author: WALLACE, Circuit Judge:

text:
    J. Arthur WHITE et al., Plaintiffs-Appellees, v. Paul ABRAMS, Defendant-Appellant. Robert HOFFMAN, Plaintiff-Appellee, v. Paul ABRAMS, Defendant-Appellant. Robert HOFFMAN, Plaintiff-Appellant, v. Paul ABRAMS, Defendant-Appellee. J. Arthur WHITE et al., Plaintiffs-Appellants, v. Paul ABRAMS, Defendant-Appellee.
    Nos. 71-2068, 71-2069, 71-2076, 71-2077.
    United States Court of Appeals, Ninth Circuit.
    March 15, 1974.
    Petition for rehearing denied June 11, 1974.

      Oliver F. Green, Jr. (argued) and Douglas C. Conroy, Paul, Hastings, Jan-ofsky & Walker, Los Angeles, Cal., for appellant in 71-2068 and 71-2069 and for appellee in 71-2076 and 71-2077.
    Thomas F. Call (argued), Adams, Duque & Hazeltine, Andrew S. Garb and Alfred I. Rothman, Los Angeles, Cal., for appellee in 71-2068 and 71-2069 and for appellant in 71-2076 and 71-2077.
    Before BARNES and WALLACE, Circuit Judges, and TAYLOR, District Judge.

       Honorable Fred M. Taylor, United States District Judge, Boise, Idaho, sitting by designation.

   WALLACE, Circuit Judge:

Abrams appeals from a jury verdict awarding damages against him for violations of the federal securities laws. The case arises out of his actions in connection with investments that White and others who invested with or through White (White Group) made in corporations owned and controlled by Theodore Richmond, now deceased. Abrams rais.es six points on appeal. We agree with his first contention that the trial court erred in instructing the jury that defendant violated the federal securities laws if he made a material misrepresentation, even if he did not know the falsity of his statement. We reverse and remand.

I. FACTUAL BACKGROUND

After a long relationship as a trusted friend and advisor, during which White had made a number of successful investments through him, Abrams encouraged White to invest substantial sums of money in several of 26 corporations owned and controlled primarily by Theodore Richmond (Richmond Corporations). Richmond operated bus lines in New York and New Jersey from 1948 until 1967 through a complex structure of corporations consisting of finance, real estate, bus leasing and bus operating corporations, all involved in one aspect or another, in operating the same bus lines. Early in their history, the Richmond Corporations began selling their own unsecured corporate promissory notes bearing interest at rates ranging from 12 to 20% per annum and generally maturing in three years. As the Richmond Corporations’ loans increased to the point that the profits from the bus lines were insufficient to pay current interest and the principal on the matured loans, the corporations borrowed additional money to meet these obligations. At the time of bankruptcy the corporations owed approximately $58,000,000 to about 5,000 persons. In addition, the corporations owed over $9,000,000 to institutional lenders such as Chase Manhattan Bank, Talcott Factors and General Motors Acceptance Corporation. In 1966, the year prior to bankruptcy, the corporations paid $6,000,000 in interest and another $8,000,000 on principal.

In 1956 Abrams began soliciting loans from private lenders for the Richmond Corporations, receiving in some instances a commission as high as 4% per annum for each year the money was left with the corporations. At the time of bankruptcy, the Richmond Corporations owed in excess of $3,000,000 to persons who had made loans through Abrams. Abrams did not sell any stocks or promissory notes, but did make arrangements for their purchase from the Richmond Corporations. The majority of the White Group’s loans were made to Manufacturers Credit Corporation, a holding company, which had as its sole asset the stock of the other 25 Richmond Corporations. The White Group had made loans, bearing interest at the rate of 12 to 14% per annum, to the Richmond Corporations over a period from 1959 until mid-1967 when the corporations filed for bankruptcy. The White Group also purchased stock, with an option in Richmond to repurchase at a price calculated at a fixed annual rate of return, approximately the same as the interest rate on the loans. At the time of bankruptcy, Mr. and Mrs. J. Arthur White and their daughter Margo, the largest investors of the White Group, held promissory notes in the total sum of-$455,000 and stock in the sum of $260,000. They had been receiving interest continuously since 1959 on the promissory notes from Richmond that totalled $346,575.

The White Group charges Abrams with violations of section 17(a) of the Securities Act of 1933 [15 U.S.C. § 77q(a)], section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. § 78j(b)], rule 10b-5 [17 C.F.R. § 240.-10b-5] and with common law fraud and seeks rescission and punitive damages. The jury found no liability under the charge of common law fraud. The White Group complains that Abrams misrepresented to them (1) that he had investigated Richmond and his corporations, examined the corporations’ financial statements and found the corporations and Richmond to be financially sound, (2) that Richmond would use the borrowed money to purchase new franchises, bus lines and additional bus equipment and (3) that the Richmond Corporations had large earnings and were well able to pay the high interest on the loans. They further complain that Abrams failed to disclose (1) that he was receiving a large commission on each investment made through him in the Richmond Corporations, (2) that he sold similar securities and loans to other persons at higher rates of return, in some instances up to 20% per annum and (3) that Manufacturers Credit Corporation owned no assets other than the stock in other Richmond Corporations. They also allege that Abrams conspired with Richmond to use unrecorded “second mortgages,” “registered notes” containing misleading language and other “lures” as a scheme, device or artifice to defraud.

After seven weeks of trial the case was submitted to the jury, which found in favor of the plaintiffs and awarded compensatory damages in the total 'amount of $1,101,982. Punitive damages were not allowed. The court subsequently decided it had erroneously allowed pre judgment interest and decreased the total award to $867,200. This resulted in a cross-appeal by the White Group.

II. ABSOLUTE LIABILITY JURY INSTRUCTION

Abrams argues that the trial court improperly instructed the jury as to the scope of duty imposed by clause (b) of rule 10b-5 which makes it unlawful for any person in connection with the sale or purchase of securities “[t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading . . . . ” SEC Rule 10b-5(b), 17 C.F.R. § 240.10b-5(b). The trial court instructed on the question of material misrepresentations as follows:

If you find that defendant made a material misrepresentation to plaintiffs in connection with the sale to plaintiffs of a promissory note or share of stock, the law is that defendant has violated the Federal securities laws even if you find that defendant did not know the falsity of the misrepresentation he made to plaintiffs. (Emphasis added.)

The court’s instruction would impose upon Abrams a duty to insure the truthfulness and reliability of the representations he has made. We reject such a broad construction since there is no indication that Congress, in passing section 10(b) of the Securities Exchange Act of 1934, or that the Securities and Exchange Commission, in issuing rule 10b-5 thereunder, intended that “anyone should be an insurer against false or misleading statements made non-negligently or in good faith.” Kohn v. American Metal Climax, Inc., 458 F.2d 255, 280 (3d Cir. 1972) (Adams, J., concurring and dissenting). See List v. Fashion Park, Inc., 340 F.2d 457, 463 (2d Cir.), cert. denied, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965) (purpose of rule 10b-5 is to qualify the rule of caveat emptor — not to establish a scheme of investors’ insurance). The instruction proposed by the White Group, objected to by Abrams and given by the trial court, imposes a liability without fault which we find to be contrary to the basic thrust of the statute and rule.

III. PRIOR NINTH CIRCUIT DECISIONS

In attempting to define the broad duty imposed under the rule, the courts have traditionally focused upon the defendant's state of mind, generally utilizing the catchword “scienter.” The question of what state of mind should be required before a court will impose liability has been a source of controversy in federal securities law since the Second Circuit said in Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 786 (2d Cir. 1951), that “proof of fraud is required in suits under § 10(b) of the 1934 Act and Rule X-10 B-5 .” Early in this controversy we rejected the notion that common law fraud or scienter must be proven in order to recover under rule 10b-5. In Ellis v. Carter, 291 F.2d 270, 274 (9th Cir. 1961), we were urged by the appellees to hold that genuine fraud, as opposed to “a mere misstatement or omission,” must be alleged and proved on the ground that proscribing material misstatements and half-truths without using fraud or scienter language would not be a permissible implementation of section 10(b). We disagreed and said:

Section 10(b) speaks in terms of the use of “any manipulative device or contrivance . . . . ” Had Congress intended to [proscribe] common-law fraud, it would probably have said so. We see no reason to go beyond the plain meaning of the word “any”, indicating that the use of manipulative or deceptive devices or contrivances of whatever kind may be forbidden, to construe the statute as if it read “any fraudulent” devices.

In Ellis we were concerned primarily with whether rule 10b-5 gave a private remedy to a buyer as well as a seller of securities. We held on the pleadings that a buyer did have a private remedy under the rule and rejected the defendants’ additional challenge that plaintiff must allege and ultimately prove genuine fraud.

Subsequently, in Royal Air Properties, Inc. v. Smith, 312 F.2d 210, 212 (9th Cir. 1962), we reaffirmed our position that common law fraud need not be alleged or proved to recover under rule 10b-5:

In an action brought under section 10(b), common law fraud need not be alleged or ultimately proved. After establishing the use of some means of interstate commerce, the mails, or any national stock exchange facility . Rule 10b-5(b), a proper implementation of section 10(b), only requires proof of a material misstatement or an omission of a material fact in connection with the purchase or sale of any security to make out a pri-ma facie case.

After finding that the plaintiff had established a prima facie violation of section 10(b), we held that the trial court erred in not allowing the affirmative defenses of estoppel, waiver and laches. A prima facie case, as we used the term in Royal Air, consists of sufficient evidence in that type of case to get plaintiff past a motion for a directed verdict in a jury case or motion to dismiss pursuant to Fed.R.Civ.P. 41(b) in a non-jury case. It is the evidence necessary to require a defendant to proceed with his case. In rule 10b-5 cases, where much of the evidence needed by the plaintiff to prove his case is in the hands of the defendant, we require a lesser amount of evidence to avoid a directed verdict or dismissal at the end of the plaintiff’s case than we require for a final judgment. In such cases where the evidence is fairly close, it is inadvisable to sustain a defendant’s motion to dismiss midway through the trial, even though technically the plaintiff may not have yet developed sufficient evidence for a final judgment, since as the defendant proceeds with his case, the plaintiff may well on cross-examination be able to develop points that will strengthen his case. 5 J. Moore, Federal Practice fl 41.13[4], at 1159 (2d ed. 1971). For that reason, we have set a lesser standard in 10b-5 cases when ruling on motions at the end of plaintiff’s case-in-chief. Thus in Royal Air the plaintiff presented sufficient evidence to require the defendants to proceed with their case. When Royal Air came before us on a second appeal, we affirmed the trial court’s decision, which it made after hearing the affirmative defenses, that there was sufficient evidence to support a final judgment for the plaintiffs. Royal Air Properties, Inc. v. Smith, 333 F.2d 568, 569 (9th Cir. 1964).

As is obvious from this discussion, our statement as to what constitutes a prima facie ease in Royal Air should not be misconstrued as the standard of liability for a rule 10b-5 case. This is adequately demonstrated by the fact that in Royal Air we considered more than the sterile fact that the defendants had made- a material misrepresentation. In addition to that fact, we noted that the defendants had either knowledge of or ready access to the information which, when omitted, made the statements to the plaintiff misleading and that the defendants had initiated the stock transaction and had actively solicited a purchase of stock by the plaintiff. 312 F. 2d at 211-212. In the second Royal Air, in affirming the trial court’s ultimate finding of liability, we also noted that the plaintiff did not have knowledge of or reasonable access to the information that the defendant omitted and that the plaintiff’s lack of business sophistication made him over trusting in the defendant and in the reliability of his statements. 333 F.2d at 570-573. The significance of this factual background will become even more important as we discuss later the liability test for a rule 10b-5 ease.

IV. THE FLEXIBLE DUTY STANDARD

A. Background

The language of Ellis and Royal Air has been the basis of a great deal of scholarly and judicial review, criticism and even speculation. Most commentators have rejected the notion that we intended to impose liability without fault and have either dismissed the language as dicta, e. g. Bucklo, Scienter and Rule 10b-5, 67 Nw.U.L.Rev. 562, 581-82 (1972), or interpreted it as requiring only proof of negligence rather than some stricter version of scienter, e. g., City Nat’l Bank v. Vanderboom, 422 F. 2d 221, 230 n.9 (8th Cir.), cert. denied, 399 U.S. 905, 90 S.Ct. 2196, 26 L.Ed.2d 560 (1970); 2 A. Bromberg, Securities Law: Fraud § 8.4(630), at 204.243 (1971); Note, Proof of Scienter Necessary in a Private Suit under SEC Anti-fraud Rule 10b-5, 63 Mich.L.Rev. 1070, 1077 (1965). We have not until now had occasion to explain more fully what we meant in Ellis and Royal Air nor to define more precisely the scope of liability imposed by rule 10b-5.

When the courts first began to allow private remedies under rule 10b-5, most followed a compartmentalized approach by requiring some semblance of the traditional elements of common law fraud: materiality, scienter, reliance, causation and damages. As federal anti-fraud litigation has further developed, however, the trend has been to modify or completely eliminate some of these elements. See e. g., Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972); 2 A. Bromberg, Securities Law: Fraud §§ 8.-1, 8.9 (1971). The courts, have recognized that if the Congressional purpose is to be accomplished, the federal securities laws must be construed liberally and flexibly'. In Affiliated Ute Citizens v. United States, 406 U.S. 128, 151, 92 S. Ct. 1456, 1471, 31 L.Ed.2d 741 (1972), the Court recently said:

The Court has said that the 1934 Act and its companion legislative enactments embrace a “fundamental purpose ... to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry.” SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186, [84 S.Ct. 275, 280, 11 L.Ed.2d 237] (1963). In the case just cited the Court noted that Congress intended securities legislation enacted for the purpose of avoiding frauds to be construed “not technically and restrictively, but flexibly to effectuate its remedial purposes.” Id., at 195 [84 S.Ct., at 285], This was recently said once again in Sup-intendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 12 [92 S. Ct. 165, 169, 30 L.Ed.2d 128] (1971). (footnotes omitted)

In Ute, the Court held that the court of appeals erred in requiring evidence of reliance on material fact misrepresentations for rule 10b-5 liability, where the defendants had induced shareholders “to dispose of their shares without disclosing to them material facts that reasonably could have been expected to influence their decisions to sell.” 406 U.S. at 153, 92 S.Ct. at 1472. In reaching this result, the Court focused on the language of the rule prohibiting a “course of business” or a “device, scheme, or artifice” that operates as a fraud in determining the extent of the duty that rule 10b-5 imposes upon persons connected with the sale or purchase of securities. Although the Court did not discuss the scope of the duty imposed by clause (b) of the rule, we believe it is significant that it considered a number of factors such as the defendants’ relationship to the plaintiffs, the benefit the defendants derived from the sale of the stock, the access the defendants had to the undisclosed information as compared with the access of the plaintiffs, and the activity of the defendants in encouraging the plaintiffs to sell their stock. See Comment, Affiliated Ute Citizens v. United States — The Supreme Court Speaks on Rule 10b-5, 1973 Utah L.Rev. 119, 127-31. Notably, the Court did not analyze the defendants’ conduct in terms of the elements of common law fraud, but rather as what kind of a duty rule 10b-5 imposes. Although the elements of common law fraud were important in defining what factors should be considered, they were neither limits nor barriers to the extent of the defendants’ duty under the rule.

The expressions of the Court are not only meaningful, but chart the way for a proper analysis of 10b-5 liability. It is not based upon easily defined, well-known legal theories such as common law fraud, nor is it based upon convenient, differently interpreted, shorthand latin phrases behind which one can sweep complex determinations. Rather, we are to examine the totality of the factual context and measure it by the duty imposed on the defendant.

B. Duty Standard of the Second Circuit

Recently the Second Circuit began to develop a duty analysis approach. In Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341 (2d Cir. 1973), it held that section 14(e) of the Exchange Act created a private action for misrepresentations and omissions made in connection with a tender offer. In defining the elements of a section 14(e) action, the court noted that since the underlying proscriptions were virtually identical, the principles developed under rule 10b-5 should apply. The Second Circuit, citing our Royal Air and Ellis cases for authority, stated: “The initial inquiry in each case is what duty of disclosure the law should impose upon the person being sued.” 480 F.2d at 363. We hold this to be the correct approach in rule 10b-5 cases. We believe it unfortunate that the Second Circuit attempted to limit this duty by requiring some degree of scienter or culpability and by holding that mere negligent conduct would not be sufficient for liability. The exact standard that the court would apply, however, is not clear to us.

The court’s reasoning in defining culpability was, first, to ask what duty of disclosure the law should impose upon the person being sued, second, to examine factors such as the access to information or special relationships that may impose an “affirmative duty” of disclosure, third, to decide whether the person has knowingly or recklessly failed to discharge these duties. The court then summarized that these three liability factors could be stated as:

whether plaintiff has established that defendant either (1) knew the material facts that were misstated or omitted, or (2) failed or refused to ascertain such facts when they were available to him or could have been discovered by him with reasonable effort.

480 F.2d at 364 (emphasis added). It may well be that the analysis in Chris-Craft accurately reflects what the courts have been doing in deciding what state of mind is sufficient for recovery under rule 10b-5, but we choose not to adopt it. We have difficulty with the court’s announced position that mere negligence is not sufficient for liability while in the same case it summarizes with language that sets forth a negligence standard, at least for persons with a special, duty.

One month after Chris-Craft, the Second Circuit, sitting en banc, again used a duty analysis in defining rule 10b-5 liability in relation to a corporate director. In Lanza v. Drexel & Co., 479 F.2d 1277 (2d Cir. 1973), it affirmed a trial court’s decision rejecting the contention that the defendant corporate director had violated rule 10b-5 because as a matter of law,

in the circumstances disclosed by the record, he was under no duty to investigate more than he did at the material times or to seek out and advise the plaintiffs in any way.

479 F.2d at 1289 (quoting the lower court’s findings). In support of this conclusion the court, after setting forth extensively the history and development of private actions under the securities laws, carefully analyzed the corporate director’s relationship to the plaintiffs, his access to the omitted and misrepresented information and his role in conducting the affairs of the corporation. After concluding that the director was under no duty to convey this particular information, the court then announced that in the Second Circuit, a mere negligent omission or misrepresentation is not enough to establish liability under rule 10b-5. Thus the court adopted a duty theory, but set a lower limit on the duty by requiring more than negligent conduct for liability to arise. Judge Hays, dissenting from the majority opinion, would have found that rule 10b-5 did impose upon the director a duty “to acquaint himself with developments in important intercorporate negotiations.” His failure to inform himself “was a breach of a duty he owed as a director and a ‘controlling person’ ” to the plaintiffs. Judge Hays then concluded :

That Coleman’s failure to act was negligent as opposed to calculated should not insulate him from liability when action on his part might have prevented the fraud perpetrated by the corporation whose activities he was under a duty to supervise. I would hold, therefore, that Coleman’s negligent “omission to state material facts” to the purchasers of BarChris stock was a violation of § 10(b) and Rule 1 Ob-5, and that Coleman should be held liable for the damages which the plaintiffs suffered.

479 F.2d at 1319. The dissent, therefore, also adopted the duty approach, but would not impose the limitation preventing liability based upon negligence.

C. Rejection of Compartmentalization The Second Circuit’s attempt in Chris-Craft and Lanza to limit the scope of rule 10b-5 duty by reference to common law fraud principles demonstrates the difficulties courts have had in trying to fit a wide varity of complex fact situations and relationships within a single standard of scienter. As Professor Bromberg writes:

A comprehensive scienter standard would have to fit the enormous variability of 10b-5 private suits, including
(1) Whether the violation is misrepresentation, nondisclosure or some more complex scheme or manipulation;
(2) Whether there is privity, a lesser relationship (such as aiding-abetting or conspiracy) or no privity at all (as in insider trading cases); in the parlance of this text, whether the transactions are direct or indirect, personal or impersonal;
(3) Whether there is one plaintiff or thousands;
(4) Whether there is some special ■ relationship between the parties, such asjüduciary-beneficiary or broker-customer ;
(5) Whether the relief sought is damages, rescission, injunction or something else.
There is a real question whether a single standard can do the job adequately.

2 A. Bromberg, Securities Law: Fraud § 8.4(513), at 204.115 (1971).

Other commentators have also recognized the necessity of- departing from the rigid standards of common law fraud if the goals of the securities laws are to be accomplished. After discussing the confusion and varied standards for state of mind that are being applied among and within the different circuits, one commentator writes:

Instead of perpetuating the practice of discussing scienter and negligence as absolutes which are capable of being objectively applied, more is gained by recognizing that there is a sliding scale which determines what constitutes sufficiently diligent conduct to avoid 10b-5 liability, and that 10b-5 liability is determinable only within the context of the vagaries of the specific facts presented.

Mann, Rule 10b-5: Evolution of a, Continuum of Conduct to Replace the Catch Phrases of Negligence and Scienter, 45 N.Y.U.L.Rev. 1206, 1209 (1970). The commentator then continues by demonstrating that the courts, in dealing with the variety of suits that arise under rule 10b-5, have in actuality been applying a sliding scale, under the guise of a state of mind (scienter) standard, that balances a number of factors in deciding the appropriate duty that should be imposed.

D. The Rule

The proper analysis, as we see it, is not only to focus on the duty of the defendant, but to allow a flexible standard to meet the varied factual contexts without inhibiting the standard with traditional fault concepts which tend to cloud rather than clarify. By adopting such a duty analysis, we avoid the confusion that arises from classifying the defendants as primary and secondary, or from classifying the transactions as direct and indirect. This flexible approach, as compared to the compartmentalized approach, does away with the necessity of creating a separate pigeonhole for each defendant whose involvement in the transaction in question may not fit nicely into one of the previously defined classes.

In this circuit, we have never adhered to the requirement of scienter in the common law fraud sense. While we did not apply liability without fault, our language in Ellis and Royal Air was apparently construed by the district court to create such a standard. Such a construction is erroneous. It is also erroneous to construe those cases as imposing a negligence standard or any other standard that focuses solely upon state of mind and its various compartmentalizations. We believe that the cases and commentators demonstrate that any attempt to limit the scope of duty in all 10b-5 cases by the use of one standard for state of mind or scienter is confusing and unworkable. Consequéntly, we reject scienter or any other discussion of state of mind as a necessary and separate element of a 10b-5 action. The proper standard to be applied is the extent of the duty that rule 10b-5 imposes on this particular defendant. In making this determination the court should focus on the goals of the securities fraud legislation by considering a number of factors that have been found to be significant in securities transactions.

E. The Application

Although it would be inappropriate for us to attempt to set forth all of these factors, past 10b-5 cases have established many of them. Without limiting the trial court from making additions or adaptations in a particular case, we feel the court should, in instructing on a defendant’s duty under rule 10b-5, require the jury to consider the relationship of the defendant to the plaintiff, the defendant’s access to the information as compared to the plaintiff’s access, the benefit that the defendant derives from the relationship, the defendant’s awareness of whether the plaintiff was relying upon their relationship in making his investment decisions and the defendant’s activity in initiating the securities transaction in question.

While giving examples in the nature of generalization is fraught with dangers, we do so by way of guidance. Where the defendant derives great benefit from a relationship of extreme trust and confidence with the plaintiff, the defendant knowing that plaintiff completely relies upon him for information to which he has ready access, but to which plaintiff has no access, the law imposes a duty upon the defendant to use extreme care in assuring that all material information is accurate and disclosed. If the defendant has breached this duty he is liable under rule 10b-5, provided the other elements of materiality, causation and damages are established. On the other hand, where the defendant’s relationship with the plaintiff is so casual that a reasonably prudent person would not rely upon it in making investment decisions, the defendant’s only duty is not to misrepresent intentionally material facts. Under this standard the duty to investigate and disclose material facts will necessarily vary according to the fact situation.

We believe this flexible duty standard is desirable in an area as complex as securities fraud litigation and will come more closely to improving the sanctity of information in the market place, as Congress intended, without severely hampering the trading of securities and the flow of information. The standard we have set forth here does not impose absolute liability for misrepresentations regardless of the person’s knowledge of falsity. It rejects the use of latin terms which obfuscate the rule and confuse the result. It rejects the idea that conduct in complex rule 10b-5 cases may be neatly compartmentalized into traditional concepts which have often resulted in jamming facts together in an effort to fit the concept. While rejecting scienter and state of mind concepts as the standard itself, it requires the court to consider state of mind as an important factor in determining the scope of duty that rule 10b-5 imposes.

Since the trial court’s jury instruction did not give weight to the factors we have here set forth, we must reverse and remand.

Because of our disposition of these cases, it is unnecessary for us to rule on the remaining questions raised by Abrams or the cross-appeal. However, by way of guidance for the retrial, we hold that prejudgment interest may be disallowed in this rescission action at the discretion of the trial judge. See Wessel v. Buhler, 437 F.2d 279 (9th Cir. 1971). However, it would have been better for the trial court to announce its determination prior to argument by counsel.

Reversed and remanded.

      . See Manufacturers Credit Corp. v. SEC, 395 F.2d 833 (3d Cir. 1968), dealing with the bankruptcy proceedings of the Richmond Corporations, for background to the present case.

      . Since the relevant language of section 17(a) is almost identical to the language of rule 10b-5, we will assume that the elements for a private action under that section are the same as the elements for an action under rule 10b-5. See Lanza v. Drexel & Co., 479 F.2d 1277, 1280 n. 2 (2d Cir. 1973).

      . The word “scienter” has been used in so mány varied meanings that for the sake of progressing jurisprudence it would be better if courts avoided using it altogether in connection with rule 10b-5 cases. Professor Bromberg writes:
      Much of the difficulty over scienter comes from varying, and often imprecise and contradictory, uses of the word. For example, Note, 63 Mich.L.Rev. 1070, 1075 (1965) distinguishes traditional scienter (actual knowledge of falsity) from modern scieaíer (defendant would or should have known of falsity had he used due care of investigation, i. e., constructive knowledge). An even more traditional scienter of intent to deceive is sometimes meant. In 1967 the 2d Circuit was speaking of “some form of the traditional scienter requirement.” Barnes v. Osofsky, 373 F.2d 269, 272 (2d Cir. 1967). The following year, in a leading case, it held that the phrase is broad enough to cover “lack of diligence, constructive fraud, or unreasonable or negligent conduct” as well as specific fraudulent intent. SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 855 (2d Cir. in banc 1968), cert. denied, 394 U.S. 976 [89 S.Ct. 1454, 22 L.Ed.2d 756] (1969). (parallel citations omitted) 2 A. Bromberg, Securities Law: Fraud § 8.-4(503), at 204102-.103 (1971). Too often in this area the courts have used words the same as Lewis Carroll’s Humpty Dumpty:
      “When I use a word,” Humpty Dumpty said in a rather scornful tone, “it means just what I choose it to mean — neither more nor less.”
      “The question is,” said Alice, “whether you can make words mean so many different things.”
      “The question is,” said Humpty Dumpty, “which is to be master — that’s all.”
      L. Carroll, Through the Looking Glass (1871), reprinted in The Annotated Alice 269 (M. Gardner ed. 1960). See Bucklo, Scienter and Rule 10b-5, 67 Nw.U.L.Rev. 562, 567-71 (1972) 5 Mann, Rule 10b-5: Evolution of a Continuum of Conduct to Replace the Catch Phrases of Negligence and Scienter, 45 N.Y.U.L.Rev. 1206, 1207-1209 (1970).

      . We reaffirmed this as the holding of Ellis in Douglass v. Glenn E. Hinton Investments, Inc., 440 F.2d 912, 915 (9th Cir. 1971), specifically stating that scienter was unnecessary.

      . The bank itself had acknowledged, by letter to AUC in January 1958, that “it would be our duty to see that these transfers were properly made” and that, with respect to the sale of shares, “the bank would be acting for the individual stockholders.” The mixed-blood sellers “considered these defendants to be familiar with the market for the shares of stock and relied upon them when they desired to sell their shares.” 406 U.S. at 152, 92 S.Ct. at 1471, citing Reyos v. United States, 431 F.2d 1337, 1347 (10th Cir. 1970).

      . The defendants “received increased deposits because of the development of this market. The two men also received commissions and gratuities from the expectant non-Indian buyers.
      The sellers had the right to know that the defendants were in a position to gain financially from their sales . ... ” 406 U.S. at 152-153, 92 S.Ct. at 1471.

      . The defendants “were ‘entirely familiar with the prevailing market for the shares at all material times.’ ” 406 U.S. at 152, 92 S. Ct. at 1471, citing Reyos v. United States, 431 F.2d 1337, 1347 (10th Cir. 1970).

      . The defendants also “ ‘were active in encouraging a market for the UDC stock among non-Indians.’ 431 F.2d at 1345. They did this by soliciting and accepting standing orders from non-Indians.
      [T]he defendants devised a plan and induced the mixed-blood holders of UDC stock to dispose of their shares . . . . ” 406 U.S. at 152-53, 92 S.Ct. at 1471, citing Reyos v. United States, 431 F.2d 1337, 1345 (10th Cir. 1970).

      . The defendants “possessed the affirmative duty under the Rule to disclose . . . [that they were active market makers] to the mixed-blood sellers. See Chasins v. Smith, Barney & Co., 438 F.2d 1167 (CA2 1970).” 406 U.S. at 153, 92 S.Ct. at 1472.

      . See Mann, supra Note 3, at 1209-10.

      . The court framed the issue as follows :
      The debate thus comes to this: 'What duty, if any, does Rule 10b-5 impose on a director in Coleman’s position to insure that all material, adverse information is conveyed to prospective purchasers of the corporation’s stock where the director does not know that these prospective purchasers are not receiving all such information?
      479 F.2d at 1289.

      . Judge Timbers, who agreed with Judge Hays’ opinion, paid the following tribute:
      [I] t is well recognized that Judge Hays’ views on the meaning of Rule 10b-5 for years have been in the vanguard of important developments in this area. See, e. g., Superintendent of Insurance v. Bankers Life and Casualty Co., 404 U.S. 6, 92 S. Ct. 165, 30 L.Ed.2d 128 (1971), unanimously rev’g 430 E.2d 355 (2 Cir. 1970)(Hays, C. J., dissenting); Schoenbaum v. Firstbrook, 405 F.2d 215 (2 Cir. 1968) (en banc opinion by Hays, C. J., reversing panel decision from which Hays, C. J., dissented), cert. denied, 395 U.S. 906, 89 S.Ct. 1747, 23 L.Ed.2d 219 (1969).
      479 F.2d at 1321-1322 n. 3 (Timbers, J., concurring in part and dissenting in part).

      . Mann, supra Note .3, at 1210-20. See also Kohler v. Kohler Co., 319 F.2d 634, 637-38 (7th Cir. 1963), where the court, after noting that section 10(b) and rule 10b-5 were intended to place “upon the insider duties more exacting than mere abstention from what generally is thought to be fraudulent practices . . .,” said :
      [T] he question arises: What are the limits of those duties? We are satisfied that the answer cannot be confined to an abstract rule hut must be fashioned case by case as particular facts dictate.

      . Cf. Ruder, Multiple Defendants in Securities Law Fraud Cases: Aiding and Abetting, Conspiracy, in Pari Delicto, Indemnification, and Contribution, 120 U.Pa.L.Rev. 597, 620-30 (1972).

      . In SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194, 84 S.Ct. 275, 284, 11 L.Ed.2d 237 (1963), the Court, in discussing the applicability of common law fraud principles to securities transactions, said:
      There has . . . been a growing recognition by common-law courts that the doctrines of fraud and deceit which developed around transactions involving land and other tangible items of wealth are ill-suited to the sale of such intangibles as advice and securities, and that, accordingly, the doctrines must be adapted to the merchandise in issue, (footnotes omitted)

      . E. g. Vine v. Beneficial Finance Co., 374 F.2d 627 (2d Cir.), cert. denied, 389 U.S. 970, 88 S.Ct. 463, 19 L.Ed.2d 460 (1967) (Class A shareholders were allowed to maintain 10b-5 action against Class B shareholders for approving an unfair merger) ; Ellis v. Carter, 291 F.2d 270 (9th Cir. 1961) (The plaintiff need not allege genuine fraud to state a good cause of action against fellow member of a joint venture formed to acquire control of a corporation). See Brennan v. Midwestern United Life Ins. Co., 259 F.Supp. 673 (N.D.Ind.1966) (motion to dismiss denied), 286 F.Supp. 702 (N.D.Ind. 1968) (on merits), aff’d, 417 F.2d 147 (7th Cir. 1969), cert. denied, 397 U.S. 989, 90 S. Ct. 1122, 25 L.Ed.2d 397 (1970). The Brennan court said:
      Certainly, not everyone who has knowledge of improper activities in the field of securities transactions is required to report such activities. This court does not purport to find such a duty. Yet, duties are often found to arise in the face of special relationships, and there are circumstances under which a person or a corporation may give the requisite assistance or encouragement to a wrongdoer so as to constitute an aiding and abetting by merely failing to take action.
      259 F.Supp. at 681-682.

      . See, e. g., Schoenbaum v. Firstbrook, 268 F.Supp. 385 (S.D.N.Y.1967), aff’d 405 F.2d 200 (2d Cir.), modified, 405 F.2d 215 (2d Cir. 1968), cert. denied, 395 U.S. 906, 89 S. Ct. 1747, 23 L.Ed.2d 219 (1969). That court said:
      The fraud involved in buying or selling on the basis of inside information is based first on the user’s relationship with the corporation being such as to allow him access to information intended only for a corporate purpose — not for his personal benefit. For the instant, we shall assume this to have been met. Secondly, the fraud rests “ * * * upon the inherent unfairness involved where a party takes advantage of such information knowing it is unavailable to those with whom he is dealing." Cady, Roberts & Co., 40 S.E.C. 907, 912 (1961). Where, as plaintiff alleges here, both parties had full knowledge, there is no fraud upon either party resulting from the use of this knowledge.
      268 F.Supp. at 395 (footnotes omitted) (emphasis added).

      . Affiliated Ute Citizens v. United States, 406 U.S. 128, 152-153, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). See 2 A. Bromberg, Securities Law: Fraud § 8.5(584), at 208.46.49 (1971) for a history of the role benefit or expectation of benefit has played in 10b-5 cases where the parties were not in privity of contract.

      . In Drake v. Thor Power Tool Co., 282 F. Supp. 94 (N.D.Ill.1967), the court, holding that plaintiffs had stated a good cause of action under rule 10b-5 against an independent auditing firm that had approved false statements in the corporation’s financial statements, said:
      [T]he alleged misstatements were intended for public information and to induce the public to buy securities. The defendant, in certifying financial statements, directed its activities toward investors. . . . The purpose of the financial statements is to inform the man on the street and the underlying policy of the Securities and Exchange Acts and of Rule 10b-5 is to assure that he can have truthful information in buying securities .... Moreover, the defendants have set themselves up to be independent certified public auditors. As such, they have assumed a peculiar relationship with the investing public. As accountants, the defendant clearly cannot be immunized from suit.
      The allegations may be sustained as either an intentional misrepresentation or as a negligent misrepresentation.

        Id. at 104-105. Implicit in the court’s statement is the notion that the defendants-should be held to a high standard since they were aware that the investing public would rely upon the accuracy of their statements.

      . Compare O’Neill v. Maytag, 339 F.2d 764 (2d Cir. 1964) (Reexchange of shares between two airlines at ratio unfavorable to plaintiffs’ corporation upon order of CAB did not result in 10b-5 liability for board of directors, even though the transaction was done to perpetuate the board in control) with Ruckle v. Roto American Corp., 339 F.2d 24 (2d Cir. 1964) (Directors’ active participation in the issuance and sale of new shares to perpetuate the board in control resulted in liability under rule 10b-5) and Globus, Inc. v. Jaroff, 266 F.Supp. 524 (S.D.N.Y.1967) (Good cause of action under 10b-5 stated where material facts were omitted by directors in notice of shareholders meeting and directors had actively participated in plan to issue new stock that would have greatly benefited them). See Mann, supra Note 3, at 1219-20.


source: Caselaw Access Project

author: ALFRED T. GOODWIN, Circuit Judge: SNEED, Circuit Judge

license: Public Domain

text:
    FIBERCHEM, INC., Appellee, v. GENERAL PLASTICS CORPORATION et al., Appellants.
    No. 72-1902.
    United States Court of Appeals, Ninth Circuit.
    April 9, 1974.
    Lawrence R. Resnick (argued), Fulop, Rolston, Burns & McKittrick, Beverly Hills, Cal., Rex M. Walker, Davis, Wright, Todd, Riese & Jones, Seattle, Wash., for appellants.
    George M. Hartung, Jr. (argued), Rodney J. Waldbaum, Lesourd, Patten, Fleming & Hartung, Seattle, Wash., for appellee.
    Before GOODWIN and SNEED, Circuit Judges, and BURNS, District Judge.

       The Honorable James M. Burns, United States District Judge for the District of Oregon, sitting by designation.

   ALFRED T. GOODWIN, Circuit Judge:

Fiberehem, the holder of an exclusive sales representation agreement with General Plastics, a now-defunct manufacturer, sued Rowland for commissions on sales by Rowland -to Boeing after Rowland had purchased from General certain assets including General’s purchase orders. Rowland appeals the resulting judgment in favor of Fiberchem.

Rowland contends that when it purchased selected assets of General, including the right to fill its purchase orders and to receive the purchase price thereon, Rowland expressly refused to become obligated to pay sales commissions to Fiberchem on these orders. Fiberchem was not a party to the dealings between General and Rowland. We hold that, in spite of Rowland’s disclaimer, because Rowland knew of the sales-commission agreement, it could not purchase the order file free from its inherent liabilities — the obligation to pay sales commissions. We affirm the judgment.

Fiberchem is conceded to have been General’s exclusive sales representative within the state of Washington. Under the terms of their agreement, Fiberchem was to receive a commission on sales of General’s products within the state. Through Fiberchem’s efforts, Boeing awarded General a contract for the sale of various plastic components for its airplanes. Subsequently, Boeing issued several add-on orders.

In 1969 General sold a portion of its business to Rowland, assigning to Rowland the then outstanding purchase orders from Boeing. The agreement specifically disclaimed any assumption of liability by Rowland for sales commissions. Following this purchase, Rowland delivered products to Boeing upon purchase orders assigned by General as well as upon add-on purchase orders issued by Boeing directly to Rowland for similar parts. On July 24, 1970, Rowland advised Fiberchem that it denied any liability to it, and, with full reservation of its denial of liability, terminated the manufacturer’s representation agreement effective August 23, 1970.

Meanwhile, General had filed for bankruptcy. The referee in bankruptcy entered an order, enjoining and staying all actions against General. For this reason, Fiberchem is not now pursuing its claim against General for unpaid commissions earned on sales by General to Boeing prior to its sale to Rowland. Fiberchem’s claim against Rowland is limited to commissions earned upon deliveries made after, the sale by General to Rowland.

The district court found that Fiber-chem had earned commissions both upon the purchase orders assigned to Rowland and upon add-on orders for the same parts issued to Rowland by Boeing. The court held Rowland liable to Fiberchem for these commissions.

Rowland argues that it had no agreement with Fiberchem and could not become obligated to pay commissions to it in the absence of an express or implied agreement to do so. Rowland also contends that even if it is held liable to pay commissions on specific purchase orders assigned to Rowland by General, it is not liable to pay commissions on purchase orders issued after the sale and certainly not on purchase orders issued after an express termination of the sales commission agreement, pursuant to its own terms.

We discuss first Rowland’s argument that it is not liable at all for commissions to Fiberchem. Although there is some dispute whether or not an assignee for value takes his claim free from the equities of third persons against the assignor, of which the assignee had no notice, there is no dispute that the assignee takes his claim subject to the equities of third persons against the assigned right where he has knowledge of such equities. See 4 A. Corbin, Contracts § 900, at 606-08 (1951); 3 S. Williston, Contracts § 438, at 254 (1960); Note, Latent Equities, 20 U.Chi.L.Rev. 692 (1953). For example, in Lasser v. Philadelphia National Bank, 321 Pa. 189, 183 A. 791 (1936), the court held that an assignee of a distributor who sold goods and billed customers in his own name but was in fact the agent of the manufacturer took free of the manufacturer’s latent equity, but the court so held only because the assignee was unaware of the manufacturer’s equity.

Here, it is undisputed that Rowland purchased assets from General with full knowledge of Fiberehem’s right to commissions. Rowland had ample opportunity to negotiate with General for a purchase price that would take into account Rowland’s possible liability to Fiber-chem. Cf. Savings Bank v. Creswell, 100 U.S. 630, 643, 25 L.Ed. 713 (1880). In fact, there is some evidence in the record suggesting that the purchase price actually was determined with an eye toward such liability. Moreover, the clause in the General-Rowland contract in which Rowland disclaimed liability for sales commissions, though ineffective here against the claims of Fiber-chem, may well permit Rowland to seek indemnification from General. Hence, we conclude that Rowland is liable to Fi-berchem for commissions on the outstanding purchase orders assigned to it by General.

Rowland’s other contention is that, even if it must pay commissions on the outstanding purchase orders, it should not be forced to pay commissions on purchase orders issued by Boeing after the sale by General Plastics, much less on purchase orders issued after Rowland had terminated whatever was left of the agreement with Fiberehem. The agreement between Fiberehem and General Plasties provided for termination by either party upon thirty days’ notice. It also contained a clause saying:

“ * * * After any such termination neither party shall be under any liability to the other, except that Company shall be liable for commissions earned prior to such . * * * termination.”

While the agreement does not say whether commissions on add-on orders issued after termination are considered to have been “earned prior to such * * * termination,” there is language elsewhere purporting to define commissions as “earned” only when the customer pays for the goods. No one appears to have argued that this clause should be read literally, as such a reading would have wiped out commissions obviously “earned” in the usual sense of the word.

Given this kind of contract to construe, the trial judge properly turned to general principles of law applicable to such transactions and particularly to the opinion in Poggi v. Tool Research & Engineering Corp., 75 Wash.2d 356, 451 P.2d 296 (1969). In Poggi, the Washington court held that termination of a manufacturer’s representation agreement does not cut off the agent’s rights to commissions on orders for which he was the efficient procuring cause, even though the orders had not yet been received in final form at the time of the termination. We recognize that Poggi is factually distinguishable from this case, but agree with the trial court that it states the rule of law applicable here. See also Zelensky v. Viking Equipment Co., 70 Wash.2d 78, 422 P.2d 293 (1966). See generally J. & B. Motors, Inc. v. Margolis, 75 Ariz. 392, 257 P.2d 588, 592 (1953); Zinn v. Ex-Cell-O Corp., 24 Cal.2d 290, 149 P.2d 177, 180-181 (1944); Wise v. Reeve Electronics, Inc., 183 Cal.App.2d 41, 6 Cal.Rptr. 587 (2d Dist. 1960); Reed v. Kurdziel, 352 Mich. 287, 89 N.W.2d 479 (1958); Leach Corp. v. Turner, 390 P.2d 515, 517-518 (Okl.1964).

Here, the trial court found that Fiber-chem was the efficient procuring cause for the orders on which the commission claims have been made. Although this finding was contested, there is ample evidence to support it, and it is not clearly erroneous.

Rather than affirm the judgment, the dissent would have us remand to the district court for express findings on the question of unjust enrichment. We think that this step is unnecessary because, though the findings and conclusions do not specifically address the unjust enrichment issue, statements made by the district judge leave little doubt that he considered and adopted the theory. For example, he observed, “ * * * they [Rowland] actually stepped in and got a gratuity * * Later, he said, “ * * * that would be quite a windfall if you [Rowland] could [defeat the claims of Fiber-chem], and that is what it amounts to, is a windfall.” These and other remarks strongly suggest that a remand would be both time-consuming and unlikely to produce a different result.

The judgment is affirmed.

SNEED, Circuit Judge

(dissenting):

I respectfully dissent.

In holding that Rowland is liable to Fiberchem for sales commissions on general and follow-up orders, the majority draws heavily from two lines of authority. The first, the “latent equity” analysis, is viewed by the majority as standing for the proposition that “the as-signee takes his claim subject to the equities of third persons against the assigned right where he has knowledge of such equities.” In' my opinion this proposition is properly applied only in situations where a third party asserts a claim to the funds also claimed by the assignee. See generally, Comment, “Latent Equities,” 20 U.Chi.L.Rev. 692 (1953). A “latent equity” claim may be derived from a prior assignment, trust principles, agency law, the doctrine of subrogation, or some other source, but it is invariably recognized only in situations where a third party is claiming specific funds also claimed by an assignee.

In this case Fiberchem is not asserting a claim against the particular funds to which Rowland became entitled by virtue of the assignment of rights and delegation of duties with respect to the Boeing purchase orders; instead it is arguing that, since it procured the orders and because General Plastics can not now pay, Rowland should pay the commissions for which General Plastics is the primary obligor. Fiberchem’s position in this litigation does not significantly differ from that of any other general creditor of General Plastics whose goods and services contributed to the orders which it transferred to Rowland.

I have been unable to find any authority in Washington law or elsewhere to justify treating Fiberchem as a lien holder absent a showing that Rowland was unjustly enriched by Fiberchem. The broad language of the Restatement of Restitution, § 161, justifies imposing a lien under such circumstances. As I shall point out, this affords little comfort to Fiberchem because it has not established in this case that Rowland has been unjustly enriched.

The second line of authority from which my brothers draw support is Pog-gi v. Tool Research & Engineering Corp., 75 Wash.2d 356, 451 P.2d 296 (1969), a case which is wholly distinguishable from the present controversy. As my brothers indicate, Poggi holds that “termination of a manufacturer’s representation agreement does not cut off the agent’s rights to commissions on orders for which he was the efficient procuring cause, even though the orders had not yet been received in final form at the time of the termination.” If Fi-berchem had brought suit against General Plastics rather than Rowland, Poggi would be controlling. Poggi, however, merely holds that when one has substantially performed his contract he can recover from the other party thereto that which such party promised. But here Fiberchem is not suing that party. It is suing an assignee of such party who expressly disclaimed any liability to the performing party. I know of no authority that makes such a disclaimer contrary to public policy. Nor is there any evidence to suggest that General Plastics’ assignment was a fraudulent conveyance or a preference in bankruptcy.

Inasmuch as there is nothing in the record inconsistent with Rowland’s disclaimer, it follows that recovery can not be based on an implied in fact contract. “Contracts implied in fact arise from facts and circumstances showing a mutual consent and intention to contract.” Chandler v. Washington Toll Bridge Authority, 17 Wash.2d 591, 137 P.2d 97, 101 (1943).

This brings me to what I view as the fundamental issue of this case: Was Rowland unjustly enriched? Since the case was not argued along this line, the district court made no express findings on this issue. Resolution of the quasi-contractual issue on appeal is further complicated by the incompleteness of the Record on the question of unjust enrichment. While it is clear that the parties to the sale of General Plastics’ assets assigned only $1,000 of the $350,000 purchase price to the purchase orders and other intangible assets, their action may be justified by a number of business purposes and, at the very least, is inconclusive on the question of unjust enrichment.

I would therefore remand to the district court for express findings on the question of unjust enrichment. On remand, the district court should also consider the decision of the Washington Supreme Court in Chandler v. Washington Toll Bridge Authority, 17 Wash.2d 591, 137 P.2d 97, 102 (1943), wherein the following language from Cascaden v. Magryta, 247 Mich. 267, 225 N.W. 511, 512 (1929), was quoted with approval:

The courts, however, employ the (quasi contract) fiction with caution, and will never permit it in cases where contracts, implied in fact, must be established, or substitute one promisor or debtor for another.

The possibility that Chandler, as a matter of law, prevents the application of quasi-contractual principles to the present case should be considered. As Chandler makes clear, recovery under a theory of quasi-contract requires the receipt of a benefit the retention of which would be unjust. Mere receipt of a benefit is not enough.

• In sum, I do not believe that the authorities relied upon by the majority provide support for its position. A remand to consider the question of unjust enrichment would be a more appropriate disposition of this case. I would reverse and so remand.

      . This same result perhaps could be reached on the theory that Fiberehem, as the procuring cause of the sales to Boeing, has an equitable lien on the proceeds of these sales to the extent of the commissions earned. See Mitchell v. Bowman, 123 F.2d 445, 447 (10th Cir. 1941). This equitable lien could be enforced against an assignee of the purchase orders with notice of the existence of the commission agreement (Rowland), as well as against the original contractor (General). See Jud Whitehead Heater Co. v. Obler, 111 Cal.App.2d 861, 245 P.2d 608, 616 (1st Dist. 1952). See generally Restatement of Restitution § 161 (1937). However, since the theory of equitable liens was never raised either here or in the district court, we are reluctant to base our decision upon it.

      . See, e. g., Brown v. Equitable Life Assurance Society, 75 Minn. 412, 78 N.W. 103 (1899) (assignment absolute in form but in fact merely intended as security for a loan) ; Levenbaum v. Hanover Trust Co., 253 Mass. 19, 148 N.E. 227 (1925) (preferential payment by insolvent debtor); Noland v. Law, 170 S.C. 345, 170 S.E. 439 (1933) (trustee assigned chose to a purchaser for value without notice); Lasser v. Philadelphia National Bank, 321 Pa. 189, 183 A. 791 (1936) (assignment by agent of funds held on behalf of principal).

      . Section 161 of the Restatement provides: Where property of one person can by a proceeding in equity be reached as security for a claim on the ground that otherwise the former would be unjustly enriched, an equitable lien arises.


author: WEBSTER, Circuit Judge.

text:
    UNITED STATES of America, Appellee, v. Donald Ratliff CADY, Appellant.
    No. 73-1344.
    United States Court of Appeals, Eighth Circuit.
    Submitted Nov. 13, 1973.
    Decided April 19, 1974.

      Robert C. Dopf, Williams, Hart, La-vorato & Kirtley, West Des Moines, Iowa, for appellant.
    Allen L. Donielson, U. S. Atty., Des Moines, Iowa, for appellee.
    Before MEHAFFY, Chief Judge, MOORE, Senior Circuit Judge, and WEBSTER, Circuit Judge.

       LEONARD P. MOORE, Senior Circuit Judge, Second Circuit, sitting by designation.

   WEBSTER, Circuit Judge.

Appellant Donald Ratliff Cady was convicted of aiding and abetting a bank robbery aggravated by putting in jeopardy the life of another person by use of a dangerous weapon or device, in violation of 18 U.S.C. § 2113(d) and 18 U.S. C. § 2. In this appeal he challenges the sufficiency of the evidence. He further contends that the court erred (1) in failing to instruct on the weight to be given the testimony of an accomplice; (2) in giving an erroneous instruction on “putting in jeopardy” and (3) in refusing to give a lesser included offense instruction on the crime of larceny of a bank, 18 U. S.C. § 2113(b). Finally he contends that the remarks of government counsel in final argument constituted prejudicial error.

On May 16, 1972 the East Des Moines National Bank branch at Pleasant Hill, Iowa, was robbed of $16,295. Two robbers entered the bank. One seized a customer and held a gun at her neck. The other robber pointed a gun at the branch manager. The robbers, later identified as Philip Carnes and Thomas Ellsworth Small, fled the bank and were observed making their getaway in an orange Chevelle with a black top.

At the trial Small and Robert Daniel Smith both testified that they conspired with Carnes and appellant Cady to rob the bank. Smith testified that Cady’s role was to obtain a car to be used in the robbery. He also testified that Cady knew the Pleasant Hill branch was the target bank. Cady delivered the car to Smith’s house on the morning of the robbery, and, according to Smith, wiped off the door handles of the car. Carnes and Small left in the Chevelle; Smith followed in his Cadillac.

After the robbery Smith, Small and Carnes met and divided the loot. Smith testified that Carnes handed him $1,500, stating “Here’s fifteen hundred for Cady”. Small testified that the agreement had been to pay Cady $1,000 for providing the car. Smith testified that he called Cady, met him at a tavern and drove back to Smith’s house, where Cady was given the $1,500.

Carnes testified for the defense, corroborating the details of the actual robbery, but exculpating Cady from any knowing participation. He testified that he told Cady that he needed to borrow a car for a few days to get around to see friends to borrow money; that he never at any time discussed robbing a bank with the defendant. He testified that arrangements to borrow the car were made over the telephone, and that Smith and another person actually picked up the automobile. He testified that none of the money went to Cady. Carnes, a prison escapee, testified that he only told Cady that he was out on appeal.

Two guns were used in the robbery. Small testified that the gun used by Carnes was loaded while his was not, and that as far as he knew, both guns were supplied by Cady. Carnes testified that at least one gun was loaded, but testified that Smith supplied one gun and he the other. Smith testified that he overheard a conversation between Carnes and Cady in which Carnes asked Cady whether he, Cady, had obtained the gun from a museum because, he Carnes, could get no shells for it.

Cady did not take the stand. With the conflicting testimony of the participants, the circumstances surrounding the furnishing of the car by Cady take on crucial importance. Gary Steward, a used car salesman for M & W Motors, testified that he first met Cady about May 1, 1972, when Cady visited his lot in search of a car. He came in several more times. On May 15 Steward told Cady about his brother’s Chevelle, which had been placed on the lot for sale, but was on loan on that particular day. Cady told him he would want a car the next day. Steward testified as follows on direct examination:

Q Did he [Cady] discuss anything about what the car was going to be used for?
A Well, he didn’t come right straight out and tell me that he was going to rob a bank with the ear.
Q What did he say?
A Well, he said something to the effect that he said he knew where there was a fellow that hauled some money back and forth in the trunk of his car to the grocery store.
Q And what did he say about that hauling that money back and forth?
A Well, I was under the impression that he was going—
MR. LAVORATO: I object to this impression.
THE COURT: Sustained.
Q What was the specific things that he said other than just hauling the money back and forth to the store ?
A Well, I don’t know. He didn’t come right straight out and tell me that he was going to rob anybody.
Q Where did he say the bank — the money, was coming from that was going to go to the store ?
A I believe he said he, the fellow, was picking the money up at a bank and hauling it to a grocery store, to open the business, and he hauled the money in the trunk of his car.

Cady told Steward he wanted the car for a cóuple of hours and might even buy the car. Steward called Mike Bach, the lendee, to say that a fellow was coming to pick up the car. He then gave Cady the address where the car was located. Mrs. Bach could not identify Cady in the courtroom as the man who picked up the car.

SUFFICIENCY OF THE EVIDENCE

On the evidence adduced at the trial the court properly rejected Cady’s motions for a directed verdict. While the evidence was conflicting, there was ample evidence from which, if believed, the jury could find that Cady knowingly and intentionally aided and abetted a bank robbery of a federally insured bank, an offense aggravated by placing in jeopardy the lives of one or more persons by means of two guns, at least one of which was loaded. The weight and credibility of the testimony was for the jury. Appellant concedes that a conviction can rest upon uncorroborated testimony of an accomplice if it is not otherwise incredible or unsubstantial on its face. United States v. Cole, 449 F.2d 194, 197 (8th Cir. 1971), cert. denied sub nom. Woodard v. United States, 405 U.S. 931, 92 S.Ct. 987, 30 L.Ed.2d 806 (1972). The testimony of government witnesses was consistent. Prior inconsistent statements were placed before the jury; the jury obviously accorded weight and credibility to their in-trial testimony. In any event, corroboration can be found in the testimony of the car salesman, to whom Cady clearly implied a sinister purpose and disclosed a time requirement consistent with the bank robbery plan.

ACCOMPLICE INSTRUCTION

Appellant contends that it was plain error not to instruct the jury that under the law Smith and Small were accomplices and hence their particular testimony should be received with caution and weighed with great care. Instruction No. 9 fully and accurately instructed the jury on the weight to be given to the testimony of an accomplice. Appellant contends, however, that since Instruction No. 12 dealing with the essential elements of the offense named only Small and Carnes, and did not name Smith, it was possible for a jury to conclude that Smith was not an accomplice. This contention is without merit. Small and Carnes were mentioned only in connection with their roles in supplying the necessary elements of the offense of bank robbery; Instruction No. 9 could not mislead the jury, and any fair application of it to the facts in this case would include Smith as an accomplice.

PUTTING IN JEOPARDY INSTRUCTION

Appellant was charged and convicted under 18 U.S.C. § 2113(d), the aggravated “assault” provision. In instructing the jury on the additional elements necessary to constitute the aggravated offense, the court defined “dangerous weapon or device” and to “put in jeopardy the life” as follows:

Instruction No. 16
A ‘dangerous weapon or device’ includes anything capable of being readily operated, manipulated, wielded, or otherwise used by one or more persons to inflict severe bodily harm or injury upon another person. So, an operable firearm, such as a pistol, revolver, or other ‘gun’, capable of firing a bullet or other ‘ammunition’, may be found to be a dangerous weapon or device.
To ‘put in jeopardy the life’ of a person by the use of a dangerous weapon or device means, then, to expose such person to a risk of death, or to the fear of death, by the use of such dangerous weapon or device.

Appellant contends that, although not objected to, this instruction constituted “plain error” under Fed.R.Crim.P. 52(b) because it failed to instruct the jury that the robber must have had the objective capability of causing physical harm by the means threatened. The Second Circuit has adopted this construction of subsection (d), holding that unless a finding was required that lives were objectively in danger, as distinguished from mere fear of injury, subsection (d) would have no different meaning from subsection (a), which prohibits robbery “by force and violence, or by intimidation.” United States v. Marshall, 427 F.2d 434 (2d Cir. 1970). This court reached a similar conclusion in Bradley v. United States, 447 F.2d 264 (8th Cir. 1971), vacated, 404 U.S. 567, 92 S.Ct. 746, 30 L.Ed.2d 722 (1972), which involved the use of a simulated bomb. For a contrary result, see United States v. Beasley, 438 F.2d 1279 (6th Cir.), cert. denied, 404 U.S. 866, 92 S.Ct. 124, 30 L.Ed.2d 110 (1971).

(d) Whoever, in committing, or in attempting to commit, any offense defined in subsections (a) and (b) of this section, assaults any person, or puts in jeopardy the life of any person by the use of a dangerous weapon or device, shall be fined not more than $10,000 or imprisoned not more than twenty-five years, or both.

The Fifth Circuit has held that in the highly charged atmosphere of a bank robbery by robbers bearing guns, persons present are placed “in jeopardy” as a matter of law. Baker v. United States, 412 F.2d 1069, 1071-72 (5th Cir. 1969), cert. denied, 396 U.S. 1018, 90 S.Ct. 583, 24 L.Ed.2d 509 (1970). It has been held that it is not necessary to show that a weapon is loaded to permit finding that life had been placed in jeopardy, United States v. Shelton, 465 F.2d 361 (4th Cir. 1972); that when a firearm is drawn as though to be used, the test is met, United States v. Marchbanks, 469 F.2d 72 (5th Cir. 1972); and that when a gun is visible and it backs the robber’s demands, the jury may find that the life of the person so accosted is “in jeopardy”, United States v. Roustio, 455 F.2d 366 (7th Cir. 1972). See also United States v. Thomas, 455 F.2d 320 (6th Cir. 1972), where it was held that the government had no burden of showing that the guns so used were operable and loaded.

While we are free to consider anew the appropriate rule for this circuit, we need not do so here because the evidence was undisputed that at least one of the guns used in the robbery was loaded. Cf. United States v. Marchbanks, supra. Smith testified that he was with Carnes when Carnes acquired shells for the .38 revolver which Carnes later pointed at the bank customer’s head. Small testified that the gun was loaded. Carnes, a defense witness, testified only that the gun used by Small was not loaded. It is reasonable to infer that if Carnes’ gun was not in fact loaded, and hence arguably objectively incapable of causing harm, the defense would have elicited such testimony from its own witness.

Direct evidence [that a gun is loaded] is unnecessary. ‘When * * * a robber displays a gun to back up his demands, he wants the victim to believe that it is loaded, and the fact-finder may fairly infer that it was.’ Wagner v. United States, 264 F.2d 524, 530, n. 8 (9th Cir.), cert. denied 360 U.S. 936, 79 S.Ct. 1459, 3 L.Ed.2d 1548 (1959); Wheeler v. United States, 317 F.2d 615, 618 (8th Cir. 1963). The defendant introduced no evidence to show that the guns were not loaded and, therefore, the jury could properly infer that they were loaded.
Morrow v. United States, 408 F.2d 1390, 1391 (8th Cir. 1969).

In Bradley, the instruction was not an issue. There simply was no proof that the paper bomb was objectively a dangerous weapon. In United States v. Marshall, supra, in which the court applied the objective test, there was no evidence that the gun was loaded and the defendant had remarked that it was not. The court rejected the Fifth Circuit’s per se test and held that it was a question of fact for the jury; in the absence of proof that the gun was loaded, the court held it was plain error to instruct the jury that a person could be put “in jeopardy” by fear of death or injury rather than the existence of an objective state of danger. In so holding, Judge Lum-bard cautioned as follows:

In light of the permissible inference that we have said may be used to find that the guns used during a robbery are loaded, we would be quick to find harmless error here if we were convinced that the jury would have found that guns were loaded and accordingly, that lives had been ‘in jeopardy.’ 427 F.2d at 438.

The facts in this case are thus readily distinguishable from Bradley, where the paper bomb was objectively incapable of causing harm, and from Marshall, where there was no proof at all that the gun was loaded. See United States v. Waters, 461 F.2d 248 (10th Cir.), cert. denied sub nom. Robins v. United States, 409 U.S. 880, 93 S.Ct. 207, 34 L.Ed.2d 134 (1972). We hold that where, as here, there is undisputed evidence that one gun was loaded and the lives of persons were thus by any standard objectively in danger, it was at most harmless error to omit a specific instruction requiring that the jury so find.

LESSER INCLUDED OFFENSE INSTRUCTION

Prior to the charge defense counsel requested the court to instruct the jury on the lesser included offense of larceny of a bank, 18 U.S.C. § 2113(b). The court declined this request, but did give the lesser included offense of bank robbery, 18 U.S.C. § 2113(a). Since defense counsel did not object to the failure of the court to give the requested instruction, the defect if any is waived unless it may be found to be plain error under Rule 52(b). See Fed.R.Crim.P. 30.

A lesser included offense instruction is mandated when requested, provided the lesser offense is necessarily included in the offense charged. See Fed.R.Crim.P. 31(c). The lesser included offense must be both lesser and included. These requirements can only be met where the included offense involves fewer of the same constituent elements as the charged greater offense and where the claimed lesser offense has a lighter penalty attached to it than does the charged offense. Thus the claimed included offense must have the same elements as, although fewer of those elements than, the charged greater offense. See Annot., 11 A.L.R.Fed. 173 (1972).

Applying these principles, it is clear that both subsections (a) and (b) of § 2113 are necessarily included within the offense set forth in subsection (d). The language of subsection (d) confirms it. However, there is a duty on the defendant to come forward with some evidence if he wishes to have the benefit of a lesser included offense instruction; while a judge cannot prevent a jury from rejecting the prosecution’s entire case, he is not obligated to assist a jury in coming to an irrational conclusion of partial acceptance and partial rejection of the prosecution’s case. Driscoll v. United States, 356 F.2d 324, 327 (1st Cir. 1966), vacated on other grounds sub nom. Piccioli v. United States, 390 U.S. 202, 88 S.Ct. 899, 19 L.Ed.2d 1034 (1968); cf. United States v. Comer, 137 U.S.App.D.C. 214, 421 F.2d 1149, 1154 (1970).

The defense in this case was that appellant, charged as an aider and abetter, did not know the true purpose for which the ear was supplied, that he was not present at the robbery and that he was not part of the crime. That the money was taken from the bank by armed robbers was not disputed. The court properly submitted the lesser offense under § 2113(a) of robbery (without putting in jeopardy). The difference between the proof of robbery (subsection (a)) and larceny (subsection (b)) is in the taking “by force and violence, or by intimidation . . . ” required in the case of robbery. That requirement is also present in subsection (d), .but not in (b). Proof of this element was established beyond reasonable doubt. Before a party is entitled to an instruction upon a lesser included offense, “ ‘the proof on the element or elements differentiating the two crimes must be sufficiently in dispute so that the jury may consistently find the defendant innocent of the greater and guilty of the lesser included offense.’ ” United States v. Thompson, 490 F.2d 1218, 1221 (8th Cir. 1974). We hold, upon the evidence adduced in this case, that it was not plain error for the court to refuse to give a lesser included offense instruction on the crime of bank larceny.

ARGUMENT OF COUNSEL

Finally, appellant complains that statements by government counsel in his final argument were improper, prejudicial and, while not objected to, constituted plain error. The specific comment complained of was:

No independent evidence?' Let’s take a look at the totally unimpeached witness that the Government put on that stand by the name of Steward, the owner of that used-car lot. Now, let me ask you this right now. Had he been convicted of a felony? No. Did he have any kind of cross-examination that indicated he wasn’t truthful? No. What did he say? Good gravy, what more can you say? ‘I want a car for two hours,’ the day before. T want a car for two hours.’ ‘Why do you want it for two hours?’ ‘Going to rob a bank,’ or ‘I’m going to rob a bank. The messenger is going to deliver some money in the trunk of his car to the grocery store.’ * * * He told Steward what he was going to use that car for.

That the prosecutor took liberties with the exact testimony is beyond question. He did not, however, inject evidence not in the case, nor did he engage in any of the other acts of misconduct which have been held to be reversible error. In his charge to the jury the trial judge cautioned the jury that argument of counsel was not evidence; that the jurors were the sole judges of the weight of the evidence and the credibility of the witnesses; and that the jury must consider only such matters as are shown by the evidence in open court. Taking the record as a whole, we cannot say that the argument of the prosecutor, balanced by the instructions of the court, affected substantial rights of the appellant. See United States v. Phillips, 482 F.2d 191, 196-97 (8th Cir. 1973); Homan v. United States, 279 F.2d 767, 775-76 (8th Cir.), cert. denied, 364 U.S. 866, 81 S.Ct. 110, 5 L.Ed.2d 88 (1960).

The judgment of conviction is affirmed.

      . In this Circuit an accomplice instruction is not required unless requested in proper form, absent plain error appearing in the record. Barnes v. United States, 347 F.2d 925, 928 (8th Cir. 1965); Annot., 17 A.L.R. Fed. 249, at § 23 (1973). Cf. United States v. Jackson, 477 F.2d 879 (8th Cir. 1973). Cady’s attorney neither requested an instruction nor objected to the instruction as given.

      . Instruction No. 9
      An accomplice is one who unites with another person in the commission of a crime, voluntarily and with common intent. An accomplice does not become incompetent as a witness because of participation in the crime charged. On the contrary, the testimony of an accomplice alone, if believed by the jury, may be of sufficient weight to sustain a verdict of guilty, even though not corroborated or supported by other evidence. However, the jury should keep in mind that such testimony is always to be received with caution and weighed with great care.
      You should never convict a defendant upon the unsupported testimony of an alleged accomplice, unless you believe that unsupported testimony beyond a reasonable doubt.

      . 18 U.S.C. § 2113(d) :

      . 18 U.S.C. § 2113(a) :
      (a) Whoever, by force and violence, or by intimidation, takes, or attempts to take, from the person or presence of another any property or money or any other thing of value belonging to, or in the care, custody, control, management, or possession of, any bank, or any savings and loan association . . .
      Shall be fined not more than $5,000 or imprisoned not more than twenty years, or both.

      . Bradley was mooted ab initio by the death of the appellant pending his appeal in the Supreme Court. 404 U.S. 567, 92 S.Ct. 746, 30 L.Ed.2d 722 (1972). See Durham v. United States, 401 U.S. 481, 483, 91 S.Ct. 858, 28 L.Ed.2d 200 (1971).

      . See note 5 supra.

      . Even in the absence of express proof that a gun used in a bank robbery was loaded, the jury may infer this fact from the circumstance itself. Morrow v. United States, 408 F.2d 1390 (8th Cir. 1969).

      . (b) Whoever takes and carries away, with intent to steal or purloin, any property or money or any other thing of value exceeding $100 belonging to, or in the care, custody, control, management, or possession of any bank, or any savings and loan association, shall be fined not more than $5,000 or imprisoned not more than ten years, or both; or
      Whoever takes and carries away, with intent to steal or purloin, any property or money or any other thing of value not exceeding $100 belonging to, or in the care, custody, control, management, or possession of any bank, or any savings and loan association, shall be fined not more than $1,000 or imprisoned not more than one year, or both.

      . See note 4 supra.

      . Note 2 supra. For a discussion of the evolution of § 2113, see Prince v. United States, 352 U.S. 322, 77 S.Ct. 403, 1 L.Ed.2d 370 (1957). It has been held that subsection (a) is a lesser included offense within (d). United States v. Methvin, 441 F.2d 584 (5th Cir.), cert. denied, 404 U.S. 839, 92 S. Ct. 130, 30 L.Ed.2d 72 (1971); United States v. Paszek, 432 F.2d 780 (9th Cir. 1970), cert. denied, 402 U.S. 911, 91 S.Ct. 1389, 28 L.Ed.2d 652 (1971). See also Green v. United States, 365 U.S. 301, 81 S. Ct. 653, 5 L.Ed.2d 670 (1961); O’Clair v. United States, 470 F.2d 1199 (1st Cir. 1972), cert. denied, 412 U.S. 921, 93 S.Ct. 2741, 37 L.Ed.2d 148 (1973). The Seventh Circuit has held that subsection (b) is not a lesser offense within (a). United States v. Hephner, 410 F.2d 930 (7th Cir. 1969). But see contra: Walker v. United States, 135 U.S.App.D.C. 280, 418 F.2d 1116, 1120 (1969); United States v. Nelson, 160 F. Supp. 881 (D.N.H.1955).

      . Bee Steward testimony quoted supra.

      . See, e. g., Griffin v. California, 380 U.S. 609, 85 S.Ct. 1229, 14 L.Ed.2d 106 (1965) (comments of prosecutor on defendant’s failure to testify violates defendant’s Fifth Amendment rights); United States v. Achtenberg, 459 F.2d 91, 98-99 (8th Cir.), cert. denied, 409 U.S. 932, 93 S.Ct. 229, 34 L.Ed.2d 187 (1972) (prosecutor’s deliberate misstatement and his effort to distort evidence in closing argument were prejudicial error).


author: LEVIN H. CAMPBELL, Circuit Judge.

text:
    SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, Plaintiff-Appellee, v. E. R. FIELD, INC., and Eugene R. Field, Defendants-Appellants.
    No. 73-1402.
    United States Court of Appeals, First Circuit.
    Argued April 2, 1974.
    Decided April 24, 1974.

      John L. Hamilton, Lewiston, Me., with whom Roscoe H. Fales and Fales & Fales, Lewiston, Me., were on brief, for appellants.
    Donald S. Shire, Washington, D. C., Atty., with whom William J. Kilberg, Sol. of Labor, Carin Ann Clauss, Associate Sol., Albert H. Ross, Regional Sol., and Robert A. Yetman, and Darryl J. Anderson, Attys., Washington, D. C., were on brief, for appellee.
    Before COFFIN, Chief Judge, Mc-ENTEE and CAMPBELL, Circuit Judges.
   LEVIN H. CAMPBELL, Circuit Judge.

After a non-jury trial the district court entered an injunction compelling E. R. Field, Inc. and Eugene R. Field (collectively Field) to adhere to the provisions of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., and to pay $1,568.62 of unlawfully withheld back wages to former employee Richard Au-det. Field argues three grounds for reversal: (1) that Audet’s time was not “employment”, and hence not compensa-ble under the Act; (2) that Field and Audet had reached an “understanding” under § 207(g) (2) for payment for different tasks at different rates; and (3) that the Portal to Portal Act, 29 U.S.C. § 254, exempts Audet’s driving time from1 the scope of the Fair Labor Standards Act. None of these arguments requires reversal.

Audet was a master electrician employed for large construction jobs. He reported each morning at 7:30 a. m. to Field’s shop in Lewiston, Maine, and drove one of Field’s four radio-equipped trucks to one of various jobsites in other communities where hospitals, schools or the like were being built, and where Audet himself was working. The district court found that while Audet “might derive some benefits from use of the truck in order to get to the job, the essential purpose of such use of the truck was (a) to convey tools necessary for use on the job and (b) to transport certain necessary supplies [to] the job.” There was evidence that the truck carried electrical supplies and tools, and that equipment in the trucks was on occasion used at the job-site. There was evidence that several times a week Audet received instructions over the truck radio regarding the return of tools needed at other jobs. Other employees rode in the truck with Audet which he, as the senior electrician on the jobs to which he was assigned, regularly drove.

Audet and the other employees took a half-hour for lunch and left the jobsite at 4:00 in the afternoon, eight working hours after the 7:30 starting time. Au-det then drove the truck back to Field’s shop, and he and any other employees who had been on the truck drove their personal cars home. The truck was left at the shop and was not used by the employees at other times.

This dispute arose because, although Audet was paid starting at 7:30 and hence for the drive to the jobsite, he was not compensated for the return trip. The Secretary of Labor argued, and the district court found, that compensation was required, and at one and one-half times Audet’s hourly rate because all time after 4:00 was overtime. Field has appealed.

Field argues, and there is evidence bearing him out, that use of the truck was of importance to Audet as a means of getting to the jobs. Audet testified, not unreasonably, that had he been forced to supply his own transportation to the various out of town sites, he would have quit. However, consistent with the above-quoted finding that the truck’s essential purpose was to convey tools and equipment, the court also found that the trucks “were primarily utilized as an integral and indispensable function of the defendant business.” We cannot say that these findings are clearly erroneous, F.R.Civ.P. 52(a), nor are they inconsistent with a benefit also having been bestowed upon Audet. It is irrelevant that Audet and the other employees might have reached the jobsite by personal transportation or that the employer might have stocked the jobsite without the use of the trucks. The activity is employment under the Act if it is done at least in part for the benefit of the employer, even though it may also be beneficial to the employee. “[T]he crucial question is not whether the work was voluntary but rather whether the [employee] was in fact, performing services for the benefit of the employer with the knowledge and approval of the employer.” Republican Publishing Co. v. American Newspaper Guild, 172 F.2d 943, 945 (1st Cir. 1949). Cf. United States. v. Rosenwasser, 323 U.S. 360, 362, 65 S.Ct. 295, 89 L.Ed. 301 (1945).

Field’s second argument, that Audet had an arrangement within the scope of 29 U.S.C. § 207(g)(2) to accept different rates of pay for the “driving” and “electrical” aspects of his employment, is without foundation. The district court expressly found that “no such agreement was ever made.” Field attempts to escape this finding by arguing that, although there was no “agreement”, there was an “understanding.” The evidence taken at trial shows that, after the employer had been alerted by the Department of Labor to the existence of a violation, Field held a discussion with Audet concerning the possibility of establishing such a two-scale system, and that the system then in force of paying for driving time in the morning but not in the afternoon was not altered, nor was there either “agreement” or “understanding” that an alteration would occur in the future.

Perhaps Field’s strongest argument is that the Portal to Portal Act excludes the driving time from the coverage of the Fair Labor Standards Act. The argument fails on several grounds, however. The Portal Act becomes inapplicable once the activity in question is compensable by “custom or practice in effect.” 29 U.S.C. § 254(b)(2). Field’s willingness to pay for the trip to the jobsite, noted by the district court, might constitute some evidence of such a practice. Cf. Ralph v. Tidewater Construction Corp., 361 F.2d 806 (4th Cir.), cert. denied 385 U.S. 931, 87 S.Ct. 294, 17 L.Ed.2d 213 (1966). More importantly, however, the Portal Act does not cover “any work of consequence performed for an employer.” 29 C.F.R. § 790.8(a). See Mitchell v. King Packing Co., 350 U.S. 260, 76 S.Ct. 337, 100 L. Ed. 282 (1956); Steiner v. Mitchell, 350 U.S. 247, 76 S.Ct. 330, 100 L.Ed. 267 (1956). The purpose served by the truck was a disputed factual issue, and the district court’s determination that use of the truck was a function of Field’s business was adequately supported. Accordingly we reject Field’s contention that the Portal Act precludes coverage. See D A & S Oil Well Servicing, Inc. v. Mitchell, 262 F.2d 552 (10th Cir. 1958); Wirtz v. Gilbert, 267 F.Supp. 69 (D.R.I.1967). To the extent Tanaka v. Richard K. W. Tom, Inc., 299 F.Supp. 732 (D.Hawaii 1969), implies to the contrary, we decline to follow it.

Affirmed.

      . Audet worked at jobs as far as 74 miles from Meld’s shop.

      . To the extent the truck benefitted other employees who did not have to drive their own cars to the site, Audet might also have been rendering services for his employer by acting as their chauffeur. Arguably his position would be different had he been a rider rather than the regular driver,


author: STEPHENSON, Circuit Judge.

text:
    UNITED STATES of America, Appellee, v. Thomas Anthony SIMONE, Appellant.
    No. 73-1839.
    United States Court of Appeals, Eighth Circuit.
    Submitted March 12, 1974.
    Decided April 29, 1974.
    Rehearing and Rehearing En Banc Denied May 29, 1974.
    Robert G. Duncan, Duncan & Russell (Gladstone), Mo., for appellant.
    Robert B. Patterson, Atty., Dept, of Justice, Washington, D. C., for appellee.
    Before GIBSON, BRIGHT and STEPHENSON, Circuit Judges.
   STEPHENSON, Circuit Judge.

On September 20, 1972, appellant was convicted in the United States District Court, Western District of Missouri, by a jury on Counts I, IV and VIII of an eight count indictment. Count I charged a violation of 18 U.S.C. § 371 (conspiracy to violate 18 U.S.C. §§ 471 and 472), Count IV charged a violation of 18 U.S.C. §§ 2 and 471 (causing to be counterfeited obligations of the United States), and Count VIII charged a violation of 18 U.S.C. §§ 2 and 473 (causing counterfeit obligations to be sold, transferred or delivered). On September 7, 1973, appellant was sentenced to custody for three years under each count, such terms to run concurrently.

I.

Appellant initially contends that there was insubstantial evidence to sustain his conviction upon Count IV of the indictment charging that he “did counterfeit and caused to be counterfeited” the bills in issue. He argues that he was improperly convicted of the offense of counterfeiting or causing to be counterfeited obligations of the United States, since the notes in issue had been made prior to his connection with the conspiracy. This argument is not persuasive. The government’s evidence consisted principally of the testimony of three co-conspirators, Newton Tritico, John Fenton and George Kallas, all of whom entered guilty pleas prior to trial.

The record, totalling nearly seven hundred and fifty pages, discloses that in January of 1972, co-conspirators Kal-las and Fenton met in Kansas City, Missouri, to discuss the sale of counterfeit money which Fenton could supply. Kal-las, in turn, approached appellant about the matter. Appellant agreed to furnish the “front money” (money to be paid Fenton for making the counterfeit bills). Kallas and appellant eventually purchased $3,000 in counterfeit bills, and arranged with co-conspirator Tritico to pass the bills in St. Louis, Missouri. Tritico and one Thomas Brill were subsequently apprehended attempting to pass the bogus money and agreed to cooperate with undercover agents who made purchases of several counterfeit bills from Kallas which appellant and Kallas purchased from Fenton.

During the initial meeting of the co-conspirators in Kansas City, appellant was shown a sampling of co-conspirator Fenton’s counterfeit product. Appellant commented to Fenton that the backs of the bills were “too light” and that they should be improved. Appellant then advised Fenton to “[p]rint all you can for three months,” then “dump the press into the river.” $30,000 of the “light bills” were subsequently destroyed. Thereafter, Fenton returned with a new sampling of the bills. These met with appellant’s approval and appellant, through Kallas, placed an order for $3,000 of the new bills in ten-dollar denominations. Additional purchases were made by Kallas and appellant subsequent thereto. The orders were also placed through Kallas.

The record indicates that the serial numbers appearing on the bills were changed with each order. When an order was completed the plate and the negative used in printing would be destroyed and the particular serial numbers used in manufacturing the order would not be used again. Thus, the serial numbers used in printing those bills under Count IV were unique to that order. They were placed on the bills after the order was entered, and were retired thereafter.

We must view this evidence in a light most favorable to the jury verdict and resolve any and all evidentiary conflicts in favor of that determination. United States v. Henson, 456 F.2d 1045, 1045-1046 (8th Cir. 1972); United States v. Scarpellino, 431 F.2d 475, 477 (8th Cir. 1970); McClard v. United States, 386 F.2d 495, 497 (8th Cir. 1967). Upon this record we are satisfied that the jury could reasonably infer that appellant did in fact assume an active role in the manufacture of the counterfeited ten-dollar bills in that he caused those bills to be counterfeited as charged under Count IV. See, 18 U.S.C. § 2, supra.

Assuming, arguendo, that appellant’s conviction under Count IV was improper, reversal with respect to this issue would still not be required. Appellant’s three-year sentences under each count were concurrent. Therefore, his convictions either under Count I (conspiracy) **or Count VIII (causing counterfeit obligations to be sold, transferred or delivered) would support the sentence and judgment. United States v. Irby, 480 F.2d 1101, 1102 (8th Cir. 1973); Kilcrease v. United States, 457 F.2d 1328, 1331 (8th Cir. 1972); compare, Greene v. United States, 358 U.S. 326, 329-330, 79 S.Ct. 340, 3 L.Ed.2d 340 (1959). In this case we find no reason for not applying the concurrent sentence doctrine. See, United States v. Irby, supra, 480 F.2d 1101, 1102 (8th Cir. 1973); see also, Benton v. Maryland, 395 U.S. 784, 789-790, 89 S.Ct. 2056, 2059-2060, 23 L.Ed.2d 707 (1969). The evidence supporting appellant’s conviction under either Count I or Count VIII was strong.

II.

The main thrust of appellant’s second contention is that the indictment charged multiple conspiracies as a single conspiracy. Kotteakos v. United States, 328 U.S. 750, 766-777, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946).

Unlike Kotteakos, the successive stages, arrangements and agreements between and among the co-conspirators herein constituted the various phases in achieving one basic and ultimate conspiracy a‘s charged under Count I. In all respects the record supports this conclusion : that beginning on or about January 1, 1972 and continuing until on or about February 9, 1972, appellant, together with co-conspirators Kallas and Fenton all knowingly joined with Charles Torrence, now deceased, Newton Tritico and Joseph Brill, named as co-conspirators but not as defendants, and with other unknown individuals, for the purpose of a common end — counterfeiting obligations of the United States and selling them; and that appellant’s role therein was but one part of a basic overriding plan. See, Blumenthal v. United States, 332 U.S. 539, 68 S.Ct. 248, 92 L. Ed. 154 (1947).

In the alternative appellant argues that the indictment was multiplieious and duplicious, and that he was prejudiced thereby. We cannot agree. Each count charged a separate offense for which different elements of proof were necessary to sustain a conviction. See, Amer v. United States, 367 F.2d 803, 805 (8th Cir. 1966); see generally, United States v. Brandom, 320 F.Supp. 520, 524-525 (D.C.W.D.Mo.1970); cf., United States v. Warner, 428 F.2d 730, 735 (8th Cir. 1970).

The judgment of the district court is affirmed.

      . 18 U.S.C. § 371, supra; see discussion, infra.

      . 18 U.S.C. §§ 2 and 473, supra,

      . Appellant suggests that Count I of the indictment alleges three conspiracies, only one of which relates to him. He argues that Count I first alleges that he, together with five other named defendants conspired first to violate 18 U.S.C. § 471 (causing to be counterfeited obligations of the United States), second, that they conspired to violate 18 U.S.C. § 472 (passing, uttering, publishing the counterfeit bills, etc.), and third, in connection with overt act # 10 under Count I, that on or about February 8, 1970, George Kallas passed and sold approximately $26,000 in counterfeit ten-dollar bills to a special agent of the Secret Service.