author: CLARK, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Peter Fleming HOFFMAN, Defendant-Appellant.
    No. 73-2140.
    United States Court of Appeals, • Fifth Circuit.
    Jan. 28, 1974.

      Eugene A. Deal, Atlanta, Ga., (Court-appointed), for defendant-appellant.
    John W. Stokes, U. S. Atty., Stanley M. Baum, Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee.
    Before BELL, DYER and CLARK, Circuit Judges.
   CLARK, Circuit Judge:

The draft has ended but all that preceded its ending is neither forgiven nor forgotten.

Peter Fleming Hoffman refused to take the symbolic step forward after being processed for induction into the army and was convicted of violating 50 U.S.C. § 462, Appendix. On this appeal he argues for reversal on the basis of three defenses that were rejected by the trial court: (1) improper order of call; (2) local board error in failing to consider his post-induction notice conseious-tious objector claim; and (3) violation of the President’s order cancelling draft calls for November and December, 1969. Finding each defense without merit, we affirm.

Hoffman registered for the draft in September 1965 at age 18. Until June 1969 he received a Class II-S (student) deferment while attending college. On June 27, 1969 his local board reclassified him in Class I-A after learning from his response to its current information questionnaire (SSS Form 127) of June 3 that he was to graduate from college on June 15. Hoffman appealed this reclassification within the Selective Service System on the basis that his upcoming position as a graduate teaching assistant in college mathematics qualified him for a Class II-A (occupational) deferment. While this appeal was running its procedural course, the local board was taking the necessary steps leading to Hoffman’s induction. In July, 1969 Hoffman was given a pre-in-duction physical examination and found acceptable. A statement of his physical acceptability for the draft (DD Form 62) was mailed to him on October 1. On October 23, 1969 the Appeal Board decided to classify Hoffman in Class IA. On November 17, 1969 the Local Board mailed to Hoffman an Order to Report for Induction on December 1, 1969. However, the Board agreed to postpone his induction at least until October 1, 1970 to allow completion of the school year already begun. In August 1970 Hoffman sought a Class 1-0 (conscientious objector) classification, but the Board declined to reopen and reconsider his draft status. On October 20, 1970 Hoffman appeared, as required, at the induction center but refused to be inducted. This action led to his indictment and conviction.

Order of Call

Hoffman initially urges that his call was out of the proper order. The reasons for allowing an order of call defense lie on two levels. On a general level the defense serves to insure that the Selective Service System implements the various sociological, political and economic considerations reflected in the sequence of induction established by Congress. On an individualized level, it safeguards each registrant’s due process rights to objective treatment by the Selective Service System in accordance with its own regulations. See United States v. Johnson, 476 F.2d 1251 (5th Cir. 1973); United States v. Strayhorn, 471 F.2d 661 (2d Cir. 1972); and United States v. Dudley, 451 F.2d 1300 (6th Cir. 1971).

Courts have developed more or less specific rules as to the procedures which must be followed in developing an order of call defense — what substantively must be shown by the registrant to raise the defense and the extent of the government’s burden in response. To assert the defense in this circuit, a registrant must report for induction processing and there refuse to be inducted. He cannot rely upon it in a prosecution for failure to report to the induction center. Compare Schutz v. United States, 422 F.2d 991 (5th Cir. 1970), with United States v. Burnett, 476 F.2d 726 (5th Cir. 1973). According the usual presumption of regularity to the actions of the Selective Service System, proof of proper order of call is not an element of the government’s case in chief. Only after evidence has been introduced by the defendant that specific other registrants with a higher call priority than defendant were eligible to be called and that their calling would have postponed the call of the defendant, does the burden shift to the government to demonstrate that the order of call of such other registrants was not improper. United States v. Burnett, supra; United States v. Johnson, 476 F.2d 1251 (5th Cir. 1973); United States v. Dudley, 451 F.2d 1300 (6th Cir. 1971); and Little v. United States, 409 F.2d 1343 (10th Cir. 1969). The government’s burden in response to the defendant’s prima facie showing is to prove that the local board acted in accordance with the Selective Service regulations in not calling those registrants, suggested by the defendant, with seemingly higher priority.

However, this latter burden must be viewed in light of the limited standard of review in Selective Service cases, and thus, letter perfect compliance with the regulations is not required. The proper standard is as stated in United States v. Griglio, 467 F.2d 572 (1st Cir. 1972).

[W]e will not deem a violation of a regulation as applied to third persons a deprivation of due process as to a registrant unless it is apparent that favoritism to another or discrimination against the registrant was intended, or unless the violation is so flagrant and serious that, whether intended or not, concern for fair and efficient administration justifies the sanction of avoiding an induction adversely affected by the violation.

[ 467 F.2d at 577 ]

See also United States v. King, 474 F.2d 402 (1st Cir. 1973); United States v. Strayhorn, supra.

Hoffman introduced the names of five registrants older than he, who were classified I-A at the time of his induction. He asserted that under the then existing “oldest first” priority for induction, these men should have been called before him. If Hoffman had not been called in December 1969 he would have been selected under the lottery or random selection system which went into effect on January 1, 1970 and, because of his high lottery number, would not have been called at all. This evidence of bypass resulting in prejudice to Hoffman was sufficient to require the government to come forward with an explanation of why Hoffman was seemingly called out of order and, indeed, the government stipulated that it had the burden of proving that three of these other registrants were properly processed. The Selective Service file of one of these registrants disclosed that he was inducted on December 1, the same date Hoffman was originally scheduled for induction. Thus, he obviously was not properly named. The government responds that the remaining four registrants under the then existing regulations were not available for December induction. These registrants, like Hoffman, all had II-S college deferments which ended in 1969. 32 C.F.R. § 1622.-25(a) (1969) provided:

In class II shall be placed any registrant . . . who is satisfactorily pursuing a full time course of instruction at a college, university, or similar institution of learning, such deferment to continue until such registrant completes the requirement for his baccalaureate degree, fails to pursue satisfactorily a full time course of instruction, or attains the twenty-fourth anniversary of the day of his birth, whichever occurs first.

The other registrants had neither reached age 24 nor completed the requirements for their degree in June 1969. Each was “satisfactorily pursuing a full-time course of instruction” within the meaning of Section 1622.-25(e). Therefore, their deferments under this regulation did not end until September 1969, since each had entered college in September of ,1965. The preinduction physical examinations of these four registrants were not scheduled until November 3, 1969. Consequently, they did not receive their notices of acceptability (DD Form 62) until November 17. Since the December call was scheduled for December 1, this notice came too late to satisfy the requirement of 32 C.F.R. § 1631.7 (1969) that notice of acceptability must precede induction by 21 days. Because Hoffman graduated in June 1969, received his physical examination in July of that year, and was given his notice of acceptability on October 1, 1969, he alone of this group was nominally eligible for December 1969 induction.

The ultimate propriety of the Board’s action in regard to the other four registrants depends upon regulations then in effect regarding the order for calling registrants to take physical examinations. 32 C.F.R. 1628.11(b) (1969), which has since been repealed, then provided as to registrants classified I-A, I-A-0 or 1-0:

[T]he local board shall, so far as is practicable, select and order to report for Armed Forces physical examination . . . such residents who are non-volunteers in the order of their liability for service.

Section 1628.11(c) (1969) stated:

[T]he local board may also mail an order to report for Armed Forces physical examination to any resident who is classified in a class other than I-A, I-A-0 or 1-0 if it determines that his induction may occur shortly.

Hoffman argues that the Board should have acted under Section 1628. 11(c) to order the other four registrants to report for physicals at least as early as he had to report after their June current information questionnaires revealed that they would lose their II-S deferments in September. Had this been done, it would have made them available for call ahead of Hoffman in December, because they were older registrants.

However, 1628.11(b) clearly leaves discretion in the Board (“as far as is practicable”) to choose the time registrants who are classified as available for induction into service will be called for physical examinations. United States v. King, supra. Since none of the other four registrants were classified I-A at the time Hoffman asserts that they should have been called for physical examination, the even more permissive “may” language of 1628.11(c) further broadens the Board’s scheduling prerogative here. In view of the fact that his Board followed a consistent practice as to Hoffman and all others of scheduling such examinations upon the expiration of student deferments,' this court will not fault the Board for not calling the other registrants during the summer when their II-S deferments were still in effect.

This record in nowise discloses any such intentional discrimination or flagrant and serious violation as is required by Griglio. See also United States v. Strayhorn, supra; United States v. Weintraub, 429 F.2d 658 (2d Cir. 1970), cert. denied 400 U.S. 1014, 91 S.Ct. 572, 27 L.Ed.2d 627 (1971). To the contrary, the Local Board’s practice of ordering the physical examinations of registrants after their reclassification appears to be a reasonable means of conserving its limited resources of money, examination space and personnel, since it cannot be determined until a registrant is finally classified as available whether the registrant will ever be liable for the draft.

Finally, Hoffman urges that he is being penalized for graduating from college on time. This branch of the argument is addressed to the wrong forum. Inequities in the impact of the draft laws upon the lives of individual registrants and groups of registrants are legion. Arguments for their correction are properly addressed to Congress, not to this court. Suffice it to say that the order of call defense has not been established here.

Conscientious Objector Status

Hoffman’s next argument is that his Local Board violated Selective Service regulations by failing to reopen his classification to consider his August 1970 conscientious- objector claim. To be entitled to a reopening for further consideration of classification after an Order to Report for Induction has been mailed, a registrant must show that there has been a change in his status “resulting from circumstances over which the registrant has no control.” 32 C.F.R. § 1625.2 (1970). Ehlert v. United States, 402 U.S. 99, 91 S.Ct. 1319, 28 L.Ed.2d 625 (1971), forecloses any argument that late crystallization of beliefs is such a circumstance. Hoffman urges that the Supreme Court’s decision in Welsh v. United States, 398 U.S. 333, 90 S.Ct. 1792, 26 L.Ed.2d 308 (1970), amounted to a change in circumstances beyond his control, because that decision first alerted him to the fact that a conscientious objector classification could be based not only upon opposition to war founded on traditional religious beliefs but also upon such opposition springing from beliefs which, while non-religious in an institutional sense, occupy the place of traditional religious beliefs in a registrant’s ethos or scheme of values. Hoffman’s position is supported by the First Circuit’s holding in United States v. Fargnoli, 458 F.2d 1237 (1973), which relied upon changes in Selective Service guidelines. However, this circuit has specifically rejected Hoffman’s contention, based upon our analysis that Welsh did not constitute a change in the law but merely followed the earlier Supreme Court decision in United States v. Seeger, 380 U.S. 163, 85 S.Ct. 850, 13 L.Ed. 2d 733 (1965). Gee v. United States, 452 F.2d 849 (5th Cir. 1971); United States v. Steiner, 469 F.2d 760 (5th Cir. 1972). Accord United States v. Gerin, 464 F.2d 492 (9th Cir. 1972). Therefore, this defense by Hoffman was properly rejected.

President's Order

Hoffman’s last argument relies upon an interpretation of the President’s announcement of September 19, 1969 canceling the programmed draft calls for November and December of that year. Hoffman argues that the effect of this announcement was to make only those registrants who were eligible for call in October liable for call in October, November and December. Since Hoffman was not eligible for the October call under the Selective Service regulations, and since under his version of the President’s cancellation directive he was exempt from call in November and December, the earliest that he could have been called was January 1, 1970 when the lottery or random selection system went into effect. Under this interpretation he would have successfully escaped the draft, since his lottery number has never been reached. The Selective Service System, as indicated by its attempt to induct Hoffman, interprets the President’s order differently. They urge that the President’s cancellation of the scheduled November and December calls with the accompanying observation that the October call would be “phased out” over the final quarter of the year, merely lowered the overall number of men to be drafted in the final months of 1969 from 79,000 to 29,000 without limiting those to be chosen to the pool of available inductees eligible for the draft in October.

The Selective Service System’s interpretation of the President’s order is a reasonable one. The language used by the President and Secretary Laird makes it appear that the intent of the order was a reduction in the overall number of men to be called and not an attempt to freeze the manpower pool as of October so as to throw those with subsequent eligibility into the lottery system. This interpretation is buttressed by the fact that the occasion for the announcement was a reduction in troop strength to be maintained in Viet Nam. Then too, to have limited last quarter calls to those registrants available in October to meet the November and December manpower needs could well have forced the local board to violate the “oldest first” priority requirement, if, as might be expected, any older registrants who were not callable in October became eligible in November or December. We also reject Hoffman’s final argument.

The judgment of conviction appealed from is

Affirmed.

      . 32 C.F.R. § 1622.25 (1969).

      . 32 C.F.R. § 1622.10 (1969).

      . 32 C.F.R. § 1622.22 (1969).

      . 32 C.F.R. § 1622.14 (1969).

      . 32 C.F.R. § 1631.7(a) (1969).

      . One of these four registrants received his deferment in the fall of 1968. Since this deferment continued until September 1969, lie did not receive a June questionnaire. Hoffman’s position as to this registrant is that prior questionnaires showed the deferment would end in 1969 and a physical examination should have been ordered.

      . For instance, a registrant may upon graduation from college be entitled to a further deferment or exemption based upon the nature of his subsequent graduate studies or upon the critical nature of the occupation he chooses to enter.

      . The President’s action is reflected in a report of his news conference of September 19, 1969 as follows :
      Ladies and gentlemen, I have an announcement today and the Secretary of Defense will answer questions on the announcement when it is concluded.
      Acting on the recommendation of the Secretary of Defense, the programmed draft calls for the months of November and December — 32,000 for November and 18,000 for December — will be canceled.
      The draft call previously announced for the month of October will be phased out over the final quarter of the year.
      Secretary of Defense Laird then amplified the President’s announcement with this explanation :
      As the President has stated, we are canceling the Defense Department’s previously programmed draft calls for November and December. The programmed draft call for November was 32,000. It was 18,000 for December. These men will not be called.
      This morning I advised the Selective Service System of the President’s decision to phase over the next 3 months the 29,000 previously announced inductees in the October draft call.

      . Hoffman’s notice of acceptability was not mailed until October 1 and his appeal was not finally rejected until October 23, 1969.


source: Caselaw Access Project

author: GEWIN, Circuit Judge:

license: Public Domain

text:
    Donald Dee COLLIER, Petitioner-Appellant, v. W. J. ESTELLE, Jr., Director, Texas Department of Corrections, Respondent-Appellee.
    No. 73-1543.
    United States Court of Appeals, Fifth Circuit.
    Jan. 31, 1974.
    Patricia E. Abbitt, Dallas, Tex. (Court-appointed), for petitioner-appellant.
    John L. Hill, Atty. Gen., E. Bruce Curry, Asst. Atty. Gen., Joe B. Dibrell, Austin, Tex., for respondent-appellee.
    Before TUTTLE, GEWIN and GOLDBERG, Circuit Judges.
   GEWIN, Circuit Judge:

This 2253 appeal, taken from an order denying a petition for a writ of habeas corpus, presents the question of whether appellant, Donald Collier, was denied his constitutional right to appeal by the failure of the state court to afford him appointed counsel on appeal. Critical to the resolution of this question is a subsidiary issue of whether appellant waived this right, irrespective of any dereliction on the part of the state. Since the district court refrained from addressing these questions, we vacate its order and remand for an evidentiary hearing to illuminate the viability of Collier’s grievances.

I

Because of the unique posture in which the purported denial of a right to appeal is presented, it is instructive to recount the course of the proceedings in the state trial and post conviction relief courts and in the federal district court. Appellant was indicted in 1968 for robbery by firearms. At the trial, his retained counsel interposed both an “insanity defense” and a plea of not guilty. Following adverse determinations by the same jury on both contentions, Collier, through his counsel, gave notice of appeal in open court. Within two months, however, his attorney filed a motion to dismiss the appeal, to which the trial court responded favorably. Since the motion stated as grounds therefor only that Collier did “not want his appeal heard before the Court,” the trial court was ignorant of the subsequently revealed and allegedly true reason for filing the motion to dismiss, namely, Collier’s inability to afford retained counsel on appeal.

Disheartened by the prospect of twenty years of incarceration, Collier sought vindication of his rights by pressing forward without the aid of counsel. Approximately eight months after his counsel had moved to dismiss his appeal, and hence after the time allowed for perfecting an appeal from his conviction had expired, he attempted to obtain a copy of the trial transcript from the district clerk of the court in which he was convicted. While the clerk maintained that he had honored Collier’s request at no cost because Collier had filed an affidavit of inability to pay, his efforts apparently went awry for Collier failed to obtain a copy of the record. Undaunted by this failure, Collier pressed the district clerk for information concerning the cost of the “statement of facts”, again to no avail. A third request was similarly inefficacious.

Abandoning this tact, Collier filed a petition for a writ of habeas corpus in the district court of Lubbock County, Texas, alleging that the trial court erred in employing the same jury to try his “insanity” and his guilt or innocence, and that the admission of a prior forgery conviction at the insanity .hearing and the reception of evidence concerning narcotics at the trial on the merits jeopardized his right to a fair trial. The state district court denied the writ of habeas corpus, holding that by dismissing his appeal, Collier waived any error in his trial. The Texas Court of Criminal Appeals affirmed the denial without hearing or opinion. It results, therefore, that the issue of waiver of the right to appeal was injected into the case by the state court. That fact is critical because the waiver determination was used to eliminate all of Collier’s claims to post conviction relief.

Subsequently, Collier filed an application for a writ of habeas corpus in federal district court, from the denial of which this appeal is taken. Despite the absence of a transcript of the proceedings in the state convicting court, the district court denied the writ, holding that the alleged evidentiary errors committed and the failure to conduct bifurcated jury trials on insanity and guilt or innocence did not implicate any constitutional proscriptions.

II

Although neither the state nor the federal habeas corpus petitions "are bottomed upon the denial of a right to appeal, it is upon the resolution of this issue that Collier’s fate hinges. Through appellate counsel’s legerity, the use of the waiver issue by the state court to deny consideration of Collier’s claims, and the absence of any evidence that he actually waived his right of appeal, the habeas petitions have in effect been transformed to incorporate this contention. In these circumstances we need not have any reservations about considering the waiver issue in this unorthodox posture.

It is beyond cavil that a criminal defendant cannot be denied an appeal because of indigency or ignorance. Anders v. California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 (1967); Douglas v. California, 372 U.S. 353, 83 S.Ct. 814, 9 L.Ed.2d 811 (1963); Griffin v. Illinois, 351 U.S. 12, 76 S.Ct. 585, 100 L.Ed. 891 (1956); Schwander v. United States, 386 F.2d 20 (5th Cir. 1967) ; Crawford v. Beto, 383 F.2d 604 (5th Cir. 1967). Nevertheless, a state court, unlike its federal counterpart, is not required to apprise a defendant of his right to appeal or to appoint him counsel for the purpose of pursuing an appeal where that court is not aware of his desire to do so. Giles v. Beto, 437 F.2d 192, 194 (5th Cir. 1971); cf. Beto v. Martin, 396 F.2d 432, 434 (5th Cir. 1968) ; Worts v. Dutton, 395 F.2d 341, 344 (5th Cir. 1968). Since Collier was represented by retained counsel in the state court who moved to dismiss his previously filed notice of appeal, a denial of a right to appeal could be established only by evidence that the state trial court or some responsible state official was or should have been cognizant of both his desire to appeal and his inability to afford to do so with retained counsel at some point after his motion to dismiss the appeal was filed. See Johnson v. Wainwright, 456 F.2d 1200, 1201 (5th Cir. 1972); Gregory v. United States, 446 F.2d 498, 499-500 (5th Cir. 1971) ; Horsley v. Simpson, 400 F.2d 708, 711-712 (5th Cir. 1968) ; Beto v. Martin, 396 F.2d 432, 434 (5th Cir. 1968).

Collier’s persistent requests to obtain a copy of the trial transcript from the district clerk, one of which was accompanied by an affidavit of inability to pay, would at first blush bring this ease within the above mentioned standards. Compare Horsley v. Simpson, supra 400 F.2d at 712 (inquiry made to clerk of court of appeals concerning status of his appeal) with Beto v. Martin, supra 396 F.2d at 434 (Texas Court of Criminal Appeals was advised of defendant’s indi-gency by letter, three months after conviction). Upon careful reflection, however, it is clear that this case differs substantially from those in which the standards governing a denial of a right to appeal were enunciated. For here, unlike Horsley v. Simpson and Beto v. Martin, for example, Collier, though evidencing his desire to appeal by filing a notice of appeal within the requisite statutory period, apprised state officials of his indigency after the time for appealing had expired. Hence, two competing factors are injected into our decision. On the one hand, we cannot countenance the view that defendants can brazenly ignore legitimate state imposed temporal limitations on filing an appeal. On the other hand, however, we cannot subscribe to the view that by belatedly informing responsible state officials of his indigency and reiterating his desire to appeal that Collier had forsaken his fundamental right to do so. Reconciliation of these two factors lies in a waiver standard. We now proceed to explicate this standard and apply it to the instant case.

If the gravamen of Collier’s complaint were confined to a denial of court appointed counsel, the applicable standard governing waiver would be that articulated in Craig v. Beto, 458 F. 2d 1131, 1136 (5th Cir. 1972) where the court stated that “[i]f Craig did not know about his right to appointed counsel and was not advised of that right, then there could not possibly be an intentional relinquishment or waiver of that right.” Since Collier’s denial of a right to appeal contention is inextricably tied to his claimed denial of a right to counsel on appeal, this same standard governs the waiver issue prescribed herein. As was noted above, the motion to dismiss the appeal stated only that Collier did “not want his appeal heard before the Court.” The State of Texas did not introduce any testimony or correspondence exchanged between appellant and his trial counsel which indicates that appellant either suggested, acquiesced in or concurred with the decision to dismiss the appeal. Nor is there any evidence which suggests that Collier was informed that upon his proof of indigency, the state would provide him with counsel to prosecute an appeal. Waiver of the fundamental right to appeal requires knowing and intelligent participation cf. Schneckloth v. Bustamonte, 412 U.S. 218, 93 S.Ct. 2041, 36 L.Ed.2d 854, 868-869 (1973). Such a view is mindful of the decision in Fay v. Noia, 372 U.S. 391, 83 S.Ct. 822, 9 L. Ed.2d 837 (1963) where in adumbrating the waiver standard, the Supreme Court announced that “[a] choice made by counsel not participated in by the petitioner does not automatically bar relief” and that “the standard here put forth depends on the considered choice of the petitioner.” 372 U.S. at 439, 83 S.Ct. at 849, 9 L.Ed.2d at 869 (emphasis added).

Since the record fails to disclose that Collier did in fact knowingly and intelligently waive his fundamental right to appeal, our only recourse is to remand this case to the district court for an evi-dentiary hearing on the waiver issue. And, if at this hearing, the state cannot adduce evidence of the aforementioned nature which demonstrates that the decision to file the motion to dismiss the appeal was the product of Collier’s considered choice, it will be incumbent upon the district court to conclude that a waiver was not effected.

Ill

Where such a waiver is not established and there is no impediment to granting an out of time appeal, federal courts will usually grant the writ, ordering the State to afford a defendant either the out of time appeal, see, e. g., Horsley v. Simpson, supra 400 F.2d at 712-13; Beto v. Martin, supra 396 F.2d at 433; LeMaster v. Beto, 387 F.2d 612, 613 (5th Cir. 1967); Schwander v. United States, supra 386 F.2d at 25, or a release from confinement. However, even with court appointed counsel, Collier would encounter the same difficulty in an out of time appeal that he complains of in his habeas petition — namely the unavailability of a transcript or “statement of facts” from the state trial court impairs his ability to amplify his allegations of a denial of a right.,to a fair trial. Our unwillingness to condone the practice of disposing of due process claims where, through no fault of a criminal defendant, a record if absent is buttressed by the fact that Texas Code of Criminal Procedure, Art. 40.09, § 5 (Supp.1972-73) precludes appellate review of an assigned error in the brief without a transcription of the court reporter’s notes, see Smith v. State, 430 S.W.2d 496, 497 (Tex.Cr.App.1968); Trevino v. State, 409 S.W.2d 853, 854 (Tex.Cr.App.1966); Isaacs v. State, 403 S.W.2d 409 (Tex.Cr.App.1966), and entitles a criminal defendant to a new trial. See Ex Parte Ramirez, 483 S.W.2d 259, 260 (Tex.Cr.App.1972); Ex Parte Perez, 479 S.W.2d 283, 285 (Tex.Cr.App.1972); Ex Parte Marshall, 445 S.W.2d 212, 213 (Tex.Cr.App.1969).

The wisdom of this course is confirmed by the fact that a new trial will largely mute the grievances which Collier proffers in his habeas petition and hence terminate the protracted proceedings spawned by his state trial. The' statutory provision pursuant to which the same jury tried both insanity and his guilt or innocence has been superseded by Texas Code of Criminal Procedure, Art. 46.02, § 1 (Supp.1972-73) which prescribes a bifurcated trial for such issues. Trial under this provision would obviate the need to consider both the first grievance pressed in Collier’s original petition and the second, which for all intents and purposes, is subsumed within the first. Presumably, the trial court could exclude evidence of narcotics offenses to which Collier allegedly had no relation, and hence foreclose any need to consider his third contention.

To reiterate we only hold that there must be an evidentiary hearing in the United States District Court to resolve the waiver issue. Appropriate disposition of the case will depend upon the findings of that court after such a hearing.

Vacated and remanded.

      . 28 U.8.C. § 2253 (1970).

      . Appellant’s characterization of his first contention — that separate juries should be required to try the insanity issue and his guilt —is somewhat misleading. A careful reading of his Second Motion for Continuance, his Motion for Perliminary Hearing, and his proposed jury charge requested of the court reveal that he did not claim insanity at the time the offense was committed but rather incompetency to stand trial. We regret that the distinction between the two which plagued the court in Bruce v. Estelle, 483 F.2d 1031 (5th Cir. 1973) still remains elusive.

      . Filed without the aid of the skillful counsel who represented him on this appeal, Collier’s habeas petition does not advert to either of the claims upon which this case is presently being considered. In his application for the writ, Collier listed the following grounds: “Judgment and conviction, violates the Fifth (5th), Sixth (6th) and Due Process of Law, and Equal Protection of Laws, Clauses of the Fourteenth (14th) Amendment to the United States Constitution.” He designated the following facts as supportive of the above grounds: “Petitioner, did not testify, in his own behalf at any part of A two (2) part jury trial, on a insanity trial and criminal trial by same jury, who was informed of petitioners past criminal record, plus merry [sic] accusations of crimes, Denying Petitioners [sic] Rights to a fair trial by an impartial jury.”
      Were we not inclined to presently view his habeas petition as containing a claim of denial of a right to appeal, then we would characterize Collier’s failure to appeal from his state court conviction as presenting a deliberate bypass issue under Fay v. Noia, 372 U.S. 391, 83 S.Ct. 822, 9 L.Ed.2d 837 (1963). See, e. g., Montgomery v. Hopper, 488 F.2d 877 (5th Cir. 1973). In Hopper, this court announced that “[n]ot even an outright failure to file an appeal would, of itself, constitute a deliberate bypass in the absence of clear proof that the decision not to appeal was made knowingly and understandingly in order to secure some benefit to the petitioner.” Application of this deliberate bypass standard at the evidentiary hearing below would produce substantially the same result as application of the standard we have articulated.

      . Since the claimed right to court appointed counsel is subsumed with the alleged denial of a right to appeal, it is only by a wooden application of exhaustion requirements that Collier’s contentions could be denied consideration by this court. Cognizant of the fact that Collier proceeded without counsel in the state habeas court, and desirous of terminating his protracted efforts to seek vindication, we refrain from indulging in such an application.

      . This case differs from others in which a denial of a right to appeal is claimed in that the actions of Collier which satisfy the standards enunciated in the text were taken after the time for perfecting an appeal had expired and after he had moved to dismiss the notice of appeal given at the time of his sentencing. Had no notice of appeal been given, the relevant temporal index would be the time when by statute he could no longer file a notice of appeal.

      . Judge Pat S. Moore, who presided at Col-tier’s state habeas hearing informed him by letter dated December 4, 1972, that the court reporter had died and no one knew where his records were. Consequently, Collier still cannot obtain a copy of the transcript.


author: DYER, Circuit Judge:

text:
    SCOTT MEDICAL SUPPLY COMPANY, INC., Plaintiff-Appellee-Cross Appellant, v. BEDSOLE SURGICAL SUPPLIES, INC., and Donald W. Edwards Company, Inc., Defendants-Appellants-Cross Appellees.
    No. 73-1576.
    United States Court of Appeals, Fifth Circuit.
    Jan. 31, 1974.
    Louis E. Braswell, Mobile, Ala., for Bedsole.
    Geary A. Gaston, David W. Green, Mobile, Ala., for Edwards.
    John L. Lawler, M. A. Marsal, Irvin J. Langford, Mobile, Ala., for plaintiff-ap-pellee.
    Before TUTTLE, DYER and MORGAN, Circuit Judges.
   DYER, Circuit Judge:

This is an appeal from a judgment of the district court entered upon a jury finding that Bedsole Surgical Supply and the Donald Edwards Company engaged in a conspiracy in restraint of trade proscribed by section 1 of the Sherman Act, 15 U.S.C.A. § 1. Upon the jury’s return of a verdict against the defendants for $10,500.00, the district court ordered a remittitur, trebled the reduced damages, and awarded substantial attorneys’ fees. We have determined that there was insufficient evidence of the alleged conspiracy to take the case to the jury. Accordingly, we reverse.

Scott Medical Supply Company, a Mobile, Alabama, hospital supplies dealer, instituted this action alleging that Bed-sole, a retail medical products supplier who was a direct competitor of Scott’s, and the Donald Edwards Company, a manufacturers’ representative of firms producing medical supplies, conspired to deprive Scott of certain medical products which Scott had theretofore been marketing or desired to market in the Mobile area.

Because the sufficiency of the evidence of unlawful conspiracy is the principal point in issue on appeal, a detailed factual examination of the very specialized hospital supplies industry is required. Scott Medical relies upon three instances of terminations or refusals to deal by manufacturers of various hospital supplies as showing the successful conspiracy by Bedsole and Edwards to deprive Scott of wares vital to its economic existence. These terminations or refusals to deal involve the Pioneer Rubber Company, a manufacturer of surgical gloves; the American Safety Razor Company, a surgical blades firm which in 1968 expanded into the sutures industry by acquiring the Lukens Sutures Company; and Shampaine Industries, which manufactures specialty tables designed for hospital usage. Several incidents of alleged misconduct prior to 1966 were developed at trial for the purpose of showing the unlawful intent allegedly harbored by Bedsole and Edwards.

There are two common, but independent, threads woven throughout most of the instances relied on by Scott Medical as supporting imposition of antitrust liability. First, Scott maintains that Bedsole, its direct and larger competitor in retailing hospital supplies in the Mobile area, exerted pressure on and then conspired with Edwards, the representative of various manufacturers of hospital supplies, to induce those manufacturers represented by Edwards to refrain from dealing with Scott. According to Scott, Edwards cooperated and acquiesced in Bedsole’s unlawful designs due to Bedsole’s threats to terminate its relationship with Edwards if the latter continued to deal with Scott, ' even though the two alleged co-conspirators were non-competitors, situated as they were on different tiers of the distribution network. Second, in other instances, Scott argues that the facts demonstrate an evil animus by Bedsole toward the former’s enterprise, even though no actionable conspiracy between Edwards and Scott is evident from these transactions.

LUKENS SUTURES

Prior to 1968, Scott Medical had engaged in sporadic sales of sutures produced by the Lukens Company of St. Louis, Missouri. In marketing its products, the Lukens firm employed its own sales force and thus did not require the services of an independent manufacturer’s representative. As a result, the Donald Edwards Company had no association with Lukens, and Scott obtained its sutures directly from the company without resort to any intermediary. This situation prevailed until 1968, when Lukens underwent a major reorganization. During that year, the American Safety Razor Company (ASR), a firm which manufactured surgical blades, acquired the small Lukens company as part of an expansion program. ASR, which was represented by Edwards and whose surgical blades were being retailed by Bedsole, continued the pre-ex-isting Scott-Lukens liaison by entering into a dealership agreement with Scott in October, 1968. This relationship continued for over a year until December, 1969, when ASR decided to terminate Scott’s dealership as part of a nationwide cut-back by ASR from 1,000 to 600 dealers. Bedsole, on the other hand, was retained as an ASR dealer, even though it was inactive in marketing the newly-acquired sutures line.

Scott, pointing out the incongruity in ASR’s terminating an active and successful dealer while retaining a dealer in the same geographical area who was disinterested and unsuccessful in selling the manufacturer’s product, urges that ASR’s termination of Scott was induced by Edwards, ASR’s manufacturers’ representative, as a result of the unlawful Bedsole-Edwards conspiracy. There was disputed evidence that at an ASR meeting in Dallas in 1968, after ASR acquired Lukens, an employee of the Donald Edwards Company suggested to ASR officials that Scott’s dealership be terminated in view of the superior performance and cooperation of Bedsole in dispensing ASR blades. Assuming that the suggestion was made and that the meeting occurred after Scott had been awarded an ASR dealership in October, 1968, we are persuaded that this evidence, albeit suggestive of suspicions of wrongdoing, does not constitute substantial evidence, particularly when viewed in the light of uncontradicted testimony to the contrary. Boeing Company v. Shipman, 5 Cir. 1969, 411 F.2d 365.

First, for over a year after the Dallas meeting, Scott continued to sell, and ASR, represented by Edwards, continued to supply Lukens sutures to Scott. No actions or suggestions on the part of either Edwards or Bedsole with respect to Scott’s dealership are alleged to have occurred subsequent to the 1968 Dallas meeting. Importantly, during this interval, Scott’s success in retailing Lu-kens sutures waned markedly from $15,000.00 in gross sales during 1968 to approximately $3,000.00 in 1969. Additionally, ASR, which was experiencing considerable production difficulties with its new sutures line, decided to eliminate 400 of its 1000 dealers. In this decision-making process, it was uncontra-dicted that the decision to terminate Scott was made on the basis of objective criteria promulgated by ASR which Scott failed to meet, and that no one at either Bedsole or Edwards had any conversation with or otherwise suggested to ASR officials that Scott’s dealership be terminated.

Aside from this testimony by ASR officials, it appears that ASR was primarily engaged in the manufacture of surgical blades, which Bedsole, and not Scott, was successfully marketing even before 1968. Indeed, Bedsole enjoyed a longstanding relationship with ASR. In contrast, the acquisition of Lukens Sutures by ASR in 1968 was the first contact Scott, which had theretofore been marketing the Lukens line, but not ASR blades, had with ASR. Upon acquiring Lukens, ASR promptly experienced sterilization difficulties in packaging the sutures, which exacerbated problems already besetting a product which had theretofore captured a mere two percent of the sutures market. Lukens sutures were, in short, comparatively poor sellers, and ASR subsequently recognized Lukens, an ancillary enterprise for a razor company, as an unsatisfactory venture and, accordingly, sold out its interest in Lukens completely. Since the evidence amply demonstrates ASR’s relative lack of concern with Lukens sutures, we can hardly fault ASR for terminating a dealer who was marketing an ancillary and troublesome line produced by the company and retaining instead a dealer, Bedsole, who was highly successful over a lengthy period in selling the company’s primary lines. Furthermore, the glitter of Scott’s success even with respect to sutures, a factor on which Scott understandably relies heavily, is tarnished upon examining the comparative sales figures for 1968 and 1969, with the substantial sales decline experienced in the latter year.

We are therefore left only with the remark of an Edwards employee at the ASR meeting in Dallas as evidence of an Edwards-Bedsole conspiracy to deprive Scott of sutures. This remark alone simply falls short of being substantial evidence.

Finally, the underlying significance of the ASR termination in terms of Scott’s competitive position in retailing sutures is greatly diminished by the fact that Scott carried another, more successful line of sutures, Davis and Geek, after ASR eliminated Scott’s access to the Lu-kens brand. Since Bedsole Medical Supply did not even attempt to market Lu-kens sutures after Scott’s dealership was ended, Scott contends that Bedsole’s motivation in effecting an ASR termination was simply to extinguish Scott’s access to sutures generally, which are a necessary component of a hospital supply company’s inventory. Without sutures, Scott contends, a supply company would be severely handicapped in competing effectively with other, more fully equipped dealers. Since Davis and Geek sutures, which Scott did have, had captured a much larger market share than Lukens, and since Bedsole never attempted to market the Lukens brand, we are left unenlightened as to what possible motivation Bedsole would have had in entering into this sort of conspiracy.

We have diligently searched, but we cannot find any substantial evidence of a conspiracy between Bedsole and Edwards violative of section l. It is, of course, axiomatic that inferences, which Scott would have us draw, cannot stand in the face of uncontradieted and substantial evidence to the contrary. Panotex Pipe Line Co. v. Phillips Petroleum Co., 5 Cir. 1972, 457 F.2d 1279, 1289, cert. denied, 409 U.S. 845, 93 S.Ct. 48, 34 L.Ed.2d 86.

PIONEER GLOVES

The second instance of the alleged conspiracy between Bedsole and Edwards arises from the termination of the dealership which Scott briefly enjoyed with Pioneer Rubber Company, an Ohio-based manufacturer of surgical gloves which was represented by the Donald Edwards Company. In 1966, Scott Medical, desirous of making a bid on a sizable order of Pioneer gloves by a Mobile hospital, initiated contact with Pioneer to obtain surgical gloves directly from the company, after unsuccessfully attempting to obtain the products through Edwards. Pioneer responded to Scott’s inquiry by dispatching a form letter notifying Scott Medical that it had been appointed a' Pioneer dealer and that its order was accepted. The dealership was short-lived, however, as Pioneer sent another form letter one month later terminating the dealership before Scott could fill the hospital’s purchase order. As a result of this termination, Bedsole, the next lowest bidder, received the hospital’s order for Pioneer gloves which Scott otherwise would have received.

Scott argues that an inference should be drawn that Pioneer was influenced by its sales representative, Edwards, to terminate Scott’s newly-awarded dealership. Edwards’ interference, in turn, is impliedly attributed to- Bedsole’s unlawful designs on Scott’s economic well-being, which Edwards acceded to in order to placate its steady customer.

Such inferences cannot prevail, however, when substantial and uneontradict-ed evidence to the contrary has been adduced. It is undisputed- that the first form letter from Pioneer to Scott was sent while Pioneer’s executive in charge of new dealership appointments was absent from the home office. Furthermore, under the company’s ordinary business procedures, Pioneer routinely mailed the form letter upon receipt of an order without any decision as to dealership actually having been made, if a preliminary credit check was satisfactory. Pioneer subsequently decided to terminate the Scott arrangement since the initial appointment had been a mistake in view of the fact that Pioneer was already well-represented in the Mobile area and since adding another dealer would cause confusion among buyers, thereby harming rather than enhancing Pioneer distributorship value. Moreover, due to Scott’s unfavorable credit rating from Dun & Bradstreet, Pioneer limited Scott’s available credit at the outset in accepting the initial order, and it was anticipated that Scott would probably have a poor payment record with Pioneer. Finally, it was uncontra-dicted that no person connected with Bedsole ever contacted Pioneer or otherwise attempted to influence its decision to terminate Scott.

In addition, it was established that even after Pioneer’s termination, Scott continued to market Seamless rubber gloves, which were qualitatively equal to those of Pioneer and other brands. The significance of Scott’s ability to obtain and market another brand of surgical gloves is underscored by substantial evidence to the effect that the various brands of surgical gloves, of which there are many, are highly competitive with one another. Indeed, various hospitals in the Mobile area simultaneously stocked several different brands of gloves in order to accommodate the varying preferences of physicians. Consequently, what continuing benefit Bed-sole would derive in blocking its competitor’s access to one particular brand of surgical gloves, while undertaking no attempt to cut its supply of other, equally competitive brands, is not apparent. In sum, Scott urges us to infer an unlawful conspiracy in the face of uncontroverted evidence to the contrary. We simply cannot say that Scott’s proof rose to the level of substantial evidence.

SHAMPAINE SURGICAL TABLES

Scott’s third complaint involves a manufacturer of surgical tables, Shampaine Industries, with whom the Donald Edwards Company had no relationship whatsoever. Since Edwards had never represented Shampaine nor was otherwise involved with this manufacturer in any way, proof of circumstances surrounding Shampaine’s termination of Scott could not demonstrate the existence vel non of the alleged conspiracy, and such evidence was therefore inadmissible except to show Bedsole’s intent or motive.

Even as to the limited inquiry into Bedsole’s intent as evidenced by Sham-paine’s actions, the evidence is unhelpful to Scott. To prove Bedsole’s unlawful designs, Scott relies on an order it obtained and placed with Shampaine which was refused by that manufacturer and thereafter filled by Bedsole. From this occurrence alone we are asked to infer an improper causal connection between Shampaine’s refusal to deal with Scott and Bedsole’s intent to drive its smaller competitor out of businéss. Once again this suggested inference which Scott would have us draw was fully rebutted by substantial evidence to the contrary. Shampaine’s refusal to deal with Scott chase order resulted from credit considerations and from the fact that Sham-paine already enjoyed adequate representation in the Mobile area. The decision was not influenced, nor was any attempt made to influence it, by either Bedsole or Edwards.

Finally, Scott was wholly unable to show that the actions of a locally-based franchisee in filling an order obtained by a nonfranchised supplies dealer in the same locality was in any way unusual or improper.

OTHER EVIDENCE

Scott also relies upon several occurrences which happened over a decade ago to shed light on Bedsole’s and Edwards’ intent with respect to Scott. Without unduly extending this opinion, it suffices to say that the parties’ dealings concerning the Lumex Company, the Pelton Crane Company, and Bed-sole’s gift to a local hospital were not only peripheral, but wholly failed to show conspiratorial wrongdoing or prove unlawful motive or interest.

We are of the firm view that there was a lawful basis for each of the transactions complained of by Scott Medical; that there was no conflict in substantial evidence to create a jury question; and that a directed verdict or judgment notwithstanding the verdict should have been granted. Boeing Company v. Shipman, supra, 411 F.2d at 374-375. The judgment of the district court is reversed and the cause is remanded with directions to enter judgment for the defendants.

Reversed and remanded with directions.

      . Bedsole was, however, selling a different line of sutures to its customers. It primarily marketed E'thicon sutures, which was the leading line of sutures, far exceeding the modest market share enjoyed by Lukens.

      . The exact date of the Dallas meeting is in dispute. Scott maintains that the meeting occurred in late 1968, after Scott and ASR had entered into the October dealership agreement. Bedsole urges that the meeting occurred sometime during the summer of 1968 and thus before the October accord was reached. The importance of the relative dates of the Dallas meeting and the October agreement is due, of course, to the fact that if the suggestion for ASR not to deal with Scott was made T)efore ASR entered into a formal dealership agreement with Scott Medical, then the suggestion had absolutely no impact on the ASR decision. Since Scott contends that the Bedsole-Edwards conspiracy resulted in ASR’s termination of Scott, it is imperative that Scott establish that it was awarded the ASR dealership before the Donald Edwards Oompany’s alleged intermeddling.

      . Scott’s reliance on the fact that Bedsole eventually received a commission on certain orders for Lukens sutures obtained by Scott prior to the ASR termination simply lacks substantial probative value, inasmuch as ASR customarily billed a purchaser through its closest representative, which in this case was Bedsole.


author: GODBOLD, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Lauro Mirnes SALAS, Defendant-Appellant.
    No. 73-1896.
    United States Court of Appeals, Fifth Circuit.
    Jan. 28, 1974.
    Alan Brown, Robert Mitchell, San Antonio, Tex., for defendant-appellant.
    William S. Sessions, U. S. Atty., Joel D. Conant, Asst. U. S. Atty., San Antonio, Tex., for plaintiff-appellee.
    Before BROWN, Chief Judge, and GODBOLD and SIMPSON, Circuit Judges.
   GODBOLD, Circuit Judge:

The only issue in this appeal from a conviction of unlawful possession of heroin and cocaine with intent to distribute, 21 U.S.C.A. § 841(a)(1), is the validity of a seizure by federal agents of the narcotics, found in an automobile in which appellant was a passenger.

At the time federal agents began following the car they were in possession of the following information. Beginning about 2:00 p. m. they had under their surveillance a house in San Antonio, Texas, which they were' informed was a place involved in narcotics distribution. They had been furnished the names of persons said to be participating in the distribution. Persons in the house were expected to make a delivery of a quantity of narcotics to the “big man”, a named dealer who was coming from Houston. (Some references are to the effect the Houston dealer was coming to consummate a sale rather than a purchase. We do not consider this variation to affect the result in the case.) Between about 2:00 p. m. and 4:30 p. m. the federal officers saw Manuel Cis-neros come out of the house several times and look around, and they saw him leave the residence on one occasion and go to a nearby wooded area and return. They observed several different vehicles come to the house and depart.

At approximately 5:45 p. m. a federal officer informed the San Antonio Police Department that his agency planned to obtain a federal warrant to search the premises. The federal officers then discovered that the city police, based on information from a different informant and as part of an investigation independent of and unknown to the federal officers, had obtained a search warrant for the premises and planned to execute it. The federal officers abandoned their proposal to obtain a federal warrant, and the two agencies agreed to work together in executing the city warrant.

At approximately 4:30 p. m. the federal officers received further information from their informant describing the details of the transactions to take place with the “big man”, including a description of a meeting place away from the house, a description of the “big man’s” car, and information that there would be three Negro males accompanying him. Federal officers • put the meeting place under surveillance, and at the stated time there appeared at the scene a Chevrolet automobile which had departed the residence, occupied by Cisneros and Frank Gonzalez. The “big man” went to the Chevrolet then returned to his car, and the vehicles left. Surveilling officers followed the two cars but lost the dealer’s car in traffic. The Chevrolet was stopped, and Cisneros and Gonzalez were arrested and discovered to have in the car a quantity of heroin and a large sum of money.

At approximately 6:00 p. m. the appellant, Salas, appeared on the scene for the first time. His name and identity were unknown to the federal officers. He drove to the house in a Ford, entered the house, remained about five minutes and left. Surveilling officers secured the license number of his car and tried without success to trace it. At approximately 7:50 p. m. appellant returned in the Ford, again entered the house, remained about five minutes, and returned to the car. On neither occasion was he observed to be . taking anything into or from the house. During the approximate time span between the two visits of the Ford to the house approximately four vehicles came to the house and departed. Officers attempted unsuccessfully to follow some of them.

When the Ford left after its second visit, a surveilling automobile unit was directed by a radio message from a surveilling officer to stop the car. Federal cars followed the Ford, and agents observed the driver and the passenger, Salas, to be looking about in what appeared to be a nervous manner. When traffic conditions permitted agents pulled alongside the Ford. One flashed his badge and a gun and identified himself as a federal agent and directed the driver to stop. The driver put his hands on the wheel, while the appellant-passenger ducked down in the seat and then reappeared. As officers came up to the stopped vehicle one of them saw in plain view on the floor near where Salas was seated a paper parcel which contained the contraband in question.

This is a close case, but we conclude that there was sufficient probable cause-just barely sufficient-to justify stopping the car and arresting Salas. The officers were informed that the house was a center of narcotics distribution. They knew that persons leaving the house approximately three hours earlier had been participants in a sizable narcotics transaction at exactly the time, place and manner stated by their informant, and that the Chevrolet which had left the house had been the means of conveying either to or from the Houston dealer a quantity of narcotics. They had seen appellant and the Ford come to the house twice in a matter of two hours, stay briefly and depart. They had seen a number of other vehicles follow the same pattern of coming to the house, the occupants entering and remaining briefly, and then departing.

In contending there was no probable cause to arrest the appellant, defense counsel focuses on the fact that Salas had not been named by the informant or identified by description as an actor in the narcotics transactions, nor had the Ford automobile been identified. This misconceives the issue, which is whether there is probable cause to believe that the Ford and its occupants, whatever their identity might be, were involved in the transportation of narcotics to or from a distribution point. The identity of the occupants is not a prerequisite to the existence of probable cause to believe that they were transporters.

This case is not governed by Sibron v. New York, 392 U.S. 40, 88 S.Ct. 1889, 20 L.Ed.2d 917 (1968) where the apprehension of the defendant and the seizure from his person of narcotics were held invalid after he had been seen during an eight hours surveillance conversing on six or eight occasions with known narcotics addicts. The federal officers here were not centered upon narcotics users but upon a distribution point. They had observed numerous vehicles coming to the place and the occupants staying briefly and departing, and at least one of the vehicles, occupied by persons from the house, had departed the house and engaged in transportation of narcotics to, or receipt from, the Houston dealer.

Once we conclude, as we do, that the arrest was valid, then the subsequent observation of and seizure of the contraband in plain sight is also valid. No contention is made by appellant that the federal offices had an opportunity to and should have obtained a warrant for the arrest or a warrant for the search of the automobile. Rather his point is that there was insufficient probable causal relationship pointing to him and to the Ford automobile to justify the police in stopping the car and arresting him. This point must be rejected.

Affirmed.

      . The Ford was travelling at an unusually slow speed, but we attribute no significance to this.

      . The discovery of the contraband on the floor in plain sight at the time of, or seconds after, the arrest cannot supply probable cause for the arrest if previously lacking.

      . This is not an investigatory stop case. The officers acknowledged that although their instructions were to stop the car they intended to stop the vehicle and to arrest the occupants as well.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Michael A. PALAZZO and Rudolfo Castro Viagran, Defendants-Appellants.
    No. 73-1847.
    United States Court of Appeals, Fifth Circuit.
    Jan. 23, 1974.

      Phillip D. Hardberger, San Antonio, Tex., for Palazzo.
    Alan Brown, San Antonio, Tex., for Viagran.
    William S. Sessions, U. S. Atty., Joel D. Conant, Asst. U. S. Atty., San Antonio, Tex., for plaintiff-appellee.
    Before THORNBERRY, SIMPSON and CLARK, Circuit Judges.
   CLARK, Circuit Judge:

Michael A. Palazzo and Rudolfo Castro Viagran were joined in a three-count indictment with Wayne Szpara. Count I charged all defendants with conspiring to possess 73.1 pounds of marijuana with intent to distribute it in violation of 21 U.S.C. § 841(a)(1). Count II charged Viagran alone and Count III charged Palazzo and Szpara jointly with possession of and intent to distribute marijuana. After the pre-trial motions to suppress the physical evidence and '-certain incriminating statements were denied, Palazzo and Viagran were found guilty by the trial judge on all counts. Szpara’s case was severed before trial because of serious accidental injuries. Palazzo and Viagran each received a five-year term of imprisonment on Count I and special parole periods of five and two years respectively on the remaining counts. Because the search of his luggage by the airport security personnel impermissibly infringed Pal-azzo’s Fourth Amendment rights, we must reverse his conviction. Inasmuch as Viagran lacks standing to assert the constitutional immunities of his co-defendant, he has no basis upon which to invoke application of the Exclusionary Rule; his conviction is therefore affirmed.

Like every search case, this one turns upon its facts. Deputy United States Marshal Mariano Granados had been working the anti-air piracy detail for several years when he observed Palazzo and Szpara as they arrived together by taxi at the San Antonio International Airport at 6:45 a.m. on the morning of August 1, 1972. Their extremely nervous and fidgety appearance as they entered the Eastern Airlines check-in area aroused his suspicion. He continued to observe them and noted that Palazzo approached Szpara, who had seated himself in the far corner of the waiting room. After they exchanged a few words, Szpara took some money from his pocket and handed it to Palazzo. As Palazzo took the money he attempted to hand Szpara a small white bundle (which later proved to be a towel), but it dropped to the floor as he hurriedly departed in the direction of the front terminal. Szpara picked up the bundle and placed it on a small table beside his seat.

■When the boarding call for the plane was given Palazzo was still absent. Szpara waited until all other passengers had left the waiting room, then moved toward the security check area with an obvious appearance of reluctance. As he passed through the gate, he “lit the magnetometer.” In response to Marshal Granados’ request for identification, Szpara produced a New Jersey driver’s license receipt and consented to be searched. After Granados was unable to detect any metal objects during a pat-down search in the men’s room, Szpara was asked to go back through the magnetometer and this time he failed to trigger the metal detector. He was told he could enter the airliner. Noticing that the bundle still lay on the table in the waiting area, Granados brought it to the waiting area, Granados brought it to Szpara’s attention. Szpara denied knowledge of its ownership. When asked about the man who dropped it (Palazzo), Szpara stated that his only acquaintance consisted of a casual request for a small loan to enable this stranger to complete the price of an airline ticket.

Just before the plane was to depart, Palazzo returned to the airline ticket lift desk at this departure point. Upon Granados’ request for identification, he produced a New Jersey driver’s license. When Granados quizzed him about the bundle in the waiting area, Palazzo stated that he had no luggage and volunteered to be searched. This search revealed no dangerous objects. Granados did write down the numbers of two baggage claim stubs for future reference, after Palazzo had attempted to hide them when he was asked to empty his pockets. The Marshal permitted Palazzo to board the flight.

Still suspicious, Granados went to the Eastern Airlines ticket lift desk and discovered that the tickets used by Szpara and Palazzo had been purchased in numerical sequence. Deducing that the tickets must have been purchased contemporaneously rather than separately as represented, the Marshal concluded that a search of their luggage was essential “for the safety of the flight.” After ordering the flight to wait, he went beneath the aircraft and withdrew one of the suitcases that matched a claim number he had recorded during his search of Palazzo. Granados testified that after checking the baggage for wires or other triggering devices, he opened it and immediately ascertained that it contained marijuana. At about 8:45 a.m. Szpara, Palazzo and four suitcases were removed from the aircraft and returned to the terminal.

Szpara claimed two of the four confiscated suitcases. A search made over his objections revealed that they contained no contraband. Palazzo continued to deny that he was traveling with luggage. Granados opened the two bags with tags matching Palazzo’s stubs and found them both to contain marijuana. The defendants’ requests to contact an attorney were refused. They were detained incommunicado by Customs agents, who had advised them of their constitutional rights, before they were transferred to agents from the Bureau of Narcotics and Dangerous Drugs (BNDD) for questioning.

At 10:30 a.m. Palazzo, who had been given Miranda warnings .by Granados and the BNDD agents, agreed to cooperate. He stated that the marijuana had been purchased early that morning from an individual named “Rudy” (the defendant Viagran), whose phone number was found on a slip of paper in Palazzo’s wallet. After several unsuccessful attempts, Palazzo completed an implicating telephone call to Viagran, which was tape recorded by the agents. •

The defendants urge this court to reverse their convictions on grounds that the district court erred in admitting the marijuana — because it was the product of a search and seizure that violated their Fourth Amendment rights — and the incriminating statements uttered by Palazzo and Szpara — because they followed denial of their requests for assistance of counsel and the delay of their appearance before a Magistrate, contrary to Fed.R.Crim.P. 5(a). Our judgment that the under-plane luggage search by Marshal Granados went beyond constitutionally permissible air piracy search limits makes it unnecessary to reach the second contention as to the defendant Palazzo.

This court was first faced with the constitutional propriety of an airport search in United States v. Moreno, 475 F.2d 44 (5th Cir. 1973). Consistent with our Fourth Amendment duty “to strike a cautious balance between the competing interests of law enforcement [in conducting warrantless searches] and the right of the individual to be left alone,” 475 F.2d at 49-50, we looked to principles enunciated by the Supreme Court in constitutionally analogous circumstances. The rationales underlying the seminal decisions in Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1963), and Adams v. Williams, 407 U.S. 143, 92 S.Ct. 1921, 32 L.Ed.2d 612 (1972), led us to recognize that “[d]ue to the gravity of the air piracy problem the airport, like the border crossing, is a critical zone in which special Fourth Amendment considerations' apply.” 475 F.2d at 51 (footnote omitted). We held there that a warrantless search of the defendant, a ticketed passenger who exhibited signs of suspicious activity in the airport lounge and en route to the boarding gate, was constitutionally permissible under a less demanding standard than ordinary probable cause. Similarly, in United States v. Legato, 480 F.2d 408 (5th Cir. 1973), two anonymous bomb threat tips that were corroborated on the scene by the questionable conduct of two suspects were held to supply “reasonable grounds” that constitutionally justified an “intermediate police response” by security personnel.

United States v. Skipwith, 482 F.2d 1272 (5th Cir. 1973), upheld an airport search at the boarding gate in a different factual setting. Skipwith had presented himself for boarding, met the F.A.A. anti-skyjack profile, appeared nervous and under the influence of alcohol or some other drug, first stated that he had no identification and then confessed to traveling under a false name, and displayed a bulge in his trouser pocket that proved upon search to be a packet of cocaine rather than the suspected weapon. We held “that those who actually present themselves for boarding on an air carrier, like those seeking entrance into the country, are subject to a search based on mere or unsupported suspicion.” 482 F.2d at 1276. When viewed in this light, Marshal Granados’ actions in detaining Palazzo and Szpara at the boarding gate on the basis of suspicious actions and in conducting personal searches to which they both consented, were clearly consistent with the constitutional precepts laid down in the prior decisions of this Circuit.

The search of the baggage deposited in the aircraft presents a far different aspect. The government argues that this search was justified by the overwhelming public interest in éffective protection against the threat posed by air piracy, the objective facts known to and capable of articulation by Granados at the time, and the fact that the luggage in question had not been examined prior to its stowage on the aircraft.

In Moreno, we measured “the constitutionality of the police officer’s conduct by the . . . [Terry] standard: whether the facts available to the officer at the moment of the seizure or the search would justify a man of reasonable caution in the belief that the action taken was appropriate. 392 U.S. 1, at 22, 88 S.Ct. 1880, 20 L.Ed.2d 889, at 906.” 475 F.2d at 47. We further stated that “reasonableness is the ultimate standard by which we must be guided in determining the constitutional propriety of the airport search which resulted in [defendant’s] arrest and conviction .... Camara v. Municipal Court, 387 U.S. 523, 539, 87 S.Ct. 1727, 1736, 18 L.Ed.2d 930, 941 (1966).” 475 F.2d at 50. The broader boarding gate search of the suspect approved in Skipwith was one “with sufficient scope to reveal any object or instrumentality that [the suspected skyjacker] could reasonably have used to effect an act of air piracy.” 482 F.2d at 1277.

A closer ease on its facts is United States v. Cyzewski, 484 F.2d 509 (5th Cir. 1973), which involved the reasonableness of the retrieval and warrantless search of checked baggage. There we held that “[a]irport security measures are reasonable, therefore, insofar as they permit government agents to determine whether a suspect presents an immediate danger to air commerce. The search may continue until the law enforcement official satisfies himself that no harm would come from the passengers boarding the plane. . . . Only when it becomes unreasonable for the suspect’s innocence to be further questioned does the security search itself become unreasonable.” 484 F.2d 509 at 513. Cyzewski and his traveling companion, Herbert, were originally pointed out to the marshals as “selectees,” persons who conformed to the F.A.A. skyjacker’s profile. We sustained the search because “at no point in the authorized security procedure did defendants’ innocence become clear to the marshals. To the contrary, Herbert and Cy-zewski suspended themselves in a quagmire of suspicion.” 484 F.2d at 514. They were initially unable or unwilling to furnish identification and their luggage was removed from the aircraft only after they represented that confirming identification papers lay inside. Subsequently, they voluntarily furnished identification demonstrating that their traveling names were false, admitted fabricating both their identities and nonpossession of identification, and refused to permit inspection of the now-retrieved bags, which had been found to trigger the magnetometer. The luggage was seized and searched only after Herbert had opened it enough to reach inside and possibly grasp a suspected weapon. .

In an attempt to construct a web of incriminating circumstances in the cause sub judice comparable to Cyzewski, the government points out that Granados had more than sufficient reason on the basis of personal observation to disbelieve Palazzo’s representations at the boarding gate. His denial of any acquaintance with Szpara was belied by the fact that Granados had seen them together on at least three occasions, that both men were traveling to New York on the same flight, and that both had presented New Jersey driver’s licenses for identification. Moreover, Palazzo had nervously disavowed any knowledge or ownership of the unidentified bundle and continued to state that he had no luggage after his attempt to hide the baggage claim stubs was exposed during the consensual search of his person. Finally, the “loan-to-a-stranger-for-a-ticket” story was repudiated by the Marshal’s reconnoiter of both suspects at the ticket counter when they first arrived at the airport and his discovery that their tickets had been issued in numerical sequence.

The search we sanctioned in Cyzewski was undertaken “[o]nly after every line of inquiry had failed to eliminate the probability of danger . . . .” 484 F.2d at 515. Whatever degree of suspicion these facts and circumstances would reasonably suggest to an experienced law enforcement officer who viewed them from Granados’ perspective, we are convinced that after personal searches failed to uncover any objects, instrumentalities or paraphernalia that could be employed to perpetrate the piracy of an aircraft, no anti-skyjacking necessity remained that would authorize the search of the baggage which had been checked at a remote point and was no longer in the possession or under the control of the suspects. Palazzo and Szpara (1) were never subjects of any pre-flight informant’s tip, (2) did not conform to the F.A.A. profile, (3) furnished satisfactory and correct identification that corresponded to the names under which they were traveling, (4) were subjected to a thorough personal search and (5) failed to “light the magnetometer” immediately before they were finally permitted to board the airliner. At this stage of the approved behavioral profile-magnetometer-interrogation-frisk procedure, the cáreful and thorough actions of Granados had foreclosed any reasonable probability of danger attendant to permitting Palazzo and Szpara to depart with the aircraft.

Consequently, the removal and subsequent search of defendant’s stowed luggage cannot be appraised under airport search standards. Rather, its authentication as an exception to the requirement of a warrant must be founded in probable cause and exigent circumstances. This latter ingredient is wholly lacking. These personal effects had been consigned to the aircraft company for transportation. If Granados thought he could demonstrate probable cause for their search, he should have impounded the baggage and presented his facts to a Magistrate. Of course, the fruits of the illegal search can neither furnish probable cause for arrest and further search, nor be admitted in evidence against Palazzo to establish criminal conduct.

Viagran’s contention that the physical evidence, Palazzo’s incriminating statements and the recorded telephone conversation were inadmissible to prove his guilt, however, rests on different ground. “The established principle is that suppression of the product of a Fourth Amendment violation can be successfully urged only by those whose rights were violated by the search itself, not by those . . . who are aggrieved solely by the introduction of damaging evidence'. Co-conspirators and co-defendants have been accorded no special standing.” Alderman v. United States, 394 U.S. 165, 171-172, 89 S.Ct. 961, 965, 22 L.Ed.2d 176 (1969). See Simmons v. United States, 390 U.S. 377, 389-390, 88 S.Ct. 967, 974, 19 L.Ed.2d 1247 (1968). Assuming arguendo that Marshal Granados and the Customs and BNDD agents, in addition to conducting an unlawful search and seizure, also unconstitutionally compromised Palazzo’s and Szpara’s Sixth Amendment right to assistance of counsel, their Fifth Amendment privilege against self-incrimination, and furthermore impermis-sibly delayed their appearance before the Magistrate, we are unable to detect any concomitant intrusion upon Via-gran’s constitutional freedoms. It is true that Viagran was convicted for having possessed this same contraband. However, the period of that possession clearly related to a time prior to his sale of the substance to Palazzo and Szpara. From the moment they entered the airport through the completion of the search and seizure of the suitcases, the contents of the suitcases were never actually or constructively possessed by Viagran. He had received payment in full for the baggage and its illicit content earlier that morning. Palazzo and Szpara were his customers, not his agents. Since Viagran never claimed or proved that he had a property interest in or physical possession of the merchandise at the time of Marshal Grana-dos’ actions, and since, the possession with which he was charged related solely to a previous time, he lacks any standing to complain of this search and seizure. Brown v. United States, 411 U.S. 223, 93 S.Ct. 1565, 36 L.Ed.2d 208 (1973); Cf. United States v. Lonabaugh (5th Cir. 1973) [No. 73-2241, December 17, 1973]. Absent any abridgment of his own constitutional rights, Viagran cannot invoke the Exclusionary Rule or contest the propriety of the airport search, or object to any Miranda warning or Rule 5(a) infirmities which might be found in the government’s conduct of its interrogation of Palazzo and Szpara. Finally, we reject outright his claims that the tape recording of his telephone conversation with Palazzo, who clearly consented to the surreptitious electronic surveillance by the BNDD agents, was inadmissible as evidence against him for lack of his consent, United States v. White, 401 U.S. 745, 91 S.Ct. 1122, 28 L.Ed.2d 453 (1971); Lopez v. United States, 373 U. S. 427, 83 S.Ct. 1381, 10 L.Ed.2d 462 (1963); United States v. Fanning, 477 F.2d 45 (5th Cir. 1973); United States v. Napier, 451 F.2d 552 (5th Cir. 1971), and that the agents infringed Viagran’s Miranda rights by delaying his arrest in order to secure recordings of the incriminating conversation. United States v. Hoffa, 385 U.S. 293, 310, 87 S.Ct. 408, 417, 17 L.Ed.2d 374 (1966); Koran v. United States, 469 F.2d 1071 (5th Cir. 1972).

The convictions of Michael Palazzo are

Reversed.

The convictions of Rudolfo Castro Viagran are

Affirmed.

      . Moreno appeared extremely nervous, had a bulge in bis coat pocket, and lied when confronted by the same Marshal Granados about his destination during a previous taxi trip from the San Antonio airport.

      . See United States v. Lonabaugh (5th Cir. 1973) [No. 73-2241, December 17, 1973] ; United States v. Garay, 477 F.2d 1306 (5th Cir. 1973).
      Whether Marshal Granados thought this luggage presented a danger to the flight of this aircraft or was subject to search for some other reason must be evaluated in light of his conduct in opening a suitcase, which had not been subjected to a magnetometer appraisal or anything other than his view and feel, beneath an airliner full of passengers and crew without evacuating the craft or calling in a bomb disposal squad.

      . “It is axiomatic that an incident search may not precede an arrest and serve as part of its justification.” Sibron v. New York, 392 U.S. 40, 63, 88 S.Ct. 1889, 1902, 20 L.Ed.2d 917 (1968). Cf. Gustafson v. Florida, - U.S. -, 94 S.CV. 488, 38 L.Ed.2d 456 (1973).

      . United States v. Mendoza, 473 F.2d 692, 695 (5th Cir. 1972) ; United States v. Solis, 469 F.2d 1113, 1114 n. 1 (5th Cir. 1972), cert. denied, 410 U.S. 932, 93 S.Ct. 1375, 35 L.Ed.2d 594 (1973); see United States v. Wilson, 488 F.2d 400 (5th Cir. 1973). But cf. United States v. Legato, 480 F.2d 408, 410 n.6 (5th Cir. 1973) (dictum).

      . Rogers v. United States, 340 U.S. 367, 371, 71 S.Ct. 438, 441, 95 L.Ed. 344 (1951) ; United States v. Dowdy, 486 F.2d 1042 (5th Cir. 1973) [1973] ; Hall v. United States, 413 F.2d 45, 48 (5th Cir. 1969).


text:
    John J. McDONOUGH et al., Plaintiffs-Appellants, v. CHAMPBURGER CORPORATION et al., Defendants-Appellees.
    No. 73-1719.
    United States Court of Appeals, Fifth Circuit.
    Feb. 1, 1974.

      James J. Sullivan, Jr., Francis J. DiMento, Manuel Z. Sherman, John J. McDonough, Boston, Mass., for plaintiffs-appellants.
    Joe N. Unger, Bernard S. Mandler, Miami Beach, Fla.,, for defendants-appel-lees.
    Before TUTTLE, DYER and MORGAN, Circuit Judges.
   DYER, Circuit Judge:

Minority stockholders of Champburger Corporation, suing in their own behalf and derivatively in behalf of the company, appeal from the district court’s final judgment of involuntary dismissal pursuant to Fed.R.Civ.P. 41(b), based upon a failure of proof at the close of plaintiffs’ evidence of a prima facie case of a violation of the federal securities laws or the applicable state common law by the defendants. We affirm.

Champburger was incorporated in 1968 to engage in the fast food service business. With the sponsorhip of boxing champion Muhammad Ali, the goal was to establish black owned and operated franchises in black areas. Unfavorable publicity, however, concerning the franchising industry at that time, made lenders reluctant to extend financing to new entrants in the fast food industry, and riots in black areas made it extremely difficult to operate existing franchises in the troubled neighborhoods. By June of 1970, the company had incurred losses of approximately $229,000 for the preceding nineteen months.

In December of 1969,, law partners Courshon and Berk were retained to represent Champburger as special counsel. For a short time in January and February of 1970, they served not only as counsel for but directors of the corporation. By May of the same year, however, they had begun to represent a group of dissident stockholders, and Courshon explored the possibility of a reorganization of Champburger which would result in redirecting the company’s assets into an entirely different business. Courshon and a few associates had, in 1968, formed Trans Globe Films, Inc. to engage in the business of leasing motion picture films to television stations. As of 1970, Trans Globe was still a dormant corporation which had no assets other than a few licensing agreements of nominal value. It had no history of operations, and, in fact, had no place of business other than Courshon’s law office. In sum, Trans Globe had an idea, but no funds with which to implement it. By contrast, Champburger’s corporate purpose appeared to be leading the company toward financial disaster,, although the balance sheet of November, 1969, showed assets of several hundred thousand dollars.

At Champburger’s annual stockholders’ meeting on June 12, 1970, it became apparent that the incumbent management was going to be ousted. The meeting was adjourned until June 18, at which time four of the company’s five directors were replaced. The proxies of the dissident stockholders were voted by Berk. Three of the new directors, Spring, Salstein, and Keats, were clients of Courshon and Berk who had been requested by Courshon or another Trans Globe officer to serve on the Champbur-ger board.

On July 23, 1970, the new Board adopted a Plan of Reorganization designed to make the Champburger assets available to Trans Globe. In return for all the outstanding shares of the Trans Globe stockholders, approximately 31% of Champburger’s stock was transferred pursuant to an escrow agreement. The agreement provided that shares of Champburger would gradually be released from escrow and delivered to Trans Globe stockholders under a formula based upon Trans Globe’s ability to generate earnings. While the Champ-burger stock was in escrow, however, the agreement gave Courshon power to vote the shares as the voting trustee. When the escrowed stock was added to that which Courshon personally owned,, he had voting control of 50.7% of the outstanding stock of Champburger.

On August 3, 1970, Champburger mailed a proxy solicitation to the company’s stockholders and recommended approval of the proposed reorganization. Although the Plan was approved by a majority of the stockholders, the company eventually failed.

Two Champburger stockholders, appellants McDonough and Clifford, not only disapproved the reorganization as an ill-advised business proposition, but now urge that it was a scheme to defraud the company and its stockholders. The thrust of their attack is that the Plan was a violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78j(b), and specifically of Rule 10b-5 It is not disputed that the exchange of the Champburger stock for that of Trans Globe was a purchase and sale of securities within the meaning of § 10(b). S.E.C. v. National Securities, Inc., 1969, 393 U.S. 453, 89 S.Ct. 564, 21 L.Ed.2d 668. McDonough’s contention that the reorganization was a fraudulent scheme which violated the express prohibitions of Rule 10b-5(a) and (e) is best summarized by the following excerpt from his brief:

Champburger was duped into parting with 375,000 shares of its stock,, shares which represented voting control over a corporation with assets worth many hundreds of thousands of dollars, for nothing in return, with the possible exception of a wild, ephemeral dream. * * *
Ordinarily, property owners do not part with their valuables without receiving something of equal value in return, unless they are victims of some type of fraud.

This broadside attack is better understood by examining some of the specific allegations that the proxy solicitation violated Rule 10b-5(b) because of untrue statements and omissions of material fact. McDonough’s thesis that the reorganization involved a deceptive course of business is grounded largely on an allegedly clandestine and illegitimate relationship between the officers of Champburger and Trans Globe.

Two of the three purportedly false statements and several of the assertedly material omissions raised in this appeal are directed to the alleged failure of the proxy statement to adequately inform the stockholders of the relationship between Courshon and Berk and the newly elected directors of Champburger. The underlying premise is that if the true relationship were known, the shareholders might not have given their approval to proposed reorganization. Mills v. Electric Auto-Lite Co., 1970, 396 U.S. 375, 384, 90 S.Ct. 616, 24 L.Ed.2d 593; Kohn v. American Metal Climax, Inc., 3 Cir. 1972, 458 F.2d 255, 269; S.E.C. v. Texas Gulf Sulphur Co., 2 Cir. 1968, 401 F.2d 833, 849. The two allegedly false statements stem from a single sentence in the proxy statement: “For a brief period of time during January and February, 1970, Messrs. Courshon and Berk were Directors of the Corporation and the firm of Courshon and Berk represented the Corporation.” At the trial,, McDonough proffered a document which suggested that Courshon was on the Champburger board as late as April of 1970. The evidence also indicated that his law firm had given legal advice to the company in two matters in July or August of 1970. Although we entertain serious doubt that such a showing would be sufficient to demonstrate the untruthfulness of the statements, we are convinced that even if the information is assumed to be false, it is so insignificant, in view of the totality of the transaction as represented by the proxy materials, that there is no reasonable possibility that the judgment of the stockholders might have been affected.

A failure to meet the materiality test is also fatal to each of the alleged omissions suggested by McDonough concerning the relationship between the Champ-burger and Trans Globe principals. It is asserted that the proxy material was incomplete because it did not indicate that Berk represented the dissident stockholders at the meetings of June 12 and June 18. Another charge is that the statement, “Roger Spring, Robert Salstein and Richard Keats are all clients of the Law Firm of Courshon and Berk and these three individuals are members and comprise a majority of the Board of Directors of the Corporation,” was insufficient since it failed to disclose (1) that the three had been asked by Courshon and another Trans Globe official if they would be willing to serve on the board, and (2) that Berk cast the proxies which elected them to office. It is claimed that the management was remiss in failing to report that as early as May of 1970, Courshon had discussed the possible acquisition of Trans Globe by Champburger. Finally, McDonough contends that the proxy material was deficient for not revealing the “conflict of interest” of the directors who commended the Plan to the stockholders.

After having carefully studied the proxy statement, as well as the entire record of the trial in the district court, we are convinced that any reasonable stockholder would be adequately apprised of the close working relationship between the Trans Globe interests and the new management of Champburger. There is no allegation or proof of any financial relationship between the nominees sponsored by Courshon and Trans Globe, and we are unwilling to hold that sponsorship alone is of such significance that it must be disclosed in a proxy statement. We are, therefore, wholly unpersuaded that any of the “omissions” concerning the relationship of the Trans Globe officers to the Champburger directors might have misled the stockholders in violation of Rule 10b-5(b).

Having disposed of the contention that the relationship of the parties who devised and recommended the reorganization was inadequately disclosed, we now must determine whether the Plan was anything other than a good faith, albeit unsuccessful, attempt to save a troubled enterprise. It is true that Champburger gave up control of rapidly diminishing but still substantial assets for little more than a potentially viable business concept. As the district court observed:

There may appear to be something rather unusual about this particular merger when you look at the proxy statement. Trans-Globe is held out as having contract rights of nominal value,, that it has no assets, no history or operations, no income and no earnings. It is hardly a situation where Champburger was beguiled or any of its stockholders were beguiled into voting for a merger with Trans-Globe. We agree that stockholder approval of the Plan resulted not from beguilement, but probably from desperation. Apparently the Champburger stockholders, fully aware of the one-sidedness of a deal requiring them to relinquish the use of their assets to a company with no business record, were willing to assume such an extreme risk to avert imminent financial disaster. Under these circumstances, we cannot say that the other information McDonough claims was wrongfully omitted was material. Certainly the details of the licensing agreements could not have been significant since it is undisputed that the contracts were of but nominal value. Even the absence of the last audited balance sheet was not, in this situation, a material omission. We recognize that the Seventh Circuit in Swanson v. American Consumer Industries, Inc., 7 Cir. 1969, 415 F.2d 1326, held that the absence of a balance sheet was one of several omissions which made a proxy statement materially misleading. In the case sub justice, however, the proxy materials noted that Champburger was operating three restaurants, that a fourth was virtually completed, and that the company had approximately $150,000 in cash in its treasury. Since it was clear that the stockholders were asked to give up control of their corporation’s substantial assets to an enterprise with almost none, the absence of a detailed financial statement was not a material omission. We are firmly of the view that there has been' no showing of a violation of § 10(b) or of Rule 10b-5.

Nothing in the record supports the assertion of a breach of the Champburger directors’ fiduciary duties. Finally', there is not a scintilla of evidence of a civil conspiracy. Because neither the) reorganization nor the proxy solicitation violated any law, we do not reach the question of damages or the propriety of " refusing to permit the suit to be main-.. tained as a class action.

Affirmed.

      . Although Clifford is a party in this litigation, she was added as a plaintiff in either the second or third amended complaint, and .apparently has taken no active part in the lawsuit. On the other hand, McDonough is an attorney who handled the matter pro se until another lawyer entered the case shortly before trial in the district court. To simplify party references, therefore, appellants will hereafter be denominated “Mc-Donough.”

      . 17 C.F.B.. § 240.10b-5 provides:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
      (a) To employ any device, scheme, or artifice to defraud,
      (b) To 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 the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

      . Because the securities were not registered under § 12 of the 1934 Act, 15 U.S.C.A. § 781, the proxy statement is not subject to the more specific regulation of § 14 of the Act, 15 U.S.C.A. § 78n.

      . We dismiss as unmeritorious the contention that the Plan which gave Courshon voting control of the corporation and thereby the power to sell all the company’s assets was the equivalent of a sale requiring stockholder approval. The proxy solicitation statement that the reorganization did not require stockholder approval was, therefore, not false.