author: McCREE, Circuit Judge.

text:
    Francis J. MARKEY and Hazel L. Markey, Petitioners-Appellees. v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.
    No. 73-1170.
    United States Court of Appeals, Sixth Circuit.
    Argued June 9, 1973.
    Decided Jan. 22, 1974.

      Joseph M. McManus, Tax Div., Dept, of Justice, for respondent; Scott P. Crampton, Asst. Atty. Gen., Meyer Roth-wacks, Elmer J. Kelsey, Attys., Tax Div., Dept, of Justice, Washington, D. C., on brief.
    Francis J. Markey, pro se.
    Before WEICK, EDWARDS and Mc-CREE, Circuit Judges.
   McCREE, Circuit Judge.

This appeal from a judgment of the United States Tax Court requires us to decide whether a subjective or objective test should be applied to ascertain the location of a taxpayer’s home for the purpose of travel and lodging expenses deducted as ordinary and necessary business expenses incurred while away from home. We hold that the subjective test employed by the Tax Court was incorrect and,.therefore, reverse.

The facts of the case are not disputed. From 1931 until his retirement in 1965, taxpayer was an employee of the General Motors Corporation and worked in Dayton, Ohio. During this time, he maintained a residence in Lewisburg, Ohio, a community approximately 20 miles from Dayton. After his retirement, taxpayer continued to live in Lew-isburg where he established a sole proprietorship, Creekview Enterprises, through which he offered his services as a consulting and development engineer and light manufacturer. Creekview Enterprises consists of an office and a machine shop.

In 1966, taxpayer and General Motors entered into an agreement under which taxpayer would use the General Motors Technical Center in Warren, Michigan, to develop patentable automobile safety devices. Profits derived from the patents would be divided equally between taxpayer and General Motors. Pursuant to this agreement, General Motors paid approximately $1,000 per month to taxpayer, filed a Form W-2 on his behalf, and withheld part of his earnings for federal income taxes. In the course of his employment at General Motors, in 1967 and 1968, taxpayer spent five days each week for 50 weeks each year in Warren, Michigan, and commuted to Lewisburg, Ohio each weekend to attend to his other enterprises. Taxpayer did not perform consulting services for anyone but General Motors in 1967 and 1968. Taxpayer continued to work in’ Warren at the General Motors Technical Center at least until 1972.

According to taxpayer, his weekend trips from Warren to Lewisburg were required by his many investments there. These investments included Creekview Enterprises for which he reported no gross receipts for 1967 and 1968, and expenses of $666.40 in 1967 and $384 in 1968, producing a net operating loss each year; two farms for which he reported gross receipts of $1,673.66 in 1967 and $1,710.83 in 1968, and expenses of $2,076.03 and $3,111.54 in 1967 and 1968 respectively, producing a net operating loss each year; and several apartments, houses and business rooms from which he received rental income of $12,706 in 1967 and $13,270 in 1968 and, after deducting expenses for each year, produced a net gain of $2,515 and $3,091 for 1967 and 1968 respectively. In addition, taxpayer was also the secretary of a Lewisburg bank and a member of its finance committee, positions that required his attendance at meetings for which he received small fees.

On his federal income tax returns for each of the tax years 1967 and 1968, taxpayer deducted approximately $5,000 for travel between Warren and Lewis-burg and for meals and lodging while he was in Warren on the theory that because his home was in Lewisburg these expenses were business expenses incurred while he was “away from home” within the meaning of section 162(a)(2) of the Internal Revenue Code of 1954, 26 U.S.C. § 162(a)(2).

When the Internal Revenue Service conducted an audit of taxpayer’s returns for the years 1967 and 1968, it disallowed these deductions because it regarded Warren, Michigan, not Lewis-burg, Ohio, as taxpayer’s home for the purpose of determining whether his traveling expenditures were business expenses incurred while away from home. However, the Commissioner did allow taxpayer to deduct $612 for both 1967 and 1968 under section 212, as expenses relating to the production of income. The expenses allowed were for travel between Warren and Lewisburg twelve times each year, the number of trips that the Commissioner determined were necessary to enable taxpayer to manage his business enterprises in Lewisburg.

Taxpayer appealed the Commissioner’s decision to the United States Tax Court. That court found that “[t]he determining factor ... is that [taxpayer’s] business interests in Lewis-burg were more important to him than those in Warren and required his presence in Lewisburg for some time in each week,” and agreed with taxpayer that “he would not be running the hazard of weekend travel on every weekend for 500 miles for his personal convenience.” (Emphasis added.) Therefore, Lewis-burg, not Warren, was the taxpayer’s home for the purpose of determining whether traveling expenditures were business expenses incurred while away from home.

In this appeal, the Commissioner challenges the subjective test employed by the Tax Court for determining whether taxpayer was “away from home” during his five day trips to Warren each week and argues that the appropriate test for determining whether Warren or Lewisburg was taxpayer’s home is an objective one in which three factors are relevant: (1) the length of time that taxpayer spent in Warren and Lewisburg; (2) the degree of taxpayer’s business activity in each place; and (3) the relative proportion of taxpayer’s income derived from each place. The first factor, the Commissioner emphasizes, has long been considered by the Internal Revenue Service to be the most important. E.g., Rev.Rul. 82, 1963-1 Cum.Bull. 33; Rev.Rul. 67, 1961-1, Cum.Bull. 25. Because we are required to decide a question of law, whether the Tax Court applied the proper test in reaching its conclusion, our inquiry is not limited to an examination of the record to determine whether substantial evidence exists to support the Tax Court’s findings. Cf. Commissioner v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960).

Section 162(a)(2), 26 U.S.C. § 162(a)(2), provides:

Trade or business expenses
(a) In General. — There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including— .
(2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business ....

Section 262 of the Internal Revenue Code of 1954, 26 U.S.C. § 262, provides:

Personal, living, and family expenses
Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses.

In the leading case of Commissioner v. Flowers, 326 U.S. 465, 66 S.Ct. 250, 90 L.Ed. 203, (1946), the United States Supreme Court held that a taxpayer could not establish his home in one city, accept permanent employment in another, and then deduct as business expenses while away from home his traveling expenses incurred going to and from his place of employment. In so holding, the Court explained that, under the circumstances, the expenses incurred were not connected with his employer’s business but instead were personal living expenses because they resulted from taxpayer’s decision to maintain his residence in a place other than that in which his employer’s business was located.

This court in Green v. Commissioner, 298 F.2d 890 (1962), following the rule enunciated by the Supreme Court in Flowers, affirmed a decision of the Tax Court that a self-employed taxpayer who had located his business 40 miles from his abode where he also maintained a small office and who remained in the city where his business was located for 300 days out of the year was not entitled to deduct the cost of his food and lodging there. His “traveling” to that city was not temporary but indefinite and indeterminate and therefore it was his “home” within the meaning of section 162 of the Code.

This court has continued its adherence to the rule that a taxpayer’s home is his principal place of business in subsequent cases in which a taxpayer accepted employment either permanently or for an indefinite length of time away from the place of his usual abode. E.g., Commissioner v. Mooneyhan, 404 F.2d 522 (6th Cir. 1968), cert, denied, 394 U.S. 1001, 89 S.Ct. 1593, 22 L.Ed.2d 778 (1960); Ham v. United States, 408 F.2d 671 (6th Cir. 1969). In Mooneyhan, we held that an American citizen who had accepted employment abroad for an indefinite period of time was not entitled to deduct his living expenses there as traveling expenses incurred while away from home. In so holding, we observed:

By providing this deduction, Congress intended to help the taxpayer whose employment demands that he travel. [Citation omitted]. This taxpayer normally maintains two homes — his business residence and his usual place of abode. If he travels away for short periods of time, Congress recogrized that it is not reasonable to expect him to carry his home with him; as a result, he may deduct his traveling expenses, including those incurred for meals and lodging. On the other hand, if his or his employer’s business requires that he remain at another location for longer periods of time he will, under the scheme of our tax law, be expected to take his home with him. 404 F.2d at 527.

Accordingly, “ . . .if the taxpayer is away [from his usual abode] ‘permanently’, a term that presents no real problem, or ‘indefinitely’, a term that does . . . his tax home shifts to his principal place of employment and he may not deduct his expenses.” Id. at 528.

In Ham v. United States, supra, we affirmed a decision of a district court that a construction worker who spent four years working on a project distant from the place where his family resided, returning only on weekends, was away from home indefinitely. Because he could reasonably be expected to move his family there, he could not deduct as ordinary and necessary business expenses while away from home the cost of his food, lodging and travel at the construction site.

As we observed in Mooneyhan, supra, the objective test that we have adopted was tacitly approved by the Supreme court in Commissioner v. Stidger, 386 U.S. 287, 87 S.Ct. 1065, 18 L.Ed.2d 53 (1967). In that case the Court held that a military officer stationed at his permanent duty post where his family was forbidden to join him could not deduct his living costs there as business expenses while away from home because this post was his home within the meaning of section 162(a)(2) of the Code. However, when the officer was required to take short trips away from his permanent duty post, his traveling expenses were deductible.

We observe that in none of the aforementioned cases did any court adopt a subjective test for determining the location of a taxpayer’s home. Instead, the essential question in each ease was whether it would be reasonable under the circumstances of an indefinite stay away from one’s previous abode and place; of employment to expect the taxpayer to move to the location of his new employment. None of these cases, however, presented squarely the question of determining the propriety of a taxpayer’s deductions for business expenses when the taxpayer had businesses in two places distant from one another.

We do, however, have some guidance from other circuits. In Ney v. United States, 171 F.2d 449 (8th Cir. 1948), cert, denied, 336 U.S. 967, 69 S.Ct. 940, 93 L.Ed. 1119 (1949), a taxpayer accepted employment with the Office of Price Administration in Washington, D. C. from July, 1942 until December, 1945. At the same time, he maintained his residence at Fort Smith, Arkansas, where his family remained during the period in question, and where the taxpayer continued to fulfill his responsibilities as president and general manager of a corporation from which he received remuneration. In upholding the district court’s decision that expenses deducted for travel, food and lodging in Washington, D. C. were personal expenses and not business expenses incurred while away from home, the court explained that “[b]eing away from home within the meaning of the tax statute does not necessarily mean being away from the place of abode without reference to the principal place of duty . . . [because] deductions allowable under this section must be in connection with business.” Id. at 453.

Accordingly, the court held that when taxpayer spent six-sevenths of his time working in one city away from his place of abode the district court was justified in concluding that expenditures for food, travel, and lodging there “were in fact personal living expenses incurred at his principal place of employment.” Id. at 452.

In Doyle v. Commissioner, 354 F.2d 480 (9th Cir. 1966), the court upheld a determination of the Tax Court that taxpayer, a California resident, who accepted temporary employment in Ohio, and who, three months after being on the job, became aware that it would take an indefinite time to complete his assignment was no longer permitted to consider his California residence his “home” for the purpose of determining whether he had incurred business expenses while away from home. This was true even though the taxpayer’s family remained in California where he and his wife owned approximately $50,000 of real estate which his wife managed in his absence. In holding that taxpayer was not entitled to deduct his expenses for meals and lodging in Ohio, the court explained that

[i]t appears to have been the personal choice of taxpayer that his wife should live in California while he remained in Ohio for the twenty-eight month period. [Citations omitted]. There appears to have been no other reason for her failure to accompany him, and the choice may have been made to avoid the necessity of employing another to substitute for the wife in the management of the California properties. Certainly this was an inference which the Tax Court might properly have considered along with taxpayer’s working history and his long existing intent, followed by practice, that his wife should not move with him to all sites of his employment. Id. at 482-483.

Although one court has expressed disagreement with our characterization of a taxpayer’s principal place of business as his “tax home” for the purpose of determining the deductibility of traveling expenses under section 162(a)(2) of the Code, it too has adopted an objective standard. E.g., Six v. United States, 450 F.2d 66 (2d Cir. 1971); Rosenspan v. United States, 438 F.2d 905 (2d Cir.), cert, denied, 404 U.S. 864, 92 S.Ct. 54, 30 L.Ed.2d 108 (1971). In the Six ease, where an actress had rented an apartment in New York away from her permanent abode in Colorado during her performance in a stage play that eventually ran for two years, the Court stated that

[t]he standard is not that applied by the district court (i.e. whether Miss Merman’s principal place of business was in New York or Colorado) but whether she was entitled to continue to treat Colorado as her permanent abode or residence during the period of her performance in ‘Gypsy,’ i.e. whether, under the circumstances, she should be deemed to have moved her home, as that word is generally understood, to New York. . . .
The key inquiry which must be made then is whether, under all the circumstances, Miss Merman’s residence in New York during 1959 may be viewed as temporary in nature or as sufficiently indefinite to expect that a reasonable person in her position would pull up stakes and make her permanent residence in New York. 450 F.2d at 69. (Emphasis added).

Finally, in Wills v. Commissioner, 411 F.2d 537 (9th Cir. 1969), the court upheld a determination of the Tax Court that a professional baseball player whose team home was in Los Angeles was also considered to have his home there even though his abode was in another state. The court relied upon the Supreme Court’s decision in the Flowers case where it was stated “that business trips are to be identified in relation to business demands and the traveler’s business headquarters and that the exigencies of business rather than personal conveniences of the traveler must be the motivating factors.” Id. at 540.

Whatever the precise formula that has been applied by courts to determine whether expenses were incurred for business reasons or for personal considerations, it is clear that the proper test is an objective, not a subjective, one in which the significance a taxpayer ascribes to the location he regards as his abode is not dispositive of the question whether that location is his home within the meaning of section 162 of the Code. We hold, therefore, that when a taxpayer has two places of business or employment at a considerable distance from one another, his designation of one as his abode, if different from the place where he spends more of his time, engages in greater business activity, and derives a greater proportion of his income, is not dispositive of the question which location is his home for the purpose of deducting traveling .expenses. In this case, taxpayer’^ choice of Lewisburg as his abode is not determinative of the question of the location of his home under section 162 of the Internal Revenue Code because taxpayer spent more time in Warren than he did in Lewisburg, and derived the greater amount, by far, of his income from the former than he did from the latter.

Reversed and remanded for further proceedings not inconsistent with this opinion.

      . Section. 212 of the Internal Revenue Code of 1954, 26 U.S.C. § 212, provides in relevant part:
      Expenses for Production of Income.
      In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year —
      (1) for the production or collection of income ; [or]
      (2) for the management, conservation, or maintenance of property held for the production of income ....

      . The Rosenspan decision which prompted the court to reject the “principal place of business” test for the determination of a taxpayer’s home was an unusual case. The taxpayer, a traveling salesman, with no permanent place of abode, sought to deduct his traveling expenses incurred while away from his principal place of business as expenses incurred while away from home. The court correctly observed, however, that the expenses that the taxpayer sought to deduct did not duplicate any incurred at his principal place of business and therefore did not come within section 162(a) (2) which was intended by Congress to alleviate the tax burden of those taxpayers who incur duplicate expenses because of business exigencies. In the case before it, the court found that the taxpayer’s home was wherever he happened to be. The court explained, however, that “when the assignment is ‘indefinite’ or ‘indeterminate,’ the situation is different and, if the taxpayer decides to leave his home where it was, disallowance is appropriate, not because he has acquired a ‘tax home’ in some lodging house or hotel at the work site but because his failure to move his home was for his personal convenience and not compelled by business necessity.” Id. at 912.


source: Caselaw Access Project

author: FRIENDLY, Circuit Judge:

license: Public Domain

text:
    Vicente GALVAN and Marcelino Torres, Plaintiffs-Appellants, v. Louis L. LEVINE, Industrial Commissioner of the State of New York, Defendant-Appellee.
    No. 91, Docket 73-1294.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 5, 1973.
    Decided Dec. 3, 1973.

      Robert P. Roberts, New York City (National Employment Law Project; Marttie L. Thompson, Community Action for Legal Services, Inc., New York City and Oscar G. Chase, of counsel), for plaintiffs-appellants.
    Amy Juviler, New York City (Louis J. Lefkowitz, Atty. Gen. of N. Y., Samuel A. Hirshowitz, First Asst. Atty. Gen., and Brenda Soloff, Asst. Atty. Gen., of counsel), for defendant-appellee.
    Before WATERMAN, FRIENDLY and TIMBERS, Circuit Judges.
   FRIENDLY, Circuit Judge:

This action, under the Civil Rights Act, 42 U.S.C. § 1983, and its jurisdictional implementation, 28 U.S.C. § 1343(3), was initiated over three years ago in the District Court for the Southern District of New York by two Puerto Ricans who for many years had been employed in largely seasonal jobs in New York and who, on at least some occasions, had returned to Puerto Rico when without work here. They brought suit on behalf of themselves and all other persons similarly situated against the Industrial Commissioner of the State of New York, who had denied them and other Puerto Ricans who had returned from New York to Puerto Rico unemployment compensation benefits to which they claimed to be entitled. Although plaintiffs have been generally successful, they attack the court’s denial of their motion for class action designation. In order to afford needed perspective with regard to plaintiffs’ claim and our power to entertain it, a rather extensive history of the litigation is required.

I.

The complaint challeged the constitutionality of New York Labor Law § 591, subd; 2, McKinney’s Consol.Laws, c. 50, denying unemployment benefits to a person “not ready, willing and able to work in his usual employment or in any other for which he is reasonably fitted by training and experience,” as this had been applied by the Industrial Commissioner. The Commissioner had adopted a policy of denying benefits to a claimant who had left the labor market area in which he was last employed and had moved his residence to another labor market area where there were no reasonable opportunities of obtaining work for which he was qualified by training and experience or which the community had to offer. Later the Commissioner had made this more specific by ruling that, save for persons with occupational skills for which there was a particular demand at their destination, removal to an area of “persistent high unemployment” would establish ineligibility as a matter of law. The complaint alleged that this policy had resulted in denial of unemployment compensation benefits to the named plaintiffs and also that the policy “was developed for the purpose of denying benefits to Puerto-Rican Americans who return to Puerto Rico and, in practice, has been exclusively applied to that group of claimants.”

Judge Tyler requested the convening of a three-judge court pursuant to 28 U.S.C. § 2281 and such a court, consisting of Circuit Judge Feinberg, District Judge Pollack and himself, was constituted. Plaintiffs moved, pursuant to F. R.Civ.P. 23(c), “for an order determining that this action is properly maintained as a class action under Rule 23(a) and (b)(2) on behalf of all persons of Puerto Rican origin who have been or may be denied unemployment insurance benefits on the basis of the defendant’s policy and practice alleged in the Complaint.” On April 12, 1971, the court issued its unanimous opinion, written by Judge Tyler, 324 F.Supp. 1016, dealing with this motion and with defendant’s motion to dismiss the complaint. The evidence showed that in 1967 the Commissioner purportedly had quantified his definition of areas of high persistent unemployment to include those where the ratio was 12% or more, rather than the 6% regarded as a norm in the Department of Labor’s Area Trends in Employment and Unemployment. The court found no basic constitutional infirmity in the Commissioner’s policy but was concerned with plaintiffs’ argument, incapable of resolution on the existing record, that, with two isolated exceptions, New York had applied the 12% rule only to persons who had moved to Puerto Rico. Accordingly, it granted the Commissioner’s motion to dismiss the complaint “in all respects save for plaintiffs’ claim of discriminatory application of New York’s policy. . . .”, 324 F.Supp. at 1021, disposition of which claim was reserved for a hearing. With respect to the motion for class action designation, the court said:

There but remains plaintiffs’ motion to declare this a class action. Presently, there seems little to commend this as an appropriate cause for class action treatment. Nevertheless, since the facts on this and other subjects still remain undeveloped, and because no parties will be prejudiced thereby, the class action application is denied without prejudice to renewal after completion of the aforementioned hearing.

Id.

After amendment of the complaint to include a claim under Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d et seq., and additional discovery, both sides moved for summary judgment and ultimately stipulated that the court might decide the case on their cross motions. Nothing was said about the motion for class-action designation. On July 5, 1972, the court again speaking through Judge Tyler rendered a second unanimous opinion, 345 F.Supp. 67. It considered on its own motion whether the narrowed issues remaining for decision were grounded on the unconstitutionality of a state statute or “of an order made by an administrative board or commission acting under State statutes,” see Oklahoma Natural Gas Co. v. Russell, 261 U.S. 290, 292, 43 S.Ct. 353, 354, 67 L.Ed. 659 (1923), as it had assumed, we think correctly, the Commissioner’s “high persistent unemployment” policy as further quantified by the 12% rule to be, see Lathrop v. Donohue, 367 U.S. 820, 824-827, 81 S.Ct. 1826, 6 L.Ed.2d 1191 (1961); Law Students Civil Rights Research Council, Inc. v. Wadmond, 299 F.Supp. 117, 127-128 (S.D.N.Y.1969), aff’d, 401 U.S. 154, 91 S.Ct. 720, 27 L.Ed.2d 749 (1971). Despite the previous granting of defendant’s motion to dismiss “in all respects save for plaintiffs’ claim of discriminatory application,” plaintiffs continued in effect to try to attack the 12% rule partly on its face by urging contentions (1) that the rule intentionally “was promulgated to apply, and does apply, only to Puerto Rico, and not to other areas of twelve percent unemployment,” and (2) that the rule “has a dramatic discriminatory impact upon Puerto Rican claimants.” 345 F.Supp. at 69. Judge Tyler áeknowledged that insofar as these issues remained in the case, the previous assumption that a three-judge court was required continued valid. Id. at 70. While he did not state expressly that these two issues had been eliminated from the controversy by the earlier partial granting of the motion to dismiss, cf. id. at 74 n. 6, it is clear from his opinion taken as a whole that the court viewed plaintiffs’ constitutional claims at this juncture as standing or falling with their claim of discriminatory application. Therefore, the continued necessity for a three-judge court effectively stood or fell with its need for purposes of considering this particular claim.

The court thought the issue of discriminatory application was not within the three-judge statute on the basis of Phillips v. United States, 312 U.S. 246, 61 S.Ct. 480, 85 L.Ed. 800 (1941), to which it could have added Ex parte Bransford, 310 U.S. 354, 361, 60 S.Ct. 947, 84 L.Ed. 1249 (1940), both holding that a three-judge court is not mandated “where the challenge was not to the statute authorizing the officer to act, but to his particular exercise of his statutory powers.” ALI, Study of the Division of Jurisdiction between State and Federal Courts, at 321 (1969). We believe the court was right. While “[t]he distinction is treacherously subtle, and difficulty to rationalize,” id., perhaps indeed impossible to apply in any principled way, courts must do the best they can with it in what we devoutly hope to be the short period during which Congress permits § 2281 to continue to plague all three levels of the federal judicial system. Here the discriminatory application of the 12% rule was at several removes both from the statute and from the Commissioner’s general policy of denying benefits to persons who had moved to a labor market where there was no reasonable opportunity for employment. No legislative or administrative policy could be frustrated by a court’s preventing the application of a reasonable rule in an invidious manner, very likely not even known to the Commissioner himself. This is no less true because the Commissioner may have been aware of the impact the 12% rule proper would have on Puerto Ricans even if impartially applied. See 345 F.Supp. at 73-74. Even more clearly the request for an injunction on the ground that New York was acting in violation of Title VI of the Civil Rights Act of 1964 did not require determination by a court of three judges. Swift & Co. v. Wickham, 382 U.S. 111, 86 S.Ct. 258, 15 L.Ed.2d 194 (1965). Again acting wisely, however, the three judges decided to continue to sit together rather than incur the risk that a possibly erroneous dissolution of the three-judge court or separation of the remaining issue for determination by a single judge might invalidate the decision. See Swift & Co. v. Wickham, 230 F.Supp. 398, 410 (S.D. N.Y.1964), appeal dismissed for want of appellate jurisdiction, supra, 382 U.S. 111, 86 S.Ct. 258, 15 L.Ed.2d 194, aff’d, 364 F.2d 241 (2 Cir. 1966), cert, denied, 385 U.S. 1036 (1967); Law Students Civil Rights Research Council, Inc. v. Wadmond, supra, 299 F.Supp. at 129.

Reaching the merits, the court found that the 12% rule had been applied in an invidious manner. With respect to the 400-odd out-of-state areas of persistent unemployment outside of Puerto Rico and outside the “150 Major Labor Areas” for which Area Trends, supra, provides monthly unemployment rates, the Commissioner’s agents had made no effort to check the unemployment rates “notwithstanding that figures readily available to them have indicated a possibility that the twelve percent rule should be applied to some . . .” 345 F. Supp. at 72. With respect to these areas, the Out-of-State Resident Office had accepted a determination by local examiners that the applicant had a reasonable opportunity for employment. “In contrast, unemployment rates for every hamlet in Puerto Rico [were] checked — whether or not those communities are listed in Area Trends”-, and if the 12% figure was exceeded, an affirmative response by Puerto Rican examiners on the “reasonable opportunity for work” standard was not accepted. Id. The court concluded that the 12% rule as applied violated Title VI of the Civil Rights Act of 1964 and the Fourteenth Amendment, although a nondiscriminatory application of it would not. The parties were directed to settle an order and judgment. Id. at 74.

At this late stage, plaintiffs renewed their motion “for an order determining that this action is properly a class action under Rule 23(a) and (b)(2) on behalf of all persons of Puerto Rican origin from' whom, upon moving from New York to Puerto Rico, New York unemployment insurance benefits have been or may be withheld by defendant on the basis of defendant’s application of his policy regarding movement to the so-called areas of ‘high persistent unemployment’.” They also submitted a proposed judgment which included a mandatory injunction directing the Commissioner to restore to the class the benefits they would have received but for defendant’s application of his policy. The State submitted an affidavit representing that, after the court’s decision, it had abandoned the 12% rule, effective July 5, 1972, and had no intention of reinstating it; that the case of any claimant held ineligible because of the rule after July 5, 1972 had been reopened for determination on the basis of other factors; and that four other categories of claims listed in the margin had also been reexamined, with results favorable to the claimants “in the overwhelming majority of instances.” Another affidavit showed that enlarging the reopenings to include all cases from January 1968 to July 1972 where denials had become final would' require examination of 25,599 claims, with a potential liability of $31,874,628. The parties submitted extensive briefs with respect to the propriety of the monetary relief sought by the plaintiffs and the power of the court to afford it under the Eleventh Amendment.

On November 21, 1972, the court entered its judgment and order. This began with a denial of plaintiffs’ renewed motion for designation as a class action. It proceeded to declare that the defendant’s withholding of unemployment insurance benefits from Puerto Rican Americans traveling to Puerto Rico on the basis of his application of his policy regarding areas of “high persistent unemployment” had violated rights secured to plaintiffs by the equal protection clause of the Fourteenth Amendment and Title VI of the Civil Rights Act of 1964. It enjoined him from using such a criterion or policy unless this was applied in identical fashion to all claimants wherever they might move. No provision was made concerning monetary relief.

Plaintiffs’ appeal, as stated at the outset, is from the denial of their motion for designation as a class action.

II.

This court has had frequent occasion to consider the appealability of orders denying designation as a class action. It has created the principle that such an order is appealable as a final decision under Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), if, but only if, denial of class action designation would ring a “death knell” on the prosecution of the action, see Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2 Cir. 1966), cert, denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967). Clearly there has been no “death knell” here; rather the action has proceeded to a paean of victory, although not so great a one as plaintiffs wish. But the issue in Eisen and other cases like it was the appeala-bility of an order denying class action designation when the order was interlocutory save, arguably, in the artificial Cohen sense. Here the denial was a part of the “final decision” of the district court, 28 U.S.C. § 1291; indeed, as will later appear, while in form plaintiffs are complaining of the denial of their class action motion, in substance their complaint is that the judgment did not include a provision directing monetary relief to all members of the class.

The State says a conclusion that plaintiffs’ real complaint relates to the terms of the injunction leads them from the frying pan into the fire so far as review by this court is concerned. For 28 U.S. C. § 1253 permits any party to appeal to the Supreme Court from “an order granting or denying, after notice and hearing, an interlocutory or permanent injunction in any civil action, suit or proceeding required by any Act of Congress to be heard and determined by a district court of three judges,” and 28 U.S.C. § 1291 withholds from the courts, of appeals jurisdiction to review final decisions of district courts “where a direct review may be had in the Supreme Court.” We have already indicated the answer to this. Although the decision was made by a court of three judges, the. issue of the discriminatory application of the 12% rule was not “required” to be so heard; in such a case appeal lies to the court of appeals. Swift & Co. v. Wickham, supra, 382 U.S. at 129, 86 S.Ct. 258.

III.

While we would have welcomed an explanation by the district court of its reasons for denying the class action motion, we think the case for doing this was clearly sufficient.

When plaintiffs’ motion, after having made reference to the minimum requirements of Rule 23(a), Prerequisites to a Class Action, came to the additional requirements of Rule 23(b), Class Actions Maintainable, it singled out subdivision (b)(2). This authorizes maintenance of a class action when “the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.” But insofar as the relief sought is prohibitory, an action seeking declaratory or injunctive relief against state officials on the ground of unconstitutionality of a statute or administrative practice is the archetype of one where class action designation is largely a formality, at least for the plaintiffs. As we have recently noted in Vulcan Society v. Civil Service Comm’n, 490 F.2d 387, 399 (1973), what is important in such a case for the plaintiffs or, more accurately, for their counsel, is that the judgment run to the benefit not only of the named plaintiffs but of all others similarly situated, see Bailey v. Patterson, 323 F.2d 201, 206-207 (5 Cir. 1963), cert, denied, 376 U.S. 910, 84 S.Ct. 666, 11 L.Ed.2d 609 (1964); cf. United States v. Hall, 472 F.2d 261, 266 (5 Cir. 1972), as the judgment did here. The State has made clear that it understands the judgment to bind it with respect to all claimants; indeed even before entry of the judgment, it withdrew the challenged policy even more fully than the court ultimately directed and stated it did not intend to reinstate the policy.

The practical significance of the denial of class action designation was thus limited to the claim for a mandatory injunction ordering monetary restitution. Even apart from the question of the court’s power to grant relief,, see note 4, supra, the State’s policy arguments against this were impressive. Unemployment benefits are payable for a limited period, generally 104 days over a 52-week span under New York law, New York Labor Law §§ 590, subd. 4, 521; cf. id. § 601, to enable the worker to maintain himself and his family during the period shortly following his loss of employment; payment in 1973 of compensation that should have been paid four or five years earlier would scarcely serve that purpose. Compare Rothstein v. Wyman, supra, 467 F.2d at 234-235.

Beyond this, the practical difficulties of affording monetary restitution to persons outside the four categories recognized by the State, see note 3, supra, were formidable. The class whom plaintiffs sought to represent would not be automatically entitled to all the compensation payments that had been withheld; they would be entitled only to the amount by*which withholdings under the 12% rule exceeded those that would have been made anyway under the more general policies the court found proper. Determination of this, only for those members of the class who had filed claims, let alone those who had not, would have required investigation of over 25,000 claimants, for more than 500,000 weeks, with average benefit checks ranging from $40.10 in 1968 to $56.17 in 1972. The court could well have concluded under such circumstances that equity did not demand, or even justify, reopenings beyond those to which the State had agreed. Since monetary relief thus was properly declined and class action designation was unnecessary for anything else, refusal of this was permissible.

Affirmed.

      . See the devastating criticism in D. Currie, The Three-Judge District Court in Constitutional Litigation, 32 U.Chi.L.Rev. 1, 37-50 (1964).

      . See Burger, Beport on the Federal Judicial Branch — 1973, 59 A.B.A.J. 1125, 1126 (1973) ; and S. 271, 93d Cong., 1st Sess. (1973), already passed by the Senate.

      . These categories were:
      1. The claimant’s right to request a hearing on the initial determination pursuant to Section 620, subd. 1 of the Unemployment Insurance Law had not expired as of July 5, 1972.
      2. The claimant had requested a hearing and the case had not been decided by the Referee prior to July 5, 1972.
      3. The Referee had decided the case prior to July 5, 1972 but the claimant had appealed and the appeal was pending as of July 5, 1972, or prior to July 5, 1972 the claimant’s time to appeal to the Appeal Board had not expired.
      4. The Appeal Board had decided the case prior to July 5, 1972 and the claimant had a pending appeal in the Appellate Division of the New York State Supreme Court or in the New York State Court of Appeals, or prior to July 5, 1972 his time to appeal further had not expired.
      The claims of the named plaintiffs are within this class and they have been paid. Defendant’s argument that this development moots the issue before this court, is, however, devoid of merit. See, e. g., Mindo v. New Jersey Dep’t of Labor & Indus., 443 F.2d 824 (3 Cir. 1971).

      . Defendant relied on the then recent decision written by Judge McGowan for this court in Rothstein v. Wyman, 467 F.2d 226, 236-242 (1972). Plaintiffs responded with the Supreme Court’s later summary affirmance in Sterrett v. Mothers’ and Children’s Rights Organization, 409 U.S. 809, 93 S.Ct. 68, 34 L.Ed.2d 70 (1972). After the district court entered its judgment, the Court denied certiorari in Rothstein, 411 U.S. 921, 93 S.Ct. 1552, 36 L.Ed.2d 315 (1973). The important issues raised by these cases now seem likely to be decided, after full argument, on the review of Jordan v. Weaver, 472 F.2d 985, 989-995 (7 Cir.), cert, granted, 412 U.S. 937, 93 S.Ct. 2776, 37 L.Ed.2d 398 (1973). Plaintiffs contend that even if the Eleventh Amendment holding in Roth-stein was correct, which they deny, it is inapplicable because unemployment benefits are paid out of funds contributed by employers, with all administrative expenses paid by the United States.

      . The Third Circuit has held such an order unappealable even in such a case. Hackett v. General Host Corp., 455 F.2d 618, cert, denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812 (1972). The issue seems likely to be resolved on the review of our third opinion in Eisen v. Carlisle & Jacquelin, 479 F.2d 1005, cert, granted, 414 U.S. 908, 94 S.Ct. 235, 38 L.Ed.2d 146 (1973).

      . The situation would be different if plaintiffs were seeking to appeal the portions of the court’s initial decision which dismissed their broader claims.

      . Plaintiffs suggest that, if the court thought itself precluded from issuing a mandatory injunction, it could have granted declaratory relief, which might stimulate the State into consenting to be sued or lead the Legislature to act affirmatively on behalf of the injured class. It is hard to see what added moral force a declaration in a class action would have as against that already made. Plaintiffs also claim that denial of class action status foreclosed the possibility of an intermediate form of injunctive relief which would overcome the bar created by lapse of time since a worker was last employed by creating a fiction that such a person had worked in covered employment in New York up to approximately the date of the decree. Apart from other considerations, it would have required great prescience on the part of the district court to anticipate the first appearance of this argument in plaintiff’s reply brief here.

      . In an effort to minimize the enormity of the administrative problem, plaintiffs emphasized certain statements in the deposition of Edward J. Bruso, Employment Security Manager of the Out-of-State Resident Office, to the effect that even when a claimant was turned away on the basis of the 12% rule, a complete file was assembled on the subject of his eligibility apart from the rule. It is not clear that Mr. Bruso’s statements would bear the weight plaintiffs now assign to them. Apart from this, plaintiffs conceded at argument that many claimants surely gave up on filing repeatedly after they were turned down on the basis of the 12% policy in their first few weeks of unemployment; on the later unemployment of such claimants, not to speak of eligibles who were discouraged by the 12% rule from filing at all, there are no records revealing availability for work on a case by ease basis.


author: WALLACE, Circuit Judge: PECKHAM, District Judge

text:
    Robert Wallace McKEAND, Petitioner-Appellant, v. Melvin LAIRD, Secretary of Defense, et al., Respondents-Appellees.
    No. 71-2169.
    United States Court of Appeals, Ninth Circuit.
    Oct. 9, 1973.
    Rehearing Denied Jan. 30, 1974.

      Burton Marks (argued), Beverly Hills, Cal., for petitioner-appellant.
    James R. Dooley, Asst. U. S. Atty. (argued), Robert L. Meyer, U. S. Atty., Frederick M. Brosio, Jr., Asst. U. S. Atty., Los Angeles, Cal., for respondents-appellees.
    Before MERRILL and WALLACE, Circuit Judges, and PECKHAM, District Judge.

       Honorable Robert F. Peckham, United, States nia, sitting by designation. District Judge, Northern District of Califor-

   WALLACE, Circuit Judge:

McKeand, an electronics engineer and an admitted homosexual, had been employed by a government contractor and was granted a secret security clearance in 1960. In 1967, his employer requested that MeKeand’s clearance be raised to top secret. Subsequent to an administrative investigation and hearing, primarily involving alleged homosexual activity, the hearing examiner concluded that “it is not clearly consistent with the national interest to grant Applicant [McKeand] security clearance at any level.” MeKeand’s administrative appeal was unsuccessful. The security clearance denial was challenged by McKeand in the district court. Summary judgment was entered against him from which he appeals. We affirm.

By Executive Order, the Secretary of Defense was directed to prescribe regulations which would safeguard classified information in companies such as McKeand’s employer. Access was to be allowed “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Order No. 10865, 25 Fed.Reg. 1583 (1960), as amended, 3 C.F.R. 83, 84 (1973). See Adams v. Laird, 136 U.S.App.D.C. 388, 420 F.2d 230, 238-39 (1969), cert denied, 397 U.S. 1039, 90 S.Ct. 1360, 25 L.Ed.2d 650 (1970); Clifford v. Shoultz, 413 F.2d 868 (9th Cir.), cert, denied, 396 U.S. 962, 90 S.Ct. 426, 24 L.Ed.2d 426 (1969). Here a contrary finding was made, the basis of which is clearly dis-positive of this appeal.

We are aware of the division of opinion as to whether a person can lose his or her security clearance on the sole basis of private homosexual activity. See, e. g., the majority and the dissent in Adams, swpra. But here, the hearing examiner not only found McKeand was a homosexual, but, in addition, made specific findings of fact clearly describing why his homosexuality posed a threat of divulgenee of classified material. The examiner found that “it is apparent from the record of the hearing that he fears disclosure; he is thus a target for coercion or pressure which may be likely to cause action contrary to the national interest.” This constitutes a rational nexus — in addition to the fact of homosexuality — between McKeand’s conduct and the government’s denial of his security clearance.

Judicial review of factual determinations by agencies is limited to whether, considering the record as a whole, there is substantial evidence supporting the findings. Universal Camera Corp. v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L. Ed. 456 (1951). Assuming, without holding, that this test should be applied, the district court correctly found it was met.

The examiner having found and relied on such a rational nexus, and the findings being supported by substantial evidence in the record, it is unnecessary for us to decide whether a finding of homosexuality alone would be sufficient to uphold the denial of a security clearance.

The other issues raised are without merit.

Affirmed.

PECKHAM, District Judge

(dissenting) :

McKeand, an engineer for a major defense contractor, held a “secret” security clearance from 1960 to 1967. At his employer’s request, he applied to the Department of Defense for a “top secret” security clearance in 1967. The Department of Defense, during its investigation of MeKeand’s application, discovered letters which indicated that Mc-Keand was a homosexual. Also, Mc-Keand submitted a written statement which reviewed his infrequent homosexual activity during the last three decades.

The Department of Defense informed McKeand that his security clearance would be revoked. Department of Defense administrative hearings upheld this revocation decision. McKeand’s action in district court ended in summary judgment in favor of the Department of Defense. McKeand now appeals that decision to this court.

This court must decide whether the Department of Defense’s decision to deny McKeand a security clearance at any level is supported by substantial evidence on the record studied in its entirety. The majority, despite its reservations, applies this standard as stated in Universal Camera Corp. v. N.L.R.B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951):

“The substantiality of evidence must take into account whatever in the record fairly detracts from its weight. . . . [A] reviewing court is not barred from setting aside a Board decision when it cannot conscientiously find that the evidence supporting that decision is substantial, when viewed in the light that the record in its entirety furnishes, in-eluding the body of evidence opposed to the Board’s view.” Id. at 488, 71 S.Ct. at 464.

I cannot agree that the Department of Defense’s decision is supported by substantial evidence.

The Department of Defense revoked MeKeand’s security clearance pursuant to 32 C.F.R. §§ 155.4, 155.5 which implement a presidential order concerning security requirements for government contracts. Section 155.4 states that the “policy” that “(a) Access to classified information shall be granted or continued only to those individuals who have been determined eligible based upon a finding that to do so is clearly consistent with the national interest.” Section 155.5 list various “criteria” upon which the Department of Defense could deny an individual a specific security classification. The relevant “criteria” for this case include: “(n) Any behavior, activities, or associations which tend to show that the individual is not reliable or trustworthy.”; and “(p) Any criminal, infamous, dishonest, immoral, or notoriously disgraceful conduct, habitual use of intoxicants to excess, drug addition, or sexual perversion.”; and “(s) Any facts or circumstances which furnish reason to believe that the individual may be subjected to coercion, influence, or pressure which may be likely to cause action contrary to the national interest.”

The Department of Defense, to justify the revocation of the security clearance, must offer proof of a rational connection between MeKeand’s admitted homosexuality, and his ability to safeguard classified information. Gayer v. Laird, 332 F.Supp. 169, 171 (D.D.C.1961) (and cases cited therein). Such proof cannot 'depend solely on the use of convenient labels such as “immoral conduct.” Norton v. Macy, 135 U.S.App.D.C. 214, 417 F.2d 1161 (1969). “A pronouncement of ‘immorality’ tends to discourage careful analysis because it unavoidably connotes a violation of divine, Olympian, or otherwise universal standards of rectitude.” Id. at 1165. Rather, the government must present specific reasons why an individual’s behavior makes him not reliable, not trustworthy, or open to coercion.

The mere fact that an individual admits his own homosexuality does not provide sufficient reason without further evidence to justify withdrawal of a security clearance. Wentworth v. Laird, 348 F.Supp. 1153 (D.D.C.1972). To support a withdrawal, the record must reveal facts showing why and how the homosexual activity renders an individual a security risk. “Generalized assumptions that all homosexuals are security risks certainly cannot outweigh almost eight years of faithful service.” Adams v. Laird, 136 U.S.App.D.C. 388, 420 F.2d 230, 241 (1969) (Wright J., dissenting).

In the present ease, the record gives scant evidence that McKeand posed any threat to national security. The record clearly establishes that since 1960 Mc-Keand has never talked with others concerning secret information within his access; has never been approached by others seeking secret information; and, in fact, has never breached his security classification in any way.

The majority relies heavily on the hearing examiner’s determination that McKeand feared disclosure of his homosexuality. However, the trial court, commenting on this suggestion, states,

“. . . there is some indication in the record that the petitioner feared disclosure to his family, friends, and fellow workers. In the light of his subsequent willingness to challenge the Department’s decision in a public proceeding such as his fear of disclosure does not appear to have been substantial.”

In addition to this finding of insubstan-tiality, the record shows that McKeand no longer lives with either his wife or his children. Of course, any homosexual with a security clearance will fear disclosure — if not to his family and friends, at least to the government — as long as the Department of Defense continues to revoke security clearances on a mere finding of homosexuality. However, the Department of Defense easily can cure the danger to national security allegedly posed by all homosexuals. It can abandon its arbitrary system of revoking security clearances solely on a finding of homosexuality and, thus, end homosexuals’ fears that public exposure will cost them their security classifications.

The record does not present further evidence that McKeand’s homosexuality made him unreliable, untrustworthy and open to coercion. Rather, the record reveals that the examiner’s decision reflected an unfortunate preoccupation with McKeand’s morality. The examiner stated,

“The extent and recency of the Applicant’s criminal and sexually perverted conduct and his obvious involvement in such conduct with dissolute persons reflects acts of reckless and irresponsible nature which indicate such poor judgment and instability and a lack of reliability and trustworthiness as to suggest that he might disclose classified information to unauthorized persons or otherwise assist such persons in activities inimical to the national interest.”

These remarks, of course, conflict with the clear evidence in the record that McKeand did not breach his security clearance during seven years of work. More important, the examiner’s comments are indicative of the type of arbitrary assumptions that not only the examiner but also the trial court judge accepted. The trial court’s findings note that,

“The examiner’s determination, and to some extent, the determination by the Board of Appeal indicate a heavy reliance upon the general assumption that all homosexuals are security risks
“We are not prepared to say that the Board might not reasonably assume that one subject to possible arrest, lurid trial, and perhaps incarcerations is thereby rendered vulnerable to external pressures not consistent with the national interest.” (emphasis not in the original)

Thus, the trial court judge, and this court’s majority, rely on findings colored by the examiner’s and the Board of Appeal’s assumptions. I find such reliance impermissible. The Department of Defense cannot defend its action on the assumption that all homosexuals necessarily are potential security risks. Went-worth v. Laird. See generally the discussion and the cases cited in Note, Security Clearances for Homosexuals, 25 StanL.Rev. 403, 410-415 (1973).

Of course, I recognize that the federal government has a legitimate interest in establishing a system of security classifications which safeguards national interests. However, the due process clause of the Fifth Amendment protects the “right to hold specific private employment and to follow a chosen profession free from unreasonable governmental interference.” Greene v. McElroy, 360 U.S. 474, 492, 79 S.Ct. 1400, 1411, 3 L.Ed.2d 1377 (1959). This right deserves special protection when the government seeks to rest its determination of an individual’s fitness for a job on a sexual categorization. See Mindel v. United States Civil Service Comm., 312 F.Supp. 485 (N.D.Cal.1970). Cf. Griswold v. Connecticut, 381 U.S. 479, 485, 85 S.Ct. 1678, 14 L.Ed.2d 510 (1965). Therefore, I cannot support the government’s action in the present case without, at the very least, the presence of substantial evidence on the record studied in its entirety.

I believe that the revocation by the Department of Defense of McKeand’s se-, curity clearance should be set aside unless and until the Department presents specific facts peculiar to McKeand that show him not reliable, not trustworthy, or open to coercion.

Therefore, I dissent.

      . The government suggests that a lesser test might be applied and refers to 5 U.S.C. § 554(a)(4). See McBride v. Roland, 248 F. Supp. 459, 465 (S.D.N.Y.1965), aff’d 369 F.2d 65 (2d Cir. 1966), vacated on other grounds, 390 U.S. 411, 88 S.Ct. 1111, 19 L.Ed.2d 1271 (1968).

      . The district court held that “[t]he record contains substantial evidence, if such is required, to support the findings of the Appeal Board and the final determination of that Board . . . .” In that record, there is evidence that McKeand feared disclosure of his homosexual activities. For example, the hearing examiner found that, during an interview with Special Agents of the Office of Special Investigations of the United States Air Force, McKeand “stated that rather than have an exposure of his background in conjunction with his security clearance, he planned to terminate his employment .... The OSI agents reported to their Headquarters that they were terminating their investigation because security clearance for the Applicant would no longer be required.” When it was discovered that he did not terminate his employment, the investigation was reinstated.
      The dissent contends that this is insufficient to show McKeand’s fear of disclosure, reasoning that such fear was not significant or he would not have initiated this action. But the question is not his state of mind when he filed his complaint — but at the time the clearance was denied.


author: PER CURIAM.

text:
    Bernard WHITE et al., Appellants, v. CHEMICAL LEAMAN TANK LINES, INC., Appellee.
    No. 73-1862.
    United States Court of Appeals, Fourth Circuit.
    Submitted on briefs Nov. 12, 1973.
    Decided Jan. 21, 1974.
    John L. Ward, Charleston, W. Va., on brief for appellants.
    Cunniff, Bray & McAleese, Plymouth Meeting, Pa., on brief for appellee; Carl F. Stucky, Jr., Charleston, W. Va., of counsel.
    Before RUSSELL, FIELD and WIDENER, Circuit Judges.
   PER CURIAM.

This suit against Chemical Leaman Tank Lines by several of its former employees was dismissed by the district court. The order of dismissal stated the court’s view that the action was barred by the applicable statute of limitations. Seven of the original eight plaintiffs appealed. The appellants subsequently filed a motion to submit the matter for a decision on the briefs, waiving oral argument. Chemical Leaman opposes this motion. We agree with the appellants that the narrow issue of the sufficiency of the unamended complaint as presented by them in this appeal may be decided without oral argument.

This litigation has a lengthy history. It originated over five years ago with an attempt by Chemical Leaman to change the call-in procedure whereby its drivers were notified of the scheduling of their truck delivery runs. At the time this occurred, the employees were covered by a collective bargaining agreement between the Company and Teamsters Local No. 175. The contract contained a no-strike clause with certain exceptions not relevant to this proceeding. On June 11, 1968, an unauthorized work stoppage commenced against Chemical Leaman in protest over the change in the call-in procedure. This wildcat walkout lasted until June 16, 1968. On that date, the Company discharged twenty-two workers, including the appellants.

In accordance with the collective bargaining agreement, the Union filed grievances on behalf of the discharged employees. While four employees were ordered reinstated, the grievance committee determined that the others, including appellants, had been discharged for just cause. In contemporaneous proceedings concerning the substance of the underlying dispute, the grievance committee determined that the company had not violated the contract by changing the call-in procedure.

On September 30, 1968, Tommy Din-gess, one of the appellants, filed charges with the National Labor Relations Board alleging that Chemical Leaman’s change in the call-in procedure and discharge of the twenty-two drivers violated the National Labor Relations Act. The Board found the Company’s actions to be lawful. In a further attempt to obtain redress of alleged wrongdoing, the drivers who are parties to this suit filed a complaint against Chemical Leaman in a federal district court on June 11, 1970. That action was dismissed pursuant to F.R.Civ.P. 8(a).

The suit out of which this appeal directly originated was one commenced in the Common Pleas Court of Kanawha County, West Virginia. It alleged breach of contract of employment. The complaint was filed in the State court on or before January 21, 1972, and the proceedings were removed to the United States District Court upon petition of the Company. After an extension of time, the defendant filed its answer in the district court May 3, 1972. The plaintiffs’ attorney was then relieved, and, after this, the defendant, on February 22, 1973, filed a motion for summary judgment, supported by affidavits. An amended complaint was tendered for filing by the plaintiffs, March 23, 1973, but was never filed. The court, by order, set a hearing on the motion for summary judgment for April 9, 1973, which was reset for April 26, 1973. The affidavits filed by the defendant in support of the motion for summary judgment were never replied to, and, on April 27, 1973, the district court dismissed the complaint “ . . . as barred by the applicable statutes of limitation.”

We affirm the dismissal of the complaint filed in January, 1972 and removed to the district court by petition February 29, 1972, but we do not reach the question of the statute of limitations relied upon by the district judge. Brown v. Allen, 344 U.S. 443, 459, 73 S.Ct. 397, 97 L.Ed. 469 (1953). Neither do we express any opinion as to the merits of any other defense relied upon by the defendant.

While it may be (and we express no opinion on the point) that the decision of the district court was in error in that it necessarily held West Virginia’s two-year statute of limitations to apply to the cause of action as stated in the unamended complaint, cf. Auto Workers, etc. v. Hoosier, etc., 383 U.S. 696, 86 S.Ct. 1107, 16 L.Ed.2d 192 (1966), it is clear that the cause of action there stated is not subject to litigation, having been previously the subject of arbitration. “ . . . [I] t is of course not open to the courts to reweigh the merits of the grievance.” Truck Drivers Union v. Riss & Co., 372 U.S. 517, 519, 83 S.Ct. 789, 791, 9 L.Ed.2d 918 (1963).

The plaintiff having made no issue in this appeal of the amended complaint, the judgment of the district court is

Affirmed.


author: PER CURIAM:

text:
    SEABOARD SURETY COMPANY, Petitioner, v. The Honorable R. Dorsey WATKINS, United States District Judge for the District of Maryland, Respondent.
    No. 73-2012.
    United States Court of Appeals, Fourth Circuit.
    Argued Nov. 6, 1973.
    Decided Nov. 9, 1973.

      Guy W. Shoup, New York City (Wyatt, Gerber & Shoup, New York City, David F. Albright, Semmes, Bowen & Semmes, Baltimore, Md., on brief), for petitioner.
    Edward F. Levy, New York City (Lawrence A. Kaufman, Cable, McDaniel, Bowie & Bond, Baltimore, Md., on brief), for Ionic Electrostatic Corp.
    Clyde F. Willian, Chicago, 111. (Robert L. Harmon, Hume, Clement, Brinks, Willian, Olds & Cook, Ltd., Chicago, 111., John F. King, Anderson, Coe & King, Baltimore, Md., on brief), for respondent.
    Before HAYNSWORTH, Chief Judge, and WINTER and WIDENER, Circuit Judges.
   PER CURIAM:

In this application for a writ of mandamus, we cannot say that the district court 'abused its discretion when it declined to dismiss the action for want of prosecution, and we will therefore deny the writ. At the same time, we conclude that there has been such unconscionable delay in the final disposition of the underlying litigation as to warrant extraordinary relief. More than ten years have elapsed since the validity and infringement of plaintiff’s patents were finally determined and since we remanded the case for assessment of damages. Ransburg Electro-Coating Corp. v. Proctor Electric Co., 317 F.2d 302 (4 Cir. 1963). See also Ransburg Electro-Coat-ing Corp. v. Ionic Electrostatic Corp., 395 F.2d 92 (4 Cir. 1968), cert, denied, 393 U.S. 1018, 89 S.Ct. 623, 21 L.Ed.2d 562 (1969); Ransburg Electro-Coating Corporation v. Ionic Electrostatic Corporation, 431 F.2d 947 (4 Cir. 1970). The action has been pending for a longer period of time (sixteen years) than any civil action pending in the district of Maryland and for a longer period of time than any other action for patent infringement shown as pending in any United States district court on the records of the Administrative Office of the United States. Even now, counsel cannot agree on the exact status of the litigation and what motions, formal or informal, have been submitted to the district court and remain undecided.

It appears that a potential future cause of delay may be a belated claim by Ransburg Electro-Coating Corporation that Ionic Electrostatic Corporation’s Model 10, with metal head, infringes Ransburg’s patents. The issue has not been formally litigated, but we are persuaded that Ransburg has been aware of this alleged claim for a sufficient number of years, with such dilatoriness and failure on its part to assert any cause of action arising thereunder that it should not now be permitted to claim that said Model 10 is an infringing device, the manufacture or sale of which entitled it to damages.

Accordingly, in the exercise of our authority to supervise the functioning of district courts within this circuit, and in furtherance of the rulings aforesaid, we order and direct the following:

(1) The parties shall initiate and complete all discovery necessary to prepare for a trial for final disposition of this action within 90 days from the date hereof. Other than for the purposes of discovery, no party shall be permitted to file any motions after the date hereof.
(2) Any objections or exceptions to discovery, or failure to respond to discovery, shall be decided at said trial.
(3) If it should appear that any party has abused the processes of discovery or employed discovery for harassment or oppression, the district court may impose appropriate sanctions, including, but not limited to, dismissal of the action, the assessment of monetary penalties, or such other relief as appears appropriate to arrive at a just and reasonable result.
(4) Within 90 days after the period for completion of discovery, the district court shall conduct such trial, and it shall decide all issues and questions presented and assess damages promptly after hearing.
(5) There shall be excluded from the present and any future litigation any question of whether Ionics’ Model 10, with metal head, infringes Rans-burg’s patents, provided that said Model 10 has been manufactured or sold prior to the date hereof.
(6) The district court is relieved from deciding whatever motions, if any, formal or informal, which may be pending before it on the date hereof.
(7) There shall be no departure from the timetable or the procedures prescribed herein except upon our approval, for good cause shown.
(8) The costs of this application for a writ of mandamus shall be paid by Ransburg.
(9) The Clerk shall issue the mandate forthwith.


text:
    James G. ELLINGBURG et al., Appellant, v. Johnny KING and Kenneth Taylor, Appellees.
    No. 73-1838.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 18, 1974.
    Decided Jan. 22, 1974.

      James G. Ellingburg, filed hand written brief pro se.
    Jim Guy Tucker, Atty. Gen., and Alston Jennings, Jr., Asst. Atty. Gen., Little Rock, Ark., for appellees.
    Before MATTHES, Senior Circuit Judge, HEANEY, Circuit Judge, and SMITH, Senior District Judge.

       Honorable Talbot Smith, Senior District Judge, Eastern District of Michigan, sitting by. designation.

   PER CURIAM.

This is an appeal from the district court’s dismissal of appellants’ class action complaint brought under 42 U.S.C. § 1983, for failure to state a claim. Appellants, inmates of the Arkansas Department of Correction, basically complain of the actions of a prison employee, Utility Sergeant Kenneth Taylor, who they feel acts unfairly toward them. Specifically, they allege:

1. That Sergeant Taylor threatened them with job demotions unless they became informers.
2. That inmate Ellingburg was deprived of needed medical care.
3. That inmate Ellingburg was intimidated by prison officials because the officials discussed with him the large number of writs he filed and denied him essential medical care in revenge.
4. That inmate Higgins was placed in punitive segregation because he attempted to explain to Sergeant Taylor certain actions which had resulted in a disciplinary report being filed against him.
5. That Sergeant Taylor confiscated personal property of inmates during searches.

The district court referred the case to a magistrate for screening. The magistrate went to the prison and interviewed the persons involved and then submitted a full report to the district court. Upon receipt of the report, the district court entered an order dismissing the complaint because it failed to state a claim, and because even if the complaint were sufficiently factually specific, none of the plaintiffs’ allegations rose to federal constitutional dignity.

We affirm on the basis of the district court’s order. Broad and conelusory statements unsupported by factual allegations are not sufficient to support a cause of action under § 1983. Howard v. Swenson, 426 F.2d 277 (8th Cir.), cert, denied, 400 U.S. 948, 91 S.Ct. 255, 27 L.Ed.2d 254 (1970); Fletcher v. Hook, 446 F.2d 14 (3d Cir. 1971); Gittlemacker v. Prasse, 428 F.2d 1 (3d Cir. 1970); Church v. Hegstrom, 416 F. 2d 449 (2d Cir. 1969). In addition, none of appellants’ allegations as stated rises to federal constitutional dignity.

Affirmed.


text:
    Bernard W. PIEL, d/b/a Elliot Tool and Manufacturing Company, Appellant, v. HARVARD INTERIORS MANUFACTURING COMPANY, a Division of Harvard Industries, Inc., Appellee.
    No. 73-1494.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 18, 1974.
    Decided Jan. 29, 1974.
    Robert E. Staed, St. Louis, Mo., filed brief for appellant.
    Richard D. FitzGibbon, Jr., Lowen-haupt, Chasnoff, Freeman, Holland & Mellitz, St. Louis, Mo., for appellee. Ap-pellee’s counsel did not file brief.
    Before VAN OOSTERHOUT, Senior Circuit Judge, and LAY and ROSS, Circuit Judges.
   PER CURIAM.

Plaintiff filed suit in the Circuit Court of St. Louis (Mo.) seeking recovery in money damages arising out of delivery of goods and materials to the defendant. The defendant, alleging that the parties had diversity, of citizenship and that the amount in controversy complied with the jurisdictional requirements, removed the suit to the United States District Court for the Eastern District of Missouri. Having failed to file any responsive pleading, the defendant, on February 6, 1973, suggested that it was in bankruptcy and that the suit should be removed from the trial docket. On July 2, 1973, the district court recited that the defendant was presently in a Chapter XI bankruptcy proceeding in the Federal District Court in New Jersey, and dismissed the action without prejudice.

Plaintiff appealed to this court alleging that the district court should have stayed the litigation rather than dismissed the suit. Appellee has failed to file a brief in this court.

We are satisfied that this court has appellate jurisdiction since a dismissal without prejudice is a final order for purposes of review. See United States v. Wallace Co., 336 U.S. 793, 794-795 n. 1, 69 S.Ct. 824, 93 L.Ed. 1042 (1949); 9 Moore’s Federal Practice ¶ 110.13 [1].

We feel the court erred in dismissing the action rather than granting a stay. Title 11 U.S.C. § 29 provides in part:

(a) A suit which is founded upon a claim from which a discharge would be a release, and which is pending against a person at the time of the filing of a petition by or against him, shall be stayed until an adjudication or the dismissal of the petition * * *. (emphasis added).

Title 11 U.S.C. § 714 (relating to Chapter XI proceedings) provides in part:

The court may, in addition to the relief provided by section 11 of this Act [§ 29 of this title] and elsewhere under this chapter, enjoin or stay until final decree the commencement or continuation of suits * * *.

To require plaintiff to commence its suit anew at a later date could result in possible prejudice. Under the circumstances, we find it was error for the district court to dismiss the case rather than simply stay the pending proceeding.

The dismissal without prejudice is vacated and the cause ordered to be reinstated until the Bankruptcy Court has rendered orders on the issues within its jurisdiction and then the cause may proceed in a manner consistent with those determinations.

      . Prior to this time plaintiff’s counsel hail written to the district court stating that he believed defendant was operating profitably in Missouri and there was “a good chance” that the pending litigation could proceed.


text:
    Ruth B. BRYANT, Plaintiff-Appellant, v. COMMONWEALTH OF KENTUCKY et al., Defendants-Appellees.
    No. 73-1452.
    United States Court of Appeals, Sixth Circuit.
    Feb. 4, 1974.

      William H. Allison, Jr., Louisville, Ky., for plaintiff-appellant.
    Frank A. Logan, Asst. Director, Dept, of Law, Frank E. Haddad, Jr., Louisville, Ky., on brief for defendants-appel-lees; Joseph G. Glass, Louisville, Ky., of counsel.
    Before WEICK, PECK and MILLER, Circuit Judges.
   PER CURIAM.

This is an appeal from an order granting summary judgment against the plaintiff-appellant who brought a civil rights action under 42 U.S.C. §§ 1983 and 1985(3) for malicious prosecution.

Appellant, together with five other individuals, was indicted by a Jefferson County (Kentucky) grand jury in October of 1968 for conspiring to destroy certain private property. Trial began in June of 1970 and at the close of the prosecution’s case, the trial judge directed a judgment of acquittal as to all defendants. In July of 1971 appellant filed this civil rights action against the Mayor of Louisville, Kentucky, and certain police officers who were witnesses before that grand jury. She charged that there was a conspiracy by these named individuals to cause that indictment to be returned against her through their false testimony because she was a local civil rights and open housing advocate. Following submission on the memoranda and oral arguments on the appellees’ motion for summary judgment and upon consideration of the deposition of the parties, the District Court granted the motion and dismissed the suit as to all defendants. This appeal followed.

We affirm. Under the law of Kentucky, a witness before a grand jury who provides false testimony is liable for a criminal action in perjury, but not for any civil action such as malicious prosecution since testimony in a judicial proceeding is privileged as a matter of public policy. McClarty v. Bickel, 155 Ky. 254, 159 S.W. 783 (1913). In addition, the thrust of an action in malicious prosecution goes to the initiation or encouragement of the prosecution. Munday v. Gott, 146 Ky. 177, 142 S.W. 238 (1912). It would follow that evidence of the fact that a defendant testified as a witness would be admissible, together with evidence of other acts and circumstances, to show that a defendant initiated or encouraged the prosecution. In this regard however the record includes only bare allegations that any of the appellees were responsible for the initiation or encouragement of the prosecution. As a matter of fact, appellant clearly stated in her deposition that her complaint rests almost entirely on newspaper stories and the allegations in the indictment. She also stated that she did not know of any conversation or communication between the appellees regarding her charges against them, but relies on the fact that their names appeared on the indictment as witnesses before the grand jury. There is no record of the appellees’ testimony before the grand jury and there is no record as to any individual witnesses’ testimony before the grand jury.

Rule 56, Fed.R.Civ.P., is clearly intended to be used to pierce the allegations of the pleadings and allow the trial court to dispose of the case in advance of the hearing on the merits when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact. See, Advisory Committee Note of 1963 to Subdivision (e). The objective is to separate the sham and insubstantial, from the real and genuine issues of fact. Accordingly, where the movant brings forward and supports his motion for summary judgment, his opponent may not rest merely upon his pleadings but rather must come forward to show genuine issues of fact. Mere conclusory and unsupported allegations, rooted in speculation, do not meet that burden.

The judgment of the District Court is affirmed.


text:
    Theodore WOOTEN, Appellant, v. The FIRST NATIONAL BANK OF ST. PAUL, MINNESOTA, et al., Appellees. Vernon CRYER, Appellant, v. The FIRST NATIONAL BANK OF ST. PAUL, MINNESOTA, et al., Appellees.
    No. 73-1703.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 18, 1974.
    Decided Feb. 1, 1974.

      Richard G. Nadler, St. Paul, Minn., for appellants.
    Fred Suhler, Sp. Asst. Atty. Gen., and Bruce E. Hanson, St. Paul, Minn., for appellees.
    Before MEHAFFY, Chief Judge, and LAY and ROSS, Circuit Judges.
   PER CURIAM.

Plaintiffs brought separate suits under 42 U.S.C. § 1983 against the First National Bank of St. Paul and the Commissioner of Motor Vehicles in the State of Minnesota. The complaints allege that the repossession of plaintiffs’ autos by the bank, lien holders, pursuant to the Minnesota statutes, was in violation of the due process clause of the United States Constitution on the grounds that the repossession of the autos was done without affording the parties prior notice and hearing. Plaintiffs sought a temporary injunction to prevent the repossession and sale of their respective autos.

The district court denied plaintiffs’ request to designate a three-judge court to entertain plaintiffs’ constitutional attack on the state statute, dismissed the suit against the Commissioner of Motor Vehicles and denied the prayer seeking a temporary injunction. On appeal plaintiffs assert error as to each ruling.

The only order this court has jurisdiction to review relates to the denial of the temporary injunction.

Plaintiffs’ attempt to appeal from the dismissal of the Commissioner of Motor Vehicles lacks finality in that the district court still has jurisdiction of the pending suits against the Bank. The district court has not directed that the judgment is final pursuant to Federal Rule of Civil Procedure 54(b) as required when the order adjudicates the rights and liabilities of fewer than all of the parties.

Similarly, this court has no jurisdiction to entertain the appeal from the denial of the request for a three-judge court in the absence of a final order. See Ferrara v. Louisiana, 443 F.2d 344 (5th Cir. 1971); Lindauer v. Oklahoma City Urban Renewal Authority, 439 F.2d 761 (10th Cir. 1970); cf. Hartmann v. Scott, 488 F.2d 1215 (8th Cir. 1973). Mandamus to the Court of Appeals is the appropriate remedy to challenge the denial of a properly requested three-judge court. See 9 Moore’s Federal Practice ¶ 110.03[3],

In order to justify the grant of a temporary injunction a party must demonstrate an inadequate remedy at law, i. e., that irreparable damage will follow without the grant of equitable relief and second, a reasonable probability that the party seeking the injunction would ultimately prevail. See Brown v. Chote, 411 U.S. 452, 93 S.Ct. 1732, 36 L.Ed.2d 420 (1973); Telex Corp. v. International Business Machines Corp., 464 F.2d 1025 (8th Cir. 1972). In the instant ease plaintiffs concede that if the car was wrongfully attached and sold that plaintiffs would have a claim for damages. Furthermore, a prior ruling of this court that “state action” under § 1983 is not involved when a private party, acting as a creditor relying on state law,' attaches secured property of a debtor, would tend to lessen the probability of ultimate success in the action filed. See Bichel Optical Laboratories, Inc. v. Marquette National Bank, 487 F.2d 906 (8th Cir. 1973). Under the circumstances, we find the district court did not abuse its discretion in denying the preliminary injunctions.

The appeals as to the dismissal of the Commissioner of Motor Vehicles and the denial of a three-judge court are dismissed for the reason that they do not constitute final orders. The district court’s order denying injunctive relief is affirmed. ' -

It is so ordered.


text:
    James BYRD, Appellant, v. Charles L. WOLFF, Jr., Warden, Nebraska Penal Complex, Appellee.
    No. 73-1672.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 18, 1974.
    Decided Jan. 22, 1974.
    James Byrd, pro se.
    Clarence A. H. Meyer, Atty. Gen., and Harold S. Salter, Deputy Atty. Gen., Lincoln, Neb., for appellee.
    Before MATTHES, Senior Circuit Judge, HEANEY, Circuit Judge, and SMITH, Senior District Judge.

       TALBOT SMITH, Senior District Judge, Eastern District of Michigan, sitting by designation.

   PER CURIAM.

James Byrd commenced a civil rights action in November of 1972 in the United States District Court for the District of Nebraska. He alleged that he was being denied proper medical care by prison officials and was being refused outside medical care. He asked that the appellee be required to furnish him with outside medical care and that he be awarded one million dollars in damages for injuries sustained by him through the failure of the prison officials to provide proper medical attention. The trial court granted the appellee’s motion for a summary judgment. It noted that Byrd had been discharged from the hospital on November 16, 1972, a few days after the suit was filed; and that on the date of dismissal, hospital medical personnel found that Byrd was not suffering from any mental or physical illness. A review of the records convinces us that the trial court properly granted the motion for summary judgment. See, Cates v. Ciecone, 422 F.2d 926, 928 (8th Cir. 1970). Compare, Jones v. Lockhart, 484 F.2d 1192 (8th Cir. 1973).

We note that Byrd contends, for the first time on this appeal, that he had been confined in the “hole” without medical treatment for the last six months. This issue was not before the trial court at the time it granted appellee’s motion for summary judgment, and we express no opinion with respect to the sufficiency or merits of the allegation.


author: BREITENSTEIN, Circuit Judge.

text:
    ALPINE COUNTRY CLUB, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
    No. 73-1250.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted Sept. 11, 1973.
    Decided Jan. 7, 1974.
    J. Jay Bullock, Salt Lake City, Utah, for plaintiff-appellant.
    Louis A. Bradbury, Atty., Tax Div., Dept, of Justice (Scott P. Crampton, Asst. Atty. Gen., Ernest J. Brown and Leonard J. Henzke, Jr., Attys., Tax Div., Dept, of Justice, and C. Nelson Day, U. S. Atty. of counsel, on the brief), for defendant-appellee.
    Before BREITENSTEIN, BARRETT and DOYLE, Circuit Judges.
   BREITENSTEIN, Circuit Judge.

This suit for refund of excise taxes was tried on agreed facts and the district court gave summary judgment for the United States. The taxpayer has appealed.

Section 4241 of the Internal Revenue Code of 1954 imposed a 20% tax on any amount paid as dues or membership fees to a social, athletic, or sporting club. Section 4291 provides that a person receiving payment for facilities or services on which a tax is imposed on the payor thereof shall collect the amount of tax due from the person making that payment. Section 4241 was repealed by § 301 of the Excise Tax Reduction Act of 1965, 79 Stat. 136, 145, and § 4291 was modified to recognize that repeal. 79 Stat. at 148. Our concern is with taxes claimed to be owing by a country club on dues and fees paid between July, 1958 and July, 1962.

The responsibilities of a club such as taxpayer are governed by the then applicable regulations and statutes. Section 42.4291-1 of the Treasury Regulations on Services and Facilities Taxes (1954 Code) makes applicable to the 1954 Code §§ 101.37 through 101.39 of Treasury Regulations 43 (1941 ed.), 26 C.F.R. §§ 101.37-101.39 (Cum.Supp.). Section 101.38 requires every club subject to the excise tax to keep records showing the amount of dues-tax paid by each member. Section 101.39 requires a club to file monthly reports showing the amount collected. Section 101.37 says that the taxes collected must be remitted not later than two months after payment thereof, and that taxes collected become a special trust fund for the United States under what is now § 7501 of the Internal Revenue Code of 1954.

Alpine Country Club, taxpayer, was incorporated in July, 1958, to operate a golf and country club at Alpine, Utah. Between then and July, 1962, it collected $331,078.60 as dues and fees from its members, did not assess the tax on its members, did not collect it from them, did not file excise tax returns, and did not pay the mandated tax.

After an audit, an excise tax deficiency of $66,215.72 was assessed against taxpayer on the basis that the entire $331,078.60 represented dues and fees subject to the tax. It was then shown that individual members of taxpayer had paid directly to the Internal Revenue Service $20,965.28 as the 20% tax on $104,826.40 of the fees and dues paid to taxpayer. This left $226,252.20 of dues and fees on which no tax had been paid. The taxpayer then paid 20% of that amount and now claims that such payment of $45,250.44 was excessive.

Taxpayer contends that the use of the $226,252.20 figure as the base on which the 20% tax was computed is wrong. Its theory is that the mentioned figure includes the tax which it was obligated to collect, and hence is 120% of the true base of $188,543.50. The parties have stipulated that if the latter figure is the true base, taxpayer is entitled to a refund of $7,541.74 plus interest. This figure is the difference between $45,250.44 (20% of the $226,252.20) and $37,708.70 (20% of $188,543.50). The question before us is the true base for the computation of the tax.

Taxpayer argues that § 4241 imposes a tax only on the amount which the club has available for its own use. The statute does not so read. ' It applies to “any” amount paid as dues or membership fees. The agreed facts are that the members’ payments were for “dues, fees and other membership assessments,” and that the taxpayer did not assess, collect, or remit this tax.

The contention that the use of the higher base results in the imposition of a tax on a tax, as well as the taxing of funds held in trust, begs the question, because it assumes the point in issue, which is whether taxpayer fulfilled its obligation of collecting the tax from its members. The agreed facts are that the taxpayer did not fulfill that obligation.

Taxpayer does not claim that a portion of the payments by its members includes nontaxable payments for specified services such as golf privileges, meals, or stable facilities rather than dues. See e.g. White v. Winchester Country Club, 315 U.S. 32, 41, 62 S.Ct. 425, 86 L.Ed. 619; Freeport Country Club v. United States, 7 Cir., 430 F.2d 986, 990-991, and Boots and Saddles, Inc. v. United States, E.D.Mich., 269 F.Supp. 274, 276. The reliance on the well-recognized, substance-over-form rule, see Weiss v. Stearn, 265 U.S. 242, 254, 44 S.Ct. 490, 68 L.Ed. 1001, is inapt. Taxpayer chose the form in which it conducted its business, and having done so must take the consequences. Higgins v. Smith, 308 U.S. 473, 477, 60 S.Ct. 355, 84 L.Ed. 406. In essence taxpayer says that noncompliance with the statutes and regulations creates a situation in which a portion of the members’ payments of dues and fees must be taken as tax payments in order to bring about compliance with the same statutes and regulations. This circular reasoning is not persuasive. The burden is on the taxpayer to establish that the wrong base was used in computing the tax and, hence, it is entitled to a refund. Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212. It has not sustained that burden.

Affirmed.


text:
    TRICO PRODUCTS CORPORATION, Appellant, v. The ROBERK COMPANY, Appellee.
    No. 53, Docket 73-1514.
    United States Court of Appeals, Second Circuit.
    Argued Oct. 31, 1973.
    Decided Dec. 18, 1973.
    Edward A. Haight, Chicago, Ill. (Robert V. Jambor, Haight, Hofeldt, Davis & Jambor, Chicago, Ill., Armand Ciffelli, Bridgeport, Conn., on the brief; E. Herbert Liss, Buffalo, N. Y., of counsel), for appellant.
    Albert C. Johnston, New York City (Leo Nevas, Nevas, Nevas & Rubin, Westport, Conn., on the brief), for ap-pellee.
    Before MOORE, HAYS and FEIN-BERG, Circuit Judges.
   PER CURIAM:

The Trico Products Corporation, owner of the 1964 Lenz Patent number 3,153,254, filed suit against the defendant Roberk Company alleging infringement, and seeking an injunction and an accounting for damages. Roberk denied infringement and set up the defenses of patent invalidity for obviousness and ov-erclaiming, and counterclaimed for .a judgment declaring the Lenz patent invalid. The defendant moved for summary judgment. The district court granted the motion on the basis of the file wrapper in the Lenz application, depositions, and prior art patents, holding that the Roberk product did not infringe and that the Lenz patent was invalid.

The appellant claims on this appeal that, because controverted issues of fact exist as to non-infringement, both defenses, and the counterclaim, the district court erred in granting summary judgment. Since we affirm on the sole ground that the record establishes that the Lenz patent is void for lack of invention, we do not reach the infringement and overclaiming issues.

The subject of the Lenz patent is a windshield wiper. The patent claim in question consists of three elements: (1) a wiper superstructure, a spring-loaded arm holding the wiper blade against the curvature of the windshield; (2) a wiper blade, a rubber squeegee backed by a flexible metal strip; and (3) a latching clip, a flat spring connecting device about the size of a man’s thumbnail^ securing the wiper blade from sliding out of claws on the superstructure. Trico bases its claim of invention not on the designs of the blade or superstructure, both of which are conceded to be well-known in the prior art, but on their connection by means of the latching clip.

To determine whether an invention is obvious under section 103 of 35 U.S.C.:

“the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved.’’ Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 694, 15 L.Ed.2d 545 (1966).

The district court properly found that the Lenz patent is not an improvement over the prior art. The prior art had solved the problem of using a flat spring clip to connect one item to another. Three prior patents — the 1954 Lambert Patent number 2,681,719, the 1939 O’Callaghan Patent number 2,169,708, and a 1958 German patent, DAS 1,047,040 — show two-legged spring clips substantially similar to the Lenz clip. The combination of superstructure, blade, and latch has greater utility than its separate parts and thus might be patentable as a combination, see Anderson’s-Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57, 60-61, 90 S.Ct. 305, 24 L.Ed.2d 258 (1969), but Lenz was not the first to combine these elements. The 1961 DePew Patent number 2,983,945 utilizes either one or a pair of two-legged latches to secure a flexible wiper blade to a superstructure. Thus, any claim of invention must be based on the design specifics of the Lenz latch itself. But even this claim of originality fails. The district court found that the Lenz latch is structurally congruent with the DePew latch, and that the language of the Lenz claim does not distinguish it from DePew. 369 F.Supp. at 1156. We find no justification for disturbing these findings. There is no merit in Trico’s argument that Lenz may be distinguished from DePew in that it utilizes only one latch, while DePew may require two, one at either end of the blade, to secure the blade when it is not in contact with the windshield. So slight an improvement in function, if it is an improvement, does not distinguish Lenz from the prior art.

Finally, we reject the appellant’s argument that the district court erred in not making further factual inquiry into the level of ordinary skill in the art of windshield wiper construction. Graham v. John Deere Co., supra, undeniably requires that differences between the prior art and the claim at issue be compared with the level of ordinary skill in the art. 383 U.S. at 17, 86 S.Ct. 684. But in the instant case, the district court properly determined that there is no difference between the Lenz claim and the prior art, so inquiry into the level of ordinary skill is superfluous. Cf. Jungersen v. Ostby & Barton Co., 335 U.S. 560, 566-567, 69 S.Ct. 26, 93 L.Ed. 235 (1949).


author: WOLLENBERG, District Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Thomas E. WOODSON, Defendant-Appellant.
    Nos. 73-2069, 73-2208.
    United States Court of Appeals, Ninth Circuit.
    Dec. 18, 1973.
    R. R. Bob Greive (argued), of Greive & Law, Seattle, Wash., for defendant-appellant.
    Stan Pitkin, U. S. Atty., J. Ronald Sem, Asst. U. S. Atty. (argued), Seattle, Wash., for plaintiff-appellee.
   OPINION

Before DUNIWAY and WALLACE, Circuit Judges, and WOLLENBERG, District Judge.

WOLLENBERG, District Judge:

Petitioner is currently under indictment in the Western District of Washington, Docket No. 176-73D2, charged with violations of the Comprehensive Drug Abuse Prevention and Control Act, 21 U.S.C. § 801 et seq. He has not been tried and is here appealing an adverse decision on his pre-indictment motion for the return and suppression of certain evidence seized from his office.

Except under certain circumstances [See 28 U.S.C. § 1292 and DiBella v. United States, 369 U.S. 121, 124-125, 82 S.Ct. 654, 7 L.Ed.2d 614 (1962)], this Court may consider appeals only from decisions which are “final” and may not hear appeals from interlocutory orders. 28 U.S.C. § 1291. Prior to DiBella v. United States, supra, there was a division of authority among the federal circuits over whether an order denying a pre-indictment suppression motion was a final decision under § 1291. DiBella, supra, at 123-124, 82 S.Ct. 654. In DiBella the Supreme Court resolved that conflict by asserting the federal policy against piecemeal review of lower court decisions [See DiBella, supra, at 124, 82 S.Ct. 654 and Wright, Federal Courts 452 (2d ed. 1970)] and held that such rulings are not appealable.

The Supreme Court has recognized two exceptions to the DiBella rule. Lower court rulings may be appealed if the motion was solely for the return of property and was not “tied to a criminal prosecution in esse against the movant . . . .” 369 U.S. at 131-132, 82 S.Ct. at 660; Freedman v. United States, 421 F.2d 1293,. 1295 (9th Cir. 1970); Goodman v. United States, 369 F.2d 166, 168 (9th Cir. 1966). A further exception hás been recognized if a denial would render any review impossible. United States v. Ryan, 402 U.S. 530, 533, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971).

Appellant in the instant case comes under neither exception to the DiBella rule. The ruling he seeks to appeal was not solely for the return of property. It was entitled “MOTION FOR THE RETURN OF SEIZED PROPERTY AND THE SUPPRESSION OF EVIDENCE”. This caption suggests that the motion was made in anticipation of criminal proceedings.

“The ‘essential character and the circumstances under which it is made’ determine whether a motion is an independent proceeding or merely a step in the criminal ease.”

Goodman v. United States, supra, 369 F.2d at 168, quoting Carroll v. United States, 354 U.S. 394, 405, n. 17, 77 S.Ct. 1332, 1338, 1 L.Ed.2d 1442 (1957).

The ruling appellant seeks this Court to review is not so unrelated to a criminal proceeding as to be independent of that proceeding and, therefore, reviewable. Goodman v. United States, supra, 369 F.2d at 168. Furthermore, assuming appellant’s ease proceeds to trial, he will have an opportunity to renew his suppression motion and, if he properly protects the record, to seek appellate review of an adverse ruling should that become necessary.

The district court’s denial of appellant’s motion is not a final decision under 28 U.S.C. § 1291, and this Court is, therefore, without jurisdiction to review it. Accordingly, the appeal is dismissed.

       Honorable Albert C. Wollenberg, United States District Judge, Northern District of California, sitting by designation.