author: PER CURIAM. ENGEL, Circuit Judge

text:
    Marvin T. O’BRYAN, Plaintiff-Appellant, v. Caspar WEINBERGER, Secretary of Health, Education & Welfare, Defendant-Appellee.
    No. 74-1868.
    United States Court of Appeals, Sixth Circuit.
    Feb. 25, 1975.

      E. Louis Johnson, Humphrey, Wilson, Johnson & Presser, Owensboro, Ky., for plaintiff-appellant.
    George J. Long, U. S. Atty., James H. Barr, Asst. U. S. Atty., Louisville, Ky., for defendant-appellee.
    Before EDWARDS and ENGEL, Circuit Judges, and DeMASCIO, District Judge.

       Honorable Robert E. DeMascio, United States District Judge for the Eastern District of Michigan, Southern Division, sitting by designation.

   PER CURIAM.

In this case appellant O’Bryan’s application for disability benefits under Title II of the Social Security Act, 42 U.S.C. §§ 401-431 (1970), as amended, (Supp. II, 1972), was denied by the Appeals Council and the Secretary of Health, Education and Welfare after an administrative law judge had entered an order granting disability benefits. The District Court affirmed the findings and conclusions of the Appeals Council.

Oral argument of the case was waived, but each member of the court at conference had individually arrived at the conclusion from reading the briefs and appendices that O’Bryan would not be able to work again. Recognizing, of course, that our appellate function is not to decide ab initio but rather to determine whether or not the findings of the Secretary were supported by substantial evidence, it still seemed likely to the court that we might find from a careful examination of this record that O’Bryan had made a prima facie case of complete and total disability and that it had not been rebutted by the medical evidence relied upon by the Appeals Council and the District Judge.

This court has, of course, held that where there is medical proof of disability, the government cannot deny disability without some medical opinion that in fact the claimant is capable of gainful employment. Giddings v. Richardson, 480 F.2d 652 (6th Cir. 1973); Whitson v. Finch, 437 F.2d 728 (6th Cir. 1971).

We have now read the entire transcript with care and find that there is medical evidence that constitutes substantial evidence to support the Secretary’s findings of residual capacity for light work.

O’Bryan is a 52-year-old man who has never resumed his previous work as a truck driver since undergoing major surgery for repair of an abdominal aneurysm by replacement of a portion of the arterial system by a Y-graft. The medical and lay evidence supports the conclusion that this operation was successful and appellant’s disability claim does not appear to rest thereon.

Appellant’s case for total disability is primarily based upon emphysema. In this regard the lung capacity study made by Dr. Jackson at Trover Clinic, which found appellant’s breathing capacity to be within normal limits, must be regarded as substantial evidence which supports the findings of the Secretary. On balance we conclude that the same must be said concerning the somewhat ambiguous opinion of Dr. C. W. VanHooser, who expressed the view that appellant was capable of light work, but doubted that he could secure such a job. The doubt expressed by Dr. VanHooser is clearly not a medical opinion. While we might share the doctor’s doubt, it is clear that Congress in the 1968 Amendment to the Social Security Act, Act of Jan. 2, 1968, Pub.L.No. 90-248, § 158, 81 Stat. 868, amending, 42 U.S.C. § 423 (1966) (codified at 42 U.S.C. § 423(d) (1970)), deliberately eliminated from court consideration of total disability the question as to whether a job was actually available to claimant where he lived, provided there was testimony in the record that jobs which he was capable of performing existed in the national economy as statutorily defined. See S.Rep.No. 744, 90th Cong., 1st Sess., 1967 U.S.Code Cong. & Ad.News 2834, 2882.

Finally, we note that the Secretary’s brief points out that if appellant’s emphysema has worsened since 1972, his period of eligibility extends well into 1975, and there is no legal bar to an application asserting total disability due to such change.

The judgment of the District Court is affirmed.

ENGEL, Circuit Judge

(concurring).

I agree with the majority that substantial evidence supports the Secretary’s findings and hence that the judgment of the district court should be affirmed. I refrain, however, from expressing any view on the effect of Giddings v. Richardson, 480 F.2d 625 (6th Cir. 1973), and Whitson v. Finch, 437 F.2d 728 (6th Cir. 1971), since I do not believe any such expression is necessary to the decision in this case.


source: Caselaw Access Project

author: STEVENS, Circuit Judge.

license: Public Domain

text:
    AVNET, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
    No. 73-1399.
    United States Court of Appeals, Seventh Circuit.
    Argued April 10, 1974.
    Decided Feb. 28, 1975.

      Howard P. Willens, Washington, D. C-, for petitioner.
    Gerald Harwood, Acting Asst. Gen. Counsel, F. T. C., Washington, D. C., for respondent.
    Before FAIRCHILD, Chief Judge, and PELL and STEVENS, Circuit Judges.
   STEVENS, Circuit Judge.

The Commission held that the acquisition by Avnet of two competing manufacturers of parts which are sold to re-builders of automotive electrical units violated § 7 of the Clayton Act, as amended. Avnet argues that it did not have a fair opportunity to meet the Commission’s prima facie case because it did not anticipate the Commission’s narrow definition of the relevant product market, and, in any event, that the evidence is insufficient to satisfy the Commission’s initial burden on the relevant market issue. We find no unfairness in the way the case was tried and have no difficulty in concluding that the evidence adequately supports the Commission’s findings.

As a preface to our discussion of Av-net’s principal contentions, we shall briefly summarize the Commission’s description of the industry, review the history of the proceedings, and identify the evidence which, according to Avnet, it was unable to present.

I.

Among the automobile parts which may need to be replaced or repaired as a car ages are electrical units, such as generators, alternators, starters and voltage regulators. These “automotive electrical units,” (“AEU’s”) are made by original equipment manufacturers (“OEM’s”) and by rebuilders. OEM’s include the major automobile companies and other firms that produce equipment for installation on new vehicles. They sell replacement units to warehouse distributors (“WD’s”), who in turn resell individual units, as well as components of such units, to retailers such as repair shops, service stations, garages and car dealers.

The record in this case demonstrates that the prices at which WD’s sell new AEU’s are significantly higher than the prices at which comparable AEU’s can be rebuilt and sold at a profit. A used unit may be dismantled, cleaned and reassembled with such substitute components as may be needed. Such rebuilding may take place in repair shops where one unit at a time is put back in working order for an individual customer (“custom rebuilding”), or in a production-line operation where units are rebuilt in large quantities and then sold to jobbers for distribution to the retail trade (“production-line rebuilding”). There are about 150 or 200 production-line rebuilders in the entire country.

The “rebuilders supply industry” includes the firms which sell new components to rebuilders of AEU’s. Counsel for the - Commission consistently contended that the industry is composed of only 16 or 17 principal manufacturers with aggregate annual sales of about $20 million. The alleged violation resulted from the combination of IPM, the largest, and Valley Forge, the third largest, of these firms. Before the combination, IPM had sales of over $11 million and Valley Forge’s were almost $2 million. Avnet acquired the assets of Valley Forge as of July 31, 1964, and those of IPM as of January 31, 1965. After the second acquisition, Avnet’s sales represented about two-thirds of the total in the market as viewed by the Commission.

II.

Both the complaint, which issued on April 1, 1969, and the amended complaint of December 1, 1969, alleged that 16 firms, of which IPM and Valley Forge were the largest and third largest, supplied virtually the total value of equipment and parts furnished to rebuilders.

The evidentiary hearing commenced on February 1, 1971. During the preceding 16 months, the parties conducted pretrial discovery, argued about the adequacy of Avnet’s compliance with discovery orders, stipulated about certain facts and issues, and agreed that, in advanee of trial, each would provide the other with a list of witnesses and copies of proposed exhibits.

From the outset Avnet disputed the Commission’s position that the market was composed of 16 principal firms. It attempted, in three different ways, to develop evidence that the 16 firms have so many competitors that their sales do not comprise a relevant market or sub-market. First, Avnet requested the Hearing Examiner to issue subpoenas to the 14 competitors of IPM and Valley Forge calling for disclosure of their customer lists, and thereafter to subpoena all those customers to learn their sources of supply. The Hearing Examiner quite properly rejected this request and directed Avnet, at least as an initial matter, to make its own inquiries of the customers of IPM and Valley Forge. Second, according to Avnet’s counsel, Avnet did attempt to develop evidence by a study of its own records and by interviewing its customers; presumably the results of those efforts were later incorporated in Avnet’s presentation of evidence at the trial. Third, well after the trial was under way, through conversations with its sales personnel and through an independent market research study, Avnet sought to prove that the volume of business handled by custom rebuilders was so enormous that, by inference, there must be such a significant total volume of sales by rebuilder suppliers that the statistics relating to the 16 firms identified by the Commission should be disregarded as essentially meaningless. The Hearing Examiner excluded the market study for procedural reasons.

On the basis of the voluminous evidence in the record, the Hearing Examiner concluded that the acquisition violated § 7 of the Clayton Act and recommended an order requiring Avnet to divest IPM. He found that the relevant market included the sale of new components by rebuilder suppliers to rebuilders and that the contours of the market were fairly delineated by the sales of the 16 principal suppliers to 150 to 200 production-line rebuilders. In so finding, he resolved the “sharp disagreement between the parties over the meaning of the term ‘rebuilder’ as used in paragraph 1(b) of the complaint.” His market analysis and conclusion summarizing competitive impact of the acquisition were corroborated in large part by an opinion expressed by a Valley Forge executive in memoranda outlining the advantages to Avnet of the acquisition of IPM.

In a carefully prepared opinion by Chairman Kirkpatrick, the Commission approved the findings and order proposed by the Hearing Examiner. Commissioner Dennison dissented on the ground that complaint counsel had not met their burden of demonstrating the size and dimensions of the relevant line of commerce.

III.

The record contains a great deal of testimony by rebuilder suppliers and by production-line rebuilders. It is clear that the production-line rebuilders could not survive without an adequate source of supply of new parts. Because the prices charged by OEM’s and WD’s are so high, the production-line rebuilders must obtain such parts from rebuilder suppliers. The testimony indicates that they relied primarily on IPM, Valley Forge and two other suppliers for these parts.

Unlike production-line rebuilders, who operate at a manufacturing level and sell largely to jobbers, custom rebuilders operate at the retail level dealing directly with consumers. At that level, particularly since their charges cover their labor and specialized expertise, they can afford to purchase OEM parts from WD’s. They may, of course, also purchase new, used, or rebuilt components from other sources, including rebuilder suppliers. We know that some of the rebuilder suppliers sell either nothing, or at most very little, to custom rebuilders, and we also know that IPM makes some sales to custom rebuilders. But the record does not tell us what portion of the rebuilder suppliers’ total sales, or even what portion of IPM’s or Valley Forge’s total sales, were to custom rebuilders rather than production-line rebuilders.

Avnet contends that such information is of critical importance in appraising the Commission’s definition of the relevant market, and that it was prevented from developing such evidence as well as any other evidence identifying the dimension of the business of supplying custom re-builders throughout the country, by the Commission’s failure to give it adequate notice that the Hearing Examiner, and ultimately the Commission, would decide that the term “rebuilders” includes only production-line operators and excludes custom rebuilders. As we understand Avnet’s principal argument, which is phrased in terms of a “denial of administrative due process,” if its counsel had understood the theory of complaint counsel’s case they would have proved (a) that for the purposes of this case, any distinction between production-line re-builders and custom rebuilders is invalid, and (b) that the inclusion of sales to custom rebuilders would so enlarge the relevant market as to undermine completely the Commission’s prima facie case. Specifically, Avnet contends that it would not have waited so long (1) to develop evidence from its own sales personnel describing the 3,300 customers of IPM who are not production-line re-builders, and (2) to obtain a market study delineating the volume done by custom rebuilders.

IV.

We find Avnet’s “administrative due process” argument unpersuasive. It relies largely on the fact that both the amended complaint and a trade practice rule promulgated by the Commission contain a functional definition of the term “rebuilder” which can be read to include custom rebuilding as well as production-line rebuilding, and on the further fact that the amended complaint described the demand side of the market as “highly fragmented,” and referred to IPM’s sales “to over 5,000 independent distributors and rebuilders.”

Avnet had no reason to rely on the trade practice rule as significant in this proceeding. The rule relates to the manner in which rebuilt units must be labeled when they are sold. Since, by hypothesis, custom rebuilding does not involve the sale of any such unit, but rather the reconstruction of the customer’s property, the rule is, in terms, inapplicable to the issue here.

Avnet’s reading of the complaint was, however, reasonable. The reference to “over 5,000” customers of IPM certainly implied that all of IPM’s sales were intended to be treated as within the relevant market; since presumably some of those sales were to custom rebuilders, one might well infer that the market was intended to include all custom re-builders. But even if Avnet’s counsel did originally assume that complaint counsel intended to treat all sales to custom rebuilders as part of the relevant market, it soon became manifest that the critical question in the case was whether or not counsel was correct in using the list of 16 firms to outline a relevant market. Arguably, but by no means necessarily, the answer to that question would be affected by the definition of the term “rebuilder” and, more narrowly, by whether sales to custom rebuilders would be treated as relevant. For that reason, as the Examiner found, a “sharp dispute” between the parties developed over the proper definition of that term. The portions of the record which are before us do not indicate precisely when that dispute developed. We are not at all persuaded, however, that the dispute arose so late in the proceeding that Av-net was powerless to muster evidence or argument to meet complaint counsel’s case.

We note that Avnet’s argument before the Hearing Examiner anticipated complaint counsel’s position that only sales to production-line rebuilders were relevant. We also find no discussion in Chairman Kirkpatrick’s opinion for the Commission of any claim that Avnet was surprised by the definition of the term “rebuilder.” The Commission did explain in detail its agreement with the Examiner’s exclusion of custom rebuilding from the demand side of the market and with his procedural and evidentiary rulings. But Chairman Kirkpatrick’s opinion does not even mention the inadequate notice argument that Avnet advances in this court.

Without further belaboring the point, we merely state that our review of the record convinces us that Avnet’s counsel had sufficient understanding of the issues, and sufficient time to prepare Av-net’s defense, to require rejection of the argument that they were denied administrative due process when the Hearing Examiner accepted complaint counsel’s definition of the term “rebuilder.” The test of fairness as stated in Cella v. United States, 208 F.2d 783, 789 (7th Cir. 1953), cert. denied, 347 U.S. 1016, 74 S.Ct. 864, 98 L.Ed. 1138, and L. G. Balfour Company v. F. T. C., 442 F.2d 1, 17 — 19 (7th Cir. 1971), was easily met.

V.

We also find no merit in the argument that the Commission relieved complaint counsel of the burden of proving the size of the relevant market and thereby deprived Avnet of administrative due process. The Examiner did not purport to make any such ruling. On the contrary, he found that the census data, the industry witnesses’ testimony, the sales data for the 16 principal rebuilder suppliers, and the corroborating expressions of opinion in memoranda prepared by the witness Fischer, an executive of Valley Forge, constituted sufficient evidence on which to predicate the conclusion that complaint counsel had met their burden of proof.

VI.

At pages 42-57 of its brief, Avnet argues that the Commission erred on the merits by artificially limiting the relevant market in two respects: first, by excluding sales to customer rebuilders, and second, by excluding sales of used and rebuilt parts.

The second exclusion was manifestly correct. The Commission found that prices for rebuilt or reconditioned used components varied from 25% to 50% below the prices for comparable new items. Moreover, it noted the absence of any substantial interaction in price between the two lines. These factors are sufficient to support the finding that they should be placed in different sub-markets. See Brown Shoe Co., Inc. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510; United States v. Aluminum Company of America, 377 U.S. 271, 276, 84 S.Ct. 1283, 12 L.Ed.2d 314; cf. United States v. Aluminum Company of America, 148 F.2d 416, 425 (2d Cir. 1945).

We are also persuaded that the omission of sales to custom rebuilders was not error. The Commission, of course, has the initial burden of explaining why a particular group of buyers or sellers should not be included within the relevant market. In this case the Commission met that burden by proving that custom rebuilders and production-line re-builders perform significantly different functions and operate at significantly different levels of distribution within the overall market for the repair or replacement of AEU’s. The custom rebuilder is primarly a retailer of services; the production-line rebuilder is a manufacturer of products which are sold largely to jobbers, and presumably to retailers as well. In our opinion, the clear functional difference between the two groups of rebuilders provides an adequate prima facie basis for placing them in different submarkets.

It is, of course, entirely possible that the rebuilder suppliers may sell sufficient quantities of parts to custom re-builders at prices comparable to those charged to production-line rebuilders to support the conclusion that such sales should be treated as part of the relevant market. If that be the fact, however, since the Commission satisfied its initial burden it was incumbent upon Avnet to prove that the custom rebuilders made purchases from competitors of IPM and Valley Forge in significant volume. That burden could not be discharged by evidence concerning purchases of used or rebuilt parts, or by evidence of purchases of OEM parts from WD’s. The testimony of the industry witnesses indicated that the volume of purchases by custom rebuilders from the principal rebuilder suppliers was not significant. It therefore seems improbable that detailed evidence concerning the volume of sales of new parts to custom rebuilders by re-builder suppliers would be significant. But even assuming that it might be, Av-net did not make a timely, or a complete, offer of proof showing the amount of its own, or of any of its competitors’, sales to custom rebuilders. Quite clearly, Av-net did not overcome the Commission’s prima facie showing that purchases by custom rebuilders were not part of the relevant market.

The Commission’s analysis of this aspect of the case is corroborated by statements made by a vice-president and director of Avnet in a pre-acquisition memorandum. That memorandum states, in part:

The acquisition of IPM would serve chiefly to remove our most major competitor from the scene. This would reduce to an overwhelming extent the price competition that is a major factor in the industry. In many cases severe competition has held profit margins on key items to a reduced level owing to the ability of two firms to offer substantially the same item at the same price. IPM has been very active in offering preferential discounts to large customers which Valley Forge has been obliged to meet. It is recognized by both Valley Forge and IPM that we must retain a reasonable share of the business from the larger users for they represent the primary target of any substantial tooling. We both recognize that large customers are necessary for our continued growth. This has produced a situation where the large customer has used his position to play off one against the other. In this situation Maremont has been the chief offender and has used their purchasing power in the most effective manner.

Quite plainly this comment supports the inference that competition for the patronage of the production-line rebuilders was of paramount importance to the re-builder suppliers and tends to justify discounting the significance of their sales to custom rebuilders.

VII.

Finally, Avnet objects to the portions of the order which require (1) divestiture of IPM rather than Valley Forge, and (2) Commission approval of any acquisition by Avnet of a supplier of used or rebuilt parts during the next 10 years.

Deference must be accorded to the Commission in fashioning the appropriate remedy. See Papercraft Corp. v. F. T. C., 472 F.2d 927 (7th Cir. 1973), and cases cited at 933 n. 17. Since it was the acquisition of IPM, rather than the earlier acquisition of Valley Forge, which violated the statute, and since the record indicates that Avnet has caused Valley Forge to emphasize expansion in its ignition parts business rather than the re-builders supply business, it was manifestly appropriate for the Commission to order divestiture of IPM.

We are also persuaded that even though the competition between used or rebuilt parts and new parts is not sufficiently intense to require the former to be treated as part of the relevant market for purposes of determining whether a violation occurred, it was nevertheless permissible for the Commission to consider the significance of that competition, together with Avnet’s past history of acquisitions, in defining the scope of Avnet’s obligation to obtain Commission approval of future acquisitions. We are unwilling to say that this portion of the remedy does not have a “reasonable relation to the unlawful practices found to exist.” Federal Trade Commission v. National Lead Co., 352 U.S. 419, 429, 77 S.Ct. 502, 1 L.Ed.2d 438.

Accordingly, we affirm and enter judgment enforcing the order of the Commission.

      . The pertinent portion of Section 7 of the amended Clayton Act, 64 Stat. 1125 (1950), 15 U.S.C. § 18 (1970), provides:
      “No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”
      The Commission’s decision is reported at 82 F.T.C. 444 (1973). ,

      . The substitute components may themselves be either new or used or rebuilt.

      . The parties agree that the relevant geographic market in this case is nationwide.

      . The following table lists the firms in complaint counsel’s market with their sales to rebuilders. It will be noted that the Hearing Examiner has included 17 firms, although complaint counsel initially contended that only 16 were sufficiently significant to be relevant.

      In addition, the Hearing Examiner and the Commission both noted that in 1964, Ford, Chrysler and General Motors had sales to authorized rebuilders which amounted to about 3% of the foregoing total.

      . The amendment excluded from the relevant line of commerce (1) the supply of used (as opposed to new) parts for rebuilt AEU’s, and (2) the sale of parts by OEM’s to “authorized rebuilders.” An “authorized rebuilder” is one, who, pursuant to specific agreement with an OEM, is authorized to rebuild that firm’s units. Although Avnet challenged the latter exclusion, the Commission noted that it related to only about 3% of total industry sales.

      . Avnet’s answer denied the allegations in paragraph 15 of the complaint. Moreover, Avnet stipulated that one of the contested issues was: “Whether sixteen firms supplied virtually the total volume of equipment and new parts furnished to rebuilders in 1964?”

      . See Papercraft Corp. v. F. T. C., 472 F.2d 927, 930 (7th Cir. 1973).

      . The pretrial order required Avnet to list its exhibits by January 25, 1971. The Commission completed its case on February 25, 1971, and the trial was then recessed until May 6, 1971, to give Avnet time for additional discovery and preparation. On April 19, 1971, Avnet employed United States Testing Company, Inc. to conduct a survey, but made no disclosure of that fact until July 9, 1971, when it moved to amend its list of proposed exhibits. The Hearing Examiner denied the motion as untimely, emphasizing Avnet’s past failure to act with appropriate diligence and candor in the preparation of the matter for trial.

      . See findings 18^10, 82 F.T.C. at 402-407, where the Examiner substantially equates the terms “rebuilder” and “production-line re-builders,” on the one hand, and “repair shops” and “custom rebuilders,” on the other, to exclude custom rebuilders from the demand side of the market.

      . The testimony of some representatives of the rebuilder suppliers made it quite clear that their sales to custom rebuilders were not significant. See, for example, the testimony of the witnesses Flynn (App. 591-592, 593-594), Kamber (App. 617), Green (App. 602), Winters (App. 663), and McCullough (App. 686).

      . Since IPM has a list of 3,500 customers and since there are only 150 or 200 production-line rebuilders in the country, it is fair to infer that at least some of IPM’s customers were custom rebuilders. Of course, the number of customers tells us little about their volume of purchases. There is a stipulation in the record describing IPM’s sales to 49 customers with individual annual purchases ranging from $23.25 to $5,165.44. These figures are to be contrasted with IPM’s total sales of over $11 million. We have not found any evidence, or any offer of proof, by either party establishing the dollar value of sales by IPM or Valley Forge to production-line and custom rebuilders, respectively.

      . In its brief at page 28 and footnote 22, Avnet states:
      “First, because Avnet lacked adequate notice, it was unable to develop and present vital evidence to support its contention that sales to all the kinds of rebuilders reflected on IPM’s list of 3,500 active customers should be included in the relevant market. If the Commission’s Amended Complaint had charged that only sales to a definite class of ‘production-line rebuilders’ were to be included in the market, Avnet would have had the opportunity to survey its active customers to ascertain which among them fit the Commission’s definition of production-line rebuilders, to ascertain its sales to such rebuilders, to elicit evidence regarding their other suppliers, to demonstrate that these rebuilders compete directly with other kinds of rebuilders, and to conduct those additional inquiries which would be reasonably expected to yield relevant evidence regarding the validity of the Commission’s restrictive definition of the term ‘rebuilder.’ No such discovery efforts were undertaken by Avnet — for the sole reason that it was not given fair notice by the Commission that such inquiries were either required or relevant.

         Fragmentary evidence on many of these issues is contained in the record. Av-net maintains, for example, that the record demonstrates the existence of real competition for the ultimate consumer’s dollar between custom rebuilt and production-line rebuilt electrical units, (see, e. g., RPF 215-22, App. Vol. IV,. and the transcript references contained therein.) The point in the text, however, is that Avnet was denied any opportunity during the prehearing stages of this proceeding to develop the kind of comprehensive evidence necessary to demonstrate the invalidity of the arbitrary definition of rebuilder subsequently adopted by the Hearing Examiner and the Commission.”

      . Avnet contends that its survey would have shown a market for new, rebuilt and used parts of more than $300 million and, if admitted, would have rebutted the Commission’s evidence tending to prove a relevant market of only about $20 million. We have examined the study identified as Respondent’s Exhibit 88 (Rejected); we find no offer of supplementary expert oral testimony. For at least three reasons, the rejected exhibit does not appear to us to be inconsistent with the Commission’s analysis of the market. First, it apparently includes sales of rebuilt AEU’s which include used and rebuilt, as well as new, components; second, it apparently includes sales of custom rebuilt units which include components purchased from WD’s and, therefore, indirectly from OEM’s; and third, its price analysis is directed to the retail market, whereas IPM, Valley Forge, and their competitors were selling to companies engaged in the manufacturing business who sold largely to jobbers, who in turn would resell to retailers. We find nothing in the study shedding any light on the magnitude of sales at the level at which IPM and Valley Forge sold. We are inclined to attach greater significance to Avnet’s failure to make a timely offer of a breakdown of its own sales to custom rebuilders and production-line rebuilders than to any extrapolation suggested by the rejected offer.

      . The FTC rule provides that a product cannot be identified as “rebuilt” or “remanufactured” unless it has been
      “dismantled and reconstructed as necessary, all of its internal and external parts cleaned and made free from rust and corrosion, all impaired, defective or substantially worn parts restored to a sound condition or replaced with new, rebuilt or unimpaired used parts, all missing parts replaced with new, rebuilt or unimpaired used parts, and such rewinding or machining and other operations performed as are necessary to put the industry product in sound working condition.” 16 C.F.R. § 62.3(b) (1974) (footnotes omitted).
      The rule also provides that units can be sold as “rebuilt” only after they have undergone this process and are labeled as rebuilt. Units which are not sold, or are not sold “to the trade,” need not be labeled if it is “clearly understood by all purchasers . . . that the products, or parts thereof . . . have been used.” 16 C.F.R. § 62.1(b)(1).

      . See App. 220.

      . See 82 F.T.C. at 448 et seq. The Commission stated:

        “Throughout the proceeding below and on appeal, respondent has contended that the term ‘rebuilder’ refers to all firms that engage in the physical operation of disassembling a unit, cleaning, testing, replacing or reconditioning defective or worn parts, and reassembling and testing the finished product.” 82 F.T.C. at 449 (Emphasis added).
      This statement provides a sufficient basis for distinguishing Rodale Press, Inc. v. F. T. C., 132 U.S.App.D.C. 317, 407 F.2d 1252, 1255-6 (1968), and Bendix Corporation v. F. T. C., 450 F.2d 534 (6th Cir. 1971), both of which involved a complete change in theory at the Commission level.

      . See 82 F.T.C. at 468-473.

      . In Celia we stated:
      “In an administrative proceeding it is only necessary that the one proceeded against be reasonably apprised of the issues in controversy, and any such notice is adequate in the absence of a showing that a party was misled.”
      In Balfour we stated:
      “As the Commission case against petitioners unfolded, there was a ‘reasonable opportunity to know the claims of the opposing party and to meet them.’ ” 442 F.2d at 19.

      . In United States v. Connecticut National Bank, 418 U.S. 656, 94 S.Ct. 2788, 41 L.Ed.2d 1016 (1974), the Supreme Court characterized the quality of the government’s burden of proving the contours of the relevant geographic market as its “role to come forward with evidence delineating the rough approximation of localized banking markets . . .” 418 U.S. at 669, 94 S.Ct. at 279. Presumably a similar “rough approximation” may be sufficient to make out a prima facie case on the relevant product market issue.

      . Respondent is incorrect in its statement that the Commission ignored the fact that the commonly quoted “exchange price” for rebuilt parts includes a used core as part of the purchase price. Avnet’s brief at page 55. See Commission opinion at 82 F.T.C. 457--158.

      . As the Commission noted in its opinion: “The facts found by the judge demonstrate that production-line rebuilders sell a product, not a service, to entirely different classes of customers at different distribution levels using completely different pricing methods.” 82 F.T.C. at 450.

      . This conclusion is buttressed by the fact, as stated by the Commission, that “while production-line rebuilders could not operate without a supply of new parts from rebuilder suppliers, custom rebuilders buy their new parts primarily from OEM wholesale distributors at prices 20-40 percent higher than those charged by the rebuilder suppliers.” 82 F.T.C. at 450. The Commission added the following footnote at this point in its opinion:
      “13 Although the judge in his initial decision made no finding as to the differential, between the prices charged to rebuilders by wholesalers and those charged by rebuilder suppliers, the testimony cited by the judge demonstrates that WD prices to rebuilders were at least 20-40 percent higher than rebuilder supplier prices. For example, the President of Precision Field Coil noted that WD prices for General Motors’ field coils were $4.41 while Precision sold to rebuilders at $2.76. (Tr. 538-39). One of the nation’s largest rebuilders testified that IPM’s prices were at least 20 percent cheaper than WD prices. (Tr. 843). The President of Valley Forge indicated that Valley Forge and IPM generally sold at a price 70 percent off OEM list price while jobbers sold at a 50 percent discount. (CX 37e). Thus, jobbers sold at prices over 60 percent greater than those of rebuilder suppliers.”
      Unquestionably the substantial price differentials make it appropriate to exclude the sales by OEM distributors to custom rebuilders from the market under study in this case. It necessarily follows, therefore, that it would have been inappropriate to include all sales to custom rebuilders in the relevant market.

      . See, e. g„ App. 591-592, 594, 602, 617, 663, 686.

      . Accordingly, the IPM assets have been “held . . contrary to the provisions of [§ 7 of the Clayton Act].” See United States v. ITT Continental Baking Co., 420 U.S. 223 at 240, 95 S.Ct. 926, 43 L.Ed.2d 148 (1975), and cases cited therein.


author: PER CURIAM.

text:
    Raymond A. NEIGHBORS, Plaintiff-Appellant, v. SECRETARY OF HEALTH, EDUCATION AND WELFARE, Defendant-Appellee.
    No. 74-1134.
    United States Court of Appeals, Tenth Circuit.
    Aug. 5, 1974.
    Robert E. Kopp, Eloise E. Davies, Attys., Dept, of Justice, Washington, D.C., for The Secretary of HEW.
    Mr. Neighbors was not represented by counsel nor did he file a memorandum.
    Before PHILLIPS and PICKETT, Senior Circuit Judges and. SETH, Circuit Judge.
   PER CURIAM.

This is an appeal from an order of the United States District Court for the District of Colorado granting appellee’s motion to dismiss the complaint on the ground that the court lacked jurisdiction to entertain such complaint. We affirm.

Briefly stated, the facts are these: Appellant Raymond Neighbors filed in February 1968 for disability benefits under the Old Age, Etc., Benefits section of the Social Security Act. His petition was denied initially and upon reconsideration. Thereafter, he sought and was given a hearing before an administrative law judge in October of 1969. On January 23, 1970, the administrative law judge issued his decision denying appellant’s application. The letter informing appellant of the administrative law judge’s decision notified him that he had sixty (60) days within which to petition the Social Security Administration's Appeals Council to review such decision. Thereafter, appellant filed an untimely petition for review on April 3, 1970. On October 2, 1970 the Council notified appellant that his petition had been dismissed since there did not appear in the record evidence which justified such late filing. Appellant submitted additional information to the Council but was informed on December 31, 1970 that the action taken on October 2, 1970 would stand. Appellant took no further action on this application.

In October of 1971 appellant filed a second application for disability benefits for the same period based substantially upon the same evidence proffered in support of his first application. This second application was denied initially and upon reconsideration, and the administrative law judge dismissed the petition for rehearing on the ground of res judicata. The action of the administrative law judge was upheld by the Appeals Council and on March 7, 1973 appellant was notified that the decision of January 23, 1970 remained as the final decision of the Secretary. Appellant then sought judicial review of such decision pursuant to § 405(g) of the Act.

The issue raised in the present appeal, that is whether the district court lacked jurisdiction to entertain a suit under the Act challenging the dismissal of an application for benefits on the ground that such application had been denied previously, was before us in Hobby v. Hodges, 215 F.2d 754 (10th Cir. 1954). In Hobby we held that, where an applicant under the Act has filed a second application raising a claim for relief previously passed upon in an earlier application and where such subsequent application was dismissed without hearing on the ground of res judicata, there is no “final decision of the Secretary made after hearing” and hence the court lacks jurisdiction to entertain a suit challenging such earlier decision. This result has been reached in other cases, and we think from the record such result is manifestly required here: It is clear that under the Act and regulations promulgated thereunder, appellant had sixty (60) days from the October 2, 1970 decision of the Secretary to seek judicial review of such decision. Appellant failed to do so, and the filing of a second and substantially identical application for disability benefits will not allow him to circumvent this requirement of the Act.

Upon docketing in this court, the parties were notified that we were considering summarily affirming the decision of the district court, and of their right to file a memorandum in support of their respective positions. Appellee availed himself of such opportunity and we now have before us appellee’s memorandum in support of summary action. A careful and thorough review of such memorandum and the record and files in this case convinces us that the judgment of the district court was correct.

Affirmed.

      . 42 U.S.C. § 402 et seq.

      . Such action was taken pursuant to 20 C.F.R. § 404.937 which provides in part:
      “The Administrative Law Judge may, on his own motion, dismiss a hearing requested, either entirely or as to any stated issue, under any of the following circumstances: (a) Res judicata. Where there has been a previous determination or decision by the Secretary with respect to the rights of the same party on the same facts pertinent to the same issue or issues which has become final either by judicial affirmance or, without judicial consideration, upon the claimant’s failure timely to request reconsideration, hearing, or review, or to commence a civil action with respect to such determination or decision . . . .”

      . The statute provides in pertinent part that:
      “Any individual, after any final decision of the Secretary made after a hearing to • which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action commenced within sixty (60) days after the mailing to him of notice of such decision or within such further time as the Secretary may allow * * * ”.• (Emphasis added)

      . Hughes v. Finch, 432 F.2d 93 (4th Cir. 1970) ; Russell v. Richardson, No. C — 4338 (D.C.Colo., April 29, 1973); Mills v. Richardson, 339 F.Supp. 402 (W.D.Pa.1972); Criddle v. Richardson, 334 F.Supp. 344 (S.C.W.Va. 1971) ; Henderson v. Celebrezze, 239 F.Supp. 277 (W.D.S.C.1965); Phillip v. Ribicoff, 211 F.Supp. 510 (E.D.Pa.1962); Hatter v. Ribicoff, 199 F.Supp. 654 (E.D.Okl.1961).

      . Note that the issue in such case would not be the correctness of the administrative law judge’s decision, but rather would be whether good cause was shown for such late filing of the petition to review such decision. See Langford v. Flemming, 276 F.2d 215 (5th Cir. 1960); Bohn v. Finch, 320 F.Supp. 270 (E.D.La.1970).


author: FAIRCHILD, Circuit Judge. SWYGERT, Chief Judge

text:
    CHICAGO HOUSING AUTHORITY, Petitioner, v. The Honorable Richard B. AUSTIN, Judge of the United States District Court for the Northern District of Illinois, Respondent.
    No. 74-1926.
    United States Court of Appeals, Seventh Circuit.
    Submitted Dec. 19, 1974.
    Decided Jan. 24, 1975.
    Rehearing Denied Feb. 27, 1975.
    Patrick W. O’Brien and Steven M. Rasher, Chicago, 111., for petitioner.
    Alexander Polikoff, Chicago, 111., for respondent.
    Before SWYGERT, Chief Judge, and FAIRCHILD and TONE, Circuit Judges.
   FAIRCHILD, Circuit Judge.

This petition for writ of mandamus is another episode in the Gautreaux litigation concerning the location of public housing in the Chicago area. Petitioner Chicago Housing Authority seeks mandamus to vacate an order of reference entered by Judge Austin November 7, 1974 in Gautreaux v. Chicago Housing Authority et al., 384 F.Supp. 37 (N.D.I1L). After a preface indicating lack of progress in supplying public housing in Chicago, the order provides, in part, as follows:

“The Master is directed to study and review segregation in Chicago public housing, to determine and identify the precise causes of the five-year delay in implementing my judgment orders, and to recommend a plan of action that will expedite the realization of my various orders and judgments. In so doing, the Master shall not be limited to determining whether HUD and CHA have employed their ‘best efforts,’ but shall examine all possibilities to expedite the mandate of this Court that the supply of dwelling units in Chicago shall be increased as rapidly as possible, including, without limitation, utilization of new housing programs established by the Housing and Community Development Act of 1974.”

Other provisions of the order dealt with procedure before the Master, and in the formulation of the Report.

On February 10, 1969, Judge Austin filed a memorandum opinion finding there had been discrimination on the basis of race in public housing site selection in Chicago. 296 F.Supp. 907. On July 1, 1969, judgment was entered ordering, among other things, that CHA use its best efforts to increase the supply of dwelling units in conformity with the judgment (304 F.Supp. 736, 741) and ultimately HUD was similarly enjoined.

On September 11, 1974 plaintiffs filed a motion for an order requiring CHA and its codefendant, HUD, to recommend how enforcement of the July, 1969 judgment order could be facilitated. This motion was apparently abandoned, and on September 30, plaintiffs filed a motion seeking the appointment of a commissioner to formulate plans for the expeditious construction of new public housing in the City of Chicago. While declining to appoint the requested commissioner, Judge Austin made the order of reference.

CHA argues that mandamus should issue because Judge Austin’s order of reference constituted an abdication of judicial decision making responsibility contrary to the teachings of La Buy v. Howes Leather Co., 352 U.S. 249, 77 S.Ct. 309, 1 L.Ed.2d 290, reh. denied, 352 U.S. 1019, 77 S.Ct. 553, 1 L.Ed.2d 560 (1957) and TPO, Incorporated v. McMillen, 460 F.2d 348 (7th Cir. 1972).

If we understand CHA’s apprehension, it is that the Master might make findings on issues of fact which would be prejudicial to CHA and would become binding unless clearly erroneous. On the other hand, no such issues have been framed by pleadings or otherwise. It can well be argued that the proceeding before the Master is limited to preliminary inquiry and the result to recommendations as to steps the court itself might consider initiating.

The district court appears to be seeking assistance in exploration of possible alternative courses in a difficult area. The memorandum which was a preface to the order stated that “this matter must be referred to a Master for immediate attention and proposals.” The order, in terms, does not require the Master to make findings of fact and conclusions of law (See Rule 53(e)(1), F.R. Civ.P.) and refers to the Master’s draft report, to be discussed with the parties, as “a final draft of his recommendations and comments.” The order says that the “final Report, as determined by the Master, shall be submitted to the Court for its review and possible use.” In colloquy, Judge Austin said, “I think my order indicates I retained the ultimate responsibility.”

A “party seeking mandamus has ‘the burden of showing that its right to issuance of the writ is “clear and indisputable.” ’ ” Will v. United States, 389 U.S. 90, 96, 88 S.Ct. 269, 274, 19 L.Ed.2d 305 (1967). Mandamus “should be resorted to only where appeal is a clearly inadequate remedy.” Ex parte Fahey, 332 U.S. 258, 260, 67 S.Ct. 1558, 1559, 91 L.Ed. 2041 (1947).

As already indicated, it seems wholly unlikely that the reference under challenge here contemplated or will result in determinations by the Master which will bind and prejudice the rights of CHA. Should CHA ultimately conclude that it can demonstrate error and resulting prejudice, appeal will be an adequate remedy.

We do not decide the question of the propriety of the order of reference, but we do consider mandamus inappropriate in the circumstances.

The petition for writ of mandamus is denied. The stay of the reference, heretofore ordered, is vacated.

SWYGERT, Chief Judge

(dissenting in part).

I cannot agree with the majority’s view that the district judge’s order seeks only a “preliminary inquiry” that will probably not result in prejudice to petitioner. I believe that both the district judge’s comments at the hearing on this matter and the order itself indicate that the master has been authorized to render specific factual findings that could become the basis for a contempt citation.

The order which is the subject of this mandamus petition is a part of protracted litigation concerning the location of public housing in the Chicago area. In 1969 a judgment order was entered which in part required that:

CHA shall use its best efforts to increase the supply of Dwelling Units as rapidly as possible in conformity with the provisions of this judgment order and shall take all steps necessary to that end, including making applications for allocations of federal funds and carrying out all necessary planning and development.

In an effort to secure enforcement of this portion of the 1969 order, the plaintiffs, on September 30, 1974, filed a motion for the appointment of a commissioner that eventually resulted in the order before us.

Before formally entering the November 7, 1974 order (Appendix A), Judge Austin held a hearing on the question of entering such an order. Some of his comments at that hearing are instructive concerning his view of the scope of the master’s responsibilities:

What I am interested in now is whether or not HUD and CHA have used their best efforts. That is what I propose to have these hearings about, to see whether based on whatever is adduced at these hearings warrants a finding that they have used their best efforts, and if after reviewing that testimony, and whatever else is considered by the Master, I find that they have not, then we will start thinking about contempt citations for the Chairman of the Chicago Housing Authority and maybe contempt citations for HUD, but what I am interested in now is seeing whether, as the parties now contend, ....
And all I am interested in, as far as these hearings are concerned, is to see whether or not the evidence warrants that they have engaged in their best efforts, and if it does, I think my hands are tied. If it does not, then my hands are not tied, and somebody had better bring their toothbrush. Indeed, the order itself indicates that

the issue of whether petitioner used its “best efforts” is to be considered by the master. One of the reasons for the referral to a master is stated to be “to pinpoint responsibility for defendants’ apparent lack of diligence.” At a later point the opinion states that “the Master shall not be limited to determining whether HUD and CHA have employed their ‘best efforts.’ ”

These comments and the quoted portions of the order indicate to me that the master’s duties are to encompass the submission of factual findings relating to whether CHA complied with the “best efforts” order. For two reasons the master should not be allowed to specifically investigate the factual underpinnings of a contempt petition. Plaintiffs have not suggested to the district court that CHA displayed any bad faith in its attempt to comply with the “best efforts” order and it is not the function of the district judge to initiate a consideration of that possibility on his own motion. As Arthur Murray, Inc. v. Oliver, 364 F.2d 28, 34 (8th Cir. 1966) states:

And above this, from the very nature of the judicial role, it is not given to a judge to engage in a prospecting quest for other evidence possibility to add to a record, nor counterpartly to appoint a master to make such a discovery pursuit for him.

More importantly, the question of whether a party has violated a court order is surely a matter for judicial determination that cannot be delegated to a master. To allow a master to make even a preliminary inquiry into the question of a possible contempt citation is “an abdication of the judicial function” and violative of La Buy v. Howes Leather Co., 352 U.S. 249, 256, 77 S.Ct. 309, 313, 1 L.Ed.2d 290 (1957). Nor do I think that the prejudice to the petitioner inherent in having the “contempt” portion of these proceedings initially presented before a master rather than before an Article III judge is cured by the fact that here the report is to be submitted only for “review and possible use.” In regard to issues bearing on contempt the petitioner is entitled to have the initial findings made by an Article III judge, not just a review. See, TPO, Inc. v. McMillen, 460 F.2d 348, 360, n.62 (7th Cir. 1972).

Finally, I cannot accept the conclusion that there is no need for mandamus since any possible prejudice can be remedied by a later appeal. The clear import of La Buy v. Howes Leather Co., supra and TPO, Inc. v. McMillen, supra is that mandamus is a proper remedy when there has been an improper reference to a master.

I would require that the following portions of the order of November 7 be vacated: the words “to pinpoint responsibility for defendant’s apparent lack of diligence and” on lines 9 — 10 of the first page; and the words “shall not be limited to determining whether HUD and CHA have employed their ‘best efforts’, but” on lines 5 — 7 of the fourth page of the order.

(APPENDIX A)

In The United States District Court Northern District of Illinois Eastern Division

Dorothy Gautreaux, et al.,

Plaintiffs,

v.

Chicago Housing Authority, James T. Lynn, Successor to George W. Romney, Secretary of Department of Housing and Urban Development, et al.,

Defendants.

Nos. 66 C 1459 & 66 C 1460 (Consolidated)

MEMORANDUM OPINION AND REFERENCE ORDER

These consolidated cases come before me now on Plaintiffs’ motion to appoint a Commissioner to formulate plans for the expeditious construction of new public housing units in the City of Chicago. Since it has not been established that Defendants Chicago Housing Authority (CHA) and United States Department of Housing and Urban Housing Development (HUD) have directly contravened my prior judgments and since Plaintiffs’ request is overbroad, the motion cannot be granted as tendered. However, to pinpoint responsibility for Defendants’ apparent lack of diligence and to develop methods for achieving compliance with my orders, reference of this case to a Master is appropriate. Fed.R.Civ.Pro. 53(a). See La Buy v. Howes Leather Co., 352 U.S. 249, 256, 77 S.Ct. 309, 1 L.Ed.2d 290 (1957); Schwimmer v. United States, 232 F.2d 855, 865 (8th Cir.), cert. den., 352 U.S. 833, 77 S.Ct. 48, 1 L.Ed.2d 52 (1956).

The history and substance of these lawsuits are extensive and complicated. For an excellent background discussion of this controversy, see Gautreaux v. Romney, 457 F.2d 124, 129 et seq. (7th Cir. 1972) (Sprecher, J., dissenting). After carefully examining the legal contentions and factual proofs of the parties, I entered a Memorandum Opinion on February 10, 1969, holding that Defendant CHA intentionally and unconstitutionally discriminated, on the basis of race, in its public housing site selection and tenant assignment procedures in Chicago. Gautreaux v. Chicago Housing Authority, 296 F.Supp. 907 (N.D.Ill.1969). On Sep-

tember 10, 1971, a similar finding was made against Defendant HUD by the United States Court of Appeals for the Seventh Circuit. Gautreaux v. Romney, 448 F.2d 731 (7th Cir. 1971). Each Defendant was ordered to use its “best efforts” to reverse the effects of its prior unlawful conduct. Gautreaux v. Chicago Housing Authority, 304 F.Supp. 736 (N.D.Ill.1969), aff’d, 436 F.2d 306 (7th Cir. 1970); Gautreaux v. Romney, 363 F.Supp. 690 (N.D.Ill.1973), rev’d on other grounds, 503 F.2d 930 (7th Cir. 1974). To that end, on July 1, 1969, I enjoined the further construction of public housing in any “non-white” section of Chicago, unless such action was accompanied by the simultaneous construction of at least 75 percent of all proposed units in “white” areas of the City. Gautreaux v. Chicago Housing Authority, 304 F.Supp. 736 (N.D.Ill.1969), aff’d, 436 F.2d 306 (7th Cir. 1970).

For the past five years and four months, no public housing construction has been completed by any party. Both HUD and CHA contend that they have employed their “best efforts” to fulfill the mandate of my orders and attribute this inordinate delay to “normal bureaucratic procedures.” For their part, Plaintiffs have refrained from charging Defendants with “bad faith” but maintain that additional Court assistance is necessary to bring these cases to a prompt and just conclusion. I agree. For reasons entirely unclear to me, the effect and import of my orders have been avoided and frustrated for over five years. During this period of time, the citizens of this City have been deprived of increased low-income housing. In light of these exceptional circumstances, in view of the unusually complex issues presented here, and in the interests of justice, I conclude that this matter must be referred to a Master for immediate attention and proposals. Fed. R.Civ.Pro. 53(a); 5A Moore’s Federal Practice § 53.05.

ORDER OF REFERENCE

Pursuant to the discretion vested in me by Fed.R.Civ.Pro. 53(a) and in exercise of my judicial authority, this matter is hereby referred to a United States Magistrate to serve as a Master. See 5A Moore’s Federal Practice § 53.05. See also Ex parte Peterson, 253 U.S. 300, 312, 40 S.Ct. 543, 64 L.Ed. 919 (1920), cited with approval in La Buy, supra, 352 U.S. at 256, 77 S.Ct. 309. The Magistrate shall be selected according to the local rules.

The Master is directed to study and review the existing patterns of racial segregation in Chicago public housing, to determine and identify the precise causes of the five-year delay in implementing my judgment orders, and to recommend a plan of action that will expedite the realization of my various orders and judgments. In so doing, the Master shall not be limited to determining whether HUD and CHA have employed their “best efforts,” but shall examine all possibilities to expedite the mandate of this Court that the supply of dwelling units in Chicago shall be increased as rapidly as possible, including, without limitation, utilization of new housing programs established by the Housing and Community Development Act of 1974.

Defendants shall render their complete cooperation to the Master. By way of example and not as a limitation, the Master shall have full access to maps, drawings, reports, statistics, computer studies, and all other information which may be necessary to accomplish the purposes of this order. He shall be supplied with any studies, plans, and partial plans for desegregation of the public housing system which Defendants individually or collectively may possess.

Defendants shall provide the Master with whatever professional, technical, and other assistance he may require to familiarize himself with the Chicago public housing system and the problems to be resolved in effectuating my orders and judgments and to otherwise comply with his delegated responsibilities. The full cooperation of Defendants’ staffs is requested and will be appreciated.

At such time as the Master shall complete a final draft of his recommendations and comments, he shall furnish copies of the same to the parties. The Master shall then meet in executive session with the Secretary of HUD or his designees, the Board of CHA or their designees, and Plaintiffs’ counsel or their designees, and review the same and discuss any suggested revisions. After such session or sessions, the final Report, as determined by the Master, shall be submitted to the Court for its review and possible use. Until the Master’s Report is presented to the Court, it shall be deemed to constitute “work papers.” All such work papers, and the contents thereof, shall be confidential; such papers shall not be disclosed to others, except as the Court may direct and except that the Master, with the Court’s approval, may employ, and consult with, such persons as he deems necessary for the performance of his prescribed duties, including particularly persons not affiliated with any of the parties, who possess specialized knowledge concerning federall-subsidized (sic) housing programs.

The Court retains jurisdiction over these cases for the entry of such further orders as may be appropriate.

Plaintiffs’ motion to appoint a Commissioner granted as modified herein. Matter referred to a Master, according to the rules.

Dated: November 7, 1974.

      . See Gautreaux v. Chicago Housing Authority, 265 F.Supp. 582 (N.D.Ill.1967); Gautreaux v. Chicago Housing Authority, 296 F.Supp. 907 (N.D.Ill.1969); Gautreaux v. Chicago Housing Authority, 304 F.Supp. 736 (N.D.Ill. 1969); Gautreaux v. Chicago Housing Authority, 436 F.2d 306 (7th Cir. 1970), cert. denied, 402 U.S. 922, 91 S.Ct. 1378, 28 L.Ed.2d 661 (1971); Gautreaux v. Romney, 448 F.2d 731 (7th Cir. 1971); Gautreaux v. Romney, 332 F.Supp. 366 (N.D.Ill.1971), rev’d 457 F.2d 124 (7th Cir. 1972); Gautreaux v. Chicago Housing Authority, 342 F.Supp. 827 (N.D.Ill.1972), aff’d sub nom., Gautreaux v. City of Chicago, 480 F.2d 210 (7th Cir. 1973), cert. denied, 414 U.S. 1144, 94 S.Ct. 895, 39 L.Ed.2d 98 (1974); Gautreaux v. Romney, 363 F.Supp. 690 (N.D. Ill.1973), rev’d sub nom., Gautreaux v. Chicago Housing Authority, 503 F.2d 930 (7th Cir. 1974).

      . In this context it is important to note that Fed.R.Civ.P. 53(e)(2) provides: “In an action to be tried without a jury the court shall accept the master’s findings of fact unless clearly erroneous. . . . ”


author: FAIRCHILD, Chief Judge.

text:
    J. L. SIMMONS CO., INC., Plaintiff-Appellee, Cross-Appellant, v. The FIDELITY AND CASUALTY CO., Defendant-Appellant, Cross-Appellee.
    Nos. 72-1163, 72-1164.
    United States Court of Appeals, Seventh Circuit.
    Argued April 4, 1973.
    Decided Jan. 3, 1975.
    Rehearing Denied Feb. 25, 1975.

      Walter W. Ross, Jr., Robert S. Milnikel, Chicago, 111., for J. L. Simmons.
    James T. Ferrini, Chicago, 111., for Fidelity and Casualty Co.
    Before CLARK, Associate Justice , FAIRCHILD, Chief Judge, and PELL, Circuit Judge.

       Associate Justice Tom C. Clark, United States Supreme Court, Retired, is sitting by designation.

   FAIRCHILD, Chief Judge.

This is an appeal by the defendant, The Fidelity and Casualty Company of New York (Fidelity) from judgment in favor of the plaintiff, J. L. Simmons Company, Inc. (Simmons). Jurisdiction is founded on diversity of citizenship. The parties accept Illinois law as controlling substantive questions.

Simmons, a construction contractor, brought this action on a policy of insurance issued to it by Fidelity alleging that Fidelity’s refusal to defend certain actions brought against Simmons was a breach of the policy and rendered Fidelity liable to Simmons for sums paid in settlement of those actions and for the costs of defense. The district court granted plaintiff Simmons’ motion for summary judgment and, after further proceedings, awarded damages, but refused to include in the total any interest on the money Simmons had paid out from the date on which it was advanced, in April of 1969, to the date of judgment, in December of 1971. Fidelity appeals from the judgment in favor of Simmons, and Simmons cross-appeals from the denial of interest.

Fidelity issued a Comprehensive General Liability Policy to Simmons. While the policy was in force, Cossie Griffin, a bricklayer employed by Simmons, suffered fatal injuries while working on the construction of a hospital for An Association of Franciscan Sisters of the Sacred Heart (Owners). An action for damages was brought in state court by Griffin’s heirs against the Owners and Architects predicated upon alleged violations of the Illinois Structural Work Act, Ill.Rev. Stats., Ch. 48, secs. 60-69.

As a result of the Griffin suit against the Owners and Architects, each in turn sued Simmons. The Architects filed a third-party action against Simmons seeking indemnity for all liability which the Architects might incur in the primary action. The complaint alleged that their liability, if any, to the plaintiffs would be a result of the active misconduct of Simmons in failing to carry out its contractual responsibilities and denied any active misconduct by the Architects. The Owners’ counterclaim against Simmons set forth two counts. One count was similar to the complaint of the Architects. The other count set forth provisions of the construction contract in which Simmons promised to furnish barricades and scaffolding as required by the state code, to exercise precaution for the protection of persons and property, and to observe the safety provisions of applicable laws and codes. The count further alleged that Simmons had impliedly promised to perform the work in a good and workman-like manner; and alleged the Owners’ liability in the Griffin action, if any, could only be the result of breach of one or more of the express or implied provisions of the construction contract.

Simmons tendered the defense of these actions to Fidelity, who refused to defend on the ground that the insurance policy did not cover these claims. The third-party actions were dismissed and the defense of the Owners and Architects was assumed by Simmons, due notice first having been given to Fidelity. During the trial of the Griffin action, a settlement of the claims was made, also after notice and a demand to pay the settlement, which Fidelity refused.

Count I of Simmons’ complaint was predicated on the theory that the liability asserted by the Owners and Architects against Simmons was liability assumed under a written contract and therefore included under Coverage Y of an endorsement on the Fidelity policy.

The policy was entitled “Comprehensive General Liability Policy.” Coverage A, providing insurance for liability because of bodily injuries and death, generally, was inapplicable to liability because of Griffin’s injuries and death since he was injured in the course of his employment, and liability for such injury and death was excluded from Coverage A by Exclusion (g).

There had been added to the policy, however, a “Contractual Liability Coverage Endorsement.” Coverage Y — “Contractual Bodily Injury Liability” was an agreement “To pay on behalf of the insured all sums which the insured, by reason of the liability assumed by him under any written contract designated in the schedule below, shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident.”

There was no schedule designating a written contract. The requirement of such designation was obviated by a further agreement that the “Contractual Liability Coverage Endorsement” shall apply to “any other contract, other than those defined in the policy, whether or not said contract is described in the endorsement.” It was further agreed that, although not a condition precedent to coverage, “The insured represents that it will notify the company of all written contracts which it may execute with any person — with full particulars thereof, and an exact transcript of each indemnity provision set forth therewith.’’ The phrasing we have italicized at least suggests that the assumption of liability to be covered was expected to be found in some portion of a written contract identifiable as an indemnity provision.

The parties agree that if the pleadings in an action against the insured disclose, potentially, a case within the coverage of the policy, the insurer must defend, and unjustified refusal renders the insurer liable for the amount of the settlement and expenses incurred in defense. See Sims v. Illinois National Casualty Co., 43 Ill.App.2d 184, 193 N.E.2d 123, 127 (1963). For present purposes, we must inquire whether the liability asserted in the counterclaim against Simmons could be said to be liability assumed by Simmons under a written contract.

The only written contract is the contract for construction of the hospital. It contained no provision whereby Simmons expressly assumed, or promised to pay, hold the Owners harmless from, or indemnify the Owners on account of any liability arising out of violation of the Structural Work Act. Hence, if the insurance policy contemplated only an express assumption of another’s liability, or an express agreement to indemnify, neither is present. We do observe that it is at least a natural reading of the policy provision, if not the most natural reading, that an assumption of another’s liability under a contract, in order to be covered, must be effected by some identifiable provision purporting to be an assumption of liability, or a promise to indemnify or hold harmless from liability. Nevertheless, the policy does not contain the word “express” and insurance contracts are to be construed in favor of the insured.

Assuming, as we must in this case because of Fidelity’s refusal to defend, that Griffin’s injury and death resulted from a violation of the Structural Work Act for which the Owners and Architects were each liable, and for which Simmons would have been liable if the injury had occurred to someone other than a Simmons employee, and that, under applicable Illinois law, Simmons was liable to indemnify the Owners and Architects, did such liability constitute liability assumed by Simmons under the contract?

The district court concluded that an implied assumption of liability was sufficient and that Simmons’ obligation, by reason of its contract, to indemnify the Owners (if not the Architects) constituted such assumption of liability. The court reasoned, in part, “that the Illinois courts do imply into contracts between a building contractor and a building owner an assumption of liability by the contractor that obligates him to indemnify the owner if the latter becomes liable to a third party because the former breached his duty to abide by the scaffolding act. We deem it immaterial that the Illinois courts may relieve the contractor of this contractual liability if the owners may have been actively involved with the contractor in the default.” In any event, the court thought that Simmons’ express agreement to furnish barricades and scaffolding as required by the state code, and to observe the safety provisions of the laws implied an obligation to indemnify the Owners for liability arising from its failure to furnish such barricades and scaffolding.

As pointed out by the district court, most of the cases construing insurance policy language concerning liability assumed by the insured under a contract deal with an exclusion of such liability from what is often called general liability coverage rather than a description of contractual liability coverage, as is present here. They do appear to support several principles:

a. Where the Insured had a contract with Other Party to perform work, and, by reason of Insured’s act or omission in the course of performing it, became liable for injury to the person or property of Injured Party, and the Insurance Policy covered liability imposed on the Insured by law, but excluded liability assumed by the Insured under contract, Insured’s liability to Insured Party was not assumed by Insured under contract even though it arose out of an act or omission in the performance of or governed by a contract. Therefore such liability was not excluded and was covered. Larsen v. General Cas. of Wisconsin, 99 F.Supp. 300 (D.Minn.1951), aff’d General Cas. of Wisconsin v. Larson, 196 F.2d 170, 174 (8th Cir. 1952); American Casualty Company v. Timmons, 352 F.2d 563, 568 (6th Cir. 1965); Lumbermens Mutual Cas. Co. v. Town of Pound Ridge, 362 F.2d 430, 434 (2d Cir. 1966); Weeg v. Iowa Mutual Ins. Co., 82 S.D. 104, 141 N.W.2d 913 (1966). Where the Insurance Policy covered only liability assumed by the Insured under contract, it would be consistent in an otherwise similar situation to decide that Insured’s liability to Injured Party was not covered.

b. Where the Insured had a contract with Other Party to perform work; by reason of Insured’s act or omission in the course of performing it, the Insured and Other Party each became liable for injury to the person or property of Injured Party; Injured Party collected from Other Party; because of a rule of policy, such a comparison between active and passive fault, Insured was required to indemnify Other Party; and the Insurance Policy covered liability imposed on the Insured by law, but excluded liability assumed by the Insured under contract, Insured’s liability to indemnify Other Party was not a liability assumed by Insured under contract even though the liability to Injured Party and the liability to indemnify arose out of an act or omission in the performance of or governed by a contract. Board of Trade Livery Co. v. Georgia Casualty Ins. Co., 160 Minn. 490, 200 N.W. 633 (1924). Where the Insurance Policy only covered liability assumed by the Insured under contract, it would be consistent in an otherwise similar situation to decide that Insured’s liability was not covered.

c. Under the same facts as b, except that in addition Insured’s contract with Other Party included an express promise by Insured to indemnify Other Party from liability growing out of acts or omissions of Insured, the express promise added nothing to the Insured’s liability. The contractual liability exclusion clause was not applicable and the liability was covered. United States Fidelity & Guaranty Co. v. Virginia Eng. Co., 213 F.2d 109, A.L.R.2d, Annotated, 63 A.L.R.2d 1122.

The rationale may well be that where the facts are such that an Insured’s liability to indemnify exists on one theory as well as another (one being liability imposed by law and the other being liability assumed by contract) the Insured is entitled to choose the theory which is to his advantage with respect to insurance coverage. Such liability would not be excluded by a clause excluding liability assumed under contract, but would be included in coverage of liability so assumed.

We are aware of one case involving a policy provision for coverage of liability assumed by the Insured under a contract. In Haugan v. Home Indemnity Company, 86 S.D. 406, 197 N.W.2d 18 (1972), Insured built a building pursuant to contract with Owner. Owner sued Insured for a defect in the building, claiming a failure to perform in a proper and workman-like manner. The court said, p. 23, “Breach of an implied warranty is not a contractual assumption of liability. The coverage under this section of the policies applies only to an assumption of another’s liability. This contemplates an express contractual assumption of another’s potential liability by an agreement to indemnify or hold another harmless for an obligation not otherwise imposed by law.” This pronouncement is somewhat similar to proposition a, stated above, although the case did not involve an act or omission of the Insured generating liability for the injury of a third party.

An Illinois Appellate Court decision involved coverage of “all sums which the insured shall become legally obligated to pay or the liability of others assumed by him under contract for damages” because of bodily injury and death, excluding, “except with respect to liability of others assumed by the insured, under contract,” bodily injury or death of Insured’s employee. Tiffiny Co. v. General Acc. F. & L. Assur. Corp., Ltd., 12 Ill. App.3d 597, 299 N.E.2d 378 (1973).

Although there are statements supporting the proposition that in Illinois a right to indemnify may be implied from a construction contract, we view the statements as dicta, since the court emphasized that the policy required only assumption of liability under a contract which was not required to be express or written, that the contractor insisted on a “Certificate of Insurance for scaffolding, to be issued before Tiffiny could start,” and “the admissions of the defendant,” apparently that the policy in question and another policy “dovetail and cover all claims for either express or implied indemnity arising out of injury to an employee.”

Although this decision comes from an Illinois court, it does not demonstrate, on close reading, a principle controlling our case, without several of the facts relied upon in Tiffiny, including, in the policy before us, a reference to a written contract.

Three decisions involve coverage of Insured’s liability because of bodily injury, subject to an exclusion of injury to an employee of Insured arising in the course of employment, but with an exception of liability assumed by the Insured under contract.

In Indemnity Ins. Co. v. California Stevedore & Ballast Co., 307 F.2d 513 (9th Cir. 1962), the Injured Parties were longshoremen employees of Insured, who was a contracting stevedore. The injuries occurred aboard a vessel while stevedore services were being performed. Injured Parties sued the Shipowner under the Longshoreman’s Act. The Shipowner sued the Insured, alleging that Insured had agreed to indemnify the Shipowner for any liability caused by the Insured’s failure to perform workmanlike services. There was a written contract between the Insured and the Shipowner. Although it did not contain an express idemnity agreement, an agreement to indemnify was deemed to have been implied in fact. The court decided that under the federal law applicable to the contract between the Insured and the Shipowner, the Insured’s warrant to perform services in a workman-like manner was the essence of the contract; that therefore Insured’s liability to the Shipowner was assumed under a written contract; and that the liability so assumed was excepted from the exclusion, and therefore covered. The decision in Indemnity was followed in Zidell v. Travelers Indemnity Company, 264 F.Supp. 496 (D.Oregon 1967).

In Kipka v. Chicago & Northwestern Railway Company, 289 F.Supp. 750 (D.Minn. 1968), the Injured Party was an employee of Insured, injured while loading cases of beer into a boxcar furnished by Santa Fe Railway. Injured Party sued Santa Fe and Santa Fe sued Insured for Indemnification. The court concluded that the complaint presented a possible claim of a relationship between Insured and Santa Fe such that Insured had an implied contractual indemnification obligation to Santa Fe. Relying on Indemnity and Zidell, the court decided that such liability would be excepted from the exclusion, and hence covered by the policy.

Thus there is some authority for the proposition that an Insured’s liability to indemnify the Other Party pursuant to an obligation merely implied by a written contract may constitute, under an insurance policy, liability assumed by the Insured under a written contract.

It is clear, under Illinois law, that where a project subject to the Structural Work Act is carried on, several persons may, depending upon the circumstances, be deemed to be sufficiently in charge of the work to be held responsible for any failure of compliance with the Act, (e. g., Schroeder v. Braun, 502 F.2d 235 (7th Cir. 1974)) and where one or more of them are held liable for a resulting injury, the Illinois courts recognize an obligation of indemnity in order to impose the ultimate burden on one who was the “active delinquent” in bringing about the injury rather than the “lesser delinquent,” who may have been held accountable by the injured plaintiff. Miller v. DeWitt, 37 Ill.2d 273, 226 N.E.2d 630 (1967). Often the Injured Party is the employee of a contractor or subcontractor, not entitled to recover from his employer, who recovers from the owner and others, and they seek indemnity from the employer. Exposure to the liability to indemnify is surely incidental to the performance of the employer’s contract. If events occur so that such liability is imposed on him, is it a “liability assumed by him under [the] contract” within the meaning of the insurance policy?

A question for which we find no clear answer in Illinois decisions is whether the obligation to indemnify is imposed as a common law device to serve state policy or arises from a promise implied in any contract in which the parties did not otherwise provide, though free to do so.

One reason for thinking that the Contractor’s obligation to indemnify does not rest on an implied promise is that to some extent, at least, the active-passive indemnity rule is applied to tort-feasors who had been strangers as well as to parties to a contract. In Sargent v. Interstate Bakeries, Inc., 86 Ill.App.2d 187, 229 N.E.2d 769, 774, a case of injury produced by the conduct of two automobile operators, the court explained:

“To alleviate the harsh results that would be caused by the uniform refusal to allow contribution, the courts of Illinois have developed indemnification as an exception to the rule. [Citations omitted.] At common law the cases in which indemnity was allowed involved a defendant held liable without personal fault, typically master-servant cases and cases where the defendant was subject to a nondelegable duty. Due to the restrictions on the right to contribution, indemnity was expanded to allow recovery to a party not completely free of fault. [Citations omitted.] Our courts now permit one tortfeasor to recover from another if there is a qualitative distinction between the negligence of the two. As it is commonly stated, a passively negligent tortfeasor may obtain indemnification from an actively negligent tortfeasor.” Reynolds v. Illinois Bell Telephone Co., 51 Ill.App.2d 334, 201 N.E.2d 322 (1964). In Muhlbauer v. Kruzel, 39 Ill.2d 226, 234 N.E.2d 790 (1968), however, the Supreme Court of Illinois, although citing Sargent for the proposition that “The doctrine of implied indemnity has been utilized to mitigate the harsh effects that could result from an inflexible application of this judicially created bar to contribution [between joint tort-feasors],” 229 N.E.2d p. 792, decided that a particular third-party complaint was properly dismissed, and that there must be, between the alleged indemnitee and indemnitor, “some relationship upon which a duty to indemnify may be predicated.” See Drozdzik, Implied Indemnity as a Substitute for Contribution between Joint Tortfeasors, November 1974, Illinois Bar Journal, 142.

Another reason for thinking that the obligation is a rule of policy is that the context of the active-passive test itself, since it depends on relative fault, so suggests. Moreover, it appears that the parties may only contract for a different test by an express indemnity provision, which in turn is subject to careful scrutiny and strict construction if one party agrees to take responsibility for another’s negligence. DeTienne v. S. N. Nielsen Company, 45 Ill.App.2d 231, 195 N.E.2d 240, 242 (Appellate Court of Ill. 1963).

The Illinois courts have often referred to the obligation to indemnify under the Structural Work Act in common law or tort liability terms, although some of the same decisions have described the obligation as contractual.

A statement of the Supreme Court of Illinois in John Griffiths & Son Co. v. National Fireproofing Co., 310 Ill. 331, 141 N.E. 739 (1923) is generally regarded as the starting point. In this case defendant subcontractor had expressly promised to indemnify the contractor and owner for loss occasioned by defendant, and the central question was whether the promise was against public policy because the indemnitee was also in violation of the Structural Work Act. In upholding the promise to indemnify, the Court said, in language suggesting a rule of policy: “The general rule is that, where two parties acting together commit an illegal or wrongful act, the party injured may hold both responsible for the damages resulting from their joint act, and neither can recover from the other the damages he may have paid, or any part of them. The further general principle is announced, however in many cases, that where one does the act which produces the injury, and the other does not join in the act, but is thereby exposed to liability and suffers damage, the latter may recover against the principal delinquent, and the law will inquire into the real delinquency, and place the ultimate liability upon him whose fault was the primary cause of the injury.” p. 742.

For later decisions dealing with the obligation to indemnify in tort or contract terms, or both, see Moroni v. Intrusion Prepakt, 24 Ill.App.2d 534, 165 N.E.2d 346 (1960); Rovekamp v. Central Const. Co., 45 Ill.App.2d 441, 195 N.E.2d 756 (1964); Parsons v. Kuhne-Simmons Co., 76 Ill.App.2d 121, 221 N.E.2d 168 (1963); Skezas v. Safway Steel Products, 85 Ill.App.2d 295, 229 N.E.2d 781 (1967); Wrobel v. Trapani, 129 Ill.App.2d 306, 264 N.E.2d 240 (1970); Buehler v. Toynan Construction Co., 133 Ill.App.2d 106, 272 N.E.2d 861 (1971), aff’d 52 Ill.App.2d 214, 287 N.E.2d 691 (1972); Gadd v. John Hancock Mutual Life Insurance Co., 5 Ill.App.3d 152, 275 N.E.2d 285 (1971); Gerlach v. Pepper Construction Co., 2 Ill. App.3d 169, 276 N.E.2d 22 (1971); Tiffiny Dec. Co., supra. It should be noted that in each case, the particular court was explaining the theory of a rule, and that the choice between a tort or policy principle and a promise to indemnify did not have the kind of significance present here.

In Miller v. DeWitt, supra, the Supreme Court of Illinois, citing Griffiths, spoke of indemnification of one tortfeasor by another, citing Moroni, said “We agree with the rationale of these cases, and thus feel that it is proper to recognize the right of indemnity, even in the absence of a specific agreement providing therefor,” and, after referring to the contractor as a possibly “active tortfeasor” agreed with language of Rovekamp to the effect that the lesser delinquent “can transfer its statutory liability to the active delinquent, whose dereliction from duty brought about the plaintiff’s injury.”

In Wrobel, the court commented on the language, as follows:

While the opinions in these cases may be subject to the criticism that they employ a mixture of terms from contract and tort law, they are, nevertheless, readily understandable and possible of application. Adhering strictly to contract principles, it may properly be said that an indemnitee . cannot obtain redress if his own conduct-is sufficient to preclude recovery. But recognition of that rule still leaves us without guidelines necessary to determine the character of such conduct. We believe that the borrowing of the “active-passive negligence” concept from tort law is quite useful in the situation presented by the case now before us. While not satisfying the legal purist, it does, by fortunate accident, make available a substantial body of case law which deals with the same — or practically the same — facts of conduct which will, or will not, permit recovery. Wrobel v. Trapani, supra, 264 N.E.2d at 246-247.

When Moroni was decided, the court based its decision in part on an implied warranty theory parallel to Ryan Stevedoring Co. v. Pan-Atlantic Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956). There it was held that an agreement to perform stevedoring operations for a shipowner necessarily includes by implication a warranty of unworkmanlike service, resulting in an obligation to indemnify the shipowner if held liable for injury caused by a breach. The agreement involved in Ryan, however, is “a maritime contract, governed by federal law . . . in an area where rather special rules governing the obligations and liability of shipowners prevail . ” Italia Soc. v. Ore. Stevedoring Co., 376 U.S. 315, 324, 84 S.Ct. 748, 754, 11 L.Ed.2d 732 (1964). Since Moroni, it has been held that the Ryan implied warranty theory is inapplicable to these building contractor indemnity actions. Wrobel, supra, and Gadd, supra.

The district court in the case at bar relied on five provisions of the contract which, taken together, required Simmons to furnish scaffolding and barricades required by law and to comply with safety regulations generally.

The district court said, “But Simmons’ express promises to abide by such law can have no other interpretation than as an obvious expression of the parties’ intent that Simmons would hold the Owners harmless, i. e., indemnify them, should the latter become liable to third parties solely due to Simmons’ failure to comply with the law. If the express contractual obligation to comply with the scaffolding act does not mean this, these promises would add nothing to Simmons’ statutory duty and would be nothing more than excess and useless verbiage. Because we doubt that Simmons and the Owners intended certain of their contractual clauses to be meaningless and because we believe that the conclusion is inescapable that the parties intended that Simmons would hold the Owners harmless if the Owners became liable to an injured third party solely because of Simmons’ failure to comply with the Structural Work Act, we conclude that such an assumption of liability, although not expressly stated, was necessarily part and parcel of this specific contract.”

We note from the opinion in Miller v. DeWitt, supra, that the contract there under consideration had a clause requiring the contractor to take all safety precautions, but no point was made of it. These provisions in the instant contract require no more than the Structural Work Act required Simmons (and anyone else in charge of the work) to provide. If an injury resulted from noncompliance which was the sole fault of Simmons, an implied promise to indemnify would add nothing, since Simmons would be liable for indemnification without it. If the party seeking indemnity were at fault in any degree, Illinois doctrine with respect to indemnity against one’s own negligence would prevent indemnification because the intention was not sufficiently shown. If these provisions could ever be meaningful in providing for indemnity, they could be so only under the limited circumstances where a third party was responsible for all the active fault.

Moreover, in Skezas, supra, a provision of the contract making similar requirements of the contractor, and more specifically providing that the safety of all persons employed by the contractor shall be his “sole responsibility,” was held not to be a covenant, express or implied, to indemnify the owner, although the court did acknowledge on rehearing that the contractor might be liable for breach of the provision if there were “acts or omissions which were not in compliance with the contract.”

In summary, (1) the policy has internal evidence that the assumption of liability to be covered was expected to be found in some portion of a written

contract identifiable as an indemnity provision; (2) the same meaning seems to us to follow most naturally from the language, liability assumed by the insured under any written contract; (3) if the liability to indemnify is not the result of an express promise, but only a consequence of breach of the contract, it would be consistent with the interpretation of similar language in exclusion clauses to hold that the liability was not covered by Coverage Y. As to others than Simmons employees, the liability would then be covered by Coverage A; (4) there is some authority for the proposition that liability to indemnify arising out of a merely implied promise may constitute, under an insurance policy, liability assumed by the insured under a written contract; (5) there is a general rule of construction of an insurance policy in favor of the insured; (6) there is language in Illinois decisions explaining the obligation to indemnify by one actively at fault under the Structural Work Act as an implied promise in his building contract, although there is other language indicating that indemnification is a common law device for shifting the burden of liability for a statutory violation to the person most actively delinquent; (7) the district court’s reasoning that a promise to indemnify is implied by a promise to furnish safety precautions required by the Act is plausible but there is an Illinois decision appearing to hold otherwise.

Giving consideration to all the foregoing factors, we choose the construction of the policy language which seems to us the most natural, that is that there must be a portion of a written contract identifiable as an indemnity provision in order for liability to be deemed assumed under a written contract, and covered. Furthermore, it seems to us that the Illinois courts would probably hold, if confronted with our question, that entering a construction contract which will be subject to the Structural Work Act is not an assumption of liability under the contract within the meaning of Coverage Y.

The judgment appealed from is reversed and the cause remanded with directions to enter judgment for defendant.

      . The Structural Work Act provides in part:
      “All scaffolds ... for the use in the erection ... of any . . . building . shall be erected and constructed, in a safe, suitable and proper manner, and shall be so erected and constructed, placed and operated as to give proper and adequate protection to the life and limb of any person or persons employed or engaged thereon, or passing under or by the same . . . ” S.H.A. Ch. 48, § 60.
      “Any owner, contractor, sub-contractor, foreman or other person having charge of the erection, construction ... of any building . . within the provisions of this act, shall comply with all the terms thereof
      “For any injury to person or property, occasioned by any wilful violations of this act, or wilful failure to comply with any of its provisions, a right of action shall accrue to the party injured . . .,” and to widow, lineal heirs or dependents, in case of death. S.H.A. Ch. 48, § 69.