Rudolph v. United States, 18788.

Decision Date28 July 1961
Docket NumberNo. 18788.,18788.
Citation291 F.2d 841
PartiesC. J. D. RUDOLPH and Irma M. Rudolph, Appellants, v. UNITED STATES of America, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Richard A. Freling, B. Thomas McElroy, Felix Atwood, Dallas, Tex., for appellants.

Meyer Rothwacks, Lee A. Jackson, Dept. of Justice, Washington, D. C., William B. West, III, U. S. Atty., Fort Worth, Tex., W. E. Smith, Asst. U. S. Atty., Dallas, Tex., Abbott M. Sellers, Acting Asst. Atty. Gen., Louis F. Oberdorfer, Asst. Atty. Gen., I. Henry Kutz, Norman H. Wolfe, Attys., Dept. of Justice, Washington, D. C., for appellee.

Before JONES and BROWN, Circuit Judges, and DE VANE, District Judge.


The facts are set forth in the opinion of the district court. Rudolph v. United States, 189 F.Supp. 2. The applicable law is to be found in Patterson v. Thomas, 289 F.2d 108, decided by this Court on March 16, 1961. No factual differences call for the application of a different rule or the reaching of a different result than in Patterson v. Thomas. The judgment of the district court is


JOHN R. BROWN, Circuit Judge (dissenting).

To what was urged by my dissent in Patterson v. Thomas, 5 Cir., 1961, 289 F.2d 108, at page 114. I would add brief comments on a few matters bearing emphasis in this record.

The notion that this was one big happy company-paid-for-holiday in New York City where a formal session for the first half day was a mere tip-of-the-hat to give appearances of a working trip is simply unfounded. Mr. Rudolph, the Taxpayer, and his wife — a companion, co-worker, partner-in-fact in the business of life insurance business as well as fellow Taxpayer — had nothing to do with selecting the time, the place, or the program. All was planned, precisely as to moment, locality, event and eligible participants. Moreover, it was not, as the Government seeks to make it appear, a long trek for a half of a day's formal business activity. Those selected by Southland Life Insurance Company were required to travel together. This group of 2931 made up of 151 men and 142 wives drawn from the South and Southwest were compelled to come to Dallas where they became passengers on "two convention special trains." The trains departed on Tuesday, December 11. Nearly 48 hours later and about 3:00 p. m. Thursday, December 13, the trains were to arrive at Jersey City, New Jersey, where special chartered buses took the travelers to the Waldorf-Astoria. On Sunday morning similar buses took all from the hotel to the trains for the return trip by the convention special trains arriving back in Dallas some time on Tuesday, December 18.

It is not, therefore, a case of employees getting together for the half-day's session on Friday, December 14, with all remaining time free. Out of the approximately 149 hours from Tuesday, December 11, to Tuesday, December 18, in the neighborhood of 96½ of them were spent in enforced togetherness. It is neither an exaggeration nor does it require more than an amateur license as a lyrist to contemplate that with the rhythmic clickety-clack of the wheels as this train made its way to and from New York City and Dallas, each recipient was reminded of the company message in a syncopated way. And a part of that message was that the company intended that all who were asked to attend would do so. Of course in the psychological complex of a sales business this point was not made crudely. Where in Thomas management phrased it as "frowning" on any who declined the trip, Southland has euphemisms of equal portent. Its agency vice president, after stating that an agent indicating he would not attend was required to give an explanation, testified that "if he the agent doesn't have a proper reason it would be looked upon with serious displeasure."

This convention trip was meant for the agent's own good. Of course that was equated with the company's good for it was wise psychologically and ethically legitimate to conclude that what was good for the agents was good for Southland. The emphasis was not really the pointed one of increasing sales. That, and the company's benefit, was to come primarily from reassuring the agents that things were not really as bad as they seemed. High officials testified without contradiction that in the life insurance sales business where there are so many "turndowns" by prospects, it is essential to buoy up the spirits of these solicitors. This, experience proves, is best accomplished through the constant, close association on an informal semi-social basis of many successful salesmen who have weathered and overcome similar discouragements.

The insidious purpose — here used with no moral overtones of disparagement — of the company's theme on the minds and wills of its captive audience, was exemplified in the most intense fashion by the Friday luncheon at the Hotel Waldorf-Astoria which ostensibly had no specific relation to selling life insurance. One of the nation's outstanding ministers and public speakers, renowned for his syndicated writings, television and radio appearances, was the luncheon speaker. But even this was not left to chance. The company, by letter, outlined to him the nature of the meeting and suggested that the talk be "of an inspirational nature, along the lines of achievement, success and happiness that can be obtained through proper attitudes of faith and practices of the well-ordered personal life." After discussing the nature of a life insurance agent's work and the essential motivation of genuine service to his clients, management's estimate of the importance of these things was stamped by this conclusion in the letter. "Therefore, the degree of success and satisfaction obtained from his work depends not just entirely upon his knowledge of life insurance, but to a very large degree depends upon his attitudes toward his opportunities and his zeal to excel." It is not surprising that the agency vice president testified of this speech that this speaker "did a better job than I had hoped he would" and that the speaker "did mention something specifically about the work of an insurance man * * *" and "he knew more about it than I did."

Unlike Thomas which concentrated on the practice followed by that particular life insurance company, this record contains the uncontradicted testimony of the Managing Director of the Life Insurance Agency Management Association. This is an industry supported organization interested in research, management consultation, education and training, and publications in the life insurance business. From his 30-years' experience in life insurance from the management point of view, this witness outlined why management would consider it good business to spend $84,000, as was done here, on such a convention for its leading agents. He emphasized the importance of personal contact in an informal setting among those who either were top flight producers or had shown promise. This included the opportunities for intimate associations with high level executives under circumstances which afforded ample time free from the diversion of workaday problems were such meetings undertaken in home office surroundings during working hours.

Indeed, as in Thomas, the Government does not question this. It acknowledges, as it must, that this is a legitimate expenditure by the employing life insurance company. But it is precisely at this point that the whole matter reaches its climax: if an event is of such importance in management's eyes, it is certainly not something which the company considers the agent may accept or decline on a take-it-or-leave-it basis. In other words, what the company does for the agents' (and its) good is known by both to be important and expensive. What is tendered must be accepted unless there is a real good excuse. This record, therefore, reiterates with emphasis the actual, psychological, economic pressure of compulsion under which the agent (and his wife) are coerced into taking what is offered.

The future economic livelihood of an agent under a contract granting the employer the right of...

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