source: Caselaw Access Project

author: ADAMS, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America v. David HECKMAN et al. Appeal of David HECKMAN, in No. 72-1713. Appeal of Robert RUNDLE, in . No. 72-1714. Appeal of James HEINEY, in No. 72-1715. Appeal of John D. VITO, in No. 72-1716.
    Nos. 72-1713-72-1716.
    United States Court of Appeals, Third Circuit.
    Argued March 22, 1973.
    Decided May 30, 1973.

      Mark D. Schaffer, David Rudovsky, Defender Ass’n of Phila., Philadelphia, Pa., for appellants in Nos. 72-1713/72-1715.
    Justin Kevin McCarthy, McCarthy & McCarthy, Bethlehem, Pa., for appellant in No. 72-1716.
    Robert E. J. Curran, U. S. Atty., Robert N. deLuca, Asst. U. S. Atty., Philadelphia, Pa., for appellee.
    Before SEITZ, Chief Judge, and ALDISERT and ADAMS, Circuit Judges.
   OPINION OF THE COURT

ADAMS, Circuit Judge.

Appellants David Heckman, James J. Heiney, Robert T. Rundle, and John D. Vito were indicted, tried, and convicted of conspiracy to violate certain provisions of the Organized Crime Control Act of 1970 —in particular, to damage and destroy power lines, a railroad junction, the Bethlehem Steel Homer Research Laboratory, and the Bethlehem Steel plant in Bethlehem, Pennsylvania.

From the evidence adduced at trial, the following facts appear. In June, 1971, Donald P. Murphy, Sr., a government informer and a key witness in this case, moved from Pittsburgh to the Allentown-Bethlehem area of Pennsylvania. During the summer, Murphy, who held himself out to be a member of a branch of SDS (Students for Democratic Society), successfully established a militant reputation and won the confidence of some young people, including appellants Heckman and Heiney. In August, 1971, Murphy moved into a house in Bethlehem where Heckman, Heiney and several other persons were living.

Murphy testified at trial that on August 28, 1971, Heiney and Heckman discussed with him the possible destruction by explosives of power lines, a railroad junction, and property of Bethlehem Steel. During the course of this conversation, Heiney stated that he had reconnoitered the Bethlehem Steel plant and laboratory, and Heckman indicated that Bethlehem Steel’s security was poor. Heiney also said that he could get the “stuff” (dynamite) for any plans. Murphy stated at this point, however, that he “was associated with the Weather Underground and we had bigger plans and not to take any independent actions like that.”

Murphy further testified that Heck-man and Heiney said they would take no independent action and that he knew they believed him because they entrusted him with the care of explosives. According to him, Heckman and Heiney said they would “wait a while.” Two days later, while walking with Murphy, Heckman pointed out the location that he thought was the best place to blow up the railroad tracks adjacent to the Bethlehem Steel Works.

Murphy later met with local and federal law enforcement officials to request the assistance of undercover agents. On September 23, Ronald Coppoletta, a special agent from the Alcohol, Tobacco, and Firearms Division of the Treasury Department, was introduced to Heckman and Heiney as Steve Fine, a member of “Weather Underground.” During a meeting at which Heckman, Murphy, Heiney and Coppoletta were present, Murphy informed Coppoletta of his previous discussions with Heckman and Heiney and Coppoletta responded “that there was to be no independent actions, that bigger things were planned, and it would just make a lot of trouble for everybody.” Coppoletta stated that “Weather had an atomic reactor somewhere in Pennsylvania they were interested in.” According to Coppoletta’s testimony, Heckman and Heiney agreed to “take no action without notifying me.” They also agreed to give him dynamite “to be used for targets that they intended to blow up and the targets that I alluded to that Weathermen wanted to blow up.”

Heiney, Heckman, Coppoletta and Murphy met again on September 27. Appellant Vito arrived at the meeting and said that he had four sticks of dynamite and would give three sticks to the group. According to Murphy, Vito said that he did not want any money for the dynamite as long as it was “used against the establishment.”

The next day Heckman led Murphy and Coppoletta to lower Saucon Park where they found three sticks of dynamite wrapped in a plastic container and placed in a garbage can. Murphy retrieved the three sticks of dynamite and gave them to Coppoletta.

On October 4, according to the testimony of undercover agent Coppoletta, Robert Rundle showed Heiney and Cop-poletta where he had hidden seventeen sticks of dynamite. Because Rundle refused to transport the explosives himself, he asked Coppoletta to drop him off before Coppoletta returned for the dynamite. During the ride, Heiney told Run-die that the dynamite would be used for the “movement.” Bundle responded that “he didn’t care what we did with [the dynamite],” that he just “wanted to be rid of it.”

1.

The appellants concede, arguendo, and in any event we conclude, that the government has proved an agreement sufficient to satisfy the elements of a criminal conspiracy to destroy power lines, a railroad junction, and property of Bethlehem Steel (hereafter Conspiracy I). They also concede that the government has proved the overt acts charged in the indictment. They argue, however, that the evidence was insufficient to prove that the overt acts were carried out in furtherance of Conspiracy I, the single conspiracy charged in the indictment. Appellants contend that the overt acts were in furtherance of a completely different conspiracy not charged in the indictment, a conspiracy to destroy a nonexistent nuclear power plant (hereafter Conspiracy II), an alternate plan urged upon them by Murphy and Coppoletta. In short, it is the appellants’ theory that Conspiracy I was abandoned at the insistence of Murphy and Coppoletta, and that all overt acts committed thereafter were in furtherance of Conspiracy II, a conspiracy that was not charged in the indictment.

Under the abandonment or withdrawal doctrine of the law of conspiracy, a defendant is not punishable as a member of a conspiracy if he withdraws before an overt act is committed. As Judge Friendly has described the eon-cept in the context of a statute of limitations problem:

“The Supreme Court last spoke comprehensively on withdrawal from a conspiracy in the opinion of Mr. Justice McKenna for five Justices in Hyde v. United States, 225 U.S. 347, 369, 32 S.Ct. 793, 803, 56 L.Ed. 1114 (1912)—the four dissenters not reaching this issue. It laid down rigorous requirements for making out the defense of withdrawal from a conspiracy. . . . ‘Having joined in an unlawful scheme, having constituted agents for its performance, scheme and agency to be continuous until full fruition be secured, until he does some act to disavow or defeat the purpose he is in no situation to claim the delay of the law.’ Mere cessation of activity is not enough to start the running of the statute; there must also be affirmative action. . . . And the burden of establishing withdrawal lies on the defendant.”

Examining the evidence in the light most favorable to the Government, as we must since the jury found against the defendants, it is clear that sufficient evidence existed for the jury reasonably to determine that Heckman and Heiney merely put off temporarily their plans to destroy powerlines, a railroad junction, and property of Bethlehem Steel and that they did not affirmatively withdraw from Conspiracy I. Although the Government informer, Murphy, may well have persuaded Heckman and Heiney not to put Conspiracy I into effect immediately, nothing in the record would require the jury to conclude that the appellants abandoned their plans entirely. Indeed, two days after the discussion during which Heckman and Hei-ney revealed to Murphy their agreement concerning Conspiracy I, Heckman showed Murphy the location that he thought was the best place to destroy the railroad tracks adjacent to the Bethlehem Steel Works.

Aside from the other overt acts relating to the collection of dynamite, which, as we hold, the jury could reasonably have found to be in furtherance of Conspiracy I, Heckman’s act of pointing out the best location for the destruction of railroad tracks was an overt act sufficient to support the conclusion that the essential elements of a criminal conspiracy were fulfilled. Moreover, nearly one month later, the plans for the destruction of the Bethlehem Steel property and the Homer Research laboratories were discussed by Heckman and Heiney with Murphy and undercover agent Coppolet-ta. Murphy also testified that as late as November and December of 1971, three to four months after their initial discussion concerning Conspiracy I, Heckman and Heiney still desired to carry out their own actions and were becoming “impatient” waiting for “Weather” and the completion of Conspiracy II. While Coppoletta may have suggested destroying an atomic reactor instead, the jury was not compelled to find that the appellants abandoned their plans to put Conspiracy I into effect merely because government agents urged an alternative.

Under these circumstances, sufficient evidence existed for the jury to conclude that the appellants did not abandon their plans or withdraw from Conspiracy I and that the overt acts proved were in furtherance of that conspiracy.

2.

The appellants attack the trial judge’s limitation of cross-examination of Murphy and the trial judge’s refusal to grant a mistrial because of certain comments by Government witnesses.

In general, a witness may not be cross-examined for impeachment purposes as to specific acts of misconduct that did not result in any criminal convictions. Appellants claim, however, that Murphy “opened the door” to cross-examination concerning his prior arrests by denying, in the following direct examination, any “involvement” with the law subsequent to a conviction in November, 1959:

“Q. Since November of 1959 have you had any other involvement with the law — •

“A. Not at all.

“Q. —as far as being a defendant is concerned ?

“A. No.”

From the context in which Murphy was testifying it was not unreasonable for the district judge to conclude that Murphy was referring only to his conviction, not his arrests. Therefore, it was not improper for the trial judge to limit cross-examination by defense counsel for impeachment purposes to Murphy’s conviction or convictions.

The appellants also claim that on several occasions during the trial, government witnesses alluded to criminal conduct by the appellants unrelated to the case at bar, and that in view of these statements the trial judge erred in refusing to grant a mistrial. Of the comments objected to, only one merits consideration here.

During direct examination, Murphy stated that when introducing appellant Vito to “Steve Fine” (undercover agent Coppoletta), Murphy said to Vito: “You did a good job on firebombing the lower Saucon Municipal Building.” The trial judge denied a motion for a mistrial, but immediately instructed the jury to “please disregard that statement.”

The appellants argue that this Court’s recent decision in United States v. Gray’ mandates reversal in this case. Gray, however, imposed no automatic rule requiring district judges to grant mistrials whenever evidence concerning a defendant’s prior alleged misconduct is blurted out at trial. The question asked by the prosecutor in Gray — “You say your wife was killed. You killed her, didn’t you?” — was such “grievous plain error,” had such a “devastating impact” upon the minds of the jurors, and was even deemed by the trial judge in that case to be so “highly prejudicial,” that this Court was constrained to conclude that “[n]o cautionary instruction could purge the jury’s mind and memory of the devastating impact of the question ”

In the present ease, on the other hand, the statement was not such as would “irretrievably [sear] itself into the conscious and subconscious minds of the jury.” The trial court, which was in the best position to observe the effect of Murphy’s statement on the jury, expressly found “nothing prejudicial thus far” and cautioned the prosecutor to “be extremely careful in this area.” We conclude that the prompt cautionary instruction given by the trial judge adequately cured whatever damaging impact this comment may have had and that the trial court did not, therefore, abuse its discretion in refusing to grant a mistrial.

3.

Rundle and Vito claim that the evidence was insufficient to show that they knew of, or agreed to, the common plan forming the basis of the agreement between Heckman and Heiney to destroy powerlines, a railroad junction, and property of Bethlehem Steel.

The testimony demonstrated that Vito agreed to give Heckman and Heiney three sticks of dynamite, stating that he did not want payment for them so long as they were “used against the establishment”. The next day, Heckman said he knew where the dynamite was. He led Murphy and Coppoletta to Lower Saucon Park where they picked up three sticks of dynamite left for them in a garbage can.

Murphy testified that Rundle offered to show the group where he had hidden some seventeen sticks of dynamite and that later Heiney stated that Rundle had shown Coppoletta and him where the dynamite was located. Agent Coppoletta testified that before picking up the dynamite, Heiney told Rundle that “we were going to use this for the Movement, that there were no guerrillas in the Lehigh Valley, and we appreciated the dynamite from him and this was going to further the Movement.” Run-dle responded that “he didn’t care what . we did with it, he wanted to be rid of it.”

This Court has stated:

“Once the existence of a conspiracy is clearly established, slight evidence may be sufficient to connect a defendant with it.”

Although the evidence as to Vito and Rundle is hardly overwhelming, still the evidence showed that they had turned over dynamite to the other conspirators knowing that those explosives would not be used by the other defendants in a lawful manner. Rundle was told the dynamite would be used illegally, and he stated he did not care. Vito conditioned his gift upon the stipulation that it be used in an illegal manner- — against the establishment. Thus, there was sufficient evidence for the jury reasonably to infer that both Rundle and Vito were aware of the general purpose of the conspiracy, agreed to aid the other eonspir-ators, and acted in furtherance of the unlawful agreement.

4.

The appellants further urge upon this Court a number of other grounds for reversal, none of which we find meritorious. Vito claims that the trial judge improperly admitted as to him hearsay statements of Heckman under the co-conspirator exception to the hearsay rule. The general principle is that such statements are admissible only when it is shown that a conspiracy existed and that a particular defendant is connected to it. It is clear, however, that independent of such hearsay statements the Government showed Vito’s connection with the conspiracy by proof aliunde, as required by Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1942).

Vito also asserts that the prosecutor should not have been permitted to ask Vito’s character witness whether he “had heard that on June 12, 1968, Mr. Vito was cited for contempt of court by the Court of Common Pleas of Lehigh County,” because there was no showing of a factual basis for the inquiry. It is apparent, however, from the form of the prosecutor’s question, that the trial judge could reasonably have found that there was a factual basis for the inquiry and, in any event, the defendant did not specifically question this point at trial. In addition, it cannot fairly be disputed that the question was relevant in the context of the examination. The trial court did not abuse its discretion in allowing it. See Michelson v. United States, 335 U.S. 469, 69 S.Ct. 213, 93 L.Ed. 168 (1948).

Finally, appellants urge this Court to adopt a rule generally requiring the recording of grand jury testimony. Upon the Government’s answer that the testimony was not recorded, the trial judge denied the appellants’ pretrial motion for production of the grand jury proceedings and in the alternative for dismissal of the indictments. The trial judge did not err in this ruling. Rule 6(d) of the Federal Rules of Criminal Procedure permits, but does not require, the recording of grand jury testimony. The appellants have not suggested that the non-recording of grand jury proceedings generally violates due process nor have they attempted to show that the non-recording prejudiced them in this particular ease. Under these circumstances, we perceive no basis for imposition, at least by this panel, of such a recording requirement.

An order will be entered affirming the judgment of the district court.

      . 18 U.S.C. § 844(i). The parties stipulated to the interstate commerce element of the statute.

      . Heckman, Heiney, and Rundle were each sentenced to indeterminate prison terms under 18 U.S.C. § 5010(b) until release under § 5017(c). Vito was committed to' the custody of the Attorney General for a period of three years, six months to be served in a jail-type institution, and the remaining time to be placed on probation.

      . Heckman, Heiney, and Bundle filed a joint brief in which this concession was made. Vito filed a separate brief and argues not that the government failed to prove the existence of a criminal conspiracy, but that the evidence was insufficient to show his connection to any conspiracy that may have existed.

      . See Developments in the Law—Criminal Conspiracy, 72 Harv.D.Rev. 920, 957-60 (1959).

      . United States v. Borelli, 336 F.2d 376, 388 (2d Cir. 1964), cert. denied, 379 U.S. 960, 85 S.Ct. 647, 13 L.Ed.2d 555 (1965), quoting Hyde v. United States, 225 U.S. 347, 369, 32 S.Ct. 793, 56 L.Ed. 1114 (1912).

      . United States v. DeCavalcante, 440 F.2d 1264, 1273 (3d Cir. 1971); United States v. Weiss, 431 F.2d 1402, 1407 (10th Cir. 1970).

      . 468 F.2d 257 (3d Cir. 1972) (en banc).

      . Id. at 259.

      . Id. at 259-60.

      . United States v. Coben, 197 F.2d 26 (3d Cir. 1954); accord United States v. Weber, 437 F.2d 327, 336-37 (3d Cir. 1970), cert. denied, 402 U.S. 932, 91 S.Ct. 1524, 28 L.Ed.2d 867 (1971).

      . Accord United States v. Hensley, 374 F.2d 341 (6th Cir.), cert. denied, 388 U.S. 923, 87 S.Ct. 2139, 18 L.Ed. 1373 (1967); United States v. Cianchetti, 315 F.2d 584 (2d Cir. 1963); see United States v. Franklin, 429 F.2d 274 (8th Cir.), cert. denied, 400 U.S. 967, 91 S.Ct. 380, 27 L.Ed. 387 (1970). But see United States v. Gramolini, 301 F.Supp. 39 (D.R.I.1969).


author: TIMBERS, Circuit Judge:

text:
    FIRCH BAKING COMPANY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    Nos. 716, 717, Dockets 72-2187, 72-2317.
    United States Court of Appeals, Second Circuit.
    Argued May 8, 1973.
    Decided May 29, 1973.

      Wendell Davis, Jr., New York City (McConnell, Scheuermann and Davis, New York City, on the brief), for petitioner.
    Stanley J. Brown, Atty., NLRB, Washington, D. C. (Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Acting Asst. Gen. Counsel, and William F. Wachter, Atty., Washington, D. C., on the brief), for respondent.
    Before SMITH, MULLIGAN and TIMBERS, Circuit Judges.
   TIMBERS, Circuit Judge:

The essential issue presented by the Company’s petition to review, and the cross-petition by the National Labor Relations Board to enforce, an order of the Board, 199 N.L.R.B. No. 62 (1972), is whether there was substantial evidence to support the Board’s conclusion that the Company violated Section 8(a)(5) and (1) of the National Labor Relations Act, 29 U.S.C. § 158(a)(5) and (1) (1970), by unilaterally instituting changes in wages and other conditions of employment without adequate bargaining with the Union. We hold that there was substantial evidence to support the Board’s conclusion. We deny the Company’s petition to review and we enforce the Board’s order.

I.

A three-year collective bargaining agreement between Firch Baking Company of Jamestown, Inc. (the Company) and Local 15520, International Union of District 50, Allied and Technical Workers (the Union) by its terms would have been automatically renewed on January 1, 1972 unless timely notice of termination or desire to modify was given by either party. Such notice was given by the Union in October 1971. Negotiations for a new contract followed. Ten collective bargaining sessions were held, six before and four after the contract expired on January 1, 1972.

In view of the essential issue presented by the petitions before us, we focus upon the critical events of the five day period — December 27-31 — immediately preceding the expiration of the contract. Prior to December 27, negotiations had bogged down, chiefly over the Union’s proposal that at least some of the negotiations take place “on-the-clock” (during working hours), a proposal which the Company flatly rejected.

On December 27, the Company delivered to the employee members of the Union bargaining committee a letter enclosing a summary of the Company’s “fair, firm offer”, including increases in wages, changed pension benefits, changed health coverage and improved major medical benefits. This “offer” was in outline form, not in the form of proposed contractual provisions. On the same day, all bargaining unit employees received a copy of the Company’s offer. The Union’s chief negotiator received a copy of the offer two days later, on December 29, whereupon he immediately wired the Company that the Union was “willing and ready to meet immediately on mutually agreed time.”

On December 30, the Company distributed to all bargaining unit employees another letter advising that if the Union did not accept the Company’s “fair, firm offer” by the time the contract expired, the Company would have no alternative but to make the offer directly to the employees in the hope they would accept it and continue on the job. On the same day, at a bargaining session arranged by a federal mediator, the Company’s offer was discussed item by item. With the exception of agreement on two non-economic proposals, the Company’s offer was rejected by the Union in its entirety. A further bargaining session was scheduled for the following day, December 31, at 6 P.M.

At the New Year’s Eve bargaining session, the Company for the first time presented to the Union a document elaborating on and setting forth in contract form the Company’s “fair, firm offer”. Before the meeting was concluded at 11:45 P.M., the Company’s offer had been fully discussed and agreement had been reached on a number of economic as well as non-eeonomic provisions. Since agreement had not been reached on the basic contract itself, however, the Union’s chief negotiator announced that he intended to have a federal mediator present at the next bargaining session.

Upon expiration of the existing contract at midnight on January 1, 1972, the Company immediately put into effect all provisions of its “fair, firm offer”, including wage increases and other economic benefits. On January 4, the Company announced to its employees that “our unilateral offer to all of you has been in effect since 12:01 a. m. Sunday, January 2. This pay increase will be in the pay check you will receive next week.”

During January and after expiration of the contract, four additional bargaining sessions were held, with the employees remaining on the job. At the final session on January 26, the Union agreed to submit the Company’s entire contract package, as modified during negotiations, to the employees to determine whether it was acceptable. The employees on February 1 voted to accept the Company’s offer as submitted. On February 16, a new contract was signed covering the period through December 31, 1974.

Going back for a moment, on December 29, after the Union received a copy of the Company’s first letter to its employees enclosing a copy of the Company’s “fair, firm offer” and with the Union and Company still unable to agree upon the hours that negotiations should take place, the Union filed unfair labor practice charges against the Company, alleging that the Company had violated Section 8(a)(5) and (1) of the Act by refusing to meet at reasonable times for bargaining purposes and by attempting to by-pass the Union and deal directly with its employees. A complaint was issued on February 16,. 1972, the same day the new contract was signed, limited to the charge based on the Company's conduct in instituting changes in wages and other conditions of employment during the pendency of collective bargaining negotiations. The Union continued to press this charge.

Following a hearing before a trial examiner on March 27 and 28 at Jamestown, New York, the examiner on June 2 filed his decision which in effect upheld the Union’s position. His recommended order, adopted by the Board on September 29, required the Company to cease and desist from unilaterally instituting changes in wages and other conditions of employment without adequate bargaining with the Union, and required the Company to take certain affirmative action, including the posting of notices, to remedy the violations.

II.

After nearly four decades of life under the National Labor Relations Act, few obligations are more firmly established than that of an employer pursuant to Section 8(a) (5) to bargain collectively with a union representing its employees, including its duty not to alter terms and conditions of employment without first giving notice to and conferring in good faith with the union. NLRB v. Katz, 369 U.S. 736, 742-43 (1962). “Unilateral action by an employer without prior discussion with the union does amount to a refusal to negotiate about the affected conditions of employment under negotiation, and must of necessity obstruct bargaining, contrary to the congressional policy.” Id. at 747. And we have held that such unilateral action “at the end of the contract period” operates at a particularly sensitive point of labor-management relations, for “the Union’s ability to function as a bargaining representative is seriously impaired. Indeed, such conduct amounts to a declaration on the part of the Company that not only the Union, but the process of collective bargaining itself may be dispensed with.” NLRB v. General Electric Co., 418 F.2d 736, 748 (2 Cir. 1969), cert. denied, 397 U.S. 965 (1970).

Viewed against these settled principles, the Company’s conduct here in unilaterally instituting changes in wages and other conditions of employment during the pendency of collective bargaining negotiations, without affording an opportunity for good faith bargaining and agreement on its package offer, strikes us as a clear refusal to negotiate about affected conditions of employment under negotiation.

From the standpoint of timing alone, the extreme haste with which the Company put into effect its changes in wages and other conditions of employment is thoroughly convincing of bad faith in the negotiations, of disparagement of the union and of obstruction of the congressionally mandated duty to bargain collectively. The formal contract proposals of the Company’s so-called “fair, firm offer” were not presented to the Union until the evening of December 31, a few hours before the existing contract was due to expire and hardly a day before the Company put the proposals into effect. Even the preliminary summary of these proposals had been disclosed to the employee members of the Union bargaining committee and to all bargaining unit employees only four days before the formal contract proposals were submitted; and the Union’s chief negotiator learned about them two days later. The Company’s unilateral action in putting the proposals into effect came after only two bargaining sessions were held following preliminary announcement of the proposals.

The nature of the Company’s proposals was such as to demand adequate time for study and discussion — item by item, not the entire program as a package. They involved wage increases for various categories of employees, entirely new pension benefits, changed health and life insurance plans and other changes in benefits. The form of retirement plan referred to in the Company’s preliminary summary was not furnished to the Union until the December 31 meeting. The Company never provided the Union with a copy of its proposed insurance plan — showing details of its new medical, surgical and term life insurance coverage — before it became effective.

Finally, if anything further were needed to dispel any vestige of good faith bargaining intent on the part of the Company in making its “fair, firm offer”, that was surely provided by the manner in which the Company communicated the offer to its employees. All else aside, the Company's letter of December 30 to its employees, advising them “[i]n the event that the union does not accept our fair, firm offer by the time the contract expires, we have no alternative but to make our fair, firm offer to you directly”, surely placed the Company in the position, as we observed in another case, of “having created a view of the bargaining process that admitted of no compromise, [and of being] trapped by its own creation”. NLRB v. General Electric Co., supra, 418 F.2d at 760. “The aim, in a word, was to deal with the Union through the employees, rather than with the employees through the Union.” Id. at 759.

Our careful examination of the record as a whole leaves us with the firm conviction that the Company became so enamored with its “fair, firm offer” technique that it ignored its basic duty of allowing adequate time and opportunity for reasonable discussion of the essential details of its offer. The Board, in its decision affirming the trial examiner in the instant case, stated:

“Quite apart from [the Company’s] argument that N.L.R.B. v. General Electric Company, 418 F.2d 736 (C.A. 2), sanctions its ‘fair, firm offer’ bargaining strategy, which argument we do not pass upon here, [the Company’s] December 30 letter to the employees makes it clear that the ‘fair, firm offer’ was not so much an offer as it was a promise to [the Company’s] employees that a specified wage increase would be granted. Inasmuch as the employees were promised the wage increase irrespective of its acceptance or rejection by .the Union, before the increase had even been presented to the Union, therefore the wage increase was in fact a firm decision which removed the element of bargaining, and a fortiori, no good-faith bargaining impasse had resulted when the [Company] effectuated its ‘fair, firm offer.’ ”

We agree. And despite the elaborate arguments which have been pressed upon us as to whether a company may unilaterally institute changes in wages and other conditions of employment without bargaining to impasse with the union about such changes, in our view this is not an “impasse case” at all. It more aptly might be called a “poisoned fountain case”: the fountain was poisoned before it ever began to flow.

Petition to review denied; enforcement granted'.


author: EDWARDS, Circuit Judge.

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. AARON CONVALESCENT HOME, Respondent.
    No. 72-1414.
    United States Court of Appeals, Sixth Circuit.
    Argued April 17, 1973.
    Decided June 8, 1973.

      John C. Getreu, Director, Region 9, N.L.R.B., Cincinnati, Ohio by Michael Wolly, N.L.R.B., for petitioner; Marcel Mallet-Prevost, Asst. Gen. Counsel, Peter G. Nash, Patrick Hardin, Elliott Moore, N.L.R.B., Washington, D. C., on brief.
    Jonas B. Katz, David Reichert, Cincinnati, Ohio, on brief, for respondent.
    Before EDWARDS, PECK and KENT, Circuit Judges.

       Judge Kent participated in the decision in this case and concurred in this opinion prior to Ms death on May 28, 1973.

   EDWARDS, Circuit Judge.

This case involves a petition for enforcement of a National Labor Relations Board order after “summary judgment” had been entered by the Board against respondent.

Two issues are presented. The first is whether the Board order should be refused enforcement because the Board failed to set it aside on respondent’s motion for reconsideration alleging that its failure to follow the Board’s procedure by filing an answer was not due to gross or willful neglect.

The Board’s complaint was served on August 10, 1971. It stated, in accordance with § 102.20 of the Board’s Rules (29 C.F.R. 257 (1972)), that respondent had ten days within which to file an answer and that “unless it does so, all of the allegations of the complaint shall be deemed to be admitted to be true and shall be so found by the Board.” Respondent’s answer was finally filed on October 26, 1971, long after the general counsel’s motion for summary judgment on October 4, 1971.

As to this issue, we feel this record discloses no meritorious facts which required the Board to grant respondent relief. Respondent had already been in default for 30 days when its president took the three-week vacation upon which respondent chiefly relies for excuse.

The second issue, however, presents an attack upon the “summary judgment” procedure of the Board. Appellant asserts that “summary judgment” is not authorized by the Board’s own rules. Relying upon the nature of summary judgment in the United States District Courts and before other trial courts, respondent points out that what is really involved here is a default judgment.

Respondent also emphasizes that Section 10(e) of the Labor-Management Relations Act, 29 U.S.C. § 160(e) (1970), provides in part: “The findings of the Board with respect to questions of fact if supported by substantial evidence on the record considered as a whole shall be conclusive,” and that Section 10(b) of the LMRA, 29 U.S.C. § 160(b) (1970), provides in part: “The person so complained of shall have the right to file an answer to the original or amended complaint and to appear in person or otherwise and give testimony at the place and time fixed in the complaint.” (Emphasis added.)

Respondent reads these two propositions together to find therein a statutory requirement that a hearing be conducted and evidence taken in every instance, even if there has been a complaint followed by a default or waiver.

The rules relied upon by the Board are as follows:

ANSWER

§ 102.20 Answer to complaint; time for filing; contents; allegations not denied deemed admitted.

The respondent shall, within 10 days from the service of the complaint, file an answer thereto. The respondent shall specifically admit, deny, or explain each of the facts alleged in the complaint, unless the respondent is without knowledge, in which case the respondent shall so state, such statement operating as a denial. All allegations in the complaint, if no answer is filed, or any allegation in the complaint not specifically denied or explained in an answer filed, unless the respondent shall state in the answer that he is without knowledge, shall be deemed to be admitted to be true and shall be so found by the Board, unless good cause to the contrary is shown.

§ 102.21 Where to file; service upon the parties; form.

An original and four copies of the answer shall be filed with the regional director issuing the complaint. Immediately upon the filing of his answer, respondent shall serve a copy thereof on each of the other parties. An answer of a party represented by counsel shall be signed by at least one attorney of record in his individual name, whose address shall be stated. A party who is not represented by an attorney shall sign his answer and state his address. Except when otherwise specifically provided by rule or statute, an answer need not be verified or accompanied by affidavit. The signature of an attorney constitutes a certificate by him that he has read the answer; that to the best of his knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay. If an answer is not signed or is signed with intent to defeat the purpose of this rule, it may be-stricken as sham and false and the action may proceed as though the answer had not been served. For a willful violation of this rule an attorney may be subjected to appropriate disciplinary action. Similar action may be taken if scandalous or indecent matter is inserted.

* * * * -X- *

MOTIONS

§ 102.24 Motions: where to file; contents; service on other parties; promptness in filing and response.

All motions under §§ 102.16, 102.22, and 102.29 made prior to hearing shall be filed in writing with the regional director issuing the complaint. All motions for summary judgment made prior to hearing shall be filed in writing with the Board pursuant to the provisions of § 102.50. All other motions prior to hearing shall be filed in writing with the chief trial examiner in Washington, D. C., or with the associate chief trial examiner in San Francisco, Calif., as the case may be. All motions made at the hearing shall be made in writing to the trial examiner or stated orally on the record. All motions filed subsequent to the hearing, but before the transfer of the ease to the Board pursuant to 102.45, shall be filed with the trial examiner, care of the chief trial examiner in Washington, D. C., or associate chief trial examiner, San Francisco, Calif., as the case may be. All motions made subsequent to transfer of the case to, and while it is pending before, the Board shall be filed with the executive secretary of the Board in Washington, D. C., as provided in § 102.47. Motions shall briefly state the order or relief applied for and the grounds therefor. All motions prior to transfer of the case to the Board shall be filed by the moving party in an original and four copies and a copy thereof shall be immediately served on the other parties. Unless otherwise provided in these rules, motions and responses thereto shall be filed promptly and within such time as not to delay the proceedings. 29 C.F.R. §§ 102.20, 102.21 and 102.24 (1970).

We agree with respondent that the term “default judgment” more accurately describes the procedure authorized by these rules and followed in this case than does the term “summary judgment.” But we do not consider such an error in nomenclature to be fatal. Respondent not only received a written complaint setting forth the essential requirements as to its answer, but also received an additional written warning that it was in default and granting an extended time for answer. We find no fatal inadequacy in the Board Rules and no due process violations in the procedures employed in this case.

As to respondent’s claim that the statutes quoted above guarantee each respondent a hearing in every case, regardless of waiver or default, the Supreme Court has decided otherwise. The same general claim was advanced in the context of a Board enforcement petition where the Board’s order was based upon a stipulation and no evidence had been adduced. The Supreme Court rejected the claim, holding that the stipulation for a consent decree “relieved the Board of the very necessity of making a supporting record.” Labor Board v. Ochoa Fertilizer Corp., 368 U.S. 318, 323, 82 S.Ct. 344, 348, 7 L.Ed.2d 312 (1961).

Enforcement of the Board’s order is granted.


author: GOLDBERG, Circuit Judge:

text:
    Fannie THOMAS, Plaintiff-Appellee-Cross Appellant, v. MYERS-DICKSON FURNITURE COMPANY, Defendant-Appellant-Cross Appellee.
    No. 72-3461.
    United States Court of Appeals, Fifth Circuit.
    June 7, 1973.
    Cleburne E. Gregory, Alexander Co-calis, John C. Gray, Atlanta, Ga., for appellant.
    John Harris Paer, Atlanta, Ga., for appellee.
    Before BELL, GOLDBERG and SIMPSON, Circuit Judges.
   GOLDBERG, Circuit Judge:

Chief Justice Burger has very recently expressed the guiding philosophy for our interpretation of the Federal Consumer Credit Protection Act, 15 U.S.C. § 1601 et seq., more popularly known as the Truth in Lending Act, and Regulation Z, 12 C.F.R. § 226, promulgated thereunder, see 15 U.S.C. § 1604:

“Passage of the Truth-in-Lending Act in 1968 culminated several years of congressional study and debate as to the propriety and usefulness of imposing mandatory disclosure requirements on those who extend credit to consumers in the American market. By the time of passage, it had become abundantly clear that the use of consumer credit was expanding at an extremely rapid rate. From the end of World War II through 1967, the amount of such credit outstanding had increased from $5.6 billion to $95.9 billion, a rate of growth more than 4% times as great as that of the economy. Yet, as the congressional hearings revealed, consumers remained remarkably ignorant of the nature of their credit obligations and of the costs of deferring payment. Because of the divergent, and at times fraudulent, practices by which consumers were informed of the terms of the credit extended to them, many consumers were prevented from shopping for the best terms available and, at times, were prompted to assume liabilities they could not meet. Joseph Barr, then Under Secretary of the Treasury, noted in testifying before a Senate subcommittee that such blind economic activity is inconsistent with the efficient functioning of a free economic system such as ours, whose ability to provide desired material at the lowest cost is dependent on the asserted preferences and informed choices of consumers.

“The Truth-in-Lending Act was designed to remedy the problems which had developed. The House Committee on Banking and Currency reported, in regard to the then proposed legislation:

‘[B]y requiring all creditors to disclose credit information in a uniform manner, and by requiring all additional mandatory charges imposed by the creditor as an incident to credit be included in the computation of the applicable percentage rate, the American consumer will be given the information he needs to compare the cost of credit and to make the best informed decision on the use of credit.’

This purpose was stated explicitly in § 102 of the legislation enacted:

‘The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaging in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the costs thereof by consumers. It is the purpose of this sub-chapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.’

“The hearings held by Congress reflect the difficulty of the task it sought to accomplish. Whatever legislation was passed had to deal not only with the myriad forms in which credit transactions then occurred, but also with those which would be devised in the future. To accomplish its desired objective, Congress determined to lay the structure of the Act broadly and to entrust its construction to an agency with the necessary experience and resources to monitor its operation. Section 105 delegated to the Federal Reserve Board broad authority to promulgate regulations necessary to render the Act effective. The language employed evinces the awareness of Congress that some creditors would attempt to characterize their transactions so as to fall one step outside whatever boundary Congress attempted to establish. It indicates as well the clear desire of Congress to insure that the Board had adequate power to deal with such attempted evasion. In addition to granting to the Board the authority normally given to administrative agencies to promulgate regulations designed to ‘carry out the purposes’ of the Act, Congress specifically stated:

‘These regulations may contain such classifications, differentiations, or other provision, and may provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Board are necessary or proper ... to prevent circumvention or evasion [of the Act], or to facilitate compliance therewith.’

The Board was thereby empowered to define such classifications as were reasonably necessary to insure that the objectives of the Act were fulfilled, no matter what adroit or unscrupulous practices were employed by those extending credit to consumers.”

Mourning v. Family Publications Service, Inc., 1973, 411 U.S. 356, 93 S.Ct. 1652, 1657, 36 L.Ed.2d 318, (1973) (footnotes omitted), reversing 5 Cir. 1971, 449 F.2d 235. Further, in the words of Chief Justice Burger we are told:

“The Truth-in-Lending Act reflects a transition in congressional policy from a philosophy of let-the-buyer-beware to one of let-the-seller-disclose. By erecting a barrier between the seller and the prospective purchaser in the form of hard facts, Congress expressly sought ‘to . . . avoid the uniformed use of credit.’ 15 U.S.C. § 1601. Some may claim that it is a relatively easy matter to calculate the total payments to which petitioner was committed by her contract with respondent; but at the time of sale, such computations are often not encouraged by the solicitor or performed by the purchaser. Congress has determined that such purchasers are in need of protection ....
“That the approach taken may reflect what respondent views as an undue paternalistic concern for the consumer is beside the point. The statutory scheme is within the power granted to Congress under the Commerce Clause. It is not a function of the courts to speculate as to whether the statute is unwise or whether the evils sought to be remedied could better have been regulated in some other manner.”

Id., 411 U.S. at 377, 93 S.Ct. at 1664 (footnotes omitted).

This is a case raising three important questions of first impression regarding the proper application of various provisions of the Truth in Lending Act and Regulation Z. More specifically, we are here concerned with Regulation Z’s requirement that creditors include the cost of “credit life insurance” in the computations of “finance charges” and “annual percentage rates” that they are required to disclose to consumers. See 12 C.F.R. § 226.4(a)(5). We are called upon to decide (1) whether “open end credit accounts” in existence prior to the effective date of the regulatory scheme must nonetheless strictly comply with those disclosure requirements, (2) whether the statutorily minimum damages may be imposed for each incorrect disclosure of this information and thus are not limited to one imposition per customer account, i. e., whether minimum damages may be imposed for each violative “periodic statement,” and (3) whether attorney’s fees may be awarded for work done on appeal on behalf of a successful litigant. Only the first two of these questions were before the trial judge, and he answered both in the affirmative. We agree that these issues were correctly decided, and we affirm both holdings. As to the third issue, we conclude that attorney’s fees are authorized for appellate legal work, and we here award such fees in an amount to be determined by the District Court.

I. THE FACTUAL SETTING & ACTION BELOW

The facts giving rise to this action are not seriously disputed. Plaintiff, Fannie Thomas, opened an “open end credit account” with defendant, Myers-Dickson Furniture Company, on October 16, 1968, at which time she made an initial purchase. She made additional purchases on April 14, 1970, September 25, 1970, and November 13, 1970, and each time the amount of the purchase was added to her account balance. During the period here in question, September 1970 to August 1971, defendant sent plaintiff eleven monthly statements of her account and plaintiff made one payment each month.

The Truth in Lending Act and Regulation Z became effective on July 1, 1969. On June 28, 1969, defendant had mailed plaintiff a “credit disclosure” letter in compliance with § 226.7(f) of Regulation Z. Among the terms disclosed in the letter was the cost of credit life insurance carried on plaintiff’s account with defendant. Defendant thereafter continued sending plaintiff monthly statements of her account, including the eleven statements here in question, none of which included the cost of credit life insurance as an element of the “finance charge” stated on each document. Each of the monthly statements did, however, contain a separately stated charge for credit life insurance. Since plaintiff was not required to and never chose to pay the entire outstanding balance on her account at one time, each “periodic statement” imposed a different and additional “finance charge” (computed on the then outstanding balance) as well as a new and different credit life insurance charge.

One of the disclosure requirements created by the Act and Regulation Z was that the “finance charge” must include, inter alia, the following:

“(5) Charges or premiums for credit life, accident, health, or loss of income insurance, written in connection with any credit transaction unless
(1) The insurance coverage is not required by the creditor and this fact is clearly and conspicuously disclosed in writing to the customer ; and
(2) Any customer desiring such coverage gives specific dated and separately signed affirmative written indication of such desire after receiving written disclosure to him of the cost of such insurance.”

Regulation Z, 12 C.F.R. § 226.4(a)(5). It is uncontested that plaintiff never gave defendant a separately signed and dated insurance authorization and that defendant sent plaintiff eleven monthly statements after the effective date of the regulatory scheme that did not include the cost of credit life insurance charges within the “finance charge” itself.

Plaintiff filed this action under the Truth in Lending Act, alleging that defendant’s failure to include the insurance charges in the “finance charge” constituted violations of § 226.4(a)(5). The court below agreed and, following a non-jury trial, entered judgment for plaintiff. Ruling that each statement that failed to include the insurance charge in the “finance charge” constituted a separate violation, the court granted plaintiff damages of $1,100, the statutory minimum for each violation being $100 and there being eleven such defective “periodic statements.” Finally, the court heard testimony regarding an award of attorney’s fees, which is specifically authorized by § 130 of the Truth in Lending Act, 15 U.S.C. § 1640, and awarded plaintiff $500 in attorney’s fees as well as the costs of her action.

Defendant brings this appeal, arguing that it was not required to comply with § 226.4(a)(5) as to pre-existing accounts and that, even if it was, the Act contemplates only one award of minimum damages per account. Plaintiff cross-appeals, arguing that the award of attorney’s fees already granted is insufficient and an abuse of discretion and that attorney’s fees for work done on appeal ought also to be awarded.

II. APPLICABILITY OF DISCLOSURE REQUIREMENTS TO PREEXISTING ACCOUNTS

There is no question that a violation of § 226.4(a)(5) would have been shown here if plaintiff had opened her account with defendant after the effective date of the Act. In each of the eleven challenged “periodic statements,” defendant failed to include the insurance charge within the “finance charge” shown on the statement, even though defendant did not have a “specific dated and separately signed” insurance authorization from plaintiff. Indeed, if defendant has improperly understated the “finance charge,” it has also improperly understated the “annual percentage rate,” which is computed from the “finance charge.” See 12 C.F.R. § 226.5.

Plaintiff’s account having been opened before the Act became effective, defendant argues that because it has complied with § 226.7(f) of Regulation Z by sending the letter of June 28, 1969, it need not now comply with § 226.4(a) (5). We cannot agree. Section 226.7(f) merely provides that:

“In the ease of any open end credit account in existence and in which a balance remains unpaid on July 1, 1969 . . . the items described in paragraph (a) of this section [the terms that a creditor must disclose to a customer opening an account after the Act becomes effective] shall be disclosed in a notice mailed or delivered to the customer not later than July 31, 1969. . . .”

Defendant argues that this language creates a “grandfather clause” excusing all pre-existing “open end credit accounts” from compliance with the ongoing disclosure requirements of § 226.-4(a)(5), but nowhere in the Act or in Regulation Z do we find any such exception. Defendant argues nonetheless that such an exception should be implied from two factors. First, defendant relies on the fact that pre-existing- “open end credit accounts” are not mentioned elsewhere in Regulation Z to support the inference that § 226.7(f) contains the only disclosure requirements applicable to such pre-existing accounts. Secondly, defendant urges that the “obvious intent of this ['§ 226.7(f)] disclosure to existing accounts was to relieve a business from the impractical requirement of obtaining signed credit life elections and disclosures from the holders of its numerous existing accounts. . . . ”

Defendant’s efforts to create an “existing-accounts exception” from the disclosure requirements of Regulation Z must fail. As to its first theory, we deem it sufficient to iterate that “exceptions” not mentioned in the Act should not lightly be read into it, Buford v. American Finance Co., N.D.Ga.1971, 333 F.Supp. 1243, 1247, and we can perceive no good reason for our creating the exception defendant here urges. See also Mourning v. Family Publications Service, Inc., supra. Nor is defendant’s second theory persuasive, for we understand that the promulgation of § 226.-7(f) reveals an altogether different intent. Section 226.7 sets out the specific disclosures required for all “open end credit accounts.” Section 226.7(a), for example, lists eight items that must be disclosed — at the time an account is opened — -to every customer who opens such an account after the effective date of the Act. Rather than creating a special category of “open end credit accounts,” we think it clear that § 226.-7 (f) merely guarantees that pre-existing “open end credit accounts” will receive the identical level of protection that such post-Act accounts are afforded. Under § 226.7(a) “new” accounts are given certain disclosures at the time of opening; “old” accounts are placed on a par by the requirement that the same disclosures be made after the Act’s effective date, i. e., under the circumstances enumerated in § 226.7(f). Furthermore, we reject the argument that creditors may excuse their actions not in compliance with the regulatory scheme by arguing that to comply will place a “commercially unfeasible burden” on them. E. G., Douglas v. Beneficial Finance Co., D.Alas.1971, 334 F.Supp. 1166, 1175, rev’d on other grounds, 9 Cir. 1972, 469 F.2d 453. In that regard, we note that at the time defendant sent out its § 226.7(f) disclosure letters, it might have been able to ease its “burden” by including a § 226.4(a)(5) insurance authorization form in the same envelopes.

Defendant’s view of this ease misconceives the central thrust of the Truth in Lending Act and Regulation Z. The stated purpose of the Act’s disclosure provisions is “to assure a meaningful disclosure of credit terms so that the customer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.” 15 U.S.C. § 1601. See also Mourning v. Family Publications Service, Inc., supra, 411 U.S. at 363-369, 93 S.Ct. 1652, § I. In order to enhance the consumer’s ability to shop for credit intelligently, the Act created the terms “finance charge” and “annual percentage rate” as standards that the consumer might look to in determining the actual cost to him of using credit. Buford v. American Finance Co., supra. See also Ratner v. Chemical Bank New York Trust Co., S.D.N.Y.1971, 329 F.Supp. 270; Bostwick v. Cohen, N.D.Ohio 1970, 319 F.Supp. 875. To implement this general purpose, two types of disclosures are required for “open end credit accounts.” First, a disclosure must be made when the account is opened advising the consumer what will or may happen to his account. See § 226.7(a). Defendant has complied with this requirement by sending plaintiff the notice contemplated by § 226.7(f). But secondly, the creditor is required to send “periodic statements” to users of its “open end credit accounts” advising them what has happened to their accounts. See § 226.-7(b).

The regulatory scheme is clearly intended to allow consumers to look to one place on the “periodic statement” to see what the cost of credit is, and defendant admits that the statement it sent plaintiff would violate Regulation Z, 12 C.F. R. § 226.4(a)(5), if employed for accounts opened after July 1, 1969. That seemingly harsh result is necessary, however, if consumers are to be able to (1) intelligently shop for credit, and (2) intelligently assess the costs of continuing to use that credit. Defendant has failed to include a required item within its listing of the “finance charge” on the “periodic statements” it sent plaintiff, and we hold that this non-disclosure is excused neither by the fact that this individual “open end credit account” was opened before the effective date of the Act nor by the fact that defendant has complied with § 226.7(f).

The biologism of the “grandfather clause” suggested by defendant would project progeny and lineal descendants ad infinitum. Instead of establishing this anomolous result, a realistic reading suggests that Regulation Z was intended to delineate the specifies of charges imposed after the Act’s effective date and necessitates a continuum of their monthly permutations. It would have been a simple matter and the grist of their daily 'Congressional mill for the Congress to have employed explicit words of prospectivity if such a result had been intended. We are satisfied that violations of § 226.4(a) (5)’s disclosure requirements have been established, and we turn now to a consideration of the proper measure of damages for those violations.

III. COMPUTATION OF DAMAGES

Once a violation has been found under the Act or its implementing regulations, damages are set by § 130 of the statute:

“(a) Failure to disclose.
“Except as otherwise provided in this section, any creditor who fails in connection with any consumer credit transaction to disclose to any person any information required under this part to be disclosed to that person is liable to that person in an amount equal to the sum of
(1) twice the amount of the finance charge in connection with the transaction, except that the liability under this paragraph shall not be less than $100 nor greater than $1,000; and
(2) in the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney’s fee as determined by the court.”

15 U.S.C. § 1640. Thus, under the statute, the amount of damages to be awarded when disclosure violations are found is not discretionary: The court must award the successful litigant-consumer twice the “finance charge” involved in the relevant transaction, with the minimum award being $100 and the maximum being $1,000. The principal issue that we must decide regarding the application of the statute is whether use of the word “transaction” in § 1640(a) limits the creditor’s liability to any one customer for disclosure violations to one imposition of damages in the $100 to $1,000 range. We hold that damages are not so limited.

The parties have not cited to us any legislative history that can guide our interpretation of the statute, and our reading of the appropriate Congressional reports reveals that the problem seems not to have been addressed in language more specific than the statute itself. We must therefore turn elsewhere for guidance as to the meaning of “transaction” as used in § 1640(a).

Defendant insists that the word “transaction” carries with it an implied Congressional rejection of assigning the meaning “violation” to the statute. The sole authority relied upon to support this argument is the “Annual Report to Congress for the Year 1971 by the Board of Governors of the Federal Reserve System on Truth in Lending,” which states as follows:

“Section 130 of the Act [15 U.S.C. '§ 1640] provides that a creditor is liable for a minimum of $100 for failure to make proper disclosure in connection with any consumer credit transaction. There is some uncertainty as to the meaning of ‘transaction’ when applying Section 130 to a possible error on a periodic statement used in connection with an open account. It might be contended that each separate purchase for which a credit card is used constitutes a ‘transaction’ for purposes of Section 13b, or that each periodic statement is a transaction. More likely the opening and use of the account is a single transaction.”

Id. at p. 18. Although official Federal Reserve Board interpretations of the Act are normally entitled to great weight, see Douglas v. Beneficial Finance Co., supra, 334 F.Supp. at 1175-1176, we note that the above-cited report does not purport to be an official Board interpretation, was not promulgated pursuant to the Board’s rule-making or legislative function, and is not binding on the Board itself; rather, the quoted portion of the report is merely a suggestion that the stated, interpretation is the “more likely” meaning of the statute. The suggested interpretation is by no means binding on this Court, and we decline to follow it.

Within the “open end credit account” context, “transaction” more logically refers to each “periodic statement.” One of the primary characteristics of these accounts is that, “the customer has the privilege of paying the balance in full or in installments,” see note 1 supra, and each month’s billing statement may therefore be viewed as an invitation to the customer to decline to pay off the balance and instead to “carry his account on credit” with a new and different “finance charge” being imposed. Conversely, the limitation defendant urges us to place on the statute would be both illogical and inconsistent with the purposes of the Act. Defendant’s argument reduces itself to the basic proposition that the opening and use of an “open end credit account” is a single “transaction” and the only event covered by the statute. How that interpretation could be applied to an ongoing series of sales and monthly billings is not clear. If, for example, a customer purchased an item one year and paid a “finance charge” of $50, the customer would, upon discovering a violation of the Act or Regulation’s Z disclosure provisions, be able to recover twice the “finance charge” or $100. If the next year the same customer were to purchase a second item and incur a “finance charge” of $500, he would normally be entitled to recover $1,000 upon the discovery of a disclosure violation. Under defendant’s view of the statute, however, the creditor could never be liable for a cumulative total in excess of $1,000, and the plain words of § 1640(a) thus could not be applied to the second violation. The facts of the instant ease also demonstrate the difficulty with defendant’s position. This particular customer, Fannie Thomas, made four separate purchases from defendant — three after the Act took effect — and she received eleven different “periodic statements,” each of which imposed a new and different “finance charge.” Each statement solicited, albeit sub silentio, a new credit obligation to extend some portion of her outstanding balance for yet another month.

Finally, it is undisputed that the mandatory disclosure provisions of the Act and Regulation Z apply with equal force to each and every “periodic statement,” and we note that the word “transaction” is used elsewhere in Regulation Z in what is obviously a plural context. See § 226.7(a). Under the totality of the circumstances herein enumerated, we hold that as to “open end credit accounts,” each “periodic statement” that imposes a new “finance charge” constitutes a separate transaction within the meaning of 15 U.S.C. § 1640(a).

IV. ATTORNEY’S FEES

Plaintiff cross-appeals from the trial court’s allegedly insufficient award of attorney’s fees, which are specifically provided for in the Act-:

“[I]n the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney’s fee as determined by the court.”

15 U.S.C. § 1640(a)(2). At the conclusion of the action below, the trial judge conducted a hearing in which he explored, inter alia, the amount of time plaintiff’s attorney spent on this case, the amount of time other lawyers might have spent on her case had they represented her, the hourly rate plaintiff’s attorney usually charged his clients, and the prevailing rate charged by lawyers of similar age and experience in the area. The court, without stating his reasons, then awarded plaintiff $500 in attorney’s fees.

Section 1640(a)(2) leaves the determination of what fee is “reasonable” to the court, and plaintiff admits that the test on appellate review is whether the trial judge abused his discretion. E. g., Weeks v. Southern Bell T. & T. Co., 5 Cir. 1972, 467 F.2d 95. Applying that test to the instant facts, we find that the $500 award falls within the range of amounts that could be called reasonable. That figure could, for example, be calculated by multiplying “hours reasonably expended” (as testified to at the hearing) by “reasonable rate per hour” (again on the basis of testimony before the court). The award is admittedly at the lower end of the scale of fees that could have been determined on the basis of the conflicting testimony before the court, but without suggesting that the court is either bound or limited in any way by such testimony, see Weeks v. Southern Bell T. & T. Co., supra, we find that no abuse of discretion occurred here.

Plaintiff argues further, however, that even if the award already entered is not increased, separate fees should be allowed for her attorney’s work on this appeal. We agree, for the Act allows fees in “any successful action,” and an action cannot be said to be “successful” when an appeal is taken unless the victory below is defended on appeal. Accordingly, we direct that the District Court (1) conduct a further hearing and determine the amount that will reasonably compensate plaintiff’s attorney for his efforts expended on appeal, and (2) enter an order awarding that amount as attorney’s fees under § 1640(a)(2). We are confident that in determining this amount, the able trial judge will take into account the fact that plaintiff’s attorney has won his client’s case in a new and difficult area of the law.

V. CONCLUSION

The result we reach today is consistent with the statute’s goal of creating a system of “private attorney generals” who will be able to aid the effective enforcement of the Act. Section 1640 is intended to allow aggrieved consumers to participate in policing the Act, Ratner v. Chemical Bank New York Trust Co., supra, and its language should be construed liberally in light of its broadly remedial purpose. Id. The domain of consumer credit with its allied commercial practices is no longer in the laissez faire era of caveat emptor. That doctrine is increasingly relegated to its proper place as a historical relic without modern application. The regulatory scheme forcefully expounds an emerging ethic of “caveat vendor,” and we will not strain to avoid giving effect to the Federal Consumer Credit Protection Act.

Affirmed and remanded for a hearing on attorney’s fees on appeal.

      . Section 226.2 (r) of Regulation Z defines the term as follows:
      “ ‘Open end credit’ means consumer credit extended on an account pursuant

        to a plan under which (1) the creditor may permit the customer to make purchases or obtain loans, from time to time, directly from the creditor or indirectly by use of a credit card, check, or other device, as the plan may provide; (2) the customer has the privilege of paying the balance in full or in installments; and (3) a finance charge may be computed by the creditor from time to time on an outstanding unpaid balance. The term does not include negotiated advances under an open end real estate mortgage or a letter of credit.”

      . Section 226.7(f) provides as follows:
      “(f) Open end credit accounts existing on July 1, 1969. In the case of any open end credit account in existence and in which a balance remains unpaid on July 1, 1969, and which balance is deemed to be collectible and not subject to delinquency collection procedures, the items described in paragraph (a) of this section, to the extent applicable, shall be disclosed in a notice mailed or delivered to the customer not later than July 31, 1969. ...”

      . The periodic statement defendant sent plaintiff in September 1970, for example, showed the following figures typed onto a form:
      Previous Balance: 255.70
      Purchases and Charges: 66.85 (09-26)
      Payments and Credits: 20.00 (09-26)
      Finance charge rate applied average balance: to this 321.26
      FINANCE CHARGE: 4.82
      Credit Life Ins.: .49
      New Balance: 307.86
      Periodic Rate: 1.50% per month
      Annual Percentage Rate: 18.0%

      . Such actions are authorized by 15 U.S.C. § 1640(e) and 28 U.S. § 1337.

      . E. g., H.R.Rep.No.1040, H.R.Banking & Currency Comm.Rep. on H.R. 11,601, 90th Cong., 2d Sess., U.S.Code Congressional & Administrative News at p. 1976 (1968) (“a minimum penalty of $100 and a maximum penalty not to exceed $1,000 on any individual credit transaction”) ; id., at p. 1987 (“a minimum of $100 and a maximum of $1,000 for failure to comply with” the disclosure requirements of the Act).


author: SOBELOFF, Senior Circuit Judge:

text:
    UNITED STATES of America and Tobe H. Todd, Jr., Revenue Agent, Internal Revenue Service, Appellee, v. Charles THEODORE, as Vice-President of Theodore Accounting Service, P. A., and Theodore Accounting Service, a Professional Association, Appellants.
    No. 72-2390.
    United States Court of Appeals, Fourth Circuit.
    Argued April 2, 1973.
    Decided May 31 1973.

      William B. Shearer, Jr., Greenville, S. C. (Robert A. Dobson, III, and Dobson & Dobson, Greenville, S. C., on brief) for appellants.

      Charles E. Anderson, Atty., Tax Division, U. S. Dept, of Justice (Scott P. Crampton, Asst. Atty. Gen., Meyer Roth-wacks and John P. Burke, Attys., Tax Division, U. S. Dept, of Justice, John K. Grisso, U. S. Atty., and J. D. McCoy, III, Asst. U. S. Atty., on brief) for appellee.
    Before SOBELOFF, Senior Circuit Judge, and FIELD and WIDENER, Circuit Judges.
   SOBELOFF, Senior Circuit Judge:

This appeal results from a proceeding initiated by the Internal Revenue Service to enforce an administrative summons issued pursuant to 26 U.S.C. § 7602. This section authorizes IRS to summon anyone in possession of pertinent records to appear and produce them, for the purpose of either ascertaining the correctness of any return or determining the correct tax liability of any person. Section 7604(b) then authorizes District Courts to enforce 7602 summonses. In the instant case, the District Court ordered Charles Theodore, vice president of Theodore Accounting Service, P. A., and custodian of its records, to produce for examination and/or copying:

(1) All accounting records, workpa-pers, correspondence, memoranda and other documents in your possession or used by you in connection with the preparation of all Federal Income Tax returns for your customers and clients for the years 1969, 1970, and 1971.
(2) All retained copies of 1969, 1970 and 1971 Federal Income Tax returns, the originals of which were prepared by you for your customers and clients.

From this order, Appellants Theodore and Theodore Accounting Service now appeal.

I

In an effort to strike at one source of tax cheating, IRS initiated in 1972 a nationwide project to investigate individual professional tax preparers to determine whether they were filing accurate returns for their clients. To this end, special agents of the IRS’s Intelligence Division, posing as ordinary customers, were sent to the offices of selected preparers. In this guise, the undercover agent would provide the preparer with all the information needed to complete a return. The preparer’s work product would then be audited carefully to determine whether he had used accurately the information furnished him. If it appeared that the information had been used improperly but there was insufficient evidence of wrongdoing to warrant immediate criminal prosecution, the case would be transferred to IRS’s Audit Division.

The Audit Division then promptly would issue a cease and desist order and ask the suspect preparer for copies of all other returns prepared by him. The alleged purpose of this request was to ascertain whether the suspect preparer had erred in computing the tax liabilities of his other clients as well. IRS would resort to a section 7602 summons to compel production only if a preparer refused voluntarily to make available for audit the requested information. If, during the course of IRS’s auditing the returns of the preparer’s other clients, errors in computing tax liabilities were uncovered, the affected taxpayers would be contacted to pay additional tax. And, if sufficient evidence were collected during the investigation to support criminal prosecution of the tax preparer involved, the matter would be referred back to the Intelligence Division for that purpose.

As part of this nationwide project, an IRS undercover agent visited the Theodore Accounting Service posing as a prospective client seeking assistance in the preparation of his tax return. A subsequent audit of the return prepared by the Theodore firm for the agent revealed that an incorrect tax refund had been requested. Thereupon, IRS issued a cease and desist order and requested access to all of the Theodore firm’s records relating to tax returns prepared from 1969 through 1971 so that the service might “correct all tax returns which have been incorrectly prepared.” Charles Theodore refused to give IRS the requested information and a section 7602 administrative summons was issued. The District Court enforcement proceeding and this appeal then followed.

II

The appellants initially raise several jurisdictional objections to the enforcement of the summons. We find none meritorious. It is first contended that since Charles Theodore rather than the corporation was named as party to the action, the District Court’s enforcement order should be reversed and the summons quashed. This argument makes little sense. Charles Theodore is the proper party. Indeed, as the officer of the corporation who has custody and care of the records described, he is a member of the class specifically described in section 7602 — “any person having possession, custody, or care of books of account.” See United States v. Held, 435 F.2d 1361, 1364-1365 (6 Cir. 1970); also see Fed.R.Civ.P. 17(b).

Next, appellants argue that since Theodore Accounting Service, P. A., has never filed articles of association as is required by South Carolina law, the partnership never became a valid corporation and the requested records are therefore the personal property of Charles Theodore, entitled to Fifth Amendment protection. We agree with the District Court, Theodore v. United States, 347 F.Supp. 1070, 1071-1072 (D.S.C.1972), that the evidence presented demonstrates convincingly that Theodore Accounting Service held itself out to the general public and to the governments of South Carolina and the United States as a professional association and is now to be estopped from denying the existence and viability of its corporate entity. We further agree with the District Court that South Carolina continues to recognize de facto corporations and corporations by estoppel, see Theodore, supra, at 1072, citing Bethea v. Allen, 177 S.C. 534, 181 S.E. 893 (1935), and Dargan v. Graves, 252 S.C. 641, 168 S.E.2d 306 (1969), and that the privilege of self-incrimination is a purely personal one which cannot be invoked by or on behalf of a corporation or professional association. See Theodore v. United States, supra. Cf. United States v. Bell, 448 F.2d 40 (9 Cir. 1971) (sole owner of corporation cannot assert personal privilege against incrimination as valid ground for refusing to produce corporate records).

Ill

The appellants also interpose what is commonly known as the criminal purpose objection. This court is urged to refuse enforcement of the section 7602 summons on the ground that while ostensibly issued in furtherance of the civil investigation of those for whom Theodore Accounting Service had prepared returns, in actuality the summons was issued to pursue a criminal investigation of Charles Theodore personally. The Supreme Court settled this issue in Donaldson v. United States, 400 U.S. 517, 536, 91 S.Ct. 534, 545, 27 L.Ed.2d 580 (1971), where it said:

We hold that under § 7602 an internal revenue summons may be issued in aid of an investigation if it is issued in good faith and prior to a recommendation for criminal prosecution.

Only where the sole objective of the investigation is to obtain evidence for use in a criminal prosecution will the purpose of the summons be said to violate the Fourth Amendment and enforcement be denied. The fact that the summons in reality may have a dual purpose or that the civil investigation may produce evidence that subsequently may be used in a criminal prosecution is no basis for objection. See Donaldson v. United States, supra; United States v. Held, 435 F.2d 1361 (6 Cir. 1970); United States v. Ruggeiro, 425 F.2d 1069 (9 Cir. 1970), cert. denied sub nom. Kyriaco v. United States, 401 U.S. 922, 91 S. Ct. 868, 27 L.Ed.2d 826 (1971); United States v. Salter, 432 F.2d 697 (1 Cir. 1970). There is ample evidence to support the District Court’s finding that the Internal Revenue Service has not as yet recommended that Charles Theodore be prosecuted and that the Service has a genuine interest in auditing the returns of Theodore’s clients to collect any deficiencies owed the Government. That a collateral result of this endeavor may be the eventual prosecution of Charles Theodore and that the Government has refused to promise him immunity from prosecution is of no consequence and in no way indicates any lack of good faith on the part of IRS. Nor does it make any difference that Theodore is not a taxpayer whose civil liability is being investigated but rather a third party in possession of pertinent records. See Hinchcliff v. Clarke, 371 F.2d 697 (6 Cir. 1967).

IV

While we agree with IRS that appellants’ jurisdictional arguments and criminal purpose objection are without substance, we nevertheless reverse the District Court’s enforcement of the section 7602 summons for reasons set forth below.

Theodore raises a serious objection to the compass of the summons in suit. Indeed the particular summons issued in this case is unprecedented in its breadth. IRS is asking for copies of all the returns of all Theodore’s clients for the years 1969, 1970 and 1971, and all records, memos, workpapers, etc., pertaining to the returns. We are told that this involves some 1500 returns and accompanying documentation.

Courts have in the past sanctioned the use of John Doe summonses, but all such cases involved either a single unidentified taxpayer or a small group of unknown taxpayers. See, e. g., Tillotson v. Boughner, 333 F.2d 515, cert. denied, 379 U.S. 913, 85 S.Ct. 260, 13 L.Ed.2d 184 (7 Cir. 1964). IRS maintains that “The fact that in these cases only one or a few taxpayers were involved has no effect on the precedential value of these cases to the instant one.” We cannot agree.

The Fourth Amendment prohibition against unreasonable searches and seizures does not require that administrative summonses meet a “probable cause” standard in order to be enforceable. United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964). Nonetheless, the Internal Revenue Service is not to be given unrestricted license to rummage through the office files of an accountant in the hope of perchance discovering information that would result in increased tax liabilities for some as yet unidentified client. Section 7602 summonses were not meant to give the IRS such investigative and inquisitorial power.

A summons will be deemed unreasonable and unenforceable if it is overbroad and disproportionate to the end sought. United States v. Harrington, 388 F.2d 520, 523 (2 Cir. 1968). The Government cannot go on a “fishing expedition” through appellants’ records, United States v. Dauphin Trust Co., 385 F.2d 129 (3 Cir. 1967); contra United States v. Giordano, 419 F.2d 564 (8 Cir. 1969), and where it appears that the purpose of the summons is “a rambling exploration” of a third party’s files, it will not be enforced. See United States v. Harrington, supra. Indeed, we agree with Judge Lumbard that “[t]his judicial protection against the sweeping or irrelevant order is particularly appropriate in matters where the demand for records is directed not to the taxpayer but to a third-party who may have had some dealing with the person under investigation.” United States v. Harrington, supra. (Emphasis added.)

Section 7602 summonses are not meant to serve as a tool to police the accounting profession. Nor are they to be used to obtain from large accounting firms the complete records of all clients so that the IRS might determine if there is an error in the return of some unknown taxpayer. Section 7602 provides that “[f]or the purpose of ascertaining the correctness of any return * * * determining the liability of any person * * * the Secretary or his delegate is authorized (1) to examine any books, papers, records or other data which may be relevant or material to such inquiry.” (Emphasis added.) We hold that this language only allows IRS to summon information relating to the correctness of a particular return or to a particular person and does not authorize the use of open-ended Joe Doe summonses. Therefore, we find the summons directing Charles Theodore to produce all of the returns and all of the work records relating to all of his clients for the years 1969-1971 is too broad and too vague to be enforced. We reverse the District Court’s order enforcing the summons.

V

There exists yet another ground for refusing to enforce that portion of the section 7602 summons that orders production of the federal income tax returns of all Theodore clients for the years 1969, 1970 and 1971 retained by the accounting firm. When the Supreme Court held in United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964), that the Commissioner did not have to meet a probable cause standard to obtain enforcement of section 7602 summonses in District Courts, it established three other prerequisites to enforcement. The Commissioner was to be required to show that his investigation was being conducted for a legitimate purpose, that the particular information being sought was relevant to that purpose, and that the information was not already within the Commissioner’s possession. The appellants contend that the Commissioner already has in his possession copies of all the requested returns and that it would therefore be an abuse of process to order Theodore to turn over copies of these returns to the IRS.

The District Court rejected appellants’ argument, adopting a very narrow definition of possession. The District Court, while finding that returns were on file in the regional filing center, reasoned that it would constitute an enormous and unjustifiably expensive undertaking for the Commissioner to search all -of the returns in the center to find those prepared by Theodore. There is nothing in the record to support the conclusion that when IRS knows the name and social security number of a taxpayer, the Service cannot readily obtain his return. The obligation is upon the Commissioner to demonstrate that the material requested is not within his possession or, that if it is technically within his possession, he has no practical way of obtaining the desired item.

VI

IRS also seeks a list of the names, addresses and social security numbers of all of Theodore’s clients. Pursuant to an order of the District Court, Theodore deposited, in camera, a sealed list of all taxpayers for whom his accounting service prepared returns during the years in question.

We agree with the District Court that the Commissioner has been granted by Congress ample power to inquire and obtain the names of these taxpayers by the use of the section 7602 summons if the information is not otherwise accessible to him. In oral argument we were told that the returns for tax year 1972 were the first which required a preparer’s identification number. We do not know whether this means that there is no way short of a manual search to obtain the requested taxpayer lists for the years 1969, 1970 and 1971. Therefore, we remand to the District Court to determine whether or not IRS has any reasonable or practical means at its disposal to compile the desired lists. Should it be determined that the list of Theodore clients for the desired years is not accessible to the IRS, the section 7602 summons should be enforced to the extent of turning over to IRS the list of Theodore clients now on deposit with the District Court.

Reversed and remanded with instructions.

      . 26 U.S.C. § 7602 provides: Examination of books and witnesses.
      For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary or his delegate is authorized—
      (1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;
      (2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary or his delegate may deem proper, to appear before the Secretary or his delegate at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and
      (3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry.

      . (b) Enforcement. — Whenever any person summoned under section 6420(e) (2), 6421 (f)(2), 6424(d)(2), or 7602 neglects or refuses to obey such summons, or to produce books, papers, records, or other data, or to give testimony, as required, the Secretary or his delegate may apply to the judge of the district court or to a United States commissioner for the district within which the person so summoned resides or is found for an attachment against him as for a contempt. It shall be the duty of the judge or commissioner to hear the application, and, if satisfactory proof is made, to issue an attachment, directed to some proper officer, for the arrest of such person, and upon his being brought before him to proceed to a hearing of the case; and upon such hearing the judge or the United States commissioner shall have power to make such order as he shall deem proper, not inconsistent with the law for the punishment of contempts, to enforce obedience to the requirements of the summons and to punish such person for his default or disobedience.

      . Section 56-1604, Code of Laws of South Carolina (1971 Supp.), provides:
      Articles of association; filing; rec-ordation ; amendment; dissolution; name of association. — Qualified persons may form a professional association by executing and recording articles of association in the office of the clerk of court in the county in which the association’s principal office is located. The clerk shall record the articles of association and any amendments thereto or instruments of dissolution thereof in a separate book to be kept for that purpose. The clerk of court shall receive as fees for recording any original articles of association or amendments thereto the sum of five dollars jtlus fifteen cents for each one hundred words contained in the particular document recorded. The articles of association shall not be required to be published or recorded elsewhere. The record of the articles of association, when so recorded, shall be notice of the provisions of the articles to the world as well as to all parties dealing with the association. The persons forming the professional association shall adopt a suitable name for the association. Provided, that the name selected shall be followed by the words ‘Professional Association’ or the abbreviation ‘P.A.’ The articles of association may contain any provision not in violation of law or the public policy of this State as the members of the association may decide. The articles may be amended or dissolved at any time by agreement of two thirds of the members at any regular meeting or at a special meeting called for that purpose. The amendment or instrument of dissolution shall be recorded in the same place as the original articles of association.

      . It is well settled that the corporation, itself, has no privilege against self-incrimination. See Essgee of China v. United States, 262 U.S. 151, 43 S.Ct. 514, 67 L.Ed. 917 (1923); Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370, 50 L.Ed. 652 (1906).