source: Caselaw Access Project

author: WEBSTER, Circuit Judge.

license: Public Domain

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. MODINE MANUFACTURING CO., Respondent.
    No. 73-1664.
    United States Court of Appeals, Eighth Circuit.
    Submitted April 15, 1974.
    Decided Aug. 5, 1974.
    Jonathan Axelrod, Atty., N. L. R. B., Washington, D. C., for petitioner.
    John D. O’Brien, Washington, D. C., for respondent.

      Before MATTHES, Senior Circuit Judge, and ROSS and WEBSTER, Circuit Judges.

      . See note 1 supra.

      . See, e. g., NLRB v. Skelly Oil Co., 473 F.2d 1079 (8th Cir. 1973); NLRB v. Southern Paper Box Co., 473 F.2d 208 (8th Cir. 1973); NLRB v. Piggly Wiggly Red River Co., 464 F.2d 106 (8th Cir. 1972); NLRB v. Commercial Letter, Inc., 455 F.2d 109 (8th Cir. 1972).

   WEBSTER, Circuit Judge.

The single issue on this application for enforcement of an order of the National Labor Relations Board is whether respondent Modine Manufacturing Company was entitled to a hearing to determine whether the United Auto Workers (UAW) was the appropriate bargaining agent for Modine’s employees. Following an election won by the UAW against the Sheet Metal Workers (SMW), the Board certified the UAW over exceptions by the company and the SMW. The company thereafter refused to bargain with the UAW and the Board found this refusal a violation of §§ 8(a)(1) and 8(a)(5) of the National Labor Relations Act. We find that the Board’s refusal to grant the company a hearing was proper and that the Board’s conclusion that the company refused to bargain is supported by substantial evidence in the record as a whole.

A consent election was held at Mo-dine’s Trenton, Missouri plant on March 20, 1972, and the UAW defeated the incumbent SMW by a 93 to 86 vote. The SMW filed timely objections claiming (1) the UAW had misrepresented wage rates at Modine’s Paducah, Kentucky plant by listing only the most favorable rates in the contract; (2) the UAW had represented to employees that they could not be called out on- strike unless the local membership voted by a two-thirds majority, where as under the UAW constitution the two-thirds requirement only applied to the members present and voting at a meeting called for that purpose and a strike could be called in certain emergency situations without a two-thirds vote of the local; and (3) the UAW represented that its dues were two hours pay per month and could only be raised by the local membership or its delegates at the UAW national convention, whereas the UAW constitution permitted dues to be raised by a majority vote of the delegates at a national convention or by emergency action of a special convention called for that purpose by the International Union. The SMW further claimed that these representations were made in various handouts distributed between the 14th and 16th of March and that it did not have an adequate opportunity to respond even though each representation was commented upon in a handout distributed by the SMW on March 17th.

The Regional Director conducted an administrative investigation in which all interested parties, including the company, were given an opportunity to submit evidence. In his report recommending the objections be overruled and the UAW certified, the Regional Director found that none of the alleged misrepresentations were departures from the truth sufficient to justify overturning the election and, in any event, he found that the SMW had an adequate opportunity to respond and had in fact responded in each instance. At this point the company joined the SMW in filing objections to the report and requested a hearing. The Board denied the request for a hearing and certified the UAW, leading to the events which resulted in this enforcement application.

In this type of case, an election will not be overturned unless the misrepresentation (1) involves “a substantial departure from the truth”, (2) is made at a time when the other party does not have an adequate opportunity to respond and (3) may reasonably be expected to have a significant impact on the election. NLRB v. Georgia-Pacific Corp., 473 F.2d 206, 208 (8th Cir. 1973); Hollywood Ceramics Co., 140 NLRB 221, 51 LRRM 1600 (1962); see Bok, The Regulation of Campaign Tactics in Representation Elections Under the National Labor Relations Act, 78 Harv.L.Rev. 38, 82-92 (1964). The Board has a wide degree of discretion in the conduct of certification elections and a hearing is required to determine whether these criteria have been satisfied only where the opposing party has raised “substantial and material factual issues”. We have said:

To raise such issues, ‘ * * * [i]t is incumbent upon the party seeking a hearing to clearly demonstrate that factual issues exist which can only be resolved by an evidentiary hearing. The exceptions must state the specific findings that are controverted and must show what evidence will be presented to support a contrary finding or conclusion. * * * Mere disagreement with the Regional Director’s reasoning and conclusions does not raise “substantial and material factual issues.” * * * The Board is entitled to rely on the report of the Regional Director in the absence of specific assertions of error, substantiated by offers of proof.’
NLRB v. Griffith Oldsmobile, Inc., 455 F.2d 867, 868-869 (8th Cir. 1972), quoting NLRB v. Tennessee Packers, Inc., 379 F.2d 172, 178 (6th Cir.), cert. denied, 389 U.S. 958, 88 S.Ct. 338, 19 L.Ed.2d 364 (1967).

In this case the Paducah contract, the UAW constitution and the handouts containing the alleged misrepresentations were all in the record. The material faets are not disputed; rather, respondent would attack the inferences and conclusions of the Regional Director. The findings of the Regional Director were adopted by the Board. He found (1) that there was adequate opportunity for the SMW to make an effective reply to the UAW’s written statement concerning the Paducah plant wage rates, (2) that the statement with respect to the strike vote did not substantially depart from the truth and was not a material misrepresentation, and (3) that the statement with respect to union dues did not substantially misrepresent the UAW’s dues structure and that the SMW had an opportunity to and did reply to such representations. These findings are supported by substantial evidence on the record as a whole. It is therefore unnecessary to consider the possible impact of such statements upon the election.

In each of the cases cited by respondent in which we held that a hearing was required, the objecting party offered evidence which established factual questions which were ripe for exploration and examination in an adversary hearing and on which the outcome turned. Moreover, in each of those cases the parties before the Board and the court were the real parties to the dispute. Here, the company had nothing to do with the election, presented no evidence to the Regional Director and raised no objection to the UAW’s conduct until after the report was submitted. We fail to see how the company was prejudiced by the Board’s decision or what it hoped legitimately to gain by refusing to bargain with the union certified by the Board.

The Board’s order is hereby enforced.

      . The Board extensively reviewed its discretionary power to determine whether to grant hearings to parties objecting to the conduct of elections and, according to respondent’s argument, expanded its authority to deny hearings in situations in which the appellate courts have heretofore required them. Modine Mfg. Co., 203 NLRB No. 77, 83 LRRM 1133 (1973). Since we conclude that no hearing was required in this case under the well established case law of this circuit, we neither endorse nor reject the Board’s stated views.

      . Subsequent to the submission of this case, a contract settlement was reached between Mo-dine and the UAW and the company has suggested that the matter is now moot. The Board has correctly pointed out that compliance with its order does not moot the proceedings because the order includes a requirement that the company cease and desist from refusing to bargain in good faith and “the Board is entitled to have the resumption of the unfair [labor] practice barred by an enforcement decree. . . . ” NLRB v. Raytheon Co., 398 U.S. 25, 27, 90 S.Ct. 1547, 1549, 26 L.Ed.2d 21 (1970).


author: WALLACE, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Lubomir PEICHEV, Defendant-Appellant.
    No. 73-2195.
    United States Court of Appeals, Ninth Circuit.
    June 21, 1974.
    Certiorari Denied Oct. 29, 1974.
    See 95 S.Ct. 229.
    James F. Hewitt, Federal Public Defender (argued), John W. Keker, Asst. Federal Public Defender, San Francisco, Cal., for defendant-appellant.
    Jerry K. Cimmet, Asst. U. S. Atty. (argued), San Francisco, Cal., for plaintiff-appellee.
    Before DUNIWAY and WALLACE, Circuit Judges, and EAST, District Judge.

       Honorable William G. East, Senior United States District Judge, District of Oregon, sitting by designation.

   OPINION

WALLACE, Circuit Judge:

The grand jury indicted Peichev on three counts: Aiding and abetting aircraft piracy [18 U.S.C. § 2; 49 U.S.C. § 1472(i)], conspiracy to commit aircraft piracy [18 U.S.C. § 371] and conspiracy to commit extortion by means of aircraft piracy [18 U.S.C. § 1951]. Pei-chev pleaded not guilty and was tried before a jury. After all of the evidence had been submitted, Peichev moved for a judgment of acquittal on count one on the ground that there was insufficient evidence, on count three on the ground that there was insufficient proof of an effect on interstate commerce and on either count two or count three on the ground that only one conspiracy had been proven. The court denied all three motions and the jury returned a verdict of guilty on all counts. The court sentenced Peichev to life on count one and to 20 years on count three, both sentences to run concurrently. The court did not impose sentence on count two. Peichev appeals. While we do not reach count two, we affirm the remainder of the case on the basis that there was sufficient evidence of aiding and abetting under count one.

We review the evidence in the light most favorable to the government. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942). Over the weekend of June 16-19, 1972, Pei-chev and two other men, Michael Azman-off and Dimitr Alexiev, traveled by car to Washington state, allegedly in search of gold. During this trip they also traveled to Vancouver and to Hope and Punt-zi, two remote landing sites, both over 100 miles from Vancouver. While on this trip, plans were made for Azmanoff and Alexiev to hijack an airplane and to fly it to a remote airport in Canada. There, a fourth person would be waiting with a car ready to take the skyjackers to an apartment hide-out in the outskirts of Vancouver. Peichev was to rent a private plane and .to meet them at an auxiliary landing strip in ease the hijacked plane was unable to land at the preferred airport.

The three men returned to San Francisco and on July'l, 1972, met at the San Francisco International Airport with II-lia Shishkoff who agreed to meet Pei-chev at noon on July 4, at the Vancouver Airport and to rent an apartment in the outskirts of the city. On July 3, Pei-chev withdrew $1,700 from his bank account and borrowed a gun under the guise of a need to protect himself while hunting for gold. Later the same day he met with Alexiev and Azmanoff at the San Francisco International Airport. They gave him a plane ticket to Seattle and told him to take a bus to Vancouver.

After meeting Shishkoff in Vancouver, Peichev rented two cars and traveled with Shishkoff to Hope airport, approximately 100 miles, and returned to Vancouver. The following day, July 5, Peichev rented a private plane and hired a pilot to fly him to Bella Coola and then to Anaheim Lake. While at Anaheim Lake, Peichev learned by radio that the hijack attempt had failed. He proceeded to Puntzi airstrip where he spent the night and then returned to Vancouver. In Vancouver he met Shishkoff and arranged for the return of the rental cars and then returned to San Francisco.

On July 5, the same day that Peichev flew to Puntzi airstrip, Azmanoff and Alexiev hijacked a Pacific Southwest Airline flight scheduled to travel from Sacramento to San Francisco. The hijackers demanded $800,000, parachutes and aircharts of Canada, Alaska and the Soviet Union. After the plane landed in San Francisco, an F.B.I. agent, posing as an international pilot, was allowed to board the plane. Gunfire erupted between the hijackers and F.B.I. agents and Azmanoff and Alexiev were killed. Azmanoff killed one passenger and wounded three others. The F.B.I. agents found on the bodies of the hijackers a map of British Columbia, Canada, and a small piece of note paper containing the map coordinates of Puntzi airstrip.

Peichev concedes that he rented a plane and flew to the Puntzi airstrip by prearrangement with Azmanoff and Al-exiev, but contends that he was coerced to do so. His statements as reported by the other witnesses belie this contention. Shishkoff testified that when he met Peichev in Vancouver, Peichev was clearly in charge of directing the car rentals, surveying the Hope airport and directing where to hide the cars. Shish-koff also testified that Peichev, after meeting him at the Vancouver Airport following the failure of the hijacking plan, stated: “They are stupid. I’d planned everything so good. They are stupid. They ask for too much money.”

Peichev argues that the evidence was insufficient to support his conviction of aiding and abetting aircraft piracy. Under count one, Peichev was charged with only aiding and abetting aircraft piracy, not additionally with counseling, commanding, inducing or procuring its commission as is also provided in 18 U.S.C. § 2. He concedes for the sake of argument that the evidence was sufficient to show a conspiracy, but argues that the government did not show that he aided and abetted in the perpetration of the crime.

At common law an abettor was one who was either actually or constructively present at the site of the crime and “who, with mens rea, either assist [ed] the perpetrator in the commission of the crime, [stood] by with intent (known to the perpetrator) to render aid if needed, or command [ed], counsel [ed] or otherwise encourage [d] the perpetrator to commit the crime.” R. Perkins, Criminal Law 645 (1969) (footnotes omitted). See W. LaFave & A. Scott, Criminal Law 495 (1972). The distinction between an accessory before the fact and an abettor (a principal in the second degree) was the requirement that the abettor be either actually or constructively present at the site of the crimp. R. Perkins at 658. A person was deemed constructively present “whenever he [was] cooperating with the perpetrator and ‘[was] so situated as to be able to aid him, with a view known to the other, to insure success in the accomplishment of the common purpose.’ ” R. Perkins at 660, quoting Skidmore v. State, 80 Neb. 698, 700, 115 N.W. 288, 289 (1908). The only proximity required was that the person be close enough to render aid as needed. Rex v. Soares, 168 Eng.Rep. 664 (1802).

Modern courts in construing 18 U.S.C. § 2 have generally followed the common law principles, but have emphasized the requirement that the person actively participate in the criminal venture. The Supreme Court defined the elements of aiding and abetting in Nye & Nissen v. United States, 336 U.S. 613, 619, 69 S.Ct. 766, 770, 9.3 L.Ed. 919 (1949), as follows:

In order to aid and abet another to commit a crime it is necessary that a defendant “in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed.” L. Hand, J., in United States v. Peoni, 2 Cir., 100 F.2d 401, 402.

Subsequently, the Court in United States v. Williams, 341 U.S. 58, 64, 71 S.Ct. 595, 599, 95 L.Ed. 747 (1951), stated: “Aiding and abetting means to assist the perpetrator of the crime.”

Following the guidelines set forth by the Supreme Court, the courts of appeals have liberally construed the requirement that the abettor be constructively present at the site of the crime. In Tarkington v. United States, 194 F.2d 63 (4th Cir. 1952), the court affirmed a conviction on a plea of guilty where the defendant had waited in a get-away car parked in the woods, after helping his companions plan a robbery and after supplying them with a rope, pistols and a bag. His companions were captured before they reached the rendezvous. The defendant was arrested after allegedly hunting squirrels in the woods.

In United States v. Burkeen, 350 F.2d 261 (6th Cir.), cert. denied, 382 U.S. 966, 86 S.Ct. 457, 15 L.Ed.2d 369 (1965), the court affirmed the conviction of a defendant who by prearrangement had met the bank robbers on a lonely country road with a second getaway car. The court concluded:

[The defendant] met the bank robbers by plan and ... he knew he was meeting them to facilitate their escape, after a bank robbery. This would constitute aiding and abetting the perpetration of the robbery.

350 F.2d at 266.

In United States v. Harris, 140 U.S.App.D.C. 270, 435 F.2d 74 (1970), cert. denied, 402 U.S. 986, 91 S.Ct. 1675, 29 L.Ed.2d 152 (1971), the court affirmed the conviction of a defendant for aiding and abetting the robbery of the company where he worked. The defendant did not participate in the actual commission of the crime since he was at work at a different part of the building during the time. But the court found that a jury could have inferred that he had participated in the planning and aided by allowing the perpetrators to use his gun, car and apartment. 435 F.2d at 88-89.

Similarly, in Asher v. United States, 394 F.2d 424 (9th Cir. 1968), we affirmed the conviction of an off-duty policeman for aiding and abetting the commission of a bank robbery although during the actual perpetration, the defendant had been at several different places completing business unrelated to the robbery. We held that the defendant was guilty as an aider and abettor even though he had not been the moving party in the plan, but had acquiesced while making suggestions in the plan proposed by the other participants. In addition, he aided the perpetrator’s escape from the site of the crime and participated in a plan to conceal his identity from the police.

On the authority of these cases we hold that a person is an aider and abettor under 18 U.S.C. § 2 if he actively assists in planning and preparing for the perpetration of the crime and assumes a station with the knowledge of the perpetrators where he may be able to assist either in the commission of the crime or in the escape immediately following the perpetration of the crime. Under this standard, the evidence was sufficient to show that Peichev was guilty of aiding and abetting. He traveled to Canada with Azmanoff and Alex-iev to look at the landing sites. He was involved in planning the crime and agreed to be a participant. He borrowed a gun and had it with him at the time he expected to become an active participant. He traveled to Canada, rented cars and an airplane to aid the perpetrators in their escape. He was en route to the airstrip planned for a possible rendezvous when he learned that the crime had failed. According to a plan, known to the perpetrators, he was positioning himself so as to assist their escape, an element essential to the successful completion of the crime. His substantial distance from the site of the hijacking is irrelevant so long as he was in a proximity where he could assist the successful completion of the crime. He was in a position to assist the escape from a jet airplane as much as the driver of a get-away car waiting outside of a bank that is being robbed. The fact that the criminal plot was foiled before he could be of assistance is immaterial; he completed his assignment with the expectation that it would result in the successful commission of the crime. We hold that there was ample evidence to support the jury verdict.

Under the concurrent sentence doctrine we need not reach Peichev’s other claims of error. Benton v. Maryland, 395 U.S. 784, 791, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969); United States v. Moore, 452 F.2d 576 (9th Cir. 1971). However, as no sentence was imposed on count two and the record reflects no reason why none was imposed, count two should be dismissed. This case is remanded to the district court for proper disposition of count two.

Affirmed in part; remanded in part.


author: HAYS, Circuit Judge:

text:
    BELL AEROSPACE COMPANY DIVISION OF TEXTRON, INC., Plaintiff-Appellant, v. LOCAL 516, INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW), Defendant-Appellee, Niagara Frontier Technical Association, Local 205, American Federation of Technical Engineers, Defendant-Appellant.
    Nos. 1160, 1161, Dockets 73-1487, 74-1135.
    United States Court of Appeals, Second Circuit.
    Argued June 12, 1974
    Decided July 26, 1974.

      Richard E. Moot, Buffalo, N. Y. (Mason O. Damon, James N. Schmit, and Ohlin, Damon, Morey, Sawyer & Moot, Buffalo, N. Y., on the brief), for plaintiff-appellant.
    Richard Lipsitz, Buffalo, N. Y. (Eugene W. Salisbury and Lipsitz, Green, Fahringer, Roll, Schuller & James, Buffalo, N. Y., on the brief), for defendant-appellee.
    Thomas P. McMahon, Buffalo, N. Y., for defendant-appellant.
    Before LUMBARD, HAYS and TIMBERS, Circuit Judges.
   HAYS, Circuit Judge:

This is an appeal by two parties from a judgment of the district court confirming an arbitration award in a jurisdictional dispute among an employer and two unions over assignment of jobs in the employer’s plant. Local 516, International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), defends the award and judgment of the district court in all respects. Niagara Frontier Technical Association, Local 205, American Federation of Technical Engineers, appeals on the ground that the arbitrator exceeded his powers, denied Local 205 a fair hearing, and acted with evident partiality. We hold that these claims lack merit and to that extent we affirm the decision of the district court. The employer, Bell Aerospace Company, appeals on the ground that the award was ambiguous and contradictory and should have been remanded for clarification. We find this claim justified and to that extent we reverse- and remand.

I.

In September and October 1970 Local 516 filed two grievances claiming that jobs properly belonging to its members under its collective bargaining agreement with Bell had been assigned to members of Local 205. Bell tried but failed to obtain a Unit Clarification Order from the National Labor Relations Board. Bell then filed a grievance against Local 205 and demanded arbitration. On July 30, 1971, Bell filed in the district court a complaint against both unions under section 301 of the Labor Management Relations Act, 29 U.S.C. § 185 (1970), and sought an order to compel tripartite arbitration. On August 5, 1971, the court preliminarily enjoined further arbitration proceedings until it could dispose of Bell’s complaint. On January 12, 1972, acting pursuant to 9 U.S.C. § 4 (1970), the district court ordered that all grievances be heard in a single proceeding before an arbitrator.

After conducting hearings and receiving exhibits and briefs the arbitrator issued his award on January 30, 1973. Local 205 petitioned the district court to vacate the award and Local 516 moved to confirm the award. On March 14, 1973, the court granted the motion of Local 516. On April 17, 1973, Local 205 moved to vacate the award on the ground that the arbitrator had so imperfectly executed his powers that a final, definite award was not made. Bell cross moved on the same ground to have the award remanded to the arbitrator for clarification. On May 17, 1973, the district court granted Bell’s motion.

On June 28, 1973, the arbitrator issued his clarification. Local 516 moved in the district court to confirm the award as clarified. Bell opposed the motion on the ground that the award was still ambiguous despite the clarification. The district court agreed that “the language of the award appears to be contradictory.” Nevertheless the court confirmed the award on the ground that the arbitrator had done “his best” and that there was “no reason to believe that a remand would lead to any additional clarification.”

Bell and Local 205 appealed.

II.

Local 205 claims that the award must be vacated because the arbitrator exceeded his powers, denied a fair hearing, and showed partiality.

A federal court may vacate the award of an arbitrator only on the grounds specified in 9 U.S.C. § 10 (1970). Local 205’s first claim is that the arbitrator exceeded his powers within the meaning of 9 U.S.C. § 10(d) by going beyond the scope of the collective bargaining agreement between Bell and 205 and considering the certification of Local 516. In Columbia Broadcasting System, Inc. v. American Recording and Broadcasting Ass’n, 414 F.2d 1326 (2d Cir. 1969), this court held relying on Transportation-Communication Employees Union v. Union Pacific R.R., 385 U.S. 157, 161, 87 S.Ct. 369, 17 L.Ed.2d 264 (1966), that the developing common law of labor contracts permitted the district court to go beyond the scope of a collective bargaining agreement and compel tripartite arbitration. 414 F.2d at 1328-1329. To accept Local 205’s argument would effectively nullify our former holding by preventing the arbitrator from referring to documents necessary to resolve the dispute. The collective bargaining agreements with both unions and the NLRB certification were relevant to the jurisdictional dispute here and the arbitrator did not exceed his powers by referring to all of-them.

Local 205 also claims that the arbitrator was guilty of “misbehavior by which the rights of any party [may] have.been prejudiced” within the meaning of 9 U.S.C. § 10(c) by referring to an affidavit which was not placed in evidence. The district court found that the affidavit was part of the record in an NLRB case which the parties had stipulated was relevant. Moreover, Local 205 had notice of inclusion of the affidavit in the record through a letter from the attorney for Bell. In handling evidence an arbitrator need not follow all the niceties observed by the federal courts. He need only grant the parties a fundamentally fair hearing. Reliance on the affidavit did not deny Local 205 a fair hearing.

Finally, Local 205 claims that the arbitrator was guilty of “evident partiality” within the meaning of 9 U. S.C. § 10(b). The only basis for the claim is that the arbitrator consistently relied on evidence and reached conclusions favorable to Local 516. This does not establish “evident partiality.” There is no evidence that the arbitrator was biased or prejudiced, that he was predisposed to favor either party, or that he acted out of any improper motives. Cf. Saxis Steamship Co. v. Multifacs International Traders, Inc., 375 F.2d 577, 582 (2d Cir. 1967).

III.

Bell claims that because of the ambiguity of the award the arbitrator “so imperfectly executed [his powers] that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10(d). The district judge accepted this argument the first time the case came before him and remanded the matter to the arbitrator for clarification. After clarification the court confirmed the award.

Courts will not enforce an award that is incomplete, ambiguous, or contradictory. United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 599, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960), modifying on other grounds, 269 F.2d 327, 331-332 (4th Cir. 1959); IBEW, Local 369 v. Olin Corp., 471 F.2d 468, 472-473 (6th Cir. 1972); Hanford Atomic Metal Trades Council v. General Electric Co., 353 F.2d 302, 307-308 (9th Cir. 1965); United Steelworkers v. Timken Roller Bearing Co., 324 F.2d 738, 741 (6th Cir. 1963); IAM v. Crown Cork & Seal Co., 300 F.2d 127 (3d Cir. 1962). In this case it appears that the award is ambiguous.

First, the award seems contradictory on its face. The question before the arbitrator is which union is to perform the calibration on the thousands of test instruments which require periodic calibration. The clarification of the award on remand reads in pertinent part as follows:

“1. Calibration
“The Award of January 30, 1973 disposed of 516’s grievance 70-692 in the following language:
All inspecting and testing, including associated calibrating, of deliverable products and/or products’ components, including US2-28, VATLS, SMASH, DVM Accelerometers and PEPS shall be performed by employees represented by Local 516, UAW.
“This means employees represented by Local 516, UAW shall inspect, test and perform the calibration associated with such inspection and testing on all deliverable products and/or products’ components, including US2-28, VATLS, SMASH, DVM, Accelerometers and PEPS. This does not mean that Local 516 has the right to perform all calibrating required by the Company. Nor does it mean 516 will be denied any calibration work performed by 516 prior to this arbitration.
“The Award of January 30, 1973 disposed of 516’s item No. 10, grievance 70-716, in the following language :
The calibration tests on all pneumatic, hydraulic, electro/mechanical and hydrostatic test instrumentation used for tests and the recording of tests shall be performed by employees represented by Local 205, AFTE.
“This means employees represented by Local 205, AFTE shall perform calibration tests on all pneumatic, hydraulic, electro/mechanical and hydrostatic test instrumentation used for tests and the recording of tests. This does not mean that Local 205 has “the right to all calibration” required by the Company. Nor does it mean that 205 must sacrifice any of its work within the confines of its work jurisdiction as established by the National Labor Relations Board [Case 3-US-39] and discussed on page 156 of the Opinion.”

On the one hand, these jobs would seem to be “associated with testing,” and thus within the award to Local 516. On the other hand, they would seem to fall under “calibration tests on . instrumentation used for tests,” and thus to be within the award to Local 205. Construing ambiguous provisions of an arbitration award is the proper province of the arbitrator, not the courts.

Bell claims, and Local 516 does not deny, that it has met with both unions and that they cannot agree on assignments under the award. Local 516 argues that the award grants to Local 205 calibration associated with research and development and to Local 516 all other calibration jobs. Perhaps this is what the arbitrator intended, but certainly one could not gather that interpretation from the face of the award. Moreover, that construction cannot stand because the clarification clearly states 3 that 516 will not lose any work already assigned to it, but members of 516 have in the past been assigned to do calibration associated with research and development.

None of the parties has advanced a clear and compelling interpretation of the award.

The decision of the district court found that “the language of the award appears to be contradictory.” Having so found, the court was bound to commit the matter to further arbitration. The purpose of arbitration is to resolve disputes, not to create new ones. An award which does not fulfill this purpose is unacceptable.

We therefore reverse that portion of the judgment of the district court which confirmed the award on calibration work and remand for further proceedings consistent with this opinion.

On remand the parties may, of course, select an arbitrator if they can agree among themselves. If they cannot agree, the district court must appoint the arbitrator. In view of the objections raised by Local 205 and the failure of the previous arbitrator to make a definite, unambiguous award even after the matter was remanded for clarification, it would be advisable for the district court to appoint a new arbitrator if the parties cannot agree.

      . It appears, moreover, that Local 205 conceded this point prior to arbitration, for the stipulation of facts entered into by the parties includes the certification as a document “which may be relevant to the final determination of this action.”


author: MANSFIELD, Circuit Judge: HAYS, Circuit Judge

text:
    UNITED STATES ex rel. Thomas JOHNSON, Petitioner-Appellee, v. CHAIRMAN OF NEW YORK STATE BOARD OF PAROLE and Commissioner of New York State Department of Correctional Services, Respondents-Appellants.
    No. 617, Docket 73-2581.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 21, 1974.
    Decided June 13, 1974.
    Judgment Vacated Nov. 18, 1974.
    See 95 S.Ct. 488.
    Burton Herman, Asst. Atty. Gen. (Louis J. Lefkowitz, Atty. Gen., of the State of New York, Samuel A. Hirshow-itz, First Asst. Atty. Gen., New York City, of counsel), for respondents-appellants.
    Stanley A. Bass, New York City (NAACP Legal Defense Fund, of counsel), for petitioner-appellee.
    Before HAYS, MANSFIELD and OAKES, Circuit Judges.
   MANSFIELD, Circuit Judge:

This appeal by the Chairman of the New York State Board of Parole and the Commissioner of the New York State Department of Correctional Services from an order of Judge John F. Dooling, Jr., of the Eastern District of New York, raises the issue of whether the Due Process Clause of the Fourteenth Amendment requires the New York State Board of Parole to provide inmates of state prison facilities with a written statement of reasons when release on parole is denied them. We hold that it does.

Appellee Thomas Johnson is presently imprisoned in the Auburn Correctional Facility, Auburn, New York, under a sentence of from 15 to 16 years imposed on him as a second felony offender on June 6, 1966, by the New York Supreme Court, Kings County, after a jury trial. In March, 1973, Johnson appeared before members of the New York State Board of Parole, who, on March 13, 1973, denied him parole and continued his imprisonment for another year without giving him any statement of reasons for their decision. In April, 1973, Johnson brought an Artidle 78 proceeding in the New York Supreme Court, Cayuga County, seeking an order compelling the Board of Parole to inform him of their reasons for denying him parole. This proceeding was dismissed by the court on May 4, 1973, on the grounds that under N.Y. Correction Law § 212 the Board’s decision was not subject to review since Johnson had made no showing that the parole proceedings were not conducted according to law.

After his Article 78 proceeding was dismissed, a decision which he did not appeal, Johnson on June 26, 1973, commenced the present action in the district court by petitioning for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. However, since Johnson did not seek actual release from custody but merely a statement of reasons for the denial of his parole, the district court, construing Johnson’s pro se petition liberally, Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972), treated it as an application for injunctive relief under 42 U.S.C. § 1983 which was not subject to an exhaustion of state remedies requirement. See Houghton v. Shafer, 392 U.S. 639, 88 S.Ct. 2119, 20 L.Ed.2d 1319 (1968); Cooper v. Pate, 378 U.S. 546, 84 S.Ct. 1733, 12 L.Ed.2d 1030 (1964); Wilwording v. Swenson, 404 U.S. 519, 92 S.Ct. 407, 30 L.Ed.2d 418 (1972). Reaching the merits of the petition, the district court held that as a minimum safeguard against arbitrary action, the due process clause of the Fourteenth Amendment required the Parole Board to state the reasons for denying Johnson release on parole.

DISCUSSION

Appellants do not seriously question the district court’s treatment of the habeas petition as a suit for injunctive relief under 42 U.S.C. § 1983. They contend, however, that our decision in Menechino v. Oswald, 430 F.2d 403 (2d Cir. 1970), cert. denied, 400 U.S. 1023, 91 S.Ct. 588, 27 L.Ed.2d 635 (1971), which upheld dismissal of a prisoner’s complaint challenging parole release proceedings on constitutional grounds, mandates dismissal of the petition in this case. We disagree.

The issue before us in Menechino was not merely whether the prisoner desiring parole was entitled to a statement of reasons, but whether he was entitled to a whole gamut of due process rights which he sought as a package, including

“(i) notice of charges, including a substantial summary of the evidence and reports before the Board, (ii) a fair hearing, including the right of counsel, to cross-examination and confrontation and to present favorable evidence and compel the attendance of favorable witnesses, and (iii) a specification of the grounds and underlying facts upon which the determination is based; . . . ” 430 F.2d at 405.

From the outset the petitioner in Mene-chino made it clear that his principal interest was in obtaining the right to be represented by counsel and to cross-examine witnesses. His request for a specification of the grounds of the Parole Board’s election was at all times subordinated to these primary demands. Indeed, the focus of the arguments, briefs and our opinion in Menechino was almost entirely upon his demand for the right to counsel, cross-examination and introduction of affirmative evidence. It was apparent that unless the full panoply of procedural due process rights sought by him were granted, Menechi-no was not interested merely in obtaining a statement of the Board’s reasons. We therefore gave no consideration to partial relief.

In denying Menechino the full-scale formal trial-type due process rights demanded by him we based our decision mainly on the ground that a parole release, as distinct from a parole revocation, determination is not an adversarial proceeding in which “charges” are preferred and disputed issues of fact presented, which might require that the weapons of legal counsel, cross-examination and other procedural protections be made available to the prisoner. We noted that, on the contrary, in parole release proceedings, the Board may have an identity of interest with the inmate, at least to the extent of granting release where it will aid in the prisoner’s rehabilitation and adjustment to society without presenting an undue risk of further anti-social activity. The significance of the distinction between parole release and parole revocation proceedings was later noted by us in United States ex rel. Bey v. Connecticut, 443 F2d 1079, 1086 (2d Cir.), vacated as moot, 404 U.S. 879, 92 S.Ct. 196, 30 LEd.2d 159 (1971).

A second ground for our decision in Menechino was that since New York had granted almost absolute power to the Board to deny parole and the prisoner did not presently enjoy any liberty, he lacked a sufficient “interest” to entitle him to procedural due process in a parole release proceeding. We view this second ground as having been superseded by the Supreme Court’s rejection of similar reasoning in its more recent decision in Morrissey v. Brewer, 408 U.S. 471, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972), holding that in parole revocation proceedings the Board must, as a matter of minimum due process, provide the parolee with a hearing. It is true that in Menechino we indicated (430 F.2d at 409) that we might reach the same conclusion in a parole revocation proceeding where the “parolee, having been released, enjoys a liberty akin to a private interest [of which] . . . the Board is seeking to deprive him . because of his alleged violation of one or more of the conditions of his parole,” and that the issues raised by specific charges against a parolee might lend themselves to “a trial-type hearing, including the right to legal counsel with traditional skills suited to such a controversy,” 430 F.2d at 409. However, we also noted that as of that date all other courts of appeal faced with the issue— some seven in number — had held that a parolee was not entitled to such due process protection in parole revocation proceedings. In our view Morrissey not only cast grave doubt upon these decisions but, more important for present purposes, rejected the concept that due process might be denied in parole proceedings on the ground that parole was a “privilege” rather than a “right.” See Graham v. Richardson, 403 U.S. 365, 374, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971). Parole was thenceforth to be treated as a “conditional liberty,” representing an “interest” entitled to due process protection. A prisoner’s interest in prospective parole, or “conditional entitlement,” must be treated in like fashion. To hold otherwise would be to create a distinction too gossamer-thin to stand close analysis. Whether the immediate issue be release or revocation, the stakes are the same: conditional freedom versus incarceration.

Our view is strengthened by the fact that most inmates in New York can expect parole. Fifty-four percent of all prisoners released from prison in 1970, according to 46 reporting jurisdictions, left as parolees. Kastenheimer and Eglit, Parole Release Decision-Making: Rehabilitation, Expertise and the Demise of Mythology, 22 Amer.U.L.Rev. 477, 481 (1973). In New York the figure is even higher. In 1972, for instance, the New York State Parole Board released 4,412 inmates on parole, or 75.4% of the eases coming before it. See “Report on New York Parole” by Citizens’ Inquiry on Parole and Criminal Justice, Inc. (1974), 48. Thus, the average prisoner, having a better than 50% chance of being granted parole before the expiration of his maximum sentence, has a substantial “interest” in the outcome. For him, with such a large stake, the Board’s determination represents one of the most critical decisions that can affect his life and liberty.

Accordingly we conclude, in light of Morrissey, that some degree of due process attaches to parole release proceedings. This conclusion does not overrule Menechino, which held that an inmate being considered for parole was not entitled to the full panoply of due process rights, including a specification of charges, counsel, and cross-examination, in a non-adversarial determination. A determination that an inmate being considered for release on parole is entitled to one due process weapon (e. g., a statement of reasons) would not necessarily entitle him to the full panoply. See Drown v. Portsmouth School District, 435 F.2d 1182 (1st Cir.), cert. denied, 402 U.S. 972, 91 S.Ct. 1659, 29 L.Ed.2d 137 (1970). As we find below, the considerations governing whether a statement of reasons should be provided have little to do with whether providing counsel to prisoners in all parole release proceedings would be desirable, much less required by due process. Cf. Gagnon v. Scarpelli, 411 U.S. 778, 787-788, 93 S.Ct. 1756, 36 L.Ed.2d 656 (1972). See also Jacob and Sharma, Justice After Trial: Prisoners Need for Legal Services in the Criminal Correctional Process, 18 Kansas L.Rev. 493 (1970).

In resolving the question of whether a statement of reasons for denial of parole is within the process that is due an inmate, we start from the generally accepted premise that due process is a flexible concept which may vary in different contexts, depending upon a complexity of factors, including “[t]he nature of the alleged right involved, the nature of the proceeding, and the possible burden on that proceeding,” Hannah v. Larche, 363 U.S. 420 at 442, 80 S.Ct. 1502, 1515, 4 L.Ed.2d 1307 (1960), see Cafeteria & Restaurant Workers Union v. McElroy, 367 U.S. 886, 895, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961). “The extent to which procedural due process must be afforded the. recipient is influenced by the extent to which he may be ‘condemned to suffer grievous loss,’ Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 168, 71 S.Ct. 624, 647, 95 L.Ed. 817 (1951) (Frankfurter, J., concurring), and depends upon whether the recipient’s interest in avoiding that loss outweighs the governmental interest in summary adjudication.” Goldberg v. Kelly, 397 U.S. 254 at 262, 90 S.Ct. 1011 at 1017, 25 L.Ed.2d 287 (1970). See Escalera v. New York City Housing Authority, 425 F.2d 853, 861 (2d Cir.), cert. denied, 400 U.S. 853, 91 S.Ct. 54, 27 L.Ed.2d 91 (1970).

Turning first to the nature of the parole release proceeding and the risk of harm to the inmate under consideration for parole, his interest is enormous. For him the Board’s decision represents the difference between incarceration and conditional liberty. It is equally clear that the Board is an extraordinarily powerful administrative body, possessing vast discretionary authority. It not only decides whether and when a prisoner will be released on parole; it also decides in most cases when he will become eligible for parole and, if parole is granted, the conditions of that parole. In making these crucial decisions it is guided by statutory standards that are extremely vague. The controlling statute, N.Y. Corrections Law, § 213 (McKinney’s Supplement 1973) provides:

“Discretionary release on parole shall not be granted merely as a reward for good conduct or efficient performance of duties assigned in prison, but only if the board of parole is of opinion that there is reasonable probability that, if such prisoner is released, he will live and remain at liberty without violating the law, and that his release is not incompatible with the welfare of society.”

In view of the almost boundless authority thus vested in the Board and the nebulousness of the statutory standards governing release, one might question whether a statement of reasons, the primary function of which is to facilitate judicial review, see SEC v. Chenery Corp., 318 U.S. 80, 94, 63 S.Ct. 454, 87 L.Ed. 626 (1943), could serve any purpose at all. Assuming that the Board, vested as it is with apparently unfettered discretion, has special competence to make the type of predictions called for by N.Y. Correction Law § 213 — and its expertise in .this area has been questioned — is a reviewing court able to determine whether there has been an “abuse of discretion,” see United Steelworkers of America, AFL-CIO v. NLRB, 126 U.S.App.D.C. 215, 376 F.2d 770, cert. denied sub nom., Northwest Engineering Co. v. NLRB, 389 U.S. 932, 88 S.Ct. 297, 19 L.Ed.2d 285 (1967); Indianapolis Glove Co. v. NLRB, 400 F.2d 363 (6th Cir. 1968), without merely substituting the judge’s will for the board’s discretion? Clearly review for “abuse of discretion” is more difficult where the statute’s language does not provide a workable decision-making scheme, and the broad grant of discretion has not been structured for exercise in a fair, rational and non-discriminatory fashion. The normal, indeed logical, method used to achieve this objective is for the administrative body which is vested with such broad powers to formulate and publish rules and criteria that will provide more precise guidelines for the responsible exercise of its discretion. See Friendly, The Federal Administrative Agencies: The Need for Better Definition of Standards, 75 Harv.L.Rev. 863, 1055, 1263 (1962) ; Davis, A New Approach to Delegation, 36 U.Chi.L.Rev. 713 (1969). But whether or not such rules are established, a statement of reasons will permit the reviewing court to determine whether the Board has adopted and followed criteria that are appropriate, rational and consistent, and also protects the inmate against arbitrary and capricious decisions or actions based upon impermissible considerations.

The broad powers vested by statute in the Board do not relieve it from the duty of observing meaningful criteria for determining in each case when a prisoner’s release “is not incompatible with the welfare of society.” The very scope of this sweeping term demands that relevant factors and limits be established and observed by the Board in deciding whether to grant or deny parole. In making the ultimate decisions demanded of it the Board must presumably consider and give appropriate weight in each ease to a variety of factors, including the prisoner’s attitude toward law and the community, his mental and physical state, his emotional stability, his sense of responsibility, parole plans, family status, skills, prospective employment, prospective residence, use of narcotics, prior criminal record, and his conduct in prison. See Dawson, The Decision to Grant or Deny Parole: A Study of Parole Criteria in Law and Practice, 196.6 Wash.U.L.Rev. 243, 248-95; A.L.I., Model Penal Code § 305.13 (Tent. Draft No. 5, 1956). However, unless and until the Board (1) discloses the release criteria observed by it and the factors considered by it in determining whether these criteria are met, and (2) states the grounds for denial of parole in each case where it is denied, the prisoner, the community and a reviewing court are left in the dark as to whether it applied permissible criteria, considered relevant factors and acted rationally rather than pursuant to whim and caprice in any given case.

We do not question the Board’s right, within constitutional limits, “to make policy, establish procedures, and to decide particular cases with a minimum of interference.” See Comment, Curbing Abuse in the Decision to Grant or Deny Parole, 8 Harv. Civil Rights — Civil Liberties L.Rev. 419, 438 (1973). Nor do we suggest that the courts should serve as “super-Parole Boards.” But judicial review should be available where the Board has arrogated to itself decisions properly made only by the legislature, when the Board’s decision in a case is inconsistent with statutory directives, when improper criteria are used, or when its decision has no basis in the prisoner’s file. We recognize that parole decision-making should involve difficult and sensitive diagnosis and prognosis in many cases, based on application and weighing of numerous factors of varying relevance. Indeed the legislature may have demanded more of the Board than it can reasonably be expected to provide. But under the present system of not giving any reasons at all, the Board may be making “major policy decisions properly made by [the legislature],” see American Ship Building Co. v. NLRB, 380 U.S. 300, 318, 85 S.Ct. 955, 967, 13 L.Ed.2d 855 (1964) (“The deference owed to an expert tribunal cannot be allowed to slip into a judicial inertia which results in the unauthorized assumption by an agency of major policy decisions properly made by Congress.”). For example, the Board could conceivably be following such questionable policies as (1) denying parole in cases where prisoners had refused to cooperate with law enforcement authorities by acting as informers, (2) denying parole in so-called “sensitive” cases where, despite the Board’s finding that the prisoner was sufficiently rehabilitated not to present a serious risk to the public, release would stir up unfavorable publicity, (3) denying parole where release would be frowned on by prison authorities because of the prisoner’s poor discipline record, see Report on New York Parole by Citizens Inquiry on Parole and Criminal Justice, Inc. 97-119; Kas-tenmeier and Eglit, Parole Release Decision-Making, supra, at 517-19; Dressier, Practice and Theory of Probation and Parole 111-12 (1959), or (4) denying parole where, because of the type of offense for which he had been committed, the prisoner has not yet served an “appropriate period” of incarceration that satisfies unarticulated and possibly inconsistent views of Board members regarding community retribution, incapacitation, or general deterrence, despite the prisoner’s readiness for the community and lack of need for further institutional control, see New York State Special Commission on Attica, Official Report 97 (Bantam Books 1972). Without interfering with the Board’s ability to exercise its discretion in future cases, it is our duty to determine whether the criteria used by the Board are consistent with the legislative purpose as expressed in the statute, see Dawson, The Decision to Grant or Deny Parole: A Study of Parole Criteria in Law and Practice, 1966 Wash.Univ. Law Quarterly 243, 300, and whether they are followed in practice.

A requirement that the Board state its reasons in each ease for denial of parole would also serve purposes other than facilitating judicial review, which are peculiarly appropriate for parole release determinations. A reasons requirement “promotes thought by the decider,” and compels him “to cover the relevant points” and “eschew irrelevancies.” See Frankel, Criminal Sentences 40-41 (1973). The appropriateness of this observation becomes apparent when one considers the manner in which the Board presently functions. The New York Parole Board is now composed of not more than 12 members, with one member serving as chairman, N.Y. Correction Law § 6 (McKinney Supp. 1973). It functions through three-member panels, with a unanimous vote of all three members being required for a grant of parole, id. § 214(5). The statute provides for review by the entire Board but no procedures appear to have been established for such review. The fate of the inmate, therefore, may depend upon whether one member of the panel dissents.

That members of the panel probably do not fully consider all relevant factors and circumstances in each case before voting to grant or deny parole is suggested by the Official Report of the Attica Commission, which observes that the average time taken by panels in reading an inmate’s file, interviewing him and then making a decision is 5.9 minutes. The Report states:

“The parole folder may have as many as 150 pages of reports on the inmate which he has never seen. Two of the Commissioners often read the files of the inmates next in line while an inmate is questioned by a third Commissioner. . . . The questions are often superficial: ‘Do you feel you have the capabilities of-functioning on the outside as a cook?’ If the questions delve more deeply, they often concentrate on the inmate’s past crime, rather than on this present condition or plans for the future. No one who worked with the inmate in prison is heard by the board.
“The panel reaches a decision immediately after the conclusion of the hearing. The two Commissioners who have been reading other inmates’ files generally acquiesce in the recommendation of the Commissioner who has read the file and questioned the inmate under consideration. The legal requirement that all three Commissioners participate in the decision is satisfied only in the most perfunctory way.” Attica Commission Report, supra at 96-97.

See also Dressier, Practice and Theory of Probation and Parole 117. The Attica Commission’s observations are confirmed by others. A recent report by the Citizens Inquiry on Parole and Criminal Justice discloses that each prisoner’s file, often voluminous, is examined by only one panel member, usually while participating with the other two members in the interview of another prisoner which is currently being conducted by the member who has examined that inmate's file. Although copies of the “Parole Summary” with respect to each interviewee are distributed to all three members, the necessity of conducting 40 to 50 interviews in seven or eight hours, coupled with each member’s examination of the case files for which he is responsible, make it unlikely that all three members can become familiar with all of the relevant circumstances in each case before making the decision. Nor is there time for later study of the files. The usual procedure is for the panel in each case, absente reo, to decide the issue within a few minutes after the interview and, if parole is denied, to fix a date within two years for the prisoner’s next interview. A denial is communicated to the inmate, after the panel’s departure from the institution, on a form which gives no reasons and offers no suggestions as to how the prisoner might improve his chances of being released after the next interview. See Report on New York Parole by Citizens Inquiry on Parole and Criminal Justice, Inc. 78-90.

Besides safeguarding against purely arbitrary denials of parole, a reasons requirement can serve the important function of promoting rehabilitation by relieving inmates’ frustrations and letting them know how they might, by improving their prison behavior or taking steps with respect to some other factor in doubt (e. g., prospective employment or housing), better their chances for release. To the inmate the Parole Board’s decisions are a form of arcana imperii. His liberty appears to depend entirely on the whim, hunch or caprice of panel members. He is left to speculate as to why he was denied parole. Due to the apparent inconsistencies in Parole Board decisions, “[Corruption and chance are among the favorite inmate speculations.” See New York State Special Commission on Attica: Official Report, supra at 97. Besides breeding needless frustration, hatred, cynicism and disrespect for government institutions, the Board’s failure to give reasons often induces feelings of hopelessness or despondency which lead inmates no longer to care about making any effort to improve themselves. Indeed, prison disturbances have been attributed to grievances based on unexplained denials of parole. Kastenmeier and Eglit, Parole Release Decision-Making, supra 484, 490. These feelings of despondency are well expressed in a letter written by an experienced advocate of prisoners’ rights to the Chairman of the New Jersey State Parole Board:

“You will understand the hopelessness that a prisoner feels when he is told simply that parole is denied, without being told why. He wonders whether some facts might be brought to the Board’s attention that would make a difference, but he cannot know what facts these might be. He wonders whether there may be some damaging information in the Board’s files that is legitimately subject to question or refutation; but he cannot know whether this is so. He wonders whether there is some way in which his prison behavior should be changed, so as favorably to impress the Board; but he does not know in what way. He wonders, in short, whether there is anything he can do or say that will make the Board take a different view of his case; but he cannot know or learn the answer.” Letter from Professor Anthony Amsterdam to Harold J. Ashby (Chairman, New Jersey Parole Board), Brief for Appellant at 5a, Monks v. New Jersey State Parole Board, 58 N.J. 238, 277 A.2d 193 (1971).

See also Davis, Discretionary Justice 132 (1969) (“One can imagine nothing more cruel, inhuman, and frustrating than serving a prison term without knowledge of what will be measured and the rules determining whether one is ready for release.”). The probability of release on parole having been held out to most prisoners and the possibility of release to the balance, fundamental fairness would seem to dictate that rather than subject a prisoner who is denied parole to the inhumanity of ignorance the state should as a matter of minimum due process provide him with the reasons.

Other useful purposes might also be served by a reasons requirement. Hopefully a body of rules, principles and precedent would be established, which would promote consistency by the Board, see Davis, Discretionary Justice 106-07 (1969), and provide a basis for critical reappraisal by trained experts working either for the Parole Board or for private groups interested in the parole system. The courts would be educated concerning the probability of parole in particular cases, an education sorely needed, since judges who exercise their power to set minimum sentences, see N.Y. Penal Law § 70.00(3), are expected to play an important role in the parole process. See Comment, Curbing Abuse in the Decision to Grant or Deny Parole, supra at 440-41 (“Effective judicial administration of criminal justice demands that courts be aware of the manner in which parole boards make the decision to grant or deny parole.”).

Undoubtedly a reasons requirement would impose some additional burden on the Parole Board and its members, which would depend upon the length and detail of each statement. However, assuming that parole is granted in the majority of cases handled by each panel, statements would be required only for the minority. Furthermore, appellants have made no attempt on this appeal to show that a reasons requirement would impose any significant burden on the state. We note in this connection that the federal Parole Board, see Wall Street Journal, Jan. 14, 1972 at 1, col. 1, and the parole boards in several other states have already — voluntarily—adopted the policy of providing inmates with a written statement as to why they were denied release on parole. See Washington Post, Aug. 23, 1973, at Bl, col. 1 (Virginia State Board of Probation and Parole decides to give a written statement of reasons for denial of parole); Monks v. New Jersey State Parole Board, 58 N.J. 238, 277 A.2d 193 (1971) (court advised that Parole Board of Pennsylvania has been furnishing written reasons to prisoners on denial of parole for 15 years). Alvin J. Bronstein, Executive Director of the National Prison Project of the American Civil Liberties Union Foundation, Inc., has submitted an affidavit reporting, on the basis of a written survey conducted in 1972 of state parole board practices, that, at the time of the survey, 34 states gave reasons to inmates either in writting or orally upon the denial of parole. See also O’Leary and Nuffield, Parole Decision-Making Characteristics: Report of a National Survey, 8 Crim.L.Bull. 651, 658 (1973) (parole boards in 33 jurisdictions either record reasons for their decision or inform the inmate directly of the decision).

To satisfy minimum due process requirements a statement of reasons should be sufficient to enable a reviewing body to determine whether parole has been denied for an impermissible reason or for no reason at all. For this essential purpose, detailed findings of fact are not required, provided the Board’s decision is based upon consideration of all relevant factors and it furnishes to the inmate both the grounds for the decision (e. g., that in its view the prisoner would, if released, probably engage in criminal activity) and the essential facts upon which the Board’s inferences are based (e. g., the prisoner’s long record, prior experience on parole, lack of a parole plan, lack of employment skills or of prospective employment and housing, and his drug addiction). See Beckworth v. New Jersey State Board of Parole, 62 N.J. 348, 301 A.2d 727 (1973). Thus a reasons requirement need not lead inevitably to “the full trappings of adversary trial-type hearings which would in all likelihood so burden and delay the entire parole release process as to disadvantage the very interests of the inmates as well as the public interest.” Beckworth v. New Jersey State Board of Parole, 62 N.J. 348, 301 A.2d at 727. Cf. Medical Committee for Human Rights v. SEC, 139 U.S.App.D.C. 226, 432 F.2d 659, 668 (1970), vacated as moot, 404 U.S. 403, 92 S.Ct. 577, 30 L.Ed.2d 560 (1972) (judicial review of an agency decision does not require agency to hold a formal evidentiary hearing). Nor are we persuaded that guidelines in this area will be so difficult to formulate that a reasons requirement will lead inevitably to endless litigation concerning the sufficiency of the written statement provided by the Parole Board. Cf. 5 U.S.C. § 555(e); City of San Antonio v. Civil Aeronautics Board, 126 U.S.App.D.C. 112, 374 F.2d 326, 331 (1967).

In light of the foregoing we conclude, in accord with the district court, that due process does require the New York State Parole Board to furnish state prisoners a written statement of reasons when release on parole is denied. See King v. United States, 492 F.2d 1337 (7th Cir. 1974); United States ex rel. Harrison v. Pace, 357 F.Supp. 354 (E.D.Pa.1973); Johnson v. Heggie, 362 F.Supp. 851 (D.Colo.1973); Childs v. United States Board of Parole, 371 F.Supp. 1246, 14 Crim.L.Rptr. 2135 (D.D.C.1973); Starks v. Sigler (E.D.Mich.Dec. 11, 1973); Monks v. New Jersey State Board of Parole, 58 N.J. 238, 277 A.2d 193 (1971); In re Sturm, 11 Cal. 3d 258, 113 Cal.Rptr. 361, 52 P.2d 97 (filed April 18, 1974) (en banc). See also President’s Commission on Law Enforcement and Administration of Justice, Task Force Report: Corrections 86 (1967).

The judgment and order of the district court are affirmed.

HAYS, Circuit Judge

(dissenting):

I dissent.

Analysis of this case begins, and could very well end, with the excellent opinion of Judge Mansfield in Menechino v. Oswald, 430 F.2d 403 (2d Cir. 1970), cert. denied, 400 U.S. 1023 (1971). In Menechino plaintiff sought a variety of due process rights in parole hearings, including “specification of the grounds and underlying facts upon which the determination is based.” Id. at 404, 405. The district court granted summary judgment for the state, 311 F.Supp. 319 (S.D.N.Y.1970), and we affirmed without qualification. The majority now claims that the court in Menechino “gave no consideration to partial relief.” I find no basis for this conclusion.

The opinion in Menechino does not suggest that the court had failed to consider any part of the relief requested. The opinion says only that a statement of reasons is requested and that the denial of such a statement is affirmed. If petitioner was entitled to part of what he requested the court should have granted him that part. Fed.R.Civ.P. 54(c). Nothing in the logic of the opinion in Menechino supports a distinction between a statement of reasons and the other procedural rights which the majority concedes were denied there. The court based its decision on a determination that a parole hearing is not an adversary proceeding and does not “necessarily” resolve disputed issues of fact, id. at 407-408; that the plaintiff did not “presently enjoy” an interest of the type protected by procedural due process, id. at 408; that imposition of due process requirements, “including preparation of written decisions” would “enormously” increase the administrative burdens on the board, id. at 410; that judicial supervision of parole would involve the federal judiciary in “non-legal, non-judicial determinations for which it is not equipped by training or experience,” id. at 412; and that recognition of limited due process rights would “no doubt ... be followed by demands . . . for the full panoply of procedural rights,” id. The opinion in Menechino provides no basis for the position that its reasoning, which logically applies to all the relief requested by plaintiff there, was not intended to apply to requests for statements of reasons.

Other courts have construed Menechi-no to refuse a statement of reasons. In Lewis v. Rockefeller, 305 F.Supp. 258 (S.D.N.Y.1969), aff’d, 431 F.2d 368 (2d Cir. 1970), plaintiff claimed that New York’s parole board violated his constitutional rights by, inter alia, “failing to support final decisions with specific findings of fact.” 305 F.Supp. at 259. In an opinion by Judge Feinberg (who dissented in Menechino) the court found it necessary only to cite Menechino as the ground for finding plaintiff’s constitutional claim frivolous and for affirming the lower court’s refusal to convene a three-judge district court. 431 F.2d at 371. See also Farries v. United States Board of Parole, 484 F.2d 948, 949 (7th Cir. 1973), which likewise interpreted Menechino to deny a statement of reasons.

The majority believes that since Me-nechino the applicable law has been changed by virtue of the holding of Morrissey v. Brewer, 408 U.S. 471, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972), that a parolee is entitled to certain due process rights before revocation of his parole. The majority holds that Morris-sey, by rejecting the view that parole is a privilege rather than a right, superseded the determination in Menechi-no that a prisoner lacks an “interest” of the type which entitles him to procedural due process. I cannot agree.

Morrissey dealt with the due process rights of one already paroled. To insure that the holding of the case would not be extended to those still incarcerated the Court quoted the following from the decision of this court in United States ex rel. Bey v. Connecticut State Board of Parole, 443 F.2d 1079, 1086 (2d Cir.), vacated as moot, 404 U.S. 879, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1971):

“It is not sophistic to attach greater importance to a person’s justifiable reliance in maintaining his conditional freedom so long as he abides by the conditions of his release, than to his mere anticipation or hope of freedom.” 408 U.S. at 482 n. 8, 92 S.Ct. at 2601.

The court in Menechino noted the basic difference between the two types of applications even before the decision in Morrissey:

“[T]he determination to be made differs from revocation of parole, where plausible reasons might be advanced in favor of minimum procedural due process.” 430 F.2d at 409.

Menechino justified this distinction on the ground that “[t]he type of interest protected by procedural due process is . usually one presently enjoyed.” Id. at 408.

Not only has this circuit in Menechino and Lewis v. Rockefeller, supra, but the two other circuits which have addressed the question have decided that due process does not entitle a prisoner to a statement of reasons for denial of parole. See Scarpa v. United States Board of Parole, 477 F.2d 278 (5th Cir. 1973) (en banc), vacated as moot, 414 U.S. 809, 94 S.Ct. 79, 38 L.Ed.2d 44 (1974); Mosley v. Ashby, 459 F.2d 477 (3d Cir. 1972); Madden v. New Jersey State Board of Parole, 438 F.2d 1189 (3d Cir. 1971). Cf. Farries v. United States Board of Parole, supra.

I would reverse the determination of the district court and dismiss the complaint.

      . N.Y. Correction Law § 212 provides that “The action of the board of parole in releasing prisoners shall be deemed a judicial function and shall not be reviewable if done according to law.”

      . We recognize that in Morrissey the Supreme Court referred in a footnote to our language in United States ex rel. Bey v. Connecticut, 443 F.2d 1079, 1086 (2d Cir. 1971), that “It is not sophistic to attach greater importance to a person’s justifiable reliance on maintaining his conditional freedom so long as he abides by the conditions of his release, than to his mere anticipation or hope of freedom.” See 408 U.S. at 482 n. 8, 92 S.Ct. 2593, 33 L.Ed.2d 484. But this hardly indicates that due process is to be ■ applied to parole revocation merely because the conditional freedom was presently being enjoyed, which would be nothing more than a reincarnation of the right-privilege dichotomy in a not-too-deceptive disguise. See Comment, The Parole System, 120 TJ. Pa.L.Rev. 282, 363 (1971). The Court was simply reinforcing its point that conditional liberty permits much greater freedom of action by the parolee than does confinement in prison.

      . See Kastenheimer and Eglit, Parole Release Decision-Making: Rehabilitation, Expertise and the Demise of Mythology, 22 Amer.U.L.Rev. 477, 503-10 (1973) ; Gold-farb and Singer, After Conviction 278-82 (1973).

      . The Board, while apparently observing certain release criteria in practice, has not reduced them to written form. See Report on New York Parole by Citizens Inquiry on Parole and Criminal Justice, Inc. (1973), 92-117. In practice the Board, before making its decision on parole release in each case, has available to it a detailed “case file” prepared under the supervision of the institutional parole officer who over a period of time conducts several interviews of each inmate, including one shortly prior to his being considered for parole, which are the subject of a report by him placed in the file. A “Parole Summary” is also prepared by him in anticipation of the Board’s interview of the prisoner, which outlines in detail the inmate’s legal history (including details of the offense for which he is incarcerated, his criminal record, outstanding warrants), his institutional adjustment (including work record, vocational and academic education, medical and psychiatric diagnosis, disciplinary report) and the institutional parole officer’s detailed evaluation of the case, with information as to the inmate’s community parole plan, parole supervision needs, prospective housing and employment. A three-member panel of the Board conducts an extremely brief interview of the prisoner.
      The information thus obtained is presumably for the purpose of determining (1) whether there is a substantial risk that the inmate, if released, will not conform to the conditions of parole or will return to crime, and (2) whether continued incarceration, correctional treatment, medical care or vocational training will improve his capability of leading a law-abiding life upon release.

      . The premise that prisons can serve as rehabilitative institutions has been seriously attacked and mounting evidence to the contrary indicates a lack of correlation between the inmate’s institutional behavior and his fitness for release, see Kastenheimer and Eglit, Parole Release Decision-Making, supra at 495-501, with the result that the concept of institutional rehabilitation has been la-belled one of the great “myths” of twentieth-century penology ; Kaufman, Prison : The Judge’s Dilemma, Fordham Univ. School of Law (1973), 168 N.Y.L.J. 4.

      . “While the board acts favorably in most eases, it engenders hostility because of the inconsistency of its rationale. Some inmates who have had good behavior records in prison are ‘hit’ (denied parole), while others with many infractions are granted parole. Some inmates with a long record of prior offenses may receive parole, while others, including first offenders, may be denied it. Nobody gives the inmate an explanation for these obviously inconsistent decisions or describes in anything more than meaningless generalities the criteria used by the board in arriving at its decisions. Institutional parole officers give inmates pointers on what might subsequently impress the board, such as enrolling in Bible classes. But inmates who follow this advice carefully often find they are hit nevertheless. As a result, inmates are left to speculate among themselves as to the reasons for the board’s decisions. Corruption and chance are among the favorite inmate speculations.”

      . In requiring the federal Parole Board to provide reasons when denying release on parole, the Seventh Circuit relied on the Administrative Procedure Act, which obligates federal administrative agencies to give “[plrompt notice ... of the denial . . . of a written application . . . accompanied by a brief statement of the grounds for denial,” 5 U.S.C. § 555(e) (1970), rather than on due process. However, contrary to the position of the Fifth Circuit in Scarpa v. United States Board of Parole, 477 F.2d 278 (5th Cir.) (en banc), vacated as moot, 414 U.S. 809, 94 S.Ct. 79, 38 L.Ed.2d 44 (1973), which the dissent relies on, the court also recognized that “a substantial argument can be made that some modicum of due process should attend the denial of the expectation of conditional freedom on parole inasmuch as its termination after having been granted inflicts a ‘grievous loss’ of a ‘valuable liberty,’ Morrissey v. Brewer, 308 U.S. 471, 482, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972). . . . ” Of further interest to us is the court’s notation that the Administrative Conference of the United States bad on June 9, 1972, adopted a resolution recommending that the federal Parole Board (1) should “in all instances” give a statement of reasons to prisoners who are denied parole, (2) should “develop a body of fully reasoned decisions — whether granting, denying or deferring parole — in typical or recurrent fact situations” in order to “serve as time-saving precedents and as the raw material for the subsequent formulation of standards” and (3) should open its decisions to public inspection. These recommendations provide additional support for our conclusion that minimum due process mandates a reasons requirement.

      . Both Third Circuit decisions relied on by Judge Hays in his dissent, Mosley v. Ashby, 459 F.2d 477 (3d Cir. 1972), and Madden v. New Jersey State Board of Parole, 438 F.2d 1189 (3d Cir. 1971), were decided before the Supreme Court’s decision in Morrissey v. Brewer, 408 U.S. 471, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972), was announced. As we observed in note 7 supra, the Fifth Circuit decision relied on by the dissent, Scarpa v. United States Board of Parole, 477 F.2d 278 (5th Cir.) (en banc), vacated as moot, 414 U.S. 809, 94 S.Ct. 79, 38 L.Ed.2d 44 (1973), was questioned by the Seventh Circuit in King v. United States, 492 F.2d 1337 (7th Cir. 1974), which apparently did not consider the “reasons” issued settled by its earlier opinion in Farries v. United States Board of Parole, 484 F.2d 948 (7th Cir. 1973), relied upon by the dissent.
      As the case citations in the text show, if we limited ourselves to the period since Morrissey v. Brewer, the assertion in note 4 of the dissent that “the majority of reported cases in the district courts and the state courts dealing with the issue have also denied inmates a statement of reasons” could not stand.

      . That Menechino continued to press demands for a statement of reasons is clear from a reading of his brief in this court, which includes quotations from passages in Goldberg v. Kelly, 397 U.S. 254, 271, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), and President’s Commission on Law Enforcement and Administration of Justice, Task Force Report on Corrections 88 (1967), emphasizing the importance of a statement of reasons.

      . See also Scarpa v. United States Board of Parole, 477 F.2d 278, 282 and n. 17 (5th Cir. 1973) (en banc), vacated as moot, 414 U.S. 809, 94 S.Ct. 79, 38 L.Ed.2d 44 (1974); Walker v. Oswald, 449 F.2d 481 (2d Cir. 1971).
      In Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), decided the -same day as Morrissey, the Supreme Court declared that a non-tenured teacher at a state college was not entitled to a statement of reasons upon failure of the state to renew his one-year contract. The Court held that such a non-tenured teacher lacks a liberty or property interest protected by due process. With respect to the former the Court held that mere refusal to renew a contract did not deny liberty. Id. at 572-575, 92 S.Ct. 2701-2708.

      . The only federal Court of Appeals case cited by the majority, King v. United States, 492 F.2d 1337 (7th Cir. 1974), expressly relied on the Administrative Procedure Act rather than due process. The majority recognizes this, n. 7, ante.

      . Moreover, the majority of reported cases in the district courts and the state courts dealing with the issue have also denied inmates a statement of reasons. See Battle v. Norton, 365 F.Supp. 925, 928 (D.Conn.1973); Barradale v. United States Board of Parole, 362 F.Supp. 338, 340 (M.D.Pa.1973); Bradford v. Weinstein, 357 F.Supp. 1127, 1131 (E.D.N.C.1973); Williams v. United States, 327 F.Supp. 986, 987 (S.D.N.Y.1971); Witt v. Arizona ex rel. Eyman, 18 Ariz.App. 120, 500 P.2d 905 (1972).


author: LUMBARD, Circuit Judge:

text:
    ATLANTIC COMMERCE & SHIPPING CO., INC., Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
    No. 1164, Docket 73-2637.
    United States Court of Appeals, Second Circuit.
    Argued June 12, 1974.
    Decided July 31, 1974.

      Arthur L. Harrow, New York City, for appellant.
    James T. Bozarth, Tax Div., Dept, of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Meyer Roth-wacks and Jonathan S. Cohen, Attys., Tax Div., Dept, of Justice, Washington, D. C., on the brief), for appellee.
    Before LUMBARD, HAYS and TIMBERS, Circuit Judges.
   LUMBARD, Circuit Judge:

The Atlantic Commerce and Shipping Co., Inc., (Atlantic) appeals from a decision of the United States Tax Court which upheld the Commissioner of Internal Revenue’s determination that Atlantic owed the additional tax on accumulated earnings imposed by Int.Rev. Code of 1954, § 531. Following a one-day trial on May 22, 1972, Judge Bruce M. For-rester filed an opinion on May 7, 1973, which held that the Commissioner had correctly found deficiencies of $21,057.98 and $18,360.63 in Atlantic’s income tax for the years 1965 and 1966, respectively, because the corporation had been availed of for the purpose of avoiding income tax with respect to its shareholders. 30 CCH Tax Ct.Mem. 473. We affirm.

Atlantic is involved in the ship brokerage business. Its president, George S. Pathy, owned 98.75 per cent of its stock in 1965 and 1966; Pathy’s brother, Lad-islas, owned the remainder. The Pathy family has been in the international shipping business for 50 years and controls several corporations in the business. For example, George Pathy is also president of Federal Commerce and Navigation Co., Ltd. (Federal Commerce), a large Canadian corporation in international shipping and the principal source of Atlantic’s brokerage income.

Initially after its formation in 1941, Atlantic was primarily engaged in the ownership of ocean-going vessels. Later it became a charterer of vessels instead, but chartering left Atlantic vulnerable to the economic cycles of international shipping. The years 1960, 1961, and 1962 were poor ones for the shipping industry and Atlantic suffered substantial operating losses. In an effort to minimize its exposure to such losses in the future, Atlantic in 1962 decided to devote itself to furnishing brokerage and management services to other shippers. This transformation was completed by the end of 1963.

Prior to 1963 Atlantic needed capital in excess of $200,000 to conduct a chartering business, but much less capital was needed to conduct a brokerage business. Rather than distribute this excess capital to its shareholders Atlantic decided instead to diversify by retaining its capital and investing in real estate. Beginning in 1962 and continuing through 1972 Atlantic examined various real estate investment opportunities throughout the United States and Canada. In addition to consulting its attorneys and its bank about possible investments, it retained an investment broker in New York and a real estate firm in Toronto to search for sound investments. From 1962 to 1966 Atlantic examined at least 30 or 40 real estate investment proposals, including a hospital, shopping centers, medical buildings, a post office, and office buildings. Despite this extensive search the only real estate investment made by Atlantic was its purchase together with another Pathy enterprise of a factory building in Brooklyn in October 1967. This purchase was largely financed by mortgage loan.

In 1965 Atlantic invested $53,158.43 in the purchase of Federal Commerce stock. In 1966 it purchased an additional $18,119.44 worth of Federal Commerce stock. In 1965 the Pathy family organized Federal Marine Terminals, Inc., (Federal Marine) to acquire marine terminals and operate them for Federal Commerce. Atlantic contributed $25,-000 to Federal Marine’s capital. Subsequently in 1968, Atlantic purchased a crane for $172,990.27 and leased it to Federal Marine for use at its Chicago terminal.

Atlantic did not pay any dividends (other than a stock dividend) to its shareholders in 1965 and 1966. Indeed, it had not paid any dividends during its entire corporate existence until 1967. Atlantic’s working capital at the beginning of 1965 and 1966 exceeded $300,-000, nearly all of which was represented by cash and marketable securities.

Section 532 of the Internal Revenue Code imposes the accumulated earnings tax of § 531 on a corporation when it is “availed of for the purpose of avoiding the income tax with respect to its shareholders . . . .” Section 533 provides that the fact that the earnings and profits have accumulated beyond the reasonable needs of the business is determinative of the purpose to avoid income tax with respect to shareholders unless the corporation proves the contrary by a preponderance of the evidence. The reasonable needs of the business includes the “reasonably anticipated needs of the business.” Int.Rev.Code of 1954, § 537 (a)(1). The Commissioner has the burden of proving accumulation beyond the reasonable needs of the business if the taxpayer has submitted a statement in accordance with § 534 of the grounds (together with facts sufficient to show the basis thereof) on which the taxpayer relies to show that earnings and profits have not accumulated beyond the reasonable needs of the business.

As we have previously noted, decisions in accumulated earnings tax cases turn largely on the facts regarding the particular business involved. Sears Oil Co. v. Commissioner, 359 F.2d 191, 193 (2d Cir. 1966). The Tax Court found here that the earnings and profits had been accumulated beyond the reasonable needs of Atlantic’s business and that Atlantic had not shown by a clear preponderance of the evidence that this accumulation was not for the purpose of avoiding income tax with respect to its shareholders. We cannot set aside these findings of fact unless we are convinced that they are clearly erroneous. See Int.Rev. Code of 1954, § 7482(a); F.R.Civ.P. 52 (a). Our careful review of the record leads us to the conclusion that the Tax Court's findings were not clearly erroneous.

The first issue confronting the Tax Court was whether Atlantic’s accumulation of its 1965 and 1966 earnings when it already had $300,000 in working capital was unreasonable. The first ground urged by Atlantic to show the reasonableness of its further accumulation was its planned diversification into real estate. The Tax Court held that Atlantic’s statement under § 534 was sufficient to place the burden of proof on this point on the Commissioner but that the Commissioner had carried this burden.

The Tax Court held that further accumulation for this purpose was unreasonable because Atlantic was interested only in passive investments in real estate unrelated to its business. See Treas.Reg. § 1.537-2 (c) (4). This finding was not clearly erroneous. Although Pathy in a letter to Atlantic’s Toronto real estate agent indicated that Atlantic was interested in acquiring waterfront terminal facilities, it is undisputed that Atlantic investigated a large number of possible investments unrelated to shipping. There is no indication in the record that Atlantic would have been capable of actively managing any of these properties as a new line of business.

In any event, the Tax Court also found that the accumulation was unreasonable because the plans for diversification were indefinite and vague. Treas.Reg. § 1.537-1 (b) (1). Again this finding was not clearly erroneous. The record indicates that Atlantic had no specific plans for investment but was examining a wide range of possible activities. It is also noteworthy that when Atlantic did invest in real estate in 1967, its investment was largely financed by mortgage rather than by prior accumulations. In order for the further accumulation of earnings in 1965 and 1966 to be reasonable, the plans for investment must be more definite than was the, case here. See Dixie, Inc. v. Commissioner, 277 F.2d 526 (2d Cir.), cert. denied, 364 U.S. 827, 81 S.Ct. 62, 5 L.Ed.2d 54 (1960); I. A. Dress Co. v. Commissioner, 273 F.2d 543 (2d Cir.), cert. denied, 362 U.S. 976, 80 S.Ct. 1060, 4 L.Ed.2d 1011 (1960); Cheyenne Newspapers, Inc. v. Commissioner, 494 F.2d 429 (10th Cir. 1974); Henry Van Hummell, Inc. v. Commissioner, 364 F.2d 746 (10th Cir. 1966), cert. denied, 386 U.S. 956, 87 S.Ct. 1019, 18 L.Ed.2d 102 (1967).

Atlantic also argued below that it planned to diversify by making further investments, other than its initial contribution to capital in 1965, in Federal Marine. The Tax Court held that Atlantic’s § 534 statement did not shift the burden to the Commissioner on this issue. Since the statement contained no facts indicating that Atlantic intended in 1965 or 1966 to invest further in Federal Marine, we hold that the Tax Court correctly placed the burden of proof concerning this issue on Atlantic. On the merits The Tax Court found that although George Pathy testified that there was an understanding that Atlantic would help finance Federal Marine, there was no objective evidence of this and that it was likely that the investment in the crane in 1968 was made only because Atlantic had nothing better to do with its steadily mounting excess funds. This finding was not clearly erroneous.

Atlantic also argued that it was entitled to accumulate its earnings to provide a reserve against possible losses caused by a future downturn in the shipping industry. The Tax Court found that the switch to a brokerage operation had virtually eliminated the possibility of large operating losses and that further accumulation of funds to meet this possibility was not reasonable. In view of the some $300,000 Atlantic had in working capital at the beginning of 1965, this finding was not clearly erroneous.

Finally, Atlantic urged that its accumulation was reasonable because as a matter of law it was entitled to rely on guidelines which allow accumulation of sufficient earnings to pay one year’s operating expenses or to maintain current assets at a level of two and one half times its current liabilities. The Tax Court correctly rejected reliance on these administrative guidelines, which can only aid and not replace examination of the needs of the particular business. Dixie, Inc. v. Commissioner, supra, 277 F.2d at 528. The Tax Court here found that Atlantic’s actual working capital needs did not exceed $20,000.

Having rejected Atlantic’s arguments that its accumulation in 1965 and 1966 was reasonable, the Tax Court then determined that Atlantic had not shown by a preponderance of the evidence that lessening George Pathy’s income tax was not one of its purposes in failing to distribute its earnings in 1965 and 1966. See United States v. Donruss Co., 393 U.S. 297, 89 S.Ct. 501, 21 L.Ed.2d 495 (1969). This finding was not clearly erroneous. Atlantic urges here that Pathy’s purpose in allowing the accumulation of funds was to save his business and that if Pathy had been concerned with lessening his income taxes he would have withdrawn capital from Atlantic in 1962 when its accumulated earnings were about $30,000. As the Tax Court noted, this argument is of little relevance to what Pathy’s and Atlantic’s intentions were in 1965 and 1966 when there was a substantial accumulation of earnings.

Atlantic also argues that Atlantic had no purpose to avoid dividend taxes in 1965 because its investments that year in Federal Commerce and Federal Marine exceeded its net income. The Tax Court, however, found that after deducting these investments from the earnings accumulated prior to 1965 there were sufficient funds to meet the reasonable needs of the- business without accumulating any more funds. Since George Pathy’s income taxes would have increased $41,404.75 and $39,635.95, respectively, in 1965 and 1966 if Atlantic had distributed its total earnings for those years, it is almost impossible to conceive that avoiding dividend taxes was not at least one motive behind Atlantic’s further accumulation.

Accordingly, the Tax Court did not err in imposing the accumulated earnings tax and its judgment is affirmed.