author: RIVES, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Kenneth L. MUSGRAVE and Marshall Womack, Defendants-Appellants.
    No. 72-2305.
    United States Court of Appeals, Fifth Circuit.
    June 29, 1973.
    As Modified on Denial of Rehearings Aug. 2, 1973.
    Certiorari Denied Nov. 12, 1973.
    See 94 S.Ct. 447, 450.

      Clifford W. Brown, Lubbock, Tex., for Womack.
    Ted M. Kerr, Midland, Tex., J. Edwin Smith, Houston, Tex., for Musgrave.
    William S. Sessions, San Antonio, Tex., Ralph Harris, El Paso, Tex., U. S. Attys., Reese L. Harrison, Jr., San Antonio, Tex., for plaintiff-appellee.
    Before RIVES, GOLDBERG and MORGAN, Circuit Judges.
   RIVES, Circuit Judge:

Appellants, Kenneth L. Musgrave and Marshall Womack, along with Jack Bryant and Homer E. Koon, Jr., were charged in a seven-count indictment with violation of 18 U.S.C.A. §§ 371, 657 and 1006 stemming from their involvement in a purported plot to defraud the Home Savings Association of Odessa, Texas. Appellants’ convictions in separate, prior trials were both reversed by this Court. On retrial below, Mus-grave was found guilty under Counts 1, 2, 4 and 6 and received a five-year concurrent sentence on each Count. Womack was convicted on Counts 1, 2 and 6 and acquitted on Count 4. He received a three-year concurrent sentence on each Count.

Appellants’ able counsel weave a hy-pertechnieal web of ingenious arguments contending that the trial court made at least ten reversible errors. Nonetheless, we find that each appellant received a fair trial and we affirm.

THE PLOT TO DEFRAUD

The complex series of financial transactions which form the heart of the alleged fraud are lucidly delineated in this Court’s prior opinions in United States v. Musgrave, 5 Cir. 1971, 444 F.2d 755, and United States v. Womack, 5 Cir. 1972, 454 F.2d 1337. We merely sketch the factual outline necessary for rational discussion of the contested portions of the trial below.

The government alleged, and the jury must have found, the existence of a single multi-stage conspiracy which had as its central purpose defrauding the Odessa Home Savings Association.

According to the prosecution, Mus-grave, then Chairman of the Board of the Association, arranged for the granting of two loans — one to Womack and the other to Womack’s nominee, Koon. The loans were designed to enable Womack to purchase Musgrave’s controlling interest in the Association [56% of the total outstanding shares]. Musgrave’s attorney, Bryant, prepared the contract, disbursed the loan proceeds, and collected a large fee.

The two loans, purportedly prompted by Musgrave’s manipulations, consisted of a $960,000 loan to Womack secured by Womack’s interest in the Trans-American Building in Fort Worth, Texas, and a $500,000 loan to Koon secured by a 1,670 acre farm near Toyah, Texas.

The various charges in the indictment stripped to their core comprise one basic allegation — that the four individuals named in the indictment misled the Association into making two extraordinarily large loans secured by grossly inadequate collateral. The strength of this central allegation rests almost entirely on the testimony of two government, expert witnesses, Charles Herman and E. T. Compere, who calculated the fair market value of Womack's interest in the Trans-American Building to be $145,000 and $232,000, respectively. Compere also placed a $110,000 value on the Toyah farm.

Compared to the testimony of Herman and Compere, the original appraisals submitted to the Association by Mus-grave (which set the value of Womack’s interest in the Trans-American Building at $1,750,000 and the value of the Toyah farm at $667,000) were outrageously inflated.

ISSUES ON APPEAL

Musgrave raises eight issues on appeal, and Womack raises ten. With a few exceptions, each appellant seeks reversal on the same grounds. Some of the issues overlap, and others are too ephemeral to deserve extended discussion. Those asserted errors which merit appellate consideration are set out below with Musgrave’s and Womack’s distinct positions noted in the instances where they differ.

I. AIDING AND ABETTING AN ACQUITTED PRINCIPAL

A. Count 4 — Count 4 of the indictment charged Musgrave and Womack with aiding and abetting Bryant who allegedly shared in the proceeds of the fraud. Both Appellants argue on appeal that Bryant’s acquittal in the first trial constitutes a binding judicial pronouncement that Bryant’s act was innocent, thereby absolving appellants from any crime predicated upon aiding Bryant.

In a three-pronged response, the government argues that Bryant’s acquittal does not preclude conviction of Mus-grave and Womack in a subsequent trial under Count 4 because:

1) Conviction of a principal is not a prerequisite to conviction of the principal’s aider or abettor; the only indispensable element in the conviction of the aider is the existence of a criminal act.

2) The holding in United States v. Musgrave, supra, that no substantial evidence existed to support the jury’s verdict on any of the counts against Bryant established only that the government had failed to prove its case against Bryant beyond a reasonable doubt; it did not clothe Bryant’s act with a permanent cloak of innocence.

The testimony of Nathan Brown [App. pp. 333-370], not available at Bryant’s trial, produced additional evidence at the second trial shedding new light on Bryant’s link with the alleged fraud.

3) The court in United States v. Musgrave, supra, after ordering Bryant acquitted and reversing the conviction of Musgrave, remanded the case against Musgrave as to Count 4 impliedly endorsing reprosecution of Musgrave as Bryant’s abettor, or at least recognizing the possibility of such reprosecution.

We agree with the government. Bryant’s acquittal does not foreclose appellants’ convictions under Count 4.

Neither of the two principal cases upon which the appellants rely — Shut-tlesworth v. Birmingham, 1963, 373 U.S. 262, 83 S.Ct. 1130, 10 L.Ed.2d 335, and Edwards v. United States, 5 Cir. 1960, 286 F.2d 681 — are dispositive of the issue presented here.

The two petitioners in Shuttlesworth, Negro ministers charged with inciting and aiding Negro students in a “sit-down demonstration,” were held incapable of being guilty of aiding principals whose own convictions had been overturned on the ground that their peaceful sit-down demonstration was a constitutionally protected act. Hence, the court merely reiterated the long-standing maxim that “there can be no conviction for aiding and abetting someone to do an innocent act.”

In Edwards v. United States, this Court reversed Edwards’ conviction for aiding and abetting the principal, Evans, on the ground that the trial court’s charge to the jury erroneously directed a verdict of guilty against Edwards by referring to Evans’ guilty plea when no documentation establishing the existence of the guilty plea had been introduced.

Neither of these cases control a situation like the instant case. Shuttles-worth stands for the proposition that an express judicial ruling that the principal’s act was constitutionally protected [i. e., innocent] precludes any convictions for aiding that act. In the present case, there has been no immutable ruling that Bryant’s act was innocent; only a holding that insufficient evidence was developed in the first trial to establish Bryant’s guilt beyond a reasonable doubt. Edwards merely requires that sufficient evidence be presented to the jury to provide a basis for establishing the guilt of the principal before anyone can be convicted of aiding that principal. In the instant case, the prosecution did present evidence purportedly implicating Bryant in the scheme to defraud and some of that evidence was not available at the prior trial of Bryant.

The government is, of course, barred by the Sixth Amendment from re-trying Bryant, but Bryant’s acquittal is not res judicata as to Musgrave and Womack.

A judgment in a criminal case operates as res judicata in a second criminal case only where the parties to both proceedings are identical. Smith v. United States, 6 Cir. 1957, 243 F.2d 877; United States v. Wapnick, D.C.N.Y.1961, 198 F.Supp. 359, aff’d 2 Cir. 1963, 315 F.2d 96, cert. denied, 374 U.S. 829, 83 S.Ct. 1868, 10 L.Ed.2d 1052. See 9 A.L.R.3rd 203, 215. A judgment of acquittal of one defendant in a prior trial does not operate as res judicata in the prosecution of a second defendant in a later trial, even where the same transaction is involved and the second defendant is charged as an accessory to the first. Roberts v. People, 1938, 103 Colo. 250, 87 P.2d 251, cited in Annotation, 9 A.L.R.3rd 203, 218.

In the instant case, the doctrine of res judicata is inapplicable. The defendants in the two prosecutions are not identical. New evidence was presented at the second trial from which the jury could properly determine that the principal, Bryant, had sufficient knowledge of the fraud to establish his commission of a criminal act.

B. Count 1 — In Count 1 of the indictment, all four defendants were charged with conspiring to defraud the Odessa Home Savings Association. Of the twenty-three overt acts assertedly committed in furtherance of the conspiracy, eight were attributed to Bryant and Koon.

Citing Herman v. United States, 5 Cir. 1961, 289 F.2d 362, as authority, appellants argue that the trial court committed reversible error in sustaining their convictions while their coconspira-tors were acquitted in a prior trial on the same charge. Appellants further contend that, even if they can properly be found guilty of conspiring with acquitted codefendants, the prosecution is precluded from proving the conspiracy through overt acts attributable solely to the acquitted conspirators.

The appellant in Herman v. United States, supra, was indicted along with two others for conspiring to receive stolen goods in interstate commerce. The conspiracy count alleged two overt acts. One was expunged, and the other was allegedly committed by Herman’s two co-defendants who were both acquitted. In reversing Herman’s conviction, this Court held that,

“To complete the crime of conspiracy at least one of the conspirators must be charged with the performance of at least one overt act in furtherance of the conspiracy [citing cases].” 289 F.2d at 367. In Herman, the verdict? were returned by the same jury in a single joint trial.

As a general rule, the conviction of only one defendant in a conspiracy prosecution will not be upheld where all the other alleged coconspirators are acquitted, Farnsworth v. Zerbst, 5 Cir. 1938, 98 F.2d 541; Thompson v. United States, 5 Cir. 1955, 227 F.2d 671; 91 A. L.R.2d 700, 705; 97 A.L.R. 1311, 1316. This rule has withstood the criticism voiced in People v. Rizzo, 246 N.Y. 334, 158 N.E. 888, 889, 55 A.L.R. 711, that a not guilty verdict is not necessarily synonymous with a declaration of innocence.

However, it is .also generally held that where two or more defendants in a conspiracy prosecution have been lawfully convicted, the fact that additional defendants have been acquitted is immaterial. Annotation, 91 A.L.R.2d 700, 704; United States v. Austin-Bagley Corp., 2 Cir. 1929, 31 F.2d 229, 233.

In the present case, two conspirators have been convicted, not just one, and, unlike the situation in Herman, overt acts were attributed both to the convicted defendants and to. those theretofore found not guilty.

The authorities discussed are not precisely applicable to the instant situation, .because here separate trials were had. In Annotation, 91 A.L.R.2d 700, 731, the note author refers to a Nebraska case, Platt v. State, 1943, 143 Neb. 131, 8 N.W.2d 849, involving a situation analogous to, but chronologically the reverse of, the present case. There one defendant was convicted of conspiracy while his coconspirator, tried separately and subsequently, was acquitted. The first defendant then appealed, and the Nebraska court held that, unlike a situation in a joint trial where failure of proof as to one conspirator would amount to failure of proof as to both, in consecutive trials the acquittal of the conspirator in the second trial amounts to no more than failure of proof as to him. We are impressed by Justice Carter’s scholarly opinion for the Nebraska Supreme Court. After an exhaustive discussion of the few pertinent authorities, he concluded :

“The rule contended for by defendant requires consistent, verdicts at separate trials. We know of no sound reason for demanding such a result, unless such verdicts stem from the identical evidence. It is not unusual in other types of crimes for one of two defendants to be convicted and the other to be acquitted where both equally participated in the same crime. Can it be said that the law is so consistent that the acquittal of one affects a discharge of the other? The question answers itself. It seems illogical to say that after one conspirator has been properly convicted he may have a second opportunity to escape punishment by the verdict in another case in which the evidence was altogether different and in which he may not even appear or testify.”

8 N.W.2d 855.

The same rationale applies with equal force to the converse chronology of the instant case. Musgrave and Womack were convicted at a second trial where new and arguably significant evidence was introduced. Overt acts were allegedly committed both by appellants and by their acquitted eodefendants. Assuming that the jury convicted appellants on the strength of the overt acts committed by their acquitted coconspirators, under the rationale of Platt, they might properly have done so. If, of course, the jury convicted appellants on the strength of the overt acts attributable to them, then the general rule that two or more conspirators may be convicted while others go free would be applicable.

II. BURDEN OF PROOF ON GOOD FAITH DEFENSE

In his charge to the jury on the claimed defense of good faith, the trial judge stated that:

“As I have told you good faith on the part of the Defendant is a complete defense to the charge alleged in the indictment. For example, if you believe beyond a reasonable doubt that the Defendant, Musgrave, in good faith believed the market value of the collateral for the loans was adequate, or that he in good faith relied on the appraisals and financial statements submitted to him * * * then this good faith on his part is a complete defense to the relevant counts of the indictment.”

[Emphasis added.] [App., Vol. IV, p. 1475.]

Continuing as to Womack, he charged:

“Similarly, should you find that the Defendant Womack acted in good faith as I have defined it to you concerning the actions mentioned in the indictment, his good faith, belief and reliance on the appraisals and financial statements * * * would likewise provide him a complete defense as to the relevant counts in the grand jury indictment.”

[App., Vol. IV, pp. 1475-1476.]

Musgrave’s attorney objected to the good faith defense charge in the following exchange:

“MR. SMITH: Further that in instructing on the good faith of the Defendant, Musgrave, that the Court placed an illegal burden of proof on the Defendant Musgrave as to good faith. And also placed on him the—
“THE COURT: Well tell us in what respect it’s an unlawful—
“MR. SMITH: The Court put the burden on Musgrave to establish good faith and put the burden on the Government to establish bad faith beyond a reasonable doubt. And if I recall correctly, I do believe that the Court instructed the jury that as to good faith, it has the burden of Musgrave to prove his good faith beyond a reasonable doubt.
“THE COURT: I sure didn’t think I did. I’ll call them back and recharge them on that if you think I did. ”

[Emphasis added.] [App., Vol. IV, p. I486.]

At this juncture the prosecutor interrupted, “The only burden the Government has is to prove each and every essential element beyond a reasonable doubt and we don’t have to negate a defense.” [App. I486.] The trial judge, with his train of thought apparently severed by that rejoinder, did not rule directly on the objection to the good faith charge, but stated: “That’s right. All right, go ahead.” [App. 1487.]

On appeal, both appellants urge reversal of their convictions on the ground that the quoted portion of the trial judge’s charge erroneously placed on defendants the burden of proof with regard to the crucial issue of good faith. The prejudicial effect of that erroneous charge could not, appellants argue, be cured by an inconsistent instruction, because that would be to speculate upon which part of the charge the jury relied.

The government first contends that the failure of Musgrave’s counsel to follow up on his objection to the good faith charge after the court offered to recall the jury amounted to an invitation of error and a conscious abandonment of the proffered objection. Second,- the government argues that the whole charge, which contained numerous correct delineations of the reasonable doubt standard, cured any error contained in the isolated passage to which defendants object. We disagree with the first contention but agree with the second.

Musgrave’s counsel’s failure to reiterate his objection to the good faith charge was clearly not, as the government argues, an express abandonment of that objection. See Locklear v. United States, 5 Cir. 1968, 393 F.2d 729. Musgrave’s counsel cannot be faulted for failure to object twice to the same charge. The trial Judge’s initial response to the objection — the offer to recall the jury — plainly indicated the court’s recognition of defense counsel’s protest. Although defendants made a timely objection to the erroneous good faith charge, that charge, viewed in the context of the court’s entire instruction to the jury, did not affect substantial rights of either of the appellants. See Rule 52(a), F.R.Crim.P.

This Court’s ruling in Price v. United States, 5 Cir. 1953, 200 F.2d 652, does not belie our conclusion that the jurors in the present case, armed with the court’s full charge, applied the correct legal principles to the dispositive facts. The holding in Price did not create an iron-clad rule but, like most appellate determinations of the prejudicial effect of an erroneous charge, hinged upon the facts and circumstances of that particular case. Our perusal of the original record in Price reveals that the trial judge delivered a short, formalistic, oral charge, mentioning the reasonable doubt standard only twice. In his second and final instruction on reasonable doubt, the trial judge erroneously placed the burden of proof on the defendant, when he asserted that,

“There is evidence here of acting on the advice of counsel. In connection therewith, if you find and believe from the evidence, beyond a reasonable doubt, that counsel George Wilson was empowered and authorized to act as agent for the purchaser of these stocks, and that the delivery to him consummated and completed the sale, then, and in that event, the defendant would be entitled to an acquittal.”

[Original record in Price v. United States, supra, p. 345.] Given the clearly incorrect, culminating instruction on the burden of proving agency, the Price court, speaking through the present writer, understandably chose not to speculate as to which part of the charge (the initial correct instruction or the final erroneous one) the jury accepted.

Both Price v. United States, supra and the case upon which the Price court relied, Kotteakos v. United States, 1945, 328 U.S. 750, 66 S.Ct. 1239, 90 L.Ed. 1557, involved situations radically different from the one which confronts us now. In Kotteakos, supra, p. 769, 66 S. Ct. p. 1250, the Supreme Court stressed that the trial court’s erroneous instruction “permeated the entire charge, indeed the entire trial.” The pervasive error in the Kotteakos charge was held to have inevitably confused the jury; the one inadvertent remark attacked by the appellants here was surrounded by a sea of impeccable instructions.

Each statement made by the judge to the jury must be examined in the light of the entire charge. Gurleski v. United States, 5 Cir. 1968, 405 F.2d 253; United States v. Birnbaum, 2 Cir. 1967, 373 F.2d 250, cert. denied, 389 U.S. 837, 88 S.Ct. 53, 19 L.Ed.2d 99. Isolated statements which appear prejudicial when taken out of context may be innocuous when viewed in the light of the entire trial. Locklear v. United States, supra, 393 F.2d 730; United States v. Wilkinson, 5 Cir. 1972, 460 F.2d 725, 732.

In his lengthy charge to the jury in the present case, the trial judge correctly depicted the reasonable doubt standard at least nine times [App., Vol. IV, pp. 1439, 1440, 1444, 1447, 1466.] and climaxed his instructions with the following admonition:

“Now, in conclusion and summary, if the Government has established each and all of the essential elements contained and charged in the grand jury indictment beyond a reasonable doubt and all of the essential elements thereof beyond a reasonable doubt, then you should find the Defendant guilty on that particular count in the grand jury indictment.” [App., Vol. IV, p. 1478.]

The cumulative effect of the total jury instruction cured any prejudicial effect of the lone erroneous charge.

III. DENIAL OF CONFRONTATION

The crucial evidence which exposed the inflated appraisals consisted of expert opinion testimony based in part on secondhand sources. For example: E. T. Compere estimated the value of the Toyah farm by comparison with sales of 13 comparable tracts of land. Compere’s knowledge of the analogous land sales derived from out-of-court investigation of deed records and conversations with those involved in the sales; evidence of the parallel land value was not supported at trial by the introduction of certified deeds. [App. Vol. II, p. 777.]

Musgrave objected to the introduction of that expert opinion testimony, exemplified by Compere’s valuation of the Toyah farm, based on secondhand sources. On appeal, he argues that its introduction both violated the hearsay rule and impermissibly encroached upon his sixth amendment right to confrontation.

In United States v. Williams, 5 Cir. 1971, 447 F.2d 1285, this Court, sitting en banc, ruled that:

1) The admission into evidence of the opinion testimony of an expert witness in a criminal prosecution based upon the witnesses’ investigation of documents not introduced into evidence did not violate the defendant’s sixth amendment right of confrontation where the witness was personally available for cross-examination;

2) the introduction of such evidence did not violate the hearsay rule; expert witness testimony may be based on secondhand sources even in criminal prosecutions.

There are no factual distinctions favorable to appellants between this case and Williams; hence, Musgrave’s contention is foreclosed by Williams.

IV. IMPROPER CONSPIRACY/ KNOWLEDGE CHARGE

In his charge to the jury, the trial judge stated that,

“One may become a member of a conspiracy without full knowledge of all the details of the conspiracy or without being acquainted with all of the other conspirators.”

[App., Vol. IV, p. 1457.]

Musgrave’s attorney objected to this portion of the conspiracy charge, explaining that,

“As to the issue on conspiracy that the Court, by the manner in which it charged on conspiracy, eliminated from the requirement that the Defendant Musgrave have actual knowledge of the falsity, if any, of the alleged appraisal reports and the inadequacy of the alleged inadequate appraisal reports.”

[App., Vol. IV, p. 1485.]

Appellants rely upon United States v. Massiah, 2 Cir. 1962, 307 F.2d 62, to support their contention that use of the contested charge constituted reversible error. In Massiah, a prosecution for conspiracy to import prohibited drugs, two judges of the three-judge panel voted for reversal of the convictions on the conspiracy count, reasoning that the trial court’s charge, identical to the contested charge in the instant case, constituted an impermissible suggestion to the jury that knowledge of importation was not necessary for conviction under the conspiracy count.

Nonetheless, we think that that ruling is inapplicable to the instant case. The court in Massiah (that is, the majority as concerns this issue) repeatedly stressed that, “the- trial judge failed at any point in his charge on the conspiracy count to instruct the jury that knowledge of illegal importation was a necessary element of the conspiracy.” 307 F.2d at 70. The trial judge in Mas-siah charged the necessity of knowledge on the substantive counts but not on the conspiracy count. The crucial error stemmed not from an incurable weakness in the quoted charge, but from a failure to supplement that charge with one clearly delineating the requirement of knowledge for conviction under the conspiracy count.

In the present case, the trial judge a number of times carefully explained the requirement of knowledge for conviction under the conspiracy count, and in the sentence immediately succeeding the disputed language stated that, “On the other hand, a person who has no knowledge of a conspiracy but happens to act in a way which furthers some object or purpose of the conspiracy does not thereby become a conspirator.” [App., Vol. IV, p. 1457.]

The precise language contained in the isolated charge to which appellants object was, in fact, utilized by the Supreme Court in Blumenthal v. United States, 1947, 332 U.S. 539, 557, 68 S.Ct. 248, 256, 92 L.Ed. 154, where the Court reasoned:

“Secrecy and concealment are essential features of successful conspiracy. The more completely they are achieved, the more successful the crime. Hence the law rightly gives room for allowing the conviction of those discovered upon showing sufficiently the essential nature of the plan and their connections with it, without requiring evidence of knowledge of all its details or of the participation of others.”

[Emphasis added.] See also cases cited in Wharton’s Criminal Law & Procedure, Vol. I, p. 179 n. 4.

V. AMENDMENT OF THE GRAND JURY INDICTMENT/IMPEACHMENT OF DEFENSE WITNESS BRYANT

The first count of the indictment as drawn by the Grand Jury was worded as follows:

“From on or about May 25,1968, the exact date being to the grand jury unknown, and continuously thereafter until on or about July 25, 1968, in the Midland-Odessa Division of the Western District of Texas, and at divers other places without the jurisdiction of this Court, Kenneth L. Musgrave, Marshall Womack, Jack Bryant, and Homer E. Koon, Jr., defendants herein, willfully and knowingly did combine, conspire, confederate and agree together and with each other, and with persons whose names to the grand jury are not known, to commit offenses against the United States * * * »

(Emphasis added.)

In reading the indictment to the jury, the trial judge altered the charging language of Count One so that Bryant and Koon were listed as coconspirators, but not as codefendants:

“From on or about May 25, 1968, the exact date being to the grand jurors unknown, and continuously thereafter until on or about July 25, 1968, in the Midland-Odessa Division of the Western District of Texas, and at divers other places without the jurisdiction of this Court, Kenneth L. Mus-grave and Marshall Womack, defendants herein, and Jack Bryant and Homer E. Koon, Jr., willfully and knowingly did combine, conspire, confederate and agree together and with each other, and with persons whose names to the grand jury are not known, to commit offenses against the United States * *

(Emphasis added.)

Musgrave, whose defense was partially predicated upon reliance on advice of counsel, called his former attorney, Bryant, to testify as a defense witness. Musgrave’s attorney argued that the court’s recital of Bryant’s name in the indictment as a coconspirator fatally undermined Musgrave’s defense and improperly impeached Bryant’s credibility. Accordingly, Musgrave’s attorney requested leave to rehabilitate Bryant’s veracity by proving that he had been acquitted in a prior trial. The trial judge refused that request [App. p. 1039].

Musgrave argues on appeal that his conviction should be reversed because his chief defense witness’ credibility was improperly impeached by reference to his status as a coconspirator without proof of conviction. Womack argues, on the other hand, that the court’s alteration of the language in Count One amounted to an impermissible amendment of a substantive portion of the Grand Jury indictment. Neither of the appellants points to an error requiring reversal.

A. Assuming that the court’s reference to Bryant as a coconspirator amounted to a viable impairment of Bryant’s credibility, the incident when viewed in context was neither improper nor fatally prejudicial.

Although it is true that the mere fact of an arrest or indictment of a witness is not normally admissible for impeachment purposes, it is also true that where the evidence of an arrest or accusation arises out of the transaction from which the trial arose, it is admissible to show interest or bias on the part of the witness. Mallory v. United States, 9 Cir. 1942, 126 F.2d 192; Alford v. United States, 1931, 282 U.S. 687, 51 S.Ct. 218, 75 L.Ed. 624 ; 20 A.L.R.2d 1421, 1446. In United States v. Dardi, 2 Cir. 1964, 330 F.2d 316, a similar case arising in this Circuit, the government was allowed to introduce evidence of the defense witness’ arrest for embezzlement to show his bias and hostility towards the key prosecution witness who was responsible for the defense witness’ arrest.

In the instant case, although Bryant had been acquitted, his prior status as a eoindictee certainly suggested a personal interest in the litigation, a potential lack of complete impartiality.

The decision in Michelson v. United States, 1948, 335 U.S. 469, 69 S.Ct. 213, 93 L.Ed. 168, upon which Musgrave relies, did not involve an attempt to impeach a witness’ credibility by showing his bias and is therefore inapplicable.

B. It is clear, as appellant Womack contends, that an indictment may not be amended consistent with the Fifth Amendment except by resubmission to the grand jury. Russell v. United States, 1962, 369 U.S. 749, 770, 82 S.Ct. 1038, 8 L.Ed.2d 240; Ex parte Bain, 1887, 121 U.S. 1, 7 S.Ct. 781, 30 L.Ed. 849. However, it is equally clear that withdrawal of a portion of the indictment not supported by the evidence is not an impermissible amendment, providing that nothing is added to the indictment and the remaining allegations charge an offense. United States v. Ballard, 1944, 322 U.S. 78, 90-91, 64 S.Ct. 882, 88 L.Ed. 1148 (Stone, C. J., dissenting); Overstreet v. United States, 5 Cir. 1963, 321 F.2d 459; Wright, Federal Practice and Procedure; Criminal, § 127, p. 275.

The statement in Russell v. United States, supra, 369 U.S. p. 770, 82 S.Ct. p. 1050, that “ * * * in the federal courts * * * an indictment may not be amended except by resubmission to the grand jury, unless the change is merely a matter of form,” has been interpreted by this Court to be only a restatement of the general rule and not an expression intended to restrict the liberal deletion of surplusage from indictments. Marsh v. United States, 5 Cir. 1965, 344 F.2d 317, 322.

By deleting from the indictment the reference to Bryant and Koon as codefendants, while retaining the reference to the same pair as coconspirators, the trial court added nothing to the indictment and subtracted only surplus-age. The remaining allegations charged precisely the same offense.

We are impressed by the scrupulously fair rulings of the able trial judge. While he failed to attain a standard of perfection, a careful consideration of the entire record convinces us that the appellants were fairly tried and convicted. We find no reversible error. The judgments of conviction are affirmed.

The separate petitions for rehearing filed by the defendant-appellant Mus-grave and by the defendant-appellant Womack are

Denied.

      . “The first count charged Musgrave, Bryant, Womack and Koon with conspiring to defraud the federally insured Association. The second count charged that Musgrave, aided and abetted by Womack, fraudulently prepared and submitted grossly inflated appraisal reports on real property securing the loans. The fourth count charged that Bryant, aided and . abetted by Musgrave and Womack, unlawfully ‘participated’ in the proceeds of the loans. The sixth count charged that Musgrave, as Chairman of the Board of the Association and aided and abetted by Womack and Bryant, fraudulently caused the Association to make the loans, knowing that they were not secured by sufficient collateral. The seventh count charged that Musgrave, aided and abetted by Womack and Bryant, unlawfully shared in the loan proceeds. Counts three and five were dismissed.”
      United States v. Womack, 5 Cir. 1972, 454 F.2d 1337, 1340.

      . § 371 provides in pertinent part:
      “If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.”

      . § 657 provides in pertinent part:
      “Whoever, being an officer, agent or employee of or connected in any capacity with * * * any institution the accounts of which are insured by the Federal Savings and Loan Insurance Corporation * * *, embezzles, abstracts, purloins or willfully misapplies any monies, funds, credits, securities or other things of value belonging to such institution, or pledged or otherwise intrusted to its care, shall be fined not more than $5,000 or imprisoned not more than five years, or both * *

      . § 1006 provides in pertinent part:
      “Whoever, being an officer, agent or employee of or connected in any capacity with * * * any institution the accounts of which are insured by the Federal Savings and Loan Insurance Corporation * * *, with intent to defraud any such institution * * makes any false entry in any book, report or statement of or to any such institution, or without being duly authorized, * * * issues, puts forth or assigns any note, debenture, bond or other obligation, or draft, bill of exchange, mortgage, judgment, or decree, or, with intent to defraud the United States or any agency thereof, or any corporation, institution, or association referred to in this section, participates or shares in or receives directly or indirectly any money, profit, property, or benefits through any transaction, loan, commission, contract, or any other act of any such corporation, institution, or association, shall be fined not more than $10,000 or imprisoned not more than five years, or both.”

      . In United States v. Musgrave, 5 Cir. 1971, 444 F.2d 755, Musgrave’s initial conviction was reversed on several grounds — the trial judge exhibited a prosecutor’s zeal by his inflammatory remarks to the jury and failed to instruct the jury on essential elements of the crimes charged in two of the Counts.
      In addition, Bryant, who had been convicted along with Musgrave, was ordered acquitted because no substantial evidence existed to support the jury’s verdict against him.
      In United States v. Womack, 5 Cir. 1972, 454 F.2d 1337, Womack’s conviction, procured in a subsequent trial, was reversed on the ground that the trial judge erred in not withdrawing from the case after having made derogatory comments (in the first trial) indicating Wo-mack’s complicity in the fraud.

      . Koon was acquitted by the jury in the first trial, United States v. Musgrave, supra.

      . Both Herman and Compere were MAI appraisers, that is, members of the American Institute of Real Estate Appraisers of the National Association of Real Estate Boards.
      Herman, in describing the Trans-American Building, testified that,
      1) it is on the perimeter of a good office-financial area [App., Vol. I, p. 393] ;
      2) it is a 17-story building [App., Vol. I, p. 393] ;
      3) the building was constructed in the late 20’s or early 30’s and is “sort of functionally obsolete in many respects today” [App. Vol. I, p. 394] ;
      4) only 41% of the floor area was leased in October, 1968 [App., Vol. I, p. 399] ;
      5) in the year prior to Herman’s inspection the building produced an income of $88,101, but incurred expenses totaling $111,000, suffering a net loss of $23,000 [App., Vol. II, p. 430],
      In his testimony, Herman delineated the three principal methods of appraisal:
      1) The reproduction, cost approach— the cost of building the structure today minus depreciation (both physical deterioration and economic obsolescence), plus the value of the land (based on sales of comparable land in the area) [App., Vol. II, p. 407].
      2) The income or economic approach —the gross income capability of the building with allowance for vacant floor area less operating expenses. The resulting net income is capitalized into an indication of the properties’ value [App., Vol. II, p. 408],
      3) The market data approach — a valuation based on the recent selling price of similar property in the vicinity of the appraised structure [App., Vol. II, p. 408].
      Utilizing the reproduction cost approach, Herman estimated the value of the Trans-American Building and land to be $657,000 [App., Vol. II, p. 471]. However, he placed more credence on the income approach, which yielded a smaller figure. Correlating all three approaches, he arrived at an average value of $600,-000 for the Trans-American Building.
      On the crucial leasehold interest which Womack owned, Herman placed a value of only $145,000 [App., Vol. II, p. 473], and Compere the value of $230,000 [App., Vol. II, p. 677].
      Mr. Compere, using the market data approach, derived a value of $110,000 for the Toyah farm based on the selling price of 13 comparable properties. [App., Vol. II, pp. 717, 743].

      . Although the Musgrave-tVomack contract called for MAI appraisals, Musgrave submitted valuations prepared by Vernon Thomas and himself, neither of whom were MAI qualified. Botli of the ap-l>raisal figures submitted by Musgrave exceeded 133%% of the loan totals — a requirement for a 75% loan.

      . Nathan Brown, a real estate investor who acted as agent for All-Ways, Inc., the predecessor in title to the Toyah farm, testified at the second trial that Bryant was present during negotiations between Brown and Womack culminating in sale of the farm to Womack for $167,000. In addition, Brown intimated that Bryant was aware of the fact that the title insurance company refused to insure title to all of the land transferred from All-Ways to Womack [App. pp. 344, 345].

      . Except in a situation like Herman v. United States, supra, where the only conspirator who committed any overt act is acquitted in a joint trial.

      . In the case last cited, Judge Learned Hand noted the rational inconsistency of the holding, but explained why that was no more fatal than is the problem which arises when, the verdicts upon two counts are logically inconsistent.

      . The decision has heretofore been cited with approval by this Circuit. Rosecrans v. United States, 1967, 378 F.2d 561, 567 n. 10.

      . The objection of Musgrave’s attorney was made after the jury had retired to consider its verdict, but he had not been accorded earlier adequate opportunity to make the objection (see. App., Vol. IV, pp. 1482-1485) as required by Rule 51, F.R.Civ.P. Hence the objection was timely.

      . Musgrave argues that the practical effect of listiDg Bryant as a coconspirator is the same as listing him as a codefendant— the jury will inevitably guess at his guilt or innocence. For purposes of argument, we assume that observation to be correct.

      . Wigmore explains the rule as founded upon the realization that, “the fact of arrest or indictment is quite consistent with innocence, and * * * the reception of such evidence is merely the reception of somebody’s hearsay assertion as to the witness’ guilt.” Wigmore on Evidence, Vol. IIIA, § 980a, p. 835.

      . In analogous cases where a nonacquitted coindictee testified for the accused, his situation has been viewed as one tempting him to exonerate the other accused and thus help towards his own freedom. See Wigmore on Evidence, Yol. IIIA, § 967, p. 816.


source: Caselaw Access Project

author: GOLDBERG, Circuit Judge:

license: Public Domain

text:
    Mrs. Nancy K. STEELE, Plaintiff-Appellant, v. G. D. SEARLE & CO. et al., Defendants-Appellees.
    No. 73-1308
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 14, 1973.
    Rehearing and Rehearing En Banc Denied Oct. 31, 1973.

      Alfred N. Crisler, Jackson, Miss., Bradley Post, Wichita, Kan., for plaintiff-appellant.
    Cary E. Bufkin, Roland D. Marble, Jackson, Miss., for Searle, Foremost and Meyer.
    Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York, 5 Cir. 1970, 431 F.2d 409, Part I.

   GOLDBERG, Circuit Judge:

The debate over the wisdom of the constitutional grant of diversity jurisdiction has much currency, as well as many argumentative antecedents. The reaches and restrictions of the grant are and have been constantly before committees, commissions, and the Congress. While reports, debates, and perhaps legislation géstate, we are forced to decide today a diversity case with many state and federal implications. We cannot wait for tomorrow’s panacea; we cannot delay our decision. This action was originally filed in 1970 in the Chancery Court of the First Judicial District of Hinds County, Mississippi and removed, under the provisions of 28 U.S.C. § 1441, to the United States District Court for the Southern District of Mississippi. Plaintiff-appellant, Mrs. Nancy K. Steele, sought to obtain jurisdiction over defendant-appellee, G. D. Searle & Co., both by personal service on an employee of appellee resident in Mississippi and by the attachment of debts owed appellee by companies doing business in Mississippi. The district coui’t dismissed the complaint holding that the state laws did not permit the assertion of jurisdiction over appellee on either basis, and that Mississippi could not, consistent with the Due Process Clause, exercise jurisdiction over appellee on the facts of this case. Plaintiff appeals only from the holding that valid jurisdiction was not obtained under the Mississippi attachment statutes, Miss. Code §§ 2729, 2733 (1942). Finding that the law of Mississippi authorizes and the Constitution of the United States permits application of the jurisdictional device of attachment on the facts of this ease, we reverse.

I. THE RECORD AND HOLDING IN THE DISTRICT COURT

.Appellant, a resident of Kansas, alleges in her complaint that she purchased in her home state certain birth control pills manufactured by appellee and that, as a result of her use of appellee’s inadequately tested product, she suffered a serious and debilitating stroke on February 15, 1964, for which she seeks $500,000 in damages. Appellee, a drug company with an extensive distribution network, is incorporated in Delaware and has its principle place of business in Illinois. Although appellee owns no property in Mississippi, it does maintain three full time employees in that state for the purpose of soliciting orders. In answer to interrogatories submitted by appellant, appellee stated that, although it is not licensed to do business in Mississippi, its sales in that state over the three year period prior to the filing of this action amounted to more than $800,000. At the time of the filing of the complaint in state court three drug wholesale firms indebted to appellee were present and doing business in Mississippi, one having been incorporated there. Purporting to act on the basis of Miss.Code § 2729 (1942), appellant served the wholesalers with writs of attachment, the res or subject of the attachment being all monies owed to appellee by the attachment defendants, some $2,458,996.17. Personal service was also made on one of the soliciting agents employed by appellee in Mississippi.

After the removal of this action appel-lee filed consolidated motions for relief under Rule 12, Federal Rules of Civil Procedure, alleging, inter alia, that the court lacked jurisdiction of the person. This motion was originally denied. However, following a realignment of the district court docket and the assignment of this ease to another judge, appellee renewed its motions to dismiss and met with more favorable results. The district court granted the motion, finding' that (1) there was no jurisdiction under the Mississippi attachment statute and (2) the Due Process Clause.would bar any attempt by Mississippi to exercise such jurisdiction. Specifically, the district court found that although the Mississippi attachment statute did permit the assertion of jurisdiction through attachment of a debt and appellant had complied with all of the technical requirements of state law, the court lacked jurisdiction because:

“The obvious intention of the statutes is to afford security to a claimant against an absent or absconding debt- or, a status which would presuppose that the resident was a former resident of the state who had removed himself from the process of the state courts. That is not the case here where defendant has never been a resident of the state.”

The court below also found that the Mississippi law permitting attachment for jurisdiction purposes was not meant to apply to a case such as this, in which the state’s only “intei'est” in the litigation would be jurisdictional, since appellant resorted to the Mississippi procedures “purely for the purpose of availing herself of this state’s longer statutory period of limitations for her tort claim.” The court further held that the heavy burden of defending an action on the basis of an out of state attachment could not be imposed, consistent with fair and just procedures and the applicable decisions of the United States Supreme Court, without a “substantial state interest” in the outcome of the controversy. The district court found an insufficient interest in this case, which involves a suit between a non-resident plaintiff and a non-resident defendant on a cause of action arising out of state, and therefore dismissed appellant’s complaint.

The jurisdiction of a federal district court in a case removed from the state courts is derivative. It depends largely for its validity on whether the state court had jurisdiction, both as a matter of state and federal law. This rule is applicable even though as an original matter the suit could have been brought in federal court without impediment. Lambert Run Coal Co. v. Baltimore and Ohio R. Co., 1922, 258 U.S. 377, 382, 42 S.Ct. 349, 66 L.Ed. 671. The district court in this case had only that juridiction conferred by the laws of Mississippi on the Chancery Court of Hinds County, no more and no less. By the same token, if the Due Process Clause of the Foui’teenth Amendment prevents Mississippi from obtaining jurisdiction, a federal court is likewise without power to proceed on removal.

II. THE MISSISSIPPI LAW

At first blush the holding of the court below in interpreting the Mississippi chancery statute would appear to be at odds with the plain meaning of the words. Section 2729 is set out in its entirety in Footnote 3, supra, but a few of its aspects merit special consideration. The district court stated that the clear purpose of the statute is to deal with potential defendants who have at one time resided in Mississippi but are “absent or absconding” at the time of attachment, and that the provision was not intended to reach individuals or businesses that had never “resided” in the state. The statute, however, specifically includes non-residents in the class subject to jurisdiction on the basis of attachment; and it appears to view them as a group distinct from once and future residents.

“The chancery court shall have jurisdiction of attachment suits against any non-resident, absent or absconding debtor, who has lands and tenements within this state, or against any such debtor and persons in this state who have in their hands effects of, or are indebted to, such non-resident, absent or absconding debtor.”

Although it would be difficult to imagine statutory language more closely embracing the case at bar, faced only with the Mississippi Code and the facts of this case, we would hesitate to reverse the interpretation offered by the district judge, a lawyer of extensive practice in the State of Mississippi. However, not even our justified deference to the conclusions of the district court can be permitted to obscure the explicit command of Erie R.R. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, that the authoritative legislative and judicial tribunals of the states are the ultimate instructors of the federal courts on matters of state law.

We must be guided by the decision of the Mississippi Supreme Court in Alabama, Tennessee & Northern R. Co. v. Howell, 1962, 244 Miss. 157, 141 So.2d 242, which held that jurisdiction could be obtained through attachment on the basis of facts nearly identical to those presented by this appeal. In Howell, the plaintiff, a resident of Alabama, brought suit in Mississippi against the defendant railroad, incorporated and doing business only in Alabama, to recover for injuries suffered in a railroad crossing accident in Alabama. Howell attempted to obtain jurisdiction by means of personal service on an employee of the defendant, resident in Mississippi, and through the attachment of debts owed the defendant by another railroad doing business in Mississippi. As in this case, the litigation involved an individual, non-resident plaintiff seeking recovery in tort against a corporate non-resident defendant, owning no property and found not to be doing business in Mississippi. Like the ease before us, Howell involved allegedly tor-tious conduct that did not take place in Mississippi and apparently had no connection with it. The Mississippi Supreme Court held,

“In the ease at bar, we hold that an action in rem is maintainable against the appellant, A.T. & N.R.R. Company, if process is completed by publication, but that since appellant is not doing business in this State no personal júdgment can be rendered against it in this suit unless it enters its appearance.” 141 So.2d at 246.

Since the district court has found and appellee admits that the technical requirements of notice have been complied with, Howell would appear to be controlling on the question of state law.

The opinion of the district court suggests one possible basis on which to distinguish Howell — the appellant’s reason for choosing Mississippi as a forum. But at no point in Howell does the state supreme court allude to the plaintiff’s motive in coming to Mississippi to initiate his action. This is true in spite of the fact that the rather extraordinary situation in that ease would have made it the natural vehicle for an examination of whether the plaintiff was engaging in prohibited forum shopping. This court cannot, consistent with Erie, add an interpretive gloss to the Mississippi chancery statute when that state’s highest court has so recently declined to do so.

On occasion federal courts might justifiably have complained that the combination of Erie and the paucity of relevant state precedents has turned the disposition of diversity cases into a kind of judicial mind reading exercise. That is not true here. Our Erie guess is truly an educated one. We are not in the quandry of the philosopher who defined his task as searching in vain for a black cat in a dark room. This court has no right to expect any more explicit direction from the State of Mississippi in deciding this case than that offered by the opinion in Howell. We must conclude that, faced with the facts of the case at bar, the Mississippi Supreme Court would find the provisions of the attachment statute applicable.

III. THE DUE PROCESS CLAUSE

Unfortunately the relatively recent and clear authority of the Mississippi Supreme Court on the issues of state law is not matched by equal federal precision on the constitutional question involved here. The path of United States Supreme Court decisions on the limits of state court jurisdiction has been neither straight nor narrow, and it will be necessary for us to travel this winding road with great care.

The substance and tone of federal decisions on state court jurisdiction through most of this century were set by the decision of the Supreme Court in Pennoyer v. Neff, 1877, 5 Otto 714, 95 U.S. 714, 24 L.Ed. 565, a case involving a dispute over title to land in Oregon. Neff claimed the tract under a patent of the United States. Pennoyer had purchased the property at a sheriff’s sale, conducted pursuant to the execution of a state court judgment obtained against Neff by a creditor, Mitchell. The disposition of the case depended on whether the Oregon state court had validly obtained jurisdiction over Neff in the earlier action. In the process of answering that question, the Court laid down the constitutional parameters of state court jurisdiction. The foundation of its opinion was the notion of territoriality: when acting upon persons or property within its borders the state may, consistent with due process, adjudicate rights and determine obligations. However, the Constitution was thought to create a bright and unmistakable barrier to the exercise of power beyond the state border. Any attempt to exercise such extraterritorial power was thought to be prohibited by the Fourteenth Amendment.

“Process from the tribunals of one State cannot run into another State, and summon parties there domiciled to leave its territory and respond to proceedings against them.” 95 U.S. at 727.

Consequently, the Court held that in personam jurisdiction over Neff, i. e., jurisdiction over his person, the power to adjudicate the claims against him, up to any sum, and to create an absolute bar to further litigation of liability, could not have been obtained in the initial action, since Neff had not been physically present in Oregon. However, the Court also noted that it would have been possible to obtain jurisdiction to litigate the Mitchell-Neff controversy by attaching, prior to the initial action, any property held by the defendant in Oregon. By thus achieving jurisdiction over the defendant’s Oregon property, the state court could enter a binding judgment up to the value of that property. This is in rem. jurisdiction. For the eases like that discussed in Pennoyer, where the res attached has no direct relation to the matter under litigation and is only meant to provide a handle for jurisdiction and a fund for execution, the legal profession has coined one of its least enchanting phrases, such jurisdiction being referred to as quasi in rem.

The property under consideration in Pennoyer was a piece of land, but a quarter of a century after that decision the Supreme Court addressed itself to the possibility of obtaining quasi in rem jurisdiction through the attachment of intangible assets. On the basis of facts bearing considerable resemblance to the case at bar, the Court upheld such a jurisdictional device in Harris v. Balk, 1905, 198 U.S. 215, 25 S.Ct. 625, 49 L.Ed. 1023. The Court held that a state court judgment rendered against a nonresident defendant, with jurisdiction founded on the garnishment of a debt owed that defendant by an individual temporarily within the state was entitled to full faith and credit in subsequent litigation between the defendant and the garnishee, since the state court had obtained constitutionally recognized jurisdiction. The Court located the debt with the debtor for purposes of asserting territorial authority; and, therefore, personal service on the debtor was sufficient to give the state the power to adjudicate any claim against the creditor up to the amount of the debt. This was true even though the transaction giving rise to the garnished obligation had no connection with the attaching state. The Court held that:

“Attachment is the creature of the local law ... If there be a law of the state providing for the attachment of the debt, then, if the garnishee be found in that state, and process be personally served upon him therein, we think the court thereby acquires jurisdiction over him, and can garnish the debt due from him to the debtor of the plaintiff, and condemn it, provided the garnishee could himself be sued by his creditor in that state.”

198 U.S. at 222, 25 S.Ct. at 626.

Appellee attempts to distinguish Harris on the ground that the plaintiff in the challenged original action under scrutiny in that case, the person in the position analogous to that of appellant here, was himself a resident of the state whose law authorized the attachment. It is appellee’s contention that this connection of the plaintiff with the forum state was the crucial factor tipping the finding in Harris. With that proposition we must disagree. While there is language in Pennoyer that might have led to a conclusion that the validity of all in rem jurisdiction is dependent on the plaintiff’s residence in the attaching or garnishing state, this broad judicial hint was never developed into a controlling principle. A reading of the opinions in both Pennoyer and Harris leads inexorably to the conclusion that the Court was concerned not with subtle questions of the forum state’s “interest” in the litigation, but with matters of territorial power and the situs of an intangible asset. Indeed the question urged upon us as essential to the disposition of this case was never expressly or impliedly relied on by the Court in Harris, The Supreme Court explicitly disavowed any such restriction on the Pennoyer line of cases in Ownbey v. Morgan, 1921, 256 U.S. 94, 109, 41 S.Ct. 433, 437, 65 L.Ed. 837, stating:

“In Pennoyer v. Neff, it was shown that the process of foreign attachment has its fundamental basis in the exclusive jurisdiction and sovereignty of each state over persons and property within its borders; and although emphasis was there laid upon the authority and duty of a state to protect its own citizens in their claims against nonresident owners of property situate within the state, it is clear that, by virtue of the “privileges and immunities” clause of section 2 of article 4 of the Constitution, each state is at liberty, if not under a duty, to accord the same privilege of protection to creditors who are citizens of other states that it accords to its own citizens.”

Were this 1905, or even 1945, the appellee’s constitutional objections to the Mississippi chancery procedure would have been fully answered at this point. Over the last thirty years, however, a veritable army of courts and commentators have besieged the citadel of territorial jurisdiction. The old territorial standards have been castigated as at once too restrictive and too permissive, preventing states from obtaining jurisdiction in cases in which they had substantial “interest,” while permitting the exercise of authority by states that were virtual strangers to both the parties and the claim. The inflexible rules of the Pennoyer era have been loosened, primarily in order to permit the expansion of the scope of state jurisdiction. In its historic opinion in International Shoe Co. v. Washington, 1945, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, the Supreme Court rejected decades of precedent basing in personam jurisdiction over corporations on the fiction of corporate “presence,” and called for a standard that looks less toward territorial power and more toward the convenience of the parties.

“Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant’s person. Hence his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally-binding him. Pennoyer v. Neff. But now . . . due process requires only that he have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ”

326 U.S. at 316, 66 S.Ct. at 158.

International Shoe laid the foundation for the massive structure of long-arm statutes that have transformed the jurisdictional landscape. Now appellee urges us to apply this flexible standard developed to increase the scope of jurisdiction in personam to the present in rem proceeding. Appellee contends that a resort to the doctrine of International Shoe will defeat Mississippi’s attempt to assert jurisdiction here over a non-resident defendant on behalf of a non-resident plaintiff on a cause of action arising outside the state, since Mississippi lacks the “minimum contacts” with the litigation necessary to justify an assertion of power over the defendant. In short, appellee urges us to assimilate in rem and in personam actions for the purpose of judging the constitutionality of a state exercise of jurisdiction.

Appellee cannot, of course, be subjected to suit in Mississippi if it would violate justice and fair play, regardless of the name given the particular type of jurisdiction. However, it is one thing to say that the standard of substantial justice propounded in International Shoe remains applicable regardless of the legal technicalities involved in a given case; it is quite another matter to contend that those technicalities have no bearing on the underlying constitutional issue. The crucial question before us is the extent to which we are free to say that the application of these hoary rules of in rem jurisdiction is violative of substantial justice. For despite earlier hints to the contrary, the Supreme Court clearly indicated in its opinion in Hanson v. Denckla, 1958, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283, that much still remains of both the old notions of territoriality and the ancient distinction between in rem and in personam actions when judgments are being made on the constitutional validity of state process.

“Founded on physical power . the in rem jurisdiction of a state court is limited by the extent of its power and by the coordinate authority of sister States. The basis of the jurisdiction is the presence of the subject property within the territorial jurisdiction of the forum State.”

357 U.S. at 246, 78 S.Ct. at 1236.

While emphasizing that the assignment of a location to intangibles can raise difficult problems , the Court recognized that intangible assets are subject to the in rem and quasi in rem jurisdictions of the state courts. 357 U.S. at 247, 78 S.Ct. 1228.

Although the Supreme Court has not had occasion since Harris to reconsider the specific question of quasi in rem jurisdiction based on the attachment of a debt, the continued vitality of that decision was examined and accepted by the Second Circuit Court of Appeals, en banc, in Minichiello v. Rosenberg, 2 Cir. 1968, 410 F.2d 106. Minichiello was a constitutional challenge to the state judiciary’s interpretation of a New York statute as authorizing quasi in rem jurisdiction in automobile accident cases through the “attachment of the defendants’ interest in liability insurance policies issued by companies doing business in New York, CPLR §§ 5201, 6202.” 410 F.2d at 107. Addressing itself to the very question raised here, the constitutionality under the Due Process Clause of the exercise of such attachment jurisdiction, the. Second Circuit dismissed the argument, contending:

“Appellants complain we did not adequately focus on the burden to a nonresident of having to defend a personal-injury action in another state, conceivably far from his domicile and the place of the accident, simply because his liability insurer has chosen to do business there.

“We find this argument unpersuasive so long as Harris v. Balk . stands.” 410 F.2d at 117-18.

In light of both Harris and Hanson this court cannot say that the presence of a potential defendant’s debtor within a state is either irrelevant or insignificant in determining the fairness of subjecting the defendant to the process and tribunals of that state. Indeed, the presence of a res, tangible or otherwise, within the jurisdiction represents a crucial point of contact. It goes far toward providing the essential “minimum” necessary for the constitutional assumption of jurisdiction.

We are not unmindful of the fact that chancery proceedings like the one considered here appear as harsh reminders of an earlier era. Even granting the availability of the doctrine of forum non conveniens as an assuaging tool in these instances, were we faced today with a case like the Harris v. Balk of old, in which a defendant’s debtor wanders across a border line and thereby subjects the defendant to the process of a strange and distant state, the tendency to call a halt would be strong. However, we are not here presented with the Case of the Peripatetic Debtor. Appellee can hardly claim to be a stranger to Mississippi or its laws. It has regularly dealt with companies incorporated or licensed to do business in Mississippi. In the course of these transactions Searle both expected and received the protection of Mississippi law. The prospect of having to defend a suit in that state, albeit on a foreign cause of action, cannot fairly be seen as a rude and unbelievable shock to a company that maintains employees and ships several hundred thousand dollars worth of merchandise into Mississippi, each year. In the horse and buggy days distance was a meaningful menace. Today we approach the speed of light, and corporations avail themselves of all the modern aspects of living. In our mobile society corporations cannot feel alien where their commercial interests magnetize them.

This court does not sit to comment on the wisest or most intellectually coherent system of state court jurisdiction. The contours and implications of corporate peregrinations are not to be drawn by federal courts. Within constitutional limits the states must be permitted to use their own transits in surveying jurisdiction. We sit only to measure state action against the constitutional parameters and to prohibit those assertions of jurisdiction that exceed the farthest reach of constitutional authority. On the facts of this case, we cannot say that Mississippi has gone too far in calling appellee to account in its courts. Intangible property is present in the state, appellee is not a stranger to the jurisdiction forced into litigation through the wanderings of a stray debtor, and the applicable state law clearly provides both actual notice and opportunity to be heard Under these circumstances the exercise of state court jurisdiction, and hence federal jurisdiction on removal, is not violative of either the principles of fairness or territoriality mandated by the Fourteenth Amendment. •

CONCLUSION

Finding that appellant’s cause of action has cleared both the státe and federal hurdles set up in the district court, we reverse.

Reversed and remanded.

      . Section 1441(a) provides:
      Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

      . Personal jurisdiction was sought on the assumption that defendant was “doing business” in Mississippi within the meaning of Miss.Code §§ 1437, 5309-230 and 5346 (1942).

      . Jurisdiction through attachment was founded on the provisions of Miss.Code § 2729 (1942) :
      The chancery court shall have jurisdiction of attachment suits based upon demands founded upon any indebtedness, whether the same be legal or equitable, or for the recovery of damages for the breach of any contract, express or implied, or arising ex delicto against any non-resident, absent or absconding debt- or, who has lands and tenements within this state, or against any such debtor and persons in this state who have in their hands effects of, or are indebted to, such non-resident, absent or absconding debtor. The court shall give a decree in personam against such nonresident, absent or absconding debtor if summons has been personally served upon him, or if he lias entered an appearance.
      (The attachment statute will be cited to the Mississippi Code of 1942. The Mississippi Code 1972 becomes effective November 1, 1973. Under the new codification the language of the statute will remain the same. See Miss.Code § 11-31-1 (1972).

      . Section 2733 (Miss.Code § 11-31-9 (1972)) provides for notice and the opportunity for the defendant to appear and be heard.

      . This was the amount of indebtedness admitted by the attachment defendants in their answer to writs of attachment.
      Appellee offered the following breakdown of the indebtedness as of January 31, 1970: (a) Foremost-McKesson, Inc., a Maryland corporation, owed Searle $2,387,870 ; (b) Meyer Brothers Drug Company, a Missouri corporation, owed $55,248; and (c) the Mississippi Drug Company, a Mississippi corporation, owed $10,578.

      . The applicable Kansas statute of limitations for such claims provides a two year period in which to bring suit. Mississippi allows six years in personal injury cases.

      . Appellee also argued below that the entire process of prejudgment attachment without prior notice and opportunity to be heard would be violative of the precepts of due process elaborated in Fuentes v. Shevin, 1972, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 and Sniadach v. Family Finance Corp., 1969, 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349. The district court found it unnecessary to reach that question and it has not been raised on appeal. It is, of course, always open to appellee to raise the matter on remand.

      . Lambert Run provides that the federal jurisdiction cannot obtain in the absence of valid prior state jurisdiction, but it is Rule 64 of the Federal Rules of Civil Procedure that has long permitted federal district courts to hear such cases at all, by authorizing the federal courts to hear removed cases founded on attachment. It was only in 1963 that the Rules were amended to permit original federal jurisdiction on the basis of attachment, the so called in rem and quasi in rem jurisdiction of the federal courts. See F.R.C.P. 4(e)(2).

      . The statute provides that the defendant’s debtor status may, as is alleged here, arise equitably from the commission of a wrong causing plaintiff injury (ex delicto).

      . Indeed the notion that state court decisions interpreting state statutes are binding on federal courts in diversity decisions was accepted long before Erie. See Green v. Neal’s Lessee, 1832, 6 Pet. 291, 8 L.Ed. 402.

      . In this case, the reason is clearly Mississippi’s six year statute of limitations.

      . As far as appears from the Howell opinion, every conceivable aspect of the case was related only to one state, Alabama. Yet the plaintiff sought recovery across the border in Mississippi.

      . See, e. g., Fidelity Union Trust Co. v. Field, 1940, 311 U.S. 169, 61 S.Ct. 176, 85 L.Ed. 109; King v. Order of United Commercial Travellers, 1948, 333 U.S. 153, 68 S.Ct. 488, 92 L.Ed. 608.

      . This concept of physical presence was subsequently expanded to permit personal service outside the state of residence on a temporarily absent domiciliary. Milliken v. Meyer, 1940, 311 U.S. 457, 61 S.Ct. 339, 85 L.Ed. 278.

      . The Court denied full faith and credit to the original judgment because the attachment had been made after the judgment against Neff. 95 U.S. at 733-734. Generally, as in the instant case, the process of attachment amounts to no more than the filing with the court, the issuance of writs to the garnishees, and the publication of notice to the defendant.

      . Bee generally Developments in the Law-State Court Jurisdiction, 73 Harv. L.Rev. 909 (1960).

      . It is clear in the instant case that the courts of Mississippi would be open to suits by Searle seeking recovery of the debts that have been attached. Appel-lee does not contend otherwise.

      . “So the State, through its tribunals, may subject property situated within its limits owned by non-residents to the payment of the demand of its own citizens against them. . . Every state owes protection to its own citizens; and, when non-residents deal with them, it is a legitimate and just exercise of authority to hold any property owned by such non-residents to satisfy the claims of its citizens.”
      Pennoyer v. Neff, 95 U.S. 714, 723.

      . Indeed, the opinion in Harris noted the extent to which the courts of each state are open for the adjudication of the claims of non-residents. 198 U.S. at 223-224, 25 S.Ct. 625. Though not directed explicitly to the matter of m rem jurisdiction, the Court’s language supports the proposition that Harris was concerned with territorial power and not with the nature of the parties.

      . See, e. g., von Mehren & Trautman, Jurisdiction to Adjudicate, 79 Harv.L. Rev. 1121 (1966); Comment, Garnishment of Intangibles, 67 Col.L.Rev. 550 (1967); Developments in the Law-State Court Jurisdiction, 73 Harv.L.Rev. 909 (1960).

      . The problem of identifying corporate presence had concerned the Court in many jurisdictional decisions in the early decades of this century. See, e. g., Davis v. Farmers’ Cooperative Equity Co., 1923, 262 U.S. 312, 43 S.Ct. 556, 67 L.Ed. 996; People’s Tobacco Co. v. American Tobacco Co., 1918, 246 U.S. 79, 38 S.Ct. 233, 62 L.Ed. 587; Simon v. Southern Ry. Co., 1915, 236 U.S. 115, 35 S.Ct. 255, 59 L.Ed. 492.

      . See McGee v. International Life Ins. Co., 1957, 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223; Dawkins v. White Products Corp., 5 Cir. 1971, 443 F.2d 589.

      . Mullane v. Central Hanover Bank & Trust Co., 1950, 339 U.S. 306, 312, 70 S.Ct. 652, 94 L.Ed. 865.

      . Debts represent perhaps the easiest intangible assets to locate so long as the federal rule established in Harris remains — that a debt travels with the debt- or and can be attached, pursuant to state law, wherever the debtor is subject to in personam jurisdiction. Menendez v. Faber, Coe & Gregg, Inc., 345 F.Supp. 527 (S.D.N.Y.1972).
      It has been pointed out that the Supreme Court has never expressly extended the rule of Harris to include garnishment of corporate debtors. 4 Wright and Miller, Federal Practice and Procedure 278, n. 43. There is no basis in the cases, however, for a blanket immunity, protecting all those who are creditors of corporations from quasi in rem jurisdiction. The potential for injustice is, of course, obvious. While individual garnishees can usually be personally served only where they are actually found or where they reside, many large corporate garnishees are available for personal service in a score of states or more. This problem can be dealt with in light of present law through the case by case application of the flexible standards of fairness urged by appellee, or through a refinement of the notions of the situs of a debt in order to exclude from garnishment sums owed by multi-state corporations on transactions having no connection with the forum. Even under the most restricted notions of situs, however, attachment jurisdiction would be permissible here, since a portion of the monies owed to appellee by residents of Mississippi does relate to transactions conducted in Mississippi.

      . The Second Circuit in its decision in Minichiello placed considerable emphasis on the fact that the plaintiff was a resident of the forum state, the very point urged upon us by appellee as controlling here. However, the plaintiff’s residence was treated by the Court in Minichiello as significant in relation to the constitutionality of imposing New York law on the contractual obligation of the insurance company-garnishee to defend the suit. In analyzing this application of New York state law to an out of state contract, the Second Circuit turned to Watson v. Employers Liability Assurance Corp., 1954, 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74 in which the Supreme Court had upheld a similar imposition of the law of Louisiana on foreign insurance contracts. In Watson the fact of some physical connection with the forum was considered crucial for the application of Louisiana law to overturn contract provisions entered into out of state.
      The Supreme Court has made it clear that the questions of state power to exercise jurisdiction over a dispute and state authority to apply its own substantive law to the resolution of that controversy are distinct. While it is true that no forum can apply any law until it has valid jurisdiction, a state with jurisdiction can be constitutionally precluded by the Due Process and Pull Paith and Credit Clauses from applying its own law if it lacks sufficient contact with the parties or the event giving rise to the litigation. See, e. g., Home Ins. Co. v. Dick, 1930, 281 U.S. 397, 50 S.Ct. 338, 74 L.Ed. 926; Hartford Accident & Indemnity Co. v. Delta & Pine Land Co., 1934, 292 U.S. 143, 54 S.Ct. 634, 78 L. Ed. 1178.
      It was the Second Circuit’s emphasis on the choice of law aspect of Minichiello that led to rehearing en banc on the broader due process issue and a holding squarely resting on Harris v. Balk.

      - An examination of the opinion of the district court and the arguments made on this appeal indicates that the real concern of appellee is not with the unfairness of having to appear in the courts of Mississippi, but rather with the application of the law of that state, specifically the rather lengthy Mississippi period of limitations. Appellee seems to assume that a decision on the jurisdictional question is dispositive on the matter of choice of law. While a policy of permitting a state to take jurisdiction only over those controversies to which it can justifiably apply its own substantive law has been much bruited about by the commentators, compare Ehrenzweig, The Transient Rule of Personal Jurisdiction, 65 Yale L.J. 289, 292 (1956) with von Mehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv.L.Rev. 1121, 1128-33 (1966), the Supreme Court has not accepted such a formulation. See footnote 25.
      Since the question of the application of the Mississippi statute of limitations was reserved in the court below and has not been briefed on appeal, we express no opinion on either the appropriate limitations period under Mississippi choice of law rules, see Klaxon Co. v. Stentor Manufacturing Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; or the constitutionality of the application of Mississippi law to the facts of this case. See Home Ins. Co. v. Dick, 1930, 281 U.S. 397, 50 S.Ct. 338, 74 L.Ed. 926.

      . See Mullane v. Central Hanover Bank & Trust Co., 1950, 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865.

      . International Shoe Co. v. Washington, 1945, 326 U.S. 310, 66 S.Ct. 154, 90 L. Ed. 95.

      . Hanson v. Denckla, 1958, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283.


author: WYZANSKI, District Judge:

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. HENDEL MANUFACTURING COMPANY, INC., Respondent.
    Cal. No. 502, Docket 72-1932.
    United States Court of Appeals, Second Circuit.
    Argued March 5, 1973.
    Decided June 14, 1973.
    Paul J. Spielberg, N. L. R. B., Washington, D. C. (Peter G. Nash, Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, and Joseph A. Oertel, Atty., N. L. R. B., Washington, D. C., on the brief), for petitioner.
    Edward Schneider, Boston, Mass. (Philip Schneider and Brown, Rudniek, Freed & Gesmer, Boston, Mass., on the brief), for respondent.
    Before LUMBARD and TIMBERS, Circuit Judges, and WYZANSKI, District Judge.

       Senior District Judge of the District of Massachusetts, sitting by designation.

   WYZANSKI, District Judge:

Pursuant to § 10(e) of the NLR Act, 61 Stat. 136, 73 Stat. 519, 29 U.S.C. § 151 et.seq., the NLRB petitions for enforcement of its June 28, 1972 order, reported at 197 NLRB No. 179. The only issues are whether substantial evidence supports the Board’s findings: first, that respondent company violated § 8(a)(1) of the Act, 29 U.S.C. § 158(a) (1), by interfering with employees in the exercise of the rights guaranteed by § 7 of the Act, 29 U.S.C. § 157, and second, that since March 5,1971, respondent company has been violating § 8(a)(5) and (1), 29 U.S.C. § 158(a)(5) and (1), by refusing to recognize the union; — and, in connection with the aforesaid findings, whether the Board was authorized to command the respondent company to bargain with the union, Local 164, International Ladies’ Garment Workers Union.

This is a summary of the findings of the Board which are supported by substantial evidence.

About February 8, 1971, Kaufman, an assistant manager of the aforesaid union, scheduled for February 11 a meeting requested by one of the respondent’s employees. Thirty-five of the company’s employees attended and heard Kaufman describe what he regarded as the benefits and methods of unionization. He distributed blank cards authorizing the union to represent respondent’s employees.

On the same day, February 8, the respondent’s plant manager suggested to the respondent’s president that he consider a wage increase. On February 10, the president agreed and the next day he advised the manager that the increase would be about four or five per cent. The same day he called an employees’ meeting for that night. At the meeting the president advised the employees that he was giving a wage increase to the pieceworkers and that later he would look into the possibility of a raise for the hourly workers. Up to the time of this meeting, there is nothing in the record to show that the president knew of the union’s organizing activities.

On February 11, following the president’s speech, the manager and one of respondent’s foremen reported that a union meeting was scheduled for that night. The day following, and again on February 16, the manager asked employees, “What is this I hear about the union?” He received somewhat evasive answers which were nonetheless indicative of union activity.

On February 18, at a meeting of employees convoked by him, the president stated he was aware of the organizing campaign, and set forth, not in the form of a threat but in the not unfamiliar paternalistic manner of some employers, what in the management’s view were the plausible reasons why a union offered no advantages to the employees. He recommended that the employees form their own committee. Finally, he reminded employees that he had previously “mentioned” his intention to grant cost-of-living increases in accordance with past practice and he said that the company was in the process of implementing these increases when it heard of “this union stir” and decided that it was “advisable not to be accused of making changes at this time.”

On the same day, the union held its second meeting. Cards embodying authorizations to the union to act as collective bargaining agent were given by thirty of the sixty-eight employees in the relevant unit at the February 11 union meeting, by thirteen additional employees who signed before the company president’s February 18 speech but who delivered their authorization cards to the union at the second meeting, and by 5 other employees who signed after the speech and who delivered the cards to the union at the second meeting.

On February 19, the company’s supervisor conversed with two employees, one of whom he approached and the other of whom approached him. In the first talk he solicited the employee’s opinion about the union; in the second he answered the employee’s questions by saying the union “won’t be very good” because she would “have no work” and would “have to go home.”

The plant manager on February 25 approached five employees during a coffee break to ask if they were talking about the union. On February 26, she suggested to an employee that “a few girls can talk it over to break the union.”

On February 26, the president’s brother and the plant manager questioned an employee about his wearing a union button and his taking notes. The same employee was asked on March 1 by the president whether he liked his working conditions and why he was wearing a union button. •

On March 2, the union held its third meeting, and agreed to demonstrate the next day. On March 3, twenty-seven employees for 20 minutes marched in front of the plant with union placards. During the picketing the union’s representative, Kaufman, presented to the company’s president the authorization cards and asked for recognition. The president did not reply.

On March 5, about thirty-seven supporters of the union picketed again. The plant manager and supervisor urged them to stop demonstrating and the manager told one employee that “it’s too bad when this is over, you won’t be around.” She told another employee that if she left the plant the doors would be locked. Kaufman, without success, renewed the union’s demand for recognition.

On March 9, the company president addressed another employee gathering. He stated that the respondent would not give in to a strike and that a strike might cause the company to lose customers or even to close. He pled for a chance “to solve our problems.”

On the night of March 5, the union held another meeting at which those present voted to strike. On March 10, forty-five employees struck; twenty-four continued working. The walkout ended on May 10, by which time only fifteen were still on strike.

On its findings of facts, the Board concluded that the company violated § 8(a)(1) of the Act by the president’s threats to reduce work or close the plant, by his suggestions that the employees form their own committee, and by his cancellation of the previously announced wage increase, by the coercive interrogations of the plant manager, the supervisor and the president’s brother, by the supervisor’s threat that there would be no work, by the plant manager’s suggestion to employees that they could break the union, by her threat to discharge an employee for picketing on March 5, and by her telling another employee that the doors would be locked.

The Board also concluded that the union on March 5 and thereafter had a majority in an appropriate unit, and that the company by refusing to grant recognition had violated § 8(a)(5) and (1).

Thereupon, the Board ordered the company, first, to desist from what the Board had found to be unfair labor practices and from further conduct which in any like or related manner interfered with employees’ § 7 rights; second, to make pieceworkers whole with six per cent interest as recompense for the wage increase which the Board concluded had been unlawfully withheld from the time of its lawful announcement on February 11 and which had been unlawfully can-celled on February 18; third, to bargain on request and, if an understanding be reached, to embody it in a signed agreement ; and fourth, to post customary notices.

In response to the Board’s petition to this court for enforcement of the aforesaid order, the company argues, first, that the president’s announcement suspending the wage increase was made in good faith to avoid the appearance of a violation of law; second, that the president’s speeches were not coercive; third, that the company’s other officers and supervisors did not engage in coercive conduct; and fourth, that the Board’s bargaining order is unwarranted since a valid election can be held.

The second and third of those arguments do not deserve our lengthy consideration. It is plain from our recital that what the Board found upon the basis of substantial evidence that the Board, relying on its expertise, was justified in concluding that there had been unlawful interference with the § 7 rights of employees in violation of § 8(a) (1) of the Act. Bourne v. NLRB, 332 F.2d 47 (2nd Cir., 1964); NLRB v. Dorn’s Transportation Co., 405 F.2d 706 (2nd Cir., 1969); NLRB v. Gladding Keystone Corp., 435 F.2d 129 (2nd Cir., 1970). It should by now be plain that the courts are limited in their authority to review NLRB findings that an employer’s conduct interferes with employees’ rights of association. We must not make de novo findings on the basis of our limited experience and competence, but must stop at the point where we are satisfied that the administrative body charged with primary responsibility had substantial evidence for its findings and conclusions. Here we are so satisfied.

Nor do we see any troublesome question raised by the respondent’s fourth argument. It is well-settled that the Board may exercise wide, though not unfettered, discretion whether to issue a bargaining order on the basis of authorization cards executed by a majority of employees in an appropriate unit without conducting an election. NLRB v. Gissel Packing Co., Inc., 395 U.S. 575, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969). The instant case falls clearly within the discretionary limits sanctioned by Gissel and we see no advantage in retreading the ground covered therein by Chief Justice Warren.

However, there is some plausibility to respondent’s final argument. It is plain from the record that the company’s president when he withdrew his suggested wage increase acted on the advice of an accountant. If this were a criminal proceeding, it might be that a corporation which followed the advice of a competent expert given in good faith could not properly be convicted of wrongdoing. But this is a civil matter in which the issue is whether what the president did was prohibited by the NLR Act, not whether what he did involved a criminal intent. The NLR Act might have been so drafted as to prohibit only intentional interferences by an employer with his employees’ freedom of association. But that was not the Congressional choice. The legislative mandate prohibits interference whether intentionally interfering or not, whether pursuant to bona fide, competent advice of an expert or not. Congress did not here give the protection available under some other statutes to those who act in good faith upon advice given by competent, honest lawyers, accountants, or other experts. See, for example, the protection afforded by Section 11 of the Securities Act of 1933 as amended, 15 U.S.C. § 77k(b)(3), and by Section 18 of the Securities & Exchange Act of 1934, as amended, 15 U.S.C. § 78r(a).

What the NLR Act does is to make the employer act at his peril. Moreover, the peril in the case at bar was not so great as respondent would have us believe. An employer who in good faith at a time when he did not know of union activity had promised a raise, when he learned of the union activity could have taken the position publicly that whether or not the union activity succeeded the raise would go into effect. That would have been a plain declaration of neutrality and no one rightly could have criticized it adversely. In that critical sense, the present case is distinguishable from NLRB v. Dorn’s Transportation Co., supra, 405 F.2d at 714-715, in which Judge Smith counseled against the adoption of a “damned if you do, damned if you don’t” approach. In Dorn’s, -the Trial Examiner had expressly found that if the employer had granted the wage increase “nothing could be clearer than that . . . the General Counsel would have alleged such action a violation of Section 8(a)(1).” Here, to cancel the raise was obviously susceptible of being understood by employees as interference with their union organizational efforts. And the Board was warranted in so finding and concluding.

Order enforced.