author: LEWIS R. MORGAN, Circuit Judge:

text:
    Tommy THOMPSON, Plaintiff-Appellant, v. Honorable Harry K. GALLAGHER, Mayor for the City of Plaquemine, Louisiana, Defendant-Appellee.
    No. 73-1415.
    United States Court of Appeals, Fifth Circuit.
    Dec. 28, 1973.
    Rehearing Denied Feb. 13, 1974.

      William E. Rittenberg, New Orleans, La., Melvin L. Wulf, Leon Friedman, ACLU, New York City, for plaintiff-appellant.
    Joseph B. Dupont, Sr., Plaquemine, La., for defendant-appellee.
    Before TUTTLE, DYER and MORGAN, Circuit Judges.
   LEWIS R. MORGAN, Circuit Judge:

Tommy Thompson served in the United States Army for 22 months before being discharged under other than honorable conditions on May 14, 1970. He went to work for the City of Plaque-mine, Louisiana, on December 16,1971, as custodian at the city diesel plant. Five weeks later, the city council passed the following ordinance:

Resolved, that any person employed by the City of Plaquemine or by the Emergency Employment Act, if said person is a veteran, must have an Honorable Discharge and must be a man of good character.

The day after the ordinance was passed, the City of Plaquemine fired Thompson because his employment violated the ordinance. Thompson sued the Mayor of Plaquemine under 42 U.S.C. § 1983, charging that his dismissal violated his rights under the due process and equal protection clauses of the Fourteenth Amendment, that it was a bill of attainder and that it was an ex post facto law. Jurisdiction was asserted under 28 U.S. C. §§ 1331, 1343, 2201 and 2202. Thompson sought a declaration that the ordinance as applied to him is unconstitutional, an injunction restraining the mayor from applying the ordinance to him, and an order reinstating him to his position at the power plant, with compensation for wages lost as a result of the dismissal.

After a hearing on the merits, the District Court for the Middle District of Louisiana entered judgment for the defendant on the ground that the dismissal pursuant to the ordinance violated none of Thompson’s rights. Thompson appeals.

I.

The first question we must consider is whether Thompson’s interest in his job is protected by the Fourteenth Amendment. Faced with the question of whether a state government as employer must comply with the requirements of due process in its employment practices, some courts have concluded that since a job with the government is neither life, liberty nor property, courts may not review the hiring and firing of government personnel. See, e. g., Bailey v. Richardson, 86 U.S.App.D.C. 248, 182 F.2d 46 (1950), aff’d. by an equally divided court, 341 U.S. 918, 71 S.Ct. 669, 95 L.Ed. 1352 (1951), Jenson v. Olson, 353 F.2d 825, 828 (8 Cir., 1965), and Orr v. Trinter, 444 F.2d 128, 133 (6 Cir., 1971).

The intellectual progenitor of all these cases is McAuliffe v. Mayor of City of New Bedford, 155 Mass. 216, 29 N.E. 517 (1892). Judge (later Justice) Holmes summarily rejected a policeman’s complaint that he had been fired because he exercised his rights under the First Amendment, saying simply,

[t]he petitioner may have a constitutional right to talk politics, but he has no constitutional right to be a policeman. 155 Mass, at 220, 20 N.E. at 517.

Notwithstanding Holmes’ distinguished imprimatur, we feel that this reasoning does not come to grips with the question in cases such as this. The real question is whether the Fourteenth Amendment’s prohibition against governmental actions which violate due process of law reaches a government’s actions as employer. We feel that it does.

The Fourteenth Amendment is a general prohibition against arbitrary and unreasonable governmental action. It no longer suffices to say that although a government may not deprive someone of a right arbitrarily, it may do so in the case of a privilege. Goldberg v. Kelly, 397 U.S. 254, 262, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), Shapiro v. Thompson, 394 U.S. 618, 627 n. 6, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969). The right-privilege distinction has been rejected as a method cf analysis in Fourteenth Amendment cases, because the question is not whether a person has a right to something denied by the government, but whether the government acted lawfully in depriving him of it. Bell v. Burson, 402 U.S. 535, 91 S.Ct. 1586, 29 L.Ed.2d 90 (1971), and cases cited therein at 539, 91 S.Ct. at 1589, “One may not have a constitutional right to go to Baghdad, but the government may not prohibit one from going there unless by means consonant with due process of law.” Homer v. Richmond, 110 U.S.App.D.C. 226, 292 F.2d 719, 722 (1961), cited in Cafeteria and Restaurant Workers Union v. McElroy, 367 U.S. 886, 894, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961).

II.

In the context of public employment, the question of whether employment is protected by the Fourteenth Amendment usually arises when an employee is dismissed for actions which may be characterized as the exercise of some other specifically defined constitutional right. In Slochower v. Board of Education, 350 U.S. 551, 76 S.Ct. 637, 100 L.Ed. 692 (1956), a tenured professor was dismissed from his position at Brooklyn College for asserting his Fifth Amendment privilege against self-incrimination at a Congressional hearing. The court held the dismissal invalid both because it punished assertion of constitutional rights and because “constitutional protection does extend to the public servant whose exclusion pursuant to a statute is patently arbitrary or discriminatory.” 350 U.S. at 556, 76 S.Ct. at 640. Slo-chower was reaffirmed recently in Con-nell v. Higginbotham, 403 U.S. 207, 91 S.Ct. 1772, 29 L.Ed.2d 418 (1971).

As precedent for the latter proposition, the court relied on Wieman v. Up-degraff, 344 U.S. 183, 192, 73 S.Ct. 215, 97 L.Ed. 216 (1952), in which certain staff and faculty members of the Oklahoma Agricultural and Mechanical College were fired for refusing to take an oath disclaiming membership in certain allegedly subversive organizations. The court invalidated the dismissals, holding that the oath lumped together innocent and knowing activity, and as such was an assertion of arbitrary power. 344 U.S. at 191, 73 S.Ct. 215.

In Hobbs v. Thompson, 448 F.2d 456 (5 Cir., 1971), this court invalidated sections of the city charter and ordinances of Macon, Georgia, which restricted electioneering activities of that city’s firemen. We held there that the statutory scheme was overbroad and interfered with the firemen’s First Amendment rights. In doing so, we specifically relied on the proposition in Pickering v. Board of Education, 391 U.S. 563, 568, 88 S.Ct. 1731, 20 L.Ed.2d 811, that ?‘ ‘the theory that public employment which may be denied altogether may be subjected to any conditions, regardless of how unreasonable, has been uniformly rejected.’ Keyishian v. Board of Regents, [385 U.S. 589, 605-606, 87 S.Ct. 675, 17 L.Ed.2d 629 (1967)].” 448 F. 2d at 474.

This case differs somewhat from the Weiman-Slochower-Pickering line of cases since it involves no constitutional right other than the right to be free from arbitrary and unreasonable government action. But the same reasoning applies. Just as a public employee does not give up hi's First Amendment rights when he begins receiving a pay check from the government, neither does he give up his right to due process of law. The Fourteenth Amendment stands for the proposition that the government must act, when it acts, in a manner which is neither arbitrary nor unreasonable. This stricture is in addition to those which restrict the government from acting in a manner which impinges on freedom to speak or associate, or to be free from self-incrimination. It is one which most certainly applies not only to the government as policeman but also to the government as employer. Public employees are every bit as protected by the Fourteenth Amendment’s safeguards as is the rest of the populace. Grausam v. Murphey, 448 F.2d 197 (3 Cir., 1971), Buckley v. Coyle Public School System, 476 F.2d 92 (10 Cir., 1973), Fitzgerald v. Hampton, 152 U.S.App.D.C. 1, 467 F.2d 755 (1972).

III.

Having determined that Thompson’s dismissal must be evaluated according to Fourteenth Amendment standards, we turn now to the question of whether the city’s dismissal of him violates due process or equal protection. Thompson was dismissed pursuant to a city ordinance forbidding the employment by the city of any veteran not having an honorable discharge from the armed forces. The ordinance thus creates two different classifications. First, it divides the employees of the city into veterans and non-veterans. In addition, it distinguishes between veterans with honorable discharges and those with other than honorable discharges.

Thompson attacked the ordinance on both equal protection and due process grounds. In many cases, of which this is one, it makes little difference which clause of the Fourteenth Amendment is used to test the statute in question. Bolling v. Sharpe, 347 U.S. 497, 74 S.Ct. 693, 98 L.Ed. 884 (1954). The question is whether the challenged statute is a rational means of advancing a valid state interest. A regulation not reasonably related to a valid government interest may not stand in the face of a due process attack. Likewise, a classification which serves no rational purpose or which arbitrarily divides citizens into different classes and treats them differently violates the equal protection clause.

Although it is proper for a city to create different classes of citizens and treat them in different manners, the classifications thus created must serve a rational and valid governmental purpose. Thus, we are faced with two questions. Is there a valid governmental interest at stake in this case? Does the ordinance bear a rational relationship to the fulfillment of those interests ?

In an effort to determine what interest of the City of Plaquemine was at stake in this ordinance, we have listened to oral argument, read the briefs presented by both parties, and examined the entire record, including the transcript of the trial held in district court. The defendant seems to feel that there are three interests which the ordinance is intended to fulfill.

The first is that persons with other than honorable discharges should not be employed by the city. The district court apparently accepted this as a valid justification for the ordinance, stating,

The burden is upon the plaintiff to prove his case and everyone who has testified in this case has testified that this ordinance was passed because first they felt that no one with a Dishonorable Discharge or a Discharge under other than honorable conditions should work for the City of Plaque-mine. I personally would wholeheartedly agree.

Of course, to state that persons with other than honorable discharges should be fired because a person with other than an honorable discharge is unfit to be a city employee is totally circular. The question is, what is it about a person with other than an honorable discharge that makes him unfit to be a city employee.

It was suggested at trial that the ordinance was an effort to comply with the Emergency Employment Act of 1971, P.L. 92-54, 85 Stat. 146, which provided funds to the city for Thompson’s wages of $350.00 per month. The act, insofar as it is relevant here, authorized financial assistance for federal, state and local governmental units to hire people particularly affected by high unemployment. Congress was particularly concerned about low-income persons, migrants, those from socio-economic backgrounds generally associated with high unemployment, young persons entering the labor force, persons recently separated from military service, and others likely to have trouble finding jobs. Governmental units seeking assistance under the act must submit to the Secretary of Labor applications which describe the programs to be instituted. The act further provides that these applications must include

. assurances that special consideration in filling public service jobs will be given to unemployed or underemployed persons who served in the Armed Forces in Indochina or Korea or after August 5, 1964 in accordance with criteria established by the Secretary (and who have received other than dishonorable- discharges); . . . P.L. 92-54 § 7(c)(4).

Thus, the act provides preferences for veterans with “other than dishonorable discharges.” The Plaquemine ordinance, however, requires the discharge of veterans with other than honorable discharges. Thompson has an undesirable discharge under other than honorable conditions. This is clearly demonstrated by the record in this case, although Thompson’s attorney, at the beginning of the trial, stipulated that he had a dishonorable discharge. An undesirable discharge is not an honorable discharge, but neither is it a dishonorable discharge. Thompson’s dismissal not only fails to further the purposes of the act, it actually subverts them. As a veteran who has received other than a dishonorable discharge, Thompson is actually entitled to a preference under the act. Thus, the employment act cannot provide any justification for the ordinance which led to Thompson’s dismissal.

Finally, the appellee appears to argue that the characteristics which cause a person to receive other than an honorable discharge from the military are characteristics which hinder that person’s effectiveness as a city employee. This rationale is stated in the appellee’s brief in the following manner:

Certainly, the fact that a person does not get an honorable discharge from the armed forces conotes, [sic] if not criminality, at least antisocial character. The City undoubtedly has an interest in not hiring persons with such character . . . It cannot be gainsaid that the exclusion of persons with criminal and/or strongly antisocial character will not, in the long run, operate to create a better serving, more efficient and more reliable service.

We agree that the city has an interest — indeed, a very strong interest —in maintaining the quality of its work force and assuring that its employees perform their tasks as well as possible. Of the three governmental interests advanced by the appellee, this is the one that may be considered for the purposes of Fourteenth Amendment analysis.

IV.

The next question, therefore, is whether the classifications in question are reasonably related to the city’s interest in maintaining the quality of its work force. First, we consider the distinction between veterans with honorable discharges and other veterans.

Numerous factors which have absolutely no relationship to one’s ability to work as a custodian in a power plant may lead to other than honorable discharges from the military, including security considerations, sodomy, homosexuality, financial irresponsibility and bed-wetting. The point is not that some or all of these considerations must, as a matter of due process, be excluded from consideration of fitness to hold the position of power plant custodian. However, a general category of “persons with other than honorable discharges” is too broad to be called “reasonable” when it leads to automatic dismissal from any form of municipal employment. We have no hesitancy in calling the ordinance which bars that class of persons from city employment, without any consideration of the merits of each individual case, irrational.

In addition, the statute distinguishes between veterans and non-veterans. By eliminating veterans with other than honorable discharges, the city eliminates veterans with those characteristics which lead to other than honorable discharges. Yet there is no effort to “weed out” civilians who have the same characteristics. We have been directed to no ordinance limiting city employment to those who are financially responsible, or who are good security risks, or who have never committed sodomy, or who do not wet their beds. There has not even been a showing that the city excludes convicted felons- from employment. This is not to imply that any or all of these restrictions would be valid. On that question we express no opinion. The point is only that the ordinance being challenged might stand in a very different light if it were part of a general comprehensive scheme which enumerated characteristics deemed to be conducive to competent performance as a city employee, and which excluded all those who lacked those characteristics. That is not what we have here. As it now stands, the Plaquemine ordinance subjects veterans to standards to which non-veterans are not subjected. It also disqualifies veterans who have received other than honorable discharges, in spite of the fact that a veteran may receive a discharge for a wide range of reasons, many of them totally unrelated to performance as a city employee. By no. stretch of the imagination could such a scheme be called rational.

The cause is reversed and remanded to the district court for proceedings not inconsistent with this opinion.

      . The Fourteenth Amendment states, in part, “. . . nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”


source: Caselaw Access Project

author: CHOY, Circuit Judge:

license: Public Domain

text:
    Kenneth M. KALE, Plaintiff-Appellant, v. The UNITED STATES of America et al., Defendants-Appellees.
    No. 26020.
    United States Court of Appeals, Ninth Circuit.
    Dec. 17, 1973.

      Kenneth M. Kale, in pro per.
    Robert L. Meyer, U. S. Atty., Los An-geles, Cal., James Akers, Asst. U. S. Atty., Glen R. Goodsell, Atty. (argued), Dept, of Justice, Dale K. Frizzell, Asst. Atty. Gen., Land & Natural Resources Div., Dept, of Justice, Washington, D. C., Edward D. Neuhoff, San Marino, Cal., and Milo V. Olson, Los Angeles, Cal., (argued), for Sea View Estates, and for defendants-appellees.
    Before BROWNING, HUFSTEDLER and CHOY, Circuit Judges.
   ORDER

After rehearing of this appeal and consideration of the additional briefs and oral arguments of the parties, our original opinion filed herein on January 18, 1973 is withdrawn and we substitute therefor the attached opinion.

No further motion for rehearing will be entertained on any ground covered by the petition for rehearing and the rehearing just concluded.

CHOY, Circuit Judge:

Kenneth M. Kale, a Chickasaw Indian, brought suit in federal court alleging that the Secretary of the Interior (the Secretary) had improperly denied his Indian allotment petition-application covering land in Coachella Valley, Riverside County, California. Kale sought to enjoin the enforcement of a California judgment which, relying on a federal land patent issued to one Errett Lobban Cord, quieted title to the land in Sea View Estates, Inc. (Sea View) and ordered Kale and his family ejected. The district court granted summary judgment against Kale. We affirm.

Cord, a holder of Soldier’s Additional Homestead Rights, filed an application for 275 acres of public land on April 9, 1962 with the Bureau of Land Management (BLM), a division of the Department of the Interior, pursuant to 43 U. 5. C. §§ 274, 278. The BLM classified the 275 acres as being proper for Soldier’s Additional Homestead Title Transfer on June 15, 1964 after determining that the land was not needed for retention in federal ownership, was not mineral in character and was suitable in a broad sense for some farming use.

Kale filed an Indian allotment petition-application for 160 acres of land pursuant to 25 U.S.C. § 334 on October 6, 1966. Ninety-five of the acres were within the area applied for by Cord. In November, 1966 Kale entered a portion of the land covered by Cord’s application and placed a mobile home there. Kale subsequently built a water tower, stock corral, and made other improvements.

The BLM, on February 8, 1967, authorized publication of notice that a patent was to be issued to Cord. Cord published notice for five consecutive weeks in the Coachella Valley Sun, the local newspaper. The notice called for any protestant to file his objection with the local BLM office. Although Kale had notice of the proposed action of the BLM, he failed to file a protest.

The BLM granted a land patent to Cord for the 275 acres on June 22, 1967. Cord and his wife conveyed the property to Sea View on April 22, 1968. Sea View commenced suit for ejectment and to quiet title against Kale in state court in June, 1968. Pending that lawsuit, on December 13, 1968, the Secretary denied Kale’s petition-application for the entire 160 acres he sought, finding that 95 of the acres had been patented to Cord and were not under the jurisdiction of the Department. The Secretary also found that all but 5 of the remaining 65 acres were in a proposed withdrawal for the Bureau of Reclamation, and that even assuming all the lands were immediately available, they were not suitable for Indian allotment.

The California court entered judgment for Sea View on March 10, 1969, quieting title in Sea View and ruling that Kale had no right, title, or interest in the 95 acres in controversy. Kale filed the present action on March 31, 1969. The district court concluded as matters of law that: (1) the real property in question did not qualify for Indian allotment because it had been previously appropriated and had not been classified for settlement under Indian allotment rights; (2) Kale had failed to exhaust available administrative remedies and was barred from judicial relief; and (3) the judgment of the California court was res judicata as to the ownership of the land.

REGULATORY SCHEME

Use of soldier’s rights and Indian allotments was relatively simple until the Secretary of the Interior, pursuant to Executive Order 6910, November 26, 1934, and Executive Order 6964, February 5, 1935, withdrew all public lands in the ten western states from selection or settlement. Thereafter, classification by the Secretary was a prerequisite to a soldier’s scrip selection or Indian settlement. Section 7 of the Taylor Grazing Act, 43 U.S.C. § 315f, authorized the Secretary “in his discretion, to examine and classify any lands withdrawn or reserved” by the executive orders. Bron-ken v. Morton, 473 F.2d 790, 793 (9th Cir. 1973).

When Cord filed his application for public lands in 1962, the regulations then in effect required that the owner of a soldier’s additional right first select a tract of land and then file a formal application. 43 C.F.R. § 132.6 (1954). The application was considered a petition for classification of the lands sought as proper for soldier’s scrip selection. 43 C.F.R. § 296.2 (1954). The filing of the application did not give Cord the right to occupy or settle upon the land and settlement prior to the allowance of his selection constituted a trespass. 43 C.F.R. § 296.5 (1954).

Detailed classification procedures were adopted during the pendency of Cord’s petition-application. After determining the regularity of a petition, a proposed decision was required to be issued containing a statement of the reasons for the classification. 43 C.F.R. § 2411.1- 3(a) (1964). For thirty days protests could be filed. 43 C.F.R. § 2411.1- 4(a) (1964). If no protests were filed, the proposed classification action was issued as the initial decision of the State director. 43 C.F.R. § 2411.1-4(a)(1) (1964). For sixty days the decision was subject to the exercise of the supervisory authority of the Secretary of the Interior and became a final order, reviewable by a court, after that time. 43 C.F.R. § 2411.1(a), (b) (1964). If public land was classified pursuant to a petition-application, the applicant was entitled to a preference right of entry. If the application of the preference right claimant was rejected, the next applicant in order of filing succeeded to the preference right. If no successor existed, the land was opened to application for the purpose it was classified or the classification could be revoked. 43 C.F.R. § 2411.3 (1964).

When Kale filed his Indian allotment petition-application in 1966, the regulations specified that settlement had to be authorized by classification. 43 C.F.R. § 2212.0-3(b) (1964). Settlement prior to that time constituted a trespass. 43 C.F.R. § 2411.3-3 (1966). Once classification occurred and an allotment application was approved, the land was segregated for the Indian allottee and later applications rejected. 43 C.F.R. § 2212.-1-3 (c) (1964). After the issuance of a “certificate of allotment,” 43 C.F.R. § 2212.2- 1 (a) (1964), a trust patent was granted two years from the date of settlement. 43 C.F.R. § 2212.2-2 (a) (1964).

The classification procedures in effect when Kale filed his petition-application were basically the same as in 1964 when Cord’s petition for classification was granted with one significant addition. The new section, 43 C.F.R. § 2411.1-1(f) (1966), read as follows:

(1) A final order of the Secretary shall continue in full force and effect so long as the lands remain subject to classification under the authorities cited in Subpart 2410 until an authorized officer revokes or modifies it. Until it is so revoked or modified, all applications and petition-applications for the lands not consistent with the classification of the lands will not be allowed. Any payments submitted therewith will be returned. If the order is revoked or modified, the land will be opened to entry on an equal-opportunity basis after public notice in accordance with applicable regulations for the purpose for which it may be classified, (emphasis added).

Cord complied precisely with the regulations governing his application for the 95 acres in question and was entitled to a preference right of entry at the time of Kale’s application. The BLM’s classification of the land as proper for soldier’s rights in 1964, although not precluding holders of those rights from filing applications until a patent had been issued to Cord, did foreclose Kale’s application because it was not consistent with the classification. 43 C. F.R. § 2411.1-l(f) (1966). Kale’s settlement was a trespass. Congress did not intend that an Indian acquire a vested right to an allotment simply by settling on a piece of land and then filing an application. Hopkins v. United States, 414 F.2d 464, 467-468 (9th Cir. 1969). Indian allotment rights may be exercised only upon public lands not otherwise appropriated. The land in question was appropriated to holders of soldier’s rights after the 1964 classification decision. Until that classification was revoked, Kale’s petition-application for the 95 acres was properly disallowed.

Kale has no basis for an attack upon the land patent granted to Cord. A United States patent is protected from easy third-party attack. Hoofnagle v. Anderson, 20 U.S. (7 Wheat.) 212, 5 L.Ed. 437 (1822). It is not sufficient for one challenging a patent to show that the patentee should not have received the patent; he must also show that he (the challenger) is entitled to it. Duluth & Iron Range RR. v. Roy, 173 U.S. 587, 590, 19 S.Ct. 549, 43 L.Ed. 820 (1899); Fisher v. Rule, 248 U.S. 314, 318, 39 S.Ct. 122, 63 L.Ed. 263 (1919). Kale can satisfy neither of the criteria for a successful attack upon a land patent. Cord had a preference right to the land from 1964 on and Kale failed to establish that he was any more than a trespasser.

EXHAUSTION OF ADMINISTRATIVE REMEDIES

The general rule of judicial administration is that “no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.” Myers v. Bethlehem Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed. 638 (1938). Application of the rule is not jurisdictional, but calls for the sound exercise of judicial discretion. United States v. Abilene & So. Ry., 265 U.S. 274, 282, 44 S.Ct. 565, 68 L.Ed. 1016 (1924).

The district court imposed the exhaustion doctrine to bar judicial relief because Kale had failed to protest the issuance of a land patent to Cord and had failed to appeal the Secretary’s denial of his application for Indian allotment rights.

Kale had no administrative appeal from the denial of his own application. The denial was not made by the BLM, but by the Secretary. The regulations in effect at that time provided that no appeal would lie from a decision of the Secretary. 43 C.F.R. § 1844.9 (1956). Kale was entitled to bring the present action in the federal district court under 25 U.S.C. § 345 and 28 U.S. C. § 1353.

But, Kale’s failure to protest the impending patent to Cord does preclude relief. The regulations provided for publication of notice and the filing of protests with the local BLM office. Subsequent appellate procedures through the Director of the BLM and finally to the Secretary are prescribed in 43 C.F. R. §§ 1840-44 (1956). The intent of the regulations is to allow the BLM to exercise its discretion and utilize its expertise in the complex area of federal land law. Protests must be filed prior to the grant of a patent because of the patent’s virtual immunity from attack. Kale cannot be permitted to circumvent the administrative procedures, particularly when he had actual notice of the necessity of a protest.

The district court correctly entered summary judgment for Sea View since Kale had no basis for an attack on the land patent from the United States to Cord, and Kale failed to exhaust available administrative remedies in not protesting the impending patent to Cord. We need not reach the other issue in this appeal.

Affirmed.

      . Soldier’s Additional Homestead Rights were created by the Act of June 8, 3872, now 43 U.S.C. § 274. Congress intended that soldiers who had received less than 160 acres of public lands could apply for an additional amount to make up the 160 acres. “Scrip” was issued entitling the holder to land patents upon presentation to the Secretary of the Interior. A soldier’s additional right was both inheritable and assignable. 43 C. F.R. § 132.2 (1954).

      . The General Allotment Act of 1887, as amended, 25 U.S.C. § 334, provided for the allotment of lands of the United States not otherwise appropriated, to eligible Indians who made settlement on those lands. “The main purpose of the General Allotment Act was to end the tribal and nomadic life of the Indians. . . . ” Hopkins v. United States, 414 F.2d 464, 467 (9th Cir. 1969).

      . The regulations, 43 C.F.R. § 1824 et seq. (1967), are intended to “bring to the knowledge and attention of all persons who are or who might be interested in the lands described . . . the fact that it is proposed to establish and perfect such claims, to the end that they may interpose any objection they may have. ...” 43 C.F.R. § 1824.0-1 (1967).

      . One Amos Hopkins did file a protest to the proposed action of the BLM. The protest was dismissed on April 14, 1967, for the reason that settlement under § 4 of the General Allotment Act was not available to an Indian until authorized by classification. The selection by an Indian carried no right to a particular tract of land. In addition, the BLM found Cord’s application senior to any other. (Record on Appeal at 76-78).

      . The denial read in part as follows :
      The lands for which you have submitted a petition-application do not meet the criteria of the law and the regulations. They have poor soil and are almost devoid of forage. They are desert in character. There is no available supply of water. Thus, they do not qualify for allotment under the criteria of 43 CFR 2410.1-1.-3(d)(6) [sic] or as either agricultural or grazing lands. They are chiefly valuable or suitable for purposes other than agriculture or grazing. They cannot be classified as suitable for Indian settlement and allotment. Therefore, the lands are hereby classified as not suitable for Indian allotment purposes.

      . The regulation, 43 C.F.R. § 2212.3-2 (1967), requiring that the BLM give notice to the Indian agent for a particular tribe of any action adverse to an Indian allottee’s interests does not apply to Kale since he was never an allottee as to any of the land involved here,


author: MANSFIELD, Circuit Judge: ROBERT P. ANDERSON, Circuit Judge

text:
    The ORE & CHEMICAL CORPORATION, Plaintiff-Appellant, v. EAGLE STAR INSURANCE COMPANY, LIMITED, Defendant-Appellee.
    No. 27, Docket 72-2103.
    United States Court of Appeals, Second Circuit.
    Argued Oct. 12,1973.
    Decided Dec. 21, 1973.
    Robei’t P. Anderson, Circuit Judge, filed a concurring opinion.
    William R. Norfolk, New York City (Sullivan & Cromwell, New York City of counsel), for plaintiff-appellant.
    Charles T. Weintraub, New York City (Weintraub & Fass, New York City, of counsel), for defendant-appellee.
    Before FRIENDLY, ANDERSON and MANSFIELD, Circuit Judges.
   MANSFIELD, Circuit Judge:

At issue on this appeal is whether the loss of some 1,600 ounces of placer gold, stolen in an armed robbery carried out in a Sheridan, Wyoming, motel under conditions reminiscent of the days of Wild Bill Hickok,- is covered under the “in transit” provisions of an All Risks Inland Marine Floater policy. Under the terms of the policy the Eagle Star Insurance Company, Limited (“Eagle Star”) insured The Ore & Chemical Corporation (“Ore & Chemical”) against all risks of loss on incoming and outgoing shipments of goods (including ores) “while in due course of transit until delivered.”

In an action tried before Judge John M. Cannella, sitting without a jury, Ore & Chemical sought to recover under the policy for a theft of the placer gold, which occurred after the gold had been transported from Spearfish, South Dakota, to Sheridan, Wyoming, where it was being held overnight for inspection by and expected delivery to a purchaser. If no sale should be consummated, the gold was to be returned immediately to Spearfish. Judge Cannella concluded that the gold was no longer in due course of transit at the time of the theft because the overnight custody of the gold in the hands of Ore & Chemical’s agents amounted to a delivery. We conclude that the district court construed the due-course-of-transit clause too narrowly. Accordingly we reverse.

The facts regarding Ore & Chemical’s loss of the gold are undisputed. The sorry tale began with its direction to its agent, the Keystone Company, to seek a purchaser for a lot of placer gold amounting to 1,609.979 ounces, which it had purchased for $68,787.06. Keystone was authorized to negotiate with prospective purchasers and to make commitments for sale upon approval by Ore & Chemical. After an uneventful month of discussions with prospective purchasers, there came a call from one “Jack Stodder,” who expressed an interest in the gold. In the course of negotiations by telephone Stodder agreed to purchase the gold for $112,106 on the understanding that he would have the right personally to inspect and assay the gold and then negotiate the precise purchase price. At his insistence the inspection, sale and delivery were to take place in Sheridan, Wyoming, presumably a city neutral for and centrally located between the seller and the purchaser. Keystone informed Stodder that on March 24 its President T. J. Oltmans and Vice President A. C. Zapf would bring the gold to Sheridan, where inspection and final negotiations on the price would take place.

Initially, all went as planned. Keystone’s officers, Oltmans and Zapf, transported the gold from its bank in Spearfish, South Dakota, by chartered plane to Sheridan, where the gold was taken to the motel room for the inspection. Stodder met with Oltmans and Zapf twice that evening. The parties were unable to agree upon a final price but arranged to meet again at eight o’clock the next morning for continuation of negotiations. However, Oltmans, apparently doubting that the sale would be consummated as planned, had decided not to keep this final appointment and instructed Zapf and their pilot to prepare to transport them with the gold back to Spearfish the next morning before the scheduled meeting. Shortly after seven o’clock on the following morning Stodder returned with two companions and at gunpoint relieved Oltmans and Zapf of the gold.

The district court concluded that this loss would have been covered by the insurance policy but for the “interruption” at the motel. Placer gold was an insured commodity under the terms of the parties’ contract (Par. 3). Loss due to armed robbery was a risk covered by it (Par. 12). The policy also permitted Ore & Chemical to act as its own carrier and to use the modes of transportation employed. However, the interruption at the motel was determined by the court not to have been “in due course of transit” but to have constituted a delivery for the plaintiff’s purposes, i. e., to set up a place for doing business with Stodder, unconnected with the transportation of the gold. Since defendant does not seriously question here any of the district court’s findings favorable to plaintiff with regard to the scope of the policy, the sole issue presented to us for consideration is whether the district court correctly interpreted the due-course-of-transit language under the prevailing law. We conclude it did not.

At the outset we observe that the courts of New York, the law of which governs, have not been niggardly in their reading of the due-course-of-transit clause. Their guiding rule of construction is one founded upon the “objectively reasonable expectations” of businessmen relying upon this type of policy.

“The true test thus appears to be not whether movement was interrupted overnight, or over a week end, but whether the goods, even though temporarily at rest, were still on their way, with any stoppage merely incidental to the main purpose of delivery. . . . If darkness had overtaken the driver on the road, and he stopped at a motel for a night’s sleep before continuing on his journey, it could not be said that transit had ceased.
“In the final analysis, the outcome of a case such as this should be determined not by precise semantic shadings of terms of art, but by commonsense appraisal of the overall situation.” Ben Pulitzer Creations, Inc. v. Phoenix Ins. Co., 47 Misc.2d 801, 804, 263 N.Y.S.2d 373, 376 (Civ.Ct.N.Y. 1965), affd. without opin., 52 Misc.2d 934, 276 N.Y.S.2d 1009 (App.Term, 1st Dept. 1966).

To this observation must be added the rubric of insurance law that any ambiguity in the construction of a policy will be resolved against the insurer. Bronx Savings Bank v. Weigandt, 1 N.Y.2d 545, 154 N.Y.S.2d 878, 136 N.E.2d 848 (1956). See also Restatement (Second) of Contracts § 232.

Applying these principles here, there can be no serious doubt but that the transportation of the placer gold would as a general matter fall within the bounds of “due-course-of-transit” aá that term has been construed by the New York courts even though there was not an unequivocal commitment from Stodder to purchase the gold. See Franklin v. Washington Gen. Ins. Corp., 62 Misc.2d 965, 310 N.Y.S.2d 648 (Sup.Ct.1970), affd. without opin., 36 A.D.2d 688, 319 N.Y.S.2d 383 (1st Dept. 1971) (transport for purpose of exhibition covered by due-course-of-transit clause). 3 The gold was transported to Sheridan with the intention of selling and delivering it to Stodder at such “factory, store, or premises” as he should designate or, if no sale and delivery could be made after the inspection by Stodder, of returning it to the premises designated by Ore & Chemical at Spearfish.

The district court, although noting that Stodder was not a consignee, saw the plaintiff’s case founder not so much for that reason, which would be insufficient, as because of the stoppage at the motel. However, an interruption in the course of transport does not in itself remove the goods from the coverage of a due-course-of-transit clause. That result will depend upon the extent and the purpose of the interruption. Franklin v. Washington Gen. Ins. Corp., 62 Misc.2d 965, 310 N.Y.S.2d 648 (Sup.Ct. 1970), affd. without opin., 36 A.D.2d 688, 319 N.Y.S.2d 383 (1st Dept. 1971).

“The true test is whether the goods, even though temporarily at rest, were still on their way, with the stoppage being merely incidental to the main purpose of delivery.” 62 Misc.2d at 966-967, 310 N.Y.S.2d at 650.

An overnight stop, for instance, is comfortably within the limits established by case law for an insured interruption. See Ben Pulitzer Creations, Inc. v. Phoenix Ins. Co., swpm. The familiar case is one where the stop is occasioned by darkness or the carrier’s need for rest. But we see no reason for limiting a permissible stoppage to such considerations. See Ben Pulitzer Creations, Inc. v. Phoenix Ins. Co., supra. Although there is room for difference in viewpoint on the matter, we do not agree with the district court’s conclusion that this interruption was “wholly independent of and in no way related to the transportation of the placer gold.” The purpose of the shipment was to make delivery of the gold to such “premises” as might be designated by the single prospective purchaser, presumably somewhere in Sheridan, if final agreement should be reached after inspection and assay, or to return it to Ore & Chemical’s premises in Spearfish on the following day if no agreement could be reached. Thus one continuous shipment, with alternate destinations, was contemplated.

The overnight stop at the Sheridan motel was designed to facilitate the inspection of the gold by the prospective purchaser. Since inspection is a natural, indeed a necessary, part of many sales and delivery transactions, this stoppage was clearly related to the purpose of the carriage. Retention overnight in the vehicle used for carriage was not essential. Such a wooden restriction might in some cases only serve to increase the risk of loss. The test is a more flexible one, based on the reasonable expectations of the average businessman. Indeed, a theft of goods left for inspection by a purported purchaser has been held nonetheless to be a loss “in transit”. See Underwood v. Globe Indem. Co., 245 N.Y. 111, 156 N.E. 632 (1927); Ocean Acc. & Guar. Corp. v. Old Nat’l Bank, 4 F.2d 753 (6th Cir. 1925).

That Keystone had determined to break off negotiations prior to the theft does not affect the result. The insurance policy clearly envisioned that return shipments “regardless of cause of return” would be covered. Whether the stoppage be viewed as one in a continuing shipment with alternative destinations or as one in a bifurcated journey with an outgoing and incoming segment, it remains a stoppage incidental to the carriage and hence within the coverage of the due-course-of-transit clause.

There is no reason to fear that our construction of the policy’s in-transit clause would permit a wholesale transfer of sales activities to the field, thus enabling Ore & Chemical or any other dealer to move its merchandise to motel rooms across the country and still enjoy the coverage of a due-course-of-transit policy. That the clause must be flexibly interpreted does not license every stoppage as a mere interruption incident to carriage. As an interruption or stoppage is protracted, its relation to the transit falls off sharply and independent, unrelated purposes may develop and predominate. If the purpose of a junket for instance, were to induce anyone with a general interest to inspect a product, the role of the transit would become more attenuated. If, in addition, this resulted in a four or five day sojourn, with interested parties queuing up outside the motel room, the point of non-coverage might well be reached. Here, however, we have an overnight stay in preparation for either the sale and delivery to an identified purchaser as the result of extended negotiations or the immediate return of the goods. We cannot say that this stop was sufficient to remove the gold from its due course of transit.

While Judge Anderson, in a separate concurring opinion, disagrees with our interpretation of the due-course-of-transit clause, we do not disagree with his reading of Underwood v. Globe Indemnity Co., 245 N.Y. 111, 156 N.E. 632 (Ct. of App. 1927), as pointing to an alternative construction that calls for the same result in the present case because Keystone was induced by fraud on Stod-der’s part to transport the gold to the Sheridan Motel and thus unwittingly provided him with the opportunity to commit the robbery.

The judgment of the district court is reversed.

ROBERT P. ANDERSON, Circuit Judge

(concurring):

I concur in the result but reach that determination by a different route from that of the majority, which I find difficult to accept.

Had the transportation of the gold from its safe depository in the bank at Spearfish to the motel in Sheridan been made at the request of a trustworthy and reliable customer in the course of a bona fide transaction, for the purpose of facilitating the inspection, weighing and assaying of the gold by the customer with a view to his purchasing it, I do not think that a theft of the gold, by a third person, while it was at the motel would have afforded a proper ground for the recovery by the insured under the terms of the policy in question.

The majority opinion treats the policy as if it provided broad “in transit” coverage, while its express terms refute such intention by providing coverage only “while in due course of transit until delivered into factory, store, premises, or warehouse at destination . . .” (emphasis added). It is not for this court to enlarge the parties’ own definition of the cut-off point for coverage as the time the insured goods were “delivered . . . into . . . the premises ... at destination.”

New York law applies; and the majority cites no decision dealing with a policy containing such a qualification of “in transit”, but instead relies on cases with policies of far greater scope. See, e. g., Ben Pulitzer Creations, Inc. v. Phoenix Ins. Co., 47 Misc.2d 801, 263 N. Y.S.2d 373 (Civ.Ct.N.Y.1965) (insured “while in due course of transit between the premises of the Insured and the premises of his contractors and while on the premises of contractors”). The majority also cites the latest New York decision on the subject, Franklin v. Washington General Insurance Corp., 62 Misc.2d 965, 310 N.Y.S.2d 648 (Sup.Ct.1970), aff’d without opinion, 36 A.D.2d 688, 319 N.Y.S.2d 383 (1st Dept. 1971), and describe it as a case which held, “transport for purpose of exhibition covered by due-course-of-transit clause.” This unfortunately implies that a theft of the rare documents was effected after arrival at the place of the exhibit, which was in California, and while they were on exhibition. Actually the documents were stolen in New York from the insured’s automobile where he had temporarily left them preparatory to driving to Kennedy Airport to board a plane with the documents to take them to California.

The majority also quote this case as authority for the perfectly sound proposition that “a temporary interruption for a purpose related to the carriage itself does not remove the property from transportation.” It then asserts that the inspection, weighing and assaying of the gold after its arrival at the motel and the sale negotiations were “a purpose related to the carriage itself.” I cannot agree that there is anything in New York law or the facts of the cases which, assuming a normal, legitimate business transaction, supports any such innovation. See, Federman Co., Inc. v. American Insurance Co., 267 N.Y. 380, 196 N.E. 297 (Crt. of App. 1935), motion for reargument denied, 268 N.Y. 609, 198 N.E. 428 (1935), which concerned a much broader policy than that under consideration. If the insured, Keystone, for such legitimate business transactions had sought “off premises” coverage with protection against theft by third persons regardless of whether its goods were in transit or not, it could have obtained a policy with that provision in it.

The New York Court of Appeals, however, has recognized an exception to the general rule for “in transit” cases that “transit” ceases when the goods have been delivered to the customer-consignee or his agent or have been delivered, as claimed by the insurer in the present case, “into premises at destination,” and that exception is, where such delivery or diversion from transit is brought about by falsification, misrepresentation or like factor in the course of the perpetration of a theft, robbery or other criminal scheme. See Underwood v. Globe Indemnity Co., 245 N.Y. 111, 156 N.E. 632 (Crt. of App. 1927).

The present case does not relate to an ordinary, legitimate, business transaction where, for the purpose of construing particular provisions of the policy, consideration may be given to the “objectively reasonable expectations of business men” in the context of the transportation of goods looking toward a lawful sale and delivery to a customer and, failing that, a return of the goods to their regular repository. From the time the con-man and thief, Jack Stod-der, induced Keystone to take the gold out of the bank and transport it to the Sheridan Motel, to the time Oltmans and Zapf, at the point of Stodder's pistol, turned the gold over to him, the case was one of theft and robbery. Although the insured, in transporting the gold to Sheridan thought it was carrying out a legitimate plan of its own, it actually was carrying out the felonious plan of the thief. Keystone transported the gold to Sheridan at Stodder’s bidding. They were dancing to his tune. The transfer was part and parcel of his larcenous scheme, and, once the gold was in the motel, in the hands of the gullible and defenseless officers of Keystone, the theft was more than half accomplished. The stop-over at the motel was directly related to the carriage, both of - which were designed to facilitate the theft.

It is apparent that Stodder’s project started out as a plan for larceny by trick. When Keystone’s officers did not turn the gold over during the evening’s negotiations and showed signs of disaffection toward the proposals, Stodder decided to accomplish his purpose by armed robbery.

As the temporary retention of the gold at the motel was an essential step in the theft, there was no lawful “delivery . . . into premises ... at destination, and” therefore no cut-off of the coverage.

As Judge Crane said in the Underwood case (supra), in which bonds were stolen from an agent by false representations, “ ‘In transit’ means, in this case, while going to make a delivery to a customer. . . . ; [t]he bonds were in [the agent’s] possession when they were obtained from him by a trick and false device . . ., [t]herefore, there had never been a delivery to end the transit.” Underwood v. Globe Indemnity Co., supra, 245 N.Y. at 116, 156 N.E. at 634.

Likewise, in the present case there was never any lawful delivery to premises at a legitimate business destination, even though the Keystone officers thought it was. Instead, the temporary stop-over at the motel was designed by the thief to put the gold in a position where it could be readily taken.

In Hanson v. National Surety Co. (Crt. of App. 1931), 257 N.Y. 216 at page 220, 177 N.E. 425, at page 426, the court said:

“Even at common law ‘if a party fraudulently obtains possession of goods from the owner, with intent at the time to convert them to his own use, and the owner does not part with title, the offense is larceny.’ . The original wrongful intent may be inferred from subsequent conduct. It cannot be said that the larceny occurred after the messenger had ended the transit risk by delivery at destination, when that delivery was itself the consummation of a scheme to obtain possession with larcenous intent.”

For a discussion of the New York law see Sutro Bros. & Co. v. Indemnity Insurance Co. of North America, 386 F.2d 798, 801-803 (2 Cir. 1967).

The coverage of Keystone’s policy was not terminated and the judgment below must be reversed.

      . The provision detailing the coverage of the policy reads in pertinent part: “This insurance is to cover from the time of leaving original point of shipment and thereafter continuously while in due course of transit until delivered into factory, store, premises, or warehouse at destination. . . .”

      . That the parties intended coverage for unsold goods in transit is evidenced by an endorsement -which specifies the measure of recovery for such goods (Joint App., C17) and by the specific exclusion of “samples” in the custody of salesmen (Joint App., C19) which would have been unnecessary if all unsold goods were excluded.

      . The coui't in Underwood v. Globe Indem. Co. suggests that in the case of a purchaser-thief there can he no delivery and the transit is never completed. There the thief had purchased bonds from the plaintiff with an ostensibly certified but unsigned check. When the insurance company balked at covering the loss on the ground that the theft had occurred after the bonds had been delivered and were no longer in transit, the court observed:
      “The bonds were in transit within the meaning of this policy when they were taken out for delivery, and until delivery, in the legal sense of that word, to a customer. The bonds were in Del Re’s [the plaintiff’s employee] possession when they were obtained from him by a trick and false device; title never passed to Dunn [the thief] ; they were procured from Del Re by common-law larceny. Therefore, there had never been a delivery to end the transit. The bonds were still in transit in the process of being taken somewhere for delivery, or to be returned to the office when stolen from Del Re.” 245 N.Y. at 115, 156 N.E. at 634.


author: SNEED, Circuit Judge:

text:
    Robert LA MAR et al., Appellee, v. H & B NOVELTY & LOAN COMPANY et al., Appellant. Ronald J. KINSLING et al., Appellant, v. ALLEGHENY AIRLINES et al., Appellee.
    Nos. 72-1485, 73-1271.
    United States Court of Appeals, Ninth Circuit.
    Dec. 7, 1973.

      Norman T. Ollestad and Alan L. Freedman (argued), of Ollestad & Freedman, Los Angeles, Cal., for appellants.
    L. A. Aschenbrenner and Charles J. Merten, Don H. Marmaduke & Noreen K. Saltveit, of Marmaduke, Aschenbren-ner, Merten & Saltveit, Portland, Or., Henry C. Thumann, Patrick Lynch, James Y. Selna (argued), of O’Melveny & Myers, Los Angeles, Cal., for appel-lees.
    Before ELY and SNEED, Circuit Judges, and SWEIGERT District Judge.

       Honorable William T. Sweigert, District Judge, Northern District of California, sitting by designation.

   SNEED, Circuit Judge:

The common issue of these cases is whether a plaintiff having a cause of action against a single defendant can institute a class action against the single defendant and an unrelated group of defendants who have engaged in conduct closely similar to that of the single defendant on behalf of all those injured by all the defendants sought to be included in the defendant class. We hold that he cannot. Under proper circumstances, the plaintiff may represent all those suffering an injury similar to his own inflicted by the defendant responsible for the plaintiff’s injury, but in our view he cannot represent those having causes of action against other defendants against whom the plaintiff has no cause of action and from whose hands he suffered no injury.

In a condensed form the facts of these cases are as follows. In La Mar the plaintiff initiated an action against all the pawn brokers licensed to conduct business under the laws of Oregon on behalf of all customers of such pawn brokers to recover either $100 or double the finance charges for alleged violations by the defendant pawn brokers of the Truth-in-Lending Act, 15 U.S.C. §§ 1601-1677.. In his complaint La Mar estimated that there were 33,000 such customers and that the recovery should approximate three million dollars. In fact La Mar did business with only one such pawn broker, the H & B Novelty and Loan Company. The district court determined that La Mar’s action was a proper class action on behalf of all those who borrowed from the H & B Novelty and Loan Company as well as on behalf of those who borrowed from all other defendants. Rule 23(b)(3) of the Federal Rules of Civil Procedure was the basis for the court’s action. Subsequent to this determination, an interlocutory appeal therefrom was authorized. Thereafter, a settlement between H & B Novelty and Loan Company and La Mar on behalf of himself and all those who did business with H & B, save those who requested exclusion, was approved by the district court. No settlement has been reached with the other named defendants. The appeal before us, therefore, concerns the appropriateness of the court’s determination that La Mar’s action was a proper class action with respect to those pawn brokers with whom he had no dealings.

In Kinsling, the plaintiff purchased a round trip ticket between Kansas City, Missouri and Augusta, Georgia from Trans World Airlines and Piedmont Aviation Corp. Because there was no published joint fare for the route, a fare construction was required under the applicable tariff rules. The plaintiff alleged that he was overcharged in the amount of $10 in violation of certain provisions of the Federal Aviation Act. This suit was brought against Trans World Airlines and Piedmont Aviation Corp. and the six appellee air carriers on behalf of Kinsling and all others who had suffered a similar overcharge in dealings with these carriers. The aggregate amount of such overcharges in the four years prior to filing the suit was alleged to be approximately eighty million dollars. In due course, the district court dismissed the complaint as to the six appellee carriers on the ground that the plaintiff had no dealings with, nor suffered any injury at the hands of, these carriers. This appeal was taken from that dismissal.

We, therefore, reverse the lower court order in La Mar v. H & B Novelty & Loan Co. et al., No. 72-1485, which designates the case as a proper class action against all defendants other than the H & B Novelty & Loan Co. and direct that the plaintiff’s action be dismissed as to such defendants.

In Kinsling v. Allegheny Airlines et al., No. 73-1271, the action of the lower court dismissing the complaint of plaintiff with respect to six of the eight defendants is affirmed.

An explanation of these actions follows and is divided into four parts. To provide some jurisprudential underpinnings to our action, the first part concerns itself with the distinctions between the judicial and administrative process, distinctions which, in our view, must be kept in mind in considering the proper scope of class actions. The second part deals with the standing issue while the third consists of an analysis of Rule 23 of the Federal Rules of Civil Procedure as it relates to the issue before us. Finally, the relevant cases are discussed and, while very few of such cases are directly in point, the resonances of most support our holding.

I.

The Judicial Process and the Administrative Process Contrasted

The emergence of the class action inescapably forces consideration of the characteristics of the judicial and administrative processes because its features in many instances are derived from both. In a broad sense, fixing the outer limits of permissible class actions involves the determination of the extent to which proceedings within the judiciary will be permitted to resemble in function the administrative process.

It is obvious to even the casual observer that the two processes have features in common and that there is no bright line between them. Judges, for example, bring to their tasks the same informed judgment about the society within which their rulings operate as do administrators. Also those in executive positions frequently find themselves involved, either in a formal or informal setting, in passing judgment on particular claims presented on the basis of a substantially circumscribed record.

Nonetheless, the archetypes are distinguishable and it is in the interest of the judiciary, as well as the executive, to recognize and maintain these distinctions. There is no need to dwell on them at great length. It is enough to observe that the judicial process generally is concerned with discrete complaints of injury by one or a very small number of alleged wrong-doers. Those invoking the aid of the courts generally have in mind particular relief which can be provided by the court in a relatively easy and expeditious manner. The passivity of the judiciary is underscored by its dependence on the evidence provided by the parties and the relatively narrow scope of possible resolutions of the controversy imposed by the applicable rules of law which it must observe. The attorneys for the parties function in a manner compatible with this structure. The method by which evidence is introduced and the type of evidence that is permissible are rigidly controlled. The forums within which persuasion may be attempted are fixed and the methods of persuasion limited and to a degree quite formal. Finally, and of particular importance to class actions, the attorneys are restrained in their pursuit of clients. While the limits of these restraints continue to perplex the profession, which must function in a world in which advertising and salesmanship are omnipresent, no one will deny that restraints do and should exist. All perceive that they are congruent with the fundamentally passive role of the judiciary.

The administrative process, on the other hand, frequently need not await the specific complaint. It can initiate, sua sponte, steps designed to correct perceived evils in accordance with the authority provided it by legislative action or delegation from higher executive authority. Traditionally it represents large and imprecise interests which, at the highest level of abstraction, are designated “the public interest.” Continuous oversight, as opposed to intervention by invitation as in the judiciary’s case, is a normal administrative function. And, not surprisingly, lawyers function quite differently in the administrative setting. Procedures and forms of persuasion are less hampered, and representation of large groups having broad common interests is quite common.

These observations set the stage for an examination of the issues which these two cases present. Class actions, we believe, must be structured so as to conform in the essential respects to the judicial process. This is the principle by which we are guided. It dictates, inter alia, that the courts not be available to those who have suffered no harm at the hands of them against whom they complain. They have no standing to sue. It is necessary, therefore, to examine the standing of the plaintiffs to institute the class actions before us.

II.

Standing

In the briefs in Kinsling and during oral argument of both cases much attention was devoted to problems of the standing. This Court, after reflection, does not believe it is necessary to pass on this issue because in our view, under a proper application of Rule 23 of the Federal Rules of Civil Procedure, the plaintiffs here are not entitled to bring a class action against defendants with whom they had no dealing. That is, for the purposes of these appeals, we are prepared to assume the presence of standing.

Our assumption is not intended to foreclose the issue. It should be observed, however, that in Hall v. Beals, 396 U.S. 45, 90 S.Ct. 200, 24 L.Ed.2d 214 (1969); Bailey v. Patterson, 369 U.S. 31, 82 S.Ct. 549, 7 L.Ed.2d 512 (1962); and McCabe v. Atchison, T. & S. F. R. Co., 235 U.S. 151, 35 S.Ct. 69, 59 L.Ed. 169 (1914), the Supreme Court, in asserting that one who was not a member of a class could not represent that class, was confronted with plaintiffs who had never been injured by the practices about which they complained. In each case before us, the plaintiff was injured by a method of dealing more or less common to all defendants. It is because of this distinction that we are prepared for the' purposes of this appeal to assume standing. No one contends, of course, that there is no ease or controversy between the defendants who seek in these cases to be dismissed and their customers. The issue upon which we turn these cases is whether the plaintiff in each case can represent such customers under Rule 23.

III.

Rule 23

Prior to its amendment in 1966 Rule 23 suffered from numerous defects; however, there is nothing in the Advisory Committee’s Note that suggests that the amendments had as their purpose the authorization of massive class actions conducted by attorneys engaged by near-nominal plaintiffs. The tone of such Note is one of prudence and caution. Certain examples are set forth with the suggestion that they “may be” instances in which a class action is proper. Moreover, the Note requires that the court find that the class action is “superior” to possible alternative procedures. It is in this spirit that Rule 23 is applied here.

Subsection (a) of Rule 23 sets forth four conditions that must be met to justify a class action. We need not dwell on the first two, although it should be noted that the prerequisite that the class be so numerous as to make joinder impracticable strongly suggests that the draftsmen did not have in mind classes so numerous as to present severe issues of manageability.

The third prerequisite is that the claims of the representative parties be typical of the class. Obviously this requirement is not met when the “representative” plaintiff never had a claim of any type against any defendant. There is nothing in the rule to suggest that the zeal or talent of the “representative” plaintiff’s attorney can supply this omission. We believe that this prerequisite is also lacking when the plaintiff’s cause of action, although similar to that of other members of the class, is against a defendant with respect to whom the class members have no cause of action. Those who purchased tickets from the six appellee airlines, from whom the representative plaintiff purchased no tickets, have no cause of action by reason of such purchases against the airlines from whom the representative plaintiff purchased. In brief, typicality is lacking when the representative plaintiff’s cause of action is against a defendant unrelated to the defendants against whom the cause of action of the members of the class lies.

The fourth prerequisite is that “the representative parties will fairly and adequately protect the interests of the class.” This is particularly troublesome in class actions, such as these, in which the injury to any possible representative party is quite small. Either no one of the injured class is a suitable representative or anyone is. From this it may be said to follow that each possible representative party could “fairly and adequately protect the interests of the class.”

The difficulty with this position is that compliance with the prerequisite must necessarily be determined more by examination of the fitness of the counsel of the candidate for representative party status than by the attributes of the candidate. Once the ability of counsel becomes the measure by which compliance with the fourth prerequisite is determined, there remains only a formal and technical reason for insisting that there be a representative party at all.

Assuming, therefore, that in this type of class action the role of the representative party is largely formal, it is reasonable in our view to design its formal characteristics in a manner that is consistent with what we perceive to be the tone of the Advisory Committee’s Note. In keeping with that tone and to reduce the incidence of proceedings in which the trial judge and the representative plaintiff’s counsel become a part-time regulatory agency, we assert that a plaintiff who has no cause of action against the defendant can not “fairly and adequately protect the interests” of those who do have such causes of action. This is true even though the plaintiff may have suffered an identical injury at the hands of a party other than the defendant and even though his attorney is excellent in every material respect. Obviously this position does not embrace situations in which all injuries are the result of a conspiracy or concerted schemes between the defendants at whose hands the class suffered injury. Nor is it intended to apply in instances in which all defendants are juridically related in a manner that suggests a single resolution of the dispute would be expeditious.

Turning to subsection (b) of Rule 23 the immediate issue is whether the action sought to be maintained in these cases should be measured by the standards of (b)(1) or (b)(3). Because (b) (2) pertains to situations in which money damages are not the relief sought, it need not be examined. Rule 23(b)(1)(A) authorizes class actions to eliminate the possibility of adjudications in which the defendant will be required to follow inconsistent courses of continuing conduct. This danger exists in those situations in which the defendant by reason of the legal relations involved can not as a practical matter pursue two different courses of conduct. The Advisory Committee’s Note makes this clear in discussing Rule 23(b)(1)(A) by its reference to actions to declare bond issues invalid, to fix the rights and duties of a riparian owner, and to determine a landowner’s rights and duties respecting a claimed nuisance.

Infrequently, if ever, will this be the case when the action is for money damages. Certainly the defendants in these proceedings can continue the conduct of which the plaintiffs complain even if the plaintiffs are successful, as the plaintiff in La Mar has been, in their individual actions. Their success by its terms does not fix the rights and duties owed by the defendants to others as, for example, would a declaration of the invalidity of the bond issue. We conclude therefore, that Rule 23(b)(1) (A) is inapplicable to class actions which the plaintiffs in these proceedings seek to initiate.

Nor' do we believe that Rule 23(b) (1) (B) is applicable. The focus of it is upon the effect of an action on behalf of an individual on the interests of those who have rights similar to those of the individual bringing suit, rather than on the danger of imposing incompatible standards of conduct on the defendant. If the individual action inescapably will alter the substance of the rights of others having similar claims, as would an action attacking the reorganization of a fraternal benefit society, the situation falls within Rule 23(b)(1)(B).*

In the cases before us the success or failure of the plaintiffs in their individual actions will not inescapably alter the rights of others similarly situated. Their claims are left untouched by separate actions. Neither the stare decisis consequences of an individual action nor the possibility of false reliance upon the improper initiation of a class action can supply either the practical disposition of the rights of the class, or the substantial impairment of those rights, at least one of which is required by Rule 23(b) (1) (B). To permit them to do so would make the invocation of Rule 23(b)(1)(B) unchallengeable. There is no indication in the Advisory Committee’s Note that any such “boot strap” effect was intended.

In essence, (b)(1)(A) and (b)(1)(B) of Rule 23 are opposite sides of the same coin — a coin which determines suitability for class action by reference to either the awkwardness, irrationality, or the probability of severe prejudice of separate actions. Depriving the plaintiffs in these proceedings of their representative status with respect to defendants whose conduct caused the plaintiffs no injury does not contravene these purposes of Rule 23(b)(1).

This brings us to Rule 23(b)(3), the so-called “spurious” class action. Two prerequisites to use of a class action are enunciated here. First, questions of law and fact common to members of the class must predominate over questions affecting individual members, and second, the class action must be superior in terms of fairness and efficiency to other means by which an adjudication of the controversy may be obtained. Among the matters that are pertinent in determining whether the prerequisites exist are:

(A) the interest of the members of the class in individually controlling the prosecution or defense of separate actions;

(B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;

(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum;

(D) the difficulties likely to be encountered in the management of a class action

If the class actions sought to be initiated in La Mar and Kinsling are to be authorized it must be done by reliance on Rule 23(b)(3). We do not believe such authorization is required. It is our view that the class actions in question here are inferior to other “available methods for the fair and efficient adjudication of the controversy.” While it is not necessary for this decision to pass on the effort of the plaintiffs to initiate a class action against the defendant with whom they dealt on behalf of all others who dealt similarly with that defendant, it must be noted that such suits are more manageable and that nothing said here precludes such actions. Thus, even though La Mar and Kinsling may not represent the classes for whom they here seek to initiate a class action, it may well be that a representative plaintiff injured by each defendant may emerge to undertake the burden which we are preventing La Mar and Kinsling from assuming.

. [6] Our finding of “inferiority” of the class actions here attempted also is based upon the belief that restrictions on the flexible language of Rule 23 are a necessary contribution to the effort to avoid the intractable problems of massive class actions and to maintain a wholesome degree of difference between the judicial and administrative functions. While our holding is not a cure-all, it does constitute modest and needed therapy. By the same token, it does not destroy the “spurious” class action. It remains alive and quite capable of providing both justice and mischief.

The positions we have taken make it unnecessary for us to deal extensively with the responses to the questions put to appellee La Mar by this Court pertaining to the effect of the settlement by La Mar with the defendant H & B Novelty and Loan Company on behalf of himself and those customers who dealt with H & B. This settlement was entirely proper, but our holdings are in no way dependent on the existence of such settlement.

IV.

The CASES

The trend of the cases support the results which the holdings above represent. Because most of the eases involve facts and legal issues different from those here before us, the cases cited generally will not be squarely in point. However, they illustrate the direction toward which the wind is blowing.

Quite persuasive and frequently cited is Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727 (3rd Cir. 1970), cert. denied 401 U.S. 974, 91 S.Ct. 1190, 28 L.Ed.2d 323. In holding that a shareholder of four mutual funds, who had no primary or personal cause of action against his funds, could not institute a class action on behalf of the shareholders of these funds plus the shareholders of 61 other funds, the court observed, “A plaintiff who is unable to secure standing for himself is certainly not in a position to ‘fairly insure the adequate representation’ of those alleged to be similarly situated.” While the position of the plaintiff in Kauffman is distinguishable from that of La Mar or Kinsling in that both of the latter have a direct cause of action against a defendant, the court’s language construed literally does not support the position they are urging here. Particularly is this true of the following comment also appearing in Kauffman, “In short, a predicate to ap-pellee’s right to represent a class is his eligibility to sue in his own right. What he may not achieve himself, he may not accomplish as a representative of a class.”

In a number of attempts to initiate class actions in the securities field, the courts have manifested a marked degree of restraint. For example, the miniscule interest of plaintiffs seeking representative status with respect to 50,000 persons heavily influenced the court in granting the defendant’s motion to for-, bid such status in Richland v. Cheatham, 272 F.Supp. 148, 154 (E.D.N.Y.1967). In Lesch v. Chicago & Eastern Illinois Railroad Co., 279 F.Supp. 908 (N.D.Ill.E.D.1968), a preferred shareholder whose stock was redeemed for cash was held not to be a proper representative plaintiff with respect to preferred shareholders who voluntarily exchanged their stock for common stock. The difference in their situations indicated claims of a different nature which were sufficient to foreclose representation of all preferred shareholders. Similarly it was indicated by footnote in Herbst v. Able, 278 F.Supp. 664, 668, n. 6, (S.D.N.Y. 1967), that purchasers of debentures would not be proper representatives of a class consisting of all security purchasers. Even so strong an advocate of a generous reading of Rule 23 as Judge Weinstein, in Dolgow v. Anderson, 43 F.R.D. 472 (E.D.N.Y.1968), restricted representation to those who purchased stock during the period in which the representative plaintiff owned such stock and also excluded from the class those who purchased debt securities.

Clearly the most nearly apposite case of which we are aware is Weiner v. Bank of King of Prussia, 358 F.Supp. 684 (E.D.Pa.1973), in which the plaintiff who borrowed from one national bank within the court’s jurisdiction sought to bring suit against all the national banks within the court’s jurisdiction on behalf of all the “customers and/or borrowers of national banks in this District”. It was held that Rule 23 does not affect the plaintiff’s lack of standing to sue those banks with whom he had no dealings.

The cases that are cited to support the result rejected in Weiner, supra, predominantly are actions to validate civil rights. While Rule 23 has no “civil rights version”, it is not surprising that its interpretation is more generous in this type of ease than in others. Even so the cases do not support the plaintiffs here. In Washington v. Lee, 263 F. Supp. 327 (M.D.Ala.N.D.1966), the plaintiffs were, or had been, incarcerated in various detention facilities of the State of Alabama, its counties, cities, and towns. Their suit was against the Commissioner of Corrections, members of the Board of Corrections, the Sheriff of Jefferson County and all other sheriffs of Alabama, the Warden of the Birmingham jail and all other wardens and jailers of city and town jails in Alabama. Its purpose was to obtain a declaration of the rights of Negro citizens not to be segregated while incarcerated. Obviously there were many facilities in which the plaintiffs had not been detained even though their wardens or jailers were named defendants. Nonetheless, the fact that the plaintiffs had been confined in several of the facilities was deemed sufficient to provide standing and to satisfy the requirements of Rule 23. Aside from the somewhat broad and accommodating concept of standing in civil rights cases, it is also true that all the defendants were officials of a single state and its subordinate units of government. Their legal relationship distinguishes them from the defendants the plaintiffs La Mar and Kinsling seek to envelop in their class action. Moreover, it was just these juridical links that were used in Brough-ton v. Brewer, 298 F.Supp. 260 (N.D. Ala.W.D.1969), to fix the identity of those defendants properly included in the plaintiff’s class action to declare Alabama’s vagrancy laws unconstitutional brought on behalf of “all persons whose poverty or lack of apparent means of livelihood renders them susceptible to arrest under” such laws.

The existence of similar links distinguishes Samuel et al. v. University of Pittsburgh et al., 56 F.R.D. 435 (W.D. Pa.1972). Despite the fact that the representative plaintiffs attended only the University of Pittsburgh, a class action against those state universities which adhered to the rule about which the representative plaintiffs were complaining was sustained. A common rule applied by instrumentalities of a single state presents a situation quite unlike that here before us. It is true that Judge Teitelbaum, who delivered the opinion in Samuel, permitted it to lead him into what we believe to be error in Haas v. Pittsburgh National Bank et al., 60 F. R.D. 604 (W.D.Pa.1973), in which he decided the issue before us contrary to what we here hold. In Haas Judge Tei-telbaum appeared to believe that a common commercial practice was enough to serve as the legal link present in Washington, Broughton, and Samuel. With this we do not agree.

Finally, Contract Buyers League v. F. & F. Investment, 300 F.Supp. 210 (N.D. Ill.E.D.1969) should be mentioned. It too is a civil rights case relating to discrimination against Negroes in real estate sales in Chicago in which the language of the opinion does not easily suggest the limitation on class actions we are announcing. However, the court in Contract Buyers League did point out that the defendant’s action was concerted and “resulted from a concert and pattern of discriminatory activity including other similar contracts.” No such allegation is made by the plaintiffs in the case before us.

Because reason and authority so indicate, La Mar v. H & B Novelty & Loan Co. et al., No. 72-1485 is reversed, and Kinsling v. Allegheny Airlines et al., No. 73-1271 is affirmed.

      . In its original form the third type of class action, the “spurious” action, was described as one in which “the right sought to be enforced for or against the class is . . . (3) several, and there is a common question of law or fact affecting the several rights and a common relief is sought.” The Advisory Committee’s Notes indicate that it was hoped this would permit members of the class to intervene on an ancillary basis and to have “the benefit of the date of the commencement of the action for purposes of the statute of limitations.”

      . The discussion of Rule 23(b)(3) emphasizes the importance of an application that achieves “economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” 39 F.R.D. 69, 102-103 (1966).

      . 39 F.R.D. 69, 103 (1966).

      . (a) Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class,' (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

      . See Contract Buyers League v. F. & F. Investment, 300 F.Supp. 210 (N.D.Ill.E.D. 1969) and the discussion at p. 470 infra.

      . See Broughton v. Brewer, 298 F.Supp. 260 (N.D.Ala.W.D.1969) and the discussion at p. 470 infra.

        . 39 F.R.D. 69, 102 (1966).

      . Class actions are authorized when “(1) the prosecution of separate actions by or against individual members of the class could create a risk of
      (A) Inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class.”

      . 39 F.R.D. 69, 100 (1966).

      . Whether an action for money damages can ever fall within Rule 23(b)(1)(A) has been the subject of much comment. See Ratner v. Chemical Bank New York Trust Co., 54 F.R.D. 412, 415 n.5 (S.D.New York 1972).

      . See Donelan, Prerequisite to a Class Action Under New Rules 23, 10 B.C.Ind. & Com.L.Review 527, 541 (1968).

      . Rule 23(b)(1)(B) authorizes a class action when separate actions create the risk of “(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interest of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.”

      . Ibid.

      . 3B Moore’s Federal Practice, § 23.45 (1969).

      . F.R.C.P. § 23(b)(3).

      . Ibid.

      . The clear trend of authority for actions alleging a violation of the Consumer Ci.-dit Protection Act, commonly known as the “Truth-in-Lending Act”, 15 U.S.C. § 1601 et seq. and Regulation Z, 12 C.F.R. § 226.1 et seq., promulgated by the Federal Reserve Board, holds that class actions are inappropriate. See e. g., Goldman v. First Nat’l Bank of Chicago, 56 F.R.D. 587 (N.D.Ill., 1972); Garza v. Chicago Health Clubs, Inc., 56 F.R.D. 548 (N.D.Ill., 1972); Shields v. First Nat’l Bank of Arizona, 56 F.R.D. 442 (D.Ariz., 1972); Kriger v. European Health Spa, Inc., of Milwaukee, Wisc., 56 F.R.D. 104 (E.D.Wis., 1972); Wilcox v. Commerce Bank, 55 F.R.D. 134 (D.Kan., 1972) aff’d 474 F.2d 336 (10th Cir. 1973); Kenney v. Landis Financial Group, Inc., 349 F.Supp. 939 (N.D.Iowa, 1972); Gerlach v. Allstate Insurance Co., 338 F.Supp. 642 (S.D.Fla. 1972); Ratner v. Chemical Bank N.Y. Trust Co., 54 F.R.D. 412 (S.D.N.Y.1972).

      . No opinion is expressed here regarding the effect, if any, the filing of these actions may have on the applicable limitation period. Cf. Utah v. American Pipe & Construction Co., 473 F.2d 580 (9th Cir. 1973), cert. granted, 411 U.S. 963, 93 S.Ct. 2146, 36 L. Ed.2d 683; Buford v. American Finance Co., 333 F.Supp. 1243 (N.D.Ga.1971). A pertinent discussion appears in Comment, Involuntary Dismissals of Class Actions, 40 U.Chi. L.Rev. 783 (1973).

      . Cf. Eisen v. Carlisle & Jacquelin, 479 F.2d 1005 (2d Cir., 1973), (Eisen III). These problems include feasibility of individual notice to members of the class, propriety of use of the “fluid recovery” pioneered in the Drug Cases, State of West Virginia v. Charles Pfizer & Co., Inc., et al., 314 F.Supp. 710 (S.D.N.Y.1970), aff’d 440 F.2d 1079 (2d Cir., 1971), and the permissibility of the preliminary mini-hearing on the merits. For a comprehensive discussion of the problems of Rule 23(b)(3), see Report and Recommendations of the Special Committee on Rule 23 of the Federal Rules of Civil Procedure, American College of Trial Lawyers (1972).

      . 434 F.2d 727, 734.

      . Ibid.

      . See Weinstein, The Class Action Is Not Abusive, 167 New York Law Journal Nos. 84, 85 (1972).

      . Also see In Re Penn. Central Securities Litigation, 347 F.Supp. 1327 (E.D.Pa.1972).

      . Singleton v. Board of Commissioners, 356 F.2d 771 (5th Cir. 1966).

      . 300 F.Supp. 210, 214.

      . 298 F.Supp. at 267.