author: GARTH, Circuit Judge.

text:
    JOSEPH LUPOWITZ SONS, INC. (Esther Meisler, President), Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee. Harold B. LUPOWITZ and Sophie Lupowitz, Appellees, v. COMMISSIONER OF INTERNAL REVENUE, Appellant. Esther MEISLER, Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Appellant.
    Nos. 73-1588 to 73-1590.
    United States Court of Appeals, Third Circuit.
    Argued Jan. 21, 1974.
    Decided May 22, 1974.

      John Y. Merrell, Richard P. Buskell, McLean, Va., for Joseph Lupowitz Sons, Inc., Harold B. Lupowitz, Sophie Lupowitz and Esther Meisler.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, William A. Friedlander, William S. Estabrook, III, Tax Div., Dept, of Justice, Washington, D. C., for Commissioner of Internal Revenue.
    Before McLAUGHLIN, GIBBONS and GARTH, Circuit Judges.
   OPINION OF THE COURT

GARTH, Circuit Judge.

We have before us three appeals from the Tax Court presenting two different factual situations, but involving related parties and similar issues.

Appeal No. 73-1588 (“Penn Wynn”) involves transfers made by Joseph Lupowitz Sons, Inc. to Penn Wynn, Inc. The Commissioner contended and the Tax Court held that these transfers resulted in a debtor/creditor relationship between the two companies.

Appeal Nos. 73-1589 and 73-1590 (“Mansfield”) involved transfers made by Mansfield Homes, Inc. to Lupowitz. The Commissioner contends that the individual taxpayers Harold Lupowitz and Esther Lupowitz (Meisler), each of whom owned 50% of Mansfield Homes stock, received constructive dividends in 1965 as a result of such transfers. The Tax Court disagreed and held that a bona fide obligation arose between the two companies.

We deal first with the Penn Wynn appeal.

APPEAL NO. 73-1588 (PENN WYNN)

This is an appeal from a decision of the Tax Court holding that for the years 1965 and 1966 a debtor/creditor relationship existed between Penn Wynn, Inc. (hereinafter “Penn Wynn”) and Joseph Lupowitz Sons, Inc. (hereinafter “Lupowitz”). Having found that Lupowitz was the creditor of Penn Wynn, the Tax Court implied an agreement for the payment of interest and concluded that such interest was includable in Lupowitz’s gross income. As a result, Lupowitz was subject to the personal holding company tax. 26 U.S.C. § 541 et seq. The Tax Court made the following findings.

Lupowitz is a closely held corporation, the voting stock of which in 1958 was equally held by four related individuals (Sidney Lupowitz, Emanuel Lupowitz, Martha Lupowitz Kaufman and Harold B. Lupowitz). Planning the construction and operation of a new apartment building, and wishing to limit their liability, they incorporated Penn Wynn, Inc. in February 1959. Each of them paid $2,500 for a one-fourth stock interest in Penn Wynn. On February 24, 1959 Lupowitz transferred $73,000 to Penn Wynn. The following day Penn Wynn purchased an $80,000 building site. Subsequently in 1960, a $2,600,000 construction loan was obtained by Penn Wynn from Frankford Trust Company, but on the condition that no loan disbursements would be made until $543,000 of Penn Wynn’s own money was committed to the project. As of August 1960, the time that the required funds had been committed, $575,000 had been transferred from Lupowitz to Penn Wynn. Frequent transfers of money between the two “brother-sister” corporations continued, but the net monies transferred to Penn Wynn from 1960 through 1966 never totalled less than $548,500. The parties (Lupowitz and Penn Wynn) never entered into any oral or written agreement evidencing these transactions. No agreements, express or otherwise, were ever made respecting repayment of principal, default, payments of interest, and the like.

In 1962, upon audit of Lupowitz’s 1960 and 1961 returns the Internal Revenue Service proposed an accrual of interest on the monies transferred. Lupowitz consented to these adjustments and paid the resulting income tax deficiencies. Interest for 1962 was accrued with consent, and the resulting tax deficiency paid after an audit in 1965. After the audits, Penn Wynn was permitted to deduct the interest for 1960, 1961 and 1962, although these deductions provided no tax benefit to Penn Wynn due to losses in each of the years. Lupowitz voluntarily accrued interest in the years 1963 through 1966.

The accrued interest for 1960 through 1963 was actually paid to Lupowitz by Penn Wynn. No 1964 payment was made. In 1965 and 1966 only an amount sufficient to cover the tax liability generated by the interest was paid.

The Internal Revenue Service determined that for 1965 and 1966 because Lupowitz’s interest income exceeded 10% of its ordinary gross income, and because no dividends were paid, the rents otherwise received by Lupowitz became personal holding company income. Personal holding company tax was assessed. Lupowitz contested that liability in the Tax Court claiming the transfers which it made to Penn Wynn were capital contributions and not loans. The Tax Court, however, held as an ultimate finding of fact that the monies transferred from Lupowitz to Penn Wynn were loans from which interest income arose.

Lupowitz challenges not the basic facts found by the Tax Court but its ultimate finding of fact, which represents an inference drawn from the basic facts. It is settled that such an ultimate finding is reviewable as an issue of law and is not subject to the clearly erroneous rule. See discussion and cases cited in Juleo, Inc. v. Commissioner of Internal Revenue, 483 F.2d 47, 50-51 (3d Cir. 1973) (Gibbons, J., dissenting on other grounds), cert. denied, 414 U.S. 1103, 94 S.Ct. 737, 38 L.Ed.2d 559 (1973) in particular, Kaltreider v. Commissioner of Internal Revenue, 255 F.2d 833, 837 (3d Cir. 1958), and Pennroad Corp. v. Commissioner of Internal Revenue, 261 F.2d 325 (3d Cir. 1958), cert. denied 359 U.S. 958, 79 S.Ct. 797, 3 L.Ed.2d 766 (1959). Thus, out of the rather complicated factual pattern described above, the one question arises: were the funds transferred from Lupowitz to Penn Wynn, loans or contributions to capital?

This Court has previously considered the question of what is debt and what is equity, and has established guidelines for determining the true nature of a “debt vs equity” transaction. Fin Hay Realty Co. v. United States, 398 F.2d 694 (3d Cir. 1968). There we enumerated sixteen criteria for judging the true nature of an investment which appeared in the form of a debt. These criteria were specified as

“(1) the intent of the parties; (2) the identity between creditors and shareholders; (3) the extent of participation in management by the holder of the instrument; (4) the ability of the corporation to obtain funds from outside sources; (5) the ‘thinness’ of the capital structure in relation to debt; (6) the risk involved; (7) the formal indicia of the arrangement; (8) the relative position of the obligees as to other creditors regarding the payment of interest and principal; (9) the voting power of the holder of the instrument; (10) the provision of a fixed rate of interest; (11) a contingency on the obligation to repay; (12) the source of the interest payments; (13) the presence or absence of a fixed maturity date; (14) a provision for redemption by the corporation; (15) a provision for redemption at the option of the holder; and (16) the timing of the advance with reference to the organization of the corporation.”

398 F.2d at 696. Appyling these criteria to the instant case we find that the Lupowitz-Penn Wynn transactions more closely resemble capital than debt.

Although we regard no single factor or group of factors as determinative or controlling see Fin Hay, supra', Tyler v. Tomlinson, supra, we are compelled to our conclusion by the following considerations, (a) The voting stock of Lupowitz was held by the same persons and in the same proportions as they held the capital stock of Penn Wynn. The officers and directors of both corporations were the same, (b) It was a common practice among the Lupowitz enterprises for one company to transfer funds to another without discussion as to repayment or interest. There was no express agreement or understanding regarding the repayment of monies to Lupowitz or regarding the payment of interest or the rate of interest, (c) Penn Wynn had no other assets on which to borrow monies from others. The mortgage lender was secured by a mortgage on all assets owned by Penn Wynn, as well as an assignment of future rents, (d) Penn Wynn was required to commit in excess of $500,000 of its own funds before it could receive construction money. (e) There were no documents or other formal indicia evidencing the arrangement. The transfers were noted only by entry in an Exchange Account on the books of the corporations. (f) As indicated in (b) above, there was no provision for interest, and no enforceable obligation on the part of Penn Wynn to repay the monies advanced. Further, there were none of the “protective” provisions normally insisted upon by “true” creditors, (g) There was no provision for prepayment or for redemption on the part of Penn Wynn and no provision for acceleration of payment at the option of Lupowitz. (h) The initial advances, (if not all advances), were used to acquire capital assets (see Jane-way v. Commissioner of Internal Revenue, 147 F.2d 602 (2d Cir. 1945). (i) With respect to the “timing” of advances, the first advance was made within 25 days from Penn Wynn’s incorporation. The major advances made from the period February 24, 1959 through August 8, 1960 were required for the construction of Penn Wynn House and by the terms of the construction loan. (j) Finally, we note the “thinness” of Penn Wynn’s capital structure (in relation to debt). Here the debt to capital ratio (if the advances made by the taxpayer are included in debt) exceeds 400 to l.

Our conclusion that the above considerations point to capital rather than debt is fortified by Trans-Atlantic Co. v. Commissioner of Internal Revenue, 469 F.2d 1189 (3d Cir. 1972). Trans-Atlantic interpreted Fin Hay as having relied heavily on four of the sixteen criteria enumerated in Fin Hay. These four criteria were: (1) equal ownership of stock and “debt”; (2) inability of the debtor corporation to repay the notes for a number of years; (3) the impossibility of the debtor corporation to otherwise raise funds; and (4) the fact that a prudent businessman would not have invested in the unsecured demand notes at their specified rate of interest. 469 F.2d at 1189.

Application of the Penn Wynn facts to the above four criteria leads to the same result as was reached in Fin Hay, (i. e. the advances made were of a capital, rather than a debt, nature). Here, as in Fin Hay, there is equal ownership of stock and debt. As in Fin Hay, the transferee of the funds (Penn Wynn) could not have repaid them for a number of years. Here, as in Fin Hay, the transferee used the proceeds of the advances to purchase its original assets and the advances represented a long-term commitment dependent on the future value of the real estate. Again, as in Fin Hay, the financial status of Penn Wynn made it highly unlikely that it could otherwise raise funds (its total assets having been pledged to its mortgagee), or that a prudent businessman would have invested in its unsecured obligations.

We are convinced by the totality of these circumstances that the advances made by Lupowitz to Penn Wynn constituted capital contributions.

The decision of the Tax Court in Appeal No. 73-1588 will be reversed.

APPEALS NOS. 73-1589 AND 73-1590 (MANSFIELD)

The issue on these two appeals involves a determination of whether the net transfer of funds during 1965 from Mansfield Homes, Inc. (hereinafter “Mansfield”) to Joseph Lupowitz Sons, Inc. (hereinafter “Lupowitz”) resulted in constructive dividends to the common shareholders of the two corporations, Harold Lupowitz arid Esther (Lupowitz) Meisler. The Tax Court held as an ultimate finding of fact that these net advances were not constructive dividends but rather “constituted a bona fide obligation of Lupowitz to Mansfield Homes representing an ‘investment’ in the former corporation by or for the benefit of the latter corporation.” It found the following facts.

Mansfield was incorporated in 1948 and was primarily engaged in the building business. Prior to and during 1965, Harold Lupowitz and Esther (Lupowitz) Meisler each owned one-half of the outstanding stock of Mansfield and approximately one-third of the outstanding stock of Lupowitz. On April 3, 1964, Mansfield sold its remaining physical assets and received sales proceeds of $89,-226.04. Except for this sale, Mansfield was not actively engaged in any business during the years involved herein.

Commencing at least as early as 1958 and continuing through 1965, Lupowitz made cash transfers to Mansfield. Commencing at least as early as 1959 and continuing through 1965, Mansfield made transfers to Lupowitz. In 1965 Mansfield transferred $30,000 to Lupowitz. In that same year Lupowitz transferred $6,000 to Mansfield, thereby resulting in a net transfer of $24,000 from Mansfield to Lupowitz in 1965. In 1966 no transfers were made by either corporation. As in Appeal No. 73-1588, there was no express agreement, either written or oral, between Mansfield and Lupowitz as to any repayment or with respect to interest on the transferred funds.

Mansfield’s tax return for its taxable year 1965 showed earned surplus and undivided profits. It did not pay or declare any dividends in that year. The Commissioner determined that both Harold Lupowitz and Esther (Lupowitz) Meisler received constructive dividends in 1965 as a result of the transfer of funds between Mansfield and Lupowitz during that year. The Tax Court disagreed for reasons which we find persuasive.

The Tax Court recognized that transfers between related corporations may result in constructive dividends when the transferred funds are used directly or indirectly for the personal benefit of the shareholders. Commissioner of Internal Revenue v. Makransky, 321 F.2d 598 (3d Cir. 1963); W. B. Rushing, 52 T.C. 888 (1969) aff’d as to other issues 441 F.2d 593 (5th Cir. 1971); Sammons v. Commissioner of Internal Revenue, 472 F.2d 449 (5th Cir. 1973); Glenn E. Edgar, 56 T.C. 717 (1971); cf. PPG Industries, Inc., 55 T.C. 928 (1970); George R. Tollefsen, 52 T.C. 671 (1969); aff’d 431 F.2d 511 (2d Cir. 1970); Edgar S. Idol, 38 T.C. 444 (1962); aff’d 319 F.2d 647 (8th Cir. 1963). However, it correctly noted that a transfer of funds between two corporations will not necessarily result in a constructive dividend to shareholders simply because there is common ownership of the transferor and transferee corporations. W. B. Rushing, supra; Sammons, supra.

Mansfield was a viable taxable entity. The transfers were part of the pattern of exchange of funds between Mansfield and Lupowitz dating as far back as 1958. These transfers were treated by both Mansfield and Lupowitz as creating an obligation at the corporate level. It is not determinative that the transfers were made without interest. What is pertinent is that the obligation existed. As the Tax Court properly noted, “it is the retention of such an obligation at the corporate level which distinguishes cases involving excessive payment for service or property by one related corporation to another, where it can be said that the shareholders of the recipient corporation received a tangible benefit.” Sammons, supra; Sparks Nugget, Inc. v. Commissioner of Internal Revenue, 458 F.2d 631 (9th Cir. 1972) cert. denied 410 U.S. 928, 93 S.Ct. 1362, 35 L.Ed.2d 589 (1973); Worcester v. Commissioner of Internal Revenue, 370 F.2d 713 (1st Cir. 1966); Equitable Publishing Co. v. Commissioner of Internal Revenue, 356 F.2d 514 (3d Cir. 1966). Since Lupowitz was sufficiently prosperous financially, the Tax Court rejected the argument that the “investment” by Mansfield was not supported by full value. The transferred funds were not siphoned off to or for the benefit of the taxpayers. As the Tax Court noted, the only discernible benefit to either Mansfield or taxpayers was that Lupowitz was able to obtain the use of Mansfield’s funds on an interest-free basis. We agree with the reasoning of the Tax Court that this element does not afford a sufficient basis for holding that the net transfers of funds constitute a constructive dividend, cf. J. Simpson Dean, 35 T.C. 1083 (1961), and that on this record the absence of a specific business purpose in making the transfers to Lupowitz, as opposed to a general one, does not mandate a different result.

While we affirm the Tax Court in both appeals respecting the issue of constructive dividends, it has been called to our attention at oral argument and by letter dated January 22, 1974, that a remand is required in the Lupowitz appeal (No. 73-1589). The Internal Revenue Service has determined that Harold and Sophie Lupowitz are entitled to net operating loss carry-back deductions from the year 1968, which deductions affect their 1965 tax liability. For that reason counsel have agreed that whether we affirm or reverse the Tax Court on the Lupowitz appeal, it will nevertheless be necessary to remand to that Court for a recalculation and redetermination of the Lupowitz’s tax liability.

Accordingly, for the reasons which we have set forth, the decision of the Tax Court in Appeal No. 73-1590 will be affirmed.

The decision of the Tax Court in Appeal No. 73-1589 similarly will be affirmed. We remand, however, for redetermination of the Lupowitz’s tax liability with respect to matters other than the constructive dividend issue with which we have dealt here.

      . The parties have agreed that whether the complex inter-relating provisions of the Code are satisified so as to make Lupowitz liable for the personal holding company tax hinges solely on one issue — whether Lupowitz was properly charged with accrued interest income in connection with advances made by it to Penn Wynn in the years in question.

      . Sidney died on July 20, 1960. On January 4, 1962, Lupowitz and Penn Wynn each redeemed all of its own stock held by Sidney’s estate.
      Emanuel died on December 8, 1963. His widow Esther Lupowitz inherited his stock in Lupowitz and Penn Wynn. Esther subsequently remarried and is the Esther (Lupowitz) Meisler, who is appellee in Appeal No. 73-1590. After Emanuel’s death, the officers and directors of both corporations were the same, i. e., Harold, Martha and Esther.

      . The $575,000 was transferred from Lupowitz to Penn Wynn during the period February 24, 1959 through August 8, 1960. Penn Wynn’s only transfer of funds to Lupowitz during this period was on May 4, 1960 when it transferred $7,000. These transfers were entered in the respective ledgers of Lupowitz and Penn Wynn under accounts titled “Exchange”.

      . It was common practice to transfer monies as needed between Lupowitz family-owned enterprises.

      . In 1964 the definition of personal bolding company income in 26 U.S.C. § 543 was amended as follows:
      “§ 543, Personal holding company income.
      (a) General rule. — For purposes of this subtitle, the term ‘personal holding company income’ means the portion of the adjusted ordinary gross income which consists of:
      * * * * :|:
      (2) Rents. — The adjusted income from rents; except that such adjusted income shall not be included if—
      (A) such adjusted income constitutes 50 percent or more of the adjusted ordinary gross income, and
      (B) the sum of—
      (i) the dividends paid during the taxable year (determined under section 562),
      (ii) the dividends considered as paid on the last day of the taxable year under section 563(c) (as limited by the second sentence of section 563(b)), and
      (iii) the consent dividends for the taxable year (determined under section 565), equals or exceeds the amount, if any, by which the personal holding company income for the taxable year (computed without regard to this paragraph and paragraph (6), and computed by including as personal holding company income copyright royalties and the adjusted income from mineral, oil, and gas royalties) exceeds 10 percent of the ordinary gross income.”

      . “During the taxable years in issue, the outstanding balance of the advances from Lupowitz to Penn Wynn was a debt of Penn Wynn owing to Lupowitz, upon which interest at 5% was due and payable.”

      . The Fifth Circuit in Tyler v. Tomlinson, 414 F.2d 844 (1969) adopted a “factor analysis” approach paralleling the analysis in Fin Hay supra.

      . We are mindful that in Fin Hay we concluded that “[T]he various factors which have been identified in the cases are only aids in answering the ultimate question whether the investment, analyzed in terms of its economic reality, constitutes risk capital entirely subject to the fortunes of the corporate venture or represents a strict debtor/creditor relationship.” 398 F.2d at 697. We adhere to this precept in the instant case. We have utilized the Fin Hay criteria as aids only and not as per se rules.

      . Although the Tax Court attributed substantial weight to Lupowitz’s consent to the assessment of interest and the manner it recorded these entries on its books of account, we are not persuaded that these actions should control the nature of the transactions as loans, particularly in view of our overall evaluation respecting the Fin Hay guidelines.

      . The significance of a thin capital structure was stressed in Tyler v. Tomlinson, supra at 848.
      “We have been careful to note that ‘thin capitalization’ is ‘very strong evidence’ of a capital contribution where: ‘ (1) the debt to equity ratio was high to start with, (2) the parties understood that it would likely go higher, and (3) substantial portions of these funds were used for the purchase of capital assets and for meeting expenses needed to commence operations.’ United States v. Henderson, 5 Cir. 1967, 375 F.2d 36 at 40. Thin capitalization is also of significance where combined with ‘subordination to other indebtedness.’ Rowan v. United States, supra, 219 F.2d 51 at 55.”

      . In Fin Hay a reclassification of debt to equity was approved by this Court where the ratio approximated 10 to 1.

      . Judge Van Dusen, who dissented in Fin Hay, authored the majority opinion in Trans-Atlantic.

      . In Appeal No. 73-1589, Sophie Lupowitz is a party to the action solely by reason of having filed a joint return with her husband, Harold Lupowitz.
      As previously noted, Esther Meisler is the widow of Emanuel Lupowitz and inherited all of his stock. See footnote 2.

      . Originally, the Commissioner asserted that both Harold Lupowitz and Esther Meisler had constructive dividend income. However, on these appeals, he now takes the position that the Tax Court’s determination that there were no constructive dividends is correct. He seeks reversal only if we reverse the Tax Court on Appeal No. 73-1588, asserting that all the Lupowitz family controlled corporate transfers must be treated the same. (Commissioner’s brief pp. 39 and 42). Two considerations compel us to reject this proposition. (1) The “true” nature and economic reality of each transaction must be examined. A per se rule such as the Commissioner propounds was rejected by this Court in Fin Hay. See also Trans-Atlantic Co., supra. (2) The issue presented here is not identical to that in No. 73-1588. Here the controlling factor is whether there are constructive dividends attributable to taxpayers.

      . The Commissioner originally determined that Harold Lupowitz and Esther Meisler each received constructive dividends in the amount of $8,000. The Tax Court assumed that the Commissioner arrived at the amount of the alleged constructive dividends from: (a) the fact that the net transfer of funds from Mansfield to Lupowitz in 1965 amounted to $24,000, and (b) the fact that Harold Lupowitz and Esther Meisler each owned approximately one-third of the stock of Lupowitz. In fact, the Commissioner’s determination was based on the erroneous understanding that Harold and Esther eacli owned one-third of Mansfield’s stock. (Commissioner’s brief p. 38). As the Commissioner has now recognized, each of the taxpayers owned 50% of the Mansfield stock. The “constructive dividend” doctrine requires reference to the transferring corporation and not to the transferee. Hence, it is Harold and Esther’s stock ownership in Mansfield not Lupowitz that is relevant with respect to this issue. Inasmuch as we affirm the Tax Court’s judgments in both appeals, we need not concern ourselves further with the erroneous original computation by the Commissioner.


source: Caselaw Access Project

author: BURNS, District Judge:

license: Public Domain

text:
    BRITISH MIDLAND AIRWAYS LIMITED, Plaintiff-Appellee, v. INTERNATIONAL TRAVEL, INCORPORATED, Defendant-Appellant.
    No. 73-2994.
    United States Court of Appeals, Ninth Circuit.
    June 3, 1974.
    Gerald F. Collier (argued), Seattle, Wash., for defendant-appellant.
    Oliver Malm (argued), of Lee, Krilich, Lowry & Thompson, Tacoma, Wash., for plaintiff-appellee.
    Before MERRILL and WALLACE, Circuit Judges, and BURNS, District Judge.

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

   BURNS, District Judge:

This action was brought to enforce a judgment obtained in the High Court of Justice in England. The District Court found the British judgment to be valid and enforceable. We agree and affirm.

Plaintiff-Appellee, British Midland Airways Limited (BMA), a corporation organized under the laws of the United Kingdom, and Defendant-Appellant, International Travel, Inc. (International), a Washington corporation, entered into a contract on May 14, 1971, providing for an agency to arrange charter flights from the western United States and Canada to England. In Clause 12 of that contract, the parties agreed to be “governed by the laws of England” and to submit “any dispute arising (from the contract) or in relation thereto” to the High Court of Justice in England. Approximately one year later, such a dispute did occur, and BMA sued International for breach of contract in the Queen’s Bench Division of the High Court of Justice in London, seeking damages of £82,455.93 ($201,788.00), plus interest ($18,864.00) and costs ($1,200.00).

International’s British attorneys entered an unconditional appearance (not contesting jurisdiction) to defend the lawsuit. BMA filed a "motion pursuant to British Order 14,.Rule l(l), a procedure which roughly parallels our Rule 56 summary judgment procedure. Additional rules under Order 14 allow the Court to “give a defendant against whom such an application is made leave to defend the action with respect to the claim, or the part of a claim, to which the application relates either unconditionally or on such terms as to giving security or time or mode of trial or otherwise as it thinks fit.” Order 14, Rule 3.

The motion was granted by a Master (a “junior” judge similar to a United States Magistrate) in August, 1972, but International was still given leave to defend if it deposited an amount equal to the prayer of the complaint with the Court. Both parties appealed this order. BMA maintained that its motion should have been granted outright (with no conditional defense allowed). International contended it should be allowed to defend without being required to make any deposit. No transcripts are made of these proceedings, but a “certificated bundle of documents” containing affidavits and other papers is filed.

The appeals were heard in November, 1972, by Justice Forbes of the High Court of Justice, Queen’s Bench Division, Supreme Court of Judicature, England, who decided that International had not made a prima facie showing of any valid defense, with the possible exception of the claim for cancellation charges. Accordingly, the judge ordered the deposit diminished by that amount of the alleged damages, but ruled that if the money was not deposited within the month, judgment for BMA for the full claim would be entered. At this point, International could have appealed again to a higher court, but failed either to pursue this remedy or to make the deposit. Judgment was then entered for BMA in the amount originally claimed, together with interest and costs on December 14, 1972.

In February, 1973, BMA brought this action in the United States District Court for the Western District of Washington to enforce the British judgment. Based on the same material which compiled the record in the High Court of Justice, the District Court granted BMA’s motion for summary judgment in August, 1973, and denied a motion for rehearing in October, 1973. International’s opposition to the motion was grounded on principles of comity, namely, its claim that the action of the British courts denied it due process in (1) requiring the deposit as a prerequisite to defending the lawsuit and holding International in “default” for its failure to comply with that order; and (2) not recording the proceedings and not allowing proof of damages to be submitted.

We find it unnecessary to decide BMA’s contention that any foreign judgment is conclusive under Washington law unless the foreign court exceeded its jurisdiction. We agree in this case with the Third Circuit’s view, stated in a similar British default case, that “English procedure comports with our standards of due process.” Somportex, supra at 444. It has long been the law that unless a foreign country’s judgments are the result of outrageous departures from our own motions of “civilized jurisprudence,” comity should not be refused. Hilton v. Guyot, 159 U.S. 113, 205, 16 S.Ct. 139, 40 L.Ed. 95 (1895).

United States courts which have inherited major portions of their judicial traditions and procedure from the United Kingdom are hardly in a position to call the Queen’s Bench a kangaroo court. Indeed, it appears that Order 14 was the forerunner of our summary judgment rule. In fact, a rational observer could well conclude that it is superior to our own practice. The British judges afforded International ample opportunity to present affidavits and argue its case.

It was International’s choice not to pursue the matter on appeal or take advantage of the conditional defense allowance. International initially agreed to be bound by British law. Where contractual parties themselves freely agree that their disputes are to be litigated in the courts of the United Kingdom, we will not disturb such a choice. We need not consider whether the result would be otherwise if between the time when the contract was signed and the litigation commenced a change occurred in the English judicial system which radically altered either the substantive rules of law or the procedure by which such were administered. As Judge Aldisert observed in the Somportex case (which both parties have cited as leading authority in this case), we not only look with skepticism, but we flatly reject the due process complaint of a party who “was given, and * * * waived, the opportunity of making the adequate presentation in the English Court.” 453 F.2d at 441.

Affirmed.

      . Order 14, Rule 1(1) provides :
      “Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has entered an appearance in the action, the plaintiff may, on the ground that the defendant has no defense to a claim included in the writ, or to a particular part of such a claim, or has no defence to such a claim or part except as to the amount of any damages .claimed, apply to the Court for judgment against that defendant.”

      . Because this is a diversity action, the law of the forum with respect to comity should be applied. Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3 Cir. 1971), cert. denied, 405 U.S. 1017, 92 S.Ct. 1294, 31 L.Ed.2d 479 (1972). BMA cites the Washington rule as set forth in Alberta Lumber Co. v. Pioneer Lumber Co., 138 Wash. 132, 244 P. 250 (1926). International maintains that this rule specifying proper jurisdiction as the sole prerequisite tó enforceability has become outmoded and has been replaced by the enlightened, but vague, standard of “public policy.”

      . In Hilton, the French judgment was enforced even though the plaintiff complained that the testimony was unsworn, there was no cross-examination and improper evidence was admitted.

      . See Rule 56, F.R.Civ.P., Notes of Advisory Committee on Buies.


author: WEICK, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. MASONRY CONTRACTORS ASSOCIATION OF MEMPHIS, INC., et al., Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellee, v. JOHN H. MOORE AND SONS, INC., Defendant-Appellant.
    Nos. 73-1567, 73-1568.
    United States Court of Appeals, Sixth Circuit.
    Argued Feb. 14, 1974.
    Decided June 11, 1974.

      Richard A. Brackhahn and David Ballon, Memphis, Tenn., for defendants-appellants; Bowling, Brackhan & Jackson, Memphis, Tenn., on brief, for Masonry Contractors Assoc, of Memphis, Inc.; William E. Friedman, Glascock, Ballon, Vorder Bruegge & Friedman, Memphis, Tenn., on brief for John H. Moore & Sons, Inc.
    Andrew J. Barrick, Dépt. of Justice, for plaintiff-appellee; Thomas F. Turley, Jr., U. S. Atty., J. Stanley Pottinger, Asst. Atty. Gen., David L. Rose, Cynthia L. Attwood, Attys., Dept, of Justice, Washington, D. C., on brief.
    Before WEICK, CELEBREZZE and PECK, Circuit Judges.
   WEICK, Circuit Judge.

These appeals arise out of a “pattern or practice” suit filed in the. District Court by the Attorney General under the provisions of Section 707(a) of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-6(a). The complaint alleged that a number of masonry contractors, the Association of Masonry Contractors, a union local, and a Joint Apprenticeship Committee had engaged in a pattern or practice, in violation of Section 707 of the Act, which deprived Negroes of employment opportunities in the masonry construction industry in and about Memphis, Tennessee, from 1965, the effective date of the Act, until the filing of this suit, February 11, 1971. Other defendants were named as necessary parties under Rule 19(a), Fed.R.Civ.P.

The defendant contractors named in this suit were the major masonry contractors in the Memphis area, who conducted most of this type of construction work there.

After extended pre-trial procedures and stipulations, and a trial on the merits, the District Court adopted detailed findings of fact and conclusions of law. The Court found that Local No. 1, the Bricklayer Joint Apprenticeship Committee, John H. Moore and Sons, Inc., and a number of masonry contractors, had engaged in unlawful discriminatory employment practices against black workers. These defendants were enjoined from limiting, excluding from, or denying employment opportunities by reason of race or color, to bricklayers, apprentices, tile-setters or permitmen who may be employed by or seek employment from the defendants.

The District Court ordered certain of the defendants to employ black workers so that at least 5% of the total bricklayer man hours would be worked by black bricklayers for the years 1978 through 1975. These defendants were ordered to make semi-annual reports to the Court of their employment practices.

The Court further held that Local No. 1 and some of the masonry contractors were liable to black bricklayer-members of Local No. 1 for back pay from January 1, 1966 until December 31, 1971, if the black members could establish in hearings to be conducted by a Magistrate as Special Master that they had suffered damages attributable directly to the unlawful actions of said defendants.

The Court further enjoined all defendants from retaliation against any black bricklayer because he may have initiated the charges against the defendants.

Defendants, the Masonry Contractors Association of Memphis, Inc. [MCAM], and certain of its member contractors, and John H. Moore and Sons, Inc. [Moore], have appealed from the judgment of the District Court.

It is contended that the judgment was not supported by substantial evidence of intentional discrimination and that the use by the District Court of statistical evidence tending to prove discrimination was not competent.

It is further contended that the court failed to include parties required under Rule 19, Fed.R.Civ.P.; that jurisdictional prerequisites of an action instituted by the Attorney General were not met; and that the suit was not timely filed.

It is further contended that the imposition of quotas for the hiring of black workers was improper; that back pay cannot be awarded in a § 2000e-6(a) suit; and that if back pay can be awarded it was improper to order hearings before a Magistrate as a Special Master to determine monetary damages.

It has been settled that the use of statistics may establish a prima facie case of discrimination. United States v. Wood, Wire and Metal Lathers Int’l Union, Local 46, 471 F.2d 408, 414, n. 11 (2d Cir. 1973), citing United States v. Ironworkers, Local 86, 443 F.2d 544, 551 (9th Cir. 1971), cert. denied, 404 U.S. 984, 92 S.Ct. 447, 30 L.Ed.2d 367 (1971).

In the present case the District Court relied not only on statistical evidence but also on the testimony of several witnesses and extensive pre-trial discovery and stipulations, to find a “pattern or practice” of discriminatory conduct. The finding of such pattern or practice is supported by substantial evidence and is not clearly erroneous. In fact, the evidence upon which the decision was based was more than sufficient ; it was quite convincing.

On appeal from a judgment of the District Court this Court will not consider the evidence de novo and substitute its judgment for that of the District Court. United States v. Ironworkers, Local 86, supra, at 549; Rule 52(a), Fed.R.Civ.P.

• Appellants contend that only major masonry contractors were joined in the action, and they assert that Rule 19, Fed.R.Civ.P., requires that “a considerable number of other companies and contractors besides Defendants who employed bricklayers or tilesetters in the Memphis area” should have been joined in this action. This contention is founded on a misunderstanding of the requirements of Rule 19. The applicability of Rule 19 to a Title VII employment discrimination case was recently discussed by the Seventh Circuit in LeBeau v. Libbey-Owens-Ford Co., 484 F.2d 798 (7th Cir. 1973). The Court held as to Rule 19:

This rule mandates two separate but interrelated inquiries. First, is the absent party a person “to be joined if feasible”; and, second, if not feasible should the court in equity and good conscience allow the action to proceed or treat the absent party as indispensible. The desirability of joining a party depends on whether (1) complete relief can be granted in his absence; and (2) whether his interests will be prejudiced or those already parties will be subjected to a substantial risk of incurring inconsistent obligations. (Id. at 800).

The “considerable number of other companies and contractors besides Defendants who employed bricklayers” do not meet these criteria so as to require their joinder.

Complete relief as to the parties can be granted in their absence, and there is no showing either that the interests of these absent “other contractors” will be prejudiced, or that the parties will be subjected to a substantial risk of incurring inconsistent obligations. These other contractors do not even meet the criteria of Rule 19(a), particularly the stringent criteria in the rule that would require dismissal of the action by reason of the nonjoinder of these parties.

Because this action was brought under Section 707 of the Act (42 U.S.C. § 2000e-6(a) ) before said section was amended in 1972, it is not necessary for a charge to have been filed with EEOC as required under § 2000e~5, nor is it necessary for the Attorney General to comply with the provisions of § 2000e-5 as to notice, informal methods of correction of the discriminatory acts, and the time limits for filing a complaint.

The only prerequisite for the Attorney General to bring a civil action under § 2000e-6 is that he have reasonable cause to believe that any person or group of persons is engaged in a pattern or practice of discrimination. 42 U.S.C. § 2000e-6(a); United States v. International Ass’n of Bridge, Structural and Ornamental Iron Workers, Local 1, 438 F.2d 679 (7th Cir. 1971), cert. denied, 404 U.S. 830, 92 S.Ct. 75, 30 L.Ed.2d 60 (1971).

As to the contention that the relief granted by the District Court was improper, it should be noted that the Attorney General may request “such relief as he deems necessary to insure the full enjoyment of the rights herein described.” 42 U.S.C. § 2000e-6(a).

The issue as to whether or not “back pay” is a proper form of relief in a Section 707 pattern and practice suit was carefully examined by the Fifth Circuit in United States v. Georgia Power Co., 474 F.2d 906, 919-921 (5th Cir. 1973). The Court concluded:

[T]his form of relief [back pay] may not properly be viewed as a mere adjunct of some more basic equity. It is properly viewed as an integral part of the whole of relief which seeks, not to punish the respondent but to compensate the victim of discrimination. (Id. at 921).

This Court’s statements in Head v. Timken Roller Bearing Co., 486 F.2d 870 (6th Cir. 1973), in regard to back pay in a Title VII Section 706 suit are equally applicable to a Section 707 action:

The finding of discrimination by the district court, in addition to the nature of the relief (compensatory as opposed to punitive), and the clear intent of Congress that the grant of authority under Title VII should be broadly read and applied mandate an award of back pay unless exceptional circumstances are present.
Congress evidently intended that the award of back pay should rest within the sound discretion of the trial judge. (Id. at 876).

Relative to the reference of the computation of back pay to a Magistrate as a Special Master, such a procedure is authorized by Rule 53(b), Fed.R.Civ.P., and has been approved by the courts in Title VII cases. Robinson v. Lorillard Corp., 319 F.Supp. 835, 843 (M.D.N.C.1970), aff’d in relevant part, 444 F.2d 791 (4th Cir. 1971), cert. dismissed, 404 U.S. 1006, 92 S.Ct. 573, 30 L.Ed.2d 655 (1971); United States v. Wood, Wire & Metal Lathers Int’l Union, Local 46, 328 F.Supp. 429 (S.D.N.Y.1971).

In regard to the question of who is liable for back pay, it should be noted that Section 707 applies to “any person or group of persons” engaged in a pattern or practice of discrimination that inhibits the full enjoyment of rights secured by this subchapter.

Subchapter VI, Equal Employment Opportunities, of Title VII (42 U. S.C. § 2000e) secures one’s rights of equal employment as to employers, employment agencies, labor organizations, or joint labor-management committees controlling apprenticeship or other training. 42 U.S.C. § 2000e. For a person or group of persons to be liable for back pay for a pattern or practice of discrimination under Section 707, said person or group of persons must come within one of the above-named categories as defined by the subchapter.

Thus, for the parties to this appeal, only those contractors who were employers under § 2000e are liable for back pay. The District Court in its final decree ordered that the relief granted as to back pay conform to this requirement, and two contractors who were previously held liable were relieved from the back pay obligations.

Appellants also assert that claims for back pay cannot be made in this action by reason of the fact that such claims are barred by the running of the statute of limitations or laches. There is no statute of limitations delineated in § 2000e-6, and the time limitations for making a claim under § 2000e-5 are not applicable to actions under § 2000e-6. United States v. Georgia Power Co., 474 F.2d 906 at 922 (5th Cir. 1973). The appropriate statute of limitations for a § 2000e-6 action is the limitation period prescribed by the state where the court sits for an action which seeks similar relief brought in a court of that state. Id. at 923.

We do not determine the applicable state law in this appeal, for the running of the statute of limitations and laches are affirmative defenses, and such defenses must be set forth in the pleadings. Rule 8(c), Fed.R.Civ.P. The defendants in their answers did not plead the statute of limitations as a defense.

The plaintiff’s prayer for relief included a prayer that defendants be permanently enjoined from:

d. Failing or refusing to provide journeymen Negro brickmasons such compensation as justice and equity may require for the past failures to provide them with equal employment opportunities.

While in our opinion the complaint was sufficient to give notice to the defendants that they may incur a liability for back pay, the defendants must have become aware, during trial, of the possibility of such a liability, and they should have moved the trial court for leave to amend their answers under Rule 15(a), Fed.R.Civ.P. if they desired to plead the statute of limitations. Appellants have not shown where any attempt was made to amend their answers at trial, and in our search of the record we have not found that such an attempt was made.

Appellants may not assert the affirmative defenses of the statute of limitations or laches for the first time on appeal. Rule 8(c), Fed.R.Civ.P.; Strauss v. Douglas Aircraft Co., 404 F.2d 1152, 1155 (2d Cir. 1968); Badway v. United States, 367 F.2d 22, 25 (1st Cir. 1966).

It is well settled that the courts may require affirmative action on the part of defendants who are found to have violated Title VII, in order to correct the continuing effect of past discriminations. United States v. International Bhd. of Elec. Workers, Local 38, 428 F.2d 144, 149 (6th Cir. 1970), cert. denied, 400 U.S. 943, 91 S.Ct. 245, 27 L.Ed.2d 248 (1970).

Such affirmative action may include the imposition of quotas for the hiring of black workers. United States v. Wood, Wire & Metal Lathers Int’l Union, Local 46, 471 F.2d 408, 413 (2d Cir. 1973).

The District Court granted relief in the form of quotas in hiring, and required of several defendants semi-annual reports to the court. Such relief is proper as to those contractors who were found to be “employers”, as defined in 42 U.S.C. § 2000e. However, such relief may not be granted against those contractors who were joined as necessary parties under Rule 19(a), but who do not meet the criteria of an employer, as established in § 2000e. Since the statute does not cover such contractors, such relief as to them was not proper.

In a Memorandum Opinion and orders pursuant thereto, dated November 29, 1972, the District Court ordered masonry contractors Cook, Fortner, Gardner, Madewell, Moore, Norris, Sowell, Young, Brown, Buck, Duncan, Jensen, Southern, and Youngblood, for the years 1973-1975, to employ sufficient black bricklayers so that at least 5% of the total bricklayer man hours worked will be attributable to blacks.

In the Final Decree of January 26, 1973 the Memorandum Opinion of November 29, 1972 was incorporated therein by reference. The Final Decree also stated that Brown, Cook, Fortner, Gardner, Huff, Jensen, Kindig, Madewell, Norris, Palmer, Sowell, and Young were ordered to employ sufficient black bricklayers, permitmen and/or apprentices so that at least 5% of the total bricklayer manhours worked would be worked by black workers. Thus, if a contractor’s name appeared either on the list in the Memorandum Opinion of November 29, 1972, or in the Final Decree of January 25, 1973, the quotas for hiring black workers were imposed.

Of those contractors against whom such relief was ordered the following were “employers” within the meaning of the Act: Cook, Fortner, Gardner, Made-well, Moore, Norris, Sowell, and Young. As to these defendants such relief was proper.

The following contractors were not “employers” as defined by the Act: Brown, Buck, Duncan, Jensen, Southern, Youngblood, Huff, Kindig, and Palmer. Of these contractors Brown, Jensen, Huff, Kindig and Palmer are parties to this appeal. For these parties the imposition of quotas was improper and the order as to them pertaining to quotas is vacated.

(Buck, Duncan, Southern and Young-blood entered into an agreement in the District Court to hire the requisite proportion of black bricklayers, and they did not appeal from the judgment of the District Court. As to these four contractors the relief granted is valid.)

The District Court assessed costs of the litigation against several defendants, some of whom were not “employers”, and some of whom were “employers”. This was proper, for all of the defendants were properly joined as defendants, and the awarding of costs is within the sound discretion of the District Court. There has been no showing of abuse of discretion on the part of the trial Judge, and the findings made by the Court support its determination of who should be liable for costs. Those contractors who began to comply with Title VII in recent years were excused from liability for costs.

The judgment of the District Court is affirmed as modified herein.


author: WILLIAM E. DOYLE, Circuit Judge.

text:
    Charlotte Joan YATES et al., Plaintiffs-Appellees, v. UNITED STATES of America, Defendant-Appellant. EAGLE STAR INSURANCE CO., LTD., Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
    No. 73-1656.
    United States Court of Appeals, Tenth Circuit.
    April 29, 1974.

      James J. McCarthy of Magana & Cathcart, Los Angeles, Cal. (Avelino V. Gutierrez and Dennis M. McCary of Keleher & McLeod, Albuquerque, N. M., on the brief), for appellee.
    Jean A. Staudt, Atty., Dept, of Justice, Washington, D. C. (Irving Jaffe, Acting Asst. Atty. Gen., Victor R. Ortega, U. S. Atty., and Robert Kopp, Atty., Dept, of Justice, Washington, D. C., on the brief), for appellant.
    Russell Moore, Albuquerque, N. M., for plaintiff-appellee Eagle Star Ins. Co., Ltd.
    Before BREITENSTEIN, BARRETT and DOYLE, Circuit Judges.
   WILLIAM E. DOYLE, Circuit Judge.

Presented on appeal is an airplane casualty case, an action against the United States brought pursuant to the Federal Tort Claims Act, 28 U.S.C. § 1346(b). Following a trial to the court, judgment was entered in favor of the plaintiff, the widow of the pilot who died in the crash, in the total amount of $375,540, the same being loss of earnings and loss of services. Judgment in the amount of $8,500 was also entered for plaintiff Eagle Star Insurance Company, the insurance carrier on the airplane.

The crash of the airplane produced the death which occurred on August 3, 1969, at which time the pilot, Thomas A. Yates, was seeking to land a Cessna 172H at the Albuquerque, New Mexico airport. He had flown from Grants, New Mexico.

The evidence showed that although Yates was a fully licensed private pilot, he had logged only 100 hours of flight time and had executed some 150 landings and takeoffs. Yates was at the time of the crash involved in study looking to becoming a licensed commercial pilot. He had flown to Albuquerque from Grants, New Mexico for the purpose of meeting an employee of his instructor, Mr. Humphries. The Cessna 172H had been borrowed by Yates from Humphries.

On the night in question visibility was clear and extended for approximately 60 miles. Visual flight rules were in effect and air traffic at Albuquerque was said to be moderate. All aircraft was using a north-south runway, No. 17, due to the fact that the east-west runway was closed. Landings were being carried out from north to south on Runway 17 which is about 9,000 feet long. Yates had previously landed in Albuquerque on at least six occasions.

There existed an airport traffic control tower operated by the United States at the Albuquerque airport. It was manned by Federal Aviation Administration personnel. The approach control position in the radar room was handled by Donald J. Sanger and supervised by R. Nattress. The local air tower control position was manned by William H. Haines and the CAB coordinator’s position was manned by William E. Moore.

Yates arrived in the Albuquerque area on August 3, 1969, at approximately 7:46 p. m. He contacted Albuquerque approach control and requested landing instructions. At that time he informed the radar controller that he was ten miles west of the Albuquerque Vortac station, the navigational aid located near the airport. The controller responded and directed the pilot to fly a right traffic pattern into the airport and land on Runway 17. Thereafter, at 7:53 p. m„ the radar controller advised Yates to follow a TWA 707 aircraft which was then eight miles west of the airport and coming in for a landing. Yates was then given the location of the 707 and told to report when he saw it. Yates acknowledged this instruction and reported sighting it. Following this instruction, the Cessna was turned over to local approach control at the airport. The local controller can visually observe aircraft approaching the field with the exception of a blind zone in the tower which obscures the approach of Runway 17 for the first 1500 to 2000 feet. The controller told Yates to continue his approach and to follow the TWA 707 on the two mile final approach. The speed of the 707 was 140 knots and that of the Cessna was 80 knots.

Next, the local controller, from a view of the flight pattern of the Cessna, noted that it was veering in a northern direction away from the runway and so he advised Yates to keep in close behind the TWA jet. The controller was aware also that there were other planes in the area and he advised the pilot “Cessna six two fox keep your traffic close behind the TWA jet, there are others behind you.” In response to this Yates corrected his flight pattern turning east and slightly south so as to follow behind the 707. As the Cessna approached the runway, the local controller lost visual contact with it as a result of the blind zone in the tower. Prior thereto the Cessna had maintained an altitude above that of the TWA 707, but even though the controller had the Cessna monitored through a radar scope, he was incapable of determining the plane’s altitude. The TWA 707 landed slightly long on the runway, touching down at approximately 4500 feet from the beginning of the runway. It taxied to the end of the runway and turned off toward the terminal. Simultaneously with the TWA landing, the Cessna was on a final approach to Runway 17, but had dropped its altitude to approximately 200-300 feet above the ground. At approximately 300 feet from the commencement of the runway, the Cessna encountered wake turbulence from the 707. As a result of this, the pilot lost control of the airplane and it crashed, killing him and destroying the plane.

The FAA inquiry concluded that the crash “was caused by a loss of control in flight due to an encounter with wake turbulence and insufficient altitude to recover before striking the ground.”

In ruling for the plaintiff the trial court held that the United States is liable for the negligence of its airport control personnel. In particular, the court found that the negligence of the FAA controllers consisted of 1) failing to provide adequate separation between the decedent’s aircraft and the preceding TWA 707 transport aircraft; 2) advising decedent to keep his aircraft in close behind the preceding 707 jet aircraft and telling him at the same time that there were other planes behind him; and 3) failing to advise decedent of the presence of the hazard of wake turbulence caused by the 707 jet transport.

Evidence at the trial, according to the court, showed that wake turbulence is generated behind and below heavier aircraft. This turbulence is invisible and moves in a circular fashion from a vortex. It is capable of remaining for periods ranging from 10 to 12 minutes. The paths from these vortices remain until they strike the ground and are disintegrated. A small aircraft flying at low altitudes encountering wake turbulence is in a very dangerous situation.

Although the government sought to establish that the Cessna crashed as a result of stalling, the overwhelming weight of the evidence disproved this. The evidence also showed that Mr. Humphries, the instructor, had talked to Yates on the subject of wake turbulence. Humphries said that Yates had more knowledge on the subject than most pilots. At the trial he amended this to more knowledge than most pilots of his (Yates’) experience.

A trans-Texas Convair 530 Turboprop aircraft was following the Cessna in a landing pattern very closely behind the Cessna. The evidence also showed that the Cessna, after receiving the instruction to get in behind the 707, altered its flight pattern so as to come in close behind the 707.

In seeking a reversal the government, first, maintains that the trial court’s finding and conclusion that the FAA controllers were negligent was clearly erroneous. They rely on the fact that the regulations establish that each pilot is in command of and responsible for his own aircraft and has the final authority with respect to its operation, and that it is up to the pilot to exercise his own judgment as to existence of hazard and to refuse to accept instructions which he considers increase his peril. The government says that Yates was guilty of either sole or contributory negligence in flying into the wake turbulence area regardless of whether the government instructed him to follow the TWA 707 and that the local controllers were not guilty of negligence in failing to maintain proper separation between the 707 and the Cessna.

Second, the government contends that the pilot was contributorily negligent. He was flying under visual flight rule conditions and there was flight visibility for a distance of at least three miles so that he could observe all other aircraft in the area. Under these conditions, according to the government, he is required to maintain his own distances in accordance with the rules governing all aircraft. They argue that even if the government may have been negligent, it is clear that the pilot was guilty of contributory negligence and is therefore barred from a recovery. It was the obligation, so the government argues, of Yates to maintain a landing pattern slightly above that of the preceding plane and to touch down on the runway at a point beyond the touch down point of the preceding plane. This, so it is argued, Yates did not do. The government cites and relies on Sanbutch Properties v. United States, 343 F.Supp. 611 (N.D.Cal.1972); Thingulstad v. United States, 343 F.Supp. 551 (S.D.Ohio 1972); Wasilko v. United States, 300 F.Supp. 573, (N.D.Ohio 1967) aff’d, 412 F.2d 859 (6th Cir. 1969).

Third, it was not negligence on the part of the controllers to fail to warn of the existence of wake turbulence.

The trial court has made extensive findings of fact and conclusions of law on the points which are advanced. To succeed, the government must, of course, demonstrate plain error.

I.

The tower is a circular glass-enclosed room allowing observation in all directions, and it is located at the top of the air control tower and is known as the tower cab. Its lower portion has the radar room and does not permit observation.

Mr. Sanger, who operated the approach control position in the radar room, was a trainee and was supervised by a Mr. Nattress, who had no active participation in the proceedings leading up to the crash in question. In addition to the men mentioned, one William E. Moore was in the tower cab acting as liaison between the approach controller and the local controller. His function was to assist both. He passed on information from the approach controller to the local controller by telephone.

The court found that the facts which we have recited correctly described the occurrences immediately preceding the approach of the Cessna and its crash. Thus, no serious dispute exists as to the cause of the crash and as to the happenings leading to it. It is not disputed that Sanger did not give the decedent a cautionary warning regarding the existence of wake turbulence and that Mr. Haines, the local controller, did order decedent to follow the TWA 707 more closely. The judge found that the approach controller was required to consider the relative speeds of the aircraft, and that after reaching a certain point Yates became subject to the local controller, who told him to continue the same approach sequence he had been placed in. It was Mr. Haines who told the decedent to keep in close behind the TWA jet “there are others behind you.” The court found that Haines was apparently under the mistaken belief that it was necessary to get the Cessna plane to the ground so as to avoid the oncoming Trans-Texas Convair which was behind him.

The court found that the TWA touched down on Runway 17 beyond the intersection with the east-west taxiway and so had to go to the end of the runway in order to turn off. This factor, the judge found, precluded the possibility of an emergency landing by decedent’s plane at a point beyond the touch down of TWA 707. The court went on to find that the expert testimony on behalf of the government as to the feasibility of the Cessna effecting a landing beyond the TWA was rejected as “unpersuasive.”

The judge further found that the instructions from Mr. Haines in the tower deprived the decedent of any choice. The judge reasoned that after all, the controller had a better view and more complete knowledge of the air traffic pattern, whereby the decedent had a right to rely on this instruction. The decedent did not have a view of the surrounding circumstances which would permit him to reject the decision of the controller in favor of a decision of his own. At the time of the crash the court found that Yates could do nothing to prevent it since he no longer had control of his aircraft.

II.

We conclude that the trial court’s findings and conclusions that the controllers were negligent which was the proximate cause of the collision and of Yates’ death are supported by the record.

The relationship between the air controller and the pilot of a plane which is landing or taking off creates a duty of care on the part of the controller. The government argues that plaintiff had no right to rely on instructions which the air controller gave him, and it was up to him to form his own judgment. We fail to see the controller’s directions and warnings as being merely advisory. It is true that the regulations state that a pilot is directly responsible for and is the final authority as to the operation of the aircraft, and they also' say that in an emergency the pilot may deviate from the regulations to the extent required to meet the emergency. He must, however, when he has deviated, send a written report of the deviation to the administrator upon request. What appears to be a conflict can be reconciled. A pilot has a choice before he commits himself to a landing, but after the commitment he is not free to change his course and thereafter he is controlled by the controller. Along this same line we note that 49 U.S.C. § 1430(a)(5) declares that it is unlawful for any person to operate aircraft in air commerce in violation of any other rule, regulation, or certificate of the Administrator. This supports our view that what appears to be a conflict between the regulation declaring that the pilot is in command of the aircraft and the regulations giving traffic control authority to the government controllers are consistent after all. This becomes clear in light of considering that if the pilot could depart from the control of the tower at any time in his discretion, the airfield traffic would soon become a shambles. We cannot, therefore, accept the view that the controllers with the complex equipment which they employ are there merely to give advice. The recognition of these functions as legal obligations gives rise to an attendant duty to perform these functions with reasonable care.

At bar the pilot Yates was peculiarly susceptible to the control of the controllers since he was piloting a light plane in between heavy jets. Once he received and followed the controller’s instructions with respect to landing he was not free to disregard the directions given and exercise independent initiative. For all practical purposes, he was in complete control of the tower. The hazardous traffic pattern, the direction which enhanced the danger and the failure to direct as to turbulence all contributed to the tragic result.

As to the failure to warn of the wake turbulence: Once Yates was caught in the traffic sequence which produced his death it is questionable whether any warning as to wake turbulence would have helped, but prior thereto such a warning could have been very significant. Surely the controllers were obligated not only by the Manual to give such a warning, but also the traffic condition was fraught with hazard. In relationship to the extent of the hazard the warning would have called for very little effort, and so based on this analysis the trial court was correct in holding that it was negligent to fail to warn.

It is familiar law that one in the care and custody of another where the circumstances deprive the person of an ordináry opportunity to protect himself has a right to expect that the person exercising the custody shall use reasonable care and caution for his protection. See Restatement of the Law of Torts Second §§ 314 and 320.

The cases cited and relied on by the government are factually distinguishable. We have examined Sanbutch Properties v. United States, supra, Lightenburger v. United States, 460 F.2d 391, 9th Cir. 1972, cert. den. 409 U.S. 983, 93 S.Ct. 323, 34 L.Ed.2d 248, and Thingulstad v. United States, supra. In Lightenburger the wing tip vortices or turbulence had been created some 12 minutes before. Although the district court found that this caused the crash the court of appeals reversed. It rejected the contention that the controllers could be held responsible for a condition allegedly created at such a remote time. The court held that the evidence was insufficient to establish that this was the cause and also held that there was no duty to warn as to wing tip vortices in view of the time lapse.

In Sanbuteh the trial court held that the proximate cause of the crash was the negligence of the pilot who, it was held, ignored the presence of the turbulence. It is true that the judge in San-butch took a very narrow view of the duty of the controllers, but this was not the factor which produced the result. Thingulstad is also distinguished on its facts because there it was decided that the heart attack of the pilot was the cause of the crash.

It has long been recognized, however, that negligent discharge of responsibilities in situations like the present one can result in federal government liability under the Federal Tort Claims Act. See Indian Towing Co. v. United States, 350 U.S. 61, 76 S.Ct. 122, 100 L.Ed. 48 (1955). In this case there was a negligent failure to tend a lighthouse, whereby it was held that where the government undertakes to warn of danger and thereby induces reliance, it is subject to liability for failure to discharge its duty. Similarly, the decision to operate air control towers and maintain air traffic separation is a legislative one and negligent operation of the facilities subjects the United States to liability. United States (Eastern Air Lines) v. Union Trust Co., 95 U.S.App.D.C. 189, 221 F.2d 62 (1955), affirmed, 350 U.S. 907, 76 S.Ct. 192, 100 L.Ed. 799; Air Transport Associates v. United States, 221 F.2d 467 (9th Cir. 1955); Ingham v. Eastern Air Lines, 373 F.2d 227 (2d Cir. 1967), cert. denied, United States v. Ingham, 389 U.S. 931, 88 S.Ct. 295, 19 L.Ed.2d 292.

We have found no cases that are comparable to the present one in which the controllers directed the pilot to fly close to the much heavier plane which when landing was almost certain to cause wake turbulence. As we view it, this is the factual point of differentiation which deserves attention and emphasis. It is not correct to say that regardless of facts there can never be a recovery by plaintiffs who stand in the shoes, so to speak, of a pilot who has been the victim of wake turbulence. See, for example, Wasilko v. United States, 300 F.Supp. 573, aff’d, 412 F.2d 859 (5th Cir. 1969), and cf. United States v. Furumizo, 381 F.2d 965 (9th Cir. 1967).

III.

We agree also with the trial court’s determination that the suit is not barred by contributory fault on the part of decedent. The government’s contention that Yates was guilty of contributory negligence is based wholly on the fact that he failed to avoid the crash and thus was unable to cope with the wake turbulence. They stress the fact that he was fully aware of its existence and of methods for avoiding it. It is said that he could have done so if he had maintained a landing pattern slightly above that of the preceding plane and had touched down on the runway at any point beyond the touchdown point of the preceding plane, but there is no showing that he failed to observe these procedures. The loss of control occurred after the 707 had touched down and while the Cessna had altitude of 200-300 feet. There is reason to believe, therefore, that the pilot would have touched down beyond the point where the TWA 707 landed had the failure not occurred before. Therefore, we are of the opinion that the trial court’s conclusion that the standard landing procedure could not be followed in this instance is fully supported by the evidence. It seems clear to us as it did to the trial court that the closeness of the sequence was the critical factor and this was brought about by the controller. It does not answer any of this to say, as the government does, that the pilot flew into the wake turbulence. Accordingly, then, there is no basis for holding that the trial court committed plain error in its refusal to find and conclude that Yates was guilty of contributory negligence.

The judgment of the district court is affirmed.

APPENDIX

HIGHLIGHTS OF THE TESTIMONY

Witness Donald J. Sanger

The controllers, Mr. Sanger, who was in the approach position at the time of the crash, and Mr. Haines, who was the local controller, were called by the plaintiff as adverse witnesses. Sanger was shown to have been a trainee. At the time he was receiving on the job training. The approach controller operates from radar. Sanger, according to his testimony, had not prior to the instant crash known that wake turbulence was capable of turning an airplane over. He recognized the need for a local controller to give a caution but did not recognize a similar need on the part of an approach controller. The local controller, at least according to Sanger, had to exercise a judgment. As a trainee, Sanger was not allowed to work as a controller unsupervised and a Mr. Nattress was aiding him on the instant occasion. It was his obligation to put the aircraft in an approach sequence, whereas the local controller can change this sequence for the purpose of landing. It was also his duty to see that two airplanes did not run over each other in approaching the airfield. Speed as well as direction and altitude are factors which determine their sequence. He acknowledged that the Cessna which crashed was sequenced behind the TWA 707. He did not consider the effect of wake turbulence, maintaining that it was not his responsibility to do so; that the extent of his obligation was to put them in sequence and then turn them over to local control.

He described the communications which he had with Yates from his first contact some ten miles west of the airport until he turned him over to the local control for landing.

Sanger had five airplanes that he was talking to in addition to the Cessna N-1662F and he was responsible for getting these aircraft into proper approach sequence. There was some confusion as to the approach sequence growing out of the fact that another Cessna was permitted to precede the TWA 707 in landing. This airplane had approached the field and contacted the tower from a short distance out, but Sanger mistakenly believed that the Cessna which crashed had been placed there and advised the Texas International plane that he was to follow the TWA instead of the six two fox trot. There is reason to infer that this resulted in the shortening of the distances of the approaching planes.

Witness William A. Haines

The witness Haines, who was the local controller on the occasion in question, testified describing the tower in relation to the field and the control zone of five miles which is the area in which the local controller operates. He said that his sole source of information concerning the phenomenon of wake turbulence was the Airman’s Information Manual. He realized that wake turbulence could cause a pilot to lose complete control of his aircraft and that it could result in a crash at a low altitude. He was also aware that he was required by the Manual to give an advisory warning if he felt that wake turbulence was a hazard. At the time of his incident the factors that he would have considered were whether the following aircraft would go below the flight pattern of the aircraft in front, but since this incident he acquired further information having seen a film on the subject of wake turbulence.

NOTE: From reading the testimony of these two controllers, one infers a reluctance on their part to take initiative. Their view appears to be that each pilot is on his own.

Witness Vance Breese

Witness Breese testified as an expert on behalf of the plaintiff. He was a pioneer flyer with a wide variety of experience. On the question of wake turbulence warning, Breese said that a wake turbulence caution should have been given at the time that the local controller ordered Yates to follow the 707 closely. At this time it would have allowed Yates to have taken corrective measures.

Breese also testified that there was no harm or burden in giving a wake turbulence warning. From a study of all the facts, Breese stated that there existed a reasonable likelihood that the accident could have been avoided had the pilot been given a wake turbulence warning. He also testified that there should be at least five miles of space behind a landing jet.

He further said that the long landing of the 707 made it impossible for Yates' Cessna to land; that the 707 closed the entire runway to him. An additional statement of the witness Breese was: “I was appalled to learn that these controllers had very little knowledge of wake turbulence.”

Witness Francis M. Me Dermott

Witness Me Dermott also testified as an expert witness. He stated that in his opinion the Manual contemplates that the controllers actually are to control traffic and are to have responsibility for life and property and are not mere ad-visors. Me Dermott concluded as to-violations of duties by the controllers as follows:

Principally, the violation which runs throughout the sequence of the handling of the aircraft, was the failure to provide the warning of wake turbulence coupled with the failure to provide adequate separation as required by the manual. And in developing this I used the transcripts that I had made, both of the approach control and the local control, and established points, specific points, at which these violations occurred at repeated intervals.

He then went on to call specific attention to the Terminal Air Traffic Control Manual provisions which point out that the Manual requires that adequate spacing be maintained and that the sequence of arriving airplanes be established and that cautionary instructions as to wake turbulence be given. Me Dermott also said that even during the approach phase of the landing there should have been a wake turbulence caution given. He also said that even in the approach to the airport, it should have been plain to that controller that the Cessna and the 707 were too close regardless of whether the Cessna landed first or the TWA 707 landed first.

On the question whether the approach controller should give a wake turbulence warning, Me Dermott said:

A. I read that testimony in his deposition and I do not agree with it under these circumstances, as radar was being used in Albuquerque at this time. He perhaps was confusing the service that he was rendering to 62 Fox, to a standard use between instrument flights under instrument flight rules and instrument flight separation, which is measured in terms of a thousand feet of vertical separation and certain number of miles of lateral separation.
His use of the radar, however, as had been adopted by the F.A.A. employed in Albuquerque was merely an extension of the duties and functions of the local controller. He was providing V.F.R. advisory service through the use of his radar, and as such he was simply extending the capability of the local controller and had the requirement to issue the same advisory to any aircraft utilizing this service that would be given by the local controller if he was seeing this aircraft with his eyes.

Defense Witnesses (expert)

Witness William John Harris

Harris testified as an expert witness for the defense. He did not personally observe the crash. He had extensive flight experience, including 5,300 hours flying time. He was a chief pilot and flight instructor for an aircraft company located at the Albuquerque airport.

Harris expressed several hypothetical opinions based on the factual circumstances of the crash of Yates’ plane. He said that 250-300 feet would not be a safe altitude for a Cessna to be flying, based on the estimations of where defendant’s eye witnesses first spotted the Cessna. With respect to the Albuquerque airport, he stated that it was not the usual practice to have small planes landing directly behind large planes, but that given the fact that one of the runways was closed on the day of the crash this type of sequencing would not be unusual. Harris also expressed the opinion that, based on the estimations of where the 707 touched down on Runway 17, there would be enough usable runway left for the Cessna to touch down beyond it and land properly. Harris testified generally about his practices in instructing his students that they are the final authorities on operation of their aircraft, that instructions of controllers under visual conditions are advisory only and that the pilot has the final responsibility as to whether he will take or not take advisory instructions. Harris expressed his opinion that for safe operation a pilot of a small craft should operate above the flight pattern of a preceding large craft and touch down beyond the touch down point of the larger craft. He also stated that even if a controller hadn’t given a wake turbulence warning, he would still be aware of the danger of turbulence if he were following a large plane and would govern his actions accordingly.

Harris acknowledged on cross that a wake turbulence warning would be a useful piece of information from the controllers to a pilot, but asserted that he or his students wouldn’t need one. He also acknowledged that the information that there was traffic behind a pilot would put pressure on him as far as making a decision whether to pull out of sequence, but stated that the pilot still would have the freedom to make the final decision as to whether to attempt to land or to execute a turn around.

Witness William Edwin Moore

Moore was the cab coordinator at the Albuquerque airport tower at the time of the crash. His memory of the incident was almost nil, and could not be refreshed by looking at his statement. Counsel went over his statement with him, which indicated that the 707 had landed long and missed its initial departure gate from the runway. It continued taxiing down the runway, and Moore was still watching it as he received a call that the Cessna had flipped over and he saw a cloud of dust in that vicinity.

There was some testimony about the partially unrecorded conversation with the approach controller regarding the confusion about changing the sequence of the plane that was originally put behind the Cessna.

Witness Bernard Curtis

Curtis was an F.A.A. official in the Air Traffic Supervision Section of F.A. A. in Washington, D.C. His formal job title was air traffic control specialist assistant and staff director of air traffic, Washington. His testimony corrected some errors in the transcription of the recorded transmissions of the air controllers on the evening of the crash. He testified generally about the meaning of various F.A.A. regulations and pamphlets. He stated that pilots were responsible for setting up their own separation from planes ahead of them under visual flying conditions. He also stated that arrival radar controllers don’t give wake turbulence warnings, that these are given, if at all, by local controllers. He expressed an opinion that the sequencing which took place in this incident was all proper, correct and safe. Curtis asserted that the relationship between pilots and controllers under visual conditions is a cooperative situation, in which the controller assumes that the pilot won’t put himself into an awkward or dangerous position.

On cross, he acknowledged that there had been a “misunderstanding” between the approach controller and the local controller about the sequencing of the Cessna and planes ahead of it and behind it.

COMMENT: The expert conclusions were controverted, but the court found the facts, including the expert conclusions, favorably to plaintiff.

      . “Cessna six two foxtrot continue approach. Cessna six two foxtrot follow TWA jet two mile final.”

      . A brief summary of the supporting testimony of the judge’s findings is appended to this opinion.

      . One of the experts for plaintiff said that the approach controller and the local controller were both required to warn of turbulence and could have avoided the accident had they done so. The other expert said that the local controller should have warned of wake turbulence Just prior to the time that he ordered Yates to get behind the 707 and in between that plane and the Convair Turbo-prop from Texan.

      . The specific testimony is as follows:
      THE WITNESS: No. he had the opportunity when the instruction was issued to come in close, follow the 707 closely, at that time he could have altered his course and avoided the wake turbulence.
      THE COURT: If at the very time the unfortunate instruction was given, a wake turbulence caution had been added—
      THE WITNESS : Yes, sir.
      THE COURT: — then at that point the pilot might have been able to avail himself of some corrective measure?
      THE WITNESS : That is correct. His corrective action, if I may add this, Your Honor, would have been, of course, to make a missed approach, to go on out and re-enter the traffic pattern.
      THE COURT: Why did the pilot need the control tower to add the caution? Would it not have been reasonable to expect that a pilot committed to such an unfortunate course would have himself asked for additional information, or have declined the instruction?
      THE WITNESS : No, sir, the student pilot would not. Under those circumstances, as I have said before, he is so intent upon landing and obeying correctly the instructions of the controller, that he doesn’t worry about anything else.
      THE COURT: He is committing his safety and the safety of his airplane to the control tower?
      THE WITNESS : That is correct.


author: WEIS, Circuit Judge.

text:
    PENN PACKING COMPANY, INC., Appellant, v. AMALGAMATED MEAT CUTTERS AND BUTCHER WORKMEN OF NORTH AMERICA LOCAL 195 et al., Appellees.
    No. 73-1963.
    United States Court of Appeals, Third Circuit.
    Argued Feb. 26, 1974.
    Decided May 31, 1974.

      Tom P. Monteverde, Max L. Lieberman, Pelino, Wasserstrom, Chucas & Monteverde, Philadelphia, Pa., for appellant.
    Charles G. Nistico, Edward Davis, Howard J. Casper, Mark P. Muller, Davis, Casper & Muller, Philadelphia, Pa., for appellees.
    Before HUNTER and WEIS, Circuit Judges, and MILLER, District Judge.
   OPINION OF THE COURT

WEIS, Circuit Judge.

The recurring question of a union’s responsibility for losses incurred by an employer as a result of a wildcat strike is before us in this appeal. We conclude that the district court’s resolution of factual issues in favor of the union was not erroneous and that a proper interpretation of the collective bargaining agreement supports the judgment in favor of the defendant.

Two hundred members of Local 195 participated in an unplanned and unexpected work stoppage at the plaintiff-employer’s plant in Philadelphia, Pennsylvania in the forenoon of October 6, 1971. At 10:00 P.M. on that same day, the district court issued a restraining order to end the walkout. However, the workers did not return until two days later, resulting in substantial loss to the plaintiff. The employer thereafter sought damages from the union alleging that it violated a no-strike clause in the contract.

The trouble at the plant began when the 4:00 A.M. cutting room shift, which ordinarily had its “lunch” break at 8:30 A.M., was ordered by the plaintiff’s foreman to begin 15 minutes earlier. The foreman took this action because a conveyor belt had malfunctioned and had brought operations in the cutting room to a halt.

Some of the employees objected and their newly elected steward, Joseph Simon, so advised the foreman. After some discussion, the foreman called the company president, Martin Lipoff, to the scene, and Simon requested the plant’s steward, Charles Cole, to join in the negotiations. Lipoff advised the stewards that they would be discharged if they did not abide by the foreman’s order. When they failed to change their position, Lipoff carried out his threat. It was then about 8:30 A.M., the regularly scheduled time for the lunch break, and all employees walked out. They did not return at 9:00 A.M. when the usual half hour lunch period ended.

In the interim, both Cole and Lipoff spoke by telephone to Albert Frankenfield, the union business agent, advising him of the problem.

Cole and Simon then spoke to the employees standing outside the plant and recommended a return to work. At this time Frankenfield and the union secretary-treasurer, James T. O’Malley, arrived at the plant and also urged the men to end the walkout. The employees, however, refused to do so, boisterously asserting that they would not return until Cole and Simon were reinstated.

Frankenfield and O’Malley went into the plant to negotiate with company officials, but Lipoff refused to rescind his discharge order. The union officers returned to the area outside the plant where the employees were assembled and again urged an end to the walkout. They were unsuccessful, the crowd emphatically refusing to follow instructions. Later that mo.rning, on a third occasion, the union’s efforts to get the men back to work had a similar, unsatisfactory result.

A meeting of the employees was scheduled to be held in the union hall at 10:00 A.M. on the following morning, October 8, 1971. Sentiment of the many who attended was to continue to remain away from work and was not changed until the officers, in a most unusual action, proposed that the union pay the salaries of Cole and Simon until an arbitrator had ruled on the propriety of their discharges. This unprecedented suggestion was acceptable to the assembled workmen, and work resumed on the following day at 4:00 A.M.

The contract between the ' company and Local 195 included a no-strike clause which had been incorporated in various successive agreements between the parties for about twenty-five years. Apparently, its wording during that time had not been changed. It reads as follows:

“The Union for itself and for its individual members agrees and guarantees that there shall be no strike, stoppage of work, slowdown, or other interference with production. The Employer agrees that he shall not lockout his employees during the term of this agreement . . .” (Article XI, § 1).

The plaintiff contends that the wording in this clause makes the union liable for any loss to the employer caused by work stoppage whether authorized by the union or not — what might be called a “no fault” duty of indemnity on the part of the union.

The district court reasoned that to impose such an unusual obligation, very explicit language in the contract would be required. We agree with this interpretation.

The costs of wildcat strikes are apt to be high, a fact of which employers are keenly aware, but which is certainly not unknown to union officials. Understandably, employers are anxious to secure all the protection possible to prevent such losses and, if possible, to secure indemnity. It is most unlikely that a union would shoulder such a large risk without clearly stating its intention to do so.

If the word “guarantees” were eliminated from the no-strike clause, it is clear that there would be no obligation on the part of the union to pay for any loss as a result of an unauthorized strike. The clause then would read: “The Union for itself and for its individual members agrees that there shall be no strike, stoppage of work, etc.” Seemingly, it is the addition of the word “guarantees” that leads the plaintiff-employer to argue for an indemnity agreement. Webster’s Third New International Dictionary, 1007 (1968 ed.), defines “guarantee,” inter alia, as:

“ . . . undertake to answer for the debt, default, or miscarriage of (another): become responsible for the fulfillment of (the agreement of another) . . .”

The employer urges adoption of the first definition, that is, that the union agreed to answer for any loss sustained by the employer resulting from default by the employees. But we should interpret the words in a contract of this nature to give them their ordinary and reasonable meaning. When viewed in this light, common experience leads to the conclusion that at the time the parties negotiated this clause, the intention was to utilize the second cited definition. It was in the minds of the parties, therefore that the union agreed to become responsible for fulfillment of the obligation of the employees to continue to work, pending arbitration of disputes. Thus, the union did not agree to pay for any loss to the employer from an unauthorized strike but did commit itself to use its best efforts to end the stoppage as soon as practicable. In effect, this is the interpretation that the trial judge found to be applicable and with which we agree.

To apply such a meaning to the language in the agreement is consistent with the decisions in Yale & Towne Manufacturing Co. v. Local Lodge No. 1717, 299 F.2d 882 (3d Cir. 1962); Pennsylvania Greyhound Lines, Inc. v. Amalgamated Association, 14 F.R.D. 11 (W.D.Pa.1953); and Eazor Express, Inc. v. International Brotherhood of Teamsters, etc., 357 F.Supp. 158 (W.D.Pa.1973). Each of the foregoing cases involved different contractual terms, but the tenor of the opinions is that liability would not be imposed upon a union for an unauthorized strike in the absence of specific language so requiring. We think that such a construction is fair and reasonable.

The district court found that as soon as responsible officials of the union learned of the walkout, they, in good faith, exercised every available means, including a novel and unprecedented procedure to end the work stoppage. This finding of fact, which is not clearly erroneous, distinguishes such cases as Wagner Electric Co. v. Local 1104, 361 F.Supp. 647 (E.D.Mo.1973); Eazor Express, Inc. v. International Brotherhood of Teamsters, etc., supra; and Adley Express Company et al. v. Highway Truck Drivers and Helpers, Local No. 107, 349 F.Supp. 436 (E.D.Pa.1972).

One other important factual issue has been resolved against the plaintiff, and that is that the trial court has found that the union did not sanction, approve, or incite the strike. Thus, such cases as Vulcan Materials Co. v. United Steelworkers of America, 430 F.2d 446 (5th Cir. 1970), cert. denied, 401 U.S. 963, 91 S.Ct. 974, 28 L.Ed.2d 247; Wagner Electric Co. v. Local 1104, supra; Eazor Express, Inc. v. International Brotherhood of Teamsters, etc., supra; and Adley Express Company et al. v. Highway Truck Drivers and Helpers, Local No. 107, supra, are not on point. In each of those cases the court found that there was, in fact, action by the union which was the cause of the work stoppage.

The plaintiff also argues that the union should be held responsible under a theory of agency for the acts of the two stewards. Vulcan Materials Co. v. United Steelworkers of America, supra. But again, the employer’s contention has no strength because it runs contrary to a finding made by the trial court that the stewards tried to persuade the men to return to work and that they did not incite the strike or ratify the employees’ action.

The judgment of the district court will be affirmed.

      . The arbitrator ultimately reinstated the men but without pay for the seven week interval from the date of the walkout to the time of the award.

      . As the trial court further points out, even assuming a situation favorable to the plaintiff, which we are not required to do here, that the stewards’ conduct was union-approved by implication, it was specifically and immediately overruled and countermanded by senior union officials. The agency problem is one of fact, was resolved adversely to the plaintiff, and affords no basis for relief.

      . See 3 Corbin on Contracts § 535.