author: GOLDBERG, Circuit Judge: THORNBERRY, Circuit Judge

text:
    Martha D. YOUNG, Plaintiff-Appellant, v. SOUTHWESTERN SAVINGS AND LOAN ASSOCIATION, Defendant-Appellee.
    No. 74-1306.
    United States Court of Appeals, Fifth Circuit.
    March 5, 1975.
    Rehearing Denied May 5, 1975.

      Joseph F. Archer, W. Arthur Combs, Houston, Tex., for plaintiff-appellant.
    Charles L. Price, Houston, Tex., for defendant-appellee.
    Before THORNBERRY, GOLDBERG and GODBOLD, Circuit Judges.
   GOLDBERG, Circuit Judge:

Congress, through Title VII, has provided the courts with a means to preserve religious diversity from forced religious conformity. In this Title VII case brought pursuant to 42 U.S.C. § 2000e-5, plaintiff-appellant Young claims that her former employer, defendant-appellee Southwestern Savings & Loan Association [Southwestern], discharged her in circumstances amounting to religious discrimination. After a trial without a jury, the district court found that although plaintiff’s complaint of ill use was not entirely unfounded, she had not been fired but had resigned her position, and so could point to no illegal action by Southwestern. After a careful consideration of the record and of the statutory, regulatory, and case law in this area of tender sensibilities, we find that Mrs. Young was in fact the victim of religious discrimination. We reverse.

At the time Mrs. Young accepted employment as a teller at Southwestern’s Bellaire, Texas, branch in February, 1971, she knew that all of Southwestern’s employees were required to attend a monthly staff meeting at the downtown Houston office. Employees are paid for attending these 45-minute meetings, which are concerned with various business matters, such as organization policy, current economic conditions and future plans. Upon arriving at her first such meeting in February, 1971, however, Mrs. Young discovered that the convocation began with a short religious talk and a prayer, both delivered by a local Baptist minister.

This theological appetizer, nondenominational ■ though it might be, was somewhat uncongenial to plaintiff, who is an atheist. She made no complaint at the time, however, and attended the March, 1971, staff meeting, which was also inaugurated by a short devotional led by a Protestant cleric. At that point, Mrs. Young decided that although she did not object to the business portion of the meetings, she felt that her freedom of conscience was being violated by forced attendance at “prayer meetings,” and, once again registering no protest with anyone, plaintiff resolved to attend no more meetings.

Mrs. Young was, by all accounts, an excellent employee and enjoyed a good relationship with peers and superiors alike. For several months, her absence at the staff meetings went undetected. Then, at the September 15, 1971 meeting, someone noticed that neither plaintiff nor the other Bellaire teller was at the meeting, and this fact was reported to Michael O. Bostain, the Bellaire branch manager. When Bostain returned later that morning to Bellaire, he asked plaintiff and her co-worker to explain their absence. The other lady confessed that she had forgotten about the meeting and the matter ended as to her. Mrs. Young was forced to reveal her objections to the religious content of the meetings, however, and she informed Bostain that she could not attend the affairs. Bostain, somewhat surprised at this revelation, reminded Mrs. Young that the primary purpose of the meetings was the discussion of business matters. He added that plaintiff had an obligation to attend the, entire meeting, and advised her that if she objected to the devotionals, she could simply “close [her] ears” during that time. Mrs. Young restated her complaint and her resolution not to attend the meetings, whereupon Bostain concluded the conversation by saying that the meetings were mandatory, and that he would leave the decision to her.

At closing time on September 15, Mrs. Young advised Bostain that she was checking out her cash drawer, turning in her keys and leaving Southwestern. Bostain asked the reason for this action, and plaintiff answered that she could not attend the “prayer meetings.” Bostain then asked Mrs. Young for a letter of resignation, but she refused, saying, “No, I am being fired.” Bostain assured her that she was not being fired, but plaintiff left without further discussion.

Later that same day, plaintiff wrote tc Southwestern, explaining her position as outlined above and requesting twc weeks’ termination pay, which requesl was granted. Mrs. Young then contacted the Equal Employment Opportunity Commission about the possibility of filing charges against Southwestern, bu1 nothing came of this effort. Plaintifi initiated this lawsuit on July 13, 1972 demanding reinstatement, back pay anc attorney’s fees and asking the districi court to enjoin Southwestern iron “presenting religious activities at then monthly meetings and in all other aspects of their relationship with their employees.”

The district court found that the facts related above compelled the conclusior that Mrs. Young had voluntarily resigned her position, so that she hac failed to demonstrate any act of discrimination against her arising out of the monthly staff meetings. For this reason, the court entered judgment for Southwestern. Although we cannot say that the district court’s findings of fact are clearly erroneous, or that the court erred in any particular in its statement of the law pertaining to religious discrimination in general, we believe that the district court incorrectly applied the law to the peculiar facts of this difficult case. We find that Mrs. Young was constructively discharged in circumstances which amounted to religious discrimination against her by Southwestern.

I

Title VII forbids an employer: “to . . . discharge any individual because of such individual’s religion . . . ” 42 U.S.C. § 2000e — 2(a)(1). In order to prevail in this lawsuit, Mrs. Young had to prove that she was discharged on account of her religious beliefs. Once she performed that task, she would have established a prima facie case of unlawful discrimination which Southwestern could then rebut by evidence that it could not reasonably accommodate her beliefs without undue hardship on the conduct of its business. Riley v. Bendix Corp., 5 Cir. 1972, 464 F.2d 1113; Reid v. Memphis Publishing Co., 6 Cir. 1972, 468 F.2d 346; Weitkenaut v. Goodyear Tire & Rubber Co., D.Vt.1974, 381 F.Supp. 1284; Shaffield v. Northrop Worldwide Aircraft Services, Inc., M.D.Ala.1974, 373 F.Supp. 937; Claybaugh v. Pacific Northwest Bell Tel. Co., D.Ore.1973, 355 F.Supp. 1.

Although there is no question that this dispute is solely the product of Mrs. Young’s objections to the religious content of Southwestern’s staff meetings, the trial court found that “no atmosphere of religious intimidation existed at Southwestern which could cause Mrs. Young’s resignation to be interpreted as constructive discharge,” and that plaintiff had voluntarily resigned. It is true that there is no evidence of proselytization by Southwestern here and that the course of events leading to Mrs. Young’s departure was rather too swift and spontaneous to admit any inference of an “atmosphere of religious intimidation.” However that may be, we believe that the district court required too high a standard for a constructive discharge. The general rule is that if the employer deliberately makes an employee’s working conditions so intolerable that the employee is forced into an involuntary resignation, then the employer has encompassed a constructive discharge and is as liable for any illegal conduct involved therein as if it had formally discharged the aggrieved employee. See N. L. R. B. v. Brennan’s Inc., 5 Cir. 1966, 366 F.2d 560; J. P. Stevens & Co., Inc. v. N. L. R. B., 4 Cir. 1972, 461 F.2d 490; N. L. R. B. v. Cavalier Olds., Inc., 6 Cir., 1970, 421 F.2d 1234; Retail Store Employees Local 880, R. C. I. A. v. N. L. R. B., 1969, 136 U.S.App. D.C. 27, 419 F.2d 1329; N. L. R. B. v. J. W. Mays, Inc., 2 Cir. 1966, 356 F.2d 693; see also EEOC Decision No. 72 — 1114, Feb. 18, 1972, CCH Employment Practices Guide H 6347.

In this case, Mrs. Young enjoyed her work and Southwestern valued her services. The only possible reason for her resignation on September 15, 1971, was her resolution not to attend religious services which were repugnant to her conscience, coupled with the certain knowledge from Bostain, her supervisor, that attendance at the staff meetings — in their entirety — was mandatory and the reasonable inference that if she would not perform this condition of her employment, she would be discharged. In these circumstances, when she could hope no longer that her absence at the meetings would not be noticed, she could reasonably infer that in one week, one month or two months, she would be discharged because of the conflict between her religious beliefs and company policy. Surely it would be too nice a distinction to say that Mrs. Young should have borne the considerable emotional discomfort of waiting to be fired instead of immediately terminating her association with Southwestern. This is precisely the situation in which the doctrine of constructive discharge applies, a case in which an employee involuntarily resigns in order to escape intolerable and illegal employment requirements.

II

Since we have concluded that Mrs. Young made out a prima facie case of religious discrimination under the Civil Rights Act of 1964, we must now determine whether Southwestern presented evidence sufficient to rebut plaintiff’s showing of unlawful employment practices. At the time of plaintiff’s termination, Southwestern had an obligation to accommodate her religious beliefs and observances unless it could show that “an undue hardship” to its business rendered the accommodation of Mrs. Young’s objections unreasonable. 29 C.F.R. § 1605.1; see fn. 5, supra. Although it is certainly true that an employer sometimes cannot reasonably accommodate the religious needs and observances of all of its employees, see Johnson v. United States Postal Service, 5 Cir. 1974, 497 F.2d 128; Hardison v. Trans World Airlines, W.D.Mo.1974, 375 F.Supp. 877, Southwestern makes no such contention here. Instead, Southwestern argues that the manner of Mrs. Young’s leaving was so precipitous as to give Southwestern no opportunity to accommodate her beliefs. In support of this position, Southwestern points to a company policy, in force at the time of Mrs. Young’s termination but known only to a few high-ranking officers, and admittedly unknown either to Bostain or to Mrs. Young, that employees who objected to the devotionals would be permitted to miss that portion of the staff meetings. Southwestern urges that if only plaintiff had contacted a high-ranking officer before leaving, the entire matter would have been' quickly resolved in a mutually agreeable fashion.

We do not see how Mrs. Young’s obligations were in any way altered by the existence of this secret policy. On the date of her departure, plaintiff knew only that attendance at the staff meetings was mandatory. Her supervisor had just assured her, in language that admitted no possibility of accommodation (for as far as Bostain knew, no accommodation was possible), that Southwestern employees had a duty to attend the staff meetings in their entirety. Bostain did not propose a ceasefire or a standstill agreement; he demanded unconditional surrender to the company policy of compulsory attendance at religious services. We can only conclude that Mrs. Young acted reasonably and in a manner which preserved the full measure of her statutory rights.

In her complaint, Mrs. Young requested reinstatement in her former job, back pay, attorney’s fees and an injunction against Southwestern forbidding it to include the religious exercises in its monthly staff meetings. On remand, the district court must determine if plaintiff still desires to return to Southwestern and if so, whether an injunction such as she asks would be proper. That court must also determine the propriety and the amount of awards of back pay and attorney’s fees to Mrs. Young.

Title VII was designed to restrain discrimination in employment because of religion. The subtle and unrealistic distinction drawn by Southwestern here between resignation and discharge does not deter us from enforcing the statutory mandate. Accommodation as a defense must be unsubtle, direct, undelayed and communicated without equivocation. The statutory defense of accommodation is not met by some post hoc hypothesis.

Reversed and remanded.

THORNBERRY, Circuit Judge

(dissenting):

I would not hesitate for a moment to join my brothers in finding an employer liable for imposing or attempting to impose “forced religious conformity.” This is not such a case. Title VII forbids, inter alia, employment discrimination based on religion. In this context discrimination implies that some employment-related penalty or disadvantage has been imposed on an employee or a job applicant. Because Southwestern claimed, and the district judge found, that appellant was not fired, to prove discrimination here Mrs. Young needed to show that her employer required or tolerated practices so inconsistent with her religious beliefs that she could not continue working and remain true to those beliefs. That is, she had to show that she was “constructively” discharged.

As I understand it, the majority bases its constructive discharge finding on (1) the company’s admitted practice of holding monthly business meetings at which the first several minutes are devoted to a religious “sermonette”, and (2) a single statement by Mrs. Young’s immediate supervisor Mr. Bostain that company policy required attendance at the devotional portion of the meetings. In my view this holding expands the constructive discharge doctrine beyond its proper scope in proceedings of this kind. I assume for present purposes that if mandatory attendance at the devotional was in fact settled company policy, Mrs. Young would have been entitled to claim a constructive discharge. During the trial of this case, however, Southwestern’s vice president and personnel director stated without contradiction that the company did not require attendance at the devotional portion of the company meeting. He further testified that no penalty attached for failure to attend and that no person had ever been denied any employment benefit because of his or her refusal to be present during the sermonette. Unfortunately, he also related that only the higher ranking officers of the company knew of this policy and that the company had failed to publicize it throughout the organization. This accounts for Bostain’s statement to Mrs. Young that attendance at the devotional was mandatory.

For several reasons I think that the better course is to deny the applicability of the constructive discharge doctrine when, as here, the employee can prove only mistaken (although understandable) reliance on an erroneous statement of company policy by a less than authoritative company source. Employment discrimination based on religion is a serious charge, and I believe that basic fairness alone demands that a constructive discharge resulting from this alleged discrimination should rest on a foundation more secure than a breakdown in bureaucratic communication. In addition, allowing an employee to claim constructive discharge only after requesting an authoritative ruling from the company management would encourage private settlement of employment disputes. Such private settlements are not just desirable from the standpoint of judicial caseloads, cf. Penn v. Schlesinger, 5 Cir. 1973, 490 F.2d 700, 713 n. 5 (Godbold, J., dissenting), dissent adopted 5 Cir. 1974, 497 F.2d 970 (en banc), but they also seem in harmony with Congress’s intent in enacting Title VII — for example, before the E.E.O.C. may take formal enforcement action it must investigate and attempt to settle the dispute by “informal methods of conference, conciliation, and persuasion.” 42 U.S.C. § 2000e-5(b) (1974). Moreover, requiring an inquiry concerning company policy as a condition of claiming constructive discharge would serve the highly desirable purpose of either putting the employer on notice of the need to accommodate its employee’s religious beliefs or at least of establishing the company’s determination to persist in the challenged practice.

This case typifies the anomalous results produced by the contrary rule. At the time appellant left Southwestern there remained approximately one month before the next business meeting. Had Mrs. Young used this time to inquire whether her branch manager had correctly stated company policy, the record gives no reason to doubt that she would have learned that attendance was not required, and this problem would never have reached the courts. Although the company is by no means blameless in the matter, appellant’s precipitous departure also made accommodation impossible. Admittedly, Mrs. Young had no particular reason to suspect that Bostain did not know company policy. I would simply hold that in cases like this one any “emotional discomfort [from] waiting to be fired” is insufficient grounds to overweigh the substantial benefits of requiring as a precondition to constructive discharge the painless process of confirming the existence of the offensive company rule.

For the reasons stated, I would affirm the district court’s finding that Mrs. Young failed to prove a constructive discharge.

      . 42 U.S.C. § 2000e et seq.

      . The employees at one far-flung financial outpost in Houston were exempted from this requirement.

      . Although Mrs. Young was a member of the Unitarian Church at all times relevant to this lawsuit, she has since left that Church; the record demonstrates that her religious beliefs had not changed from February, 1971, to the time of trial in June, 1973. There is no question of the sincerity of Mrs. Young’s religious beliefs.

      . Bostain’s account of Mrs. Young’s termination is contained in a memorandum to Southwestern’s vice-president in charge of personnel, dated September 22, 1971:
      Upon returning to the Bellaire office from last Wednesday’s staff meeting, I talked with my staff about their attendance at the meetings each third Wednesday of the month. I explained to them it was mandatory to attend this one meeting each month, and Mrs. Jo Young informed me that she would not attend the meetings. I told her she was informed of these meetings when she was hired, and it was a part of her job to attend. I asked her to let me know if she planned to fulfill her duties in this capacity and left the decision to her. Later that day she came to me and told me she was checking out her drawer. Knowing she had had some transportation problems in the past, I asked if this was why she was unhappy. She informed me this was not the problem, and stated that she would not attend a Prayer Meeting on Wednesday mornings. I took this as her resignation.

      . The district court correctly found th. Southwestern was an “employer” within tl meaning of the statute. 42 U.S.C. § 2000e(t

      . At the time of plaintiff’s termination, a re ulation of the Equal Employment Opportuni Commission required employers “to mal reasonable accommodations to the religioi needs of employees . . . where su< accommodations can be made without undi hardship on the conduct of the employei business.” 29 C.F.R. § 1605.1. In Riley Bendix, supra, we found that this regulati< was valid and binding upon employers po: tioned as Southwestern is here. In March, 1972, Congress amended the Civil Rights Act of 1964 specifically to require accommodation of the sort previously required by the EEOC: “The term ‘religion’ includes all aspects of religious observance and practice, as well as belief, unless the employer demonstrates that he is unable to reasonably accommodate to an employee’s or prospective employee’s religious observance or practice without undue hardship on the conduct of the employer’s business.” Act of March 24, 1972, Pub.L. No. 92-261, § 7010), 86 Stat. 103. 42 U.S.C. § 2000e0).

      . Southwestern argues that Mrs. Young could not have been discharged because Bostain had no authority to fire any of the employees at the Bellaire branch. While it is certain that Southwestern is correct with respect to the extent of Bostain’s actual authority, it is also certain that Mrs. Young had no reason to know of this limitation, and in fact had every reason to assume the contrary, in view of Bostain’s firm language of September 15, and of plaintiffs knowledge that her original application for employment had been submitted to Bostain for his approval. Under these circumstances, Southestern cannot disclaim responsibility for Bostain’s apparently authorized actions.

      . We do not hold that Southwestern had an absolute duty to accommodate Mrs. Young’s beliefs on the day the dispute arose. On the contrary, if Bostain had not given plaintiff an ultimatum, it is reasonable to assume that the parties would have had one month (the time until the next staff meeting) to work out a satisfactory arrangement; we expect that such action would satisfy the demands of the statute. In the particular circumstances of this case, however, where in the face of Mrs. Young’s repeated assertions that she could not in good conscience attend the staff meetings because of their religious content, Bostain presented her with an unqualified choice of compliance or discharge, Southwestern’s opportunity to attempt an accommodation at its leisure was forfeited and its duty neglected at the time of Mrs. Young’s departure on the afternoon of September 15.

      . This case is distinguishable from the normal run of constructive discharge cases because it is a company policy rather than a company practice that appellant claims required her to voluntarily resign. Mrs. Young apparently does not contend that the mere holding of the devotional offended her sensibilities to the extent that she could not continue to work for Southwestern. Rather, it is the company’s ostensible mandatory attendance policy that she found incompatible with further employment.

      . In EEOC Decision No. 72-1114, Feb. 18, 1972, 4 FEP Cases 842, the Commission wrote
      Clearly, an employer is responsible for the actions of its supervisors. Charging Parties had no obligation to inform higher level management personnel of their supervisor’s conduct in order for Respondent to be bound by the requirements of Title VII.
      Although vicarious liability and other principal-agent rules have their proper place in our legal system, as indicated i see little to gain and much to lose by applying them mechanically in the context of Title VII.


source: Caselaw Access Project

author: RONEY, Circuit Judge:

license: Public Domain

text:
    SHUMATE & COMPANY, INC., et al., Plaintiffs-Appellants, v. NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., et al., Defendants-Appellees. SHUMATE & COMPANY, INC., et al., Plaintiffs-Appellants, v. AMERICAN STOCK EXCHANGE, et al., Defendants-Appellees.
    Nos. 74-1426, 74-1427.
    United States Court of Appeals, Fifth Circuit.
    March 5, 1975.
    Rehearing Denied March 31, 1975.

      B. Thomas McElroy, Dallas, Tex., for plaintiff s-appellants.
    Morris Harrell, Lyman G. Hughes, Dallas, Tex., Robert A. Bicks, New York City, for Nat. Ass’n of Securities Dealers.
    William E. Jackson, New York City, Fletcher Yarbrough, Dallas, Tex., for N. Y. Stock Exchange.
    Briscoe R. Smith, New York City, W. Randolph Elliott, William H. Tinsley, Dallas, Tex., for American Stock Exchange.
    Robert- B. Fiske, Jr., Forsythe, McGovern & Pearson, Davis, Polk & Ward-well, New York City, of counsel for defendants-appellees.
    Before TUTTLE, RONEY and GEE, Circuit Judges.
   RONEY, Circuit Judge:

Gaston A. Shumate' and his solely owned company Shumate & Company, Inc. (Shumate) filed two suits alleging violations of the Sherman Act on the part of the National Association of Security Dealers (NASD) and Shearson, Hammill & Company, Inc., in one suit, and the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and various named individual defendants in the other. Shumate alleged that all the defendants were parties to two conspiracies in restraint of trade: first, a conspiracy to exclude securities listed on the major stock exchanges from the NASD Automated Quotation System (NASDAQ) at its beginning, and second, a conspiracy to ignore such securities after they were included on NASDAQ. The two suits were consolidated for trial, and after plaintiff had rested his case following five days of trial to a jury, the district court directed a verdict against him in favor of all defendants. As to the first alleged conspiracy, the district court found no evidence of damage to plaintiff. As to the second alleged conspiracy, the district court found no evidence of -the conspiracy itself, and no evidence of injury from the conspiracy. As a matter of law, injury to a plaintiff’s business or property is a necessary element of a private claim for any relief under the antitrust laws. Without sufficient evidence to present a jury question as to such injury, the court entered judgment against Shumate, from which Shumate appeals. We affirm.

FACTS

Shumate, a member of NASD but not a member of any major stock exchange, is a broker-dealer in securities, effectuating the purchases and sales for his clients in the over-the-counter market (OTC). The OTC market, unlike a stock exchange, has no central location in which transactions take place. The trades in OTC securities take place between individual brokers, generally over the telephone. Generally, the stocks traded in OTC are not listed on any stock exchange, and as such are referred to in the trade as “unlisted stocks.” One segment of the OTC market consists, however, of trades, outside of the exchanges, of stocks which are listed on an exchange. This is commonly called the “third market.” It is in reference to this third market in listed securities that Shumate has alleged antitrust violations on the part of the various defendants.

In response to a requirement by a 1964 amendment to the Securities Exchange Act of 1934 that NASD provide rules for dissemination of quotations on securities sold otherwise than on national securities exchanges, NASD employed Arthur D. Little, Inc., in 1967, to examine the feasibility of a nationwide automated quotation system for OTC trading. The next year NASD hired Bunker-Ramo Corp. to construct the system which was named the National Association of Securities Dealers Automated Quotations System (NASDAQ). The full membership of NASD approved an amendment to NASD’s by-laws authorizing the Board of Governors, within limitations, to adopt, amend, alter, or supplement the rules governing the NASDAQ system. This amendment of the by-laws was filed with the Securities Exchange Commission, as required by law. After consultation with the SEC, from which NASD concluded that the SEC wanted the third market included in NASDAQ, NASD adopted rules for the system which would make third market quotations for listed stocks eligible for NASDAQ.

During a visit with Gordon Macklin, President of NASD, in August 1970, Ralph Saul, President of the American Stock Exchange (AMEX), expressed his opposition to the plan to include listed stocks on NASDAQ. Macklin told Saul that NASD’s NASDAQ Committee felt that listed securities should not be included, but that the SEC wanted them in the system, so they had been included. After Macklin refused Saul’s offer to approach the SEC jointly, Saul visited the SEC where he expressed his dissatisfaction to Hamer Budge, Chairman of the SEC. Chairman Budge suggested that Saul place his objections in writing, which was done in a letter to the SEC dated October 9, 1970. Saul’s basic concern was the possible adverse impact of such inclusion upon the stock exchanges and the public. Saul did not discuss his letter with anyone connected with NASD or NYSE either before or after writing it.

Robert Haack, President of the New York Stock Exchange (NYSE), also wrote a letter to the SEC in October of 1970, expressing his concern over the possible ramifications of the inclusion of the third market in NASDAQ. While Haack sent a copy of his letter to Macklin, he did not send one to Saul. He had never seen a copy of Saul’s letter to Chairman Budge.

A week after Haack sent his letter to the SEC, Macklin visited Chairman Budge to discuss the question of whether or not the SEC would approve a start-up of NASDAQ without the listed stocks. Chairman Budge again requested a letter, but two days later called Macklin to notify him that the SEC would approve the system without the third market at start-up. Following that call, the NASD Executive Committee and the NASD Board of Governors voted to start NASDAQ with only OTC stocks.

NASDAQ began operation on February 8, 1971, with quotations for only nonlisted OTC securities. Eight weeks later, NASD began a test period with the inclusion of 32 listed stocks, each having at least two interested market makers in the third market. The test securities included two for which Shumate had requested listing. After expiration of the test period, NASD, with SEC approval, made all listed stocks eligible for inclusion on NASDAQ. Any such security is included when, as with an unlisted security, the requisite number of market makers have properly requested its inclusion. Thus, it is the interest of individual market makers in the security which determines whether or not that security will be listed on NASDAQ. None of the defendants have any control over that interest.

SHUMATE’S APPEAL

On this appeal Shumate has argued that the district court erred in directing a verdict against him on the two alleged antitrust violations. The first violation was a combination or conspiracy to exclude listed stocks from NASDAQ at the time the system commenced operation. The results of this conspiracy could only last the eight weeks between start-up of the system and the inclusion of the quotations on the system. The second was a conspiracy to ignore the listed securities once they had in fact become eligible for listing on NASDAQ and listed. To succeed in his lawsuit, Shumate must show injury from defendant’s activities. The burden of Shumate’s appeal is to show that there is sufficient evidence of injury in the record to present a jury question.

SHEARSON, HAMMILL & COMPANY, INC.

The district court found no evidence to associate Shearson, Hammill & Company, Inc. with the alleged conspiracy. The only connection Shearson, Hammill had with the activities from which these suits arose was that one of its officers, Gordon L. Teach, an individual defendant here, was Chairman of the Board of Governors of NASD during the period involved. His actions were taken as Chairman of NASD and not as an officer of Shearson, Hammill. In order for Shearson, Hammill to be liable for Teach’s actions, it would have been necessary for him, in furtherance of the alleged conspiracy, to have been acting within the scope of his authority as a Shearson, Hammill officer. See Household Goods Carriers’ Bureau v. Terrell, 417 F.2d 47, 54 (5 Cir. 1969), modified, 452 F.2d 152 (5 Cir. 1971) (en banc), appeal after remand, 494 F.2d 16 (5th Cir. 1974); United States v. Hilton Hotel Corp., 467 F.2d 1000, 1004-1007 (9th Cir. 1972), cert. denied, 409 U.S. 1125, 93 S.Ct. 938, 35 L.Ed.2d 256 (1973). Shumate offered no credible evidence from which the jury could have imputed Teach’s activities to Shearson, Hammill, and the district court was correct in directing a verdict against Shumate as to Shearson, Hammill, and in rejecting Shumate’s factually unsupported respondeat superior argument to hold Shearson, Hammill liable for any of Teach’s acts.

LAW

Except as to Shearson, Hammill, the district court concluded that there was enough evidence presented by Shumate at the trial to make a jury question as to the existence of a conspiracy to exclude the listed securities. Assuming there to be a violation of the antitrust laws, however, the plaintiff concededly must show that he has been injured in his business or property as a prerequisite to a private suit:

“Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district-court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.”

15 U.S.C.A. § 15; see Hobart Brothers Co. v. Malcolm T. Gilliland, Inc., 471 F.2d 894, 901 (5th Cir.), cert. denied, 412 U.S. 923, 93 S.Ct. 2736, 37 L.Ed.2d 150 (1973); Gorham & Johnson, Inc. v. Chrysler Corp., 308 F.2d 462, 469 (5th Cir. 1962), cert. denied, 372 U.S. 912, 83 S.Ct. 725, 9 L.Ed.2d 719 (1963). The focus of the appeal from the district court’s refusal to submit the claim based on the first alleged conspiracy to the jury therefore turns on whether the district court was correct in deciding that there was no issue of fact as to the plaintiff’s claim of injury in his business or property.

As to the second alleged conspiracy, the ignoring of the third market once listed security quotations were allowed on NASDAQ, the district court found a lack of proof as to the conspiracy itself. Partly in response to this situation, Shumate has shifted his argument on appeal, asserting now that there was only one continuing conspiracy and therefore, the sufficiency of the evidence found by the trial court to make a jury question as to the first alleged conspiracy is ipso facto sufficient to produce a jury issue as to the second alleged conspiracy. We need not consider the propriety of this shift in theories from the trial court to the appellate court. Cf. Virtue v. Creamery Package Manufacturing Co., 227 U.S. 8, 38-39, 33 S.Ct. 202, 57 L.Ed. 393 (1913); Lamb Enterprises, Inc. v. Toledo Blade Co., 461 F.2d 506, 515-516 (6th Cir.), cert. denied, 409 U.S. 1001, 93 S.Ct. 325, 34 L.Ed.2d 262 (1972). Whatever the nature of the alleged conspiracy, whether two separate ones or one single one, injury is the sine qua non for stating a cause of action. Since the district court found a lack of sufficient proof of injury from the second conspiracy as well as a lack of proof of the conspiracy itself, we affirm the district court’s decision that the plaintiff failed to present a jury question as to any antitrust claim. Thus, we need not review the decision that there was insufficient evidence to present to the jury as to whether there was a conspiracy in violation of the antitrust laws.

In evaluating the district court’s directed verdict, we must keep in mind the dictates of Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir. 1969), in light of the charitable view we have taken in treble-damage cases and the difficulties of proof facing a plaintiff who must try to prove what would have accrued to him in the absence of the defendant’s anticompetitive practice. Lehrman v. Gulf Oil Corp., 464 F.2d 26, 46 (5th Cir.), cert. denied, 409 U.S. 1077, 93 S.Ct. 687, 34 L.Ed.2d 665 (1972), appeal after remand, 500 F.2d 659 (5th Cir. 1974). Nonetheless, although we are generally lenient as to evidence required to show the amount of damages in antitrust matters once liability is determined, courts do not permit the fact of damage necessary to prove liability to be based on speculation. Household Goods Carriers’ Bureau v. Terrell, 452 F.2d 152, 159 (5 Cir. 1971) (en banc), appeal after remand, 494 F.2d 16 (5th Cir. 1974).

INJURY FROM FIRST CONSPIRACY

Shumate alleged basically four types of injury: a trading volume increase less than he had anticipated under NASDAQ, lower annual profits because of his inability to attract new salespersons, the loss of commissions on some orders placed in April and May of 1972 by a retirement fund, and the loss in August 1973 of a discretionary account for which he was paid an annual fee. None of these elements of injury is related to the ineligibility of listed stocks for the period where such stocks were not generally eligible, February 8, 1971, until October 18, 1971. Shumate did seek to have two listed securities placed on NASDAQ in the spring of 1971, in order to become a market maker in them, and they were included during the test period. But once they were listed, nothing indicates that Shumate attempted to make a market in them using NASDAQ. In fact, Shumate could not have used NASDAQ to become a market maker in those securities as he did not have a NASDAQ terminal in his office until early 1973. It is clear that Shumate presented nothing in the record, not even his own unsupported conclusions, to demonstrate any injury during the period that listed securities were excluded pursuant to the alleged conspiracy. In such a situation with no evidence of injury presented, the district court was undoubtedly correct in directing a verdict against Shumate on the first count.

INJURY FROM SECOND CONSPIRACY

The district court also held there to be a lack of evidence sufficient for jury consideration of injury from the alleged conspiracy to ignore the third market listed on NASDAQ. The trial court viewed the evidence as showing only that stockbrokers in individual members of the stock exchanges, as individuals, ignored listed securities on NASDAQ, with no evidence to link their conduct to any conspiracy among the named defendants. Cf. Northern California Pharmaceutical Association v. United States, 306 F.2d 379, 388-391 (9th Cir.), cert. denied, 371 U.S. 862, 83 S.Ct. 119, 9 L.Ed.2d 99 (1962). But we need not consider the existence or nonexistence of any conspiracy between the defendants. A thorough review of the record on appeal has convinced us that the district court correctly determined that there was no evidence from which reasonable and fairminded persons could have found that any injury to Shumate resulted from the alleged practice.

The only evidence Shumate presented regarding his damages at trial was his own testimony, unsupported by any relevant data. Shumate, among other things, asserted to the trial court? and to this Court on appeal that so much money and effort was expended to create NASDAQ that it is obvious that it was intended to increase trading volume, and consequently profits, of the individual members of NASD. Since he has not experienced this anticipated increase in profits, he asserts, he has obviously been damaged. With only his ipse dixit to establish the fact of damage, Shumate would have this Court find his testimonial speculation and contentions supply the basis for a jury issue as to the fact of damage. But more evidence than this is necessary to demonstrate that there has been injury before the jury can be allowed to consider the amount that would properly compensate him for such injury.

“Both the fact of damage, or causation, and the amount of damage are questions of sufficiency of the evidence, though the certainty of proof required on each issue differs. As the Supreme Court said in Story Parchment Co. v. Paterson Parchment Paper Co., 1931, 282 U.S. 555, 562, 51 S.Ct. 248, 250, 75 L.Ed. 544, 548,
[T]here is a clear distinction between the measure of proof necessary to establish the fact that petitioner had sustained some damage and the measure of proof necessary to enable the jury to fix the amount. The rule which precludes recovery of uncertain damages applies to such as are not the certain result of the wrong, not to those damages which are definitely attributable to the wrong and only uncertain in respect of their amount.”

Terrell v. Household Goods Carriers’ Bureau, 494 F.2d at 20 (footnote omitted); accord, Hobart Brothers Co. v. Malcolm T. Gilliland, Inc., 471 F.2d 894, 902-904 (5th Cir.), cert. denied, 412 U.S. 923, 93 S.Ct. 2736, 37 L.Ed.2d 150 (1973). Shumate could not recover any amount of damage, where the jury could only speculate either as to its occurrence or as to its causal relationship to the anticompetitive activity. See, e. g., Dailey v. Quality School Plan, Inc., 380 F.2d 484, 487-488 (5 Cir. 1967), appeal after remand, 427 F.2d 1080 (5th Cir. 1970). It is incumbent upon plaintiff to produce some credible evidence to support his various allegations of injury and its cause. Failure to do so makes a directed verdict correct. See, e. g., Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 66 S.Ct 574, 90 L.Ed. 1040 (1946); Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed. 544 (1931); Hobart Brothers Co. v. Malcolm T. Gilliland, Inc., supra.

We have examined the record for evidentiary support as to each of the four types of injury asserted by Shumate. First, Shumate alleged he experienced a lesser increase in trading volume than he had anticipated from NASDAQ. He presented no evidence to show that this lesser increase was related to the alleged conspiracy, which only affected the third market segment of the OTC. He did not present any records of his own trades in the third market before or after NASDAQ became operational, or any projections of what he had expected from NASDAQ regarding the third market. Shumate produced some gross income figures which he did not even relate to the area in which the alleged conspiracy would have its effect, the third market. His general allegation of lesser increase in trading volume in the relevant market is simply not supported by any evidence.

Second, Shumate argues that he had lower annual profits due to his inability to hire additional salespersons. This argument, unsupported by relevant data, finds its sole support in his bare assertion that after NASDAQ was operational, but while the third market was being ignored, he was unable to hire any new salespersons. There was no testimony from any of the prospective salespersons that they chose not to work for Shumate because of the failure of the third market to develop more fully with the commencement of NASDAQ. Shumate’s after-the-fact-therefore-because-of-it argument is especially weak considering the fact, adduced during his own testimony, that he had experienced much difficulty in finding associates well before NASDAQ’s operation. Without some evidence that he could have employed additional salespersons if the third market had developed more expansively under NASDAQ, it is not necessary to consider whether Shumate’s proof of the beneficial result of additional salespersons was sufficient to create a jury issue.

Third, plaintiff alleges the conspiracy made him lose the commissions on a number of individual transactions for the New York State Teachers’ Retirement System. Two things are particularly relevant to this item of alleged injury: first, at the time these orders were placed, listed securities were eligible to be displayed on NASDAQ, but any particular security would be included only if more than one NASDAQ subscriber (a broker-dealer) were interested in dealing in the security in the third market, and second, Shumate did not subscribe to NASDAQ when the orders were placed. Thus, when the orders were placed Shumate did not attempt to execute them with the aid of NASDAQ and could not testify positively that had he attempted to do so, he would have been unsuccessful. Perhaps his failure to subscribe also contributed to his failure to present evidence that the securities for which the orders were placed were even on the NASDAQ system. Without proof that the securities were listed on NASDAQ, there could certainly be no reasonable inference drawn that they were being ignored. Shumate’s argument boils down to this: had NASDAQ been fully competitive, he would have subscribed to it, and if he had subscribed to it and if the securities were listed he would have been able to execute the transactions in a manner otherwise unavailable to him. A jury could not reasonably draw the inferences necessary to reach this conclusion from the bare allegations in Shumate’s testimony, devoid of supporting facts.

Last, Shumate alleged injury from his loss of an account which paid him a $25,-.000 annual fee in August of 1973, almost two years after listed securities were eligible for inclusion in NASDAQ. Other than Shumate’s unsupported assertion that one of the proximate reasons for losing the account was the failure of NASDAQ to develop as he had thought it would, there is no evidence of the reason for the loss of the account. Shumate produced no data relating to transactions which he had attempted to make for the account, but as to which he had been frustrated by the alleged conspiracy. He did not produce any correspondence or testimony from the account client supporting Shumate’s bare allegation that the failure of the third market to develop under NASDAQ had caused the withdrawal of the account from Shumate’s business. Shumate did not even offer the details of the operation of the account, from which a jury might have understood the reasoning from which his own conclusion was derived. In this instance, as in the other areas of alleged injury, Shumate simply failed to produce any relevant data from which the jury could find any damage.

MISCELLANEOUS POINTS ON APPEAL

Shumate appeals other rulings of the district court, which, if error, might bear upon the correctness of the court’s decision as to whether there were sufficient issues of fact for presentation to the jury.

1. Class Action

Shumate asserts that, regardless of the merits of his own claim, the district court should have allowed him to maintain the suits as class action representative for some 3000 members of NASD who are not members of NYSE or AMEX. The district court denied Shumate class action status because of its conclusion that, even if a conspiracy were proved, the controlling question as to liability was whether a class member had suffered injury. It opined that the difficulties likely to be encountered in maintaining the cases as class actions outweighed the benefits. The district court’s decision is reviewable only for an abuse of discretion. See Johnson v. Georgia Highway Express, Inc., 417 F.2d 1122, 1123 (5th Cir. 1969). We find no abuse of discretion. This case is different from one where liability can be shown as to all class members, with only the amount of damage to be determined as to each. In this antitrust case the proof of injury to business or property of each class member is critical for the determination of defendants’ liability to any individual. The district court was within its discretion in deciding that common questions of fact do not predominate. See F.R.Civ.P. 23(b)(3); Smith v. Denny’s Restaurants, Inc., 62 F.R.D. 459 (N.D.Cal.1974); Kinzler v. New York Stock Exchange, 62 F.R.D. 196 (S.D.N.Y.1974); Gneiting v. Taggares, 62 F.R.D. 405 (D.Idaho 1973).

2. Elimination of Collateral Claims

Shumate also attacked the district court’s refusal to allow plaintiff to interject into these cases the issues related to the stock exchanges’ anti-rebate rules, and the court’s refusal to consolidate with these cases another case which plaintiff has pending on that issue. Again our review is limited to a determination of whether the district court abused its discretion on these matters. Considering that another suit in which Shumate was an active member of the plaintiff class had already been tried on these issues and was sub judice in the District Court for the Eastern District of Wisconsin, see Thill Securities Corp. v. New York Stock Exchange, 433 F.2d 264 (7th Cir. 1970), cert. denied, 401 U.S. 994, 91 S.Ct. 1232, 28 L.Ed.2d 532 (1971), that Shumate and his counsel independently admitted prior to trial that the issue in plaintiff’s nonconsolidated suit was separate from the issues in these suits, and further, that there were numerous defendants in the nonconsolidated suit who are not parties to these suits, we see no abuse of discretion in the district court’s decision to have plaintiff pursue the two claims separately.

3. Evidentiary Rulings

The district court did not err either in its evidentiary rulings on two voluminous exhibits offered by plaintiff or in its refusal to allow Shumate to introduce into evidence an SEC staff memorandum which alluded to legal opinions on the illegality of NASDAQ without listed securities. One of these exhibits was a bound volume containing all memoranda, letters and documents regarding the implementation of NASDAQ by NASD contained in SEC files. The other was a volume of several hundred pages of similar material from NASD’s own files. The two large exhibits were first presented to the district court at the end of a trial day. Defense counsel reserved the right to object for irrelevance to any of the individual documents which comprised the exhibits. The district court agreed to allow defense counsel to examine the exhibits overnight and to offer their objections the next morning. The next morning the court directed plaintiff’s counsel to number each document and to offer each separately so that the court could rule on the admissibility of each separately. Nonetheless, Shumate failed to offer any documents in his case-in-chief. It was only after the court had ruled on defendants’ directed verdict motions that plaintiff offered some of the individual documents into evidence, and even then plaintiff did not specifically identify which documents he was offering. The district court sustained defendants’ objections. The particular documents plaintiff offered were merely general statements relating to the effect of NASDAQ on the third market and the desire of some NASD members to include more listed stocks. It was not demonstrated that they would have been admissible. See Standard Oil Co. of California v. Moore, 251 F.2d 188, 212-218 (9th Cir. 1957), cert. denied, 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148 (1958). Even had they been otherwise admissible, they did not relate to plaintiff’s own situation and provided no facts to bolster plaintiff’s inadequate proof of his own injury. Under such circumstance, we can find no abuse of the trial court’s discretion.

Similarly, we sustain the district court’s refusal to admit the portions of an SEC study referring to various legal opinions as to the illegality of NASDAQ under the antitrust laws if the listed securities were excluded. Those opinions were in no way related to alleged conspiracy between the defendants to these suits. The memorandum containing these opinions does not quote the NASD attorneys verbatim, but merely states the SEC’s interpretation of discussions with NASD attorneys while the SEC and NASD were finalizing the terms of the NASDAQ system’s approval by the SEC. Shumate argues that since the opinions expressed a belief that a possible violation of the antitrust laws could result from the operation of NASDAQ without the listed securities, and since a private antitrust violation requires injury, the opinions implicitly found injury from such action and are probative of the fact of damage. We agree with the district court that the memorandum references to the opinions were inadmissible. First, the opinions were clearly hearsay as to all defendants and without Shumate demonstrating that the defendants had vouched for their accuracy, the legal opinions would not have been admissible as an admission of a party opponent exception to the hearsay rule. See Sanitary Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679, 686 (8th Cir. 1966); Standard Oil Co. of California v. Moore, 251 F.2d 188, 218 (9th Cir. 1957), cert. denied, 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148 (1958). Second, while in some circumstances opinions offered to a Government agency might be admissible not for the truth of the matter stated therein, but to show purpose and character of certain acts alleged to constitute an antitrust violation, see Lamb Enterprises, Inc. v. Toledo Blade Co., 461 F.2d 506, 515 — 516 (6th Cir.), cert. denied, 409 U.S. 1001, 93 S.Ct. 325, 34 L.Ed.2d 262 (1972), here the opinions could not have served even that purpose because they related to an antitrust violation by the members of NASD as a group, and not the alleged violation of NASD as an entity in conspiracy with the other defendants in this suit. Cf. Northern California Pharmaceutical Association v. United States, 306 F.2d 379, 388 — 391 (9th Cir.), cert. denied, 371 U.S. 862, 83 S.Ct. 119, 9 L.Ed.2d 99 (1962). Third, even if the opinions had been admissible to show the conspiracy, they would not have affected the directed verdict against Shumate which was based on his failure to produce evidence of any injury. The opinions expressed to the SEC, a Government agency, did not state that the possible violation of the antitrust laws would give rise to a private claim and therefore, did not address the possibility of injury. Even if they could be viewed as intimating the possible existence of a private claim, there is nothing to show that any possible injury was to Shumate’s business, which is the only injury for which Shumate could recover. In addition, it is not appropriate to admit a legal opinion as to a fact which is within the competency of the jury itself to determine from evidence presented, and not requiring special expertise. See McCormick on Evidence, § 13 (2d ed. 1972).

The trial court did not abuse its discretion in denying Shumate leave to file an amended complaint or in taxing costs against plaintiff. The need for the amended complaint was obviated by the filing of the second suit and its consolidation for trial with the first suit. The amended complaint, even if allowed, would not have affected the fate of Shumate’s claims. The particulars of the costs so taxed are not here considered, as the record indicates that the district court has not ruled thereon.

Affirmed.


author: THORNBERRY, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Jeffrey Roy BRASSEAUX, Defendant-Appellant.
    No. 74-2882.
    United States Court of Appeals, Fifth Circuit.
    March 5, 1975.
    Rehearing and Rehearing En Banc Denied April 3, 1975.

      James A. McPherson, New Orleans, La., for defendant-appellant.
    Douglas M. Gonzales, U.S. Atty., Baton Rouge, La., James D. Carriere, Special Asst. U.S. Atty., New Orleans, La., Stephen A. Mayo, Asst. U.S. Atty., Baton Rouge, La., for plaintiff-appellee.
    Before THORNBERRY, COLEMAN and ROSENN , Circuit Judges.

       Of the Third Circuit, sitting by designation.

   THORNBERRY, Circuit Judge:

J. Roy Brasseaux appeals from his conviction under an indictment charging him with participation in a conspiracy to obstruct justice in violation of 18 U.S.C. § 371. He contends that the evidence against him was insufficient to establish the offense alleged in the indictment and that an erroneous statement in the judge’s instructions to the jury deprived him of a fair trial. The following facts, taken from the evidence viewed in the light most favorable to the government, are necessary to understand appellant’s first contention.

I.

In February, 1970, one Richard Baker testified before a grand jury in New Orleans that he had heard Edward Grady Partin threaten Wade McClanahan in an attempt to dissuade McClanahan from testifying at Partin’s federal trial for criminal antitrust and Hobbs Act violations. The government sought and rer ceived an obstruction of justice indictment against Partin based on this threat. The prosecution intended to call Richard Baker as a witness at the trial of the case but because of some oversight lost track of Baker after he was released from a prison in Texas where he was serving time on an unrelated charge. Having located Baker on September 27, 1972, while he was working as a crewman on a river tugboat, an FBI agent notified Baker that he was expected to testify for the government at Partin’s obstruction of justice trial on October 10, 1972, in Houston. Baker responded that he would not testify. Upon receiving this information the somewhat surprised prosecutor obtained two subpoenas for Baker. One commanded his attendance at the October 10 trial of Partin and the other requested his presence on October 5 before a grand jury investigating whether another obstruction of justice had taken place because of Baker’s apparent hesitance to repeat at trial his prior grand jury testimony against Par-tin. These subpoenas were served on Baker on September 30, 1972.

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both. If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.

That same day Baker and a shipmate, Sam Howard, left ship at Pittsburgh, Pennsylvania, and together decided to call Partin in Baton Rouge, Louisiana, to let him know that Baker would not testify. Impersonating Baker, Howard eventually got a call through on October 2 and informed Partin of his unwillingness to testify and of his need for money. He also stated that he had never heard Partin threaten McClanahan. After a series of telephone calls it was agreed that Jerry Millican, an attorney, would come to Pittsburgh the next day, accompanied by Don Marionneaux, a friend of Partin’s, in order to take Baker’s statement. Howard was told that if he [Baker] would give a statement favorable to Partin, he would be given five hundred dollars for the statement and a good job after Partin’s trial.

On October 3 Marionneaux and Millican flew to Pittsburgh and met Baker. They told him that arrangements had been made for Baker to give his statement at 6:00 p. m. before a former United States Attorney, Gustave Diamond. Millican then left and Marionneaux gave Baker fifty dollars and advised him that he would get the rest after giving his statement. At the appointed time Baker made the promised statement and when alone with Marionneaux was given an additional $450. Millican, Marionneaux, and Baker later that night flew back to Baton Rouge, arriving in the early morning hours of October 4. Meanwhile, Sam Howard became concerned about Baker’s safety — Baker having expressed some fear of Partin — and informed Mr. Gallinghouse, the United States Attorney in New Orleans, of the foregoing transactions. This information led'Gallinghouse to cause a material witness warrant to issue for Baker’s arrest pending his testimony at Partin’s trial in Houston on October 10.

Once in Baton Rouge on October 4, Don Marionneaux, Marionneaux’s brother Hugh, Richard Baker, and Baker’s brother James, engaged in a complex bout of drinking and driving that culminated with Richard Baker and Don Marionneaux spending the night in a motel in Lake Charles, Louisiana. Sometime during this period it was agreed that Baker would not appear before the grand jury the next day. On October 5, appellant Brasseaux finally entered the picture when he and Hugh and Don Marionneaux made arrangements for Baker to stay at Brasseaux’s house near DusonScott, Louisiana. Brasseaux’s first contacts with Baker took place, however, after the time had already passed for Baker’s grand jury appearance that morning.

Baker remained at Brasseaux’s house, except for one brief period, until the morning of October 9, but later that day appellant took Baker to a camp in Grand Chevier, .Louisiana, where Baker remained until approximately October 29 or October 30, 1972. Meanwhile, because of the absence of government witnesses, including Baker, the Partin obstruction of justice trial originally set for October 10 was continued until October 31. Appellant went to the camp “a couple of times” while Baker was there, taking him to get groceries on several occasions, and maintained telephone contact with the camp. At the end of October, Baker was moved ■ first to Galveston and then to Houston, Texas. Brasseaux played no part in these moves. On November 2, 1972, Baker testified at the Partin trial and denied having heard Partin threaten McClanahan or having received $450 from Don Marionneaux. This testimony about his financial transactions with Marionneaux formed the basis of the government’s charge that Baker gave false material declarations at the trial.

Appellant and the government disagree on a number of points concerning what the evidence shows. These disputes were for the jury to resolve. Appellant nonetheless argues that he was entitled to acquittal as a matter of law because the undisputed evidence shows (1) that he joined the conspiracy, if any, after its first alleged object was achieved and (2) that he had no knowledge of, nor did he participate in, the second alleged object. Brasseaux’s argument runs like this: The indictment in this case actually charges two conspiracies in the guise of charging a single conspiracy with two objectives. One conspiracy was aimed at preventing Baker’s appearance before the grand jury on the morning of October 5. But Brasseaux did not meet Baker until the afternoon of that day. The second conspiracy sought to aid Baker in giving false material declarations at the Partin trial. Yet, appellant was no longer involved when Baker decided to go to Texas and testify, and he knew nothing of the substance of Baker’s testimony. Thus, Brasseaux could not be convicted under the present indictment when the proof showed him involved only in a “lesser on-going conspiracy ... to hide Baker from the authorities until after the Partin trial was completed.” (Appellant's brief at 22).

Appellant’s argument is grounded in a misapprehension of conspiracy law. The indictment did not charge Brasseaux with personal participation in the two alleged incidents of obstruction of justice. It charged him with willfully and knowingly joining with other conspirators whose purpose comprised those acts. Brasseaux apparently does not deny participating in a conspiracy, and the evidence viewed in the light most favorable to the government clearly was sufficient to establish that he acted with full knowledge of its general purpose — namely, to obstruct justice. We find no warrant in the evidence for appellant’s suggestion that he joined no more than a “lesser” conspiracy that somehow slips through the interstices of the government’s indictment net. Brasseaux himself clearly rendered Baker sustenance and transportation during the period from October 5 to October 9. There is some evidence that he rendered sustenance and transportation thereafter. The evidence permits the inference that he did so knowing that Baker was being sought as a witness by federal authorities. Taken together with the actions of the others mentioned in the indictment, these facts sufficiently establish Brasseaux’s participation in “one overall agreement among the various parties to perform different functions in order to carry out the objectives of the conspiracy.” United States v. Perez, 5th Cir. 1973, 489 F.2d 51, 62. See also United States v. Efronson, 5 Cir. 1974, 505 F.2d 104; United States v. Felts, 5 Cir. 1974, 497 F.2d 80, 81-82.

Moreover, once having entered into a common scheme with the other conspirators, appellant is bound by all acts committed by them in furtherance thereof, including those acts committed without his knowledge before he joined the conspiracy. United States v. Wilson, 5th Cir. 1974, 500 F.2d 715, 727; United States v. McGann, 5th Cir. 1970, 431 F.2d 1104, 1106. Similarly, a conspirator may not willfully and knowingly participate in a criminal scheme and then disclaim responsibility when his coconspirators later take actions that are the necessary or natural consequence of the unlawful agreement. Nor may the same end be achieved by simply alleging that each illegal objective constitutes a separate conspiracy. Appellant’s first point is without merit.

II.

Appellant also alleges that the district judge committed reversible error when he instructed the jury that

[o]nce the existence of the agreement or common scheme or conspiracy is shown, however, “slight evidence” is all that is required to connect a particular defendant with the conspiracy, (emphasis in original).

The parties agree that this language appears frequently in appellate opinions in this circuit. Appellant correctly notes, however, that what it purports to describe is the standard to be used by this court in judging whether the evidence against a particular defendant supported submission of his case to the jury. We agree with respected authority that the challenged language should not be used in the charge. 1 Devitt & Blackmar, Federal Jury Practice and Instructions § 29.05, at 280 (2d ed. 1970, 1974 Supp.). Nevertheless, although the instruction was erroneous, because appellant did not object at trial, we must go further and inquire whether the use of the “slight evidence” language constitutes plain error. Fed.R.Crim.P. 30, 52(b).

We could find no cases in which this precise question was raised. But our court has recently restated the considerations when reviewing a charge for plain error:

The essential question before us, of course, is whether this contested part of the charge is so erroneous that when considered in the totality of the charge as a whole and the evidence presented against each appellant, the error is so great as' to result in the likelihood of a grave miscarriage of justice.

United States v. Smith, 5th Cir. 1974, 502 F.2d 1250, 1256. We perceive two possible dangers inherent in the challenged instruction. First, the jury might be led to conclude that a defendant’s participation in the alleged conspiracy need not be proved beyond a reasonable doubt. Second, they might simply become confused regarding the proper standard for linking a defendant to a conspiracy. Viewing the entire circumstances of this case we are not convinced that either possibility requires reversal here. Immediately following the “slight evidence” language the court charged that:

Before the jury may find that a defendant, or any other person, has become a member of a conspiracy, the evidence in the case must show beyond a reasonable doubt that the conspiracy was knowingly formed, and that the defendant or other person who is claimed to have been a member, willfully participated in the unlawful plan, with the intent to advance or further some object or purpose of the conspiracy. (emphasis added).

At several other places in the charge the judge reiterated that each element of the offense must be proved beyond a reasonable doubt. Examining the challenged language in the context of the entire charge, we are not convinced that appellant’s case was prejudiced.

Appellant’s two contentions being without merit, the judgment is affirmed.

Affirmed.

      . 18 U.S.C. § 1503, which provides that:
      Whoever corruptly, or by threats or force, or by any threatening letter or communication, endeavors to influence, intimidate, or impede any witness, in any court of the United States or before any United States magistrate or other committing magistrate, or any grand or petit juror, or officer in or of any court of the United States, or officer who may be serving at any examination or other proceeding before any United States magistrate or other committing magistrate, in the discharge of his duty, or injures any party or witness in his person or property on account of his attending or having attended such court or examination before such officer, commissioner, or other committing magistrate, or on account of his testifying or having testified to any matter pending therein, or injures any such grant or petit juror in his person or property on account of any verdict or indictment assented to by him, or on account of his being or having been such juror, or injures any such officer, magistrate, or other committing magistrate in his person or property on account of the performance of his official duties, or corruptly or by threats or force, or by any threatening letter or communication, influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice, shall be fined not more than $5,000 or imprisoned not more than five years, or both.

      . 18 U.S.C. § 371 provides that:

      . The government is not required to prove that a conspirator had full knowledge of all the details of the conspiracy; knowledge of the essential nature of the plan is sufficient. Blumenthal v. United States, 1947, 332 U.S. 539, 557, 68 S.Ct. 248, 256, 92 L.Ed. 154, 168; United States v. Cardi, 7th Cir. 1973, 478 F.2d 1362, 1369; cf. United States v. Musgrave, 5th Cir. 1973, 483 F.2d 327, 336.

      . Appellant states his contention in terms slightly different from those in which we choose to discuss it. He argues that “he was convicted on a charge the grand jury never made'against him” because the indictment did not mention the “lesser” conspiracy in which appellant apparently would concede involvement. Stirone v. United States, 1960, 361 U.S. 212, 218, 80 S.Ct. 270, 274, 4 L.Ed.2d 252, 257; Cole v. Arkansas, 1948, 333 U.S. 196, 68 S.Ct. 514, 92 L.Ed. 644; cf. United States v. Goodson, 5 Cir. 1974, 502 F.2d 1303, 1306.
      We perceive no such variance problem here. The government offered no evidence not fairly deriveable from the allegations of the indictment. Appellant’s contention in reality attacks only the government’s view that the transactions involving Richard Baker’s testimony constituted one on-going conspiracy. Hence, his point parallels in some respects the more familiar argument in conspiracy cases that the indictment alleges one conspiracy while the government’s proof establishes several. Kotteakos v. United States, 1945, 328 U.S. 750, 66 S.Ct. 1239, 90 L.Ed. 1557. Appellant’s complaint, however, is not like the one made in Kotteakos, i. e. that he was prejudiced in the manner of guilt by association by being tried together with many alleged coconspirators under an indictment charging one large conspiracy when the evidence revealed smaller clusters of conspirators involved in several separate conspiracies. See United States v. Perez, supra, 489 F.2d at 57; United States v. Morado, 5 Cir. 1972, 454 F.2d 167, 170. Instead, he argues Stirone-type prejudice arising from evidence at trial ostensibly establishing his participation only in a “lesser” conspiracy not charged in the indictment. In either case, even before reaching the question of possible prejudice we must determine whether the evidence shows one conspiracy or multiple conspiracies. As later noted in the text, we believe that the government properly alleged and proved one conspiracy.

      . See, e. g., United States v. Prieto, 5 Cir. 1974, 505 F.2d 8, 11; United States v. Smith, 5 Cir. 1974, 504 F.2d 560, 562 n. 2; United States v. Maslanka, 5 Cir. 1974, 501 F.2d 208, 216; United States v. Miller, 5 Cir. 1974, 500 F.2d 751, 763; United States v. Wilson, supra, 500 F.2d at 727.


text:
    Bettye A. SANDERS, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
    No. 74-1862.
    United States Court of Appeals, Fifth Circuit
    March 7, 1975.

      Scott P. Crampton, Asst. Atty. Gen., Tax Div., Dept, of Justice, Washington, D. C., Wayman G. Sherrer, U. S. Atty., Charles D. Stewart, Asst. U. S. Atty., Birmingham, Ala., Benton Burroughs, Jr., Meyer Rothwacks, Chief, Appellate Sec., Ernest J. Brown, Elmer J. Kelsey, Liberto Marinelli, Jr., Michael L. Paup, Tax Div., Dept, of Justice, Washington, D. C., for defendant-appellant.
    Richard J. Cohn, Robert B. Eubank, Birmingham, Ala., for plaintiff-appellee.
    Before THORNBERRY, COLEMAN and ROSENN, Circuit Judges.

       Of the Third Circuit, sitting by designation.

   THORNBERRY, Circuit Judge:

This is a refund suit for taxes paid by appellee, Mrs. Bettye Sanders, with respect to calendar years 1968 and 1969. Bettye and her husband Charles, who died of a heart attack on November 2, 1970, filed joint income tax returns for these two years. All gross income for the period in question, except $2,058.75, was earned by Charles. In midsummer 1971 the IRS assessed deficiencies amounting to just over $30,000.00 against appellee and Charles’s estate because of the Commissioner’s discovery, using the so-called bank deposits plus expenditures accounting method, of substantial unreported income received by Charles during the tax years here in issue. Since the estate was insolvent, Mrs. Sanders paid the entire assessment. She then brought this suit to recover the sums paid, claiming that she was an “innocent spouse” protected by 26 U.S.C. § 6013(e) (1971). After a nonjury trial the district court entered judgment in appellee’s favor and filed an opinion. We affirm.

Married taxpayers who choose to accept the benefits of filing a joint tax return are in turn jointly and severally liable for the tax due on their combined incomes. 26 U.S.C. § 6013 (1967). Because this joint and several liability often produced hardship on an “innocent spouse” whose marriage partner received substantial unreported income and then disappeared, leaving the spouse to pay a large deficiency, Congress in 1971 enacted § 6013(e):

(1) In General. — Under regulations prescribed by the Secretary or his delegate, if—
(A) a joint return has been made under this section for a taxable year and on such return there was omitted from gross income an amount properly includable therein which is attributable to one spouse and which is in excess of 25 percent of the amount of gross income stated in the return,
(B) the other spouse establishes that in signing the return he or she did not know of, and had no reason to know of, such omission, and
(C) taking into account whether or not the other spouse significantly benefited directly or indirectly from the items omitted from gross income and taking into account all other facts and circumstances, it is inequitable to hold the other spouse liable for the deficiency in tax for such taxable year attributable to such omission, then the other spouse shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent that such liability is attributable to such omission from gross income.
S}t i(i íjs 4: tj!

The government does not now dispute the district court’s finding that appellee meets the requirements of (e)(1)(A), but it does vigorously contest the conclusion that appellee qualifies under (e)(1)(B) and (e)(1)(C). In the interests of clarity we will discuss separately the district court’s findings and conclusions concerning the contested subsections.

I. Section 6013(e)(1)(B)

The lower court found that Mrs. Sanders “did not know, or have reason to know, of the omissions of gross income attributable to Charles from their 1968 and 1969 joint income tax returns.” 369 F.Supp. at 163. As to actual knowledge the judge simply credited Mrs. Sanders’s testimony that she knew nothing of the omitted items of income. This finding of fact, turning as it does entirely on a credibility determination by the trial judge, comes to us with a strong presumption of correctness. It is not clearly erroneous. Fed.R.Civ.P. 52(a). Accordingly we must turn our attention to the government’s primary contention relating to this subsection: Did the district judge apply an erroneous legal standard in determining that Bettye Sanders had no reason to know of the unreported income? The lower court cited a number of factors that led it to conclude that appellee met the “no reason to know” test: (1) Charles’s financial affairs were complex and took even the IRS a good deal of time to unravel; (2) appellee was a high school educated housewife who during this period was having severe emotional problems heightened by heavy alcoholic consumption; (3) Charles rarely confided in appellee concerning his business affairs; (4) appellee placed great trust and reliance on their accountant, whom she had recommended to her husband; (5) although appellee typed letters for her husband concerning the transactions that resulted in the unreported income, she is an experienced typist who types without comprehension of her material; and (6) although appellee balanced checkbooks for her husband that showed large deposits in excess of reported income, this was insufficient to convey knowledge because it took the IRS over 100 manhours to deduce the omissions from the same checkbooks. Finally, to explain in part why a new home with interior and exterior improvements, new expensive automobiles each year, gambling trips to Las Vegas, and a new condominium in the Bahamas did not put appellee on notice of omissions from gross income, the court noted “that the cost of the house was relatively modest; that it was mortgaged heavily; that the condominium likewise represented only an equity investment, and was bought with borrowed money . . . .” 369 F.Supp. at 165. As we understand its position, the government makes no real challenge to these individual factfindings but instead questions whether, in light of the circumstances of this case, the district court has not read the “no reason to know” requirement too liberally in the taxpayer’s favor.

The government suggests that subparagraph (B) puts the burden on the taxpayer to prove that she was “completely without fault and could not possibly have discovered the omission before executing the returns.” (Appellant’s Brief at 17.) The taxpayer, on the other hand, suggests that the highest permissible standard of care would be what a reasonable person in the taxpayer’s subjective position would have discovered. (Appellee’s Brief at 18-19.) The district court seems to have adopted appellee’s standard, for the opinion states that “plaintiff has proven to the Court’s satisfaction that, as a reasonably prudent taxpayer, she had no reason to know of the omissions.” 369 F.Supp. at 166 (emphasis added).

We agree with Mrs. Sanders that the government’s proposed test is too stringent and thus inconsistent with the remedial purpose of § 6013(e). Admittedly the statute was passed as an exception to the normal rule of joint and several liability. Jerome J. Sonnenborn, 57 T.C. 373, 380 (1971). But Congress intended the exception to remedy a perceived injustice, and we should not hinder that praiseworthy intent by giving the exception an unduly narrow or restrictive reading. Moreover, the test suggested by the taxpayer and apparently adopted by the district court is in line with the usual legal understanding of the phrase “reason to know”:

A person has reason to know of a fact if he had information from which a person of ordinary intelligence which such person may have, or of the superior intelligence which such person may have, would infer that the fact in question exists or that there is such a substantiál chance of its existence that, if exercising reasonable care with reference to the matter in question, his action would be predicated upon the assumption of its possible existence.

Restatement (Second) of Agency § 9, comment d (1958). Finally, we do not read the opinions by other courts who have been called upon to construe this language in (e)(1)(B) as inconsistent with the standard that we today approve. Although the Tax Court has cited a number of factors that it believes can be decisive in making the “reason to know” determination — factors that we will examine shortly when deciding whether the district judge clearly erred here — its opinions offer scant support for the strict reading suggested by the government.

It remains only for us to determine, then, whether the district court clearly erred in concluding that Bettye Sanders had no reason to know of the omissions from gross income on the joint returns. The question is close, even under the lower court’s less restrictive reading of (e)(1)(B). Examination of the cases suggests at least three factors that courts have thought significant in deciding whether a spouse had reason to know of omissions from gross income: (1) unusual or lavish expenditures; (2) participation in business affairs or bookkeeping; and (3) the “guilty” spouse’s refusal to be forthright about the couple’s income. The district court here added at least three more: the claimant spouse’s emotional condition during the period in question, the complexity of the financial transactions that produced the funds, and the complexity of the method used by the IRS for deducing the omissions.

In Patricia E. Mysse, 57 T.C. 680 (1972), a wife whose husband had embezzled large sums of money from the bank where he worked and neglected to report these amounts as gross income was held to satisfy (e)(1)(B), but the court warned that spouses would not be allowed to “close . . . [their] eyes to unusual or lavish expenditures.” 57 T.C. at 699. As noted, the district judge in this case apparently accepted appellee’s explanation of why the new home and improvements thereon, the new cars, the gambling trips, and the condominium in the Bahamas were not lavish or unusual. We feel constrained to point out, however, that except for the purchase of a Jaguar automobile that required a cash outlay of only $1000.00, the expenses of the husband in Mysse were at least arguably less “unusual” than those involved here: Mr. Mysse paid income taxes, his sons’ college expenses, mortgage payments on the family residence, bills at furniture and department stores, and $556.00 for a new diamond ring for his wife. 57 T.C. at 698. Nonetheless, one person’s luxury can be another’s necessity, and the lavishness of an expense must be measured from each family’s relative level of ordinary support. During the years in issue here the Sanders were apparently enjoying a fairly high and generally improving standard of living. Thus, we cannot say as a matter of law that their expenses should have put Mrs. Sanders on notice of omissions from gross income. Yet in our opinion this case falls much closer to the line than Mysse does.

The district judge also compared Mrs. Sanders favorably to Mrs. Mysse with respect to the degree of her participation in the financial affairs of the family. On the whole we find little fault with his reasoning on this issue. It is worth noting, however, that although Mr. Mysse apparently was not generally secretive about his financial dealings, he derived his unreported income from embezzlement so difficult to uncover that the Tax Court characterized him as a “master of deceit.” 57 T.C. at 698. Hence, it is likely that no amount of bookkeeping would have apprised Mrs. Mysse of her husband’s peculations. Moreover, cases other than Mysse have found relatively little participation in the family’s money matters sufficient to charge the spouse with knowledge of the omissions from gross income. Chanik v. C.I.R., 6 Cir. 1974, 492 F.2d 1182, aff’g, T.C.Memo 1972 — 174; Jerome J. Sonnenborn, 57 T.C. 373, 381-82 (1971); Cecelia M. Harmon, T.C.Memo 1974-82; Schwartz v. C.I.R., T.C.Memo 1973 — 226. Admittedly, special circumstances — e. g., Bettye’s emotional problems and the intricacy of Charles’s finances — make this a stronger case for the spouse, but we approve no presumption that women in general are uninterested in or incapable of understanding financial affairs.

The district court also found that Bettye’s emotional problems and heavy alcoholic consumption during the years in question impaired her ability .to gain knowledge of the unreported income. Since we have agreed that sub-paragraph (B) must be interpreted in the light of the subjective position of the spouse claiming the benefits of § 6013(e), the state of the spouse’s cognitive faculties becomes a permissible inquiry. We take care to point out, however, that different considerations would obviously apply where the evidence permitted the inference that the spouse intentionally turned a blind eye upon the financial activities of his or her marriage partner. Cf. Raymond H. Adams, 60 T.C. 300, 303 (1973).

Finally, in deciding that appellee had no reason to know of the omissions the lower court gave considerable weight to the complexity of Charles’s finances and' to the complicated and laborious method employed by the IRS to discover the unreported income. In this regard we think it would be worthwhile to deal with a distinction that we cannot be sure the district court clearly articulated. Certainly as to the actual existence of receipts in excess of those acknowledged for tax purposes it would be unreasonable in some circumstances to impute knowledge to the wife. For example, in Mysse the Tax Court found “no reason why Patricia, a housewife without business knowledge, should have known more about . . . [her husband’s long undiscovered embezzlements from the bank where he worked] than . businessmen having pecuniary or professional interests in the bank.” 57 T.C. at 698. A different question arguably arises, however, when the issue is the tax consequences of admitted receipts. For example, the Tax Court has held that (e)(1)(B) was not satisfied when lack of knowledge is “predicated on mere ignorance of the legal tax consequences of transactions the facts of which are either in the possession of the spouse or reasonably within his reach.” Robert L. McCoy, 57 T.C. 732, 734 (1972); Howard B. Quinn, 62 T.C. 223 (1974); cf. Herbert I. Joss, 56 T.C. 378 (1973). But see Altman v. C.I.R., 2 Cir. 1973, 475 F.2d 876, 879-80 (implying that a good faith belief that certain receipts were gifts rather than income might qualify a spouse under § 6013(e)(1)(B)). That is, the Tax Court apparently reads the statute to say that if a spouse knows or has reason to know of a transaction that the IRS later determines resulted in income to the couple, that spouse cannot claim the benefit of the innocent spouse provision even though he or she had no reason whatever to suspect that they had received taxable income.

In this case the complexity of Charles’s financial transactions clearly is a permissible consideration. Extremely intricate financial dealings could mask the existence of actual receipts as readily as did the manipulations of the defalcating husband in Mysse. The district judge relied upon this rationale only tangentially, however, while strongly emphasizing his reluctance to hold Bettye “responsible for deducing omissions from gross income under a rather esoteric method of accounting which apparently gave an experienced, capable and diligent revenue agent . . . considerable difficulties.” 369 F.Supp. at 166. We do not view this reasoning as necessarily contrary to the Tax Court’s position on the effect of ignorance of the tax consequences of known transactions. Nevertheless, we cannot fully approve it.

The bank deposits plus expenditures method used by the IRS agent here is employed when the taxpayer has “no regular method of accounting, or a method of accounting that does not clearly reflect his income.” 369 F.Supp. at 162; 26 U.S.C. § 446(b) (1967). Mrs. Sanders played a significant role in maintaining tax records for the marriage. It would be anomalous to hold that she had no reason to know of omissions from gross income because she and Charles kept such incomplete or confusing records that the IRS required complicated methods to deduce the couple’s true income situation. The Sanders’s access to the facts of their own finances was much better than that of the IRS. The service used its complex accounting procedure in lieu of the more complete facts available to Charles and Bettye but not reflected in their written records. As a factual matter, then, we would give only slight weight to the intricacy of the procedure used by the IRS to detect the omissions.

As the foregoing discussion reveals, we are not entirely comfortable with the district court’s ultimate finding that Bettye Sanders met her burden of establishing that she had no reason to know of the omissions from gross income. We have concluded, however, that the judge applied the correct standards to the question and that the evidence nowhere compels a finding against appellee as a matter of law. Moreover, although disagreeing with the district court concerning the weight to be given some of the evidence, in view of all the circumstances of the case we cannot say that we are left with a definite and firm conviction that a mistake has been committed. The district court’s finding that appellee qualifies under subparagraph (e)(1)(B) is not clearly erroneous.

II. Section 6013(e)(1)(C)

The Senate Report accompanying the bill that became 26 U.S.C. § 6013(e) makes clear that subparagraph (C) of that section “requires a factual determination ... as to whether the spouse seeking relief from liability significantly benefited, directly or indirectly, from the items omitted from gross income.” (emphasis added). See S.Rep.No. 91-1537, 1970 U.S. Code Cong. & Admin. News, pp. 6089, 6092. The report further notes, however, that:

A mere finding that the spouse “benefited” from the items omitted from gross income will not be sufficient . to prevent that spouse from obtaining relief from liability for the tax. For the spouse to be prevented from obtaining relief there must also be a finding that the benefit was “significant” and that “taking into account all other facts and circumstances,” it is not “inequitable to hold the . . . spouse liable for the deficiency in tax . . . .”

Id. The district court here concluded that Bettye Sanders had not significantly benefited from the unreported income but even if she had, it would still be inequitable to hold her responsible for the tax deficiency.

We have carefully examined the lower court’s findings and conclusions on this issue, and we cannot say that they are clearly erroneous. Congress manifestly intended that the weighing of the equitable considerations for and against charging an asserted “innocent spouse” with tax deficiencies be left largely to the informed judgment of the trier of fact. The district court’s opinion reflects a careful and conscientious review of appellee’s financial situation. Hence, we are loath to overturn his considered judgment that it would be inequitable to require Mrs. Sanders to pay these taxes. Additionally, another circuit recently decided that it would be inequitable to require payment on facts substantially similar to those here. Dakil v. United States, 10 Cir. 1974, 496 F.2d 431, 433. Finding no error mandating reversal, we affirm the district court.

Affirmed.

      . The notice of deficiency alleged omissions from gross income for 1968 of $18,800.97, from unknown sources; for 1969, $6,316.73 from unknown sources and $71,000.00 of capital gain resulting from the sale of certain shares of stock.

      . Sanders v. United States, N.D.Ala.1973, 369 F.Supp. 160.

      . Compare Estate of Upshaw v. C.I.R., 7th Cir. 1969, 416 F.2d 737; Horn v. C. I. R., 5th Cir. 1967, 387 F.2d 621, with Sharwell v. C.I.R., 6th Cir. 1969, 419 F.2d 1057; Huelsman v. C.I.R., 6th Cir. 1969, 416 F.2d 477; Scudder v. C.I.R., 6th Cir. 1968, 405 F.2d 222.

      . If we find that the district judge adopted the correct interpretation of the phrase-“know or reason to know,” his decision on whether a party falls within it would be reversed only if clearly erroneous. See Griffin v. Missouri Pacific Railroad Co., 5th Cir. 1969, 413 F.2d 9, 12-13. The government’s contention that the phrase has a meaning in this tax statute different from its ordinary legal usage, however, presents a question of law.

      . We do not interpret this test as excluding consideration of the taxpayer’s subjective condition when assessing the reasonableness of her actions. But neither does it preclude the setting of judicially-defined minima of reasonable prudence for individual taxpayers or classes of taxpayers. Hence, in some circumstances it might be possible for a court to conclude as a matter of law that a given taxpayer had reason to know of omissions from gross income.

      . Although rejecting the government’s proposed test, we in no way reject its argument that Congress did not intend § 6013(e) to provide wholesale relief from joint and several liability. Nor do we ignore the benefits that both spouses ordinarily derive from the reduction in tax that results when a joint return is filed. See Jerome J. Sonnenborn, 57 T.C. 373, 380 (1971). We simply implement Congress’ clearly stated intent that courts should not limit the relief afforded by § 6013(e) to the case where assessment of the tax would be patently harsh and oppressive but should instead consider the individual situation of each taxpayer who arguably comes within the statute’s coverage. S.Rep.No. 91-1537, 1970 U.S.Code Cong. & Admin.News, pp. 6089, 6091.
      Concededly, some legislative history supports the government’s contention. For example, when the House Ways and Means Committee reported the bill out to the whole House, the speakers stressed the cases where then-existing law resulted in clear injustice and oppression. 116 Cong.Rec. 43351 (1970). We believe, however, that the Senate Report is a clearer reflection of Congress’ final intent.

      . In Patricia E. Mysse, 57 T.C. 680 (1972) the Tax Court noted that the husband’s expenses were “not of such character as to cause a reasonably prudent person with Patricia’s knowledge of the family finances to question the source of the funds.” Id. at 698-99.

      . Our review on this issue will be more intensive than on the actual knowledge question, because the ultimate “reason to know” determination involves not just inferences about the taxpayer’s subjective position as revealed by her demeanor at trial but also secondary inferences drawn from the primary facts as found by the district court. See 5A Moore, Federal Practice § 52.03[1].

      . Patricia E. Mysse, 57 T.C. 680, 699 (1972).

      . See Howard B. Quinn, 62 T.C. 223 (1974); Jerome J. Sonnenborn, 57 T.C. 373, 381-382 (1971); Cecelia M. Harmon, T.C.Memo 1974-82; Schwartz v. C.I.R., T.C.Memo 1973-226; Chanik v. C.I.R., T.C.Memo 1972-174, aff’d, 6th Cir. 1974, 492 F.2d 1182.

      . Raymond H. Adams, 60 T.C. 300, 303 (1973). In Adams the taxpayer’s wife kept the family books and prepared the joint income tax returns. During the tax years in question she omitted income earned by her as sales commissions and consistently refused to furnish copies of the returns to her husband. In holding that Mr. Adams failed to meet the requirements of (e)(1)(B) the Tax Court accepted the Commissioner’s argument that the husband was put on notice of the omissions by his wife’s refusal to disclose the family income. The court also noted that the husband “made no effort to ascertain the correct income of the family . . and that there was “no showing that the books and records maintained by [the wife] were not available to petitioner.” Id.
      Here the district court found as a fact that Mr. Sanders “did not confide financial matters to his wife and indicated, at several times, to friends that it was his policy not to do so.” 369 F.Supp. at 163. Nevertheless, Charles requested Bettye to balance checkbooks and keep other financial records. These actions are inconsistent with an intent to conceal the sources and amount of the family income. This case is therefore distinguishable from Adams.

      . This follows naturally from the proposition that expenses for ordinary support cannot normally put the spouse on notice of omissions from gross income. Patricia E. Mysse, supra, at 698.
      We do not agree, however, with the implication in the district court’s opinion that the absolute size of the reported income can alone be given much weight in making the reason to know determination. If annual reported income is either relatively constant or decreasing, rather than increasing, receipts in one year substantially in excess of reported gross income will raise the suspicion that some amount is going unreported whether the absolute size of the reported income is large or small.

      . During the years in question Charles Sanders moved from the practice of chiropractic to various positions with a number of pyramid sales marketing firms, including one of his own. In 1968 the couple reported gross income of $63,523.29. In 1969 they reported $36,087.38.

      . This is perhaps a permissible reading of § 6013(e)(l)(A)-(B) in light of Congress’s general intent to extend relief only where equity demands it, but it is difficult to square with a literal reading of the statutory language. Subparagraph (B) mentions “such omission,” which obviously refers back to (e)(1)(A) where omissions are described as “an amount properly included . . .” (emphasis added). Since the propriety of including a given sum can finally be determined only by the IRS or the courts, subparagraph (B) seemingly makes ignorance of the fact that known receipts constitute taxable income a valid justification for not knowing or having reason to know of omissions from gross income. Nevertheless, the practical problems that have always prevented acceptance of an ignorance of the law defense in the criminal law area, see W. LaFave & A. Scott, Handbook on Criminal Law § 47, at 363-64 (1972), arguably aPPly just as forcefully here.

      . In Cecelia M. Harmon, T.C. Memo 1974-82 the Commissioner used the bank deposits method of reconstructing the taxpayer’s income. During the tax years in question the husband ran an automobile repair business and the wife managed a grocery and liquor store. The court held that because the wife made out the bank deposit slips for bank accounts for both businesses, and because the husband took the slips to the bank, both knew or had reason to know of the omissions from gross income and were thus not entitled to the protection of § 6013(e).

      . The government urges that the district court also employed an erroneous legal standard in applying subparagraph (C). Pointing to the undisputed fact that Mrs. Sanders received both the proceeds from an insurance policy that was increased from $50,000 to $145,000 during the period when the Sanders were underreporting their income and the proceeds from the sale of property acquired during the same period, the government argues that “Congress . . . did not intend to afford taxpayers any relief from joint liability, despite future hardship, if they retained unreported income or the fruits of unreported income which could be used to discharge the liability.” (Appellant’s Brief at 18).
      Taken literally, this argument is plainly contradicted by the language of (e)(1)(C), which enjoins the Commissioner and the courts to' consider the presence of significant benefits from the unreported income as only one factor in the overall decision of whether it is equitable to charge the spouse with the tax. Moreover, nothing in the statute or its legislative history purports to forbid the consideration of probable future hardship when examining the equities of the case.