author: BRIGHT, Circuit Judge.

text:
    INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW), et al., Plaintiffs-Appellees, v. WHITE MOTOR CORPORATION et al., Defendants-Appellants.
    No. 74-1379.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 11, 1974.
    Decided Nov. 11, 1974.
    Rehearing Denied Nov. 27, 1974.

      Frank C. Heath, Cleveland, Ohio, for defendant-appellant.
    John A. Fillion, International Union, UAW, Detroit, Mich., for plaintiff-appellee.
    Before GIBSON, Chief Judge; BRIGHT and STEPHENSON, Circuit Judges.

      . The Pension Agreement was to continue on a yearly basis thereafter unless terminated by one of the parties on six months notice.

   BRIGHT, Circuit Judge.

White Motor Corporation (Company) appeals from the judgment of the district court enforcing an arbitration award in favor of appellee-United Auto Workers Union (Union). We affirm.

In January 1972, the Company notified the Union that it planned to close two factories manufacturing farm machinery located at Hopkins and Minneapolis, Minnesota. The Company also informed the Union that the Pension Plan for the employees at these two plants would be terminated as of June 30, 1972. The Union, claiming that the Pension Plan could not be terminated until May 1, 1974, the expiration date of the Collective Bargaining Agreement, sought arbitration of the dispute. The Company refused, and on motion of the Union, the federal district court issued an order compelling arbitration. The arbitrator sustained the Union’s position and his award prohibited the Company from terminating the Pension Plan for Union-represented employees before the expiration date of the Collective Bargaining Agreement. White Motor Corp. & UAW, 61 Lab.Arb. 320 (1973) (Seitz, Arbitrator). After the Company announced that it would not comply with the arbitration award, the Union sought enforcement of the award in a suit filed in federal district court pursuant to Section 301 of the Labor-Management Relations Act, as amended, 29 U.S.G. § 185. On cross motions for summary judgment, the district court (Judge Larson) ruled in favor of the Union and ordered enforcement of the award. The Company appeals from that decision.

The Company contends that specific and unequivocal language in an agreement between the parties authorized it to terminate the then existing Pension Plan at any time. The phrase relied on by the Company, as found in the Pension Plan, reads: “The Company shall have the sole right at any time to terminate the entire Plan.” The Company maintains that since the foregoing provision is “clear and unambiguous,” the arbitrator exceeded his authority in extending the Pension Plan beyond June 30, 1972, the termination date selected by the Company.

In ruling for the Union, the arbitrator did not limit his analysis to the explicit terms of the Collective Bargaining Agreement and the Pension Plan but also examined the history of the pension arrangements commencing with the agreements executed in 1950 between the Company and the Union consisting of three separate documents — a Collective Bargaining Agreement, a Pension Agreement, and a Pension Plan. The Pension Agreement recited that the Company would adopt and establish a Pension Plan in the form attached for the benefit of all employees, including both union and nonunion workers. Section 10.02 of that attached Pension Plan recited the crucial language, to which we have referred, ostensibly granting the Company the right to terminate the Pension Plan at will. This right of termination, however, did not become binding on Union employees since the Pension Agreement embodied this stipulation:

The Company waives its right to amend the [Pension] Plan or terminate it as to employees represented by the Union while this [Pension] Agreement is in full force and effect.

The 1950 Collective Bargaining Agreement listed a termination date of September 1, 1952, while the Pension Agreement recited a later expiration date of January 1, 1956. Prior to 1968, the Union and the Company made peri-odie changes in the pension arrangements by formally amending the Pension Agreement through written documents, each entitled “Amendment of Pension Agreement.” These amendments were dated respectively November 16, 1954, February 8, 1957, October 22, 1959, October 1, 1962, and May 10, 1965. Except for the May 10, 1965, amendment, each amendment provided a termination date for the Pension Agreement extending beyond the expiration date of the then existing Collective Bargaining Agreement. For example, the Amendment of Pension Agreement, dated October 1, 1962, extended the 1950 Pension Agreement to January 1, 1966, although the terms of the then existing Collective Bargaining Agreement contained a termination date of May 1, 1965. In 1965, however, the Amendment of Pension Agreement and the Collective Bargaining Agreement provided for essentially the same termination date. Each Amendment of the Pension Agreement included a separate paragraph with essentially the following language:

In all other respects [except as amended] the Pension Agreement entered into between the parties hereto under date of September 7, 1950, and the Pension Plan therein referred to are hereby ratified and confirmed. [Amendment of Pension Agreement dated November 16, 1954.]

Thus, until 1968, the respective rights of the parties regarding termination of the Pension Plan were clear. The Company reserved the right to unilaterally terminate the Pension Plan for nonunion employees at any time. As to Union employees, however, the Company’s right to terminate the Pension Plan was limited to the expiration date specified in the Pension Agreements and its subsequent amendments.

In the Collective Bargaining Agreements for 1968 — 1971 and 1971 — 1974, the format for the pension arrangements was altered. These bargaining agreements each contained this paragraph:

The parties hereto have agreed to a Pension Agreement and Plan, printed under separate cover, which is made a part of this Agreement the same as if set forth at length herein. (Emphasis added).

A signed document entitled “Minneapolis-Moline Pension Plan” was attached to these Bargaining Agreements. This attachment included similar terms and was essentially the same in format as the original 1950 Pension Plan, with, of course, changes in benefits derived from the various amendments made over the intervening years.

The parties in 1968 and 1971, however, did not execute any document similar to the Pension Agreement of 1950, nor any agreement similar to the later documents entitled Amendment to Pension Agreement, in which the Company had expressly agreed to waive its right to unilaterally terminate the Pension Plan at any time as to Union employees. Because of the absence of a waiver provision in the 1968 and 1971 documents, the Company argues that the clause in the Pension Plan providing for termination “at any time” becomes the controlling provision of the agreement regulating termination of the Pension Plan as to all employees. In rejecting this argument, the arbitrator stated:

The record made satisfies me that in the negotiations leading to the 1968 collective agreement and the 1968 Pension Agreement and Plan, neither side made a demand or proposal related to the abandonment of the waiver provisions; and, apparently, it had not been the subject of bargaining or even discussion. The Union brief argues that the absence of the waiver provision was not even noticed. •X* -X- -X-
A long-standing and repeatedly expressed waiver of a right to terminate a Pension Plan as to union-represented employees disappeared from the 1968 and 1971 Pension Agreements under circumstances that nobody can account for or explain. The absence of the provision affects very substantial rights under the Plan.

The arbitrator concluded:

Thus, the 1971 Pension Agreement and Plan which was merged into and absorbed by and is a component of the collective bargaining agreement lives to the end of the term of the collective bargaining agreement. The Plan has no independent termination date nor is there a Pension Agreement with a different termination date. The Pension Agreement and Plan of 1971 draw their termination date from the collective bargaining agreement of which they are parts.
These circumstances leave the Company free to invoke Section 10.02 of the Plan to terminate the Plan at will insofar as members of non-bargaining unions are concerned. The fact that the Plan has been absorbed into the collective bargaining agreement, however, reinforces the point that, insofar as union-represented employees are concerned, the Company’s right to terminate, expressed in Section 10.02 of the Plan, is affected by and is subordinated to the provisions of the collective agreement.
Accordingly, on this question, I conclude that the Company had no power or right unilaterally to terminate the Plan as to union-represented employees on June 30, 1972. (Footnote omitted).

The district court ruled that the arbitrator had not exceeded his authority and ordered the arbitrator’s award enforced. The Company asserts that the arbitrator exceeded his authority in not enforcing the clear terms of a written agreement binding the parties on the issue presented to the arbitrator and that, therefore, the district court committed error in not setting the arbitrator’s award aside.

In resolving this case, we note initially that judicial review of an arbitrator’s decision is limited. The scope of that review is discussed by the Supreme Court in United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960):

The refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under collective bargaining agreements. The federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards. * * * [T]he arbitrators under these collective agreements are indispensable agencies in a continuous collective bargaining process. They sit to settle disputes at the plant level — disputes that require for their solution knowledge of the custom and practices of a particular factory or of a particular industry as reflected in particular agreements.
When an arbitrator is commissioned to interpret and apply the collective bargaining agreement, he is to bring his informed judgment to bear in order to reach a fair solution of a problem. * * * He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator’s words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award. [Id. at 596-597, 80 S.Ct. at 1360-1361 (footnote omitted).]

Thus, our function is limited solely to determining whether the arbitration decision, in the language of the Supreme Court, “draws its essence from the collective bargaining agreement.” 363 U.S. at 597, 80 S.Ct. at 1361.

In interpreting a collective bargaining agreement it is often necessary to go outside the four corners of the contract itself and examine the agreement history to ascertain the intent of the agreement and determine the rights and duties of the parties. The touchstone for the construction and interpretation of labor agreements subject to arbitration is found in the Steelworkers Trilogy, supra. In the second case of the Trilogy, United Steelworkers of America v. Warrior & Gulf Nav. Co., supra, the Supreme Court specifically examined the unique characteristics of the labor contract with which the arbitrator deals:

The collective bargaining agreement states the rights and duties of the parties. It is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen cannot wholly anticipate. * * * The collective agreement covers the whole employment relationship. It calls into being a new common law— the common law of a particular industry or of a particular plant.
“ * * * There are too many people, too many problems, too many unforeseeable contingencies to make the words of the contract the exclusive source of rights and duties. One cannot reduce all the rules governing a community like an industrial plant to fifteen or even fifty pages * *
Gaps may be left to be filled in by reference to the practices of the particular industry and of the various shops covered by the agreement. [363 U.S. at 578-580, 80 S.Ct. at 1351-1352.]

In discussing the labor arbitrator’s source of law, the Court added that he

is not confined to the express provisions of the contract, as the industrial common law — the practices of the industry and the shop — is equally a part of the collective bargaining agreement although not expressed in it. [363 U. S. at 581-582, 80 S.Ct. at 1352.]

In Humble Oil & Refining Co. v. Teamsters Local 866, 447 F.2d 229 (2d Cir. 1971), the Second Circuit, in discussing the authority of the arbitrator to resolve a labor-management issue by relying on agreement history, stated:

To determine whether the Company had violated rights intended by the parties to be preserved by the language of that provision, the [arbitration] Board was required to discover the intent of the parties, and to do this it looked to evidence and not merely the cold and cryptic words on the face of the agreement which shed little light on the issue. We see nothing in the arbitration clause which forbids resort to such rudimentary tools of construction. If the Board were barred from resorting to bargaining history and rights established under similar language in past contracts, the parties to the contract would be remitted to securing arbitration only when there was a violation of a provision so plain and unambiguous as to require no collateral evidence of intent — and we might add hardly requiring arbitration itself. * * * The arbitrators here, * * * confronted with an opaque but “express provision” of the contract governing the rights at issue, sensibly sought clarification in totally relevant evidence beyond the language of the contract. lid. at 232-233.]

Other cases support the view that an arbitrator may examine agreement history in order to resolve a question not expressly covered by a collective bargaining agreement. See Baldwin-Montrose Chem. Co. v. International Rubber & Plastic Wkrs, 383 F.2d 796 (6th Cir. 1967); H. K. Porter v. United Saw, File & Steel Products Wkrs, 333 F.2d 596 (3d Cir. 1964); Independent Petroleum Wkrs v. American Oil Co., 324 F.2d 903 (7th Cir. 1963), aff’d by an equally divided court, 379 U.S. 130, 85 S.Ct. 271, 13 L.Ed.2d 333 (1964); cf. Teamsters Local 688 v. Crown Cork & Seal Co., 488 F.2d 738 (8th Cir. 1973).

We believe the record demonstrates that the Collective Bargaining Agreement executed in 1971 (as well as 1968) , discloses an ambiguity in two respects relating to the Company’s right of termination. First, the Bargaining Agreement specifically refers to an attached “Pension Agreement and Plan.” This phrase could refer to a single document consisting of both a Pension Agreement and a Pension Plan or, as had been the case in prior years, to two documents, a separate Pension Plan and a separate Pension Agreement. As we have already noted, the attached Pension Agreement and Plan was entitled “Minneapolis-Moline Pension Plan” and referred to a document essentially the same in form as the 1950 Pension Plan but with modifications wrought by amendments made over the past two decades. The phrase “Pension Agreement,” as previously used by the parties, designated a document separate from the Pension Plan and contained a termination date and a specific waiver of the Company’s right to terminate the Pension Plan at will as to Union employees. Since neither the contract documents nor contemporaneous history of the 1968 and 1971 Bargaining Agreements offers any explanation for the absence of an attachment to the Bargaining Agreement entitled “Pension Agreement,” an arbitrator could conclude that this omission was inadvertent, permitting him to resort to evidence extrinsic to the written contract documents to determine the full agreement intended by the parties. When an agreement may be expected to speak on a subject but does not, its silence imports ambiguity on that subject. See Humble Oil & Refining Co. v. Teamsters Local 866, 447 F.2d 229 (2d Cir. 1971); Baldwin-Montrose Chem. Co. v. International Rubber & Plastic Wkrs, 383 F.2d 796 (6th Cir. 1967); H. K. Porter v. United Saw, File & Steel Products Wkrs, 333 F.2d 596 (3d Cir. 1964).

In commenting on this omission, the arbitrator observed:

[T]he writer’s experience informs him that it is most difficult to conceive that a Union would knowingly, lightly, or casually acquiesce in the elimination of a Company waiver of a right to terminate a pension plan in which the employees it represents participate without a vigorous struggle or, at least, the attempt to obtain some satisfactory quid pro quo. To accept the Company’s thesis would mean that one week after the signing of the 1971 (or 1968) pension agree-' ment and plan, the Company, at will, could have terminated the Plan, despite the fact that it had agreed in writing to waive the exercise of that right for eighteen years in a series of five documents. The Company’s thesis is incompatible with the institutional behavior of labor organizations in our society and does not take account of the reasonable expectations that the usages of the past have engendered.

The arbitrator properly noted a second aspect of the ambiguity relating to the termination date for the Pension Plan. The bargaining history disclosed that prior to 1968 the parties had always specified a definite termination date of the Pension Plan extending to or beyond the date established for the expiration of the Collective Bargaining Agreement. But in 1968 and 1971, the “Minneapolis-Moline Pension Plan” did not contain any specific termination date. Given this omission, the arbitrator did not exceed his authority in concluding that the May 1, 1974, date for termination of the Collective Bargaining Agreement as the only relevant date specified in the documents executed by the parties served also as the termination date of the Pension Plan as to Union members.

Our review of the record satisfies us that the arbitrator arrived at a decision drawn from the contract documents and from the history of the agreements leading up to the 1971 Collective Bargaining Agreement. We conclude, contrary to the Company’s contentions, that the arbitrator did not exceed his arbitral authority and that his award is valid since it “draws its essence from the collective bargaining agreement.” United Steelworkers of America v. Enterprise Wheel & Car Corp., supra, 363 U.S. at 597, 80 S.Ct. at 1361.

Accordingly, the district court properly enforced the arbitrator’s award.

Affirmed.

      . The United Auto Workers became the bargaining representative for the employees on July 6, 1955. Prior to that date, the employees were represented by Local 1146 of the United Electrical, Radio and Machine Workers of America.

      . The Collective Bargaining Agreement was to continue thereafter for yearly periods unless the parties gave a notice of termination at least 60 days prior to the end of the contract period.

      . The Collective Bargaining Agreement terminated at 12:01 A.M. May 1, 1968, while the Amendment of Pension Agreement terminated April 30,1968.

      . This paragraph was slightly altered in the 1965 Amendment of Pension Agreement:
      In all other respects said Pension Agreement, as amended, and the Pension Plan referred to therein, as amended, are hereby ratified and confirmed.
      Additionally, the 1962-1965 and the 1965-1968 Collective Bargaining Agreements contained general information concerning benefits available under the Pension Plan.

      . See United Steelworkers of America v. American Mfg. Co., 363 U.S. 564, 567-569, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers of America v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582-583, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) (these two cases and United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 563, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960) comprise the Steelworkers Trilogy) ; Western Iowa Pork Co. v. National Bro. Pack & Dairy Wkrs, 366 F.2d 275 (8th Cir. 1966). In Western Iowa Pork, this court stated that “ * * * in making the determination of whether an arbitrator has exceeded his authority the agreement must be broadly construed with all doubts being resolved in favor of his authority.” 366 F.2d at 277.


source: Caselaw Access Project

author: HAMLEY, Circuit Judge:

license: Public Domain

text:
    In the Matter of DIAMOND DOOR COMPANY, a California corporation, Alleged Bankrupt-Appellant, v. LANE-STANTON LUMBER COMPANY, a California corporation, et al., Petitioning Creditors-Appellees.
    No. 73-1590.
    United States Court of Appeals, Ninth Circuit.
    Oct. 21, 1974.

      Lawrence A. Diamant, Robinson & Wolas, Los Angeles, Cal., for alleged bankrupt-appellant.
    Barnard F. Klein, Beverly Hills, Cal., for petitioning creditors-appellees.
    Before HAMLEY and DUNIWAY, Circuit Judges, and NEILL, District Judge.

       The Honorable Marshall A. Neill, United States District Judge for the Eastern District of Washington, sitting by designation.

   OPINION

HAMLEY, Circuit Judge:

This is an appeal from a partial adjudication by the district court under Rule 56(d), F.R.Civ.P., entered in an involuntary bankruptcy proceeding. The alleged bankrupt, Diamond Door Company (Diamond), appeals from a district court order determining that Diamond had committed an act of bankruptcy as defined in section 3(a) of the Bankruptcy Act, 11 U.S.C. § 21(a). We affirm.

On November 24, 1970, Lane-Stanton Lumber Company and other creditors of Diamond filed a petition to have Diamond adjudged an involuntary bankrupt. Petitioners alleged that Diamond, while insolvent and within four months of bankruptcy, committed, on two occasions, the second act of bankruptcy, a preferential transfer. For present purposes we need notice only the alleged act of bankruptcy occurring on July 27, 1970. Petitioners claim that on that date Diamond, while insolvent, executed and delivered to Mercury Hardwood Lumber Company (Mercury), a creditor, a financing statement and security agreement on the physical assets of Diamond to secure a previously-existing unsecured account “with the intent to prefer such creditor over his other creditors.” Diamond denied the allegations of the involuntary petition and demanded a trial by jury in accordance with section 19(a) of the Bankruptcy Act, 11 U.S.C. § 42(a).

The district court thereafter referred the proceeding, pursuant to Rule 53, F. R.Civ.P., to a referee in bankruptcy “as Special Master” for the specific purpose of hearing the evidence and reporting to the court, pursuant to Rule 53(e)(3) his findings upon the issues in respect to the insolvency of, and claimed act of bankruptcy by, Diamond.

In answer to petitioners’ request for admissions, Diamond thereafter admitted that, on July 24, 1970, it had executed a financing statement and security agreement in favor of Mercury by which Diamond granted a security interest in all of Diamond’s property, consisting of goods, chattels, tangible and intangible properties, including parts, machinery, equipment, fixtures, fittings and tools. Diamond further admitted that the security interest was given to secure a promissory note of forty thousand dollars and all other or additional indebtedness due or to become due. Diamond also admitted that, prior to the granting of this security interest, Mercury had held no security for this forty thousand dollar “indebtedness,” except that the company had a right to stop any goods in transit under section 2705 of the California Commercial Code.

After an evidentiary hearing before the Special Master, the latter filed a report covering both the issues of preference and insolvency. With reference to the preference the Special Master found the facts to be as admitted, except that the Special Master did not find that, in addition to the forty thousand dollar promissory note, the security was given to secure, as stated in the security agreement, “all other or additional indebtedness due or to become due.” The Special Master also concluded that:

“The effect of the granting of the security interest was to give Mercury Hardwood Lumber Company a greater percentage of its unsecured indebtedness than other unsecured creditors of Diamond Door Company.”

Finally, the Special Master found that, at the time this preference was given, Diamond was insolvent.

Petitioners thereafter moved in the district court for summary judgment pursuant to Rule 56 on both the preference and the insolvency issues. In making this motion petitioners relied upon the pleadings, records and files, especially the answers to requests for admissions, the report of the Special Master, the statement of reasons and memorandum of points and authorities filed in support of the motion, and the proposed summary judgment and proposed findings of fact and conclusions of law filed with the motion.

Diamond filed points and authorities in opposition to the motion for summary judgment, but without supporting affidavits or other supporting documents. The position asserted by Diamond was exclusively legal in nature, confined primarily to the argument that it was entitled to a jury trial on all issues, and that in such a trial the findings of the Special Master are not conclusive, but merely evidence to be read to the jury.

In its memorandum opinion granting in part, and denying in part, the motion for summary judgment, the district court held, in effect, that as to the issue of preferential transfer there was, assuming insolvency, no genuine issue of material fact, and that Diamond had made a preferential transfer as described in 11 U.S.C. § 96(a).

The district court based this finding upon Diamond’s admissions, described above, and upon the report of the Special Master. As to the issue of insolvency, the district court determined that there was a genuine issue of material fact. The court therefore granted the motion for summary judgment as to the issue of preferential transfer and denied it as to the issue of insolvency. Diamond appeals.

We note at the outset that while the judgment under, review is labeled “partial summary judgment,” it is, in reality, an order under Rule 56(d), where judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary. Under Rule 56(d), where such is the case, the court is to make an order specifying the facts that appear without substantial controversy, and directing such further proceedings in the action as are just. See 6 Moore, Federal Practice § 56.20 [3.-4] at 2759-2760 (2d Ed.). The “partial summary judgment” here under review is, in effect, a Rule 56(d) order, because it determines the issue of preferential transfer on evidence which the court believed to be without substantial controversy, and reserves the insolvency issue for trial.

Rule 56(d) orders are interlocutory, because they do not decide the whole case and therefore are not final decisions. See 28 U.S.C. § 1291; In re Merle’s, Inc., 481 F.2d 1016, 1018 (9th Cir. 1973). But this court nevertheless has jurisdiction because this is a proceeding in bankruptcy, as to which courts of appeal have jurisdiction to review either interlocutory or final decisions. See section 24(a) of the Bankruptcy Act, 11 U.S.C. § 47(a).

On the merits,. Diamond argues that the district court erred in deciding as a matter of law that assuming insolvency, Diamond had made a preferential transfer on July 27, 1970. The error, Diamond urges, is that summary adjudication under Rule 56 contravenes Diamond’s right to a jury trial under section 19(a) of the Bankruptcy Act, 11 U. S.C. § 42(a).

It is established law that the Seventh Amendment right to a trial by jury does not preclude the granting of a summary judgment where there is no genuine issue of material fact. See Sartor v. Arkansas Gas Corp., 321 U.S. 620, 627, 64 S.Ct. 724, 88 L.Ed. 967 (1944); Fidelity & Deposit Co. of Maryland v. United States, 187 U.S. 315, 23 S.Ct. 120, 47 L.Ed. 194 (1902); Lindsey v. Leavy, 149 F.2d 899, 902 (9th Cir. 1945). See also Burnham Chemical Co. v. Borax Consolidated, 170 F.2d 569, 573 (9th Cir. 1948).

Since bankruptcy proceedings are equitable in nature, the right to trial by jury therein derives, not from the Seventh Amendment, but from section 19(a) of the Bankruptcy Act, 11 U.S.C. § 42(a). In re Midtown Contracting Co., 243 F. 56, 63-65 (2d Cir. 1917). .But section 19(a) accords no more absolute right to trial by jury in bankruptcy proceedings than does the Seventh Amendment in other civil proceedings. Thus, if the summary judgment procedure of Rule 56 is applicable in a bankruptcy proceeding, as it is applicable in a Seventh Amendment jury trial, the section 19 right to trial by jury will not stand in the way of a proper application of Rule 56.

Rule 81, F.R.Civ.P., defines, in general, the applicability of the federal rules. Subdivision (a)(1) of Rule 81 provides that the rules “do not apply to proceedings in bankruptcy . . . except in so far as they may be made applicable thereto by rules promulgated by the Supreme Court of the United States.” The Supreme Court’s General Orders and Forms in Bankruptcy are “rules promulgated by the Supreme Court” within the meaning of Rule 81(a)(1). See Benitez v. Anciani, 127 F.2d 121 (1st Cir. 1942). General Orders in Bankruptcy, No. 37, provides, in part:

“In proceedings under the Act the Rules of Civil Procedure for the District Courts of the United States shall, in so far as they are not inconsistent with the Act or with these general orders, be followed as nearly as may be.”

While General Bankruptcy Order No. 37 was in effect, Rule 56 was frequently deemed applicable to bankruptcy cases. See Advisory Committee’s Note to Rule 756, Bankruptcy Rules and Official Bankruptcy Forms, Special Supplementary Pamphlet for use with 11 U.S. C.A. See also Britt v. Damson, 334 F.2d 896, 902 (9th Cir. 1964); Yorke v. Harry’s Department Stores, 343 F.2d 814 (5th Cir. 1965). We therefore hold that the summary judgment procedure of .Rule 56 is applicable in the bankruptcy proceeding before us, notwithstanding the jury demand made under section 19(a) of the Bankruptcy Act, 11 U.S.C. A. § 42(a).

This brings us to Diamond’s contention that where there is a demand for a jury trial, the Special Master’s report may not be utilized as a basis for granting summary judgment. Diamond predicates this argument upon Rule 53(e)(3), F.R.Civ.P., pertaining to Masters. That rule provides that in actions to be tried by a jury the Master shall not be directed to report the evidence to the court. Instead, the rule directs that:

“His findings upon the issues submitted to him are admissible as evidence of the matters found and may be read to the jury, subject to the ruling of the court upon any objections in point of law which may be made to the report.”

We assume, without deciding, that this provision of Rule 53(e)(3), precludes the use of a Special Master’s findings as a basis for a summary judgment in a bankruptcy proceeding in which a jury trial has been demanded.

However, insofar as the issue of preferential transfer is concerned, petitioners’ motion for summary judgment was based not alone upon the Special Master’s report, but also upon other documents, including Diamond’s answer to the requests for admissions. Likewise, the decision of the district court, granting a Rule 56(d) order, insofar as it deals with the preferential transfer issue, is predicated both on the Special Master’s report, and upon Diamond’s answers to the requests for admissions. If those answers to admissions establish, beyond dispute, that Diamond made a preferential transfer on July 24, 1970, then the Rule 56(d) order is supportable without reference to the Special Master’s report.

In order for there to be a preferential transfer under section 60(a) of the Bankruptcy Act, 11 U.S.C. § 96(a), the following elements must be present: (1) a transfer of any of the property of a debtor, (2) for the benefit of a creditor, (3) for or on account of an antecedent debt, (4) made or suffered by such debtor while insolvent, (5) within four months before the filing by or against him of the petition initiating a proceeding under the Act, (6) the effect of which transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class.

The fourth of these elements has been reserved for jury trial. Diamond concedes on appeal that it has admitted that it granted a security interest to a creditor, Mercury, to secure a promissory note and other additional indebtedness due or to become due. This would appear to establish the presence of the first and second elements listed above. While Diamond does not expressly concede the admission, it is apparent that Diamond has admitted the presence of the fifth listed element, that is, that the transfer occurred within four months before the filing of the instant petition.

Diamond contends, however, that it has not admitted the presence of the third and sixth elements listed above. The third element is that the transfer was for or on account of an antecedent debt. Diamond asserts that it is not established that it gave the security interest on account of an antecedent debt, arguing that there is no evidence in the record indicating why it was given. Diamond also argues that it is not unreasonable to assume that the granting of the security interest enabled a continuing future relationship between Diamond and this creditor, whereby Diamond could make future purchases from Mercury.

In its answers to requests for admissions, Diamond admitted that the security interest it gave to Mercury was given to secure a promissory note of forty thousand dollars and all other or additional indebtedness due or to become due. Diamond also admitted that prior to the granting of such security interest, Mercury had held no security for this forty thousand dollar “indebtedness,” except the right to stop any goods in transit under section 2705 of the California Commercial Code.

This admission indicates beyond dispute that at least to the extent of forty thousand dollars, the security interest was given on account of an unsecured antecedent debt. It may be true that the security interest was also given to secure additional indebtedness to be incurred in the future, and that this enabled Diamond to continue a business relationship with Mercury. But this additional purpose to be served by the security interest in no way undermines the fact that, at least to the extent of forty thousand dollars, the security interest was given to secure an unsecured antecedent debt. We accordingly hold that the third element of a preferential transfer was present and beyond factual dispute in this case.

The sixth element which must be present to constitute a preferential transfer, as listed above, is that the effect of the transfer must be to enable the creditor (here Mercury) to obtain a greater percentage of its debt than some other creditor of the same class.

Diamond submits that this element is not beyond dispute in this case because the existence of creditors of the same class as that of Mercury is an issue not yet before the court or a jury. Diamond asserts that there are not now any facts in evidence concerning this issue.

We think Diamond is mistaken. Diamond has admitted that Mercury was an unsecured creditor at the time of the transfer in question. The transfer of a security interest was as to “all of Diamond Door Co.’s property consisting of goods, chattels, tangible and intangible properties including parts, machinery, equipment, fixtures, fittings and tools.” Thus, if there were any other unsecured creditors in addition to Mercury, the effect of the transfer was to enable Mercury to obtain a greater percentage of its debt than the other unsecured creditors.

The pleadings establish that there were other unsecured creditors of Diamond in addition to Mercury. Petitioners alleged, in paragraph eight of their petition, that Diamond is indebted to petitioner Lane-Stanton Lumber Company in the sum of $798.88, “no part of which has been paid and, for payment of which your petitioner holds no security of any kind whatsoever.” Petitioners further alleged, in paragraph nine of their petition, that Diamond is indebted to petitioner Simmons Hardwood Lumber in the sum of $1,757.98, “no part of which has been paid, and for payment of which your petitioner holds no security of any kind whatsoever.” In its answer to this petition, Diamond did not deny paragraphs eight and nine.

We therefore conclude that the sixth element of a preferential transfer, as listed above, was present and beyond factual dispute in this case.

Diamond's final point on appeal brings into question whether it was an abuse of discretion for the district court to refer this matter to the referee as a Special Master, under Rule 53. Diamond does not appear to argue that Rule 53 is not applicable in bankruptcy proceedings, but contends that it should not have been applied under the circumstances of this case. In this connection Diamond calls attention to a part of Rule 53(b), quoted in the margin. Diamond asserts that the issues and facts that were heard by the Special Master were not of the complexity that required expertise. Diamond also calls attention to the fact that the order of preference made in this case was ex parte and without notice or hearing.

Insofar as the preferential transfer issue is concerned this argument is irrelevant because we have decided that issue without reference to the Special Master’s report. But upon the remand of the proceedings there will presumably be a jury trial on the issue of insolvency. At that trial it is likely that the report of the Special Master, bearing upon the question of insolvency, will be read to the jury, unless excluded on some proper ground. See Rule 53(e)(3), F.R.Civ.P. Thus, save for the circumstances noted below, it would be appropriate for us to consider this issue.

The circumstance to which we refer is Diamond’s failure to preserve a district court record which entitles the company to raise this question on appeal. Insofar as we can determine from our reading of the record, Diamond did not move in the district court, or before the Special Master, that the order of reference be vacated. Nor did it, in any other manner, indicate an objection to the reference of the matter to a Special Master, until this appeal.

Except in the case of jurisdictional questions or where particular circumstances indicate that injustices might otherwise result or where public policy requires, this court declines to consider arguments for reversal that were not presented in the district court. See also Maricopa County v. American Pipe and Construction Co., 431 F.2d 1145 (9th Cir. 1970); Westinghouse Electric Corporation v. Weigel, 426 F.2d 1356 (9th Cir. 1970).

The question as to the reference of this case to a Special Master is not jurisdictional, nor do we perceive how such reference worked an injustice or contravened public policy. We therefore decline to consider this question on the merits.

Affirmed.

      . Section 3(a) of the Bankruptcy Act, 11 U. S.C. § 21(a), provides in part:
      “(a) Acts of bankruptcy by a person shall consist of Ms having ... (2) made or suffered a ■ preferential transfer, as defined in subdivision a of section 60 of this Act.”

      . Consistent with this decision the district court entered findings of fact, conclusions of law, and “partial summary judgment” determining that:
      “if Diamond Door Co. was insolvent at the time of its granting the security interest to Mercury Hardwood Lumber Company, that Diamond Door Co. is guilty of an act of bankruptcy at that time and within four months of t'. e filing of the involuntary petition of creditors herein.”

      . The effect of this judgment is to reserve the question of insolvency for a jury trial.

      . Although the parties do not address the issue, we are of the view that the matter before us constitutes “proceedings in bankrujrtcy” as to which interlocutory appeals are permissible under section 24(a) of the Bankruptcy Act, 11 U.S.C. § 47(a), and not “controversies arising in proceedings in bankruptcy,” as to which, under that section, review may be had only of final decisions. See In re National Finance & Mortgage Corp., 96 F.2d 74 (9th Cir. 1938); Morehouse v. Pacific Hardware & Steel Co., 177 F. 337 (9th Cir. 1910); In re Charmar Investment Co., 475 F.2d 560, 563 (6th Cir. 1973); Theard v. Fidelity & Deposit Co. of Maryland, 202 F.2d 880, 881-882 (5th Cir. 1953); 2 Collier, Bankruptcy § 24.12 at 736-738 (14th Ed.).

      . Section 19(a) reads:
      “(a) A person against whom an involuntary petition has been filed shall be entitled to have a trial by jury in respect to the question of his insolvency, except as here in otherwise provided, and of any act of bankruptcy alleged in such petition to have been committed, upon filing a written application therefor at or before the time within which an answer may be filed. If such application is not filed within such time, a trial by jury shall be deemed to have been waived.”

      . The general reasoning behind this holding is that summary judgment is granted as a matter of law where there is no genuine issue of material fact, and, therefore, the province of the jury, fact finding, is not invaded.

      . General Order No. 37 was abrogated effective October 1, 1973, which was long after the Rule 56(d) order was entered herein on June 27, 1972. New Bankruptcy Rules and Official Bankruptcy Forms, prescribed by the Supreme Court, became effective on October 1, 1973. See Special Supplementary Pamphlet for Use with 11 U.S.C.A. Rule 756 of the new rules provides: “Rule 56 of the Federal Rules of Civil Procedure applies in adversary proceedings.” However, the proceeding before us is not an “adversary proceeding,” as that term is defined in new Rule 701, because “adversary proceedings” do not include contested petitions such as we have before us. Nevertheless, through the interaction of new Rules 121 and 914, the summary judgment procedure of Rule 56 may still be applicable to contested proceedings. See 6 Moore, Federal Practice § 56.-06-1 at 2080 (2d Ed.).

      . The part of Rule 53(b) relied upon by Diamond reads:
      “A reference to a master shall be the exception and not the rule. In actions to be tried by a jury, a reference shall be made only when the issues are complicated;

      . E. g., Horner v. Ferron, 362 F.2d 224, 232 (9th Cir. 1966).

      . E. g., Nuelson v. Sorensen, 293 F.2d 454, 462 (9th Cir. 1961).


author: CHRISTENSEN, Senior District Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Quay Douglas WORTH, Defendant-Appellant.
    No. 74-1137.
    United States Court of Appeals, Tenth Circuit.
    Argued Sept. 13, 1974.
    Decided Nov. 11, 1974.
    Certiorari Denied March 3, 1975.
    See 95 S.Ct. 1358.

      Leonard D. Munker, Federal Public Defender, Wichita, Kan., for defendant-appellant.
    Stephen K. Lester, Asst. U. S. Atty., Wichita, Kan. (Robert J. Roth, U. S. Atty., Wichita, Kan., with him on the brief), for plaintiff-appellee.
    Before HOLLOWAY and McWILLIAMS, Circuit Judges, and CHRISTENSEN, Senior District Judge.

       Of the District of Utah, sitting by designation.

   CHRISTENSEN, Senior District Judge.

The appellant Quay Douglas Worth was tried by jury and convicted on a four count indictment charging possession and transfer of a sawed-off shotgun in violation of 26 U.S.C. §§ 5861(d), 5812, and making a false statement to obtain twenty sticks of dynamite, and unlawfully as a felon receiving the dynamite in violation of 18 U.S.C. § 842(a)(2) and 18 U.S.C. § 842(i)(l).

The record before the trial court left little room for dispute about the facts and no basis at all for doubt concerning the appellant’s commission of the prohibited acts under the circumstances charged in the indictment. Whatever significance the case has beyond the lot of the parties is the inquiry it invokes concerning (1) the splitting of prosecutions between federal and state courts based upon the same or related transactions, (2) whether under such circumstances an accused taking the stand in the federal court in support of his entrapment defense retains Fifth Amendment rights limiting inquiry concerning other conduct relevant to his predisposition to commit the offenses charged, (3) whether in any event the federal prosecution someway impinged rights under the Double Jeopardy Clause, and (4) the extent, if any, to which the prosecutor could properly comment before the jury on the seriousness of the charge remaining to be tried before the state court. While some of these problems lurked in United States of America v. James Walter Hawke, Sr., 505 F.2d 817, decided today, we now reach aspects of the entrapment defense which there was no need to consider there.

For essential framework facts we can do no better than quote from the candid statement appearing in appellant’s brief:

“The criminal episode for which the defendant stood trial occurred in the following manner. The defendant, Quay Douglas Worth, on or about July 26, 1973, through negotiations sold to Kent Green a government informant, a sawed-off shotgun in violation of the National Firearms Act. The defendant Worth and Kent Green were acquaintances of long standing having previously served felony sentences together at the Kansas State Penitentiary at Lansing, Kansas. Kent Green, as an informant, was working with a Treasury Agent of the Alcohol, Tobacco and Firearms Division of the Department of Treasury, and an agent of the Kansas Bureau of Investigation . There were further negotiations to purchase dynamite and cocaine on July 31, 1973. [And it was not questioned that both dynamite and cocaine, as well as the firearm, were purchased from appellant as a result of these negotiations.] [T]he cocaine was purchased with funds from the Kansas Bureau of Investigation . . . The cocaine mentioned in the case was the subject of a state charge in the District Court of Sedgwick County, Kansas, State of Kansas vs. Quay Douglas Worth, Case No. 73-CR-3151. ...” [At the time of the federal trial the state case had not been tried.]

Appellant, without flatly standing upon the premise, argues that “if the ruling in the Martinez case requires the defendant to take the stand to assert the entrapment defense” his Fifth Amendment rights were violated in view of the pending state prosecution. This interpretation of Martinez inferentially was rejected in Hawke. We now expressly determine consistently with Martinez that testimony from an accused is not prerequisite to his reliance upon the defense of entrapment.

Of course, in the absence of such testimony the defense of entrapment may not sufficiently appear as to warrant submission of the issue to the jury. And as in the case of any other defense premised significantly upon state of mind, failure of the accused to take the stand may or may not leave other prima facie evidence unconvincing or insufficient to raise a reasonable doubt of guilt. Such practical consequences, contrary to appellant’s contention, cannot be considered to render appearance of the accused as a witness involuntary. The appellant’s testimony in support of his entrapment defense was voluntary as far as this ease was concerned. What his situation might be in another court on another charge does not alter the result here, although we can see no likelihood of impermissible “compulsion” resulting elsewhere from the circumstances of the charges and testimony in the federal court.

Appellant’s next contention relates to his cross-examination after having elected to take the stand in his own defense. On direct examination he had testified that about the time he found the shotgun in question he had “run across a couple or three things.” On cross-examination he stated that he “didn’t really run across anything” but merely heard from some friends that “they (sic) might be some automatic weapons around.” He refused to say who these friends were, despite direction from the court to do so. At a bench conference objection on the ground of immateriality was brushed aside and the trial judge stated that he had directed the witness to answer and “if he still refuses [upon resuming before the jury] we will take that up at a later time.” The appellant in the presence of the jury reaffirmed his unwillingness to answer concerning the source of his information about automatic weapons. To the question of where he obtained the shotgun, he answered : “From a friend” but “I will not implicate him in it either.” Appellant’s objection to inquiry concerning the source of the cocaine was sustained. While the court left no room for doubt that it expected answers to the questions held to be proper, the possibility of any sanction was suggested only out of the presence of the jury (no sanctions were ever applied) and the entire impasse was treated with similar moderation as far as the record discloses.

A defendant who takes the stand and testifies in his own defense cannot claim privilege against cross-examination on matters reasonably related to the subject matter of his direct examination. “ . . . [T]he breadth of his waiver is determined by the scope of relevant cross-examination.” Brown v. United States, 356 U.S. 148, 154, 78 S.Ct. 622, 626, 2 L.Ed.2d 589 (1958). See also Fitzpatrick v. United States, 178 U.S. 304, 20 S.Ct. 944, 44 L.Ed. 1078 (1900). The scope of cross-examination is within the sound discretion of the trial court. We are of the opinion that its evidentiary rulings did not constitute abuse of that discretion. The rulings were non-prejudicial in any event.

We reject the contention that mere involvement at the trial of evidence that cocaine was sold in connection with the sale of the dynamite somehow ran afoul, in view of the state and federal prosecutions, of the Double Jeopardy Clause of the Fifth Amendment or the doctrine of collateral estoppel, or otherwise improperly prejudiced the appellant. Since federal funds were used in the purchase of the firearm and the dynamite, and state funds were used for the purchase of the cocaine, it was not irrational or essentially manipulative for the prosecutions to be separated on that basis.

It would seem that neither the Double Jeopardy Clause of the Fifth Amendment and the Fourteenth Amendment now held to encompass it, Ashe v. Swenson, 397 U.S. 436, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970), nor the doctrine of collateral estoppel would foreclose under the circumstances of the present case prosecution by both sovereigns for a single act violating the laws of each. Bartkus v. Illinois, 359 U.S. 121, 79 S.Ct. 676, 3 L.Ed.2d 684 (1959); Abbate v. United States, 359 U.S. 187, 79 S.Ct. 666, 3 L.Ed.2d 729 (1959); United States v. Smaldone, 485 F.2d 1333, 1343 (10th Cir. 1973). Cf. Ashe, supra, and Waller v. Florida, 397 U.S. 387, 90 S.Ct. 1184, 25 L.Ed.2d 435 (1970). Much less do these doctrines apply when, as here, the sales of the dynamite and the cocaine, although contemporaneous, comprised essentially two acts. Robinson v. United States, 366 F.2d 575 (10th Cir. 1966), cert. denied, 385 U.S. 1009, 87 S.Ct. 717, 17 L.Ed.2d 547 (1967).

There is nothing inconsistent in this view with acceptance of the materiality and relevancy of the cocaine sale to the federal charge for transferring the dynamite. The two transactions were inextricably interwoven. Evidence of the sale of the cocaine was directly relevant to the contemporaneous dynamite sale and, in view of the defense of entrapment, to the predisposition of the appellant to commit each of the offenses charged in the federal indictment. United States v. Hawke, 505 F.2d 817 (10th Cir. 1974), supra; United States v. Gilbert, 447 F.2d 883 (10th Cir. 1971); United States v. Sluder, 457 F.2d 703 (10th Cir. 1972); Robinson v. United States, 366 F.2d 575 (10th Cir. 1966), cert. denied, 385 U.S. 1009, 87 S.Ct. 717, 17 L.Ed.2d 547 (1967), supra.

Finally, appellant complains of prose-cutorial misconduct when counsel for the government stated during oral argument:

“And he transferred a vial of cocaine, a hard narcotic. And I can’t say enough bad about cocaine and I can’t say enough bad about people who would sell it. In that respect I again ask you ‘who weren’t the victims’ because that cocaine that was testified to is now in the police department laboratory.”

Appellant’s counsel failed to lodge timely objection to this language. It has been held repeatedly that where there is no objection to the prosecution’s closing arguments at the time, related contentions will not be considered on appeal in the absence of error prejudicial to the fundamental rights of an accused. See e. g., United States v. Gilbert, 447 F.2d 883, 886 (10th Cir. 1971), supra; McManaman v. United States, 327 F.2d 21, 24 (10th Cir. 1964).

We are not impressed with the government’s argument that the quoted statement'was made in appropriate response to the assertion of appellant’s counsel that Worth had committed only “victimless crimes”. Such a contention, indeed, had been made with reference to the crimes charged in the federal indictment. Concerning those, government counsel had the right to argue, and did so effectively, that the sales of dynamite and the sawed-off shotgun under the circumstances were not in reality victimless crimes. To go beyond this in berating the defendant specifically for the cocaine sale tended to move the latter charge entirely into the federal tent when there was the right to get in only its nose on the theory of comminglement of circumstances and appellant’s predisposition to commit the federal offenses.

It cannot be thought that the offending remarks constituted plain error affecting appellant’s substantial rights within the meaning of Rule 52 Fed.R.Cr.P. United States v. Gilbert, 447 F.2d 883 (10th Cir. 1971), supra, Cf. Epperson v. United States, 490 F.2d 98 (7th Cir. 1973). What was said hardly could have added force to the effect of the overwhelming evidence properly before the jury on all issues of the case. But we note our disapproval of such comments as we did in Gilbert, where they related more directly to the crime being tried. And by reason of this difference, and in further discouragement of similar excesses in the future, we feel constrained to add that the condemnatory statement under the circumstances constituted a substantial departure from acceptable standards for argument on behalf of the United States.

Affirmed.

      . Martinez v. United States, 373 F.2d 810 (10th Cir. 1967).

      . A reference to tile opinion in Martinez itself, together with tlie fact not therein disclosed but revealed by the record in that case that the defendant did not take the stand, is supportive of this conclusion: “The fact that an accused asserts the affirmative defense of entrapment does not shift the burden of proof to liim. When the defense is raised or asserted, the burden is upon the government to prove beyond a reasonable doubt that entrapment did not occur . . . Without reviewing in this opinion the evidence in this case we believe from a reading of the record the trial court properly submitted the issue of entrapment to the jury.” 373 F.2d at 812.


author: TONE, Circuit Judge.

text:
    Samuel K. GARAFOLA et al., Petitioners-Appellees, v. Charles L. BENSON, Warden, et al., Respondents-Appellants.
    Nos. 74-1787 to 74-1789, 74-1791 and 74-1792.
    United States Court of Appeals, Seventh Circuit.
    Argued Oct. 30, 1974.
    Decided Nov. 18, 1974.
    Rehearing Denied Dec. 5, 1974.
    Stanley B. Miller, U. S. Atty., Richard L. Darst, Asst. U. S. Atty., Indianapolis, Ind., for respondents-appellants.
    Michael B. Nash, Chicago, 111., for petitioners-appellees.
    Before SWYGERT, Chief Judge, and SPRECHER and TONE, Circuit Judges.
   TONE, Circuit Judge.

These appeals involve challenges to the decision-making procedures of the United States Board of Parole in cases in which the sentencing judge, acting under 18 U.S.C. § 4208(a)(2), has specified “that the prisoner may become eligible for parole at such time as the board of parole may determine.”

The federal sentencing statutes contain three provisions concerning parole eligibility of adult offenders. The first is 18 U.S.C. § 4202, which provides for the “straight” sentence, under which the prisoner may be released on parole after serving one-third of his term (or after serving fifteen years of a life sentence or a sentence of over forty-five years). The second and third are 18 U.S.C. § 4208(a)(1) and (2), adopted by Congress in 1958, 72 Stat. 845. Under these provisions the judge sentencing a defendant to a prison term may fix “a minimum term at the expiration of which the prisoner shall become eligible for parole,” which cannot exceed one-third of the sentence (§ 4208(a)(1)), or may provide that the prisoner shall be eligible for parole whenever the Board of Parole so determines (§ 4208(a)(2)). Section 4208(a) thus allows the sentencing judge to permit the Parole Board to parole a prisoner earlier than the one-third of sentence point provided in § 4202.

The question before us is whether the Parole Board is required to give meaningful consideration to parole in a § 4208(a)(2) case before the expiration of one-third of the prisoner’s sentence.

I

All five petitioners were sentenced under 18 U.S.C. § 4208(a)(2), and are serving their sentences at the United States Penitentiary at Terre Haute, Indiana. Petitioners Garafola, DeCesare and Horvath were sentenced for terms of three years, and petitioner Loy was sentenced for a term of two years. In each of these four cases the Parole Board held an initial parole hearing within approximately two or three months of the time the prisoner commenced his sentence, and in each instance the prisoner was denied parole and his case was “set off” or continued to the expiration of his sentence.

Petitioner Bartello was sentenced to a term of six years. He received his initial hearing approximately three months after he began to serve his sentence, and his case was set off for two years, until December, 1974.

Each of the petitioners filed a habeas corpus petition pursuant to 28 U.S.C. § 2241 asserting that the Board’s action was not in compliance with the requirements of 18 U.S.C. § 4208(a)(2). The petitions were assigned to a single district judge and consolidated by him pursuant to Rule 42(a), F.R.Civ.P., for determination of the common questions of law presented. The warden of the penitentiary is named as a respondent in all five petitions, and the Board of Parole and officials of the Board are named as additional respondents in four of the petitions. The United States Attorney, who represents all of the respondents, make no point of the absence of the Parole Board defendants in one of the cases, so we treat that case like the others.

The District Court entered an order to show cause in each case and the respondents filed motions to dismiss for lack of jurisdiction and failure to state a claim upon which relief can be granted.

The District Court appears not to have expressly ruled on the motions to dismiss, but impliedly did so in a memorandum of decision dated August 2, 1974, holding that petitioners’ construction of § 4208(a)(2) was correct. The court reasoned that “if § 4208(a)(2) has any purpose, and the Court must assume that it does, the purpose must be to allow the Board, in its discretion, to grant parole in less than one-third of the sentence in cases where all of the relevant circumstances warrant such action,” a construction which, the court said, makes that provision compatible with § 4202. The court ordered that the writ issue discharging petitioners “unless within thirty days the Board rescinds its previous decisions as to them and substitutes new orders continuing them to dates at or prior to the expiration of one-third of their respective sentences, at which time they will be entitled to in-person parole consideration. In those cases where one-third of the term has already passed, the hearing is ordered to be held within 30 days of this date.”

Shortly before the expiration of the 30-day period allowed by the District Court for the parole hearings, the respondents filed an application for stay pending appeal and a notice of appeal. Petitioners filed responses to the motion, reciting that the Parole Board had conducted parole hearings at Terre Haute during the period of August 19 through August 29, 1974 but had failed and refused to grant petitioners hearings and failed to modify its previous orders. These assertions were not denied by the respondents, and the District Court accepted them as true. On September 24, 1974, the court denied the motion for stay and ordered the warden to release petitioners on parole September 30, 1974 unless the order was stayed by this court.

On respondents’ application, we stayed the District Court’s order of September 24 and ordered an accelerated briefing schedule and an early setting for argument.

II

In 1973 the Board of Parole adopted a table of guidelines for use in deciding the length of time a prisoner should serve before he is released on parole. 38 F.Reg. 31942 (1973), 28 C.F.R. § 2.20 (Rev. July 1, 1974). These guidelines, which set out point ratings for offenses and offender characteristics, represent an effort by the Board to “establish a national paroling policy” and to promote consistency and fairness in its parole decisions “without removing individual case consideration.” 28 C.F.R. § 2.20(a) (Rev. July 1,1974).

The Board continues to base its exercise of discretion in part on considerations outside the guidelines. According to an affidavit of the Board’s Chairman printed as an appendix in Battle v. Norton, 365 F.Supp. 925, 932-933 (D.Conn. 1973):

“The guideline ranges are set for cases with good institutional performance. A hearing panel may render a decision either above or below the guideline range if it is justified by a sufficient explanation. Circumstances in which the Board may consider decisions below the guidelines include exceptionally good institutional performance; . . . and cases in which the Board feels that the clinical risk prognosis is substantially better than indicated by the offender characteristics score.”

Thus, as Judge Jon O. Newman stated in Grasso v. Norton, 371 F.Supp. 171, 173 (D.Conn.1974) (Grasso I), even though prison performance “is not a factor that determines an inmate’s rating on the offender characteristic scale,” it “is not wholly excluded from parole decision making.” On the contrary, the Board’s regulations provide that among the factors the Board may consider in its parole decision-making, in addition to the guidelines, are “changes in motivation and behavior,” “institutional experience,” and “comments by hearing examiners; evaluative comments supporting a decision, including impressions gained from the hearing.” 28 C.F.R. § 2.19(d), (f) and (j) (Rev. July 1, 1974). Thus, according to the Board’s rules, the prisoner’s institutional performance' and achievement as well as the impressions gained and the evaluation made at the hearing are factors in the parole decision-making process of the Board.

Ill

The Board’s procedure when the prisoner has received a “straight” sentence under 18 U.S.C. § 4202 is to hold the initial hearing at the time he becomes eligible for parole, i. e., at the completion of one-third of the term. United States Board of Parole, You and The Parole Board, pp. 1, 3 (1971). If a parole is not granted at that time the Board continues the case to another date for future consideration or “continues to expiration.” In the latter event, no further consideration is given to parole. Id,., at p. 10.

The parole hearing which the prisoner receives at the one-third point of his sentence is conducted before two hearing examiners and normally lasts 15 to 20 minutes. The prisoner is entitled to be present and may be represented by a person of his choice. His case worker at the institution is often also present. Grasso v. Norton, 376 F.Supp. 116, 118 (D.Conn.1974) (Grasso II); see also United States Board of Parole, You and The Parole Board, p. 3; 28 C.F.R. §§ 2.-12, 2.13 (Rev. July 1, 1974). In a substantial number of cases, the prisoner is granted a parole at this initial hearing.

When the prisoner has been sentenced under § 4208(a)(2), the Board’s practice is to hold its initial hearing, at which the prisoner personally appears, “as soon as possible after . . . commitment” (United States Board of Parole, You and The Parole Board, p. 1), which is normally within two to four months after the prisoner begins serving his sentence. Ordinarily serious consideration is not given to parole at this initial hearing. In the great majority of eases the Board continues the case, as it did the five cases before us, either to a date which is beyond the one-third point in the prisoner’s sentence or until expiration of the sentence.

The (a)(2) prisoner serving a relatively short sentence is thus likely to be paroled at a later date than his counterpart who has received a straight sentence under § 4202, or not to be paroled at all. Typically, the § 4202 prisoner would receive his initial hearing at the one-third point in his sentence and have a substantial chance of being paroled at that time. The (a) (2) prisoner would either receive his first meaningful hearing at a time later than the one-third point or, if the decision at the initial hearing was to “continue to expiration,” would receive no consideration for parole whatsoever. The practices of the Board which produce this result were held to be illegal in Grasso I, supra, 371 F.Supp. 171 (D.Conn.1974).

In March 1974 the Chairman of the Board of Parole issued a memorandum to the Board’s staff announcing as follows:

“As a result of litigation in the ‘Grasso’ case, the following procedure was adopted by the Board and will be inserted in the Rules.
‘A prisoner with a maximum sentence of two years or more under Section 4208(a)(2) who is continued to a date past one-third of his maximum sentence at an initial hearing shall upon completion of one-third of his sentence receive a review on the record (including a current institutional progress report) by an examiner panel.’ ” Diaz v. Norton, 376 F.Supp. 112, 116 n. 4 (D.Conn.1974).

This system of file review for (a)(2) prisoners at the one-third point of their sentences was adopted for the Northeast Region in June 1974 and, we were advised on oral argument, for the Midwest Region in October 1974. Although it will not be applied in cases in which initial hearings have already been held, respondents offer to provide file reviews to petitioners in this case.

IV

It is apparent from the terms of the statutes governing the sentencing of adult offenders, § 4202 as well as § 4208, that at least one major purpose of § 4208(a)(2) is to provide the sentencing judge with the option of allowing the Parole Board to release the prisoner on parole at any time before the one-third point if in its judgment events after the date of sentencing warrant early release. When § 4208 was adopted in 1958 no additional authority was required for the paroling of a prisoner after the expiration of one-third of his sentence, for § 4202 already specifically authorized that. What was missing from the statutory scheme before the adoption of § 4208(a)(2) was any grant of authority to the sentencing court or the Board of Parole that would permit release of a prisoner earlier than the one-third point. That provision supplied the omission by permitting the judge either to shorten the mandatory minimum imprisonment period ((a)(1)) or to| eliminate the minimum entirely and per-! mit the Board to parole the prisoner at any time ((a)(2)). The statutory scheme completed by the adoption of § 4208(a) thus gives the judge sentencing an adult offender the three options of (1) a straight sentence, with parole eligibility after service of one-third of the sentence (§ 4202); (2) an indeterminate sentence with minimum and maximum confinement periods specified (§ 4208(a)(1)); and (3) an indeter-mínate sentence with no minimum and only a maximum specified (§ 4208(a) (2)).

A major purpose of any indeterminate sentence provision is to give the Parole Board discretion to determine when a prisoner has reached that point in his rehabilitation process at which he should be released under supervision to begin his readjustment to life in the community. By keeping the minimum low, the prisoner is encouraged “to earn favorable consideration for parole in accord with the public policy embodied in the parole statutes.” National Council on Crime and Delinquency, Guides for Sentencing 21 (1963). An additional purpose of indeterminate sentencing is to provide a mechanism for reducing disparity of sentences given by different judges. Both of these goals have long been stressed by commentators and advocates of modified indeterminate sentencing plans for the federal courts. See e. g., the symposium on the indeterminate sentence in Federal Probation, January 1941, pp. 1-27; “Report to the Judicial Conference of the Committee on Punishment for Crime,” Federal Probation, July 1942, p. 40; and P. McCormick, “A Judge Discusses the Proposed Federal Corrections Act,” Federal Probation, January 1944, p. 3. That both of these purposes were brought to the attention of Congress and played a role in the passage of (a) (2) in particular is demonstrated by the legislative history of the statute. In addition, Congress intended to expand the executive department’s role in determining length of imprisonment. See 104 Cong. Rec. 13391-13401 (1958); S.Rep. No. 2013, Conf.Rep. No. 2579 and letter from Lawrence E. Walsh, Deputy Attorney General, July 25, 1958, 85th Cong. 2d Sess. (1958), 2 U.S.Code Cong. & Admin. News pp. 3891-3896 (1958). As for disparity, however, Congress must have recognized that (a) (2) would have only .a modest impact, since its use is optional with the judge and judges who tend to give severe sentences are not the ones most likely to make frequent use of (a)(2) or even (a)(1).

The judge who sentences a prisoner under § 4208(a) (2) ordinarily contemplates that, at an appropriate time before the one-third point in the sentence, the Parole Board will exercise a meaningful judgment upon, i. e., give “serious consideration” to, the question of whether the prisoner should be paroled before the one-third point. In a comprehensive paper on sentencing that among federal district judges is perhaps the most widely used text and guide on the subject, Judge Walter E. Hoffman states that while an (a) (2) sentence “does not per se indicate early parole,” it “supplies flexibility to program the individual in prison and to grant parole based on his adjustment and readiness for release.” W. Hoffman, “Purposes and Philosophy of Sentencing,” Seminars for Newly Appointed United States District Judges, 286, 307 (West Pub. Co. 1971). See also Federal Judicial Center, Desk Book for Sentencing IV-29 — 31 (1962):

“Thus, the 4208(a)(2) procedure empowers the treatment staff to set up goals for the prisoner to achieve, to require that he meet these goals before he can be released, and to release him promptly when his assigned goals have been attained.”

The Desk Book for Sentencing also contains (pp. IV-30 — 31) the following statement by Judge Edward J. Devitt:

“When will he have received the maximum benefits of confinement? We judges don’t know the answer to that crucial question, and bountifully as we may be blessed with wisdom, we are not possessed of the prescience to foretell it.
“By the use of this new statute, we can delegate to the Parole Board the authority to wisely fix the terminus of the sentence on the basis of the prisoner’s progress in rehabilitation and his attitudes toward a return to society.”

Judge Francis L. Van Dusen said at the 1964 Institute on Sentencing in Colorado:

“The majority of Federal Judges prefer giving such discretion to the Parole Board in most cases and, hence, make use of 18 U.S.C. § 4208(a)(2) in their sentences (see 30 F.R.D. 459, paragraph‘2’). The analogy has been used by some judges that a person should not expect a judge at the time of sentence to be able to determine the exact term of confinement, since such person would not expect a doctor to prescribe a definite period of commitment to a hospital the moment after an operation. In both cases, the progress of such person (whether called patient or defendant) should be considered in determining the time of confinement.” “Trends in Sentencing Since 1957 and Areas of Substantial Agreement and Disagreement in Sentencing Principles,” Institute on Sentencing for United States District Judges, 35 F.R.D. 381, 401 (1964).

And as Judge Newman said in Grasso I:

“Sentencing judges using the provisions of § 4208(a)(2) have done so in the expectation that the Board will consider prison performance in deciding whether to grant early parole. Judge Weinfeld recently observed, in deciding to sentence pursuant to § 4208(a)(2), ‘The Parole Board . determines, based on all significant factors, whether the defendant’s response to the institutional program has been such that release on parole’ is warranted. United States v. Zacharias, 365 F.Supp. 256, 257 (S.D.N.Y.1973). In this very case, Judge Fdley, in imposing sentence, explained to petitioner that ‘the sentence in this type of case is in your favor. You are sentenced under Title 18, Section 4208(a)(2), which means that the Board of Parole may determine your eligibility for parole. It depends upon your behavior at Danbury. . . . ’ ” 371 F.Supp. at 174.

And see Seminar and Institute on Disparity of Sentences for Sixth, Seventh and Eighth Judicial Circuits, 30 F.R.D. 401, 459 (1961).

We conclude that § 4208(a)(2) was enacted, and has been interpreted by sentencing judges since its enactment, to give the court sentencing an adult offender the authority to make him eligible for release at any time that in the Board’s judgment is appropriate in light of factors that include his institutional performance and progress. Therefore, that provision, read in the context of the statutory scheme, imposes a duty on the Board to give meaningful consideration to parole prior to the time the Board would do so if the prisoner had been sentenced under § 4202. The Board breaches this duty when, by its own admission, it “ordinarily” fails to give “serious consideration” to an (a) (2) prisoner’s parole application at the initial hearing, and in more than three fourths of the (a)(2) cases either never again considers the application or does not consider it until substantially more than one-third of the sentence has been served.

The Board has breached its statutory duty in the five cases before us. In four of these cases the Board entered orders after the initial hearing continuing the cases until the expiration of the sentences. By this order the Board determined in effect that it would never give “serious consideration” to the petitioners’ parole applications. In the fifth case the Board entered an order after the initial hearing continuing the case until a date well beyond the one-third point in the sentence, thus deciding in effect that it would not give “serious consideration” to this (a)(2) prisoner’s application until well after the time it would have done so if he had been sentenced under § 4202. The situation created by the Board’s orders “is not merely ironical; it is illegal.” Grasso I, 371 F.Supp. at 174. Petitioners are entitled to relief from the effect of these illegal orders.

V

We come now to the question of what kind of relief is appropriate. Respondents have offered to conduct a review on the record in these five cases under § 2.14(b) of the Board’s new regulations. Such a review would not constitute adequate relief. The petitioners have been injured by illegal orders by which the Board not only denied petitioners any meaningful parole consideration but prospectively determined that no meaningful consideration will ever be given in the four cases continued to expiration and that it will not be given in the fifth case until after the prisoner has served substantially more than one-third of his sentence. It is not enough for the Board merely to consider whether to vacate its illegal orders, i. e., to decide whether its previous illegal decisions should be changed. Those orders should be vacated so the Board can write on a clean slate. A hearing of the kind given non-(a) (2) prisoners should then be provided. This means an institutional hearing at which the prisoner may appear in person as provided in § 2.12 of the Board’s rules. Without that, he would lose the opportunity to have the Board consider the factor of “Comments by hearing examiners; evaluative comments supporting a decision, including impressions gained from the hearing,” as provided in § 2.19 (j) of the Board’s rules. 28 C.F.R. § 2.19 (Rev. July 1, 1974).

The orders entered by the District Court will be modified to provide that unless, within fourteen days from the entry of this court’s judgment in the case of petitioner Bartello, and within thirty days in the other cases, the Board (a) vacates its previous orders in these cases, (b) holds a hearing and makes a good faith determination in each case in accordance with §§ 2.12 and 2.13 of its rules, and (c) informs each petitioner of its action and, if parole is denied, the reasons therefor, the petitioners shall be released on parole on the thirty-first day after the entry of this court’s judgment. As modified, the orders of the District Court are affirmed.

Affirmed as modified.

      . Except when the sentence is for a term of 180 days or less, or for life or over 45 years. A prisoner sentenced for 180 days or less is not eligible for parole. One sentenced for life or over 45 years becomes eligible for parole at the end of 15 years.

      . As the Board advises prisoners in its pamphlet, You and The Parole Board (p. 2), “If you received an indeterminate sentence (4208(a)(2) . . .) you should not usually expect to be granted parole at the time of your initial hearing; ordinarily serious consideration is not given until your second personal appearance before the Board, ‘your review hearing.’ ” This appears to have been the Board’s policy from the inception of the administration of § 4208(a)(2). See G. Reed, “Federal Parole and the Indeterminate Sentence,” Federal Probation, December 1959, pp. 12-13.

      . In their brief in this court the respondents challenged the District Court’s assertion that the Board’s, practice was to continue § 4208(a) (2) cases at the initial hearing to a point beyond one-third of the sentence, but in oral argument counsel for respondents conceded that we may take as substantially correct and representative of the Midwest Region the statistics the Board’s Director of Research supplied to the District Court in Grasso II, supra, 376 F.Supp. 116, 118. These statistics show that “at initial parole hearings for (a) (2) prisoners in the Northeast region from October, 1973, to March, 1974, 51% of the prisoners were given a setoff past the one-third point of their sentences and an additional 27% were continued to expiration.” 376 F.Supp. at 118 n. 1. Thus 78% were given setoffs beyond the one-third point in their sentences or continued to expiration. Id., at 120. During the same period only 17 or 18% of the (a) (2) prisoners in that region were released prior to the expiration of one-third of their sentences, id., at 119 n. 2, and that figure included, of course, prisoners who were serving relatively long sentences and whose second, or review, hearings therefore came up before the one-third point and prisoners who had served the amount of time recommended by the guideline table by the time they were released.

      . The decision in Grasso I has been followed by the same court in Diaz v. Norton, 376 F.Supp. 112 (D.Conn.1974) and by another district court in Stroud v. Weger, et al., 380 F.Supp. 897 (M.D.Pa. 1974).
      In the Fifth Circuit, the Grasso approach has been rejected by two district courts. Armes v. Grunska, et al. (M.D.Ala. No. 74-232-N, Sept. 5, 1974); Moody v. United States Board of Parole, et al. (N.D.Ga. No. C74-601 A, April 1, 1974). Both decisions relied on a prior Fifth Circuit decision in banc which had dismissed a prisoner’s petition challenging the cursory review given (a) (2) cases in the initial parole hearing as violative of due process and contrary to the statutory requirements. Scarpa v. United States Board of Parole, et al., 477 F.2d 278 (5th Cir. 1973), vacated and remanded, 414 U.S. 809, 94 S.Ct. 79, 38 L.Ed.2d 44 (1973), ordered dismissed as moot, sub nom. Ridley v. McCall, 496 F.2d 213 (5th Cir. 1974). Although the Scarpa opinion did not explicitly discuss the issue presented in Grasso, in that it merely held that the scope of judicial review of Board of Parole determinations is extremely limited and does not include such matters as the weight of the factors to be considered in the process or the appropriate amount of investigation prior to the decision on parole, the opinion can be interpreted as indicating disapproval of the Grasso approach. Of course, Scat'pa’s subsequent history makes the case of no precedential value. The Fifth Circuit reiterated its general view as to the narrow scope of judicial review and the broad discretion vested in the Board of Parole in Sexton v. Wise, 494 F.2d 1176, 1178 (5th Cir. 1974).

      . Substantially this language now appears in the Board’s rules. 28 C.F.R. § 2.14(b) (Rev. July 1, 1974).

      . Congressman Emanuel Celler, principal author of the bill, stated that § 4208(a) (2) constituted authority for a federal judge to dispense with the statutory minimum for eligibility for parole. 104 Cong.Rec. 13392-3 (1958). Congressman Celler’s view is reiterated elsewhere in the legislative history of this section and accompanying commentaries. See Judicial Conference Report, Committee on the Administration of Criminal Law, 268-9 (1958), ABA Section of Criminal Law Proceedings 91-2 (1958). Respondents point to statements by Congressman Keating in the House debates to the effect that § 4208(a)(2) could be used to preclude the seasoned criminal from being “automatically eligible” for parole after serving one-third of his sentence. 104 Cong.Rec. 13393 (1958). Since the Parole Board had authority under the existing sentencing statute, § 4202, to refuse to parole any prisoner until the expiration of his sentence, it would appear that the latter statement was based on a misapprehension. Because the history, as a whole, firmly establishes that (a) (2) was intended as a step in the direction of increased individualization in the federal sentencing process, sentencing under (a) (2) must be viewed as an exercise of the judiciary’s authority “to except such prisoner from the statutory limitation as to eligibility for parole when in the judgment of the court it might reasonably be expected to facilitate the rehabilitation of the prisoner.” Statement presented before Subcommittee No. 3 of the House Committee on the Judiciary at a Hearing on April 30, 1958, on House Joint Resolution 424-425 and H.R. 8923, 2 U.S. Code Cong. & Admin. News p. 3894 (1958).

      . Cf. ABA Project on Minimum Standards for Criminal Justice, Standards Relating to Sentencing Alternatives and Procedures, 159 (1968) :
      “Parole eligibility in the federal system is automatically set at one-third of the maximum sentence imposed, 18 U.S.C. § 4202 (1951), unless the court takes the initiative to set the minimum at some lower point. 18 U.S.C. § 4208(a) (1964). In the opinion of the Advisory Committee, this is the reverse of what it should be.”

      . In the Board’s words. You and the Parole Board 2.

      . As the court said in Grasso II:

      “When the non-(a) (2) prisoner has his hearing at the one-third point of Ms sentence, the examiners conscientiously decide what parole decision is appropriate. However, when the (a) (2) prisoner gets a file review at the one-third point, after having first received a setoff to a date well beyond the one-third point, the Board is starting with a slightly stacked deck. The decision is not whether and when should he be paroled; it is whether the setoff previously given should be changed. In all processes of decision-making, it is more difficult to undo a decision already made, than to decide the same issue on a clean slate.” 376 F.Supp. at 118.

      . See also Grasso II, 376 F.Supp. at 118, 119.

      . Bartello’s review bearing is presently scheduled for December, 1974. In Ms case, therefore, we are shortening the compliance period and ordering that the mandate issue on the seventh day after the entry of our judgment.