author: JAMES M. CARTER, Circuit Judge.

text:
    In re MASTER KEY LITIGATION. States of ILLINOIS et al., Plaintiffs-Appellants and Appellees, v. Edward H. McCULLOCH, Witness-Appellee and Appellant.
    Nos. 73-1783, 73-1830.
    United States Court of Appeals, Ninth Circuit.
    Nov. 26, 1974.

      Aaron M. Peck (argued) of McKenna, Fitting & Finch, Los Angeles, Cal., for plaintiffs-appellants and appellees.
    Lee A. Freeman, Jr., of Freeman, Freeman, & Salzman (argued), Chicago, 111., for witness-appellee and appellant.
    Before BROWNING, CARTER and CHOY, Circuit Judges.
   OPINION

JAMES M. CARTER, Circuit Judge.

This appeal arises from the refusal of a witness, on grounds of self-incrimination, to answer questions upon an oral deposition taken in a civil antitrust action. Pursuant to Fed.R.Civ.P. 37, plaintiffs filed a motion to compel the testimony of the witness, Edward H. McCulloch. Pursuant to Fed.R.Civ.P. 26(c) and 30(d), McCulloch moved for a protective order terminating the deposition entirely. The district court denied both motions and both parties appealed. We affirm the denial of both motions.

Brought against four manufacturers of contract hardware, the antitrust suit alleges that the defendants illegally conspired to fix prices at inflated levels by allocating jobs, territories, and customers, and by jointly enforcing such restrictions through their distributors. During the years 1954-1965, McCulloch was national sales manager and later vice-president of sales for Russwin, a division of Emhart Corp., one of the defendants.

Plaintiffs first contend that McCul-loch has no right to assert his privilege against self-incrimination because there is not the remotest chance that he could be criminally prosecuted for his part in the antitrust violations committed by his employer Emhart. They cite the oft-stated rule that “if the testimony sought cannot possibly be used as a basis for, or in aid of, a criminal prosecution against the witness,” the Fifth Amendment rule ceases to apply, its object being to protect the witness from participating in the establishment of his own guilt. Brown v. Walker, 161 U.S. 591, 597, 16 S.Ct. 644, 40 L.Ed. 819 (1896). Thus, if by reason of a grant of immunity or the statute of limitations, the only danger of prosecution is an imaginary one, the witness is not justified in refusing to answer. See e. g., United States v. Goodman, 289 F.2d 256, 259 (4th Cir. 1961), vacated on other grounds, 368 U.S. 14, 82 S.Ct. 127, 7 L. Ed.2d 75.

In the present ease, however, McCul-loch did not receive a grant of immunity or even informal assurances that he would not be prosecuted by federal or state governments. Furthermore, it appears that the statute of limitations for criminal conspiracy had not run at the time of the deposition, particularly since McCulloch had been working for one or more of the corporate defendants up until the time of the deposition and arguably could have remained a part of the conspiracy at that time.

Although the federal government and the states do not appear particularly interested in bringing criminal actions against the defendant corporations or their employees, the right to assert one’s privilege against self-incrimination does not depend upon the likelihood, but upon the possibility of prosecution. See Hoffman v. United States, 341 U.S. 479, 486-487, 71 S.Ct. 814, 95 L.Ed. 1118 (1951); Isaacs v. United States, 256 F.2d 654, 658 (8 Cir. 1958).

Plaintiffs also contend that, in voluntarily testifying to and admitting certain incriminating facts, McCulloch waived any privilege against testifying further concerning his involvement in the alleged conspiracy. Whatever may be the rule with respect to such a “waiver” by a criminal defendant who elects to take the stand in his own behalf, see Brown v. United States, 356 U.S. 148, 155-166, 78 S.Ct. 622, 2 L.Ed.2d 589 (1958), an ordinary witness may “pick the point beyond which he will not go,” and refuse to answer any questions about a matter already discussed, even if the facts already revealed are incriminating, as long as the answers sought may tend to further incriminate him. Shendal v. United States, 312 F.2d 564, 566 (9 Cir. 1963). See Hashagen v. United States, 283 F.2d 345, 349 (9 Cir. 1960).

Rogers v. United States, 340 U. S. 367, 71 S.Ct. 438, 95 L.Ed. 344 (1951), relied upon by plaintiffs, does not hold to the contrary. That case merely invoked the well-accepted rule that where incriminating facts have been revealed without claiming the privilege, the privilege cannot then be invoked to avoid disclosure of the details. The Court then held, however, that “[a]s to each question to which a claim of privilege is directed, the court must determine whether the answer to that particular question would subject the witness to a ‘real danger’ of further crimination.” Id. at 374, 71 S.Ct. at 442 (footnote omitted).

The proper inquiry in this case then, is not whether McCulloch waived his privilege simply by giving incriminating testimony as to certain company practices, but whether, in light of his prior disclosures, the testimony sought could possibly incriminate him further.

Criminal conspiracies in restraint of trade are difficult to prove. Consequently, the testimony sought by plaintiffs, dealing with McCulloch’s knowledge and intent and with specific instances of attempted restraint on competition, could very well provide a link in the chain of evidence needed in a subsequent prosecution. If the answers could possibly provide such a link, the witness may refuse to answer. See Bursey v. United States, 466 F.2d 1059, 1072 (9 Cir. 1972); Shendal v. United States, supra, 312 F.2d at 565. The testimony sought in this case is much more incriminating and extensive than that sought in Shendal, supra, where this court upheld a witness’ refusal to say how much money he (illegally) collected from a gambling debtor, even though the witness had earlier testified as to the nature of the collection, the person who sent him, and the manner in which the money was delivered.

McCulloch’s claim that the district court abused its discretion in denying his motion to terminate the deposition entirely is without merit. Under Fed.R.Civ.P. 26(c) and 30(d), a district court has broad discretion with respect to the termination of a deposition. The cases relied on by McCulloch are totally inapposite to the present case.

The district court’s orders are affirmed.


source: Caselaw Access Project

author: WILLIAM E. DOYLE, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Alex HARDING, a/k/a Mark Harding, Defendant-Appellant.
    No. 74-1323.
    United States Court of Appeals, Tenth Circuit.
    Dec. 3, 1974.
    Rehearing Denied Jan. 14, 1975.
    Certiorari Denied March 24, 1975.
    See 95 S.Ct. 1437.

      James L. Treece, U. S. Atty., and William K. Hickey, Asst. U. S. Atty., for plaintiff-appellee.
    Edward H. Sherman of Sherman, Sherman & Morgan, P. C., Denver, Colo., for defendant-appellant.
    Before SETH, HOLLOWAY and DOYLE, Circuit Judges.
   WILLIAM E. DOYLE, Circuit Judge.

The above cause is appealed to this court following a remand by the Supreme Court of the United States, 414 U.S. 964, 94 S.Ct. 274, 38 L.Ed.2d 211 (1973), and our remand to the district court pursuant thereto. The district

court then held a hearing to consider whether the changed standard of obscenity announced in Miller v. California, 413 U.S. 15, 93 S.Ct. 2607, 37 L.Ed.2d 419 (1973) was capable of altering the result which had been previously reached. This was necessary because the allegedly obscene materials had not been before this court. Following a full hearing by the district court, we once again consider it.

Appellant was originally indicted on August 25, 1971 on a charge of receiving obscene books and films which had been transported in interstate commerce, contrary to 18 U.S.C. § 1462. Following a trial held in May 1972, the appellant was found guilty. This court affirmed the conviction, 475 F.2d 480 (10th Cir. 1973), and in so doing determined that the indictment was sufficient; that the search was legal; and that the stipulation entered into by defendant and the government as to obscenity was valid. The Supreme Court granted certiorari following which the judgment was vacated and the cause was remanded.

Following remand we again considered the validity of the stipulation as to obscenity and determined that the only issue presented was whether the material involved was obscene under the Miller v. California test. We noted that Miller had modified the previous standards. Also, we considered whether the new standards made a favorable change from the standpoint of the accused. On this we concluded:

[T]he new standards are less exacting to the prosecution. Thus, proof of obscenity is much less difficult under these standards. We believe that material found to be obscene under the Roth-Memoirs test would unquestionably satisfy the test contained in Miller.

491 F.2d 697 at 699.

At the retrial the district court reexamined the materials to confirm that they were the same that had previously been considered and heard the argument of appellant that the stipulation was no longer valid as a result of the changed conditions. On March 20, 1974 the trial court issued its order finding that the material was obscene under the Miller standard as well as under the Roth-Memoirs standards. The court did not delineate the community consideration, but it had no doubt that the material was obscene under Miller and it denied appellant’s request that he be relieved of the stipulation.

The only issue presented to us is whether the trial court complied with the mandate of the Supreme Court and of this court.

As is clear from the mandate quoted herein, no particular procedure was ordered by the Supreme Court. The mandate simply called for consideration in the light of subsequent cited cases. However, the district court and this court as well went further. The district court gave the appellant full opportunity to be heard. Nevertheless, the point which he features here is that he did not get a full-scale trial by a jury on the remand. The trial court from an examination of the record and the statements of counsel found in the light of Miller that there was no basis for relieving appellant from the stipulation. We agree.

Appellant’s further arguments include the following:

1. The tests set forth in Miller are substantially different from the Roth-Memoirs standards.
a. Miller requires that the materials depict or describe sexual conduct specifically defined by state law.
b. The Roth-Memoirs test of no “redeeming social value” was replaced in Miller by a test of lack of serious literary, artistic, political or scientific value.
c. Miller refers to a community standard, not a national standard. The standards of Metropolitan Denver may well be more liberal than a national standard.
2. Given the differences in the two tests, defendant would not have stipulated to obscenity under the Miller case.
3. Failure to relieve defendant of his stipulation where the standards of obscenity have changed deprives him of his right to have the jury decide the issue of obscenity. The trial court is not authorized to decide whether the material is obscene under Miller.

The trial court’s decision could be affirmed on the basis that it complied with the mandate and that no grounds exist for disturbing its finding of obscenity under the Miller test. However, we also think that subsequent decisions of the Supreme Court support the prior decision of this court. Thus, in Ham-ling v. United States, 418 U.S. 87, 94 S. Ct. 2887, 41 L.Ed.2d 590 (1974) the defendants were indicted for using the mails for the purpose of carrying an obscene book and advertisement. They were convicted prior to the Miller decision. The Court of Appeals there denied the petition for rehearing but reconsidered the cause after the Miller case was announced. The problem presented to the Court of Appeals for the Ninth Circuit in Hamling was almost identical with that which we have before us. 481 F.2d 307. It was recognized by the Supreme Court in Hamling that the juror applies his knowledge of contemporary community standards under the Miller test as opposed to application of a national standard under the Roth-Memoirs standard. In response to the defendant’s contention (in Hamling) that the jury had been instructed to apply national standards and that the Miller case had invalidated that approach, the Supreme Court said:

Miller rejected the view that the First and Fourteenth Amendments require that the proscription of obscenity be based on uniform nationwide standards of what is obscene . . . . But in so doing the Court did not require as a constitutional matter the substitution of some smaller geographical area into the same sort of formula ....

94 S.Ct. at 2901.

The Supreme Court observed in Hamling that whether a national or a local standard is used the adjudication must be an objective one and not subjective. The Court remarked that the distinction between national and local standards is often “gossamer.”

At bar appellant asserts that his stipulation was made in relation to a national standard, whereas the recent Supreme Court decisions hold that the juror is entitled to consider the community standard. But the Court did not say that a juror is constitutionally limited to considering local standards. The trial court determined that the materials in question would be found obscene under contemporary community standards, and hence we fail to see that there could be any prejudice as a result of the stipulation of obscenity.

Appellant also argues that the definitions contained in the state laws should now, under the present standard, be submitted to the jury. We must reject this. Surely the Supreme Court did not in Miller decree that state laws would henceforth govern these federal prosecutions. The appellant makes no claims that the books and films did not depict conduct such as the examples cited in Miller, Moreover, he does not claim a lack of notice under either the prior or present standards. Accordingly, there is no basis for holding that he was prejudiced by the stipulation.

The Hamling case also answers appellant’s final reason for being relieved of the stipulation. He argues that Miller substitutes a test of lack of serious artistic or social merit for the Roth-Memoirs test of utterly without redeeming social value. He claims that this change is so substantial that he would not have stipulated to obscenity. The defendants in Hamling maintained that the test under the statute there applied was invalid because vague. However, the Court said:

[O]ur opinion in Miller plainly indicates that we rejected the Memoirs “social value” formulation because it represented a departure from the definition of obscenity in Roth, and because in calling on the prosecution to “prove a negative,” it imposed a “[prosecutorial] burden virtually impossible to discharge” and which was not constitutionally required. . . . Since Miller permits the imposition of a lesser burden on the prosecution in this phase of the proof of obscenity than did Memoirs, and since the jury convicted these petitioners on the basis of an instruction concededly based on the Memoirs test, petitioners derive no benefit from the revision of that test in Miller.

94 S.Ct. at 2907.

And so appellant by stipulating that the materials were without redeeming social value also stipulated that they were without serious artistic or social merit. We are unable to perceive unfairness or injustice in holding him to his stipulation.

In view of the fact that the appellant has failed to show prejudice as required by the Supreme Court’s decision in Hamling, we must conclude that he was not entitled to a new trial and that the trial court’s findings amount to a determination that the material here is obscene under either or both the Miller and Roth-Memoirs standards.

The judgment is affirmed.

      . The terms of the remand are as follows: . that this cause be, and the same is hereby, remanded .... for further consideration in light of Miller v. California, 413 U.S. 15 [93 S.Ct. 2607, 37 L.Ed. 2d 419] (1973) ; Paris Adult Theatre I v. Slaton, 413 U.S. 49 [93 S.Ct. 2628, 37 L.Ed.2d 446] (1973) ; Kaplan v. California, 413 U.S. 115 [93 S.Ct. 2680, 37 L.Ed.2d 492] (1973) ; United States v. 12 200-Ft. Reels of Super 8mm. Film, 413 U.S. 123 [93 S.Ct. 2665, 37 L.Ed.2d 500] (1973) ; United States v. Orito, 413 U.S. 139 [93 S.Ct. 2674, 37 L.Ed.2d 513] (1973) ; Heller v. New York, 413 U.S. 483 [93 S.Ct. 2789, 37 L.Ed.2d 745] (1973) ; Roaden v. Kentucky, 413 U.S. 496 [93 S.Ct. 2796, 37 L.Ed.2d 757] (1973) ; and Alexander v. Virginia, 413 U.S. 836 [93 S.Ct. 2803, 37 L.Ed.2d 993] (1973).

      . (a) Patently offensive representations or descriptions of ultimate sexual acts, normal or perverted, actual or simulated. (b) Patently offensive representations or descriptions of masturbation, excretory functions, and lewd exhibition of the genitals.
      413 U.S. at 25, 93 S.Ct. at 2615.

      . Many cases, both state and federal, have been remanded for further consideration in light of Jtiller and the other obscenity cases decided that day. Several courts have decided the question of obscenity under the new Miller tests without remanding for a new trial. See, e. g. United States v. Groner, 494 F.2d 499 (5th Cir. 1974), petition for cert. filed, 43 U.S.L.W. 3001 (U.S. June 24, 1974) (No. 73-1932) ; United States v. Cote, 485 F.2d 574 (5th Cir. 1973), cert. denied, 418 U.S. 954, 94 S.Ct. 3217, 41 L.Ed.2d 1166 (1974) ; United States v. Miller, 482 F.2d 1379 (9th Cir. 1973). See also United States v. One Reel of 35 MM Color Motion Picture Film, 491 F.2d 956 (2d Cir. 1974) ; United States v. Thevis, 484 F.2d 1149 (5th Cir. 1973), cert. denied, 418 U.S. 932, 94 S.Ct. 3222, 41 L.Ed.2d 1170 (1974) ; United States v. One Reel of Film, 481 F.2d 206 (1st Cir. 1973). In these latter cases the trial was held before Miller was announced, but the Courts of Appeals did not act until after Miller.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Lincoln Calvert McSWEANEY, Defendant-Appellant.
    No. 74-1983.
    United States Court of Appeals, Ninth Circuit.
    Nov. 12, 1974.

      David J. Philipson (argued), Los An-geles, Cal., for defendant-appellant.
    Tom Crowe, Asst. U. S. Atty., Phoenix, Ariz. (argued), for plaintiff-appel-lee.

      Before MERRILL, BROWNING and INGRAHAM, Circuit Judges.

      Honorable Joe McDonald Ingraham, United States Circuit Judge, Fifth Circuit, sitting by designation.

   OPINION

PER CURIAM:

Appellant was convicted of bringing into the United States two aliens not lawfully entitled to enter (Roland Robinson and Roland’s sister), in violation of 8 U.S.C. § 1324(a)(1) and (4) and 18 U.S.C. § 2, and for conspiracy to commit the substantive offenses. 18 U.S.C. § 371.

Roland Robinson testified for the government. Appellant contends that the district court erred in refusing to order disclosure under the Jencks Act of statements made by Robinson to government agents.

Under the Jencks Act, 18 U.S.C. § 3500(e), the government is required to produce “writings signed or adopted by a witness and . . . accounts which are ‘a substantially verbatim recital’ of a witness’s oral statements.” Wilke v. United States, 422 F.2d 1298, 1299 (9th Cir. 1970). There is no evidence that Robinson “signed or adopted” any writings. He did testify, however, that on two occasions he was interviewed by government agents who took notes.

The first interview was conducted after Robinson had been taken to the secondary inspection area at the border. Other testimony established that Robinson was interviewed at this point by Immigration Inspectors Holmes and Gur-ble. The government argues that certain notes taken by an Inspector Quick did not constitute a statement discoverable under the Jencks Act. It is clear that appellant is not seeking discovery of these notes. Quick was the Customs inspector on duty when Robinson attempted his illegal entry, and it was he who directed the automobile in which Robinson was a passenger to the secondary area for further inspection. Robinson testified that the first occasion on which he was interviewed by a government agent who took notes was after he had been taken “in the back” at the border crossing. The government has not discussed this interview in its brief.

The second interview was conducted by Inspector Cabasos with both Robinson and his sister present. A copy of the interview report was provided to McSweaney and his counsel. It states that Robinson’s sister did most of the talking, Robinson merely agreeing with her, and that no separate statement was taken from Robinson.

Appellant argues that this case is controlled by the holding of Ogden v. United States, 303 F.2d 724, 736-737 (9th Cir. 1962), that testimony that a witness was interviewed by a note-taking government agent presents a prima facie showing of the existence of a producible Jencks Act statement, and when such a showing has been made it is error to deny defendant’s motion that the government produce the notes, or an explanation, on the basis of the government’s unsupported assertion that the notes are not available.

The report produced by the government provided an adequate basis for the district court’s conclusion that Inspector Cabasos did not take a Jencks Act statement from Robinson at the second interview. However, the note-taking at the first interview has not been sufficiently explained. Accordingly, the ease must be remanded to permit the district court to determine whether a Jencks Act statement was in fact taken at the first interview and, if so, what has become of it. A new trial will be required only if the court concludes that a Jencks Act statement was taken from Robinson at the first interview and that the substantial rights of appellant were affected by failure to make that statement available for use in the cross-examination of Robinson. If the court finds that a new trial is not required, it must “enter a new order of conviction that a record may be preserved for review.” Hilliard v. United States, 115 U.S.App.D.C. 86, 317 F.2d 150, 151 (1963).

The second assignment of error concerns a comment by the district court. In the course of the trial the prosecutor objected that defense counsel was “putting on a show for the jury.” The court said that defense counsel “enjoys that.” This short and relatively mild rebuke of counsel was not “clearly prejudicial” to appellant; it was neither intended nor calculated to disparage him in the eyes of the jurors and prevent them from exercising an impartial judgment on the merits. Paddock v. United States, 320 F.2d 624, 627 (9th Cir. 1963,).

Appellant next argues that Robinson’s testimony should have been excluded because he was an accomplice and his testimony was uncorroborated, he was interrogated without having been advised of his rights, and his cooperation was rewarded with a visa to remain in the United States and attend school. None of these objections were raised in the district court. The latter two are without factual support in the record. As to the first, Robinson’s testimony was corroborated in many respects by the testimony of appellant himself, and, in any event, “the uncorroborated testimony of an accomplice is sufficient to sustain a conviction . . . .” United States v. Jones, 425 F.2d 1048, 1055 (9th Cir. 1970).

Appellant’s contention that the conviction should be reversed because the district court did not give an accomplice instruction sua sponte is also without merit. The court instructed the jury to “carefully scrutinize the testimony given,” and in doing so to consider, inter alia, “the extent of contradiction or corroboration by other evidence.” United States v. Brown, 454 F.2d 397, 399 (9th Cir. 1972).

Remanded for further proceedings consistent with this opinion.


author: WILLIAM E. MILLER, Circuit Judge.

text:
    HYDE PROPERTIES, Plaintiff, v. Clyde McCOY, Defendant-Appellant, Will Luck, Trustee, Defendant, United States of America, Defendant-Appellee, and Commissioner of Revenue for Tennessee, George M. Tidwell, Intervenor.
    No. 73-2095.
    United States Court of Appeals, Sixth Circuit.
    Nov. 5, 1974.
    Order Oct. 24, 1974.
    Opinion Nov. 5, 1974.

      Ronald Lee Gilman, Farris, Hancock, Gilman, Branan & Lanier, Memphis, Tenn., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Myron C. Baum, Ernest Brown, Crombie J. D. Garrett, David English Carmack, Tax Div., Dept, of Justice, Washington, D. C., for defendant-appellant.
    W. Michael Richards, Donald A. Mal-ino, Heiskell, Donelson, Adams, Williams, & Wall, Memphis, Tenn., Thomas F. Turley, Jr., U. S. Atty., David M. Pack, Atty. Gen. of Tennessee, William B. Hubbard, Asst. Atty. Gen. of Tennessee, Nashville, Tenn., Joseph R. Buehig-nani, Asst. Atty. Gen., Memphis, Tenn., for defendant-appellee.
    Before WEICK, MILLER and LIVELY, Circuit Judges.
   WILLIAM E. MILLER, Circuit Judge.

International House of Pancakes of Tennessee, Inc. (IHPT) was a corporation formed by and owned in equal shares by Clyde McCoy and his two brothers-in-law, Allin Means and Frank Means. The corporation was organized in 1963 for the purpose of franchising pancake houses throughout Tennessee. All three men were officers of the corporation, but the management of the business was conducted by the Means brothers. McCoy contributed most of the original capital investment, but because he traveled a great deal as a musician, his only other contact with the corporation was to attend the directors’ meetings.

In addition to its franchising activities, IHPT constructed the Oak Hall Building, an office and commercial structure located in East Memphis. At the same time, the corporation was having difficulty in meeting its financial obligations to various creditors. Specifically, it was delinquent in paying taxes owed both to the state and to the federal government. As these tax delinquencies increased, IHPT decided to sell the Oak Hall Building in an effort to increase the corporation’s liquidity. The company began to look for a purchaser in 1968 and finally negotiated a sale to Hyde Properties on June 16, 1969. As part payment, Hyde Properties executed two promissory notes, each for a principal sum of $25,000. Both notes were to mature two years later on June 16, 1971. Two days after the sale, on June 18, 1969, IHPT transferred these same two notes to McCoy as a redemption of all of his interest in the business. Subsequently, in October and November of 1969 and in October of 1970, the Internal Revenue Service (IRS) filed notices of tax liens against IHPT. Finally, on June 8, 1971, only a few days before the notes were due, the IRS served a notice of levy upon Hyde Properties. Because of the conflicting claims of the Government and McCoy, Hyde Properties brought this suit in the nature of inter-pleader, depositing with the court the funds representing its entire obligation on the notes. The United States maintained that the redemption of McCoy’s stock with the notes was a fraudulent conveyance as to it as a tax lien creditor. McCoy contended that the transfer was a legal redemption of the stock by a solvent corporation.

On the ground that this was an equitable proceeding, the Government moved to strike the jury demand made by McCoy. This motion was overruled by the district court, and the case was submitted to the jury on interrogatories. In essence, the jury determined that IHPT was solvent at the time of the transfer and that the conveyance was not a fraudulent one. Upon motion, the district court granted a judgment notwithstanding the verdict (j.n.o.v.) and a conditional new trial in favor of the Government. On the basis of its own independent consideration of the evidence, it directed that the fund, less various expenses and a setoff, be awarded to the United States as partial satisfaction of its tax liens. From this ruling McCoy appealed.

The threshold issue in this case is whether McCoy was entitled to jury trial under the Seventh Amendment. This question must be first answered because it bears directly upon the district court’s rulings subsequent to the verdict.

In Farmers-Peoples Bank v. United States, 477 F.2d 752 (6th Cir. 1973), this Court dealt with the right to jury trial in civil lawsuits in federal court. There we noted that this right adhered not only to traditional common law proceedings but also to other cases requiring the ascertainment and determination of legal rights. Id. at 756. Suits involving solely equitable rights and remedies are outside the ambit of the Amendment. Yet, the precise demarcation between legal and equitable claims is frequently difficult to discern. Id. at 756. Because of the nature of the present case, we must analyze any claim to a right to jury as it applies both to interpleader suits and to fraudulent conveyance actions.

Although interpleader traces its origins to the common law courts, it soon became the exclusive province of the English chancellors, and today it is regarded as a traditional remedy of equity. 7 C. Wright & A. Miller, Federal Practice and Procedure, § 1701, at 351-52 (1972). In a case decided before the merger in the federal system of law and equity, the Supreme Court indicated that the Seventh Amendment did not provide for a right to jury in interpleader actions. Liberty Oil Co. v. Condon Nat’l. Bank, 260 U.S. 235, 244, 43 S.Ct. 118, 67 L.Ed. 232 (1922). This view prevailed even after merger, but today its support has eroded because “numerous courts and commentators have now come to the conclusion that the right to a jury should not turn on how the parties happen to be brought into court.” Ross v. Bernhard, 396 U.S. 531, 542 n. 15, 90 S.Ct. 733, 740, 24 L.Ed.2d 729 (1970). For the purpose of evaluating this constitutional right, it is important to distinguish between a device used to prosecute a case and the underlying issue to be resolved by the litigation. The historical characterization of the former is no longer determinative of the jury claim. “The Seventh Amendment question depends on the nature of the issue to be tried rather than the character of the overall action.” Ross, 396 U.S. at 538, 90 S.Ct. at 738. Interpleader is analogous to the stockholder derivative action considered in the Ross case. Even though the derivative action wás an equitable device, the right to a jury turned on the character of the corporation’s cause of action. The same rationale we believe applies to interpleader— an equitable remedy to resolve conflicting claims to a single fund. While the remedy may be considered as traditionally an equitable device, the Seventh Amendment’s applicability should depend upon the classification of the controlling issue between the adverse parties.

In this case, the underlying controversy was whether or not there had been a fraudulent conveyance of two promissory notes. To distinguish between legal and equitable claims, this Court has looked to the three factors set forth in the Ross decision — “first, the pre-merger custom with reference to such questions; second, the remedy sought; and, third, the practical abilities and limitations of juries.” Farmers-Peoples Bank, 477 F.2d at 756.

Questions involving fraud cannot be classified from custom as solely legal or solely equitable and, as a result, the nature of the remedy sought becomes considerably more important in resolving the right to jury trial. 5 J. Moore, Federal Practice f[ 38.20, at 175 (2d ed. 1974). If a fraudulent conveyance action is brought to set aside a transfer, such a remedy is cognizable only in equity. Damsky v. Zavatt, 289 F.2d 46, 53 (2d Cir. 1961); see Senchal v. Carroll, 394 F.2d 797 (10th Cir.), cert. denied, 393 U.S. 979, 89 S.Ct. 448, 21 L.Ed.2d 440 (1968). However, where the legal relief is adequate, it is an action at law and the right to jury adheres. See 9 Wright & Miller, § 2311, at 52-53 (1972).

The second element takes into account the various types of relief available. A creditor under Tennessee law has two possible remedies for a fraudulent conveyance — he can have the transfer set aside or annulled, or he can ignore the conveyance and levy an execution upon the property. The first alternative is exclusively within the power of equity. Damsky, 289 F.2d at 53; Baker v. Penecost, 171 Tenn. 529, 534, 106 S.W.2d 220, 222 (1937). The second option is a legal remedy based on the theory that a fraudulent conveyance, though valid between the parties, is void as to creditors. Covington v. Murray, 220 Tenn. 265, 271, 416 S.W.2d 761, 764 (1967). Because such a transfer is void, a court of law may grant a creditor either a levy of attachment or execution. Baker, 171 Tenn. at 534, 106 S.W.2d at 222 (1937). Although a creditor has a choice of proceeding either at law or in equity, we are of the view that for the purposes of determining a right to jury trial the creditor must proceed at law unless such remedy is inadequate. Without this requirement, it is clear that a creditor could decide to pursue his relief in equity and, thereby, deny to his adversary the right to a jury under the Seventh Amendment. To prevent a party from thus controlling the constitutional rights of his opponent, the legal remedy must be inadequate before the equitable means of redress can be employed. See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959); Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962).

This case is a hybrid one because the subject matter of the suit is a fund on deposit with the district court while the notes are in the hands of the transferee. The legal remedies of attachment or execution levied against promissory notes would generally be inadequate because of the ease with which these items can be concealed or otherwise placed beyond the reach of the levy. In addition, there is the risk of liability for a wrongful áttaehment or execution. See Baker, 171 Tenn. at 535, 106 S.W.2d at 222 (1937). As the fund had already been deposited with the district court, and as the notes themselves needed to be set aside or cancelled to prevent any future liability, equitable relief was necessary for enforcement of the Government’s claim.

At trial the fraudulent conveyance issue depended upon the solvency or insolvency of IHPT at the time of or immediately after the transfer. The determination of this question involved conflicting issues of fact concerning accounting procedures used to list the assets and liabilities of the corporation. In its opinion, the district court acknowledged that “the issues between the parties were both complex and likely to be confusing in light of the underlying facts and circumstances. . . . ” We agree with this observation and consequently find as to the third factor that a jury is not especially well-qualified to dispose of such issues and that a non-jury trial of the issues is both more efficient and more likely to produce a just result.

In light of the above criteria, we conclude that there is no constitutional right to a jury trial in an inter-pleader action when the creditor is proceeding against the fund and seeking to annul the conveyance to the transferee. Because no right to jury trial existed, the jury empanelled by the district court was, in effect, an advisory one. See Fed.R.Civ.P. 39(c). Since it is within the discretion of the trial court to accept or reject the verdict of an advisory jury, it can by the same token disregard the jury’s responses to the interrogatories. See Sheila’s Shine Products, Inc. v. Sheila Shine, Inc., 486 F.2d 114, 122 (5th Cir. 1973) ; Chicago & N. W. Ry. Co. v. Minnesota Transfer Ry. Co., 371 F.2d 129, 130. (8th Cir. 1967).

We must, therefore, review the findings of fact and conclusions of law of the district court which constituted the basis for its final judgment for the Government. We may not overturn the trial court’s factual determinations unless we find them to be “clearly erroneous.”' Fed.R.Civ.P. 52(a). As previously stated, the fraudulent conveyance issue turned upon the financial condition of IHPT at the time of the transfer of the two notes. McCoy’s proof of the company's solvency consisted of a balance sheet purportedly reflecting the financial position of the corporation as of March 31, 1969, and the testimony of several persons connected with IHPT. This balance sheet had been prepared by the corporation's bookkeeper, and it indicated that IHPT had a total net worth of slightly over $358,000.00. The Means brothers relied upon the figures in the balance sheet to support their testimony that IHPT was solvent and that the redeemed stock was more valuable than the $50,000 worth of notes. Nevertheless, all of the witnesses who were familiar with the management of the business acknowledged that IHPT lacked cash and, consequently, had difficulty in paying its obligations.

Much of McCoy’s proof depended upon the accuracy of the unaudited balance sheet since a number of witnesses used its figures to buttress their opinions of IHPT’s solvency. The district court, however, found the balance sheet to be misleading and concluded that the corporation actually had a negative net worth on the date of the sale. This determination was based on evidence that the company understated depreciation, overstated the value of the Oak Hall Building and underestimated its tax liabilities. According to the trial court, these and other inaccuracies caused IHPT to have liabilities in excess of its assets. After carefully reviewing the evidence presented, we cannot say that the district court’s findings were clearly erroneous.

Although the district court mentioned several tests for insolvency, it relied upon the criterion set forth in the Uniform Fraudulent Conveyance Act in effect in Tennessee. Because the present case involves an alleged fraudulent transfer, this standard was the proper one to be applied and reference to any other test was unnecessary. Essentially, the statutory provision anticipates a voluntary, open market sale of all of an individual’s assets. If the fair market value of the individual’s property will not cover his obligations as they fall due, the debtor is insolvent. See State ex rel. v. Caldwell, 21 Tenn.App. 396, 111 S.W.2d 377 (1937). At the time of the transfer, IHPT had a negative net worth and, therefore, was insolvent under the statute. As a result, the corporation’s stock in the hands of McCoy was virtually worthless. Any exchange of these shares for the well-secured Hyde Property notes would constitute a transfer without fair consideration. Under the Tennessee law, every conveyance made by an insolvent without fair consideration is deemed fraudulent as to creditors regardless of the actual intent of the debtor. This was precisely the situation of IHPT — its transfer of the notes to McCoy was fraudulent because the corporation did not receive a fair consideration for the exchange. The district court was correct in setting aside the conveyance and in awarding the fund to the United States.

We conclude that the judgment of the district court should be modified to include a provision cancelling the two notes in question. Apparently the notes are presently in the custody of the court, but if not, the district court should direct that they be duly surrendered for cancellation. The judgment of the district court is accordingly modified only to the extent herein indicated and as so modified it is

Affirmed.

AGREED ORDER FOR WITHDRAWAL OF APPEAL AND REMAND IN ACCORDANCE WITH THE AGREEMENT OF THE PARTIES

Upon statements of counsel that the parties to this appeal have reached a settlement of their differences, it is, by consent of the parties, ordered:

1. That the appeal of Clyde McCoy be and the same is hereby dismissed with prejudice.

2. That the Judgment of the District Court for the Western District of Tennessee, Western Division, be and the same is hereby vacated, and this cause is hereby remanded to said Court for the entry of a Consent Order of Settlement in accordance with the agreement of the parties.

3. That a copy of this Order shall be transmitted promptly upon entry to the Clerk of the District Court for the Western District of Tennessee, Western Division, with a conformed copy to be sent to each of the parties hereto.

4. That each of the parties shall bear their own costs of this appeal.

      . One of the notes was subject to an express agreement by IHPT to indemnify Hyde Properties for tire costs incurred in making certain kinds of repairs. Hyde asserted a breaeh of the contract and was awarded a setoff by the district court of $3,008.45. The court considered the question of the breach of contract to be a legal issue and one that was properly triable before a jury. Neither this characterization nor the actual setoff are challenged on appeal. In effect, the trial judge accepted the jury’s verdict on the legal issue but rejected its advisory opinion concerning the fraudulent conveyance. This procedure for dealing with legal and equitable claims presented in the same case is consistent with recent Supreme Court decisions. See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959) ; Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962).

      . The State of Tennessee intervened in this action, but it was determined that the United States’ tax claims had priority. The State did not appeal from this determination.

      . Later in his opinion, the trial judge reconsidered the issue of the right to jury trial of the fraudulent conveyance issue under the Seventh Amendment. He concluded that there was no such right because of the equitable nature of interpleader and fraudulent conveyance actions. As a result, while he did not in terms set aside the jury’s responses to the interrogatories, lie did grant the Government’s motion for j. n. o. v.

      . T.O.A. 64-317. Remedies of creditor on matured, debt. — Where a conveyance or obligation is fraudulent as to a creditor, such, creditor, when his claim lias matured, may,' ■ as against any person except a purchaser for fair consideration without knowledge of the fraud at the time of the purchase, or , one who has derived title immediately or me-diately from such a purchaser, (a) have the conveyance set aside or obligation annulled to the extent necessary to satisfy his claim, or (b) disregard the conveyance and attach or levy execution upon the property conveyed. See also American Surety Co. v. Conner, 251 N.Y. 1, 166 N.E. 783 (1929).

      . There is at least some authority in Tennessee that a promissory note is not subject to execution. Moore v. Pillow, 22 Tenn. 437 (1842).

      . It must be remembered that the United States was not attempting to assert any tax liability against McCoy. That issue was exclusively between IIIPT and the IRS. The Government’s only interest in McCoy was as holder of notes originally due to the tax delinquent corporation.

      . T.G.A. 64-309. Test for insolvency. — A person is insolvent when the present fair ’ salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured.

      . T.G.A. 64-311. “Fair consideration” defined. — Fair consideration is given for property, or obligation, (a) when in exchange for such property, or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied, or (b) when such property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared with the value of the property or obligation obtained.

      . T.G.A. 64-312. Conveyances by insolvent without fair consideration declared fraudulent. — Every conveyance, made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent, if the conveyance is made or the obligation is incurred without a fair consideration.

      . After Hie above opinion liad been circulated and approved by tbe three judges constituting the panel, the Court was notified through the Clerk that the parties were engaged in efforts to settle their differences. At that time, however, tbe Clerk liad not received a proposed order or stipulation formally indicating that a settlement bad been finally agreed upon. In tbe absence of such formal notification the opinion of tbe Court was forwarded to the printer for publication. Since that time, but before the release of the printed opinion, the Court has received an agreed order withdrawing the appeal of Clyde McCoy “without prejudice,” vacating the judgment of the district court and remanding the action to that court “for the entry of a Consent Order of Settlement in accordance with tbe agreement of the parties.” On this date, October 21, 1974, the said agreed order has been approved by this Court with the result that the settlement of the parties shall be carried out in accordance with its terms.


author: CELEBREZZE, Circuit Judge. McCREE, Circuit Judge

text:
    Stafford MILLER, Plaintiff-Appellant, v. C. W. DAVIS et al., Defendants-Appellees. Estill HALL, Plaintiff-Appellant, v. C. W. DAVIS et al., Defendants-Appellees. Clay D. SELLERS, Plaintiff-Appellant, v. C. W. DAVIS et al., Defendants-Appellees. Herbert BARGER, Floyd White, and all other persons similiarly affected, Plaintiffs-Appellants, v. C. W. DAVIS et al., Defendants-Appellees.
    Nos. 73-2009 to 73-2012.
    United States Court of Appeals, Sixth Circuit.
    Nov. 26, 1974.

      John W. Collis, Anggelis & Vimont, Lexington, Ky., for plaintiffs-appellants.
    H. B. Noble, Hazard, Ky., Joseph T. McFadden, Washington, D. C., M. E. Boiarsky, Charleston, W. Va., for defendants-appellees.
    Before CELEBREZZE and McCREE, Circuit Judges, and WALINSKI, District Judge.

       The Honorable Nicholas .T. Walinski, Judge, United States District Court for the Northern District of Ohio, sitting by designation.

   CELEBREZZE, Circuit Judge.

The question in these consolidated appeals is whether a federal court sitting in Kentucky has subject-matter jurisdiction over suits by Kentucky residents for pension benefits allegedly wrongfully withheld by the Trustees of the United Mine Workers of America Welfare and Retirement Fund (hereafter “the Fund”). The District Court dismissed the complaints on the ground that Kentucky law would not permit them to be brought in a Kentucky state court and that it was bound to follow this Kentucky rule.

We reverse the District Court’s dismissal of Appellants’ complaints. Even assuming that Kentucky law bars a Kentucky state court’s jurisdiction over these claims, a question we do not reach, a federal court is not foreclosed from adjudicating them.

Before discussing this conclusion, we face a question which was not considered by the parties or the District Court. Appellants asserted jurisdiction under 29 U.S.C. § 185(e). This provision merely describes where labor organizations may be sued and does not establish subject matter jurisdiction over claims of improper administration of union trust funds. Nor do Appellants cite a statute which makes federal law the test of Appellants’ claims. See Giordani v. Hoffmann, 295 F.Supp. 463, 469-470 (E.D.Pa.1969); Employing Plasterers’ Ass’n v. Journeymen Plasterers’ Local 5, 279 F.2d 92 (7th Cir. 1960) ; Rittenberry v. Lewis, 222 F.Supp. 717, 721 n. 2 (E.D.Tenn.1963), aff’d, 333 F.2d 573 (6th Cir. 1964); Palnau v. Detroit Edison Co., 301 F.2d 702 (6th Cir. 1962).

It appears, however, that jurisdiction could have been alleged under 28 U.S.C. § 1332 (1966), the diversity of citizenship provision. Appellants are most probably citizens of Kentucky (since they are “residents” of Kentucky), Appellees are not Kentucky citizens, and the Fund is situated in the District of Columbia. Under 28 U.S.C.. § 1653 (1966) “Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.” Amendment to establish jurisdiction is broadly permitted, so as to effectuate Congress’ intent in enacting § 1653 — to avoid dismissals on technical grounds. Blanchard v. Terry & Wright, Inc., 218. F.Supp. 910 (W.D.Ky.), aff’d, 331 F.2d 467 (6th Cir. 1963), cert. denied, 379 U.S. 831, 85 S.Ct. 62, 13 L.Ed.2d 40 (1964). While we proceed to the merits of this appeal, Appellants must file, within ten days of this decision, a proper amendment in this Court alleging diversity jurisdiction. If appellants fail to do so, the case will be placed on the rehearing docket, and the question of jurisdiction will be reconsidered. See Kaufman v. Western Union Telegraph Co., 224 F.2d 723 (5th Cir. 1955). Should the allegations of $10,000 in controversy prove defective on remand, the District Court will be free to dismiss the complaints.

Since jurisdiction is based solely on diversity of citizenship, Kentucky conflict of laws rules determine what substantive law governs the merits of Appellants’ claims. Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). It is undisputed that the law which Kentucky courts would apply to determine the merits of these claims is that of the District of Columbia, under whose jurisdiction the Fund is administered. Wilder v. United Mine Workers Welfare and Retirement Fund, 346 S.W.2d 27 (Ky. 1961).

The District Court went beyond application of Kentucky’s conflict rules in its holding. Applying the decision of the Kentucky Court of Appeals in Wilder, the District Court determined that "Kentucky courts ha[ve] no jurisdiction to entertain an action concerning a trust with a situs outside the Commonwealth,” and that it consequently had no jurisdiction over these cases. Thus, the District Court held that its very jurisdiction as a federal court was circumscribed by Kentucky law.

This conclusion has serious implications concerning the power of the federal judiciary and the relationship of state and federal law. We feel it important to treat the issue in depth, despite the lack of argument from counsel on this point.

The Rules of Decision Act, 28 U.S.C. § 1652 (1966) states:

The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply.

Under this statute a federal court must apply state law in deciding the merits of a diversity case.

Until the Supreme Court’s decision in Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), it was hornbook law that the jurisdiction of the federal courts depended entirely on the Constitution and acts of Congress and that state law could not limit the federal judicial power. See David Lupton’s Sons Co. v. Automobile Club of America, 225 U.S. 489, 32 S.Ct. 711, 56 L.Ed. 1177 (1912); Barrow Steamship Co. v. Kane, 170 U.S. 100, 18 S.Ct. 526, 42 L.Ed. 964 (1898); Chicago & N. W. Ry. v. Whitton, 80 U.S. (13 Wall.) 270, 20 L.Ed. 571 (1871); Union Bank v. Vaiden, 59 U.S. (18 How.) 503, 15 L.Ed. 472 (1855) ; Suydam v. Broadnax, 39 U.S. (14 Pet.) 67, 10 L.Ed. 357 (1840); Dobie, Federal Jurisdiction and Procedure 336 (1928).

With the advent of Erie, a wholesale re-evaluation of the interrelationship of federal and state law began. Erie itself simply extended the Rules of Decision Act to state judge-made law, so that a federal court was required to apply state law as pronounced not only by legislatures but also by state judges.

It soon became clear that Erie was much more than a holding, as the “Erie doctrine” became a broad principle governing the distribution of federal and state law-making power. In Guaranty Trust Co. v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 1470, 89 L.Ed. 2079 (1945), the Supreme Court announced that

the intent of [Erie] was to ensure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a state court ... a block away.

Two years later, the Supreme Court faced a problem somewhat similar to that before us. In Angel v. Bullington, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed. 832 (1947), a North Carolina statute forbade deficiency judgments on contracts for the purchase of real estate. When, Bullington, the Virginia vendor, sued Angel, the North Carolina purchaser, in a North Carolina state court to collect the deficiency on the purchase contract (which had not been satisfied through sale of the foreclosed-upon land) the North Carolina Supreme Court held that the statute ousted the state courts from jurisdiction over the complaint. 220 N. C. 18, 16 S.E.2d 411 (1941). The vendor then sued in a North Carolina federal court, under diversity of citizenship jurisdiction. The United States Supreme Court held that the state jurisdictional bar applied to the North Carolina federal court sitting in diversity, both because of the former adverse adjudication in the state court and because of the premise that such state statutes should be given effect in federal court.

In Woods v. Interstate Realty Co., 337 U.S. 535, 69 S.Ct. 1235, 93 L.Ed. 1524 (1949), decided the same day as Ragan v. Merchants Transfer Co., 337 U.S. 530, 69 S.Ct. 1233, 93 L.Ed. 1520 (1949), and Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) (with only four Justices joining in all three decisions), the Supreme Court required a federal court to apply a Mississippi statute which provided that a foreign corporation doing business in Mississippi could not bring suit in a Mississippi court unless it had designated in writing an agent for service of process in that state. The majority opinion cited Angel for the proposition that “the policy of Erie R. Co. v. Tompkins precluded maintenance in the federal court in diversity cases of suits to which the State had closed its courts.” 337 U.S. at 537, 69 S.Ct. at 1237.

We believe that a broad “outcome-determinative” test derived from York, Angel, and Woods would bar federal jurisdiction over these claims. Indeed, our Circuit applied this view of Erie in Atkins v. Schmutz Mfg. Co., 372 F.2d 762 (6th Cir. 1967), and Still v. Rossville Crushed Stone Co., 370 F.2d 324 (6th Cir. 1966).

York, however, is not the Supreme Court’s final word on “the policy of Erie.” In Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), the Supreme Court held that a federal court sitting in diversity should grant a jury trial on a crucial issue of fact which the state court would have determined without a jury. The Court limited York-by holding that although application of a state rule would be required of federal courts in diversity cases when the rule is “bound up with [the] rights and obligations” at issue, federal courts need not -adopt state procedural rules which did not have substantive import and which conflicted with countervailing federal interests.

The policy of uniform enforcement of state-created rights and obligations cannot in every case exact compliance with a state rule — not bound up with rights and obligations —which disrupts the federal system of allocating functions between judge and jury. 356 U.S. at 537-538, 78 S.Ct. at 901.

Furthermore, Byrd cited the pre-Erie case of Herron v. Southern Pacific Co., 283 U.S. 91, 51 S.Ct. 383, 75 L.Ed. 857 (1931), for the proposition that “state laws cannot alter the essential character or function of a federal court.” 283 U.S. at 94, 51 S.Ct. at 384, cited at 356 U.S. at 539, 78 S.Ct. 893. Thus, the Rules of Decision Act was interpreted as mandating strict adherence to state law which had substantive content, but not requiring mimickery of state procedural rules which had little substantive content and were designed primarily for purposes of state judicial administration.

This view of the Rules of Decision Act was reiterated in Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). While resting its decision on the Rules Enabling Act, the Supreme Court went out of its way to state that

it is doubtful that, even if there were no Federal Rule making it clear that in-hand service is not required in diversity actions, the Erie rule would have obligated the District Court to follow the Massachusetts procedure. ‘Outcome-determination’ analysis was never intended to serve as a talisman. 380 U.S. at 466-467. 85 S.Ct. at 1141.

Thus, the strict “outcome-determinative” test was laid to rest as the sole criterion for determining when the Rules of Decision Act required application of a state rule by a federal court. The key considerations were two: maintaining uniformity in the interpretation of a state’s substantive law (so as to avoid forum-shopping) and preventing the accident of citizenship from unfairly affecting the outcome of a diversity case.

In this case two statutes give the District Court jurisdiction and venue over these claims, 28 U.S.C. § 1332 and 28 U. S.C. § 1391(a). The crux of this case, therefore, is whether the Rules of Decision Act required the District Court to apply the Wilder rule despite these federal statutes.

In light of the above analysis, we hold that the following test determines whether a federal court should apply a state rule when it is enforcing rights created by state law:

1. If the state provision is the substantive right or obligation being asserted, the federal court must apply it.
2. If the state provision is a procedural rule which is intimately bound up with the substantive right or obligation being asserted, the federal court must apply it.
3. If the state provision is a procedural rule which is not intimately bound up with the substantive right or obligation being asserted, but its application might substantially change the outcome of the litigation, the federal court should determine whether state interests in favor of applying the state rule outweigh countervailing federal considerations against application of the rule. If the state interests predominate, the state rule should be adopted.

A substantially similar test was announced in Szantay v. Beech Aircraft Corp., 349 F.2d 60, 63-64 (4th Cir. 1965).

Applying this test to the case at hand, we find that Kentucky’s Wilder rule is not the substantive right or obligation being asserted. The substantive rights in question are Appellants’ entitlement to pension benefits under the terms of the UMW Fund and the laws of the District of Columbia. Where Appellants may sue to enforce their rights is a different question.

We cannot say that the Wilder rule is intimately bound up with Appellants’ asserted rights to pension benefits. There is no indication in Kitchen v. New York Trust Co., 292 Ky. 706, 168 S.W.2d 5 (1943) or Wilder, 346 S.W.2d 27 (1961), that the policy behind the Kentucky rule is to handicap the ability of trust beneficiaries to enforce their rights. Rather, the judge-made rule of Kitchen and Wilder derives from notions of in personam jurisdiction and choice of law that no longer predominate. Kitchen was a 1943 suit by a settlor attempting to revoke a trust. Since the Kentucky courts had no jurisdiction over the corpus (situated in New York) or over the New York trustee, the Kentucky court would have been unable to enforce an order against the trust company. 168 S.W.2d at 8. Kitchen also relied on and adopted the former § 299, Restatement of Conflict of Laws (1934), which was based on the notion that only one court should instruct a trustee as to his obligations, so as to achieve complete uniformity in the administration of a trust of movables. Wilder simply followed this holding.

The Wilder rule, then, rests on policies that were not meant to inhibit a beneficiary’s ability to enforce his rights. The rule simply requires beneficiaries to travel to the trust’s situs to assert their rights. Thus, this case falls outside the reach of such decisions as Angel v. Bullington, 330 U.S. 183, 67 S. Ct. 657, 91 L.Ed. 832 (1947) (strong state policy against the deficiency judgment sought by plaintiff was expressed through a state court “door-closing” statute, which was held to require shutting the federal court’s doors as well); Cities Service Oil Co. v. Dunlap, 308 U.S. 208, 212, 60 S.Ct. 201, 84 L.Ed. 196 (1939) (state burden of proof rule amounted to “valuable assurance” in favor of the legal title); Chevron Oil Co. v. Huson, 404 U.S. 97, 103, 92 S.Ct. 349, 354, 30 L.Ed.2d 296 (1971) (state statute of limitations “is coordinated with the substance of the remedy”); and Atkins v. Schmutz Mfg. Co., 372 F.2d 762 (6th Cir. 1967) (state statute of limitations prevails). See Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 536, 78 S.Ct. 893, 900, 2 L.Ed.2d 953 (1956), where “the requirement appears to be merely a form and mode of enforcing the immunity, . . . and not a rule intended to be bound up with the definition of the rights and obligations of the parties.”

Under neither of the first two sections of the test set forth above, then, does the Wilder rule control a Kentucky federal court. Under the third section, it is obvious that the District Court’s non-application of Wilder would lead to an opposite result from that which Appellants would receive from a Kentucky state court, assuming that Wilder is still the law of Kentucky. Thus, we must ask whether state interests in favor of the rule or countervailing federal considerations predominate.

The policies that underlie Kitchen and Wilder, as discussed above, are those of personal jurisdiction, choice of law, and venue.

Since the 1961 Wilder decision, the Kentucky legislature passed a long-arm personal jurisdiction statute. See § 454.210, Ky.Rev.Stat. (1968). Under this statute it appears that personal jurisdiction over non-resident trustees will often be available. That part of the Kitchen-Wilder rationale which rests on a restrictive view of personal jurisdiction must be revised to account for its present broad availability. This means that the policy against issuing nugatory decisions no longer bears on such claims as those before us. In this respect it infringes no state policy at all for a Kentucky federal court to assert subject-matter jurisdiction over these cases.

That part of the Kitchen-Wilder rationale which rests on notions of choice of law has been seriously undermined by recent developments. The former Restatement view invoked by the Kitchen and Wilder courts (that trusts should be suable only in the courts of the jurisdiction in which they are situated) has been changed so as to favor Kentucky jurisdiction over Appellants’ claims. Compare Restatement of Conflict of Laws § 299 (1934), with Restatement (Second) of Conflict of Laws § 267 (1971). The modern Restatement rule has led to an abandonment of the Wilder view in several jurisdictions, and the Kentucky Court of Appeals might decide to do likewise, in view of its heavy reliance on the earlier Restatement. Indeed, the old Restatement rule has lost much of its justification since other jurisdictions have chosen not to abide by it. The presumed benefit of the old rule is that the courts of each state will be the exclusive forums for actions against trusts situated therein. An inequitable situation arises if Kentucky maintains its bar against suits by Kentucky miners in Kentucky courts to obtain pension benefits from the UMW Fund while miners in Tennessee, Colorado and Pennsylvania, among other states are able to sue trustees of Kentucky trusts in their home courts. Kentucky would be adhering to a system that handicaps its own residents while not preventing out-of-state beneficiaries of Kentucky-situated trusts from suing in the beneficiaries’ home courts. Of course, Kentucky is free to come to its own conclusion as to whether Kentucky state courts should be open to Appellants. It is sufficient for our purpose to conclude that the Wilder rule does not represent a policy against convenient suits by Kentucky pensioners, in light of the erosion of support for the old Restatement rule.

Finally, insofar as Kitchen and Wilder rest on considerations of venue, including the doctrine of forum non conveniens, this is considered a “procedural” matter within the policy of Erie. State law does not control the venue of federal courts. Steel Motor Service v. Zalke, 212 F.2d 856, 858 (6th Cir. 1954) ; McCoy v. Siler, 205 F.2d 498 (3rd Cir.), cert. denied, 346 U.S. 872, 74 S.Ct. 120, 98 L.Ed. 380 (1953). See 1 J. Moore, Federal Practice 1322 (1974).

Just as the state policies against a federal court’s exercise of subject-matter jurisdiction over these claims are weak, if existent, the federal interests in favor of its exercise are strong.

One federal interest to be served by having the Kentucky federal courts take subject-matter jurisdiction is embodied in the grant of diversity jurisdiction itself. By conferring jurisdiction on the federal courts in diversity cases through 28 U.S.C. § 1332, Congress intended a uniformly administered federal judicial system, which affords litigants of diverse citizenship convenient forums in which to vindicate their rights. Although the basic Congressional purpose behind the grant of diversity jurisdiction was to protect out-of-state suitors from the prejudice of state courts, see The Federalist No. 80 (Hamilton) ; Erie R. R. v. Tompkins, 304 U.S. 64, 74, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), the Congressional purpose was broader. By vesting the federal district courts with equity jurisdiction and guaranteeing adequate appeals within the federal judicial system, Congress afforded procedures and remedies that were not available in the courts of several states. There is historical evidence that apart from the fear of local bias, Congress intended to open the federal courts to litigants of state claims who would not have received an adequate reception in state courts. More importantly, the Supreme Court has held,

The diversity jurisdiction was not conferred for the benefit of the federal courts or to serve their convenience. Its purpose was generally to afford to suitors an opportunity in such cases, at their option, to assert their rights in the federal rather than in the state courts, (emphasis added)

Meredith v. Winter Haven, 320 U.S. 228, 234, 64 S.Ct. 7, 11, 88 L.Ed. 9 (1943). See also First Nat’l Bank v. United Air Lines, 342 U.S. 396, 399-400, 72 S.Ct. 421, 96 L.Ed. 441 (Jackson, J., concurring). As Judge Brown stated in Monarch Ins. Co. v. Spach, 281 F.2d 401, 407 (5th Cir. 1960),

“A United States District Court clothed with power by Congress pursuant to the Constitution is not a mere adjunct to a state’s judicial machinery. In entertaining diversity cases it is responding to a constitutional demand made effective by congressional action and, as the recent abstention cases have made so clear, it has a constitutional duty to hear and adjudicate.”

See also Sayers v. Forsyth Building Corp., 417 F.2d 65, 73 (5th Cir. 1969); In re President and Fellows of Harvard College, 149 F.2d 69, 72-73 (1st Cir. 1945).

In short, there is a federal interest in having federal courts adjudicate all cases properly brought under a jurisdictional grant from Congress. This interest is particularly strong where the beneficiaries of a hugh, nationwide pension fund are involved.

A second federal interest is the uniform application of the federal venue statutes. Under 28 U.S.C. § 1391(a),

A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in the judicial district where all plaintiffs or all defendants reside, or in which the claim arose.

Kentucky is Appellants’ residence, so that the federal statute gives the Kentucky federal courts venue to adjudicate these claims. Heeding federal venue provisions despite a conflicting state door-closing rule is appropriate when the state rule itself stems from venue considerations rather than substantive state policies. As noted above, supra n. 17, the former Restatement view which the Kentucky Court of Appeals adopted in Kitchen and Wilder rested largely on venue considerations. Federal courts should apply federal venue rules and need not follow contrary state law. Steel Motor Service v. Zalke, 212 F.2d 856, 858 (6th Cir. 1954).

A third federal interest is the need for uniform administration of a trust of nationwide scope such as the UMW Fund, which was Kentucky’s policy in adopting the Wilder rule. Since federal courts in Pennsylvania, Colorado, and Tennessee, among other states, entertain similar suits by resident claimants of the UMW Fund, Kentucky claimants would be disadvantaged if they were unable to sue in Kentucky. As stated in Rittenberry v. Lewis:

When a trust seeks to operate upon a nationwide basis, as does the Welfare Fund here, with 1,500,000 beneficiaries scattered across the nation, it is difficult to understand how a rule of convenience in the law of administration of trusts could so dominate the judicial mind as to cause it to disregard the rights and convenience of 1,500,000 beneficiaries across the nation in favor of a rule that accords a theoretical uniformity of instruction to the trustee. Under such a rule the Fund could locate in Hawaii, where presumably no miners live, and for all practical purposes escape any court supervision of the rights of the beneficiaries. To a destitute and disabled miner in Tennessee, Washington, D. C. can be about equally as unavailable as Hawaii. 222 F.Supp. at 721-722.

We would be encouraging the inequitable administration of the UMW Fund were we to block a Kentucky claimant’s access to a convenient federal court while the federal courts are open to claimants in other states. There is a substantial federal interest in ensuring that beneficiaries of a nationwide fund such as the UMW’s have equal access to the judicial process. Otherwise, retired miners in some states will be effectively foreclosed from enforcing their pension rights while others will not be so handicapped. The federal interest, furthermore, is especially strong when the defendant trust is subject to federal regulation which expresses a national interest in its fair administration. See 29 U.S.C. § 186(c). In order that the Fund be administered equitably, by ensuring that its beneficiaries have equally effective access to a convenient judicial forum, the federal courts should be open to all litigants within their statutorily granted jurisdiction.

In view of the federal interest favoring subject-matter jurisdiction and the minimal — if existent — state policy disfavoring it, we conclude that the Rules of Decision Act does not require the District Court to decline jurisdiction over these eases.

Since Kentucky’s Wilder rule should not be applied by the District Court, a final question is whether there is any basis in federal law to warrant a dismissal of these suits. Upon a sufficient allegation of diversity jurisdiction, Appellants will have vested subject-matter jurisdiction in the District Court. Whether Appellees can establish that federal rules require the dismissal or transfer of the claims to another district, e. g., under 28 U.S.C. § 1404, and whether Appellees are subject to personal jurisdiction in Kentucky under § 454.-210, Ky.Rev.Stat., are questions not presently before us.

The District Court’s dismissal of Appellants’ claims is reversed, and the causes are remanded for further proceedings consistent with this opinion.

McCREE, Circuit Judge

(concurring).

I concur because the only issue presented in this appeal is whether a Kentucky court would have assumed jurisdiction of this- case if it had been instituted in a state court; and I believe that the Kentucky Court of Appeals, which, in Wilder v. United Mine Workers Welfare and Retirement Fund, 346 S.W.2d 27 (Ky.1961), followed Hobbs v. Lewis, 197 Tenn. 44, 270 S.W.2d 352 (1954), in upholding the refusal of a Kentucky trial court to assume jurisdiction of an action brought by one of its residents against a fund not located within its boundaries, would, in light of the recent enactment of a Kentucky “long-arm” statute, decide the issue presented here as we determined Tennessee would after enacting its “long-arm” statute. See Rittenberry v. Lewis, 333 F.2d 573 (6th Cir. 1964), where we held that because of Tennessee’s enactment of a “long-arm” statute, its courts would assume jurisdiction of an action brought by one of its residents against the United Mine Workers fund not located in that state.

      . Memorandum Opinion and Order, Civil Nos. 1606, 1607, 1669, 1670 (E.D.Tenn. July 12, 1973) ; on motion to reconsider, Memorandum Opinion and Order (July 23, 1973).

      . Our discussion below concerning the erosion of state policy against a non-resident trust’s amenability to suit in Kentucky should not be taken as a determination that Kentucky law has abandoned the Wilder decision, on which the District Court relied. See Wilder v. United Mine Workers Welfare Retirement Fund, 346 S.W.2d 27 (Ky.1961). That, of course, is a decision which only the Kentucky state courts or legislature can make.

      . Although the Fund must comply with certain federal requirements, 29 U.S.C.A. § 186(a) (1974 Supp.), “[sjtate authority remains the legal foundation upon which such funds are constructed.” Snider v. All State Administrators, Inc., 481 F.2d 387, 390 (5th Cir. 1973), reh. denied, 481 F.2d 1403. The state authority governing the obligations of the Fund’s trustees is that of the District of Columbia. See, e. g., Kiser v. Carey (Moore) v. United Mine Workers of America Welfare and Retirement Fund of 1950), 353 F.Supp. 736 (D.D.C.1973) ; Haynes v. Lewis, 298 F.Supp. 331 (D.D.C.1969) ; Sturgill v. Lewis, 125 U.S.App.D.C. 335, 372 F.2d 400 (1966).

      . See generally Meador, “State Law and tlie Federal Judicial Power,” 49 Va.L.Rev. 1082 (1963).

      . See generally Smith, “Blue Ridge and Beyond : A Byrd’s-Eye View of Federalism in Diversity Litigation,” 36 Tul.L.Rev. 443 (1962).

      . See generally McCoid, “Hanna v. Plumer: The Erie Doctrine Changes Shape,” 51 Va.L.Rev. 884 (1965). But of. Ely, “The Irrepressible Myth of Erie,” 87 Harv.L.Rev. 693, 717 n. 130 (1974).

      . Thus, in a diversity case a state statute of limitations, for instance, must be followed, Hanna, 380 U.S. at 469, 85 S.Ct. 1136, as well as a state rule determining when such an affirmative defense is considered waived, Hayden v. Ford Motor Co., 497 F.2d 1292, (6th Cir. 1974). In both cases the state rules embody important substantive policies that transcend their role in judicial administration. See Ely, 707-18.

      . Erie R. R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; Hanna v. Plumer, 380 U.S. 460, 471-472, 475, 85 S.Ct. 1136, 14 L.Ed.2d 8 (Harlan, ,T., concurring) (1965).

      . Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 538, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958) ; Angel v. Bullington, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed. 832 (1947).

      . Byrd, 356 U.S. at 537-538, 78 S.Ct. 893; Cf. Woods v. Interstate Realty Co., 337 U.S. 535, 69 S.Ct. 1235, 93 L.Ed. 1524 (1949).

      . See also Atkins v. Schmutz Mfg. Co., 435 F.2d 527 (4tli Cir. 1970) (en banc). Similar reasoning is apparent in eases involving conflicts between state bond requirements and Federal Rules of Civil Procedure 1, 6(b), and 60(b), Johnson Chemical Co. v. Condado Center, Inc., 453 F.2d 1044 (1st Cir. 1972) ; the relationship of federal admiralty jurisdiction and local interests, Kelly v. Smith, 485 F.2d 520 (5th Cir. 1973) (majority and dissenting opinions) ; jurisdiction over foreign corporations, Arrowsmith v. United Press Int’l, 320 F.2d 219 (2d Cir. 1963) ; and the admissibility of evidence in the face of a restrictive state statute, Courtland v. Walston & Co., Inc., 340 F.Supp. 1076 (S.D.N.Y.1972).

      . Insofar as our Atkins opinion fails to discuss Supreme Court holdings after York, Angel and Woods, its reach must be confined to the boundaries set forth herein.

      . Section 454.210, Ky.Rev.Stat., states in part:
      (1) As used in this section, “person” includes an individual ... or a corporation, partnership, association, or any other legal or commercial entity, who is a nonresident of this Commonwealth.
      The statute goes on to list various instances in which such “persons” are subject to personal jurisdiction of the Kentucky courts.

      . Whether Appellees are subject to personal jurisdiction in the District Court is a question not presently before us.

      . See Rittenberry v. Lewis, 222 F.Supp. 717 (E.D.Tenn.1963), aff’d, 333 F.2d 573 (6th Cir. 1964) ; George v. Lewis, 228 F.Supp. 725 (D.Colo.1964), and Myhalyk v. Lewis, 398 Pa. 395, 158 A.2d 305 (1960).

      . The ca.se of Still v. Rossville Crushed Stone Co., 370 F.2d 324 (6th Cir. 1966), can be distinguished on this basis. The policy that an action for injury to real estate is ‘‘local” and must be brought only in a court with jurisdiction over the land itself is widely held. This policy has underpinnings of federal law and massive historical support, as the Still Court pointed out through its citations of Livingston v. Jefferson, 15 Fed. Cas. p. 660, 1 Brock. 203 (No. 8,411) (C.C.D.Va.1811), and Ellenwood v. Marietta Chair Co., 158 U.S. 105, 15 S.Ct. 771, 39 L.Ed. 913 (1895).

      . The Restatement view which Kitchen and Wilder adopted was largely based on doctrines of venue. See Comment to § 299, Restatement of Conflict of Laws (1934) ; Rit-tenberry v. Lewis, 222 F.Supp. 717, 721-722 (E.D.Tenn.1963), aff’d, 333 F.2d 573 (6th Cir. 1964).

      . See generally P. Bator, P. Mishkin, D. Shapiro, & II. Weehsler, Ilart & Wechsler’s The Federal Courts and the Federal System 18-19, 1051-53 (2d ed. 1973) ; Hill, “The Erie Doctrine and the Constitution,” 53 Nw.U.L.Rev. 427, 451-55 (1958) ; The Federalist No. 81 (Hamilton).

      . There are also reasons for a federal court to abstain from exercising its jurisdiction. See, e. g., Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 79 S.Ct. 1070, 3 L.Ed.2d 1058 (1959) ; Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). In these cases, the federal courts had jurisdiction over the claims. The decisions not to adjudicate them in federal court rested on an exercise of discretion based on “some recognized public policy or defined principle guiding the exercise of the jurisdiction conferred which would in exceptional cases warrant its non-exercise.” Meredith, 320 U.S. at 234, 64 S.Ct. at 11. See Kurland, “Toward a Co-operative Judicial Federalism: The Federal Court Abstention Doctrine,” 24 F.R.D. 481 (1966).

      . See n. 15, supra.


author: REAL, District Judge. MERRILL, Circuit Judge, with whom BROWNING, Circuit Judge, joins,

text:
    C. R. FEDRICK, INC., Plaintiff-Appellee, v. STERLING-SALEM CORPORATION, Defendant-Appellant.
    No. 72-3118.
    United States Court of Appeals, Ninth Circuit.
    Nov. 8, 1974.
    Dario De Benedictis, (argued), of Thelen, Marin, Johnson & Bridges, San Francisco, Cal., for defendant-appellant.
    Edward K. Allison (argued), of Ehrlich & Allison, San Francisco, Cal., for plaintiff-appellee.
    Before MERRILL and BROWNING, Circuit Judges, and REAL, District Judge.

       Honorable Manuel L. Real, United States District Judge, Central District of California, sitting by designation.

   REAL, District Judge.

This appeal brings before this Court what is, perhaps, a classic example of the various inadequacies of a Federal Court’s diversity of citizenship jurisdiction.

Defendant-appellant, Sterling-Salem Corporation (hereafter Sterling) appeals from a judgment rendered by the District Court on behalf of plaintiff-respondent C. R. Fedrick, Inc. (hereafter Fedrick) on a claim arising out of a purported breach of contract in which Sterling was to supply certain equipment for a construction job at Incline Village, Nevada.

Fedrick’s trial theory and the basis upon which the trial court made its findings of fact and conclusions of law and entered judgment against Sterling in the sum of $56,882.95 is grounded in promissory estoppel (Restatement of the Law of Contracts, Section 90).

Sterling, an Ohio corporation, duly authorized to conduct business in California, is engaged — through its division Topeo — in the manufacture and sale of sewage pumping equipment, including prefabricated sewage stations. In mid-1969, Topeo orally authorized one Marvin Derfler (hereafter Derfler) to act as its independent commission agent in the California area; and Derfler was so employed in the Fall of 1969 when the events now in controversy arose.

Fedrick is a licensed contractor in the State of California. In August, 1969, when the Incline Village General Improvements District (hereafter District) invited bids for the construction of certain sewage pump stations at Incline Village, Nevada, Fedrick — in response to said invitation and in order to meet the scheduled bid opening on September 4, 1969 — solicited price quotations on the equipment necessary for the construction of these sewage pumping stations.

Chas. Lowe Company (hereafter Lowe), a supplier of pumps and other construction equipment, contacted Fed-rick for the purpose of quoting prices on the equipment for what was then known as Sewage Pumping Stations Nos. 7, 8 and 9 of the District’s planned Incline Village project.

Sharing office space with Lowe, but having no other connection with it, Derfler, together with Jay Gwinn, a Lowe employee, obtained price quotations from Topeo on the equipment needed for Pumping Stations 7 and 9. Der-fler having informed Topeo that its customer in this instance was Lowe, Topeo, in the absence of Derfler, responded with price quotations to Lowe on Pumping Stations 7 and 9, at bids of $11,329.-00 and $6,115.00 respectively, for a total of $17,444.00.

Upon reviewing this quotation, Lowe, through its employee, Herb Roedel, then submitted a quotation to Fedrick for $45,900.00 — $21,700.00 for Station 7, $16,200.00 for Station 8, and $8,000.00' for Station 9. The variances are not totally accounted for in the evidence before the trial court. However, the difference in the Topco’s quotations for Stations 7 and 9 and Lowe’s quotation to Fedrick for Stations 7 and 9 is at least partially accounted for by Topco’s arrangement with Derfler by which the would customarily add an amount to Topco’s bid to represent his commission compensation when he in turn quoted his own bid.

An additional portion of the difference between the oral quotation to Top-co’s customer and its subsequent written breakdown may be attributed to Topco’s correction of its obvious failure to include in its quotation to Derfler and Lowe a rotor necessary for one of the pumping stations. Derfler, however, had previously noticed the error and corrected it before submission of the bid by Lowe to Fedrick. The quotation by Topeo to Derfler was then adjusted to reflect this correction, thereby changing the price of the two stations to $21,944.-00 in lieu of the original $17,444.00 bid.

Fedrick, utilizing the quotation received from Lowe, submitted its bid to the District, with all the foregoing occurring on September 4, 1969. As required by the District’s bidding procedures, the bid stated that Lowe was the supplier and Topeo the manufacturer of the equipment to be used on Stations 7 and 9. Equipment for Pump Station 8 was listed as supplied by Coast Pump Company and manufactured by Allis Chal-mers.

On September 16, 1969, Fedrick executed a prime contract with the District for construction of the project, while October 29, 1969, found Fedrick directing its printed form of Purchase Order Agreement to “Topeo in care of Lowe.” This mailing was done in apparent compliance with Fedrick’s common practice of addressing its purchase orders to the manufacturer of the equipment and not to the supplier. Although the evidence is far from clear, the trial court found that this purchase order eventually was mailed to Lowe’s San Pedro office from its Emeryville office but never forwarded to Topeo in Ohio. Topco’s Ohio office was never advised of the receipt of the purchase order in San Pedro, and the purchase order was never signed or otherwise accepted by an employee of Topeo. In addition, Lowe had never advised Topeo that it had in any way accepted Topco’s price quotation for Stations 7 and 9.

Two or three weeks after the bid date Derfler and Roedel, Lowe’s employee, met with a representative of Fedrick to deliver a Topeo Pumping Station Catalogue. Thereafter, as is customary, Topeo, through Derfler, made submittals to Fedrick and the District upon the equipment which it had quoted to Lowe. During the period for which these submittals were under consideration by the District, Topeo and Fedrick came to an impasse as to ability of the equipment which Topeo has offered to meet the requirements of the District. The disputes were never resolved; and on March 11, 1970, Topeo, by letter, in effect withdrew itself from consideration regarding its providing of Stations 7 and 9.

Fedrick then obtained Stations 7 and 9 elsewhere at a higher cost than that quoted by Topeo on September 4, 1969. This suit solely against Sterling followed, and damages were founded on the delay in and additional cost of the completion of the District project by Fed-rick.

As to Sterling’s liability, the District Court’s judgment on behalf of Fedrick can withstand this appeal if (a) the trial court’s findings concerning agency relationship between Topeo and Lowe are not clearly erroneous, i. e., are adequately supported by the record, or (b) Topeo is estopped by force of the Restatement of Contracts, Section 90 (Revised) from denying a contractual relationship between Topeo and Fedrick.

The record does not seem to support the trial court’s finding of an agency relationship between Topeo and Lowe. The evidence, it appears, fis to the contrary since both Derfler and Lowe disclaimed any agency relationship. There is no evidence to the effect that Fedrick ever believed that it was dealing directly with Topeo by means of any agency with Lowe. For all that Fedrick knew, Lowe could have previously purchased the equipment from Topeo and then had it in stock for its own account. The judgment of the District Court, therefore, cannot stand on this theory of the case.

As an alternative, Fedrick asks this court to affirm on the Restatement of Contracts Section 90 (Revised) which provides:

“A promise which the promisor should reasonably expect to induce action or forebearance on the part of the promisee or a third person and which does induce such action or fore-bearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice re-

quires.” (Emphasis supplied).

This revised Section 90 extends to third parties the benefits that erstwhile Section 90 created solely between promisor and promisee. It brings to this court, as a matter of first impression, the application of this revised Section 90 to price quotations by manufacturers to general contractors. That this court should not make this extension is compelled by the facts here and, further, by a consideration of the consequences of such application to like situations.

To apply Revised Section 90 here, we need address ourselves to the various elements involved in price quotation situations. Hence, there must be:

1. A manufacturer;
2. An intermediary, for our purposes, independent of the manufacturer, i. e., not an agent;
3. Reasonable expectation that a particular third party will rely upon the manufacturer’s promise and
4. Identity of the terms of the promise.

Fedrick clearly cannot meet these requirements. Although the first two elements appear present in light of the evidence introduced in this ease, the record cannot support a finding of elements 3 and 4: (a) Topeo was dealing with Lowe as its customer and (b) the price quoted by Topeo to Lowe and the price quoted by Lowe to Fedrick are manifestly dichotomous.

Section 90 (Revised) can, if interpreted in any other manner, give further concern in these situations. Under the provision of former Section 90, the possible defenses, if any, were clearly drawn between the promisor and prom-isee. Here, defenses that Topeo may have asserted against Lowe cannot be determined in a trial only between Topeo and Fedrick; nor can any defenses that Lowe may have vis-a-vis Fedrick be the subject of an inquiry by the District Court in a trial between Fedrick and Topeo.

Fedrick’s suggestion of the applicability of Section 90 (Revised) would turn manufacturers price listing literally on its head. An application of Fedrick’s proposed interpretation of Section 90 (Revised) would import that no manufacturer could issue a price list to an independent dealer without the fear that some day (unbeknownst to him) the manufacturer might be called upon to answer to a third party for an independent dealer’s price quotation to that third party, even though the price list may bear the legend in boldest possible type that “prices are subject to change without notice.” So, too, manufacturers may be called upon, in a litigative posture, to answer for contractual terms that may differ vastly from those originally consummated between the manufacturer and the independent dealer.

Finally, it appears, that the “justice” requirement of contract law and promissory estoppel can best be determined where all parties are brought to answer for their own promises in the Superior Court of San Mateo County where this litigation properly belongs.

While we have reservations on the question of damages as awarded by the trial court, we need not now concern ourselves with a detailed analysis of the evidence on damages in light of our current disposition of this case.

The judgment is reversed.

MERRILL, Circuit Judge, with whom BROWNING, Circuit Judge, joins,

concurring :

I concur in Judge Real’s opinion for additional reasons.

California law controls this diversity case. The California courts have recognized the principles of the original section 90 in holding that when a contractor (promisee), in submitting a construction bid, relies upon the offer of a subcontractor (promisor) to perform part of the work, that reliance makes the subcontractor’s offer irrevocable, see Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757 (1958), at least for a reasonable time, see H. W. Stanfield Co. v. Robert McMullan & Son, Inc., 14 Cal.App.3d 848, 92 Cal.Rptr. 669 (1971).

So far, however, the California courts have been cautious in applying the principle of section 90 to third party beneficiaries. Where third parties have been permitted to assert rights flowing from a promise, the third party has been either an alter ego of the promisee, see Aronowicz v. Nalley’s, Inc., 30 Cal.App.3d 27, 106 Cal.Rptr. 424 (1973), or the recipient of substantially the same promise as was made by the promisor with knowledge that the promisee would pass the promise along to a third party. See Burgess v. California Mut. Bldg. & Loan Ass’n, 210 Cal. 180, 186-187, 189, 290 P. 1029, 1031, 1032 (1930); Peterson Tractor Co. v. Orlando’s Snack-Mobile Corp., 270 Cal.App.2d 787, 790-791, 76 Cal.Rptr. 221, 224 (1969). Moreover, in applying the principles of revised section 90 and extending the rules of promissory estoppel to third parties the California courts in my judgment would construe the revised section in a way consistent with analogous rules applicable to contracts for ordinary consideration. See Cal.Civ.Code § 1559 (West 1954); Restatement (Second) of Contracts §§ 135, 147 (Tent. Draft No. 3, 1967), 133 (Tent.Draft No. 4, 1968). Thus I believe that they would hold that only when a promisor knows that a third party may reasonably rely on his offer, and only when the third party so relies, may the third party enforce the promise, other requisites being satisfied.

In limiting the beneficiaries who may enforce a promise, California courts in my view would require that the promisor intend his offer to reach the third party without undergoing change en route; that it must be the offer of the promisor and not some intervening elaboration or modification on which the third party relies. If the promise has, with the promisor’s knowledge, prompted the promisee to make his own more comprehensive or simply different promise to the third party, the third party could not claim to be entitled to enforce the promisor’s offer. Cf. Restatement (Second) of Contracts § 133, comment e & illus. 16, 18 (Tent.Draft No. 4, 1968). Courts of California have so held in the case of contracts supported by ordinary consideration. See Southern California Acoustics Co. v. C. V. Holder, Inc., 71 Cal.2d 719, 727-728, 79 Cal.Rptr. 319, 326, 456 P.2d 975, 982 (1969); Neptune Gunite Co. v. Monroe Enterprises, Inc., 229 Cal.App.2d 439, 40 Cal.Rptr. 367 (1964).

Whatever the result might be had Topeo known in making its offer to Lowe that Lowe would merely repeat the offer to a contractor without offering to perform other duties and without changing the terms of Topco’s offer, this is not such a case. Here Topeo had no reason to believe that Lowe would submit an offer identical to that made by Topeo. In fact Lowe not only changed the terms on which equipment for stations 7 and 9 was offered but also bid on an additional pumping station.

Topeo, then, did not intend or reasonably expect that Fedrick would rely on the promise Topeo made to Lowe. Accordingly, in my judgment, California would not extend the promissory estop-pel principles of section 90 to Fedrick.

As Judge Real has indicated, this does not necessarily leave Fedrick without remedy. Assuming promises enforceable by the promisee under section 90 to have been made, Fedrick may well have a claim against Lowe and Lowe may well have a claim against Topeo, with the extent of recovery by Fedrick and Lowe depending on the specifics of the promises made to them.

      . For the record, the exact, relationship between Derfler and Lowe is uncertain. Derfler had evidently, on some occasions prior to this transaction, quoted unsuccessfully to Lowe for the sale of the equipment lie represented, but. both Lowe and Derfler disclaimed any agency relationship between them.

      . AVliat the quotation by Derfler to Lowe was is not indicated by the record.

      . ICedrick’s bid inadvertently transmogrified “Topeo” into “Tocpo”.

      . Topeo was in no way involved in the equipment for Station 8.

      . Submittals contain information concerning operations, design and capacity, etc., n ces-sary to meet the specifications set forth in construction plans.

      . Fedrick filed suit upon an identical claim solely against Lowe in the Superior Court of San Mateo County. That court, having the ability to obtain jurisdiction over botli Sterling and Lowe, could have comp-tently disposed of this entire litigation, thereby giving to each party the opportunity to present its individual claims and defenses in order to accomplisli complete justice among all the parties to these transactions. The unsatisfactory results accomplished in this litigation are essentially due to the inability of the court to reach all of the ramifications of price quotation procedures and the attendant liability which may be visited upon the participating parties. Just one of the typical questions involved herein is the suggestion in the evidence that Lowe’s quotation to Fed-rick was an all or nothing situation. There are innumerable others. Counsel for plaintiff never did answer this Court’s inquiry as to why he had not proceeded in the state court action to a resolution of all the issues. This suit simply represents another in the continuing problems facing Federal Courts in the exercise of their diversity jurisdiction.

      . We say agency in light of the trial court’s findings of fact 1.6 that “Derfler appointed Lowe to communicate Topco’s offer to general contractors” and conclusion of law 2.1 that “Topeo authorized Lowe.”

      . Restatement (Second) of Contracts § 90 (Tent. Draft No. 2, 1965) Comment d; See also, Section 135 (Tent. Draft No. 3) ; Section 133 (Tent. Draft No. 4) Comment 3, II-lus. 18.

      . In this case, among other tilings, the delivery terms quoted to Lowe were different than those quoted to Fedrick by Lowe. It would seem that Section 90 (Revised) should, if at all, only be applicable to third persons in complete privity with the terms of the promise made by the promisor and whose conduct of reliance is in answer to the terms of the promise.

      . The result would be the same should California, faced with a choice of law problem, choose to apply the law of Nevada, where performance of the promise to supply equipment would make itself felt. Nevada law is consistent with that of California on the general scope of the original Section 90, see American Sav. & Loan Ass’n v. Stanton-Cu-dahy Lumber Co., 85 Nev. 350, 455 P.2d 39 (1969), and permits a third party, intended by a promisor to be a beneficiary of an offer, to recover from the promisor, see Lear v. Bishop, 86 Nev. 709, 476 P.2d 18 (1970). The Nevada courts would accord weight to California decisions in areas where Nevada law is yet unclear.