is presently covered by Section 641 of Title 18, U.S.C.A.
      Whoever embezzles, steals, purloins, or knowingly converts to his use or the use of another, or without authority, sells, conveys or disposes of any record, voucher, money, or thing of value of the United States or of any department or agency thereof, or any property made or being made under contract for the United States or any department or agency thereof ; or
      Whoever receives, conceals, or retains the same with intent to convert it to his use or gain, knowing it to have been embezzled, stolen, purloined or converted—
      Shall be fined not more than $10,000 or imprisoned not more than ten years, or both; but if the value of such property does not exceed the sum of $100, he shall be fined not more than $1,000 or imprisoned not more than one year, or both.
      The word “value” means face, par, or market value, or cost price, either wholesale or retail, whichever is greater.
      As is plain from a single reading of this section the crime of receiving and concealing government property does not contain an element of receiving and concealing while on territory o f the United States. While it is probable that Congress could have made criminal the receiving and concealing of nongovernment property stolen from a federal reservation where the receiving and concealing occurred outside the federal reservation, the simple answer is that it did not. See United States v. Bowman, 1922, 260 U.S. 94, 43 S.Ct. 39, 67 L.Ed.2d 149. Leary, supra, clearly rejects the argument that because Congress could have made such an action criminal, the law will allow an inference that the commission of the action that Congress could have criminalized demonstrates the commission of the related action that Congress did criminalize.

      . This may be no victory for the Appellant. If prosecution is possible under the Texas law, and we intimate no opinion as to whether this is the case, the penalty is considerably stiffer.
      Vernon’s Rev.Pen.Code and Art. 1430 provides :
      “Whoever shall receive or conceal property which has been acquired by another in such manner as that the acquisition comes within the meaning of the term theft, knowing the same to have been so acquired, shall be punished in the same manner as if he had stolen the property.”
      and Article 1421 of the same code provides :
      “Theft of property of the value of fifty dollars or over shall be punished by confinement in the penitentiary not less than two nor more than ten years.”


author: PER CURIAM:

text:
    John J. JOYCE v. UNITED STATES of America, Appellant.
    No. 71-2057.
    United States Court of Appeals, Third Circuit.
    Argued Jan. 18, 1973.
    Decided Feb. 16, 1973.

      Alan S. Rosenthal, John B. Scott, Attys., Department of Justice, Washington, D. C., L. Patrick Gray, III, Asst. Atty. Gen., Richard L. Thornburgh, U. S. Atty., for appellant.
    Ronald H. Heck, Bagley, Sydor & Heck, Pittsburgh, Pa., for appellee.
    Before VAN DUSEN, and ADAMS, Circuit Judges and BARLOW, District Judge.
   OPINION OF THE COURT

PER CURIAM:

This is an action against the United States under the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671, et seq. The plaintiff, John J. Joyce, is a United States Postal Service employee. He seeks recovery for injuries sustained when he was hit on the top of his head by a bar of soap that was either dropped or thrown from the window of a restroom on the third floor of the United States Post Office and Courthouse Building in Pittsburgh, Pennsylvania.

The incident occurred at approximately 5:45 A.M. on August 26, 1968, while Mr. Joyce was walking along the sidewalk adjacent to the Post Office and Courthouse Building and on his way to enter the building in order to commence his 6:00 A.M. shift as a postal clerk. At the time he received the blow, Mr. Joyce was approximately 300 to 350 feet from the employees’ entrance to the building on that portion of the sidewalk owned and maintained by the City of Pittsburgh.

Within two days after the incident occurred, Mr. Joyce notified the Bureau of Employees’ Compensation (hereinafter BEC) of his injuries. In the “Notice of Injury” filed with BEC, Mr. Joyce, in addition to describing the place where the injury occurred, the injury’s cause, and the nature of the injury, certified that “the injury described * * * was sustained in the performance of [his] duties as an employee of the United States Government. * * * ”

The filing of Mr. Joyce’s notice was followed on December 10, 1968, as required, by an official supervisor’s Report of Injury that was executed by the Assistant Postmaster. It provided BEC with summary answers to a variety of form questions relating to the accident and to Mr. Joyce’s injuries. Thereafter, on January 16, 1969, BEC approved for payment, on Mr. Joyce’s behalf, two medical bills incurred as a result of the accident and certified to BEC by the United States Public Health Service.

Approximately nine months later, BEC requested additional information concerning the accident from Mr. Joyce’s superiors. Then, on October 8, 1970, the examiner assigned to the case entered his findings formally approving the claim. In his “Notice of Injury,” Mr. Joyce stated that as a result of the blow to his head he had experienced “headaches, dizziness, and pain continually at the point where the bar of soap hit [him].” The only demonstrable injury described was the contusion of the head.

Shortly after its approval of the claim, BEC authorized Mr. Joyce to undergo further medical examinations in order to determine the full extent of his treatment needs. On October 16, 1970, BEC wrote to Mr. Joyce, advising him to make an appointment with the United States Public Health Service in Pittsburgh to be examined and treated, if necessary, for possible residual effects of the injury. A similar letter was also sent by BEC to the Public Health Service, confirming the authorization for further treatment and advising clinic officials how best to expedite BEC’s payment of any subsequent medical bills.

Having received no response from Mr. Joyce, BEC again wrote to him on February 17, 1971, asking for an explanation of why no medical reports had been received. Mr. Joyce did not respond to that letter.

On February 25, 1971, Mr. Joyce filed the present complaint against the United States under the Federal Tort Claims Act, seeking damages for a sum in excess of $10,000. Following several days of a non-jury trial, which commenced on May 20, 1971, the Government filed a motion for leave to amend the answer. In its motion, the United States asserted that the district court lacked jurisdiction to adjudicate plaintiff’s cause of action until such time as the Secretary of Labor, through BEC, determined that the injuries were not covered by the Federal Employees Compensation Act (FECA). The court was asked to stay its proceedings in order to allow plaintiff time to complete the processing of his FECA claim.

The district court, 329 F.Supp. 1242, denied the motion and entered judgment in favor of Mr. Joyce for approximately $35,000. The court held that a district court must defer to BEC only when the facts in a particular case raise a substantial question of FECA coverage and that since no such question was presented it was free to adjudicate the cause of action. Alternately, the district court stated that even if FECA coverage did, in fact, exist, because the FECA issue was raised so late in the proceedings, it had discretion whether to consider the Government’s motion and under the circumstances would deny such motion.

The FECA, 5 U.S.C. § 8101, et seq., provides the exclusive remedy for a Federal employee’s injuries covered by that Act.

The nature and purpose of the FECA were stated by this Court in Somma v. United States, 283 F.2d 149, 151 (3d Cir. 1960) :

“[The] Act sets up a comprehensive system of workmen’s compensation for federal employees. Congress provided that [the FECA] be interpreted and administered by a Bureau of Employees’ Compensation and an Appeals Board whose action is not reviewable by the courts. * * * Obviously, the purpose in so providing was to insure uniformity of interpretation and policy. * * * ”

The FECA has thus been made the exclusive remedy for federal employees within its coverage, and such employees have no election of remedies. See United States v. Demko, 385 U.S. 149, 87 S.Ct. 382, 17 L.Ed.2d 258 (1966).

As this Court recognized in Somma, supra, the Act explicitly provides that all questions “arising under” the FECA shall be decided by the Secretary of Labor, and his decision in allowing or denying a payment “is (1) final and conclusive for all purposes and with respect to all questions of law and fact; and (2) not subject to review by another official of the United States or by a court by mandamus or otherwise.” 5 U.S.C. § 8128(b).

The statutory test of coverage is whether the employee was injured “while in the performance of his duties.” 5 U.S.C. § 8102(a). In light of the foregoing, it is clear that an injured Federal employee must seek administrative relief before he files suit under the Federal Tort Claims Act, unless his injuries are clearly not sustained “while in the performance of his duties.”

As stated in Somma, supra, at 151 of 283 F.2d:

“Where * * * a substantial question of coverage exists especially in an area in which the [Appeals] Board has not as yet authoritatively spoken * * * it [is] extremely important that it have the opportunity to speak first.”

The circumstances present here did raise “a substantial question” of FECA coverage. Before filing the present action, Mr. Joyce submitted a “Notice of Injury” to BEC, in which he certified that his injuries were sustained in the performance of his duties as an employee of the United States, and the record reflects that FECA coverage was acknowledged by BEC and that BEC “accepted the injury for contusion of the head.” It is also undisputed “that two separate medical bills incurred as a result of the accident * * * were paid by the Bureau of Employees Compensation, United States Department of Labor.” These facts certainly raise “a substantial question” of coverage.

In Cobia v. United States, 384 F.2d 711 (10th Cir. 1967), cert. denied, 390 U.S. 986, 88 S.Ct. 1182, 19 L.Ed.2d 1290 (1968), the court, when confronted with a similar factual situation, ruled that an injured employee’s acceptance of FECA benefits created a bar to a later action under the Federal Tort Claims Act.

Although it is regrettable that the Government did not raise the FECA issue more promptly, once that issue was raised, the district court had no discretion to proceed to a final adjudication of the cause of action without first requiring the plaintiff to complete the processing of his administrative claim under the FECA. Where there is no jurisdiction over the subject matter, there is, as well, no discretion to ignore that lack of jurisdiction. See F.R.Civ.P. 12(h)(3), supra note 1.

It is well settled that no action lies against the United States unless authorized by Congress. E. g., Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950). And despite the fact that the Federal Tort Claims Act provides, broadly, that the district court shall have exclusive jurisdiction of civil actions on claims against the United States for money damages, a clear showing of relinquishment of sovereign immunity in the particular case is required to give jurisdiction for tort actions. Dalehite v. United States, 346 U.S. 15, 30-31, 73 S.Ct. 956, 97 L.Ed. 1427 (1953).

The judgment of the district court will be vacated and the matter remanded to the district court with instructions to stay any action pending outcome of the proceedings under the FECA.

      . But see F.R.Civ.P. 12(h)(3): “Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.”
      Although the district court relied in part upon DiFrischia v. New York Central Railroad, 279 F.2d 141 (3d Cir. 1960), that decision is distinguishable. There, although first filing an answer challenging the averment of diversity jurisdiction, the defendant later entered into a stipulation with the plaintiff that the district court did have jurisdiction. Nearly two years later, after extensive trial preparation and after the statute of limitations would have run on the plaintiff’s claim, the defendant filed a motion to dismiss for lack of jurisdiction. This Court held that under these unusual circumstances dismissal of the complaint was improper. “A defendant may not play fast and loose with the judicial machinery and deceive the courts.” 279 F.2d at 144. In the present case, there is no evidence of deception or that the 'government by “sitting on its rights” may cause the plaintiff an effective loss of his claim through the running of the statute of limitations.

      . 5 U.S.C. § 8102(a) provides :
      (a) The United States shall pay compensation as specified by this subchapter for the disability or death of an employee resulting from personal injury sustained while in the performance of his duty, unless the injury or death is—
      (1) caused by willful misconduct of the employee;
      (2) caused by the employee’s intention to bring about the injury or death of himself or of another; or
      (3) proximately caused by the intoxication of the injured employee.
      5 U.S.C. § 8116(c) provides:
      (e) The liability of the United States or an instrumentality thereof under this subchapter or any extension thereof with respect to the injury or death of an employee is exclusive and instead of all other liability of the United States or the instrumentality to the employee, his legal representative, spouse, dependents, next of kin, and any other person otherwise entitled to recover damages from the United States or the instrumentality because of the injury or death in a direct judicial proceeding, in a civil action, or in admiralty, or by an administrative or judicial proceeding under a workmen’s compensation statute or under a Federal tort liability statute. However, this subsection does not apply to a master or a member of a crew of a vessel.


author: HEANEY, Circuit Judge.

text:
    In the Matter of MOULDED PRODUCTS, INC., Debtor. Stockholders’ Protective Committee for Moulded Products, Inc., Appellant, v. Richard H. BARRY, Trustee, et al., Appellees.
    Nos. 72-1701, 73-1044.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 12, 1973.
    Decided March 1, 1973.

      Joe A. Walters, Minneapolis, Minn., for appellant.
    Arthur L. Doten, Minneapolis, Minn., for appellees.
    Before LAY, HEANEY and STEPHENSON, Circuit Judges.
   HEANEY, Circuit Judge.

The Stockholders’ Protective Committee appeals from orders of the District Court with respect to a plan for reorganizing Moulded Products, Inc.

Moulded Products, Inc., is a publicly held corporation engaged primarily in the business of rotational molding. Its financial problems began in 1968, when it attempted to add. two major products to its line. The projects were unsuccessful. The ensuing financial strain overburdened Moulded Products, and, on July 6, 1971, it filed a petition for reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C. § 501 et seq.

Two hundred and five claims were timely filed, including $9,581.05 in taxes, $271,761.52 in secured claims and $1,545,658.26 in unsecured claims. The largest unsecured claim was filed by the Monsanto Company. This claim of $787,229.00 was represented by promissory notes which were convertible into common stock. Monsanto also filed a claim as a shareholder of 200,000 shares of Class B stock. Similarly, 1,781 other shareholders filed interests totaling 776,188 shares of Class A stock.

The trustee filed a reorganization plan on May 23, 1972. His plan provided that the shareholders would receive one share of a new common stock for each ten dollars of positive net worth of the debtor attributable to their respective holdings of the old common stock. The effect of this provision is that all stockholders will be denied participation in the reorganization because the corporation was found to have a negative net worth. Secured claims were to be paid in full, and unsecured creditors were given the option of exchanging every ten dollars of their claims against the corporation for one share of the new common stock, or of accepting an unsecured promissory note for twenty percent of the value of their claim, due and payable four years from date of confirmation by the court of the reorganization plan. The reorganization plan was approved as to feasibility by the referee and the District Court. This ruling is not questioned on appeal.

The Stockholders’ Protective Committee raises three issues on appeal:

(1) That Monsanto’s unsecured claim should properly be classified as equity rather than a debt because of the close relationship between Monsanto and Moulded Products.

(2) That the trustee breached his fiduciary duty to the stockholders of Moulded Products in arranging for the assignment by Monsanto of its unsecured claim to Red River Enterprises, Inc., without notice to the stockholders and without giving the stockholders the same opportunity; and that because of the trustee’s wrongful activity, Red River’s claim should be limited to the consideration paid.

(3) That the debtor corporation was improperly valued, and that the District Court’s finding that the debtor was insolvent was clearly erroneous.

I. CLASSIFICATION OF MONSANTO’S INTEREST AS DEBT OR EQUITY.

To a large extent, the controversy before us centers around Monsanto’s interest in Moulded Products, which was subsequently assigned to Red River Industries, Inc. In 1968, Moulded Products, in an attempt to raise an additional one million dollars in capital, offered common stock to the public. When this offering failed to raise the necessary capital, Moulded Products agreed to transfer 200,000 shares of newly created Class B common stock to Monsanto for $700,000. Monsanto also agreed to lend Moulded Products additional working capital to be represented by corporate notes convertible into additional common stock. Moreover, Monsanto acquired an option to purchase sufficient additional shares of stock to make it owner of fifty-three and one-half percent of the outstanding common stock of Moulded Products. From 1969 to 1971, Monsanto made interest bearing loans to Moulded Products totaling $771,650. Under the reorganization proceedings, its claim, including interest, amounts to $787,229.

The Committee argues that, because of the above transactions, Monsanto was so deeply enmeshed in the affairs of Moulded Products and shared such a large part of the responsibility for its financial difficulty, its interest should be classified as equity and, therefore, subordinated to the claims of the other unsecured creditors. In support of this argument, the Committee cites Taylor v. Standard Gas and Electric Co., 306 U.S. 307, 59 S.Ct. 543, 83 L.Ed. 669 (1939). There, the Supreme Court held that the claim of a parent company against its insolvent subsidiary would be subordinated to the claims of certain shareholders other than the parent. The Court found that the subsidiary’s financial problems were due to the poor management inflicted upon it by the parent corporation. The Committee argues that this “Deep Rock” doctrine (named after the subsidiary in Taylor) should be extended to this case where there is no technical parent-subsidiary relationship because the substance of the relationship is the same.

A reviewing court in a reorganization proceeding has the power to subordinate claims, but this power is not to be exercised lightly. In re Kansas City Journal, 144 F.2d 791 (8th Cir. 1944). This ease is not a proper one for the exercise of the power to subordinate or for an extension of the “Deep Rock” doctrine. In Taylor, the subsidiary was completely controlled by the parent, and the disastrous management decisions came from the parent. Here, the two products which caused Moulded Products’ downfall were conceived and undertaken by the management of Moulded Products, which then approached Monsanto for financial backing. Although Monsanto did give financial backing to the project and encouraged Moulded Products to proceed, the evidence does not establish that it was primarily responsible for the financial disaster which occurred. On the contrary, the record reveals that Monsanto, in an effort to avoid anti-trust problems, retrained from involving itself in the management of Moulded Products.

The District Court, in an order of October 12, 1972, found that the loans and purchases of the stock interest by Monsanto were “for proper purposes, fair and reasonable, and of beneficial effect to the debtor.” It also found that Monsanto assisted Moulded Products financially and in other ways, but did not dominate or control it. The record does not indicate that the transactions between Monsanto and Moulded Products were other than in good faith with the welfare of the latter corporation in mind. Likewise, the record does not show that Monsanto itself was enriched at the expense of Moulded Products or that it v/as guilty of bad management. Therefore, we hold that the District Court’s findings with regard to the Monsanto claim were not clearly erroneous. Monsanto’s claim should be classified as an unsecured claim and Red River as Monsanto’s assignee should participate on an equal footing with other unsecured creditors in the reorganized corporation.

II. BREACH OF FIDUCIARY DUTY TO THE STOCKHOLDERS BY THE TRUSTEE.

The Committee argues that the trustee breached his fiduciary duty to the stockholders of Moulded Products when he negotiated the assignment by Monsanto of its unsecured claim and its Class B common stock for $95,000 to Red River Industries, Inc., ninety-seven percent of which was owned by J. D. Farnham, a close friend of the trustee. As a result of the assignment, Red River will control the reorganized corporation. The Committee contends that since the trustee did not give the shareholders the opportunity to buy Monsanto’s claim for the price paid by Red River, the assignment constituted a breach of the fiduciary duty by the trustee. It, therefore, argues that Red River’s claim should be limited to the consideration paid to acquire Monsanto’s claim.

A. Trustee’s Duty.

The trustee, appointed by the court in a reorganization proceeding, is a fiduciary and has an obligation to treat all interested parties fairly. Wolf v. Weinstein, 372 U.S. 633, 83 S.Ct. 969, 10 L.Ed.2d 33 (1963). This obligation includes fair treatment of creditors and stockholders. In re Los Angeles Lumber Products Co., 46 F.Supp. 77, 88 (S.D.Cal.1941). However, in this case, the District Court found that there was no breach of fiduciary duty on the part of the trustee, and we hold that this finding is not clearly erroneous.

Additional working capital was required for Moulded Products to be successfully reorganized. Monsanto refused to supply it. The best alternative available to the trustee was to find a purchaser for Monsanto’s interest who had the capacity and the willingness to furnish additional working capital. One stockholder tried to negotiate with Monsanto. He was unsuccessful. The employees, with the assistance of the trustee, then tried to buy Monsanto’s interest; they were unsuccessful. At that point, the trustee assisted Red River in negotiating an agreement with Monsanto for the purchase of its interest and induced Red River to guarantee a loan to supply working capital for Moulded Products. This loan was secured by a lien on the accounts receivable and the inventory. There is nothing in the record to indicate that any individual stockholder or group of stockholders, other than those who negotiated unsuccessfully, were interested in purchasing Monsanto’s interest and advancing working capital to the corporation. Perhaps the trustee should have actively pursued this possibility with the stockholders, but on the record before us, we cannot say that the trial court erred in holding that his failure to do so was not a breach of his fiduciary duties.

B. Limiting Red River Claim to the Amount of Consideration if Paid.

Holding as we do that the trustee did not breach his fiduciary duty in arranging for the sale of Monsanto’s claim to Red River, we can find no reason to limit Red River’s unsecured claim to the amount of consideration it paid.

An authoritative bankruptcy treatise states:

“Where claims or interests have been assigned or purchased, allowance thereof may be controverted on the ground that as a result of fraud, misrepresentation, overreaching or violation of a fiduciary obligation, such claims or interests were acquired for an inadequate consideration, and where this can be shown the court may disallow the claim or interest or (more often) allow it only for the amount actually paid.” (Footnotes omitted.)

6A Collier on Bankruptcy § 9.04 at 155-156 (14th ed. 1971).

The cases in which claims are limited to the amount of consideration paid generally deal with transactions where the assignee is in a fiduciary relationship with the corporation or is a close relative of someone in such a fiduciary relationship. There is no such relationship between Red River and Moulded Products. The record does not support the contention that Red River purchased Monsanto’s claim for an insufficient consideration, nor does it indicate that Red River had access to information not available to the shareholders when it purchased Monsanto’s claim. Moreover, there is no evidence of any fraud or misrepresentation. See, In re Automatic Equipment Mfg. Co., 106 F.Supp. 699 (D.Neb.1952). Consequently, we do not hold the District Court’s finding that the assignment was “for proper purposes, fair and reasonable and of beneficial effect to the debtor” to be clearly erroneous.

It is unfortunate that the shareholders of Moulded Products will lose their investment. However, they have been accorded all of their rights under Chapter X. They submitted an alternative plan for reorganization, which was properly rejected by the District Court. The shareholders’ plan, in which the shareholders would participate and Red River would participate on a subordinated basis, was predicated on a finding of solvency and a finding that the trustee breached his fiduciary duty. Neither of these findings was made. Because we uphold the District Court on its findings concerning solvency (see Part III of this opinion, infra) and breach of fiduciary duty, we hold that the District Court’s rejection of the shareholders’ plan was reasonable. Under the rule of absolute priorities, if the corporation is insolvent, the shareholders may not participate in the reorganized corporation. Consolidated Rock Products Co. v. DuBois, 312 U.S. 510, 61 S.Ct. 675, 85 L.Ed. 982 (1941).

Even if we were to limit Red River’s claim to the consideration it paid, the corporation would still be insolvent and the shareholders would not be affected by our ruling on this issue. Moreover, none of the creditors — secured or unsecured — has objected to the Monsanto-Red River transaction or to the status of Red River’s claim.

III. VALUATION.

The appellant contends the going concern value of Moulded Products was erroneously fixed at $900,000.

It is uncontested that the District Court used the proper measure of valuation. In reorganization proceedings, the test of the fair value of the debtor’s property is the earning power of the corporation as a going concern. Consolidated Rock Products Co. v. DuBois, supra 312 U.S. at 525, 61 S.Ct. 675. The debtor is insolvent if the aggregate amount of its property, as measured by its going concern value is insufficient to pay its debts. In re Muskegon Motor Specialities, 366 F.2d 522, 526 (6th Cir. 1966). The District Court found that Moulded Products was insolvent on July 6, 1971, when it filed its petition for reorganization and, on October 12, 1972, when the finding of insolvency was made, since on both dates its liabilities exceeded its going concern value of $900,000.

A determination by the District Court of valuation is a finding of fact and will not be reversed on appeal unless clearly erroneous. Dudley v. Mealey, 147 F.2d 268 (2nd Cir. 1945), cert. denied, 325 U.S. 873, 65 S.Ct. 1415, 89 L.Ed. 1991 (1945). However, the United States Supreme Court in Protective Committee for Independent Stockholders of TMT Trailer Ferry v. Anderson, 390 U.S. 414, 88 S.Ct. 1157, 20 L.Ed.2d 1 (1968), emphasized that if the District Court does not use the proper measure of future earnings, its valuation cannot stand even though the valuation could not be said to be clearly erroneous. The Committee contends that the District Court employed an improper measure of future earnings by using an earnings figure from which estimated interest payments had been deducted. The Committee contends that the amount of interest payments which will be made by the reorganized corporation is a highly speculative figure. Whether the corporation will be financed by equity investment or by loans under reorganization is an “arbitrary management decision,” and the trustee, if he desires, can greatly affect the going concern value by his choice of financing, if the earnings figure used to compute this value is reduced by the amount of estimated interest payments. Therefore, the Committee argues that the use of an earnings figure before deduction of interest payments is the only fair method of valuation.

The effect of using the Committee’s proposed measure of earnings would be that the going concern value of Moulded Products would probably exceed its liabilities, and the shareholders would not be excluded from participation in the reorganized corporation under the rule of absolute priorities. However, to accomplish this result, the Committee asks us to take an arbitrary approach to valuation and to use, in all instances, an earnings figure before interest payments have been deducted. To take such a stance would be directly contrary to the basic approach courts have taken in the past to valuation of debtor corporations in reorganization proceedings. This approach is that valuation must be determined on a case-by-case basis, and all relevant factors must be taken into consideration in each case in determining going concern value. Consolidated Rock Products Co. v. DuBois, supra, 312 U.S. at 526, 61 S.Ct. 675.

We have carefully examined the record before us and find that the District Court acted properly by taking interest payments into consideration in making its determination of valuation. Correspondence and testimony in the record indicate that the reorganized corporation will be financed heavily by loans. In addition, the corporation is assuming all secured debts of the old corporation. Consequently, interest payments will be a definite expense under reorganization.

The rationale underlying the case-by-case determination of valuation is to avoid past errors, guard against overcapitalization, afford the creditors and stockholders a fair and equitable distribution, and assume as far as possible that the new corporation will be able to meet its interest and dividend requirements. Consolidated Rock Products Co. v. DuBois supra 312 U.S. at 526, 61 S.Ct. 675; 6A Collier on Bankruptcy, supra, § 11.05. To adopt the Committee’s argument would result in too high a valuation of the corporation with all the attendant problems described above. We have carefully examined the record and hold that the District Court considered all relevant factors and that its finding as to valuation is not clearly erroneous.

Affirmed.

      . The feasibility of this reorganization plan appears marginal, but we do not feel that the plan has so little merit as to permit us to set it aside on our own motion. To protect the interest of existing and future creditors and to improve the chances of success of the reorganized corporation, the trustee should proceed immediately to firm up the understanding that he has with Red River for that corporation to furnish adequate working capital to Moulded Products. Moreover, the referee must insist that the trustee advise him of major decisions before they are made so that he can approve or disapprove them. The referee must also proceed to fix the compensation of the trustee at a reasonable sum and to make that compensation a matter of record.

      . According to the contract of sale, $75,000 of the purchase price was in consideration for assignment of the unsecured claim, and $20,000 was in consideration for assignment of the stock interest. Regarding its stock interest, Red River shares the fate of the other stockholders. Under tlie rule of absolute priorities, its stock interest is worthless, unless at the time of discharge, the corporation has a positive net worth. Red River will participate in the reorganized corporation only to the extent of its unsecured claim.

      . See, 6 Collier on Bankruptcy § 7.01 fit 1144 (14th eel. 1971), where it stated:
      “ * * * [0]nee reorganization becomes necessary, the procedure * * * should be based primarily on the criterion of what is best for the interests of the many whose money has been put into the corporation, as compared with the interests of the management and dominant groups, strategically powerful, who could otherwise force a plan favorable to themselves upon the general body of security holders.”

      . In a letter to this Court, dated January 23, 1973, counsel for the Committee enclosed a letter, dated January 19, 1973, signed by four members of the Stockholders’ Protective Committee, stating their willingness to guarantee a secured $185,000 bank loan to Moulded Products if the present trustee is replaced. Since we find no breach of fiduciary duty by the trustee, we find the stockholders’ offer to be unreasonable.

      . Liabilities as of July 6, 1971, totaled $2,161,176. Liabilities as of October 12, 1972, totaled $2,187,826.