text:
    CHICAGO & NORTH WESTERN RAILWAY COMPANY, a corporation, Plaintiff-Appellee, v. CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD COMPANY, a corporation, Defendant-Appellant.
    No. 73-1349.
    United States Court of Appeals, Seventh Circuit.
    Argued Feb. 12, 1974.
    Decided Sept. 6, 1974.
    James P. Reedy, Anthony W. Summers, Chicago, 111, for defendant-appellant.
    Edward Warden, James P. Daley, Chicago, 111, for plaintiff-appellee.
    Before CASTLE, Senior Circuit Judge, and PELL and SPRECHER, Circuit Judges.
   PELL, Circuit Judge.

In 1932, the Chicago, Milwaukee, St. Paul and Pacific Railway (the Milwaukee) and the Chicago & North Western Railway (North Western) entered into an agreement granting the Milwaukee the right to use jointly with North Western a certain section of main line track owned by North Western. In 1971, North Western attempted to ter-mínate the agreement. When the Milwaukee rejected the notice of termination, North Western instituted the present action seeking, inter alia, that the Milwaukee be enjoined from using the line and that plaintiff have judgment for $1,250 per day for each day of defendant’s use of the line subsequent to the termination date announced in North Western’s notice.

Denying the Milwaukee’s motion for summary judgment and granting that of North Western, the district court found that the 1932 agreement specified no termination date and the court concluded that “in this jurisdiction . . [such a] contract ... is terminable at the will of either party.” Accordingly, because North Western had duly notified the Milwaukee of its intention to terminate the agreement, the court ordered the defendant railroad to deliver possession and enjoined it from any further use of the line. However, the court stayed “all further proceedings to restrain defendant” pending this appeal by the Milwaukee or the application by either party to the Interstate Commerce Commission.

I

North Western operates three main lines of railroad from Chicago. One extends in a westerly direction from Chicago through Proviso, Illinois, to Omaha, Nebraska; another extends in a northwesterly direction from Chicago through Des Plaines, Illinois, to St. Paul, Minnesota; and the third extends in a northerly direction from Chicago through Blodgett, Illinois, to Ishpeming Michigan. The 10 y2 mile section of line covered by the parties’ 1932 agreement (the “Techny line”) is part of a railroad line running from Proviso through Des Plaines to Blodgett. Its use permits the railroads to expedite the handling of traffic. The Milwaukee claims that if it is foreclosed from using the Techny line it would have to route its rail traffic to Milwaukee through downtown Chicago.

During the First World War, when the federal government assumed control of the nation’s railroads, freight trains of the Milwaukee used North Western’s Techny line. In 1920, with the approval of the Illinois Public Utilities Commission, the Milwaukee contracted with plaintiff for the continued use of the line. That agreement by its terms expired in 1928. North Western was reluctant to renew the right of the Milwaukee to use the tracks, particularly in a long-term contract. While the two railroads negotiated to determine whether they could reach a new agreement, they from time to time informally reaffirmed the arrangements that had been made in 1920.

The negotiations resulted in a new agreement, dated September 8, 1932. It provided, inter alia, for monthly payments based on 300 for each car and 600 for each locomotive moved by the Milwaukee over the Techny line. The instrument specified no termination date, and it contained no provision either for the escalation or the reduction of the compensation to be paid North Western. Plaintiff was not obligated to continue ownership, maintenance, improvement, or operation of the Techny line and related facilities. However, if North Western was to decide to abandon all or part of the line, the Milwaukee had the right to purchase it within 90 days. The parties also agreed that if they subsequently participated in the construction of tracks or additions in order to service nearby industries, each railroad would own an undivided one-half interest in such future side tracks. The final paragraph of the agreement specified that the instrument “shall not become effective until approved and authorized by such public authorities as may be required by law.”

The prayer to plaintiffs’ complaint requested, inter alia, that the court (1) declare the agreement void pursuant to section 1(18) of the Interstate Commerce Act because the Interstate Commerce Commission had never approved it, (2) find the agreement terminable at will since it failed to provide a termination date, (3) declare the instrument unenforceable for lack of mutuality, and (4) enjoin the Milwaukee from using the line and from asserting any claims to it. The district court “chos[e] to focus upon the [issue of] the duration of the 1932 contract.”

II

The district court did not reach or explore the ICC issue, the alleged basis of federal jurisdiction. Instead, it implicitly accepted pendent jurisdiction over the nonfederal claims and, as we mentioned above, resolved the controversy on one of the state contract law grounds urged by North Western. Our examination of the law pertinent to the federal issues raised by this case convinces us that the ICC ultimately will have to become involved in the Techny line track-age rights matter. That is, regardless of which party wins on state contract law grounds, the ICC’s expertise and approval are necessary for full resolution of the controversy. The district judge implicitly acknowledged the inevitable participation of the Commission when he stayed the injunction against the Milwaukee. Since, in our opinion, the jurisdiction of the ICC is the first issue that should have been resolved, we turn to it.

A

A finding that North Western had the right under Illinois contract law to terminate its agreement with the Milwaukee raises the question whether the cessation of the Milwaukee’s operations over the Techny line may be accomplished without the approval of the Interstate Commerce Commission. Whether such authorization is required depends upon the construction and application of 49 U.S.C. § 1(18) which provides in pertinent part:

“[N]o carrier by railroad subject to this chapter shall abandon all or any portion of a line of railroad, or the operation thereof, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity permit of such abandonment.”

The primary decision involving this portion of section 1(18) is Thompson v. Texas Mexican Ry. Co., 328 U.S. 134, 66 S.Ct. 937, 90 L.Ed. 1132 (1946) (Tex-Mex). By written contract entered into in 1904, the Tex-Mex granted the St. Louis, Brownsville & Mexico Railway (Brownsville) the right, in return for payment of specified rentals, to operate its trains over Tex-Mex tracks and to make use of Tex-Mex terminal facilities. Both railroads were interstate carriers subject to the provisions of the Interstate Commerce Act. The contract provided for a term of 50 years unless the parties terminated it sooner. Either party was permitted, upon giving twelve months’ notice, to terminate the lease, In 1940, seven years after the grantee railroad had petitioned for reorganization under § 77 of the Bankruptcy Act, Tex-Mex gave notice that it was exercising its right to terminate the contract. The trustee in the Brownsville bankruptcy proceeding, however, continued to operate trains over Tex-Mex lines and refused to pay more than the rental established by the contract. Tex-Mex thereupon brought suit in state court to enjoin the grantee and its trustee from using the tracks and to recover damages for such use. The state court denied an injunction, adjudged that the contract had been terminated, and awarded damages.

Although the United States Supreme Court granted certiorari mainly to clarify the relationship of the Bankruptcy Act with the Interstate Commerce Act, the Court’s opinion does provide guidelines for the present case, which resembles Tex-Mex in crucial factual respects. We shall, therefore, quote the Court at length:

“[I]t [is] important that the status quo of this trackage agreement be maintained pending decision by the [Interstate Commerce] Commission as to the proper treatment of it in the reorganization plan. . . . [Moreover,] [t]he Commission has further functions to perform [apart from those under § 77.] [The Court then quoted the abandonment clause of § 1(18) of the Interstate Commerce Act.] . . . Whatever may be the powers of the Commission under the Interstate Commerce Act over the terms of the trackage agreement . . . , it is clear that the Commission has jurisdiction over the operations. Sec. 1(18) embraces operations under trackage contracts, as well as other types of operations. Though the contract were terminated pursuant to its terms, a certificate would still be required under § 1(18). Brownsville or its trustee could, of course, make the application for abandonment of operations. Tex-Mex might [also] invoke the Commission’s jurisdiction under § 1(18) and make application for abandonment of operations by Brownsville or its trustee. The jurisdiction of the Commission is not restricted, however, to determining whether or no operations of Brownsville over the tracks of Tex-Mex should be abandoned. Until abandonment is authorized [by the ICC], operations must continue. . The question of what would be the amount of a fair rental to be paid by Brownsville would be highly relevant to a decision by the Commission on the issue of abandonment. We conclude that at least in that situation the Commission has the power under § 5(2) to fix a reasonable rental. . . Once the Commission has acted, the court may then proceed to enter judgment in conformity with the terms and conditions specified by the Commission.” Id. at 143-149, 66 S.Ct. at 946. (Emphasis added.)

In its final statement, the Supreme Court held that

“however the case may be viewed, the court below should have stayed its hand and remitted the parties to the Commission for a determination of the administrative phases of the questions involved. . . . Until that time, judicial action is premature. The judgment will be reversed and the cause remanded so that the case may be held pending the conclusion of appropriate administrative proceedings.” Id. at 151, 66 S.Ct. at 947. (Emphases added.)

Cf. Smith v. Hoboken R. R., Warehouse & S. S. Connect. Co., 328 U.S. 123, 133, 66 S.Ct. 947, 953, 90 L.Ed. 1123 (1946), where the Court stated, “[T]he District Court erred in declaring the lease forfeited .... The District Court should stay its hand pending a decision by the Interstate Commerce Commission on the questions”; Warren v. Palmer, 310 U.S. 132, 137-138, 60 S.Ct. 865, 84 L.Ed. 1118 (1940).

North Western and the Milwaukee apparently agree that interstate traffic constitutes a substantial portion or perhaps even all of the Milwaukee’s business carried over the Techny line. This trackage, according to the agreement, is part of a North Western main line. Cf. New Orleans Terminal Co. v. Spencer, 366 F.2d 160 (5th Cir. 1966), cert. denied, 386 U.S. 942, 87 S.Ct. 974, 17 L. Ed.2d 873 (1967). Furthermore, the discontinuance of operations by the Milwaukee over the Techny line would seem to be within the meaning of “abandonment” as that term has been construed by the courts. Cf. City of Des Moines, Iowa v. Chicago & N. W. R. R., 264 F.2d 454, 458 (8th Cir. 1959); contrast City of Alexandria, La. v. Chicago, Rock Island & Pacific R. R., 311 F.2d 7, 10, 12 (5th Cir. 1962), petition for reh. denied, 321 F.2d 822 (1963), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 165. See also 49 C.F.R. Part 1121, esp. § 1121.l(p). The requisites for the applicability of section 1(18) and the Tex-Mex decision thus have been met. The significance or insignificance of the cessation of operations by the Milwaukee is a matter within the ICC’s competence and domain. The federal district court should have the benefit of the agency’s determinations on these administrative questions.

B

North Western’s complaint alleged that the jurisdiction of the federal district court was predicated upon subsections 1(18) and 1(20) of the Interstate Commerce Act, 49 U.S.C. §§ 1(18) and 1(20), and 28 U.S.C. § 1337. When the two railroads executed their agreement in 1932, subsection 1(18) had provided in part:

“No carrier by railroad shall . . . operate any line of railroad . . . unless and until there shall first have been obtained from the [Interstate Commerce] Commission a certificate that the present or future public convenience and necessity require or will require . operation ... of such .* line of railroad . . . .”

Subsection 1(20) states:

“. . . Any construction, operation, or abandonment contrary to the provisions of this paragraph or of paragraph (18) ... of this section may be enjoined by any court of competent jurisdiction at the suit of any party in interest >>

In memoranda submitted to the district court, North Western maintained that, under the above clauses of the Interstate Commerce Act, ICC authorization of the use of North Western’s Tech-ny line by the Milwaukee was needed. North Western called the court’s attention to the final paragraph (27) of the 1932 agreement, which specifically referred to the obtaining of approval from public authorities. To the extent such action was required by law, North Western had further asserted that neither party to the 1932 agreement had obtained approval.

In support of its contention that ICC approval had never been obtained, North Western appended to its renewed motion for summary judgment “true copies” of two letters from the ICC to North Western’s attorneys. The first letter, dated May 10, 1972, and written by the Deputy Director, Section of Finance, Office of Proceedings, Interstate Commerce Commission, on ICC stationery, stated that a “preliminary check” by the ICC had turned up no record of proceedings wherein the ICC had authorized the Milwaukee to operate over tracks between Bensenville and Techny, Illinois. The second letter, dated three months later and written by the Secretary of the ICC on official stationery, informed North Western that a “comprehensive search” had failed to disclose that the Milwaukee had been issued a Certificate of Public Convenience and Necessity to operate over North Western’s Techny line.

The Milwaukee’s counterargument, presented to the district court, was that in 1932 the need for ICC approval of trackage rights agreements was uncertain. To support this contention, it cited several ICC decisions handed down shortly after the Transportation Act of 1920 had added subsection 1(18) to the Interstate Commerce Act of 1887. Those decisions supposedly revealed that the Commission narrowly interpreted its jurisdictional purview. The Milwaukee further asserted that it would be unfair for the district court to give retroactive effect to Transit Commission v. United States, 289 U.S. 121, 53 S.Ct. 536, 77 L.Ed. 1075 (1933), wherein the Court construed section 1(18) as granting the ICC jurisdiction over operations under trackage rights agreements. That opinion was not issued until six months after the Milwaukee and North Western had signed their contract.

Our reading of the pre-1933 law yields a different conclusion, one, moreover, that does not depend upon giving retroactive effect to the Supreme Court’s decision in the Transit Commission case.

In June 1921, in Public-Convenience Certificate to A. & L. M. Ry., 67 ICC 781, 783 (1921) the Commission did state, as the Milwaukee maintained, that contracts granting only trackage rights do not fall within the jurisdiction conferred by section 1(18) and that, therefore, an ICC certificate for authority to exercise such trackage rights was unnecessary. The ICC reaffirmed this position two months later, in The Cleveland Passenger Terminal Case, 70 ICC 342, rev’d on other grounds upon rehearing, 70 ICC 659 (1921). By August 1922, the Commission was expressing its views more hesitantly, see Chesapeake & Ohio-Norfolk Western Trackage Rights, 72 ICC 471, 472 (1922). However, in Operation of Sherman, Shreveport & Southern R. R., 76 ICC 771, 773, decided in March 1923, the Commission returned to its original position.

The Milwaukee in its memorandum to the district court cited no ICC report subsequent to the Sherman, Shreveport of 1923. It thus ignored the further development of the Commission’s thinking and the pre-1933 case law touching upon the Commission’s jurisdiction under section 1(18). See the discussion in Transit Commission v. United States, 1 F.Supp. 595, 599 (S.D.N.Y.1932). See, e. g., Chicago & Alton R. R. v. Toledo, P. & W. R. R., 146 ICC 171, 179-81 (1928); Long Island R. R. Co. Trackage, 162 ICC 218, 220, 221 (1930), and 180 ICC 440, 446 (1932). In the latter matter, the same as that the Supreme Court later reviewed in Transit Commission, 289 U.S. 121, 53 S.Ct. 536, 77 L.Ed. 1075 (1933), the New York Transit Commission and the State of New York sought to have an order and certificate of the ÍCC set aside and annulled. The federal district court (by Judge Augustus Hand) denied the motions for a preliminary injunction and dismissed the petitions. It squarely held that, under section 1(18), the Interstate Commerce Commission and not the state Transit Commission had jurisdiction to pass on the railroads’ trackage agreements. Transit Commission v. United States, supra, 1 F.Supp. at 598-599. Apparently the first judicial interpretation of section 1(18) directly on point, Transit Commission was handed down by the district court on October 3, 1932. The Milwaukee and North Western had signed their trackage rights agreement just several days earlier, on September 28th.

In sum, in 1932 the law on trackage rights was not the morass defendant had claimed it was. We can only speculate that, through an oversight, North Western, th'e Milwaukee, and their attorneys failed to take action in accordance with paragraph 27 of their agreement. And because both railroads until 1971 adhered to the agreement without conflict, the question of Interstate Commerce Commission involvement simply did not arise. Therefore, even if we were to assume arguendo that the Milwaukee’s view of Illinois contract law is correct —that is, that the 1932 agreement was for a perpetual term — that would not obviate the necessity of having the parties and the Commission at this time rectify the past omissions.

Ill

We conclude that inherent in the controversy between North Western and the Milwaukee are matters that must be examined by the Interstate Commerce Commission before a court may make a final, enforceable ruling. We, therefore, vacate the judgment entered in favor of North Western, remand the cause to the district court, and direct the court to stay further proceedings in the case, although leaving in effect its record-keeping requirement, until a determination or other disposition shall have been obtained from the ICC on the administrative. questions and considerations involved. The court may enter any facilitating orders it deems necessary to handle the case in accordance with our opinion, and shall reserve the power to terminate the pendency of the action or to make other appropriate disposition of it if circumstances warrant. Cf. City of Des Moines, Iowa v. Chicago & N. W. R. R., 264 F.2d 454, 459-460 (8th Cir. 1959).

Vacated and remanded.

      . The parties, Wisconsin corporations, are common carriers by railroad engaged in interstate commerce and subject to the Interstate Commerce Act. See 49 U.S.C. § 1 et seq.

      . The North Western’s brief states the line segment in question is commonly called' the Des Plaines Valley Line. The nomenclature to be applied to the 10^ mile section of line is certainly one of the lesser problems of this litigation and one with which we shall not concern ourselves further.

      . The parties and the district court accepted Illinois law as controlling. The Milwaukee’s main objection on appeal to the ruling of the court was that it failed to give sufficient weight to the materials the Milwaukee had submitted; they supposedly revealed the railroads’ intent during the negotiations that culminated in the 1932 agreement. Under the Seventh Circuit’s interpretation of Illinois law, it appears that the scope of the examination of extrinsic evidence in contract disputes is considerably greater than that traditionally recognized, at least where the court was of the opinion that there was no ambiguity. See Ortman v. Stanray Corp., 437 F.2d 231, 234-235 (7th Cir. 1971), reaffirmed in International Minerals & Chemical Corp. v. Husky Oil Co., 485 F.2d 153, 158 (7th Cir. 1973). Cf. Decatur Lumber & Mfg. Co. v. Trail, 350 Ill. 319, 323-324, 183 N.E. 228 (1932). For what seems to be the “modern” rule, see Pacific Gas & Elec. Co. v. G. W. Thomas Drayage & Rigging Co., Inc., 69 Cal.2d 33, 69 Cal.Rptr. 561, 442 P.2d 641 (1968), Annot., 40 A.L.R.3d 1384 (1971).
      Although the court’s memorandum opinion suggests that the court did consider the supplementary materials filed by the defendant, it did not discuss nor rule on the complex evidentiary questions presented by those materials. Nor did the court distinguish the case on which the Milwaukee placed greatest reliance, Illinois Central R. R. v. Michigan Central R. R., 18 Ill.App.2d 462, 152 N.E. 2d 627 (1958).

      . See United Mine Workers v. Gibbs, 383 U. S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); see generally C. Wright, Federal Courts § 19 (2d ed. 1970); Comment, UMW v. Gibbs and Pendent Jurisdiction, 81 Harv. L.Rev. 657 (1968); Case Note, 81 Harv.L. Rev. 1580 (1968). As for North Western’s prayer that the court “declare” the rights of the parties under their agreement, see Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 674, 70 S.Ct. 876, 94 L.Ed. 1194 (1950).

      . In addition to the basis on which the district court’s decision rested, the only issue really presented in the original briefs in this appeal, the case also raised what we regard as a substantial mutuality question under state law. The Milwaukee, while having the right under its contract to use the trackage, did not commit itself to any particular usage thereof.
      Although it was not argued at any juncture of this litigation, we also note that the agreement contained a provision for the arbitration of controversies arising out of the agreement.

      . North Western asserts that the Milwaukee has adequate alternative means of moving its traffic other than by using the Techny line. As we explain below, we believe that such an assessment is for the Interstate Commerce Commission first to make.

      . Section 1337 of the Judicial Code reads: “Tlie district courts shall have original jurisdiction of any civil action or proceeding arising . under any Act of Congress regulating commerce . . .

      . See 28 U.S.C. §§ 1732, 1733. The Secretary of the Interstate Commerce Commission is the custodian of various ICC files, including ICC reports and other ICC-issued documents and contracts, agreements, and arrangements between common carriers. 49 U.S.C. § 16(13) ; see also, e. g., 49 U.S.C. §§ 12(1), 14(3), 17(3) and (5), and 49 C. F.R. §§ 1001.1(d), 1120.2(b).
      Prior to Xorth 'Western’s submission to the district court of these papers, the Milwaukee had attached an affidavit to its motion for summary judgment which stated that the Milwaukee’s “General Attorney and Commerce Counsel” had caused a search of the Milwaukee’s records to be made. The affidavit claimed that “such search [for evidence whether ICC authority had ever been obtained for the Milwaukee’s use of the Techny line] has proven to be inconclusive as many of the involved company records of transactions at that time are no longer in existence and what few records are available are patently incomplete.” The attorney-affiant further stated that “in his opinion the only reliable way to determine whether such Interstate Commerce Commission authority was obtained would be by a thorough examination of the [IOC’s] records conducted by persons who are completely familiar with the Commission’s record-keeping procedures.”

      . The Milwaukee concedes that the ICC now plainly has jurisdiction over the approval, authorization, and terms of trackage rights agreements. See 49 U.S.C. § 5, par. (2) (a) (ii), which refers specifically to “trackage rights.” That provision was part of a 1940 act amending the Interstate Commerce Act and giving the ICC new, explicit powers over trackage rights. In Thompson v. Texas Mexican Ry. Co., 328 U.S. 134, 146, 66 S.Ct. 937, 945, 90 L.Ed. 1132 (1946), the Supreme Court held that “[t]he authority of the Commission under § 5(2) (a) extends to fixing terms and conditions, including rentals, for any trackage agreements entered into subsequent to the effective date of the Transportation Act of 1940.”

      . We do note the following statement in Thompson v. Texas Mexican Ry. Co., id. at 144, 66 S.Ct. at 944: “[T]he fact that the trackage contract was entered into in 1904 prior to the passage of the Act [of 1920] is immaterial; the provisions of the Act, in-eluding § 1(18), are applicable to contracts made before as well as after its enactment.” Tex-Mex, of course, was concerned with an attempted abandonment subsequent to the passage of the Act. See also Transit Commission, 289 U.S. at 129, 53 S.Ct. 536.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. The CAIN-SLOAN COMPANY, Defendant-Appellee.
    No. 73-1870.
    United States Court of Appeals, Sixth Circuit.
    Argued April 1, 1974.
    Decided Aug. 28, 1974.
    William J. Kilberg, Solicitor of Labor, U. S. Dept, of Labor, Washington, D. C., Donald S. Shire, U. S. Dept, of Labor, Washington, D. C., Carin Ann Clauss, Washington, D. C., for appellant.
    Joseph Martin, Jr., Nashville, Tenn., for appellee.
    Before PHILLIPS, Chief Judge, EDWARDS and PECK, Circuit Judges.
   PER CURIAM.

Appellant Secretary of Labor appeals from the denial of its petition to enjoin the Cain-Sloan Company, Inc., from violating Section 17 of the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (1970), in particular those provisions which prohibit discrimination on the basis' of sex by paying wage rates to employees of one sex at a lesser rate than are paid to employees of the opposite sex.

The basic contention here on the part of the government is that men assigned to the “400 Selling Center” (men’s clothing) received a guaranteed wage, or in the alternative, a commission of 7%, whereas female employees of the store were paid either on a straight hourly rate which yielded less money, or at a commission rate of 5% or 5%%. The specific store involved in this case is Cain-Sloan’s Green Hills Store in a suburb of Nashville, Tennessee. The principal issue pertains to Cain-Sloan’s argument, which was accepted by the District Judge, that in the “400 Selling Center” the male employees who received the 7% commission are “required to possess or acquire expertise in the marking of men’s suits for alterations.”

On this basis the District Judge found that the defendant’s practice of paying additional compensation for the men’s high-priced suit department had a rational basis and did not constitute a violation of the Act.

Government counsel sought to belittle the expertise involved in the marking for alteration and insisted that the District Judge had failed to apply the standards applicable to an employer claim that “the job requires additional skill,” as these standards are set out in Hodgson v. Brookhaven General Hospital, 436 F.2d 719 (5th Cir. 1970).

During the course of the trial, Cain-Sloan conceded that the saleswomen in the designer and better dress department and fur department were doing equivalent work and they now are being paid on the same commission rate as men. The government, however, asserts that all saleswomen in some eleven divisions in the store are doing work equal to that of the two groups of employees just discussed and should be paid on the same basis, and, of course, Cain-Sloan argues to the contrary.

We have reviewed this lengthy record against the standards of Hodgson v. Brookhaven General Hospital, 436 F.2d 719 (5th Cir. 1970); Corning Glass Works v. Brennan, 417 U.S. 188, 94 S. Ct. 2223, 41 L.Ed.2d 1 (1974), and Brennan v. City Stores, Inc., 479 F.2d 235 (5th Cir. 1973). In this last case Judge Tuttle noted, “While the standard of equality is clearly higher than mere comparability yet lower than absolute identity, there remains an area of equality under the Act the metes and bounds of which are still indefinite.” Brennan v. City Stores, Inc., supra, at 238-239. Our instant case helps to illustrate that conclusion. Contrary to the findings of fact of the District Court in the City Stores case before Judge Tuttle, the District Judge who tried this case found as follows:

After consideration of all the testimony, it seems clear that the pinning for and alteration of garments, both women’s and men’s, requires a level of skill above that required of one engaged in sales alone. Certainly an employer may require employees of the men’s department to possess or learn such skills and, in accordance with the interpretative bulletin of the Department of Labor, it is not unreasonable that if additional skills are required, the employer shall pay additional compensation therefor. Keeping in mind the legislative history, the provisions of the Act, and the interpretive bulletin of the Labor Department, the court finds that Cain-Sloan had a justification for the payment of additional compensation for those employees who exercised or were required to learn additional skills over and above those required to accomplish the duties of other job classifications. Therefore, in accordance with the above findings, the court holds that defendant’s practice of paying additional compensation • to employees of the men’s “high-priced” suit department has a rational basis and does not constitute a violation of the Act.

Although this record is not without factual dispute, there is substantial evidence that men in the “400 Selling Center” were required to have or acquire alteration skills. Since November 1971 there has not been a full time tailor at the store which is the situs of this dispute. Under these circumstances we cannot hold that the District Judge’s findings of fact recited above are “clearly erroneous.” Fed.R.Civ.P. 52(a).

This, then, would lead logically to our affirmance of the District Judge’s opinion and judgment, but for the fact that there were claims by other employees that their work also required them to mark for alterations. (See, for example, transcript pp. 155-57 attached). As to these instances the District Judge did not make findings of fact which provide us with a basis for differentiating between such claimants and those found by the District Court to be appropriately rewarded by higher wages within the purview of the Act.

We find no reason in this record to doubt the District Judge’s conclusion that there is a substantial distinction as found by the District Court between the skills found on the normal selling floor and those provided by a salesman who also marks garments for fitting and alteration. There may also be distinctions between the skills required for marking for lengthening or shortening cuffs, for example, and marking substantial alterations, but if so, the findings of fact thus far made are inadequate for our drawing such distinctions.

For the reasons outlined above, we affirm the judgment of the District Court to the extent that it finds the “400 Selling Center” employees are required to have or acquire an expertise in marking for alteration which represents a substantial difference from normal selling work. As mentioned above, defendant conceded that saleswomen engaged in selling designer and better dresses and furs should be paid wages at a percentage equal to that of the salesmen in the men’s clothing department, and the court ordered the payment of back wages. This concession is not disputed on appeal, and that portion of the judgment is also affirmed. We vacate all other aspects of the judgment and remand the case for further findings of fact pertaining solely to saleswomen in other departments who claim that alteration expertise and work are equally a part of their selling job.

APPENDIX

For example, Mrs. McMahon testified: By MISS BARNETT:

Q. Did any small men ever come to you as well?

A. Yes, ma’am, they did.

[155] Q. Did you cross-sell in any other departments in the store ?

A. A few times I sold out of the men’s, very few times.

Q. And what commission were you paid when you sold from the men’s department ?

A. Regular 5%.

THE COURT: What did you sell in the men’s department?

THE WITNESS: Well, I sold, I remember I had one customer that had two tall boys and I sold a suit over there once, and then I sold some men’s slacks once or twice.

By MISS BARNETT:

Q. Could you tell us what your duties were as a sales person at Cain-Sloan ?

A. Well, I waited on the customers and I kept the stock filled up and I wrote credits and refunds and okayed cheeks, took care of alterations.

THE COURT: Wait a minute. What kind of alterations?

A. Marking pants, shortening sleeves on coats when I would sell them, jackets.

By MISS BARNETT:

Q. When you took care of this marking, did you actually have to prepare a ticket to take up to the alterations department?

[156] A. Yes, ma’am.

Q. What would you do after you filled out that ticket?

A. Take them to the alterations department upstairs.

Q. And how long generally did you have to wait until you could go back and get it?

A. It would depend on the season. If we weren’t too busy, sometimes you would work it through in a couple of days, but when we were busy, sometimes it would be as much as a week, back to school, you know, and sales like that.

Q. As far as the alterations, did most of the items you sold require some kind of marking?

A. Most slacks on children had to be shortened, yes, ma’am.

Q. What about the suits ?

A. Well, usually the sleeves, we would have to alter those.

THE COURT: Did you ever mark any pegs in the men’s and boys’ suits to be taken out by the alterations department? Do you know what a peg is in a men’s suit?

THE WITNESS: No.

By MISS BARNETT:

Q. Would you call the alterations department for assistance at all ?

A. Yes, ma’am. Whenever there would be something unusual, [157] like shortening a collar or shortening the coat or putting a gusset in a paid of pants, Mr. Greenberg was called in to take care of that.

THE COURT: Putting a what now, a gusset?

THE WITNESS: In a pair of pants.

THE COURT: What is a gusset?

THE WITNESS: Under the crotch, where the crotch would be too short, set in a piece.

THE COURT: Okay. What do you call it when you take out the fullness in the leg, on the outside of the leg?

THE WITNESS: Taper.

THE COURT:' Taper, that is what they call marking a peg. Did you mark tapers?

THE WITNESS: Yes, sir. Taking the flare out and tapering it.

THE COURT: All right.

Transcript p. 155-57.

      . We note, of course, the contrary findings of fact on this issue which confronted the Fifth Circuit in Brennan v. City Stores, Inc., 479 F.2d 235 (5th Cir. 1973).- Additionally, we observe that alterations by salesmen may be quite rare in the clothing industry since, aside from this case, we have not found (or been cited to) any case where salesmen were found to be performing such work to a significant extent. Nonetheless, the record does support the District Judge’s findings as to this particular store.


author: CLARK, Associate Justice. PELL, Circuit Judge

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Alfred KOWALSKI, Defendant-Appellant.
    No. 74-1171.
    United States Court of Appeals, Seventh Circuit.
    Argued June 3,1974.
    Decided Aug. 19, 1974.
    Rehearing Denied Sept. 16, 1974.
    Rehearing and Rehearing En Banc Denied Nov. 26, 1974.

      Pell, Circuit Judge, dissented with opinion.
    William R. Kelly, Peoria, 111., for defendant-appellant.
    Donald B. MacKay, U. S. Atty., Springfield, 111., Max J. Lipkin, Asst. U. S. Atty., Peoria, 111., for plaintiff-appellee.
    Before CLARK, Associate Justice, and PELL and SPRECHER, Circuit Judges.

       Associate Justice Tom O. Clark of tlie Supreme Court of the United States (Retired) is sitting by designation.

   CLARK, Associate Justice.

Alfred Kowalski was convicted by a jury of violating Title 18, U.S.C. § 922(a)(1) [engaging in the business of importing, manufacturing or dealing in firearms]. On his appeal he raises six points: (1) Is Section 922(a)(1) unconstitutionally vague and indefinite; (2) is the evidence sufficient to support the verdict; (3) was it error to cross-examine Kowalski regarding pending state charges; (4) may prior felony convictions more than twenty-five years old be used for impeachment; (5) is it error to allow proof by hearsay that one of the guns allegedly sold by Kowalski was stolen; and (6) was it prejudicial for the prosecutor to characterize one of the guns in question as a “sniper’s gun”, etc.

Wayne Stebins offered to sell a rifle (that Kowalski was holding on a $100 loan owed by Stebins) to David Krug, a Treasury Agent. Krug, Stebins and another Treasury Agent went to Kowal-ski’s house to obtain the gun. While the Agents remained in a van truck, Stebins went into Kowalski’s house and returned alone with the gun which he sold to Krug for $125.00, which money Stebins later paid to Kowalski. Thereafter a Government informer, Junior Lucas, took the Agents to Kowalski’s house and inquired of Kowalski if he had any guns for sale. The latter said that he had “a varmint rifle” and after some dickering over the price, Kowalski sold the rifle to Krug for $150.00, with some ammunition thrown in. Some two weeks later the same parties returned to Kowalski’s house and purchased a .45 caliber target pistol for $150.00 and an old 16 gauge shotgun for $30.00.

Kowalski was regularly employed as a truck driver by Ruan Transport Company, was 60 years of age and married. From June 7, 1973 until October 2, 1973, Kowalski did not sell or purchase any other firearms nor did he spend any time locating additional firearms to sell.

The statute in question provides that except for a licensed importer, licensed manufacturer, or licensed dealer, it “shall be unlawful ... to engage in the business of importing, manufacturing or dealing in firearms or ammunition. . . ” We hold that the statute is not unconstitutionally vague; that Kowalski was engaged “in the business of . . . dealing in firearms . . .” in violation thereof; and that there is no merit in the remainder of his points.

1. As to the vagueness claim, we find that this Circuit has upheld the Act under that attack in two cases, United States v. Zeidman, 444 F.2d 1051 (1971) and United States v. Gross, 451 F.2d 1355 (1971). In the latter case the Act was found “not impermissibly vague”, Id. at 1357. Likewise three additional circuits have upheld it: Kaneshiro v. United States, 445 F.2d 1266 (9th Cir. 1971); United States v. Day, 476 F.2d 562 (6th Cir. 1973) and United States v. Wilkening, 485 F.2d 234 (8th Cir. 1973). The single case cited by Kowalski is wholly inapposite. It involved a vagrancy statute in the District of Columbia and typical of those acts, used such terms as “loitering”; “leading an immoral and profligate life”, etc. And it was properly held vague. Ricks v. District of Columbia, 134 U.S.App.D.C. 201, 414 F.2d 1097 (1968). We uphold the Act involved here.

2. Kowalski attacks the evidence as being insufficient to support the jury verdict. However, a reading of the transcript reveals at least three sales of prohibited weapons, a .225 Winchester rifle, a .45 pistol and a 16-gauge shotgun. In addition, Kowalski received the proceeds of a fourth prohibited gun sale, a .30-30 rifle. Moreover statements by Kowalski to the Government agents and admitted by Kowalski but at trial claimed to be: “That was just, like I say, just wind-ing it a little bit, playing it bigger than I should have and got myself into trouble” indicate other illegal activity under the Act. These included receiving a shipment of ten stolen rifles, after which he tried to contact Krug but could not find him and so he sold them to others; that he was trying to re-stock his gun supply; that he went to Michigan to get some guns but only got one and it was no good; and that he got guns in and out all the time for sale. We believe the evidence quite sufficient.

3. Kowalski claims that the prosecutor’s questions on cross-examination if he had ever been convicted of a felony were all too remote in years, i. e. 1932, 1937 and 1948. However the eases are to the contrary. See United States v. Dow, 457 F.2d 246 (7th Cir. 1972); United States v. Morefield, 411 F.2d 1186, 1188 (7th Cir. 1969); United States v. Escobedo, 430 F.2d 14, 18-20, (7th Cir. 1970), cert. den., 402 U.S. 951, 91 S.Ct. 1632, 29 L.Ed.2d 122.

4. During the interrogation as to prior felonies, the prosecutor also asked Kowalski: “You have been charged in state court in Bureau and La Salle County”, and the answer was: “conspiracy”. The prosecutor then asked: “How many charges are pending against you there, sir”, whereupon objection was made. The court sustained the objection “to the pending charges.” Ko-walski then moved for a mistrial which was denied. The court did instruct the jury “to disregard the question and any implications of it.” The question should not have been asked and we agree with the dissent’s criticism of the Assistant United States Attorney. However we note that Kowalski made no objection to the previous question. Indeed he answered it. The prosecutor then asked the details. In light of the court’s specific charge to the jury that the question as to the pending charges be stricken and that they disregard “the question and any implications of it”, we find it harmless, especially in light of the entire record.

The direct evidence of guilt was overwhelming — indeed it was admitted by Kowalski save for the point as to whether the number of sales etc. was sufficient to find that he engaged in the business of dealing in firearms. The jury found against him on this point under the court’s charge to which there was no objection. There was no indication of bad faith on the part of the government. Indeed, the previous question as to Kowalski being charged in “Bureau and LaSalle County” had already been answered without any objection. We reiterate the question should not have been asked, and the prosecutor is censured for posing it, but in view of the overwhelming evidence of guilt as well as the manner and time in which the question was asked, we find that there was no prejudice.

5. The claimed hearsay nature of the evidence as to one of the guns involved being stolen is not correct. It is true that in tracing the sale of the gun the Agent received information as to the sequence of purchasers. However, upon going to the ultimate purchaser, he found that the gun was stolen. He then contacted the Sheriff of Putnam County who forwarded the official report showing the gun was stolen. Moreover, Ko-walski admitted on cross-examination that he had told Agent Krug the gun was stolen at Granville. At trial he testified that he had traded a .243 target rifle for it at a gun show in Princeton. He said: “I was questioning around if anybody had a smaller gun that I could trade around. The guy asked me to look at it.” The trade took place, he said, “right at the edge of where they — where all the gun show — where the people were.” Kowalski remembered that it was in 1971 but could not remember the day, the month and “didn’t even ask him” (the seller) his name. “He didn’t ask me mine.”

6. Nor was the prosecutor’s comment that the gun might be a “sniper’s gun” prejudicial. The gun was before the jury, had a scope on it and was called “a varmint gun” by Kowalski. The referenced characterization is not claimed to have referred to Kowalski as a sniper. It was fair comment under the evidence.

The other claims of Kowalski are frivolous and the judgment is Affirmed.

PELL, Circuit Judge

(dissenting).

In a recent per curiam opinion, United States v. Dilts, 501 F.2d 531 (7th Cir., 1974), a panel of this court stated:

“We have previously felt compelled to criticize this Assistant United States Attorney for departing from the record. [See United States v. Hernandez, 486 F.2d 614, 618 (7th Cir. 1973).] In view of this history, we have considered the need for an exercise of our supervisory power as a deterrent to deliberate prosecutorial misconduct. Cf., United States v. Tru-tenko, 490 F.2d 678, 681 (7th Cir. 1973). We have concluded, however, that since the flagrant misconduct occurred before us, rather than in the trial court, these judgments should not be reversed.” (At 8, footnotes omitted.)

Now we have another case involving the same Assistant United States Attorney who engaged in what, in my opinion, was sufficiently flagrant misconduct in the trial court that we should exercise our supervisory power and reverse a judgment in what has the earmarks of an unfair trial because of that misconduct. Accordingly, I respectfully dissent.

The record brooks of no dispute of the fact that Kowalski sold firearms on more than one occasion. He was not charged, however, with the sale of guns, or with possession of prohibited guns, but with being in the business of dealing in firearms. Just where the line is to be drawn between sales by a dealer engaged in the business and by an owner of firearms engaged in a casual, occasional sale is a difficult one to draw. The statute does not prescribe any standards for determining when a person is “engaged in the business.” United States v. Zeidman, 444 F.2d 1051, 1055 (7th Cir. 1971). I do not conceive that the statute should be interpreted to the effect that once a person has acquired a firearm he should forever aft-erwards be precluded from disposing of it by threat of a substantial prison sentence if he does so.

On the customary basis of considering the evidence on appeal from a criminal conviction in the light most favorable to the Government, this court might well affirm in the ordinary case involving sales of firearms on only two occasions. However, the record does not reflect the ordinary case but instead one in which conduct on the part of the prosecutor was such that I cannot say it was not a factor in tipping a close case toward the side of conviction. In any event, our supervisory power should have been called into play.

The trial in this case commenced on January 15, 1974, at 10 a. m. All evidence was submitted, final arguments made, and the jury charged by 4:30 p. m. on the same day. Sometime after 9:00 p. m. the jury sent the following note to the judge: “After 10 votes, we have not been able to come to a verdict. We see no chance of reversal of any of the votes.” An hour later, the jury returned to the courtroom where the instructions were reread to the veniremen. At fifteen minutes before midnight, the jury returned its guilty verdict.

During this compact exercise in the administration of justice, at the conclusion of which Kowalski, then aged 60, was found guilty of a crime which would result in his incarceration for three years, the Assistant United States Attorney, an experienced and veteran legal practitioner, engaged in conduct which appears to me to be designedly and by improper means denigrating of the defense advanced by Kowalski’s appointed counsel. Unfortunately, his counsel did not preserve the record that should have been made on these occasions; however, I consider the errors on the part of the prosecutor to have affected substantial rights of Kowalski and therefore a basis for reversal. Rule 54, Fed.R.Crim.P.

Impeachment Proceedings

I agree with the majority that as the law stood at the time of the trial, and as it now stands despite the more compassionate (and probably more realistic) ten-year limitation reflected in Rule 609(b) of the Proposed Rules of Evidence for United States District Courts and Magistrates, remoteness of the crime is not a basis for excluding queries to a witness about his prior criminal convictions. The remoteness aspect, however, is only a part of the cumulative picture.

At trial, the prosecutor opened this phase of his cross-examination of Ko-walski not by asking him as to whether he had been convicted of a certain crime at a certain time and place but instead asked, “Now, Mr. Kowalski, have you ever been convicted of a felony?” A general objection was overruled and Ko-walski responded, “Well, I don’t know whether it was a felony or not. I was convicted — ”

But before pursuing further the cross-examination, it should be noted that the prosecutor was fully aware of the defendant’s criminal record. At a hearing more than a month prior to the trial, after referring to a pending state conspiracy charge to deliver a controlled substance sometimes referred to as “speed,” which charge emanated from the same transactions as the federal firearms indictment, the prosecutor stated the following:

“In addition, the defendant’s record indicates that since 1942 the defendant has not been involved or does not have any felony charges against him. He has had several charges in ’47, ’48 and ’49 — one each. I should say — for being intoxicated. I don’t know what ‘ADW’ means.
“THE CLERK: Assault with a deadly weapon.
“MR. LIPKIN: Assault with a deadly weapon, but no conviction and no disposition.
“It is true that back in the ’30’s the defendant was charged at one point in ’35 with vagrancy and in ’37 with auto theft, but no disposition was ever made, except on the vagrancy charge he had 30 days in the House of Correction; and in ’32 he was charged with manslaughter arising with leaving the scene of an automobile accident and was fined a dollar and served three months in the House of Correction.
“One further investigation, as I have indicated, indicates that since this time and during this period, with the exception of this particular offense and the one involving his offer to obtain narcotics, he has no criminal record and has been working and has been in no trouble.”

The prosecutor apparently was sufficiently impressed with Kowalski as being at present a law-abiding citizen that he recommended probation on a guilty plea. Nevertheless, when the court declined to accept the guilty plea on the basis of probation being granted and the case went to trial, the prosecutor proceeded on a line of interrogation which I can only conceive was one designed to leave with the jury the impression that this defendant was a menace to the community.

The following pertinent portions of the transcript of evidence are noted:

“Q. Do you know what I’m talking about, sir?
“A. Well, if — I don’t know just what you mean by ‘felony.’ I know 1932 I went to jail for 90 days for manslaughter charge on an automobile accident.”
* -X- * -X- * -X-
“Q. How about December, 1937?
“A. Well—
“Q. Do you remember that ?
“A. Yes, I remember that, I went to jail for stealing some copper.
“Q. You were sentenced to one year?
“A. Right.
“Q. And in 1948, do you remember that?
“A. Yes.
•X- * -X- * -x- *
“Q. What was that charge ?
“A. That charge was assault and battery.
“Q. With a deadly weapon, wasn’t it?
“A. Yes.
“Q. With a gun, right?
“A. .22 rifle, they claim.
“Q. And you were found guilty of that charge?
“A. No.
“Q. Sir?
“A. I don’t think I was found guilty.
“Q. Did you have a trial ?
“A. Yes, I had a trial.
“Q. And you weren’t found guilty ?
“A. The judge . . . let’s see. I don’t quite recall. I think I done probation on that.
“Q. Well, you were found guilty and he placed you on probation, is that right?
“A. Well, yes, I believe it was right.
“Q. Now, in connection with your conversations with Mr. Barrett concerning which you have testified about, you have been charged in' State Court in Bureau and LaSalle County.
“A. For conspiracy.
“Q. How many charges are pending against you there, sir ?

Objection was sustained to the last question but motion for mistrial was denied and “the jury will be instructed to disregard the question and any implications of it.” This was the only admonition given to the jury and the only apparent reference in the charge to the jury was “[t]he jury must consider only the evidence properly admitted in the case.”

There are troubling aspects of the ancient crimes paraded before the jury other than their remoteness. The defendant obviously was not cognizant of what was or was not a felony. The three earlier crimes adverted to in his testimony may well have been felonies. See the discussion as to the impeaching aspects of misdemeanor convictions not involving moral turpitude, Dilts, supra, 501 F.2d at 533. Manslaughter is ordinarily a felony. Ill.Rev.Stat., ch. 38, §§ 9-2 and 9-3 (1973). However, as far as can be told from the record, it was only the 1932 charge which was a felony, and Kowalski was then apparently a minor. It is clear that the conviction had something to do with leaving the scene of an accident, and as far as can be told from the record he could have been convicted on a guilty plea of a lesser charge connected with leaving the scene of an accident. The penalty for a violation of this statute at the time appears to have been a fine not to exceed $200 and imprisonment in the county jail not .to exceed one year, or both. Cahill Ill.Rev.Stat. 95a, 1142(1) (1931). Apparently Kowalski, who was fined $1, served in the equivalent of a county jail. (The prosecutor in the pretrial hearing had referred to the House of Correction.) See Cahill’s, supra, ch. 67. At the time in question, a felony was defined in Illinois as an offense punishable by death or imprisonment in the penitentiary. Cahill’s, supra, 38 |f 614.

Character and reputation for credibility and honesty are precious commodities and, it seems, should not be besmirched by anything less than clear and precise admissible proof.

Further, it is not clear whether the conviction in 1937 was for auto theft, as to which the prosecutor had said at the pretrial hearing there was no disposition, or for the theft of some copper as to which Kowalski candidly admitted a sentence of one year. The 1948 conviction, being the third and final conviction shown, is also ambiguous. Again, at the pretrial hearing the prosecutor asserted there was no conviction. But if this was the fact he permitted the defendant from an obviously hazy memory to impeach himself by a conviction. It is not clear whether the charge was assault ADW or assault and battery ADW. Under present Illinois law at least, the former is a misdemeanor and the latter is a felony. Ill.Rev.Stat. ch. 38, §§ 12-2 and 12-4 (1973).

Even if we assume that the evidence clearly established three convictions of felonies, the last of which was approximately a quarter of a century before the present trial, the jury might well have determined that credibility was not impeached if they had not learned that charges were simultaneously pending in two counties of the state court system. This brought the matter right down to date and showed that the criminal pattern of a young man had not been shaken. District courts for obvious reasons are reluctant to declare a mistrial and scrap a practically completed trial. Here, however, I think Mr. Justice Jackson’s often quoted words that “[t]he naive assumption that prejudicial effects can be overcome by instructions to the jury, ... all practicing lawyers know to be unmitigated fiction” are particularly apropos.

I would be inclined to attribute the embarkation into the impropriety of asking about pending charges as overzeal-ousness in a hotly contested case if the facts warranted it. Here I find no door opeping requiring a prosecutorial closing. The trial had just commenced that morning and the record does not indicate the presence of vigorous confrontations between counsel. Further, I note in Dilts that the same prosecutor had asked about a conviction of a misdemeanor and about a pending charge against a witness. In Dilts, the panel held the error to be harmless. I cannot agree that it was harmless in the present case and, in any event, the beginning of a pattern having presented itself, in my opinion there should be a reversal in the exercise of our supervisory- power.

Other Misconduct

The question of the exercise of this power might be a closer one if it were not for the cumulative effect of other procedures engaged in by the Assistant United States Attorney.

I

The district court instructed the jury that “[t]here is no clearcut definition of what constitutes engaging in the business of dealing in firearms” and that the term “means more than a single act or single transaction.” The number and frequency of transactions undoubtedly has some weight in determining whether a person was engaged in the business. Apparently aware of the value in numbers, the Government presented as its first witness, Wayne Stebins, who, while testifying as to a gun transaction, clearly did not testify as to a transaction in which Kowalski made a sale. There was no contradiction to his testimony in its showing that Stebins had pawned his own gun with Kowalski to secure a loan of $100; that when Stebins had been approached by the agents about the sale of a gun, he had gone to Kowalski, secured the gun, sold it to the agents for $125 and had given Kowalski the entire amount. Kowalski had told him that he was only owed $100 but Stebins had “told him to keep the whole amount as a favor. Because I was supposed to have been back within a week for the gun and instead it was two weeks. So I told him to keep the extra $25 for his trouble.”

I fail to find any evidence of being in the business of dealing in firearms from this loan transaction in which Kowalski had no contact with the buyers and in which Stebins was selling his own gun.

Since there was no objection made to this line of testimony, nor was there a motion to strike it, the admission probably standing alone would not require reversal. However, it cannot be ignored in the overall picture of whether Kowal-ski received a fair trial.

The only gun transactions with Ko-walski in which the agents were involved occurred on August 22 and September 5, 1973. Yet the indictment which was before the jury charged that Kowalski engaged in the business from about June 7, 1973. This was the date of the Ste-bins’ transaction, and the testimony having gone in without challenge the jury may very well have concluded that there were illegal transactions beginning with the sale by Stebins in June.

II

The final argument of the prosecutor continued the smearing with the brush of general criminality: “I didn’t know that these are the kinds of bullets that people use for target practice. Now, you gentlemen know more about it than I do. But I don’t think that these are bullets that are used for target practice.

We’ve got three guns in this case that the evidence shows were stolen.

. I think that would be an ideal sniper’s gun rather than what he said it was used for.”

The scope on the rifle had been placed there by Kowalski after he had removed it from another gun of his. When this changed by prosecutorial characterization from a weapon to dispose of vermin of the animal type to one directed toward humans, I find it difficult to say that the governmental finger was not pointed at Kowalski as the possessor of a lethal weapon kept for an illegal purpose. I suppose it is possible to say that one is sniping at varmints but that is not the concept that the term presents to me. Webster (Third International Edition, 1966) appears to agree in defining a sniper as “one who fires at exposed men of an enemy’s force.”

III

The one gun that apparently had been stolen was in evidence as Government’s Exhibit 3. During the direct examination of agent Krug as a Government witness he was asked, without objection, whether he had made an investigation to trace the gun and what was the result of that investigation. After an affirmative response to the first question, Krug replied to the second that the firearm “was stolen in a residence in Granville, Illinois, along with approximately thirty other firearms.” No effort was made to remove this evidence as a factor creating an inference, if not a presumption, that the possession of recently stolen property is equatable with knowledge of its tainted character. The prosecutor thought the fact that the gun was stolen was worthy of mention in his closing argument although he somehow got the number at three instead of one.

I am at a loss as to what purpose, other than that of creating manifest prejudice against Kowalski, the fact of theft had to do with Kowalski’s innocence or guilt of the crime charged, which was being in the business of dealing in firearms. The charge was not possessing stolen firearms nor dealing in stolen firearms.

The prosecutor, possibly encouraged by the somewhat carte blanche privilege as to the introduction of evidence accorded by the lack of defense objections, having gotten the evidence of theft before the jury did not leave the matter there. Instead, he recalled agent Krug to the stand on rebuttal to testify as to the investigation which was objected to by the defense. The transcript reflects the following:

“Q. Mr. Krug, you will recall that on the previous examination you testified that you had made an investigation with respect to Government’s Exhibit 3, being the gun with the scope, having been stolen. Will you tell the jury the date that that gun was stolen?
“MR. KELLY: Objection, your Honor. Without a proper foundation. I don’t think that this man has any personal knowledge.
“MR. LIPKIN: He said he investigated it.
“By Mr. Lipkin:
“Q. Okay, will you tell us the investigation you made ?
“A. Yes, our Bureau has the capability, since the Gun Control Act, to go — we call Washington and we give them the model number of the gun, serial number of the firearm and then they will call the manufacturer, in this case was Winchester.
“MR. KELLY: Objection, your Honor, to that. I think that calls for hearsay and a conclusion on his part. I think he can tell what he did or what he knows but when he starts talking—
“THE COURT: Objection is overruled.
“By Mr. Lipkin:
“Q. Go ahead.
“THE COURT: May answer what investigation he made.
“A. I called Washington, they replied to me that the gun had been shipped from Winchester to a wholesaler in Owen, Wisconsin.
“MR. KELLY: I object to any conversation outside of the presence of the defendant. It would be hearsay.
“THE COURT: Well, the objection will be overruled again, sir, and you don’t have to make it on each question. The objection is overruled to this man’s investigation.
“By Mr. Lipkin:
“Q. What did they tell you ?
“A. That the firearm had been shipped from Winchester to a wholesaler in Owen, Wisconsin, who in turn shipped the firearm to Spring Valley, Illinois, to a dealer there. He in turn sold the firearm to an individual in Standard, Illinois, who in turn sold the firearm to a Kelvin Neubaum, of Granville, Illinois.
“I went to Kelvin Neubaum’s house and talked to him and he had told me he had had two thefts of his firearms at his house, the first theft approximately $7,000, the second theft somewhat less than that.
“And he said the report was at the police station.
“I then called the Sheriff of Putnam County and he forwarded me a report which included the Winchester .225.”

The agent was permitted to testify not only as to what investigation was made but what he discovered as a result thereof. This is pure and simple hearsay and over and above the lack of materiality and relevancy to the charge which was being tried, its hearsay aspects should have precluded its admission. This is not a matter of admissibility of records kept in the ordinary course of business. As a matter of fact where there was a reference to records, e. g., the sheriff’s report, the record itself was not put into evidence but only the agent’s report of what was in the report. In addition to the rule against hearsay evidence there also would be involved an application of the best evidence rule.

It is no answer to say as is suggested in the majority opinion that upon going to the ultimate purchaser, the agent found that the gun was stolen. The statement of the purchaser remains hearsay. If the status of the firearm as a stolen weapon had been relevant to the issue before the court the Government could easily have brought as a witness the legal owner of the gun who could have identified it as a weapon stolen from his home.

I do not believe that this further emphasis. on the theft can be classified as harmless error. The fact that the gun may have been stolen was not controverted by any evidence. Kowalski testified that he had acquired it by trade from someone at a gun fair. The fact that the gun had been stolen does not negative Kowalski’s testimony as to how he had acquired the gun unless it is inferred that he, himself, had done the stealing. If that is the inference that the prosecutor was intending to leave then it is a matter, also improper, of .attempting to convict of one crime by proof of the commission of another.

Conclusion

The defense asserted was not that there had been no sale of guns on two occasions but rather than Kowalski had not in making the sales engaged in the business of dealing in firearms. This defense took the form of showing that the two agents whose identities as agents were not known to Kowalski approached him. They appeared to Kowal-ski to be hippie types. That he reasonably could have had this impression was not denied. It could reasonably have been determined from the evidence that Kowalski had no intention of engaging in the business of dealing in firearms but was presented with an opportunity of unloading some guns he owned on a couple of fellows whom he did not respect at a goodly price and that he would “string” them along about both guns and narcotics. A tendered instruction on entrapment was denied although there is some basis for a question of proclivity to engage in the crime of the business of dealing in firearms in view of the particular defense asserted.

In reviewing the record of this trial, which was consummated from selection of jury to the retirement for deliberation in less than a full court day, I am unable to dispel the uneasy feeling that justice was subverted in the respects I have indicated to the extent that the plain error requires reversal. Whether, in the absence of the factors to which I have adverted, the jury would have found the asserted defense sufficient for acquittal is, of course, problematical. The significant matter is not whether the jury would or would not have but rather that the triers of fact should have received the case free from the smear of egregious potentially prejudicial conduct.

■In referring to the dispatch with which this trial was consummated I have not intended to demean the importance of expeditious disposition of criminal cases. Prompt disposition, however, should not be purchased at the expense of a fair trial in any case and certainly not where a person’s liberty is at stake.

While I regard this case as one where the defendant received sufficiently less than a fair trial as to require a reversal and a new trial, I am reluctant to fault the experienced trial judge in this respect. It is true that the burden of conducting a fair trial is a continuing obligation resting upon the judge, nevertheless, a constant sua sponte supervision in the absence of prompt proper objections not only places an unfair burden on the judge, whose primary capacity should be as an arbiter, but could itself be a form of interference with the proper development of the trial.

I am also not unsympathetic with the frustrations which may beset the prosecutor’s attempts to present the case of the Government against an alleged criminal. The Assistant United States Attorney involved in the present case in the argument before this court stated the following:

“The defendant’s lawyer can do anything he wants because if it works, he’s got a not-guilty plea, a not-guilty verdict, and it doesn’t make any difference what happened or how he got it. It’s only the prosecutor, trying to do his job — As Mr. Kelly says, I’m overzealous. I prefer to think, your Honor, I’m pretty good, not just overzealous.”

The answer is if defense counsel does resort to questionably improper tactics that the prosecutor should look to the trial judge to handle the situation so as to preserve a fair trial not only for the defendant but for the Government as well. The answer is not to resort to the same type of tactics.

This, of course, does not in any sense mean that a, prosecutor should not undertake vigorous and forceful advocacy. He should not, however, forget that in the case of the federal prosecutor he is a functionary of a segment of government designated not as the Department of Prosecution but as the Department of Justice.

      . Kowalski’s counsel also embarked on wliat lie apparently considered a necessary trial tactic despite the objection of the prosecutor and the admonition of the judge. The tactic can only charitably be described as unique. When federal Treasury agent Krug was being cross-examined, counsel asked him if Kowalski hadn’t told the agent, then undercover, that he, Kowalski, “was going to get a shipment of narcotics that he wanted to sell you?” This line first introduced by Kowalski’s counsel was pursued throughout the trial apparently to demonstrate that the defendant was just engaged in a lot of big talk and nothing else. It did not minimize the aspersions cast by the prosecutor, the effect of which was to make Kowalski the possessor of generalized criminal attributes.

      . I have assumed that this as well as the other offenses were committed in the state of Illinois. The record is silent in this respect with the exception of the charges pending in the state courts at the time of the federal trial but, of course, these were not of impeaching caliber, not being convictions. The record, incidentally, indicates that when these state charges were tried, a hung jury resulted.

      . Krulewitch v. United States, 336 U.S. 440, 453, 69 S.Ct. 716, 723, 93 L.Ed. 790 (1949).

      . Upon challenge, the district court could only recall the evidence of one theft. The evidence as to even one in this hastily dis-. posed of trial -will be dealt with separately.


author: CRAVEN, Circuit Judge:

text:
    FLI-BACK COMPANY, INC., et al., Appellants, v. PHILADELPHIA MANUFACTURERS MUTUAL INSURANCE COMPANY and Affiliated FM Insurance Company, Appellees.
    No. 73-1636.
    United States Court of Appeals, Fourth Circuit.
    Argued May 7, 1974.
    Decided Aug. 1, 1974.

      Arch K. Schoch, Sr., High Point, N.C. (Schoch, Schoch, Schoch & Schoch, High Point, N.C. on brief), for appellants.
    William L. Stocks, Greensboro, N.C. (Welch Jordan and Jordan, Wright, Nichols, Caffrey & Hill, Greensboro, N.C., on brief), for appellees.
    Before WINTER, CRAVEN and BUTZNER, Circuit Judges.
   CRAVEN, Circuit Judge:

The Fli-Back companies, toy manufacturers in High Point, North Carolina, allege that they were surprised and dismayed when the defendants, two affiliated insurance companies, refused to pay a claim for business interruption loss caused by a fire in Fli-Back’s West Building. Fli-Back sued for the loss, mustering various theories designed to provide coverage when the policy’s terms fail, but the district judge granted defendants’ motion for summary judgment. On Fli-Back’s appeal we reverse.

Fli-Back first negotiated for fire insurance coverage with Philadelphia Manufacturers Mutual (PMM) in 1955. PMM notified Fli-Back that it could provide lot-cost mutual coverage for all of the manufacturing complex except the West Building, which fell short of PMM’s construction standards. For the West Building, PMM offered to secure coverage from an affiliated insurance company, Affiliated FM. PMM and Affiliated FM issued their first policies for fire and extended coverage in 1957. In 1960 Fli-Back purchased business interruption insurance from PMM. PMM did not tell Fli-Back that the policy excluded the West Building and did not offer to secure business interruption coverage for the West Building from Affiliated FM, despite the fact that Affiliated FM was in the business of writing such coverage. An affidavit supplied by a former Fli-Back vice president who was in charge of insurance in 1960, indicates he did not read the policies. Instead he relied on conversations with PMM representatives, and on letters from PMM to the effect that “your interests are protected” and that the policy covered “Business Interruption loss of your plant” (defendants’ exhibits 27 and 29). Another vice president, who took charge of insurance in 1965, made an affidavit saying that he read the policies but did not realize they failed to cover business interruption losses caused by damage to the West Building.

The policies were renewed in 1963 and 1966. Throughout this period representatives of PMM were in frequent contact with Fli-Back, making recommendations about insurance coverage, reporting the results of safety inspections, and recommending fire-prevention measures. In these matters PMM representatives acted on behalf of Affiliated FM as well as their own company. PMM collected the premiums for both companies, and PMM’s inspectors surveyed the West Building along with the rest of the complex.

On May 7, 1969, the West Building was destroyed by fire. Affiliated FM paid Fli-Back’s claim for property damage, but' PMM refused its claim for business interruption loss. Fli-Back filed suit on the policy in state court on April 29, 1970. PMM invoked its diversity of citizenship and removed the suit to the district court. Fli-Back then amended its complaint to state a claim against PMM for breaching an agreement to provide business interruption coverage for the entire plant. It also joined Affiliated FM as a defendant, on the theory that PMM was acting as Affiliated FM’s agent. In granting defendants’ motion for summary judgment, the district court reasoned that the policy did not cover the West Building and that any claim not based on the policy was barred by North Carolina’s three-year statute of limitations, N.C. Gen.Stat. § 1-52.

On appeal Fli-Back presses four arguments: (1) that business interruption coverage must be construed more broadly than regular accident insurance, because its purpose is to protect an entire business from an accident in any part; (2) that PMM’s conduct estops it to deny coverage; (3) that the insurance policy should be reformed on the ground of mutual mistake or mistake induced by the deceit of PMM; and (4) that the claim against PMM for breach of an agreement to provide full business interruption coverage is not barred by the statute of liniitations.

On the first point we agree with the district court that the coverage clause is unambiguous. The precedents plaintiff cites are therefore inapposite.

On Fli-Back’s second point we are bound by decisions of the North Carolina courts holding that the doctrine of estoppel cannot be used to extend coverage beyond the terms of an insurance policy. Hunter v. Jefferson Standard Life Ins. Co., 241 N.C. 593, 86 S.E.2d 78 (1955); McCabe v. Maryland Casualty Co., 209 N.C. 577, 183 S.E. 743 (1936); Currie v. Occidental Life Ins. Co., 17 N. C.App. 458, 194 S.E.2d 642 (1973). Although we would prefer the rule of Harr v. Allstate Ins. Co., 54 N.J. 287, 255 A. 2d 208 (1969); Pitts v. New York Life Ins. Co., 247 S.C. 545, 148 S.E.2d 369 (1966); and Preferred Risk Mutual Ins. Co. v. Thomas, 372 F.2d 227 (4th Cir. 1967) (applying South Carolina law), we find no indication that the North Carolina Supreme Court is disposed to abandon the rule followed in most jurisdictions in favor of the liberal rule followed in fewer than a dozen states. See Annot., 1 A.L.R.3d 1139, §§ 3-5.

On Fli-Back’s other two contentions —reformation and breach of agreement to provide coverage — we find material questions of fact that make summary judgment inappropriate.

North Carolina’s law on agreements to procure insurance coverage was summarized in Wiles v. Mullinax, 270 N.C. 661, 155 S.E.2d 246 (1967), describing the holding on the first appeal in that case, 267 N.C. 392, 148 S.E.2d 229 (1966):

[W]e . . . held that, where an insurance agent or broker undertakes to procure a policy of insurance for another, it is his duty to use reasonable diligence to obtain it and, within the amount of the proposed policy, he may be held liable for a loss sustained by the proposed insured due to his negligent failure to do so. We further stated that if, in spite of reasonable diligence, such agent or broker is unable to procure the desired insurance coverage, it is his duty to so notify the proposed insured in order that the latter may take the necessary steps to protect himself otherwise.

270 N.C. at 665, 155 S.E.2d at 249. The relationship between an insurance agent and his client is both contractual and fiduciary; it is unaffected by the fact that the insurance agent represents both insurer and insured; and failure to provide the requested coverage may support an action either for breach of contract or for negligence. Bank of French Broad, Inc. v. Bryan, 240 N.C. 610, 83 S.E.2d 485 (1954); Elam v. Smithdeal Realty & Ins. Co., 182 N.C. 599, 109 S.E. 632 (1921); Musgrave v. Mutual Savings & Loan Ass’n, 8 N.C.App. 385, 174 S.E.2d 820 (1970). Proof that the agent misrepresented the scope of coverage may also support an action for damages. Elam v. Smithdeal Realty & Ins. Co., supra. The insured’s failure to read his policy to see if it fulfills the agreement is not, as a matter of law, a bar to his suit against the agent. In a suit for negligence, failure to read the policy may constitute contributory negligence that will bar recovery altogether, and in a suit on the contract, it may reduce recovery to nominal damages under the doctrine of avoidable consequences. But either case requires a factual determination that failure to read the policy was negligent under the circumstances. Elam v. Smithdeal Realty & Ins. Co., supra.

Under these principles, Fli-Back’s theory is that PMM was an agent for Affiliated FM, and that. it agreed to provide business interruption insurance for Fli-Back’s entire plant. Because of the past course of dealing between the parties, Fli-Back contends it was entitled to assume that PMM would either insure the West Building along with the rest or obtain insurance through Affiliated FM. PMM neither obtained coverage for the West Building nor notified Fli-Back that it had not, and it is therefore prima facie liable as an agent for breach of its contractual duties.

The exhibits in the record amply support Fli-Back’s contention that PMM was an agent for Affiliated FM. Defendants have supplied no proof, either by exhibits or affidavits, that PMM did not agree to provide full business interruption coverage or that it told Fli-Back the West Building was not covered. Instead, defendants rely on their contention that Fli-Back’s cause of action is barred by the statute of limitations, N. C.Gen.Stat. § 1-52(1), (5). This was the theory on which the district court granted summary judgment, holding that the agreement was breached, if at all, no later than 1960 when the first business interruption policy was delivered.

The North Carolina cases, however, demonstrate that an agreement to provide insurance may create a continuing agency relationship. See Wiles v. Mullinax, 267 N.C. 392, 148 S.E.2d 229 (1966); Meiselman v. Wicker, 224 N.C. 417, 30 S.E.2d 317 (1944). The evidence PMM furnished in support of its motion for summary judgment raises a strong inference that PMM accepted a continuing obligation to advise Fli-Back on its insurance needs. There are several letters from PMM to Fli-Back reviewing Fli-Back’s insurance and recommending increased coverage. DX 34, DX 41, DX 51, DX 56, and DX 60. Three of these letters were written within the three-year period before this suit was instituted: DX 51 (June 19, 1968), DX 56 (Sept. 16, 1968), and DX 60 (Nov. 8, 1968). In none of these letters did PMM mention that the West Building was not covered by a business interruption policy. If an agreement to provide full insurance is proved, these letters could evidence a breach of PMM’s duty to inform Fli-Back that the policies did not include the West Building. Since such a breach would fall within the limitations period, Fli-Back’s suit would not be barred. Cf. Bame v. Palmer Stone Works, Inc., 232 N.C. 267, 59 S.E.2d 812 (1950).

The district court granted summary judgment as to the claim for reformation on the ground that it too was barred by the statute of limitations. N.C.Gen.Stat. § 1-52(9) sets up a three-year bar for suits based on fraud or mistake but provides that the cause of action is not deemed to accrue until the aggrieved party discovers the facts that constitute the fraud or mistake. The North Carolina Supreme Court has qualified the proviso, holding that the cause of action may also accrue when the aggrieved party, in the exercise of ordinary diligence, should have discovered the fraud. E. g., Bennett v. Anson Bank & Trust Co., 265 N.C. 148, 143 S.E.2d 312 (1965). In this case the district judge held that ordinary diligence includes reading the policy, and since Fli-Back could have discovered the gap in coverage as early as 1960, its action for reformation would be barred. We think this holding cannot be squared with North Carolina law under the inherent limitations of summary judgment.

The North Carolina Supreme Court has declined to hold that failure to read an instrument invokes the “ordinary diligence” rule as a matter of law. Peacock v. Barnes, 142 N.C. 215, 55 S.E. 99 (1906); cf. Elliott v. Goss, 250 N.C. 185, 108 S.E.2d 475 (1959); Ollis v. Board of Education, 210 N.C. 489, 187 S.E. 772 (1936). It has also held that a fiduciary relationship between the parties, including an agency relationship that entails a duty of disclosure, may excuse the plaintiff’s delay in discovering the fraud or mistake. Whether it does or not is, of course, a question for the trier of fact. Bennett v. Anson Bank & Trust Co., supra; Vail v. Vail, 233 N.C. 109, 63 S.E.2d 202 (1951); Small v. Dorsett, 223 N.C. 754, 28 S.E.2d 514 (1944). Summary judgment is inappropriate if material facts and permissible inferences are in genuine dispute. Here, the applicability of the statute of limitations depends on facts and inferences that have not yet been determined. It is not enough for defendants merely to invoke the statute.

Defendants have advanced another ground in support of the summary judgment, citing North Carolina cases to the effect that equity will not grant reformation to a person who fails to read his contract. Setzer v. Old Republic Life Ins. Co., 257 N.C. 396, 126 S.E.2d 135 (1962); W. B. Coppersmith & Sons, Inc. v. Aetna Ins. Co., 222 N.C. 14, 21 S.E.2d 838 (1942). The North Carolina Supreme Court has undermined those cases, holding that failure to read an instrument may be negligence, but that whether it bars reformation depends on the facts of the particular case. McCallum v. Old Republic Life Ins. Co., 262 N.C. 375, 137 S.E.2d 164 (1964). On this issue Fli-Back may also find a helpful analogy in Gaston-Lincoln Transit, Inc. v. Maryland Casualty Co., 20 N.C.App. 215, 201 S.E.2d 216 (1973), cert. allowed, 284 N.C. 623, 202 S.E.2d 273 (1974).

Because there are undetermined material facts on the crucial issues of this case, we reverse the entry of summary judgment and remand for trial.

Reversed and remanded.

      . The parties stipulated that PMM is one of four mutual insurance companies that own the stock of Affiliated FM. Stipulation No. 10. The extent of its ownership is not revealed.

      . The coverage clause appears on a separate schedule attached to the standard jminted policy. It is a separate paragraph, typed in elite-size type, and it reads as follows :
      This Policy covers only the actual loss sustained by the Insured due to interruption of business as a result of physical damage caused directly by the perils insured against hereunder to the property utilized by the Insured, situate on premises within the area bounded by West Green Street, a line parallel and coinciding with the southerly walls of East Wing and 1950 Addition, a line parallel with and 10 feet east of the easterly wall of the West Building, and a line parallel with and 30 feet north of the north wall of North Building, in HIGH POINT, Guilford County, NORTH CAROLINA.
      The boundary description is identical to that in the PMM fire policy, which both parties understood to exclude the West Building.

      . Lewis Food Co. v. Fireman’s Fund Ins. Co., 207 Cal.App.2d 515, 24 Cal.Rptr. 557 (1962); Studley Box & Lumber Co. v. National Fire Ins. Co., 85 N.H. 96, 154 A. 337 (1931); Nusbaum v. Hartford Fire Ins. Co., 285 Pa. 332, 132 A. 177 (1926).

      . The theory of a continuing duty and separate breaches, independent of the initial delivery of the policy, make plaintiffs’ allegations analogous to Bame and differentiate them from Matthieu v. Piedmont Natural Gas Co., 269 N.C. 212, 152 S.E.2d 336 (1967), in which the defendant’s duty terminated on installation of a defective heating/cooling system. The proof in FliBack’s case will, of course, determine which of these cases controls the statute of limitations issue. See also Case v. Ewbanks, Ewbanks & Co., 194 N.C. 775, 140 S.E. 709 (1927) (holding in another context that cause of action against insurance agent did not arise until company’s nonliability was adjudged).

      . Moore v. Fidelity & Casualty Co., 207 N.C. 433, 177 S.E. 406 (1934), is not to the contrary. The court did not hold that the cause of action accrued as a matter of law when the plaintiff received the surety bond without reading it. It only affirmed a factual finding, entered after a bench trial, to the effect that plaintiff could have discovered the mistake by reading the bond, holding that on those facts, the action was barred under the rule of Peacock v. Barnes.