author: BREITEN STEIN, Circuit Judge.

text:
    MONARCH ASPHALT SALES CO., INC., et al., Applicants for Intervention and Appellants, v. WILSHIRE OIL COMPANY OF TEXAS et al., Defendants-Appellees.
    Nos. 74-1196, 74-1391.
    United States Court of Appeals, Tenth Circuit.
    Argued Nov. 14, 1974.
    Decided Feb. 26, 1975.
    Rehearing Denied April 4, 1975.

      John A. Claro, Oklahoma City, Okl. (Bert Barefoot, Jr., Edward H. Moler, Joseph A. Claro and Barefoot, Moler & Claro, Oklahoma City, Okl., on the brief), for appellants.
    R. L. Davidson, Jr., Tulsa, Okl., for Empire Const., Inc., appellant in No. 74-1391.
    Jay M. Galt and Clyde J. Watts, Oklahoma City, Okl., for B & P Const. Co. and K-P Const. Co., appellants in No. 74-1391.
    Lynn F. Wade, Fayetteville, Okl., for Anchor Const. Co., appellant in No. 74-1391.
    A. Duncan Whitaker, Washington, D. C., for defendants-appellees. With him on the brief were Coleman Hayes, Oklahoma City, Okl., and M. R. Glover, Chicago, 111., for Standard Oil Co.; Gordon F. Rainey, Oklahoma City, Okl., and Colvin A. Peterson, Jr., Kansas City, Kan., for American Petrofina Co. of Tex.; Edward F. Howrey, A. Duncan Whitaker, John R. Fornaciari, Washington, D. C., Charles F. Rice, New York City, and S. M. Groom, Jr., Oklahoma City, Okl., for Mobil Oil Corp.; Coleman Hayes, Willard P. Scott and Carl G. Engling, Oklahoma City, Okl., for Kerr-McGee Corp.; C. W. McDermott, V. P. and Gen. Counsel, Colo. Oil & Gas Corp., Denver, Colo., Peter B. Bradford and Joseph W. Kennedy, Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, Kan., for Colo. Oil & Gas Corp.; John A. Ladner, Tulsa, Okl., and John J. Runzer, Philadelphia, Pa., for Sun Oil Co. of Pennsylvania; John H. Cantrell, Oklahoma City, Okl., for Mid-America Refining Co., Inc.; V. P. Crowe, Oklahoma City, Okl., John W. Hammett, Houston Tex., and John S. Kerr, Oklahoma City, Okl., for APCO Oil Corp.; S. E. Floren, Bartlesville, Okl., R. B. McDermott, Tulsa, Okl., Thomas M. Blume and Thomas L. Barton, Denver, Colo., for Phillips Petroleum Co.; John F. Smith and Sam C. Oliver, Tulsa, Okl., for Skelly Oil Co.; Robert H. Bingham and Robert L. Gowdy, Kansas City, Kan., for Farmland Industries; and Robert J. Woolsey and Lawrence A. G. Johnson, Tulsa, Okl., for Wilshire Oil Co. of Tex.
    Before LEWIS, Chief Judge, and BREITEN STEIN and McWILLIAMS, Circuit Judges.
   BREITEN STEIN, Circuit Judge.

This suit is another episode in the liquid asphalt antitrust litigation. See Standard Industries, Inc. v. Mobil Oil Corporation, 10 Cir., 475 F.2d 220, cert. denied 414 U.S. 829, 94 S.Ct. 55, 38 L.Ed.2d 63, and United States v. Wilshire Oil Company of Texas, 10 Cir., 427 F.2d 969, cert. denied 400 U.S. 829, 91 S.Ct. 58, 27 L.Ed.2d 59. The court denied class status to certain contractors who then sought to intervene. The court rejected the interventions. We affirm.

The named plaintiffs are the Board of County Commissioners of Custer County, Oklahoma, a public body, and J. D. Metcalfe, Inc., a private contractor. As purchasers of liquid asphalt, they sued on behalf of themselves and other purchasers of liquid asphalt in a three-state area. Defendants are 12 sellers of liquid asphalt. The charge is price rigging during the period July 22, 1961 — December 31, 1968, in violation of the Clayton and Robinson-Patman Acts.

Plaintiffs moved for a Rule 23(c)(1) order that the suit be certified as a class action. Defendants objected and asserted that the action was barred by the statute of limitations. The trial court deferred the limitation issue until decision on the class action motion.

On February 28, 1973, the court ruled out all putative class members from states other than Oklahoma, approved class status for all Oklahoma public bodies, and denied class status to the Oklahoma private contractors. During the period April 9-13, 1973, nine contractors filed petitions for leave to intervene. The trial court upheld defendants’ contentions that the interventions were barred by the statute. The appeals are by the nine contractors who were denied intervention.

The first question is the reviewability of the order denying class status. Barring the death knell exception, not applicable here, an order denying class status is interlocutory and not appealable. See Eisen v. Carlisle & Jacquelin, 2 Cir., 370 F.2d 119, 121, cert. denied 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598; Falk v. Dempsey-Tegeler & Co., Inc., 9 Cir., 472 F.2d 142, 143. See also Herbst v. International Telephone and Telegraph Corp., 2 Cir., 495 F.2d 1308, 1311; Eisen v. Carlisle & Jacquelin, 2 Cir., 479 F.2d 1005, 1007 n. 1, vacated 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732.

On March 13, 1974, the trial court entered “final judgment” in favor of defendants and against intervenors and in so doing complied with Rule 54(b), F.R. Civ.P. The general rule is that interlocutory orders from which no appeal lies are merged into the final judgment and open to review on appeal from that judgment. Atchison, Topeka and Santa Fe Railway Co. v. Jackson, 10 Cir., 235 F.2d 390, 392, and Skirvin v. Mesta, 10 Cir., 141 F.2d 668, 671-672.

Apparently there are no cases on the question of whether a person denied class status and intervention can, on appeal from denial of intervention, raise as error denial of class status. The general rule is applicable. Nothing in American Pipe & Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed.2d 713, justifies a contrary result. Accordingly, the class action order is presently reviewable.

A class action may be maintained if all four prerequisites of Rule 23(a), and at least one of the prerequisites of Rule 23(b), are satisfied. Class action certification is discretionary with the trial judge. Wilcox v. Commerce Bank of Kansas City, 10 Cir., 474 F.2d 336, 342-347. The question is abuse of discretion^

The complaint pleads an overall class of purchasers of liquid asphalt. No one attacks the order limiting that class to Oklahoma purchasers. Those purchasers are divided into two subclasses, (1) public bodies and (2) private contractors. Rule 23(c)(4)(B) says that “a class may be divided into subclasses and each subclass treated as a class, and the provisions of this rule shall then be construed and applied accordingly.” The interests of public bodies and private contractors are divergent rather than similar. Representatives of one group may not adequately represent members of another group. These factors justify the discretionary creation of the two appropriate subclasses. See 3B Moore’s Federal Practice H 23.65, p. 23-1251. Each subclass must meet the prerequisites established by the rule. 7A Fed.Pract. & Proc. § 1790, pp. 191 — 192. The class composed of members of the public group meets the requirements of Rule 23(a) and (b).

The situation of the private contractors is different. The prerequisites of Rule 23(a)(1), numerosity, and (4), fair and adequate representation, were not satisfied. The class of Oklahoma private contractors had 37 potential members. The court doubted, and we doubt, that joinder of all members was impracticable.

With regard to representation, the court found that the purported representative, Metcalfe, Inc., could not fairly and adequately represent the class because it had not been in the road construction business, and had not purchased liquid asphalt, for four years prior to the filing of this suit. A class action may not be maintained by a putative representative who is not a member of the class. Bailey v. Patterson, 369 U.S. 31, 32-33, 82 S.Ct. 549, 7 L.Ed.2d 512; Fed.Pract. & Proc. § 1761, p. 584; 3B Moore’s Federal Practice H 23.04, p. 23— 254. Fair and adequate representation requires more than competent counsel. The putative representative must have a common interest with class members. See Free World Foreign Cars, Inc. v. Alfa Romeo, S.D.N.Y., 55 F.R.D. 26, 28-29. In the instant case it was not a member of the class when suit was brought.

Although consideration of Rule 23(b) is unnecessary when, as here, Rule 23(a) is not satisfied, the court discussed the Rule 23(b) requirement that a class be “superior to other available methods for the fair and efficient adjudication of the controversy,” and made three points. First, there was prior litigation in which the contractors could have been, but were not, joined and in which they could have, but did not, intervene. Second, the contractors are sophisticated and economically powerful entities “fully able to make intelligent and informed decisions regarding the institution of antitrust litigation.” Third, representatives of two contractors, which purchase large quantities of liquid asphalt, testified as defense witnesses before the same judge in the previous litigation relating to price rigging in defendants’ sales of liquid asphalt. The court said that if their companies are within the class their admissions “might be extremely harmful to the cause of action of the political subdivisions.”

Esplin v. Hirschi, 10 Cir., 402 F.2d 94, 101, cert. denied 394 U.S. 928, 89 S.Ct. 1194, 22 L.Ed.2d 459, holds that in doubtful class actions certification of the class is to be favored. In Wilcox, 474 F.2d at 344, we said that the Esplín doctrine “should not be extended to limit unreasonably the sound discretion of trial courts” in class action cases. We have problems of numerosity under Rule 23(a)(1), of fair and adequate representation under Rule 23(a)(4), and of superiority of class action procedure under Rule 23(b)(3). The court properly exercised its discretion in denying class status to the Oklahoma private contractors.

The February 28, 1973, order denying class status said that “those entities [contractors] as are desirous of so doing will have forty-five days from this date within which to seek to intervene as a co-Plaintiff herein.” Nine petitions to intervene were filed in the April 9-13 period. The court denied leave to intervene because of the bar of the statute of limitations.

Section 15b, 15 U.S.C., bars private civil antitrust actions “unless commenced within four years after the cause of action accrued.” Section 16(b), 15 U.S.C., suspends the four-year statute during proceedings brought by the United States to enforce the antitrust statutes “and for one year thereafter,” provided that when the running of the statute is suspended an action “shall be forever barred unless commenced either within the period of suspension or within four years after the cause of action accrued.”

The § 16(b) suspension period applied during the pendency of United States v. Wilshire Oil Company. The Supreme Court denied certiorari in that case on October 12, 1970, 400 U.S. 829, 91 S.Ct. 58, 27 L.Ed.2d 59. Under Supreme Court Rule 58, the losing certiorari petitioners had 25 days to file a petition for rehearing. Although none was filed, the case was pending in the Supreme Court during the 25 days. The suspension period ended November 6, 1971. The original complaint herein was filed October 12, 1971.

In American Pipe & Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed.2d 713, the Court considered the suspension period in a case where class status was denied for failure to meet the numerosity requirement of Rule 23(a)(1). When the class action was filed, 11 days remained of the suspension period. The Court held, 414 U.S. at 561, 94 S.Ct. at 770, that the § 16(b) suspension period was tolled “during the pendency of the motion to strip the suit of its class action character,” and sustained interventions filed eight days after the order denying class action certification. The Court noted that otherwise parties could protect themselves only by motions to join or petitions in intervention, “precisely the multiplicity of activity which Rule 23 was designed to avoid.” 414 U.S. at 551, 94 S.Ct. at 765.

In the instant case 26 days of the suspension period remained when class status was denied the private contractors. The first petitions in intervention were presented 40 days thereafter. American Pipe may not be distinguished on the differences between the two cases for denial of class status, or on the fact that there intervention was permitted and here it was denied. The holding in American Pipe cuts both ways.

Appellants say that intervention into a certified class action automatically relates back to the date on which the original action was filed. Before the amendments to Rule 23 this suit would have been known as a spurious class action. As pointed out in American Pipe under old Rule 23 the circuits were in disagreement “as to whether parties should be allowed to join or intervene as members of a ‘spurious’ class after the termination of a limitation period, when the initial class action complaint had been filed before the applicable statute of limitations period had run.” 414 U.S. at 549, 94 S.Ct. at 764. The Court said that under the new rule the concept that one joining a class after the statutory period must individually meet the time period is not applicable. 414 U.S. at 550, 94 S.Ct. 756. By the same token, the concept of relation back, by which intervention into old Rule 23 class actions was allowed after the running of the statute, does not control here. If in American Pipe the Court had believed that relation back controlled, it would not have gone into its long discussion of Rule 23. The Court says nothing which would except those members of a subclass which was denied participation in a class action from the operation of its conclusions.

Interveners say that they were misled by the February 28 order and had the right to assume that interventions could be filed within the 45-day period. The argument is of no avail. The courts must strictly adhere to statutory limitation periods. Kavanagh v. Nobel, 332 U.S. 535, 539, 68 S.Ct. 235, 92 L.Ed. 150. See also American Pipe, 414 U.S. at 556, 94 S.Ct. 756. Burnett v. New York Central Railroad Co., 380 U.S. 424, 85 S.Ct. 1050, 13 L.Ed.2d 941, does not aid interveners. There a state court suit tolled the statute and was still pending when the federal suit was filed. The Court expressly rejected the argument that the statute was tolled for a reasonable time after determination of the state suit. 380 U.S. at 435, 85 S.Ct. 1050.

On March 1, 1973, the named plaintiff contractor moved under Rule 59(a) and (e) for a new trial or to amend the February 28 rejection of class status for the contractors. The motion was denied April 16, 1973. Interveners claim that the statute was tolled until the disposition of the motion. They cite no pertinent authority.

The provisions of Rule 59 apply to new trials and amendments of judgments. No judgment was entered on February 28. There had been no trial. The order was interlocutory and not appealable. Although Rule 59 motions may extend the time for appeal from judgments and appealable orders, see F.R.A.P. Rule 4(a), they do not stay interlocutory orders or toll the running of a limitation period.

On February 15, 1974, the named plaintiff contractor orally moved to amend the February 18, 1973, order, and the court denied the motion. This attempt to avoid the bar of the statute was untimely and properly denied.

The notices of appeal in our 74r-1196 were filed on March 14, 1974. On March 27 the named plaintiffs moved in the district court to amend the complaint by adding as additional plaintiffs seven of the contractors with which we are concerned. Additionally, plaintiffs requested that the amendment relate back to the date of filing the original complaint. We doubt whether this matter is properly before us. If it is, nothing more need be said than that the trial court did not abuse its discretion in denying the belated effort to amend.

The interventions were not within the suspension period or any tolling thereof. They did not relate back to the filing of the original complaint. We have a Rule 24(b) permissive interven-, tion. The liquid asphalt sellers were indicted in 1966 for price-rigging antitrust violations, pleaded nolo contendere, and were fined. See Wilshire Oil Co., 427 F.2d at 971. Interveners had notice of the situation and slept on their rights. They did not seek to intervene in a previous civil antitrust action relating to sales of liquid asphalt. See Standard Industries, 475 F.2d at 220. Possible prejudice to the public bodies arises from testimony given by representatives of two contractors in support of the liquid asphalt sellers in the prior litigation. The trial court did not abuse its discretion in denying intervention.

Affirmed.


source: Caselaw Access Project

author: ALDRICH, Senior Circuit Judge.

license: Public Domain

text:
    German ORTIZ et al., Plaintiffs-Appellees, v. Hon. Rafael HERNANDEZ COLON, Governor of the Commonwealth of Puerto Rico, et al., Defendants-Appellants.
    No. 74-1115.
    United States Court of Appeals, First Circuit.
    Argued Feb. 4, 1975.
    Decided Feb. 28, 1975.

      Miriam Naveira de Rodon, Sol. Gen., with whom Peter Ortiz, Deputy Sol. Gen., was on brief, for appellant.
    Harvey B. Nachman, San Juan, P. R., with whom Dubon & Dubon and Nachman Feldstein & Gelpi, San Juan, P. R., were on brief, for appellees.
    Before ALDRICH, McENTEE and CAMPBELL, Circuit Judges.
   ALDRICH, Senior Circuit Judge.

We are faced with a somewhat thorny problem. On January 16, 1974 a three-judge district court, finding that it had jurisdiction, and declining to abstain be- ■ cause it saw no way that the Puerto Rico Supreme Court could resolve or remove the difficulty, held unconstitutional 21 LPRA § 1152(b) under which the Governor of Puerto Rico shall add to the twelve elected members of the Municipal Assembly of San Juan five members appointed by himself with the advice and consent of the Senate. D.C.P.R., 385 F.Supp. 111. Hopeful that the Puerto Rico legislature might see fit to amend the statute so as to remove what the court saw as an unconstitutional defect, the court issued no injunction, but contented itself for the nonce with entering a declaratory judgment. We say for the nonce, because it expressly retained jurisdiction and the right to issue an injunction later if the legislature did not see fit to respond.

The legislature did not respond. In the meantime the defendants appealed. Taking note of the filing of the appeal, this court requested the parties to state their position as to whether the appeal lay with us or with the Supreme Court. Upon receipt of memoranda we concluded last April, a conclusion to which we adhere, that an appeal did not, on the then state of the record, lie in the Supreme Court. Compare Gunn v. University Committee to End the War in Vietnam, 1970, 399 U.S. 383, 90 S.Ct. 2013, 26 L.Ed.2d 684, with Schmidt v. Lessard, 1974, 414 U.S. 473, 94 S.Ct. 713, 38 L.Ed.2d 661 (per curiam). At the same time we stated that we were expressing no view on whether there was a final judgment, so as to permit an appeal to us. The parties did not, in response to this motion, move to have the case transferred to the Boston calendar for early disposition of that question, or to submit on briefs without argument. We face that question now.

Before dealing with this issue defendants raise a new question of jurisdiction. We feel that our supervisory power, 28 U.S.C. § 1651, at least calls for comment, noting that our comment will not be final since the matter of jurisdiction always remains open. Defendants now contend that the district court itself had no jurisdiction. The argument goes like this. In Calero Toledo v. Pearson Yacht Leasing Co., 1974, 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452, the Court held that Puerto Rico fits the term “state” for the purpose of three-judge district court jurisdiction under 28 U.S.C. § 2281, which was enacted for “the purpose of insulating a sovereign State’s laws from interference by a single judge . . ..” Id. at 671, 94 S.Ct. at 2085. See Stainback v. Mo Hock Ke Lok Po, 1949, 336 U.S. 368, 377-78, 69 S.Ct. 606, 93 L.Ed. 741. Since the Commonwealth of Puerto Rico had become a self-governing constitutional entity independent of specific Congressional direction and thus “ ‘sovereign over matters not ruled by the Constitution,’ ” see Mora v. Mejias, 1 Cir., 1953, 206 F.2d 377, 387-88, Calero Toledo held it no less entitled than the states to protection of three-judge scrutiny under section 2281. 416 U.S. at 670-75, 94 S.Ct. 2080, 40 L.Ed.2d 452. Cf. Wackenhut Corp. v. Rordiguez Aponte, D.P.R., 1966, 266 F.Supp. 401, 405, aff’d per curiam, 386 U.S. 268, 87 S.Ct. 1017, 18 L.Ed.2d 37. Because jurisdictional requirements in Calero Toledo were clearly satisfied under 28 U.S.C. § 1331, the Court refrained from considering whether the Commonwealth might also be characterized as a state for the purposes of jurisdiction under 42 U.S.C. § 1983 and 28 U.S.C. § 1343(3), see 416 U.S. at 677 n. 11, although noting that the propriety of such a characterization depends upon the extent to which it comports with the overall intent and “serves . the purposes” of the legislation. Id., 416 U.S. at 675, 94 S.Ct. 2080, 40 L.Ed.2d 452. See also District of Columbia v. Carter, 1973, 409 U.S. 418, 420, 93 S.Ct. 602, 34 L.Ed.2d 613.

However, the Court addressed the intent and purposes of section 1983 in District of Columbia v. Carter, ante, and held that the District of Columbia might not properly be termed a “State or Territory” thereunder. See also Washington .Free Community, Inc. v. Wilson, 1973, 157 U.S.App.D.C. 360, 484 F.2d 1078, 1081. Defendants argue that these cases are controlling of the instant question. We agree, but with the opposite conclusion. The Court determined in Carter that section 1983 was enacted to protect citizens against unconstitutional state action under the Fourteenth Amendment by conferring federal jurisdiction over sovereign entities not otherwise subject to federal control. 409 U.S. at 423-30, 93 S.Ct. 602, 34 L.Ed.2d 613. Since the District of Columbia is neither a state for the purposes of the Fourteenth Amendment, see Bolling v. Sharpe, 1954, 347 U.S. 497, 499, 74 S.Ct. 693, 98 L.Ed. 884, nor in any sense insulated from plenary Congressional authority over “all the legislative powers which a state may exercise over its affairs,” Berman v. Parker, 1954, 348 U.S. 26, 31, 75 S.Ct. 98, 102, 99 L.Ed. 27, the statutory purposes of section 1983 would not be served by the District’s inclusion within the provision’s jurisdictional ambit. 409 U.S. at 424, 429, 93 S.Ct. 602, 34 L.Ed.2d 613.

The Commonwealth’s situation is precisely the opposite. Indeed, the very reasons which called in Calero Toledo for the Commonwealth’s special protection by a three-judge district court as a matter of comity and respect — its sovereign status and functional independence from Congressional control — call with equal force for the special protection of the Commonwealth’s citizens against unwarranted and otherwise insufficiently checked governmental action provided by 42 U.S.C. § 1983 and 28 U.S.C. § 1343(3).

The citizens of the several states are permitted to seek redress in the federal courts for deprivation of their rights under color of state law without first seeking relief in the state courts. Monroe v. Pape, 1961, 365 U.S. 167, 183, 81 S.Ct. 473, 5 L.Ed.2d 492. We yield to no one in our regard for the Supreme Court of Puerto Rico, but at the same time, if citizens of the several states may call for an initial decision in the district court without deferring to the courts of their local state, we must wonder how we could conscientiously hold that under 28 U.S.C. § 1343 United States citizens resident in Puerto Rico are any less entitled. With great respect to the distinguished Solicitor General of Puerto Rico, who raised this point only at oral argument, we believe that it was a last minute concept not fully thought through in all its ramifications. We do not accept it.

Turning from the jurisdiction of the district court to our own, the appealability of this matter presents something of a dilemma. The district court’s failure to take a position on whether to issue an injunction, since it was only a postponement of its decision, indicates, as we stated earlier, the lack of a right to appeal to the Supreme Court. On the other hand, this same lack of finality raises serious questions of our own jurisdiction. See 28 U.S.C. § 1291. None of the recognized exceptions apply, unless one were to say that the decision was essentially final because only a routine and procedural matter remained. Cf. Mills v. Alabama, 1966, 384 U.S. 214, 217, 86 S.Ct. 1434, 16 L.Ed.2d 484. However, such an analysis would immediately raise the spectre that in substance we would be acting beyond our powers. If we were to take jurisdiction, render a decision on the merits, and send the case back, either to enter an injunction, or to dismiss, and hence deny one, we would seem in so doing to have directly usurped the Supreme Court’s jurisdiction.

In a 2-1 decision of the Second Circuit, in a stronger case for taking jurisdiction than this one because the district court had been less plain in reserving consideration of a possible injunction, Thoms v. Heffernan, 2 Cir., 1973, 473 F.2d 478, vacated on other gr’ds, 7/8/74, 418 U.S. 908, 94 S.Ct. 3199, 41 L.Ed.2d 1154, the court took jurisdiction and affirmed the district court. But at the same time, it expressly recognized that if, thereafter, the district court issued an injunction, the court of appeals ruling would be automatically mooted. See 473 F.2d at 480 n. 1. With due respect, this seems a most unsatisfactory solution. Our affirmance would give the state totally free rein to disregard our ruling, and hence require the district court to issue the injunction, thereby mooting our decision, according to Thoms, and then appeal to the Supreme Court. Nor could we criticize a state for so exercising the rights which Congress has given it. Rather, we think the majority in Thoms has again merely illustrated the wisdom of the old adage that hard cases — here a peculiar statute — make bad law. We prefer Judge Timbers’ dissent, and the view of another panel of the Second Circuit which he quoted.

In accordance with that view, see 473 F.2d at 487-88, we decline jurisdiction and take no position on the merits, but remand the case to the district court to take such action as it sees fit on the injunction.

Because Chief Judge Coffin is a member of that court and, because he has already made a decision therein, he must be disqualified from making a designation to fill the vacancy created by the resignation of former Judge Cancio. The remaining members of the Circuit Council appoint the Honorable Juan R. Torruella, U.S. District Judge for Puerto Rico, to be the third member of the three-judge court,

      . The Puerto Rico Court could not, by any process of construction, alter the fact that the Governor of Puerto Rico can appoint five persons of his choice to the San Juan Assembly; nor could it by interpretation avoid the consequence that by this action he may change a minority party in the Assembly into a majority-

      . We take informal note of the defendants’ urging us not to reject jurisdiction because rejection will result in considerable lost motion. We regret the lost motion, but it is axiomatic that jurisdiction cannot be conferred by consent. So long as there remains a possibility that an injunction may be needed, our declination must stand.


author: HASTIE, Circuit Judge. WEIS, Circuit Judge

text:
    UNITED STATES of America v. Gary WEST, Appellant.
    No. 74-1279.
    United States Court of Appeals, Third Circuit.
    Argued Oct. 21, 1974.
    Decided Feb. 25, 1975.

      Albert L. Deutsch, Stanley Bashman, Bashman, Deutsch & Bernstein, Philadelphia, Pa., for appellant.
    Frank J. Bove, Asst. U. S. Atty., Robert E. J. Curran, U. S. Atty., Walter S. Batty, Jr., Asst. U. S. Atty., Chief, Appeals Div., for appellee.
    Before HASTIE, GIBBONS and WEIS, Circuit Judges.
   OPINION OF THE COURT

HASTIE, Circuit Judge.

In the district court, sitting without a jury, the Appellant, Gary West, was tried and convicted on three counts on an indictment. Count 1 charged unlawful distribution of about 9 grams of heroin on January 23rd. Similarly, count 2 charged the distribution of about 7 grams on January 25th. Count 3 charged knowing possession of about 4 grams of heroin on January 29 with intent to distribute. West was sentenced, “under counts 1, 2 and 3” generally, to imprisonment for a period of five years with particular provisions concerning parole.

To establish its case the government introduced testimony by Herbert Laguins that he had purchased heroin from West in the amounts and at the times set out in counts 1 and 2. Concerning count 3, two arresting officers testified that on January 29, pursuant to a telephone call in which Laguins had informed them that West was on his way to meet Laguins and sell him two bundles of heroin, they intercepted West en route and found two bundles of heroin in his car.

Laguins was a police officer, working undercover and assigned to purchase narcotics from and thus obtain evidence against unlawful sellers. Beyond testifying about the above outlined transactions, Officer Laguins also acknowledged that a Robert Chieves had introduced him to West in the following circumstances. Chieves had been arrested, apparently on a narcotics charge. “Pursuant to that arrest”, according to Officer Laguins’ testimony, he arranged with Chieves that Chieves would introduce him to other illicit vendors from whom he could purchase narcotics. Thereafter, Chieves introduced Laguins to West. At that time Chieves and West together proposed to Laguins that they would provide him with five bundles of heroin, weekly or at more frequent intervals. They proposed further that this be done on consignment with Laguins paying them an agreed price for each consign-1 ment after he had resold the heroin. The next consignment would then be delivered to him. Laguins agreed to this proposal and Chieves and West delivered a first consignment to him on January 19. Shortly thereafter, he paid for this and on January 23 received another consignment for which he paid before receiving a third consignment on January 25th. West was arrested on January 29 while allegedly en route to deliver another consignment to Laguins.

All of this appears from the case for the prosecution. Most of it was confirmed, but also explained and amplified, by testimony of the accused West in his defense. He and Chieves were old friends. Chieves, learning that West was in serious need of money, approached him and proposed that they join in a scheme of selling fake or “over-cut” heroin on consignment to Laguins, an acquaintance of Chieves. Chieves, who already was in trouble with the law, would supply the heroin and establish contact with a buyer but wanted West to hold himself out as the seller. They would divide the profits.

West testified further that he was regularly employed by the City of Philadelphia as a truck driver and that he had never had any part in the narcotics traffic before Chieves persuaded him to join in the scheme which was to be his undoing. At this point it is noteworthy that, in the course of concluding argument, the prosecutor, with commendable candor, conceded that West had no history of past participation in the narcotics traffic. And this is strongly, if inferentially, confirmed by the fact that he had been allowed to sign his own bond for release after indictment and pending trial.

This ease is unusual in that the uncontradicted evidence shows a confederation of two government agents, one an informer who, according to uncontradicted testimony, actually supplied the narcotics in question and the other an undercover officer who, as prearranged with the informer, bought this contraband from the accused third person whom the informer had persuaded to join with him in a selling venture.

In two recent cases, both remarkably similar to this case, the Court of Appeals for the Fifth Circuit has held that a conviction may not be founded on a sale of narcotics which a government informer had supplied to the accused for sale to an undercover agent. United States v. Bueno, 1971, 5 Cir., 447 F.2d 903; United States v. Mosley, 1974, 5 Cir., 496 F.2d 1012. In our view these decisions are sound. Frequently, it is permissible law enforcement practice for an undercover agent to obtain evidence of unlawful traffic in narcotics by purchasing heroin from a suspected drug peddler. But when the government’s own agent has set the accused up in illicit activity by supplying him with nar-. cotíes and then introducing him to another government agent as a prospective buyer, the role of government has passed the point of toleration. Moreover, such conduct does not facilitate discovery or suppression of ongoing illicit traffic in drugs. It serves no justifying social objective. Rather, it puts the law enforcement authorities in the position of creating new crime for the sake of bringing charges against a person they had per- ' suaded to participate in wrongdoing. It was this evil of law enforcement officers instigating a criminal act by persons “otherwise innocent in order to lure ■ them to its commission and to punish them” that led the Supreme Court to its first reversal of a conviction on the ground of entrapment. Sorrells v. United States, 1932, 287 U.S. 435, 448, 53 S.Ct. 210, 215, 77 L.Ed. 413.

The recent decision of the Supreme Court in United States v. Russell, 1973, 411 U.S. 423, 93 S.Ct. 1637, 36 L.Ed.2d 366, upon which the government relies, does not sanction what the government agents did in this case. In Russell, an undercover government agent, having good reason to believe that a suspect was engaged in an ongoing enterprise of unlawfully manufacturing and selling certain restricted drugs, supplied the suspect with a lawfully obtainable but scarce chemical ingredient for use in the illicit manufacture. The Supreme Court held that this governmental conduct did not preclude conviction of the manufacturing seller. The opinion emphasized that the accused “was an active participant in an illegal drug manufacturing enterprise which began before the Government agent appeared on the scene, and continued after the Government agent had left the scene”. 411 U.S. at 436, 93 S.Ct. at 1645. In these circumstances a majority of the Court did not view the nature or extent of the government agent’s assistance to the manufacturing enterprise as intolerable. And as concerned predisposition, the evidence was overwhelming.' We find no suggestion or implication that the legal result would have been the same if the accused had not already been engaged in the illicit traffic or if the government agent had supplied him with contraband drugs rather than lawful articles of commerce.

While we view West’s case as one of intolerable conduct by government agents, one supplying and the other buying the narcotics, the same result is reached if the entrapment aspect of this case is analyzed as depending solely on the predisposition of West to engage in illicit drug traffic. The government argues that the series of sales made by West during the latter part of January, the first predating the transactions for which he was indicted, shows predisposition. 'But if, as the evidence indicates, these four transactions among the same three people within a ten day period were all part of a scheme proposed by a government agent, the relevant predisposition is West’s attitude on January 19, just before the government agent enlisted his participation in the venture. Certainly, the fact that he was not indicted for his first sale in implementation of the informer’s plan does not make that sale evidence that he was already engaged in the drug traffic or merely awaiting an opportunity to do so. West’s conduct undoubtedly reflects unfavorably upon his strength of character, but it does not establish a prior inclination to engage in this evil business. And the evidence that he was and for a considerable time had been regularly employed as a municipal truck driver, the prosecution’s concession that he appeared to be a first time offender and the fact that, after his arrest, it was deemed appropriate to release him on his own recognizance all point the other way.

We have not overlooked the fact that West’s own testimony was the only evidence of the source of the heroin or the way in which Chieves enlisted him in the enterprise. There was, however, Laguins’ testimony indicating that he had recruited Chieves, a charged offender, to find other persons from whom he might purchase drugs. Certainly, these circumstances lend plausibility to West’s testimony as to Chieves’ role, including the supplying of the drugs.

Once this evidence of the source of the narcotics was introduced, the burden was upon the prosecution to prove beyond reasonable doubt that the government informer did not supply the drugs. United States v. Silver, 3d Cir. 1972, 457 F.2d 1217; United States v. Landry, 7th Cir. 1958, 257 F.2d 425; United States v. Bueno, supra. This the government did not even attempt to do.

We are not sure whether our dissenting colleague disagrees with the general rule, which the Silver case adopts for this circuit, that the prosecution bears the burden of proof on entrapment when it becomes a contested issue in a criminal case. In any event, we think it must be the dissenting contention that the defendant’s unrefuted testimony, which if true would establish entrapment, must go to the trier of fact and, if the trier of fact disbelieves that testimony, then the prosecution can be said to have proved beyond reasonable doubt that there was no entrapment.

.It seems to us that this in effect puts the burden of proof on the entrapment issue upon the accused. To avoid this improper consequence the burden of going forward, in this case the burden of making some showing contrary to the testimony of the accused, must be imposed on the prosecution, once evidence, sufficient on its face to prove entrapment, is introduced by the defense. In the absence of some such showing the court should enter a judgment of acquittal.

What this procedural rule does is to prevent the trier of fact from ever passing upon the credibility of certain defense testimony, unless and until the prosecution has made some showing to the contrary. But this is no unreasonable burden here since a government agent knows and can testify to the relevant facts, thus getting the issue and the question of credibility it involves to the jury. We deem this a fair and appropriate way of avoiding an improper imposition of the burden of proof upon the accused.

The decision of the Supreme Court in Masciale v. United States, 1958, 356 U.S. 386, 78 S.Ct. 827, 2 L.Ed.2d 859, upon which the dissent-opinion relies, does not discredit the foregoing analysis. For even though there was no direct contradiction of testimony of Masciale that he had been overborne by the overreaching of a government agent, the prosecution satisfied its burden of going forward through contravening testimony of its witness that the accused, when solicited to procure narcotics, had boasted of his acquaintance with someone “high up in the narcotics traffic” and of his ability to procure heroin. Cf. United States v. Soto, 5th Cir. 1974, 504 F.2d 557.

It follows that the conviction on counts 1 and 2 cannot stand. However, count 3 presents different considerations. West does not contend that Chieves supplied him with the two bundles of heroin found in his car. Rather, he testified that he did not know how it got there. Laguins testified that a few minutes before West’s arrest and the discovery of this heroin in his possession, West had stated in a telephone conversation that he was en route to deliver two bundles to Laguins. Thus, the defense that must prevail on counts 1 and 2 is not supported by the evidence on count 3. However, West was sentenced generally to five years imprisonment on all three counts. It may well be that if the court had considered only the third count and the evidence relevant to the events of January 29, as now it must, a less severe sentence would have been imposed. Therefore, there must be a re-sentencing on count 3.

The conviction on counts 1 and 2 will be reversed and the general sentence vacated. The conviction on count 3 will be affirmed. The cause will be remanded for entry of judgment of acquittal on counts 1 and 2 and for resentencing on count 3 without consideration of the wrongdoing charged in the other counts.

WEIS, Circuit Judge

(dissenting):

As the majority opinion indicates, it relies principally upon United States v. Bueno, 447 F.2d 903 (5th Cir. 1971), cert. denied, 411 U.S. 949, 93 S.Ct. 1931, 36 L.Ed.2d 411 (1973). That case stands for two important propositions, both of which are relevant here — one substantive and the other procedural.

From a substantive viewpoint, Bueno stands for the premise that entrapment, as a matter of law, is established when a government informer supplies narcotics to the defendant for sale to an undercover agent. The validity of this proposition has been subject to question since the Supreme • Court’s decision in United States v. Russell, 411 U.S. 423, 93 S.Ct. 1637, 36 L.Ed.2d 366 (1973). See United States v. Hampton, 507 F.2d 832 (8th Cir. 1974); United States v. McGrath, 494 F.2d 562 (7th Cir. 1974); United States v. Jett, 491 F.2d 1078 (1st Cir. 1974); United States v. Johnson, 484 F.2d 165 (9th Cir.), cert. denied, 414 U.S. 1112, 94 S.Ct. 842, 38 L.Ed.2d 739 (1973); United States v. Ewbank, 483 F.2d 1149 (9th Cir. 1973); United States v. Pollard, 483 F.2d 929 (8th Cir. 1973), cert. denied, 414 U.S. 1137, 94 S.Ct. 882, 38 L.Ed.2d 762 (1974); and United States v. Hayes, 477 F.2d 868 (10th Cir.' 1973). Cf. United States v. Soto, 504 F.2d 557 (5th Cir. 1974); United States v. Mosley, 496 F.2d 1012 (5th Cir. 1974); and United States v. Oquendo, 490 F.2d 161 (5th Cir. 1974). See also Judge Friendly’s discussion in United States v. Archer, 486 F.2d 670, 674-77 (2d Cir. 1973). Generally, the division of opinion represents a continuation of the debate whether “objective” or “subjective” tests should be applied to the entrapment defense. It is this dispute which underlies the 5-4 division of the Supreme Court in Russell, supra. Although I have some doubt that the Russell decision left any viability to the substantive law in Bueno, I focus my dissent on the procedural aspects of that opinion.

The Bueno court held that when a defendant testifies to facts which would establish an objective type of entrapment, the government must come forth with contrary evidence if it is to carry its burden of proving guilt beyond a reasonable doubt. As another panel of the Fifth Circuit Court of Appeals explains it, “ . . . when a defendant testified that he obtained the contraband from a government undercover agent, the Government must produce the undercover agent to contradict the defendant’s allegations in order to take the case to the jury. Ms. Reaves, the undercover agent, did in fact testify in this case. Then the jury must find beyond a reasonable doubt that the defendant did not obtain the contraband in question from the undercover agent.” United States v. Mosley, supra, 496 F.2d at 1015.

Neither Bueno nor Mosley discussed the holding of the Supreme Court in United States v. Masciale, 356 U.S. 386, 78 S.Ct. 827, 2 L.Ed.2d 859 (1958). That case involved a claim of subjective entrapment where criminal predisposition is a prominent element. The informant was not called to testify, but the entrapment contentions were established by the testimony of the defendant. The Court held, “Petitioner argues that this undisputed testimony explained why he was willing to deal with Marshall [the undercover agent] and so established entrapment as a matter of law. However, his testimony alone could not have this effect. While petitioner presented enough evidence for the jury to consider, they were entitled to disbelieve him in regard to Kowel [the informant] and so find for the Government on the issue of guilt. Therefore, the trial court properly submitted the case to the jury.” 356 U.S. at 388, 78 S.Ct. at 829.

In United States v. Jett, supra, in a factual situation almost identical to the one sub judice, the court refused to accept the rationale of Bueno on the ground that it had failed to consider the effect of Masciale. The Jett court followed the general rule that “ . where the law attaches some inferential consequence to the introduction of evidence, this means credited evidence — if the jury disbelieves it, it becomes, in effect, no evidence.” 491 F.2d at 1080. This view is in agreement with the principle set out in YII Wigmore on Evidence § 2034, “(3) Conversely, the mere assertion of any witness does not of itself need to be believed, even though he is unimpeached in any manner; because to require such belief would be to give a quantitative and impersonal measure to testimony.” Accord, United States v. Johnson, 495 F.2d 242 (10th Cir. 1974); United States v. Saka, 339 F.2d 541 (3d Cir. 1964); and Wooley v. Great Atlantic & Pacific Tea Co., 281 F.2d 78 (3d Cir. 1960).

In the instant case, the majority places upon the prosecution the burden “to prove beyond reasonable doubt that the government informer did not supply the drugs.” If the informer is not produced, then the uncontradicted (and uncorroborated) testimony of the defendant establishes a fact which, in turn, leads to a finding of entrapment as a matter of law. In this, I believe the majority opinion is contrary to Masciale and unduly inhibits the scope of the fact finder’s competence.

The trial here was non jury, and although the defendant argued entrapment upon a factual pattern similar to Bueno, he did not cite that case to the district court. In his memorandum opinion, the trial judge discussed United States v. Russell, supra, and the cases relied upon by the defendant — Sherman v. United States, 356 U.S. 369, 78 S.Ct. 819, 2 L.Ed.2d 848 (1958) and Sorrells v. United States, 287 U.S. 435, 53 S.Ct. 210, 77 L.Ed. 413 (1932). In finding against the defendant West, the district court stated:

“It is true that when the defense of entrapment is properly raised the burden of proof is on the Government to prove beyond a reasonable doubt that the defendant was not entrapped. United States v. Silver, 457 F.2d 1217 (3d Cir. 1972). Here, the evidence indicates beyond a reasonable doubt that there was no entrapment and that defendant was predisposed to commit the crime.”

And again:

“Although the defendant has claimed solicitation by the government agent and lack of disposition on his part to deal in drugs, his ‘course of conduct’ in the series of transactions with Officer Laguins indicates to the contrary. The Court, as trier of the fact, evaluated the defendant’s credibility and found the defendant’s testimony concerning his alleged entrapment by the government officials not worthy of belief.”

It is arguable that these findings do not specifically pass upon the defendant’s contention that the heroin was supplied by the informant. This is understandable since the Bueno issue was not presented to the trial judge. So that there could be no doubt about this important factual matter, I would remand to the district court for further findings.

I concur with the affirmance on Count

3.

      . In entrapment cases, the “objective” theory, also known as the “creative activity” doctrine, directs the court’s attention to misconduct of government agents rather than the particular defendant’s conduct and criminal predisposition. See Bergan, Criminal Law— Entrapment in the Federal Courts — Subjective Test Reaffirmed Against Lower Court Departures, 42 Fordham L.Rev. 454 (1973).

      . The majority opinion in Russell left open for future consideration “a situation in which the conduct of law enforcement agents is so outrageous that due process principles would absolutely bar the government from invoking judicial processes to obtain a conviction . . .”411 U.S. at 431-32, 93 S.Ct. at 1643.

      . In United States v. Workopich, 479 F.2d 1142 (5th Cir. 1973), a panel of the Fifth Circuit did analyze the Masciale decision. In an opinion which I am unable to reconcile with the procedural holdings in Bueno and Mosley, the court said, “Thus, when the undisputed testimony of a defendant is the sole basis for an entrapment defense, entrapment is not established as a matter of law but rather is an issue for the jury to decide. Accord, United States v. Burgess, 5 Cir. 1970, 433 F.2d 987. Cf. United States v. Bueno, 5 Cir. 1971, 447 F.2d 903, where, when the government supplied contraband to the defendant, his uncontradicted testimony established entrapment as a matter of law.” 479 F.2d at 1146. If the Fifth Circuit thus means to establish a different procedural rule for the objective type of entrapment as distinguished from the subjective, it gave no reasons for doing so, and I am unable to understand why such disparity should exist.

      . For a discussion of the quantum of evidence required to make entrapment a jury question, see United States v. Watson, 489 F.2d 504 (3d Cir. 1973).


author: CELEBREZZE, Circuit Judge.

text:
    In re ESTATE of Harry B. McCOY, Jr., Deceased. Norfleet R. TURNER and Frank Wilbourn, Jr., Executors, Plaintiffs-Appellees, v. UNITED STATES of America, Defendant-Appellant.
    No. 74-1582.
    United States Court of Appeals, Sixth Circuit.
    March 4, 1975.

      Thomas F. Turley, U. S. Atty., Memphis, Tenn., Scott P. Crampton, Meyer Rothwacks, Ernest J. Brown, Loring Post, William Estabrook, III, Gilbert E. Andrews, Joseph McManus, U. S. Dept, of Justice, Washington, D. C., for defendant-appellant.
    Walter P. Armstrong, Jr., Joseph B. Walker, Armstrong, Allen, Braden, Goodman, McBride & Prewitt, John J. Doggett, Jr., Memphis, Tenn., for plaintiffs-appellees.
    Before PHILLIPS, Chief Circuit Judge, and WEICK and CELEBREZZE, Circuit Judges.
   CELEBREZZE, Circuit Judge.

The Government appeals from a District Court order that estate taxes and interest in the sum of $122,605.71 be refunded to the Estate of Harry B. McCoy, Jr. The question presented is whether the value of a charitable gift in remainder could be definitely ascertained as of the date of testator’s death, so that his estate should be allowed a deduction therefor under § 2055 of the Internal Revenue Code, 26 U.S.C. § 2055 (1967).

Harry B. McCoy, Jr., died on December 7, 1966, leaving a will which was duly probated in the Probate Court of Shelby County, Tennessee on December 16, 1966. By his will McCoy provided that, after the payment of debts and certain specific bequests, the entire residue of his estate was bequeathed to a trust for the following purposes:

During their lifetime, the trustee shall pay to the following persons in monthly installments the following sums: A.
(1) Provided he has been in my employ within two months prior to my death, Will Townsell shall receive Four Hundred ($400.00) Dollars per month.
(2) Ruth Smythe Graham shall receive Four Hundred ($400.00) Dollars per month.
(3) Sarah Bell Jones shall receive Two Hundred ($200.00) Dollars per month.
Each bequest is contingent upon the recipient surviving me, and at the death of each recipient his or her monthly payment shall cease and shall be added to the income to be distributed in Paragraph B following.
In the event of extreme need by Will Townsell for additional funds, for health reasons or otherwise, the trustee in its sole discretion may encroach upon as much of the principal as it deems necessary for this purpose and shall pay to or apply directly for his benefit.
B. It is my desire that this trust be known as the McCoy Foundation, established in memory of Mr. and Mrs. Harry B. McCoy. It is to be established for the promotion and furthering of cultural development in the Memphis area. Not limiting my trustee in any way, but for the purpose only of conveying my preference, it is my hope that primary interest will be focused upon developments in the theatre. (Emphasis added)

In addition, the will gave the trustee discretionary power to terminate the trust, or any share thereof, at any time, “if the amount thereof does not warrant the cost of continuing said trust, or its administration would otherwise be impractical.” In such event, the trustee was directed to pay the principal and any undistributed income “to the person or persons entitled at that time to the income therefrom in the proportions in which they were then entitled to receive the income, and upon such termination the rights of all other persons who might otherwise'have an interest as succeeding life tenant or in remainder shall cease.”

The executors and trustee filed a Bill for Construction and a Declaration of Trust with the Chancery Court of Shelby County, Tennessee. The Declaration of T>-ust provided that section A would be funded with assets sufficient to produce annual income of $12,000 (the total amount of the trust payments to be received by the three income beneficiaries), plus administration costs, with the balance of the estate’s assets going to create the McCoy Foundation. The Declaration of Trust stipulated that in the event of invasion on Townsell’s behalf, “said encroachment shall not serve to reduce the payments to the remaining life beneficiaries, and following said encroachment the monthly payments to Will Townsell shall be reduced proportionally to effect this result.”

In a final decree entered on December 7, 1970, the Chancellor held:

“ . . . The trust created by said Will is (with the exception of the value of the life estate) a valid charitable trust within the meaning of the laws of Tennessee, defining a charitable trust ...”

In a letter dated March 26, 1971, the District Director of Internal Revenue, Atlanta, Georgia, determined that the McCoy Foundation qualified as a charity under the provisions of Sections 2055, 2106 and 2522 of the Internal Revenue Code.

The executors filed an Estate Tax Return claiming the entire corpus of the trust established by sections A and B, minus the present value of the life estates, as a charitable bequest. The Commissioner disallowed this bequest, thus increasing the taxable estate by $327,-233.18. The disallowance was based on Reg. Sec. 20.2055-2, 26 C.F.R. § 20-2055-2 (1973), which forbids deductions for interests not “presently ascertainable”. The Government assessed additional taxes and interest in the amount of $122,605.71. The estate paid the assessed amount and filed for a refund. After six months had elapsed following the filing of the claim, the estate initiated an action in District Court to recover the disputed taxes.

On cross-motions for summary judgment, the District Court determined that

“the power to encroach given to the trustee ‘in the event of extreme need by Will Townsell for additional funds, for health reasons or otherwise’ does not defeat this charitable exemption, as ‘extreme need’ is an ascertainable standard. These words modify and therefore limit the words ‘for health reasons or otherwise’; the trustee must make an objective finding of extreme need, from whatever cause, before he can encroach. This presents an entirely different situation, for example, from Loyd v. United States, 319 F.Supp. 237 (W.D.Tenn.1970) aff’d 443 F.2d 1179 (C.A.6, 1971), where the trustee was authorized to encroach ‘whenever and to the extent it deems necessary or proper for her maintenance, support, welfare, enjoyment and pleasure and in reaching such determination the trustee shall be generous and liberal.’ The standard of ■‘need’ has been held to be an ascertainable standard; much more so is ‘extreme need.’ Lincoln Rochester Trust Co. v. McGowan, 217 F.2d 287 (C.A.2, 1954).” In re Estate of McCoy, 374 F.Supp. 1321 (W.D.Tenn. Feb. 14, 1974).

The District Court also concluded that ■ the provision authorizing the trustee to terminate the trust presented an “ascertainable standard, requiring an objective finding on the part of the trustee”, the trustee being required in the event of such termination to pay the remaining assets to “non-profit cultural institutions”. The District Court allowed the claimed deduction and ordered the disputed taxes refunded. From that determination the Government appeals.

Section 2055 and the regulations thereunder allow a deduction from a decedent’s gross estate of the presently ascertainable value of a bequest to a charitable organization. Treasury Regulation § 20.2055-2, 26 C.F.R. § 2055-2 (1973), titled “Transfers not exclusively for charitable purposes”, states that “if a trust is created or property is transferred for both a charitable and a private purpose, deduction may be taken of the value of the charitable beneficial interest only insofar as that interest is presently ascertainable, and hence severable from the noncharitable interest.”

In a case such as this, a Court must employ a two-step analysis, First, the Court must determine if the language of the will or trust conditions invasion of the corpus on a “presently ascertainable” standard so that “the amount which will be diverted from the charity and the present value of the bequest become adequately measurable. . ” Merchants Nat. Bank of Boston v. Commissioner of Internal Revenue, 320 U.S. 256, 64 S.Ct. 108, 88 L.Ed. 35 (1943).

If a presently ascertainable standard is present, the Court must determine the value of the amount which will eventually go to charity and allow a charitable deduction therefor. Lincoln Rochester Trust Co. v. McGowan, 217 F.2d 287 (2d Cir. 1954).

To be “presently ascertainable” a bequest to charity must not allow for invasion of the corpus of a trust unless the amount which possibly can be diverted from charity is defined by a standard that is “fixed in fact and capable of being stated in definite terms of money.” Ithaca Trust Co. v. United States, 279 U.S. 151, 154, 49 S.Ct. 291, 73 L.Ed. 647 (1929). In Ithaca the Court sustained a deduction although the bequest allowed invasion “to suitably maintain her [the life beneficiary] in as much comfort as she now enjoys.”

In Merchants Nat. Bank of Boston v. Commissioner of Internal Revenue, 320 U.S. 256, 64 S.Ct. 108, 88 L.Ed. 35 (1943), the standard for invasion was not fixed, but was susceptible of broad, almost unbounded interpretation by the trustee administering the bequest. The testator in Merchants authorized the trustee to invade the corpus of the trust to provide “for the comfort, support, maintenance, and/or happiness of my said wife.” See also Henslee v. Union Planters Bank, 335 U.S. 595, 69 S.Ct. 290, 93 L.Ed. 259 (1949), rehearing denied, 336 U.S. 915, 69 S.Ct. 601, 93 L.Ed. 1078 (1949), where the trustees were authorized “to use and expend in their discretion any portion of my estate, either income or principal, for the pleasure, comfort and welfare of my mother.”

In the instant case, the language is “extreme need . ., for health reasons or otherwise.” While this phrase is not within the express reach of Ithaca, we agree with other circuits that it is within the ambit of Ithaca.

“Need” has been held to be an acceptable standard under. section 2055. Lincoln Rochester Trust Co. v. McGowan, 217 F.2d 287 (2nd Cir. 1954). The Third Circuit said concerning need, Funk v. Commissioner of Internal Revenue, 185 F.2d 127, 131 (3d Cir. 1950):

The term “needs” is not, of course, one the content of which can be defined precisely .
While obviously it must include the essentials of life, it has been construed in New Jersey to mean that which is reasonably necessary to maintain a beneficiary’s station in life. It is not indicative of an unqualified gift, nor is it dependent upon the fancy of the administrator. Thus, its use confined the trustee to limits objectively determinable. [footnotes omitted]

See also Peoples Trust Co. of Bergen County v. United States, 311 F.Supp. 1197 (D.N.J., 1970), aff’d 444 F.2d 193 (3d Cir. 1971).

If “needs” means “that which is reasonably necessary to maintain” a standard of living, then “extreme need” means that which is absolutely essential to maintain a beneficiary’s standard of living. “Extreme need” is, thus, an even stricter standard than “need” and allows ready ascertainment of the potential invasion of trust corpus for the life beneficiary.

The government urges that the “or otherwise” language in the trust instrument before us allows the trustee unbridled leeway. A review of the instant language, “extreme need . . ., for health reasons or otherwise,” however, shows that the words questioned by the Government are part of a clause which modifies “extreme need.”

The complete phrase, “for health reasons or otherwise,” merely provides insight into the type of situation which testator felt would warrant invasion. “Or otherwise” indicates that testator was leaving the actual determination of the circumstances which would place Townsell in “extreme need” solely in the trustee’s hands.

Having concluded that a “presently ascertainable” standard for determining invasion of the corpus is present, we turn to the second stage of the analysis.

To the extent of possible invasion, a deduction for estate tax purposes cannot be allowed because funds subject to invasion may be expended for private rather than charitable purposes. United States v. Commercial National Bank of Kansas City, 404 F.2d 927 (10th Cir. 1968) cert. denied, 393 U.S. 1000, 89 S.Ct. 487, 21 L.Ed.2d 465 (1968). Where a broad or narrow reading of the phrase authorizing invasion of the corpus for non-charitable purposes is possible, the broad standard should be applied to assure that a deduction is not given for funds which may go to private use. State Street Bank & Trust Co. v. United States, 313 F.2d 29 (1st Cir. 1963).

The District Court failed to note that it had engaged in this stage of the analysis in reaching its decision. The Court did, however, conclude that an estate tax deduction should be allowed for the entire corpus of the trust. Implicit in that conclusion is a determination that the corpus will not be invaded. The District Court had in its possession affidavits from Will Townsell and others indicating that Townsell was seventy-two years old at the time of testator’s death, that Townsell was frugal, that he had no outstanding debts other than car payments, that he was in good health and was facing no extreme emergencies necessitating additional funds. These facts support the District Court’s determination that the prospect of invasion of corpus is so unlikely as to be negligible. This being the case, the District Court correctly determined that the entire trust corpus would go to charitable rather than private purposes and properly allowed a deduction for the entire amount.

The District Court’s judgment is affirmed.

      . Black’s Law Dictionary — (4th ed. 1951) defines “extreme” to mean “. greatest, highest, strongest, or the like.”


author: MURRAH, Circuit Judge.

text:
    UNITED SERVICES AUTOMOBILE ASSOCIATION, Plaintiff-Appellee, v. ROYAL-GLOBE INSURANCE COMPANY, Defendant-Appellant.
    No. 74-1300.
    United States Court of Appeals, Tenth Circuit.
    Submitted Nov. 13, 1974.
    Decided March 7, 1975.

      Ralph W. Newcombe, Newcombe & Redman, Lawton, Okl., for plaintiff-appellee.
    Burton J. Johnson, Watts, Looney, Nichols, Johnson & Hayes, Oklahoma City, Okl., for defendant-appellant.
    Before MURRAH, HOLLOWAY and DOYLE, Circuit Judges.
   MURRAH, Circuit Judge.

Louis Friloux, a minor, is the defendant in a lawsuit in Texas state court arising from an accident in which he was involved as the driver of a car rented from Comanche Enterprises, Inc., of Hertz Corporation (“Hertz”). In the diversity case before us, Friloux’s insurance company, United Services Automobile Association of Texas (“USAA”), sues Hertz’s insurance company, Royal-Globe Insurance Company of New York (“Royal”), for a judgment declaring that Royal’s policy covers Friloux’s liability and that Royal, rather than USAA, must therefore defend and indemnify him in the Texas lawsuit, notwithstanding an exclusion-of-minors clause in the Hertz car rental contract. Upon its finding that Royal was estopped from relying on this clause because its agent Hertz had notice that Friloux was a minor and would drive the ear, the trial court granted the declaratory judgment, from which Royal appeals. We affirm.

The parties agree that USAA’s policy is applicable if Royal’s policy is not. And it is admitted that Friloux’s youth group director, West, arranged and signed for the rental of two cars for a trip from Lawton, Oklahoma, to a sports tournament in San Antonio, Texas; that he had rented Hertz cars for his youth group previously; that the Hertz rental contract which West signed provided Royal coverage only for “authorized” drivers — i. e., “persons of full age (21 years) who are members of the immediate family of customer” — further stating “no right of lessor under this agreement may be waived or modified except by written instrument signed by the President or a Vice President of lessor or of Hertz System, Inc.”; and that Friloux, age 16, was the driver of the rented car involved in the accident.

There was sharp dispute as to the circumstances surrounding the delivery of the car to West by the lessor, Mrs. Jennings. Jennings testified that she told West of the. minority exclusion when he first telephoned to order the cars several weeks in advance; that, when West came to pick up the cars accompanied by Friloux and Bly, she asked him if they were “qualified drivers,” meaning by mutual understanding, “drivers over twenty-one,” to which West answered “yes”; and that the keys to both cars were delivered to West. West’s testimony was that the minority exclusion was never brought to his attention by anyone; that Jennings examined the driver’s licenses of Friloux and Bly; and that Jennings gave Friloux keys to one car and gave Bly possession of the other car with keys in it. Bly, age 17 at the time of the rental, verified that he received possession of one car in this manner and that Friloux was given keys to the other car “at the counter,” though Bly was unsure whether by Jennings or by West. Friloux testified that the keys passed directly from Jennings to West to him at the counter in the presence of Jennings and that Jennings or her husband had asked only whether he and Bly were “licensed drivers.”

At the outset on this appeal, Royal challenges USAA’s standing to bring this action. Apparently, this contention was not made at the trial court, and the trial court’s findings of fact state as an admitted fact that “this court has jurisdiction of this proceeding.” Pointing out that USAA is not a direct beneficiary of the rental contract, Royal invokes the settled and familiar rule that an action by a third party to enforce a contract may be brought only when the third party is a direct beneficiary of the contract. See Hawkins v. Mattes, 171 Okl. 186, 41 P.2d 880 (1935); Traders & General Insurance Co. v. Sand Springs Home, 195 Okl. 509, 158 P.2d 1018 (1944); Neal v. Neal, 250 F.2d 885 (10th Cir. 1957). We do not think this rule applicable here, simply because this action is not one to enforce a contract but rather seeks a declaration of the relative rights and duties of USAA and Royal. The subject matter of the suit — the duty to defend and indemnify Friloux in the pending Texas lawsuit — is definite and substantial. Each party has a stake in the outcome, and their interests are adverse. We conclude that USAA has-^standing to bring this declaratory suit. See, e. g., Lumbermens Mutual Casualty Co. v. Iowa Home Mutual Casualty Co., 405 P.2d 160 (Okl.1965). And see generally, Hart & Weehsler, The Federal Courts and the Federal System, 120—133, 150—183 (1973).

Next, Royal points out that restrictive covenants, such as this exclusion-of-minors clause, are valid in Oklahoma under case law and statute. See 47 O.S. § 8 — 101(f); Carlton v. State Farm Mutual Automobile Insurance Co., 309 P.2d 286 (Okl.1957). The effect of the cited authorities is that such a restriction is valid absent an “implied or tacit consent.” Id., at 288. In Security Insurance Co. of New Haven v. Greer, 437 P.2d 243 (Okl.1968), the court held that an insurance company was estopped from relying upon a clause excluding non-personal property from coverage by the fact that the company’s agent was advised by the insured that one of the items to be covered was non-personal. Sustaining coverage under the policy, the court said, “An insurer may by his action or conduct be estopped from denying that his policy affords coverage for a risk which the insured has been led honestly to believe was assumed under the terms of the policy.” Id., at 245-246.

Security Insurance was an action by the insured; and Royal contends that, even though US A A has standing to adjudicate coverage, only the insured can assert a theory of waiver by estoppel against Royal. It cites Day v. Hartford Accident & Indemnity Co., 223 F.Supp. 953 (N.D.Okl.1963), where a third party holding a judgment against the insured was not allowed to advance a waiver by estoppel theory against the insurer. We think that case distinguishable from ours because, unlike our own case, the insured there did not claim coverage by estoppel. The Oklahoma courts have permitted an insurance company to sue another on a theory of waiver by constructive notice similar to the one advanced here. See Lumbermens Mutual Casualty Co. v. Iowa Home Mutual Casualty Co., supra.

Royal contends that the evidence does not establish the necessary elements of estoppel. These elements are well settled and have been followed by this court. Estoppel arises where one party, by its words or actions, misrepresents a fact, and the other party reasonably relies upon such representations to its detriment. See Allied Steel Construction Co. v. Employers Casualty Co., 422 F.2d 1369, 1371 (10th Cir. 1970). As we have seen, testimony by West, Friloux, and Bly indicates that Jennings knew the two minors would be driving the cars and facilitated their driving by the way she delivered possession of the cars and the keys. Under these circumstances, we think the court was justified in finding an implicit representation by Jennings that Friloux and Bly, both minors, were authorized drivers under the terms of the contract and would be covered by the Royal insurance. West, who signed the contracts, testified that he relied upon this implicit representation; “Had I known that this agreement stated ‘Under 21,’ I never would have put those kids in that position.” Royal argues that all the evidence supporting estoppel is merely testimony by interested persons. However, the sole refutation of this evidence is also testimony by interested persons, Mr. and Mrs. Jennings. But even so, that was a matter for the trier of the fact. .The trial court’s resolution of the crucial factual issue is not clearly erroneous, and the judgment is affirmed.

      . Royal does not rely upon the rental contract provisions forbidding waiver unless in writing. Moreover, such reliance is foreclosed by the ease law. See 3 Corbin § 763 and cases cited therein (1960; 1971 Supplement).


author: COFFIN, Chief Judge.

text:
    ANHEUSER-BUSCH, INC., Plaintiff-Appellee, v. TEAMSTERS LOCAL NO. 633, NATIONAL CONFERENCE OF BREWERY AND SOFT DRINK WORKERS, et al., Defendants-Appellants.
    No. 74-1291.
    United States Court of Appeals, First Circuit.
    Argued Nov. 5, 1974.
    Decided Feb. 19, 1975.

      I. Philip Sipser, New York City, with whom Sipser, Weinstock, Harper & Dorin, New York City, and Nixon, Christy & Tessier, Manchester, N. H., were on briefs, for appellants.
    John J. Delaney, Jr., Boston, Mass., with whom William T. Sherry, Jr., Nutter, McClennen & Fish, Boston, Mass., William L. Phinney, Sheehan, Phinney, Bass & Green, Manchester, N. H., Charles P. O’Connor, and Morgan, Lewis & Bockius, Washington, D. C., were on brief, for appellee.
    Before COFFIN, Chief Judge, and ALDRICH and CAMPBELL, Circuit Judges.
   COFFIN, Chief Judge.

This tempest has been brewed in a very small teapot. The dispute which precipitated the filing in this court of more than 80 pages of briefs and an extensive appendix began on July 30, 1974, when appellee Anheuser-Busch posted a notice prohibiting employees at its Merrimack, New Hampshire brewery from wearing tank-top shirts on the job. Tank-tops are sleeveless shirts which leave exposed the shoulders, arms and underarms of the wearer. Beginning on July 31, when three employees were sent home after refusing to doff their tank-tops for other shirts, the emotional temperature rose, with over a dozen more employees, including shop stewards, being sent home a few days later. The issue peaked by August 14, when thirteen of the eighteen employees in the Brewing Department wore tank-tops, refused to put on other shirts, and went home. Approximately thirty employees in the Maintenance Department wore tank-tops on August 15. On August 16 no maintenance employees reported for work and production at the brewery was halted.

On August 14 appellee filed a complaint seeking injunctive relief and damages for what it alleged were violations of the collective bargaining agreement then in force. Labor Management Relations Act § 301(a), 29 U.S.C. § 185(a). After an August 16 hearing, the district court enjoined appellants from encouraging or participating in any concerted interference with brewery operations. By the specific terms of the injunction, employees were permitted to wear tank-tops only if working in areas of the plant where they were not subject to view by those members of the public or special groups touring the brewery. Although the hearing was directed at the question of whether a temporary restraining order should issue, when it became clear that neither party intended to introduce additional evidence, the district court ruled that the order issued “was and is a preliminary injunction”.

There are several difficult issues, raised by the parties in their briefs, which might require discussion and decision if this were a different case. The district court held that an injunction could be entered against the unions despite the Norris-LaGuardia Act, 29 U.S.C. § 101 et seq., because of the Supreme Court’s decision in Boys Markets, Inc. v. Retail Clerks Union, Local 770, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970). It is true that strikes and work stoppages are proscribed by the collective bargaining agreement between the parties, but that does not settle the question of the applicability of the Boys Markets doctrine, for the plant’s shutdown might be viewed as attributable to the employer’s choice of disciplinary methods rather than to the employees’ failure to conform to the dress code. Other issues raised that need not be addressed here include the possible application of the requirements of the NorrisLaGuardia Act in a case where the Boys Markets exception is available and the suggestion that the employees’ actions here were individual, not concerted.

This case may be resolved by reference to the ordinary principles governing equitable relief — principles which, the Boys Markets Court made clear, are to be applied where a labor injunction is sought:

“ . . the District Court must . ■ consider whether issuance of an injunction would be warranted under ordinary principles of equity— whether breaches are occurring and will continue, or have been threatened and will be committed; whether they have caused or will cause irreparable injury to the employer; and whether the employer will suffer more from the denial of an injunction than will the union from its issuance.” 398 U.S. at 254, 90 S.Ct. at 1594, quoting Sinclair Refining Co. v. Atkinson, 370 U.S. 195, 228, 82 S.Ct. 1318, 8 L.Ed.2d 462 (1962) (Brennan, J., dissenting).

The district court’s findings on the question of injury were brief: “I take judicial notice of the fact that the general public’s desire for beer, while a year-round phenomenon, is more acute in the summer. I find, therefore, that continuance of this dispute will cause irreparable injury to the plaintiff and that an injunction is warranted under ordinary principles of equity. Although no strike has been called or threatened, the plant has been shut down just as effectively as if all of the employees were on strike and picketing the plant.”

Even though the decision to grant or deny preliminary injunctive relief is one within the discretion of the district court, 11 C. Wright & A. Miller, Federal Practice and Procedure § 2948 (1973), we conclude that the limited incursion upon the Norris-LaGuardia Act which was authorized by Boys Markets is insufficient to support the injunction issued below. Although the district court’s findings on injury make reference to the fact that the plant was effectively shut down, an employer cannot be permitted to qualify for injunctive relief simply by responding to minor employee infractions in a way that brings serious and irreparable damage upon himself by causing a shutdown. That is what happened here. As the district court noted, “the real controversy is whether the employees shall be allowed to wear tank-top shirts pending submission of the agreement to arbitration.”

Viewed from this perspective, the appellee’s expected injury cannot be said to be either irreparable or one which outweighs the loss which the union was likely to suffer through the issuance of an injunction. Detroit Newspaper Publishers Ass’n v. Detroit Typographical Union No. 18, 471 F.2d 872 (6th Cir. 1972), cert. denied, 411 U.S. 967, 93 S.Ct. 2149, 36 L.Ed.2d 687 (1973), is persuasive authority. In that case, a district court enjoined an employer, pending arbitration, from utilizing certain electronic editing equipment unless it was operated by employees represented by the plaintiff union. The court of appeals reversed. The lower court had not weighed the equities between the parties, and the employees’ probable loss of overtime pending arbitration was found not to qualify as irreparable injury. Having some employees wear tank-tops, even during the summer when there are likely to be more than the'usual number of persons touring the plant, cannot be considered the type of injury properly providing a basis for injunctive relief.

Our holding here should not be taken as one that an employer will never be successful in demonstrating that he will be seriously or irreparably harmed if prevented from effectively enforcing a work rule pending arbitration. Refusal by employees to comply with a mandated safety precaution might well stand on a different footing. See United Steelworkers v. Blaw-Knox Foundry & Mill Mach. Inc., 319 F.Supp. 636, 640-641 (W.D.Pa.1970). Or, in another case, there might be an adequate showing that employee disregard of work rules was seriously undermining an employer’s ability to conduct his business. Here, however, there has been on the employer’s part nothing more than the undifferentiated claim that there exists a right to make and enforce rules pending the outcome of a grievance and arbitration procedure, and we reject the contention that the labor injunction is available in the ordinary course of events as an enforcement mechanism. See Detroit Newspaper Publishers Ass’n v. Detroit Typographical Union No. 18, supra (rejecting argument that, absent unusual circumstances, a party’s appearance of powerlessness due to failure to prevent opposing party’s unilateral action pending arbitration constitutes irreparable injury). We hold merely that in this case there was not a showing of potential injury adequate to support relief under general equitable principles. See Detroit Newspaper Publishers Ass’n v. Detroit Typographical Union No. 18, supra; North American Coal Corp. v. Local Union 2262, 497 F.2d 459 (6th Cir. 1974); Pittsburgh Newspaper Printing Pressmen’s Union No. 9 v. Pittsburgh Press Co., 479 F.2d 607 (3d Cir. 1973).

We are mindful of the repeated concessions of both parties that the underlying dispute on the wearing of tank-tops is an arbitrable one, and therefore find it unnecessary to incorporate in this court’s judgment a direction that the district court order the parties to proceed to arbitration. Either party may return to the district court on that issue if that proves necessary.

Reversed.

      . Defendants, herein referred to as appellants, were Teamsters Local No. 633, the National Conference of Brewery and Soft Drink Workers, and three union officers.

      . Appellee objects to tank-tops on the ground that an unsightly appearance is presented by employees to the many persons touring the brewery.


author: PER CURIAM.

text:
    David L. STROUD, Petitioner, v. Frank A. HALL et al., Respondents.
    Misc. 75-8009.
    United States Court of Appeals, First Circuit.
    Submitted Feb. 21, 1975.
    Decided March 5, 1975.

      Before COFFIN, Chief Judge, and ALDRICH and McENTEE, Circuit Judges.
   PER CURIAM.

Petitioner was tried in Franklin County Superior Court in 1971 on a charge of assault with intent to rape, and is presently serving the ten to twenty-five year sentence imposed upon conviction. The district court, after considering the claims that the conviction rested on physical evidence and identification testimony which should have been suppressed, denied the writ of habeas corpus and refused to issue a certificate of probable cause. The question before us is whether a certificate should issue so that the appeal may be pursued.

The starting point for our inquiry is the 14-page Findings of Fact and Rulings on Defendant’s Motions to Suppress filed by the state court trial judge and based upon a hearing he conducted on the motions. The judge found that the distinctive sweatshirt introduced at trial was properly seized as clothing worn by petitioner when he voluntarily went to another building for a “show up” and was there arrested, and that its use was in no way tainted by the alleged illegality of the entry by police into petitioner’s room. The judge also allowed testimony as to the victim’s “show up” identification of petitioner, finding that petitioner voluntarily consented to the procedure and that it was conducted in a constitutionally permissible manner. The Massachusetts Supreme Judicial Court affirmed the conviction on direct appeal. Commonwealth v. Stroud, 1972 Mass. Adv.Sheets 775, 281 N.E.2d 599.

The district court properly accepted the trial judge’s factual findings as adequately supported by the record. 28 U.S.C. § 2254(d); Leavitt v. Howard, 462 F.2d 992 (1st Cir.), cert. denied, 409 U.S. 884, 93 S.Ct. 175, 34 L.Ed.2d 140 (1972). On those facts, the introduction of the sweatshirt constituted no constitutional violation. Nor was the identification testimony improper, since under “the totality of the circumstances” the procedure utilized was not unnecessarily or unduly suggestive. Neil v. Biggers, 409 U.S. 188, 93 S.Ct. 375, 34 L.Ed.2d 401 (1972); Stovall v. Denno, 388 U.S. 293, 87 S.Ct. 1967, 18 L.Ed.2d 1199 (1967).

Certificate denied.

       Although the trial court did not allow testimony or introduction of evidence as to what the police and others saw and found in petitioner’s room in the period immediately after entry, this was done only “for reasons of caution”, since the entry was found to be a permissible one. We need not decide whether the entry was permissible or not.


author: SETH, Circuit Judge.

text:
    Daniel P. MANDRELL, Appellant, v. Caspar W. WEINBERGER, Secretary of Health, Education and Welfare of the United States, Appellee.
    No. 74-1398.
    United States Court of Appeals, Tenth Circuit.
    Argued Jan. 22, 1975.
    Decided March 4, 1975.
    John N. Goodman, Oklahoma City, Okl. (Leslie L. Conner, and Conner, Little & Conner, Oklahoma City, Okl., with him on the brief), for appellant.
    Larry R. O’Neal, Atty., Dept, of Justice (Carla A. Hills, Asst. Atty. Gen., William R. Burkett, U. S. Atty., and William Kanter, Atty., Dept, of Justice, with him on the brief), for appellee.
    Before HILL, SETH and HOLLOWAY, Circuit Judges.
   SETH, Circuit Judge.

This case is before us for review of a decision of the district court which found [pursuant to 42 U.S.C. § 405(g)] that substantial evidence in the administrative record supported the finding of the Secretary of Health, Education and Welfare that Daniel P. Mandrell is not disabled to an extent which would entitle him to disability insurance benefits under the Social Security Act.

Mr. Mandrell filed an application for Social Security disability insurance benefits pursuant to 42 U.S.C. §§ 416(i) and 423(d)(2)(A) on March 10, 1970, alleging that he had been disabled due to emphysema, thrombophlebitis, and heart trouble since February 2, 1969. The request was denied, reconsidered, and the denial affirmed. He then requested and obtained a hearing during which he testified and made numerous medical reports part of the record. The Administrative Law Judge made findings and concluded that the claimant was not entitled to benefits as he was able to engage in substantial gainful work, and thus not disabled, as of the critical date.

The decision of the Administrative Law Judge became the final decision of the Secretary, and the claimant thereafter brought an action in the district court for review of the decision. The Secretary moved for summary judgment on the basis of the administrative record. The trial judge granted summary judgment and filed an explanatory memorandum.

Claimant on this appeal raises three points: (1) The district court erred in holding that the decision of the Secretary is supported by substantial evidence; (2) the court did not give proper consideration to the fact that appellant-claimant receives one hundred per cent disability benefits from the Veterans’ Administration; (3) the court did not properly construe the applicable portions of the Social Security Act.

We note first that the district court’s decision preceded our opinion in Nickol v. United States, 501 F.2d 1389 (10th Cir.), which discusses judgments in cases of this type. In any event, the opinion of the district court here summarizes the facts relied on in the administrative record by the trial court to support the decision as to substantial evidence.

The claimant has been classified by the Veterans’ Administration as totally disabled and receives benefits from them of $130.00 per month. Concerning this the district court said: “But that is not significant herein because the requirements and standards mandated by statutes and regulations of the two agencies are not the same.” Mandrell suggests on appeal that the correct statement of the law is that, while the Veterans’ Administration’s finding of disability is not controlling on the Social Security Administration, it is a factor entitled to considerable weight. De-Paepe v. Richardson, 464 F.2d 92 (5th Cir.); Skeels v. Richardson, 453 F.2d 882 (5th Cir.), cert. denied, 409 U.S. 857, 93 S.Ct. 137, 34 L.Ed.2d 101. We agree that the finding of the Veterans’ Administration is entitled to consideration by the Secretary, although it is not controlling. This is what the trial court decided and meant by the above quotation.

The proper emphasis to be given to this fact is initially for the Secretary. The quotation from the opinion of the district court does not' appear to be a statement to the contrary. The district court correctly applied the law to the conflicting facts in the administrative record in its determination whether substantial evidence was shown.

The claimant also urges that the district court erred in its construction of the Social Security Act, citing the proposition from DePaepe v. Richardson, 464 F.2d at 101:

“The cases are numerous that hold that the Social Security Act should be liberally construed in favor of disability and the intent is inclusion rather than exclusion.”

This is the rule of construction, and there is nothing to show that it was not here applied. Obviously it cannot mean that every individual with a substantial physical complaint is entitled to disability insurance benefits. The statute sets rather high requirements which must be met. It does not appear that the district court erred in applying the standards of the Social Security Act in its substantial evidence evaluation.

Finally, it is alleged that the decision of the Secretary is not supported by substantial evidence in the administrative record. The district court carefully and thoroughly reviewed the disputed facts in the administrative record and found substantial evidence to support the Secretary’s denial of disability benefits to Mr. Mandrell. The operative facts which are supported in the administrative record by substantial evidence are summarized in the opinion of the district court, and this provides this court with a sufficient basis for review without a complete repetition of the trial court’s action.

The district court did not err in holding that the decision of the Secretary denying benefits to Mr. Mandrell is supported by substantial evidence in the administrative record. The opinion of the district court is affirmed.


author: LEWIS, Chief Judge.

text:
    George SHUPUT, Plaintiff-Appellant, v. HEUBLEIN INC., a Connecticut Corporation, Defendant-Appellee.
    No. 74-1207 (C-195-73).
    United States Court of Appeals, Tenth Circuit.
    Submitted Nov. 15, 1974.
    Decided March 6, 1975.
    Allan L. Larson, of Worsley, Snow & Christensen, Salt Lake City, Utah, for plaintiff-appellant.
    Ramon M. Child of Ray, Quinney & Nebeker, Salt Lake City, Utah, for defendant-appellee.
    Before LEWIS, Chief Judge, and BREITEN STEIN and McWILLIAMS, Circuit Judges.
   LEWIS, Chief Judge.

George Shuput, the plaintiff below, appeals from a judgment of the United States District Court for the District of Utah entered upon a ruling of the trial court granting the motion of the defendant, Heublein Inc., for a directed verdict. The plaintiff had sought damages for injuries he received when a polyethylene stopper ejected from a champagne bottle, manufactured and distributed by Heublein, and struck him in the eye. He advanced the following theories in support of his claim: (1) negligence of the defendant in designing, manufacturing, and distributing a champagne bottle which would spontaneously and unexpectedly eject its stopper and the stopper’s restraining wire, and in failing to warn thereof; (2) breach by the defendant of the warranties of merchantability and of the fitness of its product for its intended use; (3) breach by the defendant of its duty in strict liability. In directing its verdict at the close of the plaintiff’s evidence, the trial court made clear, as the basis for its ruling, that Heublein owed plaintiff no duty to protect against the risk of the stopper’s being ejected and causing injuries to the plaintiff and that the defendant’s product was not unreasonably dangerous. Thus, the trial court stated that “[tjhere isn’t any undisclosed hazard in this case.”

Plaintiff now contends that his evidence was sufficient, under any one of his theories, to require the submission of his case to the jury. The question on appeal is, therefore, whether that evidence was such that reasonable persons could have reached but one conclusion as to the verdict — namely, that defendant should prevail. Brady v. Southern R. R., 320 U.S. 476, 479-80, 64 S.Ct. 232, 88 L.Ed. 239; Wright v. Marzo, 10 Cir., 427 F.2d 907, 909; Swearngin v. Sears Roebuck & Co., 10 Cir., 376 F.2d 637, 639. Mindful of our own admonition, that directed verdicts should be granted sparingly in consideration of the seventh amendment, Swearngin v. Sears Roebuck & Co., supra, we have neither weighed the credibility of the witnesses nor otherwise considered the weight of the evidence in our review of the record. Rather, we have viewed the evidence in the light most favorable to the plaintiff. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 82 S.Ct. 1404, 8 L.Ed.2d 777; Peter Kiewit Sons Co. v. Clayton, 10 Cir., 366 F.2d 551, 554. So viewed, the following facts appear.

During the afternoon of December 31, 1970, plaintiff attended a party given by his employer. Several bottles of defendant’s champagne had been purchased and chilled. They had not been shaken or abused. Some of the bottles were opened, in each instance by pushing or in some way forcing the cork after the removal of the restraining wire. The host Mr. Ed Mawod began to open a bottle, first removing the foil wrapping on the bottle’s top and then attempting to remove the restraining wire. He quickly became impatient with the wire and asked the plaintiff for assistance. The plaintiff said “you turn that” and reached to twist the wire himself. Mr. Mawod continued to hold the bottle but looked away from the plaintiff. He then heard a pop and saw the plaintiff on the floor. The polyethylene stopper had ejected from the bottle and, together with the loosened restraining wire, had struck plaintiff in the right eye. Only about fifteen seconds had elapsed since Mawod first picked up the bottle. The plaintiff later permanently lost all of the central vision in his right eye.

Plaintiff presented no evidence that the product was negligently designed in general nor that the subject bottle was separately defective in any way. As a consequence we agree, on this record, that plaintiff failed to make a case based on traditional negligence or specific warranty as it pertains to the particular bottle involved. We are left, then, to a consideration of whether plaintiff made a prima facie case under the doctrine of strict liability, a claim primarily relied on at trial and emphasized on appeal. The Supreme Court of Utah has not specifically recognized such doctrine but its trend of authority is not inconsistent with the doctrine. See Julander v. Ford Motor Co., 10 Cir., 488 F.2d 839, 844.

The thrust of plaintiff’s case was that defendant’s product was unreasonably dangerous, Restatement (Second) of Torts § 402A (1965), and more particularly that the uncorking of the product presented a dangerous and unreasonable hazard to the consumer-plaintiff requiring defendant to adequately warn of

such hazard. Plaintiff presented considerable evidence, largely through expert testimony, concerning the speed and force with which a plastic stopper will eject from a champagne bottle when the restraining wire is released under varying conditions. And in regard to this evidence the defendant stipulated that champagne “corks under the pressure of the gases in the bottle, when you remove the wire, are likely to fly” and “with sufficient force to damage an eye.” So, too, the trial court termed the corks, especially plastic ones, as “very dangerous things” but added that “is common knowledge.”

We consider that plaintiff’s evidence was obviously sufficient to allow the jury to find that defendant’s product contained an unreasonable danger or hazard to the consumer and was thus defective, and that defendant did not remedy this defect by labeling the bottle to give adequate warning of that danger. No warning of any kind was given. The duty to warn, however, does not extend to a perfectly obvious hazard but we do not consider this to be such a case. The propensities of bubbly wine may be well known to many but are not a matter of such common knowledge as to be established as a matter of law and imposed as a matter of judicial knowledge. The court erred in so doing as a basis for directing a verdict.

As additional bases for its ruling, the trial court held not only that the plaintiff had failed to prove defendant’s negligence but also that the plaintiff himself had been negligent.

Plaintiff testified that he knew champagne was bottled under pressure and that champagne corks would pop. He further stated, however, that he had never opened a bottle and “did not know that the cork would eject spontaneously.” Clearly that offshoot of contributory negligence commonly referred to as assumption of risk is a defense to a strict liability claim, Perkins v. Fit-Well Artificial Limb Co., 30 Utah 2d 151, 514 P.2d 811, but the trial court again erred in holding the defense proved as a matter of law because “anyone knows” champagne stoppers can eject spontaneously. We agree, as plaintiff contends, that in addition to the jury question of whether defendant’s product was unreasonably dangerous and thus defective, an additional factual issue exists in the determination of whether plaintiff acted unreasonably in view of what he knew or should have known about opening champagne bottles. Such issues are for the jury.

The plaintiff further suggests that on remand the case be ordered assigned to another and different judge and refers to numerous statements by the trial judge that plaintiff’s case lacked merit. The record does reflect some impatience from the bench which we assume followed the court’s belief that the case did lack merit but falls short of conduct requiring disqualification.

Reversed and remanded for a new trial.

      . This testimony indicated that cold champagne may eject the stopper with a momentum of 63 percent of that of a .22 caliber pistol firing a short cartridge.