author: TIMBERS, Circuit Judge:

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ADVANCED BUSINESS FORMS CORPORATION, Respondent.
    No. 145, Docket 72-1332.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 9, 1972.
    Decided Jan. 3, 1973.

      Bertram T. Kupsinel, Atty., NLRB, Washington, D. C. (Peter G. Nash, Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, Robert A. Giannasi and Alan D. Cirker, Attys., NLRB, Washington, D. C., on the brief), for petitioner.
    Alfred T. DeMaria, New York City (Kirlin, Campbell & Keating, -New York City, on the brief), for respondent.
    Before FRIENDLY; Chief Judge, MANSFIELD and TIMBERS, Circuit Judges.
   TIMBERS, Circuit Judge:

This petition to enforce an order of the National Labor Relations Board, 194 N.L.R.B. No. 52 (1971), is another instance where the Board’s order in large measure is not challenged. Of the numerous provisions of the trial examiner’s recommended order of August 17, 1971, adopted by the Board on November 24. 1971, less than 20% are challenged by the Company in the proceedings on the instant petition by the Board to enforce its order.

The petition before us presents only-two essential issues by virtue of the Company’s limited challenge of the Board’s order:

(1) Whether there was substantial evidence to support the Board’s determination that the Company violated Section 8(a)(3) of the Act in discharging employee Barbara Fasano because of her union activities.
(2) Whether there was substantial evidence to support the Board’s determination that the Company violated Section 8(a)(5) of the Act in failing to bargain collectively in good faith with the Union.

For the reasons stated below, we hold that there was substantial evidence to support the Board’s determination on issue (1), but not on issue (2). We enforce the Board’s order in all respects, except that we deny enforcement as to those provisions of the order dependent upon the Board’s finding of a violation of Section 8(a) (5).

I.

The essential facts as found by the trial examiner may be summarized as follows.

The Company, a New York corporation, operates a small printing plant at Ronkonkoma, New York. It is engaged in the printing, sale and distribution of business forms and related products. Prior to early February 1971, its president was James Orrach. It is a wholly owned subsidiary of Retrieval Control Systems, the president of which is John Montague.

One department of the Company — the pressroom and preparatory department (referred to together as the prep department) — is at the center of this controversy. This department does the art work and photography for the Company, and makes the plates that are run on the presses. The size of the department fluctuates between 11 and 14 employees.

Prior to September 1970, the prep department did not have union representation. Two department employees, who apparently were angry with management, arranged for a meeting on September 12 with Julius Seide, a business representative of the Union. Nine prep department employees attended the meeting. Some of them signed union bargaining authorization cards.

On September 16, Seide filed with the Board’s regional office a petition for certification as the bargaining representative of the employees of the Company’s prep department. A copy of the petition was served on the Company on September 18. That same day, four pressmen — Walter Yarosz, Eugene Sannuto, Joseph Kirklewski, and Carl Pis-cani — were laid off. All four had attended the September 12 meeting and had signed union authorization cards. Arthur Kunzweiler, supervisor of the prep department, participated in the decision to lay off the men. At the hearing he admitted being aware at the time of the discharge that the four men were union sympathizers.

On October 13, Seide and President Orrach entered into an Agreement for Consent Election which provided that the Board’s regional director would conduct an election on November 4 among the prep department employees. In the afternoon of October 13, Orrach called a meeting of all prep department employees. At the meeting, he stated that the Company did not really want the Union, “that he thought they had a pretty good company, they had pretty good benefits, and if anybody had any gripes they should have come to him and discussed them.” Similar statements were made at another meeting called by Orrach on October 30, five days before the election.

As the election approached, the Company’s tactics in opposition to the Union became more questionable. On November 2, Orrach and Kunzweiler threatened employee George Najdek as he was operating one of the presses. While checking the operation of Najdek’s press, which apparently was not functioning properly, Orrach told Najdek that “[i]f the Union gets in, I will have to lay you off.” Orrach also reminded Najdek to attend a Union meeting scheduled for that evening. Seide conducted the scheduled Union meeting that evening at a local tavern. While it was in progress, Or-rach entered and sat at the bar. After a short while, Seide approached Orrach and spoke to him briefly. Shortly thereafter Orrach left the premises. The next day, Orrach talked with Kunzweiler on the plant floor in the prep department within the hearing of Najdek and another employee, Barbara Fasano. In the course of the conversation, Orrach stated that “[ajnyone seen at the meeting last night won’t be here for long.” After making the statement, Orrach turned and grinned in Fasano’s direction, indicating that the remark applied to her.

The election was held as scheduled on November 4. It resulted in 7 votes for the Union, 3 against, and 1 challenged ballot. That evening after work several employees celebrated the Union victory at a local bar. Orrach entered the bar and insulted the celebrants. He then approached Fasano and asked her why she had voted for the Union. When Fasano replied that she believed that it was right, Orrach argued with her, asking, “What did you think you would benefit out of it?” and, “If you want more pay, why didn’t you ask me ? How much do you want? Fifty dollars?” At a later date; November 16, Orrach remarked to two other employees that he would “get rid of the people one by one, all the people that try to hurt him and all the people that voted for the Union.”

On November 6, the Company instituted several changes which adversely affected the working conditions of the employees. These changes were made without notification to or bargaining with the Union. On the same day, Naj-dek was laid off. On November 11, eight employees, including Fasano, called in sick to protest Naj dek’s discharge. When Fasano returned to work the next day, Kunzweiler made sarcastic comments about her absence. On November 20, Fasano was discharged. The circumstances surrounding her discharge will be discussed more fully below.

On November 19, the Company and the Union began negotiations for a collective bargaining agreement. At the outset, Company negotiators Orrach and Ralph Bartell informed Union negotiator Seide that any agreements reached would have to be ratified by John Montague, president of the parent company. A form of association contract used by Printing Industries of Metropolitan New York, Inc. served as the basic framework from which the parties negotiated. At bargaining sessions held on December 2, 22 and 28, and January 28, 1971, the parties discussed and reached tentative agreement on most of the economic terms such as wage increases. At the December 28 meeting, the Company requested a maintenance-of-membership clause in lieu of the union security clause contained in the standard association contract. This became the main point in dispute between the parties; the Union insisted on the union security clause and the Company was firmly opposed to it.

Prior to the next bargaining session on March 12, 1971, Orrach was relieved of his duties as president of the Company. Montague replaced him in the negotiations. Montague apparently had been kept informed of the progress of the negotiations. The parties met again on April 8 and 16. At the April 16 meeting, Seide proposed a compromise union security plan. Montague wanted to reject the compromise immediately. At Bartell’s suggestion, however, they requested time to consider the compromise plan.

On April 21, Bartell called Seide and told him, “We have a contract. We got to get together and work out all of the details.” Seide and Bartell met on April 23 and drew up a handwritten document setting forth all the tentative agreements theretofore reached, as well as the compromise union security provision as proposed by the Union. They arranged to meet with Montague on April 27 to review and to sign the contract. When Seide arrived at Bartell’s office on April 27 for the scheduled meeting, Bartell informed him that he had just received a telephone call from Montague who had stated that he would not sign “any contract”.

On April 30, Seide informed several employees that Montague had refused to sign a contract. Seide concluded that they had no alternative but to strike. On May 3, an undisclosed number of employees did go on strike. On May 14, while the strike was in progress, the parties, at the request of the Suffolk County Labor Commissioner, met at the Commissioner’s office for further negotiations. After some persuading by the Commissioner, Seide renewed the compromise union security proposal in order to get a signed contract. Montague consulted with his employees and informed the Union that he would not agree to the compromise proposal. For aught that appears in the record before us, no collective bargaining agreement was ever signed.

An evidentiary hearing was held before a trial examiner at Brooklyn, New York, on May 17 and 18,1971. The hearing resulted from various charges filed by the Union and certain employees against the Company during the period from November 23, 1970 to February 22, 1971, followed by the filing of various pleadings which in turn were consolidated and amended from time to time through the hearing itself.

On August 17,1971, the examiner filed his decision which included findings of fact, conclusions of law and a recommended order. He found that the Company had violated § 8(a)(1) of the Act by threatening employees with discharge or other reprisals because of their union activities, coercively questioning employees concerning their union sympathies, and engaging in surveillance of employee union activity; that the Company had violated § 8(a)(3) and (1) of the Act by discharging employees Yarosz, Kirklewski and Sannuto on September 18, Najdek on November 6, and Fasano on November 20 because of their union activities, and by instituting adverse changes in working conditions after the union election in retaliation against the employees voting for the Union; that the Company had violated § 8(a) (5) and (1) of the Act by unilaterally instituting adverse changes in employment conditions and by its conduct in the collective bargaining process of repudiating on April 27 all agreements reached by the parties through several months of bargaining; and, finally, that the May 3 strike was caused by the Company’s refusal to bargain in good faith and its other unfair labor practices.

On November 24, 1971, the Board filed its decision and order, 194 N.L.R.B. No. 52, which affirmed the rulings, findings and conclusions of the trial examiner and adopted his recommended order. The order required the Company to cease and desist from the unlawful conduct found and from in any other manner discriminating against employees or interfering with, restraining or coercing them in the exercise of their statutorily protected rights. The order affirmatively required the Company to offer reinstatement to the discriminatorily discharged employees and to make them whole; upon application, to offer full reinstatement to the employees who struck on May 3, 1971, and to make them whole; upon request, to bargain collectively with the Union in good faith; to restore any of the employment conditions which were unlawfully changed after the election; and to post appropriate notices.

In view of the substantiality of the supporting evidence, the Company understandably did not take exceptions to the examiner’s findings, and of course does not challenge the Board’s determinations, that the Company violated § 8(a)(1) by threatening and coercively questioning employees, and by surveilling their union activity; that it violated § 8(a) (3) and (1) by discharging ■ employees Yarosz, Kirklewski, Sannuto and Najdek, and by making adverse changes in working conditions after the election; or that it violated § 8(a)(5) by making adverse changes in the employee’s working conditions without consulting the Union.

The Company’s efforts coercively to discourage its employees from voting for the Union were numerous and flagrant, and were amply supported by the proof before, the examiner. It is equally clear that the discharge of the employees named above, without apparent lawful reason, shortly after they had performed acts in support of the Union, and following threats of discharge for Union activity, constituted violations of § 8(a) (3). NLRB v. Scoler’s Inc., 466 F.2d 1289, 1291-92 (2 Cir. 1972). And there can be no doubt that the changes made by the Company in employee working conditions were made without Union participation in violation of § 8(a)(5).

The Company does challenge, however, the Board’s determinations that Barbara Fasano was discriminatorily discharged in violation of § 8(a) (3), and that the Company failed to negotiate in good faith on the collective bargaining agreement in violation of § 8(a) (5). To these provisions of the Board’s order, we now turn.

II.

Section 8(a)(3) of the Act makes it unlawful for an employer to discourage or to encourage membership in any labor organization by discrimination in regard to hire or tenure of employment, or any term or condition of employment. The critical question under this provision is what motivated the employer to discharge or otherwise change the employment conditions of the employee. NLRB v. Melrose Processing Co., 351 F.2d 693, 697-700 (8 Cir. 1965). Section 8(a)(3) does not deny an employer the right to discharge an employee for genuine economic reasons or for unsatisfactory work performance. NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 45-46 (1937). The existence of a valid ground for discharge is not sufficient, however, if it was merely a pretext or if the discharge was based in part on an unlawful ground. NLRB v. Dorn’s Transportation Co., 405 F.2d 706, 713 (2 Cir. 1969); NLRB v. Pembeek Oil Corp., 404 F.2d 105, 109-10 (2 Cir. 1968), vacated on other grounds and remanded sub nom. Atlas Engine Works, Inc. v. NLRB, 395 U.S. 828 (1969).

The issue here is whether there was substantial evidence to support the Board’s conclusion that Fasano’s discharge was motivated at least in part by the Company’s discrimination because of her union activities. See Universal Camera Corp. v. NLRB, 340 U.S. 474, particularly at 476, 491-92 (1951); NLRB v. Great Dane Trailers, Inc., 388 U.S. 26, 34-35 (1967). In reviewing a decision of the Board on this issue, we have said that its ruling on motivation “cannot lightly be overturned”. United Aircraft Corp. v. NLRB, 440 F.2d 85, 91-92 (2 Cir. 1971); NLRB v. Gladding Keystone Corp., 435 F.2d 129, 131-32 (2 Cir. 1970). We hold that the Board’s decision here was based on substantial evidence.

The Company introduced at the hearing some evidence which indicates that Fasano was an inefficient and insolent employee. She was hired on September 29, 1970, shortly after the Union established its first foothold in the Company. She was hired to make plates and to operate the cameras. Although she performed well during the first few weeks of employment, her performance deteriorated thereafter. She spoiled an unusually high percentage of the plates on which she worked. She required more supervision than an average employee. While she never actually refused to work, she, unlike other employees, often had to be ordered to perform her work. We believe that Fasano’s conduct, while an adequate ground for discharge, was not so intolerable as to demand it. NLRB v. Park Edge Sheridan Meats, Inc., 341 F.2d 725, 728 (2 Cir. 1965). Moreover, there was sufficient evidence to provide a reasonable basis for inferring that in fact this ground alone did not lead to her discharge.

Fasano was actively involved in promoting the Union. She attended the November 2 organizational meeting of the Union which was interrupted by the appearance of Orrach. She voted for the Union on November 4. When Orrach asked her at the victory celebration that night why she did so, she explained that she felt that it was “right”. On November 11, she and seven other employees called in sick to protest the discharge of Najdek. Her supervisor, Kunzweiler, knew of her participation in the “sickout”. The Company certainly was aware of her strong support of the Union. NLRB v. Pembeek Oil Corp., supra, 404 F.2d at 110.

Several facts disclosed by the record support the Board’s conclusion that the Company was motivated by antiunion considerations in discharging Fasano. On November 3, within her hearing and presence, Orrach threatened to discharge employees who had attended the Union meeting the previous evening. His glance toward Fasano and “little grin” indicated that she in particular was to be a target of the Company. Following the Union election on November 4, Orrach questioned and argued with her about her support of the Union. On November 12, the day after the sick-out, Kunzweiler made sarcastic remarks about her participation in that protest. For example, he instructed her to perform her job if she was not “too sick today”. We believe this indicated that the Company intended to watch Fasano’s work extra-carefully in order to find a pretext on which to discharge her. On November 16, Orrach warned two other employees that he would “get rid of” Union supporters. Four days later Fasano was discharged. “The abruptness of a discharge and its timing are persuasive evidence as to motivation.” NLRB v. Montgomery Ward & Co., 242 F.2d 497, 502 (2 Cir.), cert. denied, 355 U.S. 829 (1957). The closeness in time of Orraeh’s threat and Fasano’s discharge strongly suggests that the latter was the effectuation of the former. Finally, the Company’s numerous other unfair labor practices designed to defeat unionism support the inference that Fasano’s discharge was for union activity. NLRB v. Midtown Service Co., 425 F.2d 665, 671 (2 Cir. 1970).

We hold that there was substantial evidence to support the Board’s determination that the valid grounds for discharge asserted by the Company were not alone the cause of Fasano’s discharge, and that her discharge was motivated at least in part by unlawful discrimination on the part of the Company.

III.

Section 8(a)(5) of the Act makes it unlawful for an employer “to refuse to bargain collectively with the representatives of his employees.” Collective bargaining is defined in § 8(d) as “the mutual obligation ... to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession : .” The Act does not require that an employer yield a position fairly maintained, NLRB v. Herman Sausage Co., 275 F.2d 229, 231 (5 Cir. 1960), or that the parties actually reach an agreement. NLRB v. Israel Putnam Mills, 197 F.2d 116 (2 Cir. 1952).

The issue before us is whether there was substantial evidence to support a conclusion either that the Company in its collective bargaining negotiations engaged in a specific practice which constitutes a per se violation of § 8(a)(5) or that the Company’s entire course of conduct in the negotiations clearly shows a lack of good faith. We hold that there was not sufficient evidence to support either conclusion.

A per se violation of § 8(a)(5) may occur when a company misleads the union into believing that an agreement has been reached as to the terms of a collective bargaining contract and only formal execution remains, NLRB v. Mayes Bros. Inc., 383 F.2d 242 (5 Cir. 1967); or when an employer has reached a complete agreement with the union and its refusal to sign frustrates the whole concept of collective bargaining, H. J. Heinz Co. v. NLRB, 311 U.S. 514, 523-26 (1941). The Board here determined that the Company violated § 8(a)(5) when on April 27, Montague, acting for the Company, refused to sign a written contract embodying the tentative agreements reached over six months of negotiations and thereby indicated a refusal to enter into any agreement at all with the Union. In support of this conclusion, the Board relied primarily upon evidence that on April 27 Montague said he would not sign “any contract”.

In our view, the Board attributes unjustifiable significance to this vague and ambiguous statement by Montague. Moreover, the events which occurred before and after this statement indicate that the reasonable interpretation of it is that the Company was refusing to sign the proposed agreement merely because it contained the union security clause. Montague refused to sign “any contract” V with a union security clause. The Company had bargained in apparent good faith for months before this statement. It had reached agreement with the Union on most of the economic issues. At the I same time, the Company consistently had I opposed the union security clause. This lends support to the conclusion that it was this clause that caused Montague to reject the specific contract proposed by the Union. Indeed, when the parties continued negotiations after April 27, the only provision in dispute was the union security clause. Seide’s testimony also severely undermines the Board’s conclusion. He testified at one point that Montague had merely refused to sign the particular contract that had been prepared. He also testified that he understood that Montague had refused to sign the contract because one of his employees refused to join the Union under any circumstances. We fail to find substantial evidence to support the Board’s decision that this statement was a repudiation of six months of bargaining and an absolute refusal to sign any contract.

There was some testimony that^ the Company had reached an oral agreement with the Union on the union security clause ■ issue, and then repudiated its agreement. The courts have not yet established whether such conduct alone is sufficient to support a finding that a company has refused to bargain in good . faith. This is not a situation such asj that in NLRB v. Industrial Wire Products Corp., 455 F.2d 673 (9 Cir. 1972), where the company repeatedly changed its mind on various provisions that had been agreed on. We believe that repudiation of an agreement on a single issue, without more, does not under the circumstances presented here manifest a lack of good faith. In any event, the record here does not show that the Company reached an agreement, oral or otherwise, on the union security clause issue. Bartell was the only negotiator for the Company to indicate agreement on that issue. But he did not have the authority to bind the Company. We do not agree with the Board that Montague must have approved the compromise proposed before Bartell would tell Seide that they had “a contract”. Bartell may well have acted on his own or misunderstood Montague. We find insufficient evidence to support the Board’s conclusion that the Company reached an agreement with the Union on the security clause issue.

We recognize of course that a company’s “entire course of conduct” or “the totality of the circumstances” may show a lack of good faith in violation of § 8(a)(5), although none of its specific acts amounted to proscribed conduct. NLRB v. Fitzgerald Mills Corp., 313 F.2d 260, 264-67 (2 Cir.), cert. denied, 375 U.S. 834 (1963); NLRB v. Industrial Wire Products Corp., supra, 455 F.2d at 677-78. The appropriate standard is whether the circumstances clearly indicate “a desire not to reach an agreement with the union”. NLRB v. Reed & Prince Mfg. Co., 205 F.2d 131, 134 (1 Cir. 1953), cert. denied, 346 U.S. 887 (1953). Here there was not sufficient evidence from which it fairly could be concluded that the Company had no intention of reaching an accord with the Union.

The Company’s unfair labor practices did show resentment and hostility toward the Union. We have held that evidence of general antiunion animus is admissible to prove lack of good faith in the collective bargaining process. NLRB v. Patent Trader, Inc., 415 F.2d 190, 197 (2 Cir. 1969). But here the Company’s apparent' cooperation and sincere efforts in the contract negotiations demonstrated that the Company did not allow its dislike for the Union to affect its conduct at the bargaining table. Accordingly, we believe that its unfair labor practices carry little, if any, weight in proving a violation of § 8(a) (5).

The Company was represented in the negotiations by a person who did not have authority to enter into a binding agreement. While a company has the right to conduct negotiations in this way, the use of a negotiator without authority to bind the company is some evidence of a lack of good faith. NLRB v. Coletti Color Prints, Inc., 387 F.2d 298, 304 (2 Cir. 196V). We have held, however, that it requires more than proof that the bargaining representative of the company was not empowered to enter into a binding agreement to support a determination that the Company violated § 8(a)(5). NLRB v. Fitzgerald Mills Corp., supra, 313 F.2d at 267.

Finally, the Company adamantly refused to agree to the union security clause despite the Union’s willingness to compromise on that provision. It sometimes may be necessary for the Board or a court to examine the reasonableness of the parties’ positions on specific issues to determine whether, under all the circumstances, a particular bargaining position was taken to frustrate negotiation generally and thus to prevent agreement. NLRB v. Reed & Prince Mfg. Co., supra, 205 F.2d at 134. By the express terms of § 8(d) of the Act, the obligation to bargain “does not compel either party to agree to a proposal or require the making of a concession”. NLRB v. American Nat’l Ins. Co., 343 U.S. 395, 402-04 (1952). A party thus is entitled to stand firm on a position if he reasonably believes that it is fair and proper or that he has sufficient bargaining strength to force agreement by the other party. See NLRB v. General Electric Co., 418 F.2d 736, 766-70 (2 Cir. 1969) (Friendly, J., dissenting), cert. denied, 397 U.S. 965 (1970). The Board of course cannot ignore a patently unreasonable position. Moreover, if other circumstances indicate that a party was determined not to reach an agreement, the Board may consider the reasonableness of his positions on particular issues to determine whether he was attempting to frustrate negotiation. Neither of these situations, however, is present here. We find insufficient evidence to establish lack of good faith bargaining by the Company, as indicated by the totality of the circumstances.

We hold that there was not sufficient substantial evidence to support the Board’s determination that the Company failed to bargain collectively in good faith with the Union.

We enforce the Board’s order in all respects, except that we deny enforcement of paragraphs 1(b), 2(b) and 2(e) of the order.

      . This case is a striking illustration of the desirability of amending Section 10(e) of the National Labor Relations Act, 29 U.S.C. § 160(e) (1970), to provide that an order of the Board shall become effective within a reasonable period after it is issued unless a petition to review is filed by an aggrieved person pursuant to Section 10(f) of the Act. See Friendly, Federal Jurisdiction: A General View, Part IX (Carpentier Lectures, Columbia University School of Law, November 13-16, 1972, to be published by the Columbia University Press in January 1973) ; and see 1 Recommendations and Reports of the Administrative Conference of the United States, Recommendation No. 10 and pp. 238-67 (1970).
      In the instant case, the violations to which the Board’s order is directed occurred during a period of 17 to 27 months ago. Aside from the fact that approximately 80% of the Board’s order is not challenged, the Company informs us in its brief that “ [bargaining with the Union has resumed and numerous negotiating sessions have taken place”, and that “[d]uring the pendency of this appeal . the Company has ceased operations due to its financial inability to continue operations and, therefore, no longer operates the business corporation involved in this appeal.” This does not render the case moot, however, because the Company’s liability for back pay for Fasano and the replaced strikers is dependent upon our decision.
      In connection with the Company’s statement that it has gone out of business, the record shows that the Company (Advanced Business Forms Corporation) was a wholly owned subsidiary of Retrieval Control Systems, a publicly held company whose president, John Montague, participated actively on behalf of Advanced Business Forms Corporation in the collective bargaining negotiations referred to in this opinion below.

      . Advanced Business Forms Corporation (the Company).

      . National Labor Relations Act, 29 U.S.C. § 151 et seq. (1970) (the Act).

      . New York Printing Pressmen & Offset Workers Union No. 51, International Printing Pressmen and Assistants’ Union of North America, AFL-CIO (the Union).

      . A summary of the provisions of the Board’s order and the Board’s determinations, including those not challenged by the Company, are set forth below at pp. 462-463.

      . The termination of Piscani was never involved in this case.

      . Two of the employees — Kirklewski and Sannuto — were reinstated on November 16 and 30, respectively.

      . Thereafter, on November 18, the Board’s regional director certified the Union as the bargaining representative for the prep department employees.

      . Among other insults, Orrach shouted to the bartender, “Don’t serve these queers.”

      . Employees lost the privilege of listening to the radio in the darkroom; the lunch period was moved to an inconvenient time; outside telephone calls no longer could be made from the plant telephone, nor could incoming calls be received on the plant telephone; and strippers in the prep department for the first time were required to maintain time sheets for every job performed. The Board found that each of these changes in working conditions were in violation of § 8(a) (3) and (1), including the last item as to which the Board reversed the trial examiner. See note 14 infra.

      . Bartell was employed by the Printing Industries of Metropolitan New York, Inc., an association of employers that negotiates an association-wide contract on behalf of its members. In the instant negotiations, however, Bartell acted solely as a negotiator for the Company and not for the association.

      . Under a maintenance-of-membership clause, all employees who are members of the union at the time the bargaining agreement is entered into, and those who of their own volition thereafter become members, are required, as a condition of employment, to maintain their union membership for the duration of the agreement. Employees are not required, however, to join the union. On the other hand, the union security clause contained in the standard association contract made union membership compulsory.

      . We discuss below in more detail the question whether there was substantial evidence to support the Board’s determination that this statement by Montague indicated a refusal to enter into any agreement or a refusal to sign the particular contract with the union security clause in it.

      . The Board reversed only the examiner’s determination that the Company had not violated § 8(a)(3) and (1) by requiring after the election that prep department strippers keep time sheets for every job performed. See note 10 stipra.

      . The consequences to an employee of being discharged under the pretext of poor work performance are too serious to allow the discharge to stand when an improper motive entered into the employer’s decision to discharge. Moreover, other employees —particularly those barely holding their jobs — are likely to be discouraged from supporting a union if they reasonably believe that it will cost them their jobs.

      . In operating a platemaker, which burns a negative onto a plate, it is possible to “spoil” a plate so that it cannot be used in the presses. Bach spoiled plate cost the Company between $3.20 and $5.50.

      . The Company cites several decisions for the proposition that evidence of an employer’s general hostility to a union does not support a finding that an individual discharge was in violation of § 8(a)(1) and (3) of the Act. NLRB v. Shepherd Laundries Co., 440 F.2d 856 (5 Cir. 1971); NLRB v. Monroe Auto Equipment Co., 368 F.2d 975 (8 Cir. 1966). The thrust of such decisions is that an employer’s general antiunion policy, without more, does not prove an unlawful motive as to a specific discharge. It is clear in the instant case that the Company’s general antiunion animus was only one of several facts which indicate an improper motive for the discharge of Fasano.

      . Other examples of proscribed tactics that constitute a per se violation of § 8(a) (5) are set forth by Judge Friendly in NLRB v. General Electric Company, 418 F.2d 736, 767 (2 Cir. 1969) (dissenting opinion), cert. denied, 397 U.S. 965 (1970).

      . The Board concluded that the strike beginning May 3, 1971 was an unfair labor practice strike caused by the Company’s refusal to bargain collectively in good faith and the Company’s other unfair labor practices. We disagree. Since we have held that there was insufficient evidence to support the Board’s determination that the Company refused to bargain collectively in good faith, the only possible remaining peg for the Board’s finding of an unfair labor practice strike were the Company’s “other unfair labor practices”. We find no evidence which indicates that the unfair labor practices six months before the strike played any part whatsoever in the decision to strike. We hold that the Board’s finding of an unfair labor practice strike is not supported by substantial evidence and we decline to enforce that part of the Board’s order based upon such finding.


source: Caselaw Access Project

author: LIVELY, Circuit Judge.

license: Public Domain

text:
    Mildred COURTNEY, Administratrix of the Estate of John R. Courtney, Deceased, Plaintiff-Appellant, v. ISLAND CREEK COAL COMPANY, Defendant-Appellee.
    No. 72-1560.
    United States Court of Appeals, Sixth Circuit.
    Argued Dec. 8, 1972.
    Decided March 1, 1973.

      Ronald W. May, Pikeville, Ky., for plaintiff-appellant. Damon Vaughn, Madisonville, Ky., on brief.
    Carroll Morrow, Moore, Morrow, Fry-mire & McGaw, Madisonville, Ky., for defendant-appellee.
    Before EDWARDS and LIVELY, Circuit Judges, and CECIL, Senior Circuit Judge.
   LIVELY, Circuit Judge.

This is an appeal from summary judgment in favor of the Defendant Island Creek Coal Company. The facts are not in dispute.

The decedent, John R. Courtney, was employed by Cementation Company of America while working on land owned by the Island Creek Coal Company in Union County, Kentucky. Cementation had a contract with Island Creek to make two air shafts and sink a slope from which coal could be removed in connection with the construction of a new mine on the property of Island Creek.

Cementation was an independent contractor and Island Creek had no right to exercise supervision as to the manner or method in which the work was done. The contract required Cementation to comply with all state and federal safety regulations and Island Creek had the right to impose other safety regulations which were not in excess of those of the state and federal authorities. Island Creek reserved the right to inspect the work as it progressed, to terminate the contract if Cementation failed to supply a sufficient number of skilled workmen or equipment or materials, or if it should persistently disregard applicable laws or ordinances.

At the time of the fatal accident employees of Cementation, including Appellant’s decedent, were removing temporary air vents from one of the shafts which had previously been constructed. The employees .were working on a platform or work deck which was suspended by cables and raised and lowered by a hoist located on the surface of the ground. The platform had no outside guardrails and no toe boards, and the employees of Cementation wore neither safety belts nor lifelines. The hoist belonged to Cementation and was being operated by its employees and under the direction of its superintendent. Decedent fell to his death when the work deck or scaffold on which he was standing was tipped at an angle. As an employee of Cementation, decedent was covered by workmen’s compensation.

Although Island Creek made no inspection of the hoist, cable or platform, several of its supervisory employees, including its chief supervisory engineer, had observed the deck from which the decedent fell and knew that it was not equipped with guardrails or toe plates and that the employees of Cemen-tation wore no safety belts. Island Creek had never called these facts to the attention of any representative of Ce-mentation.

At the time that decedent met his death, the construction of the mine was not complete and no coal had been removed from the mine. Island Creek had applied for a license to construct the new mine and had filed with the Kentucky Department of Mines and Minerals several maps showing the construction of the new mine and the location of the proposed air shafts. The license had been issued and representatives of the Department of Mines had conducted several inspections of the property prior to the date of the accident.

Jurisdiction is based on diversity of citizenship, and our decision is controlled by the law of Kentucky. It is settled in Kentucky that one who engages an independent contractor is not legally responsible for the torts or negligence of such a contractor unless the work involves a special danger to others. It must either be a nuisance or be inherently dangerous. Jennings v. Vincent’s Adm’x., 284 Ky. 614, 145 S.W.2d 537 (1940); City of Hazard Municipal Housing Commission v. Hinch, 411 S.W.2d 686 (Ky.1967); Olds v. Pennsalt Chemicals Corporation, 432 F.2d 1033 (6th Cir. 1970). This rule has been applied to a number of cases in which scaffolding was involved and it has been consistently held that scaffolding is not an inherently dangerous instrúmentality and its use is not an inherently dangerous activity. Nashville Bridge Co. v. Marsh, 212 Ky. 728, 279 S.W. 1099 (1926); Simmons v. Clark Construction Co., 426 S.W.2d 930 (Ky.1968); Grogan v. United States, 341 F.2d 39 (6th Cir. 1965). No Kentucky cases have been cited, or discovered by independent research, in which an injury resulted by reason of a fall from a work platform or scaffolding being used in the construction of an underground coal mine.

The Appellant maintains that the meaning of “inherently dangerous” has been greatly expanded by the decision in Rietze v. Williams, 458 S.W.2d 613 (Ky. 1970). In that case an invitee of an apartment building tenant was permitted to recover from the building manager who had permitted an independent contractor to install a hot water heater in the building in violation of the plumbing code of Kentucky. The evidence indicated that the Plaintiff had been injured by hot water which escaped from the heater. The Kentucky Court of Appeals stated its reasoning as follows:

In effect the plumbing code here involved placed in the inherently dangerous category an installation which did not conform to the specified safety requirements, and the person who undertakes to make such an installation is responsible for compliance regardless of whom he employs to perform the work. 458 S.W.2d at 618.

The only other case where the Rietze rule appears to have been applied was one involving suit against a landlord by an employee of a tenant. In Kidd v. Price, 461 S.W.2d 565 (Ky.1971), the Kentucky Court of Appeals held that a landlord cannot escape responsibility for violation of safety regulations in an installation on his property by having the tenant do the work. However, it was further held that the landlord is not an insurer of the safety of every plumbing installation made by a tenant for the tenant’s benefit, and that a jury question was presented as to whether the landlord knew, or should have known, of the defect.

' The significance of the Rietze and Kidd decisions in the present ease is that Appellant maintains that applicable safety regulations required guardrails and toe boards on the work platform from which decedent fell, and that failure to so equip the platform placed it in the inherently dangerous category. Prior to the date of the accident in which Appellant’s decedent met his death, the Kentucky Department of Labor had adopted safety regulations identified as LAB 65-1 which applied to the construction industry. These regulations required that elevated work platforms be equipped with guardrails and toe boards and further provided that the owner of a project, as well as the contractors, should be responsible for compliance. These safety standards for the construction industry were issued pursuant to Chapter 338 of Kentucky Revised Statutes (KRS).

As the Appellee points out, however, KRS 338.010(3) provides that this Chapter shall not apply to “. places of employment subject to the jurisdiction of the department of mines and minerals . . . .” Appellee maintains and the District Court held, that when Island Creek applied for and received a license to construct a new mine on its property and filed required maps, it became subject to the jurisdiction of the Department of Mines and Minerals. However, the mine safety regulations which are set forth in KRS Chapter 352 apply only to commercial mines. A commercial mine is defined in KRS 351.010(1) (e) as meaning “any coal mine from which coal is mined for sale, commercial use or exchange.” Since it was admitted that no coal had been removed from Appellee’s new mine at the time of the accident, the District Court held it was not a commercial mine and was not subject to the mining regulations which prescribe safety standards for hoists and cages used for raising and lowering persons in mines.

Appellant forcefully argues that the legislature only intended to exempt places of employment subject to the jurisdiction of the Department of Mines and Minerals from the general safety standards of the construction industry in those situations where the Department of Mines is involved in active inspection, supervision and enforcement of its own regulations. She further maintains that the site of the accident in the present case was under the jurisdiction of the Department of Mines and Minerals in only the most technical sense. She would have us treat the accident location as a construction site subject to the general rules of safety applicable to the construction industry and hold that the exemption contained in KRS 338.010(3) applies only to completed mines which are under the active control of the Department of Mines and Minerals.

There is apparently no legislative history available to assist in determining this question. It cannot be said with any certainty that the legislature would not have intended this apparent hiatus in the application of safety regulations, because KRS 338.010(3) contains numerous other exemptions in addition to the one referring to places of employment subject to the jurisdiction of the Department of Mines and Minerals. However, it is clear that the standards of safety promulgated by the Kentucky Department of Labor were intended for the protection of workers in the construction industry. Cementation, the employer of the decedent Courtney, was not a mining company. It was a general contractor which was incidentally engaged in a project involving the opening of a new mine. Nevertheless, the Department of Mines and Minerals, as well as the Federal Bureau of Mines, made an investigation of the accident. In his report to the Department, the Kentucky inspector gave a detailed account of the accident and made specific recommendations for the prevention of similar accidents in the future. One of these recommendations was that all suspended work decks be equipped with guardrails on all sides.

We have concluded that it is not necessary to decide whether the new mine of Island Creek was under the jurisdiction of the Department of Mines and Minerals. Assuming that the granting of the license and the several inspections were not sufficient to make it a place of employment exempt from the general standards of safety under KRS 338.010(3), still other determinations must be made in reaching our final decision; The Kentucky Court of Appeals has long held that miners working for an independent contractor who operates under a lease from the owner of the coal mine, cannot recover from the owner of the premises for personal injuries or death which occur while working in the mine. Turner, Administratrix v. Lewis and Baker, 282 S.W.2d 624 (Ky.1955); Blair v. Boggs, 265 S.W.2d 795 (Ky.1954); Stearns Coal and Lumber Company v. Spradlin, 176 Ky. 405, 195 S.W. 781 (1917). While none of these opinions makes a specific finding on the question of whether work in a coal mine is inherently dangerous, nevertheless, the consistent refusal to permit recovery against the owner of the premises by an employee of an independent contractor who is operating a mine is tantamount to the finding that such work is not inherently dangerous.

In two reported cases involving non-mining employees working in or about mines, the same result has been reached. In Cumberland Coal Company v. Lee, 119 S.W. 746 (Ky.1909), an injured employee of an independent contractor who was hired to drive an entry in an existing mine was permitted to recover from the mine owner only because the owner had undertaken an obligation to keep the entry propped and in a reasonably safe condition. The Court held in Carter Coal Company v. Howard, 169 Ky. 87, 183 S.W. 244 (1916), that an employee of a third person hired by the mine owner to remove timber from the premises could only recover from the mine owner if his employer was not an independent contractor.

KRS 13.081 provides that each agency may adopt reasonable regulations to implement administration of the functions assigned to it by law and shall adopt such regulations as are necessary to the proper execution of those functions. This statute further provides that the power to adopt regulations to implement a particular function is limited by the terms of the grant of authority under which the function was assigned. While administrative regulations which have been duly adopted and properly filed have the full effect of law, Harrison’s Sanitarium, Inc. v. Commonwealth of Kentucky, 417 S.W.2d 137 (Ky.1967), nevertheless, by the terms of KRS 13.081 the purpose of such regulations is limited to an implementation of administration of the functions assigned to the agency issuing the regulations. It has been held that the state legislature may delegate to administrative agencies an administrative discretion in the application of law enacted by it. The same», cases hold, however, that the legislature may not delegate its power to enact laws. Veail v. Louisville and Jefferson County Metropolitan Sewer District, 303 Ky. 248, 197 S.W.2d 413 (1946); Craig v. O’Rear, 199 Ky. 553, 251 S.W. 828 (1923). Furthermore, Section 28 of the Constitution of the Commonwealth of Kentucky forbids delegation of the power belonging to one department of government to any person or collection of persons belonging to another department. The Department of Labor is part of the executive department of the government of Kentucky and has no power to legislate. It was beyond the power of the Industrial Safety Board in promulgating the standards of safety for the construction industry to change the settled law of Kentucky by making the owner of premises liable to an employee of an independent contractor for injuries suffered while working on the premises. That portion of the regulation which attempted to make the owner of the premises equally liable with the employer for enforcement of safety standards exceeded the bounds of administrative implementation. The powers of an administrative agency created to perform one specific function are by nature limited and any doubt concerning the existence of a particular power should be resolved against such agency. Henry v. Parrish, 307 Ky. 559, 211 S.W.2d 418 (1948).

The Appellants do not argue that the administrative regulations created a third party action against the owner of the premises in this case, but they do maintain that when the standards of safety were violated, under the holding in Rietze v. Williams, supra, the work which the decedent was performing became “inherently dangerous,” thus permitting this action against Island Creek. A close examination of that opinion does not support the position of the Appellants. In Rietze the Plaintiff was a very young child who was visiting in the apartment of a tenant of the Defendant. As between a landlord and his tenant (or invitees of the tenant) there can be no doubt that the landlord is liable for injuries resulting from his noncompliance with applicable safety laws and regulations. As the Kentucky Court stated the proposition:

Whatever may be the rights and liabilities as between the landlord and a negligent contractor, we think the purpose and policy of the law is that the innocent tenant (and, through him, his invitee) is entitled to rely on the landlord. 458 S.W.2d at 618.

The Court then went on to state that a landlord may not escape liability to his tenant for injuries resulting from negligent work because it was performed by an independent contractor. The ease cited in support of the general proposition that failure to comply with the plumbing code placed the installation in the inherently dangerous category also dealt with the claim of a disinterested third party rather than the employee of an independent contractor. City of Hazard Municipal Housing Commission v. Hinch, supra. That case involved damage from blasting which has long been considered an inherently dangerous activity. No mention was made in the Rietze opinion of any previous case involving claims by employees of an independent contractor against the owner of the premises upon which the injury took place. Absent a clear intent to overrule previous decisions such as Jennings v. Vincent’s Adm’x., supra; Nashville Bridge Co. v. Marsh, supra, and Simmons v. Clark Construction Co., supra, or explicit inclusion of such cases within the rule we think the Court of Appeals of Kentucky would limit the decision in Rietze. Where an installation or mechanism is the property of an independent contractor and is under the sole control of such contractor, a failure to comply with the standards of safety applicable to such installation or mechanism does not, of itself, render it “inherently dangerous” for the purpose of permitting an injured employee of the independent contractor to recover from the principal or the owner of the premises. Simmons v. Clark Construction Co., 426 S.W.2d 930 (Ky.1968).

One other contention should be answered briefly. It is maintained that the contract provisions which gave Island Creek the right to terminate the contract with Cementation for breaches of applicable laws and regulations imposed upon Island Creek a duty, not to Cementation, but to the decedent, to take steps to obtain a correction of the safety defects which it admittedly knew existed. The District Court pointed out the similarities between the contract in this case and that in Grogan v. United States, supra, and observed that the same argument had been made in Gro-gan. We do not find any provision in the contract between Island Creek and Cementation which imposed affirmative obligations on Island Creek to take steps for the safety of Appellant’s decedent.

The judgment of the District Court is affirmed.


author: PER CURIAM.

text:
    UNITED STATES of America, Appellee, v. CITY OF BELLEVUE, NEBRASKA, Appellant.
    No. 72-1003.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 12, 1972.
    Decided Jan. 10, 1973.
    As Modified on Denial of Rehearing and Rehearing En Bane March 1, 1973.

      David S. Lathrop, Omaha, Neb., for appellant.
    Eva R. Datz, Atty., Appellate Section, Land and Natural Resources Div., Dept, of Justice, Washington, D. C., for appel-lee.
    Before BRIGHT and STEPHENSON, Circuit Judges, and TALBOT SMITH, District Judge.

       Hon. Talbot Smith, Senior United States District Judge, Eastern District of Michigan, sitting by designation.

   PER CURIAM.

The case before us is unique. Neither diligence of counsel nor our independent research had disclosed a case on all fours. What we have presented is an attempt by the City of Bellevue, Nebraska, to annex a SAC (Strategic Air Command) base, indeed, its headquarters, and its adjacent housing area, referred to in the record as the “Capehart housing area.”

The Offutt Air Base was described in the opinion of the District Court (permanently enjoining the annexation) as “the headquarters of the Strategic Air Command, to which is assigned the overwhelming majority of the nuclear deter-rant power of the free world.” From this base, the record discloses, the proper authorities plan, manage, direct and control the “Strategic Nuclear Deterrant capacity of the free world; all of the B52 aircraft, all of the Minute Men and Titan missiles . . . ” Here the Army, Navy, Air Force and foreign representatives sit together and “plan and coordinate the targeting of all the nuclear weapons that the free world has under its control.” From here also is controlled the Flying Command Post, which is in the air 24 hours per day, and here is stationed the Wing which processes “all of the recognizance [sic. reconnaissance] data” collected by SAC and other military agencies both photographic and electronic, as well as the “Air Weather Control,” that collects meteorological data, from world-wide sources, including satellites, processes such data, and distributes throughout SAC (the Strategic Air Command) and the United States Air Force, world wide. In addition, there are certain Groups whose missions are classified.

The Air Base itself is under the exclusive legislative jurisdiction of the Federal government. U.S.Const. Art. I, § 8, cl. 14. The Capehart housing area, on the other hand, although owned by the United States, is subject to the legislative jurisdiction of the State of Nebraska. So far as federal (as distinguished from state) law is concerned, the City of Bellevue has the power and the authority to annex the realty in question and it may “tax and regulate in those areas to the extent permitted by the Congress of the United States.” Howard v. Comm’rs of the Sinking Fund of the City of Louisville, 344 U.S. 624, 73 S.Ct. 465, 97 L.Ed. 617 (1953); Evans v. Cornman, 398 U.S. 419, 90 S.Ct. 1752, 26 L.Ed.2d 370 (1970). There is no challenge before us as to these matters.

In view of the unique and peculiar nature of the area, militarily dominated and oriented as it is, having little community of interest with near-by Bellevue, providing in substantial part to our necessary community facilities, the inevitable threshold question arises as to why annexation would be sought. The sole purpose, held the District Judge, was to increase Bellevue’s revenues. If Bellevue could include as a part of its population count the 12,000 persons residing in the barracks and quarters on the Offutt Base and in the Capehart area, it could obtain “a larger share of Nebraska state tax receipts that are distributed to municipalities on a per capita basis.” Such was the Government’s allegation, found by the trial court to be supported by a record “replete” with evidence thereof. We have held repeatedly that we do not set aside the findings of fact by a trial judge sitting without a jury unless it is -clear that they are without adequate evidentiary support. Manning v. Jones, 349 F.2d 992 (8th Cir., 1965); Jackson v. Hartford Accident and Indemnity Co., 422 F.2d 1272 (8th Cir., 1970); cert. denied, 400 U.S. 855, 91 S.Ct. 86, 27 L.Ed.2d 92 (1970). Here there was substantial evidence in the record supporting such findings.

The legal effect of this factual finding was examined by the Nebraska Supreme Court in Witham v. City of Lincoln, 125 Neb. 366, 250 N.W. 247 (1933), and the rule thereon stated as follows:

This court has held that a municipality cannot annex property for revenue purposes, as appears to have been done in the case at bar. Joerger v. Bethany Heights, 97 Neb. 675, 151 N.W. 236; Village of Osmond v. Smathers, 62 Neb. 509, 87 N.W. 310 (250 N.W. at 249).

Thus, it was the conclusion of the District Court upon such authority that the annexation was invalid as far as for an unlawful purpose.

The appellant, however, urges to us that the cases cited in support of the holding all pertained to “strictly agricultural land that was rural in nature,” and argues that all of the cases cited stand merely for the proposition that “Annexation of agricultural land, rural in character, cannot be accomplished for tax purposes only” pointing out that the statutes of Nebraska now exempt agricultural land from annexation. From this the conclusion tendered is that the doctrine of the Witham case supra, that a municipality cannot annex property for revenue purposes, no longer is the Nebraska law.

The argument is ingenious but not persuasive. The proscription against annexation for revenue purposes only is not so restricted. It finds widespread application in both case and statutory law. Thus, the sister state of Iowa provides by statute that an annexing municipal corporation must show that it is capable of extending substantial services and benefits not theretofore enjoyed “so that the proposed annexation will not result merely in increasing the revenue from taxation” of such municipal corporation, and the Supreme Court of Oregon has enjoined a proposed annexation by the City of Estacada of the “River Mill Plant” of its General Electric Company where the “inclusion of plaintiff’s property was unreasonable and where the annexation was employed for the sole purpose of enhancing the revenues of the city . . . ” Moreover, and returning to Nebraska law, we find no intimation in the opinions relied upon to so restrict the salutary doctrine to the degree that appellant suggests. The more accurate view is well expressed in Basis of Annexation of Territory by Municipal Corporations, 21 Iowa L.R. 128, 133 (1935), wherein it is said, “The courts have not allowed municipalities, under the guise of annexing adjoining property, to acquire territory simply for the purpose of raising revenue, and especially have the courts scrutinized the proceedings to determine the existence of this element when agricultural land was involved.” See, generally, McQuillin on Municipal Corporation, 3rd Ed., Annexation, §§ 7.10-7.23, particularly the latter.

The lower court relied also upon the warning expressed in Howard v. Comm’rs of the Sinking Fund of the City of Louisville, swpra, with respect to the annexation of federally owned land on which a Naval Ordnance Plant was located, stating that “It is friction, not fiction, to which we must give heed.”' In view of the nature of the property here sought to be annexed, being the headquarters, of the Strategic Air Command, the court felt a “potential for friction” with the City of Bellevue pressing upon the Court, indeed that the interests of the United States in its national security outweighed any interests of the City of Bellevue in acquiring the property. The appellant, on the other hand, points to the present lack of friction in the Capehart area and stresses that the court referred to “potential danger that may arise from city ordinances yet to be passed.” In view of the abundance of litigation as to federal-state-municipal powers and functions with respect to annexed military reservations, see Hammack, Annexations of Military Reservations by Political Subdivisions, 11 Mil.L.R. 99 (1961), we cannot say that the court’s apprehensions were unfounded. But in the view we have taken of the case as to the unlawfulness of annexation for revenue purposes only, we do. not reach this point. Nor do we consider the problem of annexation, vel non, of Capehart housing area. The annexation here authorized by the municipality, and enjoined by the lower court, consisted of both the above described base and the housing area adjacent thereto. Our affirmance rests on the fact that the base area is included in the annexation. We reiterate that whether the city of Bellevue might annex the Capehart house area alone is not a matter now before us, nor do we intend to decide that issue.

Affirmed.

      . The opinion, United States v. City of Bellevue, Nebraska is reported in 334 F.Supp. 881 (D.Neb., 1971).

      . Offutt Housing Co. v. County of Sarpy, 351 U.S. 253, 76 S.Ct. 814, 100 L.Ed. 1151 (1956).

      . Nebraska Reissue of Revised Statutes, 1943, § 16-117.

      . I.C.A. § 362.26, para. 6.

      . Portland General Electric Co. v. City of Estacada, 194 Or. 145, 241 P.2d 1129 (1952).


author: DUNIWAY, Circuit Judge:

text:
    SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. GLENN W. TURNER ENTERPRISES, INC., et al., Defendants-Appellants.
    No. 72-2544.
    United States Court of Appeals, Ninth Circuit.
    Feb. 1, 1973.

      See also, D.C., 355 F.Supp. 1402.
    Jeffrey A. Tew (argued), Miami, Fla., Charles R. Mowry, of Dardano, Mowry & Hanson, Portland, Or., Clarke C. Brown, Salem, Or., Theodore I. Kos-koff, Bridgeport, Conn., Bruce Jarman, Salem, Or., John A. Burgess, Montpelier, Vt., for defendants-appellants.
    David Ferber, Solicitor (argued), James E. Newton, Jack H. Bookey, Francis N. Mithoug, Jerry King, Attys., Richard E. Nathan, Asst. Gen. Counsel, Securities and Exchange Comm., Washington, D. C., for plaintiff-appellee.
    Before DUNIWAY, HUFSTEDLER, and TRASK, Circuit Judges.
   DUNIWAY, Circuit Judge:

This is an appeal from an order, 348 F.Supp. 766, granting the Securities and Exchange Commission a preliminary injunction. The injunction prohibits offering and selling by appellants of certain of their “Adventures” and “Plans”, and also any withdrawal by appellants of funds from the assets of the corporate defendants other than in the regular course of business. Dare To Be Great, Inc. (Dare), a Florida corporation, is a wholly owned subsidiary of Glenn W. Turner Enterprises, Inc. The individual defendants are, or were, officers, directors, or employees of the defendant corporations.

The trial court’s findings, which are fully supported by the record, demonstrate that defendants’ scheme is a gigantic and successful fraud. The question presented is whether the “Adventures” or “Plan” enjoined are “securities” within the meaning of the federal securities laws. Of the five that Dare offers — Adventures I, II, III, and IV, and the $1,000 Plan — the court held that Adventures III and IV and the $1,000 Plan are securities. We affirm.

I. The Adventures and the $1000 Plan — the facade.

The five courses offered by Dare ostensibly involve two elements. In return for his money, the purchaser is privileged to attend seminar sessions and receives tapes, records, and other material, all aimed at improving self-motivation and sales ability. He also receives, if he purchases either Adventure III or IV or the $1,000 Plan, the opportunity to help to sell the courses to others; if successful he receives part of the purchase price as his commission. There is no doubt that this latter aspect of the purchase is in all respects the significant one.

Adventure I costs $300. The purchaser receives one portable tape recorder, twelve tape recorded lessons, and certain written material in notebooks. He is entitled to attend a 12-16 hour group session.

Adventure II includes Adventure I, and costs $700. The purchaser receives twelve more tape recorded lessons. He is offered approximately 80 hours of group sessions.

Adventure III includes Adventures I and II, and costs $2,000. The purchaser receives six more tape recordings, one notebook of written material called “The Fun of Selling,” and a limited amount of written instructions and material, as well as thirty more hours of group sessions. The purchaser also receives a different sort of benefit. After fulfilling a few nominal requirements he becomes an “independent sales trainee,” empowered to sell the Adventures. He receives $100 for each Adventure I, $300 for each Adventure II, and $900 for each Adventure III that he sells.

Adventure IV costs $5,000, and includes Adventures I, II and III. The purchaser receives six more tapes, the opportunity for thirty more hours of group sessions, the opportunity to attend two other week-long courses in Florida, at his own expense, and he may or may not receive a movie projector with six cartridge-type films. He also is now empowered to sell all of the Adventures to others. For selling Adventure IV he gets $2,500.

Finally, there is the $1,000 Plan. For this sum the purchaser receives the tape cassettes sold in Adventure II, but not the accompanying written material. He also receives some additional sales instruction, and may be entitled to a 24-hour group session. He may also sell the Plan, if he brings two individuals to the person who sold him the Plan, and if these two also purchase the Plan from the first seller. If that occurs, he may then sell the Plan on his own, receiving $400 for each additional sale that he makes. If one brings three people into the scheme, he may sell the $1,000 Plan without buying it himself, and would earn the same $400 commission for each additional sale that he makes.

II. The Adventures and the Plan in operation.

It is apparent from the record that what is sold is not of the usual “business motivation” type of courses. Rather, the purchaser is really buying the possibility of deriving money from the sale of the plans by Dare to individuals whom the purchaser has brought to Dare. The promotional aspects of the plan, such as seminars, films, and records, are aimed at interesting others in the Plans. Their value for any other purpose, is, to put it mildly, minimal.

Once an individual has purchased a Plan, he turns his efforts toward bringing others into the organization, for which he will receive a part of what they pay. His task is to bring prospective purchasers to “Adventure Meetings.”

A. The meetings.

These meetings are like an old time revival meeting, but directed toward the joys of making easy money rather than salvation. Their purpose is to convince prospective purchasers, or “prospects,” that Dare is a sure route to great riches. At .the meetings are employees, officers, and speakers from Dare, as well as purchasers (now “salesmen”) and their prospects. The Dare people, not the purchaser-“salesmen”, run the meetings and do the selling. They exude great enthusiasm, cheering and chanting; there is exuberant handshaking, standing on chairs, shouting, and “money-humming”. The Dare people dress in expensive, modern clothes; they display large sums of cash, flaunting it to those present, and even at times throwing it about; they drive new and expensive automobiles, which are conspicuously parked in large numbers outside the meeting place. Dare speakers describe, usually in a frenzied manner, the wealth that awaits the prospects if they will purchase one of the plans. Films are shown, usually involving the “rags-to-riches” story of Dare founder Glenn W. Turner. The goal of all of this is to persuade the prospect to purchase a plan, especially Adventure IV, so that he may become a “salesman”, and thus grow wealthy as part of the Dare organization. It is intimated that as Glenn W. Turner Enterprises, Inc. expands, high positions in the organization, as well as lucrative opportunities to purchase stock, will be available. After the meeting, pressure is applied to the prospect by Dare people, in an effort to induce him to purchase one of the Adventures or the plan. The sale is sometimes closed by the purchaser who brought the prospect to the meeting, but primarily, by Dare salesmen, specialists in the “hard sell.”

The format of the meeting is preordained. A script created by Dare is strictly adhered to. The format applies even to the sale, there being a standard procedure for inducing the prospect to sign his name to the agreement and to part with his money. While no express guarantee of success is made at the meetings, and the statement is made that the purchaser must expect to work, the impression which is fostered is of the near inevitability of success to be achieved by anyone who purchases a plan and follows Dare’s instructions.

Dare also arranges, in addition to the Adventure Meetings, “GO Tours,” or “Golden Opportunity Tours.” Prospects are taken by plane or bus to one of Dare’s regional centers where further meetings and sales efforts are undertaken. A significant effort is made during the trip itself to sell the plans to prospects. Much the same atmosphere as at the meetings pervades the trip-exuberant shouting, chanting, handshaking, relating of success stories, and lavish displays of cash.

In a scheme such as this, the possibility that a market will become “saturated” is a real one. Saturation has in fact occurred in some markets, but this is not mentioned at the meetings. Few, if any, purchasers of these plans have achieved any success remotely approaching that described by defendants and their agents.

B. The role of the purchaser-salesman.

Once he has bought a plan that empowers him to help sell the plans to others, the task of the purchaser is to find prospects and induce them to attend Adventure Meetings. He is not to tell them that Dare To Be Great, Inc. is involved. Rather, he catches their interest by intimating that the result of attendance will be significant wealth for the prospect. It is at the meetings that the sales effort takes place. The “salesman” is also told that to maximize his chances of success he should impart an aura of affluence, whether spurious or not — to pretend that through his association with Dare he has obtained, wealth of no small proportions. The training that he has received at Dare is aimed at educating him on this point. He is told to “fake it ’til you make it,” or to give the impression of wealth even if it has not been attained. He is urged to go into debt if necessary to purchase a new and expensive automobile and flashy clothes, and to carry with him large sums of money, borrowing if necessary, so that it can be ostentatiously displayed. The purpose of all this is to put the prospect in a more receptive state of mind with respect to the inducements that he will be subject to at the meetings.

III. The Adventures and Plans as Securities.

The district court held that Adventures III and IV, and the $1,000 Plan were securities under the Securities Act of 1933, 15 U.S.C. § 77a et seq. and the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. The definitions of security that are found in each Act are almost identical. Both definitions include the terms “investment contract,” “certificate of interest or participation in any profit-sharing agreement,” and any “instrument commonly known as a ‘security’.” The district court held that the plans in question fell into all three categories of securities. Because we find them to be investment contracts, we need not decide whether the other definitions are applicable as well.

The 1933 and 1934 Acts are remedial legislation, among the central purposes of which is full and fair disclosure relative to the issuance of securities, SEC v. W. J. Howey Co., 1945, 328 U.S. 293, 299, 66 S.Ct. 1100, 90 L.Ed. 1244; Tcherepnin v. Knight, 1967, 389 U.S. 322, 337, 88 S.Ct. 548, 19 L.Ed.2d 564. It is a familiar canon of legislative construction that remedial legislation should be construed broadly, Tcherepnin v. Knight, supra, 389 U.S. at 337, 88 S. Ct. 548. The Acts were designed to protect the American public from speculative or fraudulent schemes of promoters. For that reason Congress defined the term “security” broadly, and the Supreme Court in turn has construed the definition liberally. In SEC v. Joiner Corp., 1943, 320 U.S. 344, 64 S.Ct. 120, 88 L.Ed. 88, the Court stated: “However, the reach of the Act does not stop with the obvious and commonplace. Novel, uncommon, or irregular devices, whatever they appear to be, are also reached if it be proved as matter of fact that they were widely offered or dealt in under terms or courses of dealing which established their character in commerce as ‘investment contracts,’ or as ‘any interest or instrument commonly known as a “security” 320 U.S., Id. at 351, 64 S.Ct. at 123. In SEC v. W. J. Howey Co., supra, the Court stated that the definition of a security “embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.” 328 U-S. Id. at 299, 66 S.Ct. at 1103. And in the recent case of Tcherepnin v. Knight, supra, the Court stated, “[I]n searching for the meaning and scope of the word ‘security’ in the Act, form should be disregarded for substance and the emphasis should be on economic reality.” Id. at 336, 88 S.Ct. at 553. We approach the definition of a “security” with these admonitions in mind.

In SEC v. W. J. Howey Co., supra, the Supreme Court set out its by now familiar definition of an investment contract:

“The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.” Id. at 301, 66 S.Ct. at 1104.

In Howey the Court held that a land sales contract for units of a citrus grove, together with a service contract for cultivating and marketing the crops, was an investment contract and hence a security. The Court held that what was in essence being offered was “an opportunity to contribute money and to share in the profits of a large citrus fruit enterprise managed and partly owned by respondents.” Id. at 299, 66 S.Ct. at 1103. The purchasers had no intention themselves of either occupying the land or developing it; they were attracted only “by the prospects of a return on their investment.” Id. at 300, 66 S.Ct. at 1103. It was clear that the profits were to come “solely” from the efforts of others.

For purposes of the present case, the sticking point in the Howey definition is the word “solely,” a qualification which of course exactly fitted the circumstances in Howey. All the other elements of the Howey test have been met here. There is an investment of money, a common enterprise, and the expectation of profits to come from the efforts of others. Here, however, the investor, or purchaser, must himself exert some efforts if he is to realize a return on his initial cash outlay. He must find prospects and persuade them to attend Dare Adventure Meetings, and at least some of them must then purchase a plan if he is to realize that return. Thus it can be said that the returns or profits are not coming “solely” from the efforts of others.

We hold, however, that in light of the remedial nature of the legislation, the statutory policy of affording broad protection to the public, and the Supreme Court’s admonitions that the definition of securities should be a flexible one, the word “solely” should not be read as a strict or literal limitation on the definition of an investment contract, but rather must be construed realistically, so as to include within the definition thoge schemes which involve in substance, if not form, securities. Within this context, we hold that Adventures III and IV, and the $1,000 Plan, are investment contracts within the meaning of the 1933 and 1934 Acts.

Strict interpretation of the requirement that profits to be earned must come “solely” from the efforts of others has been subject to criticism. See, e. g., State of Hawaii v. Hawaii Market Center, Haw.1971, 485 P.2d 105. Adherence to such an interpretation could result in a mechanical, unduly restrictive view of what is and what is not an investment contract. It would be easy to evade by adding a requirement that the buyer contribute a modicum of effort. Thus the fact that the investors here were required to exert some efforts if a return were to be achieved should not automatically preclude a finding that the Plan or Adventure is an investment contract. To do so would not serve the purpose of the legislation. Rather we adopt a more realistic test, whether the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise.

In this case, Dare’s source of income is from selling the Adventures and the Plan. The purchaser is sold the idea that he will get a fixed part of the proceeds of the sales. In essence, to get that share, he invests three things: his money, his efforts to find prospects and bring them to the meetings, and whatever it costs him to create an illusion of his own affluence. He invests them in Dare’s get-rich-quick scheme. What he buys is a share in the proceeds of the selling efforts of Dare. Those efforts are the sine qua non of the scheme; those efforts are what keeps it going; those efforts are what produces the money which is to make him rich. In essence, it is the right to share in the proceeds of those efforts that he buys. In our view, the scheme is no less an investment contract merely because he contributes some effort as well as money to get into it.

Let us assume that in Howey, supra, the sales and service agreements had provided that the buyer was to buy and plant the citrus trees. Unless he did so, there would be no crop to cultivate, harvest and sell, no moneys in which he could share. The essential nature of the scheme, however, would be the same. He would still be buying, in exchange for money, trees and planting, a share in what he hoped would be the company’s success in cultivating the trees and harvesting and marketing the crop. We cannot believe that the Court would not have held such a scheme to be an investment contract. So here. Regardless of the fact that the purchaser here must contribute something besides his money, the essential managerial efforts which affect the failure or success of the enterprise are those of Dare, not his own.

Our holding in this case represents no major attempt to redefine the essential nature of a security. Nor does our holding represent any real departure from the Supreme Court’s definition of an investment contract as set out in Howey. We hold only that the requirement that'profits come “solely” from the efforts of others would, in circumstances such as these, lead to unrealistic results if applied dogmatically, and that a more flexible approach is appropriate.

Affirmed.

      . The district court found that defendant Sant had not been linked to these proceedings.

      . Although mention of “money-humming” is made at several points in the record, we are not certain what this activity entails, nor do we venture to guess.

      . On at least some occasions prospects are told to acquire the necessary money through bank loans, by not being candid about the purpose of the loan, and by making simultaneous applications to a number of banks without informing each bank that more than one application is being made.

      . The Securities Act of 1933 defines “security” as:
      “. . . any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of dejwsit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a ‘security’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.” 15 U.S.C. § 77b (1).
      The Securities Exchange Act of 1934 defines “security” as:
      “. . . any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, or in general, any instrument commonly known as a ‘security’ or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to any purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.” 15 U.S.C. § 78c(a) (10).

      . The broad purpose of the Securities Act of 1933 was stated in the report of the Senate Committee on Banking and Currency, S.Rep. Xo. 47, 73d Cong., 1st Sess. 1 (1933):
      “The aim is to prevent further exploitation of the public by the sale of unsound, fraudulent, and worthless securities through misrepresentation; to place adequate and true information before the investor; to protect honest enterprise, seeking capital by honest presentation, against the competition afforded by dishonest securities offered to the public through crooked promotion; . . . . ”

      . A sample listing of eases in which diverse schemes have been held to involve securities includes: Continental Marketing Corp. v. SEC, 10 Cir., 1967, 387 F.2d 466, cert. denied, 1968, 391 U.S. 905, 88 S.Ct. 1655, 20 L.Ed.2d 419 (beavers); Roe v. United States, 5 Cir., 1961, 287 F.2d 435, cert. denied, 368 U.S. 824, 82 S.Ct. 43, 7 L.Ed.2d 29 (mineral leases); Los Angeles Trust Deed & Mortgage Exch. v. SEC, 9 Cir., 1961, 285 F.2d 162, cert. denied, 366 U.S. 919, 81 S.Ct. 1095, 6 L.Ed.2d 241 (mortgages and deeds of trust); Penfield Co. of California v. SEC, 9 Cir., 1944, 143 F.2d 746, cert. denied, 323 U.S. 768, 65 S.Ct. 121, 89 L.Ed. 614 (whiskey sales contracts); SEC v. Crude Oil Corp. of America, 7 Cir., 1937, 93 F.2d 844 (crude oil sales contracts).

      . A common enterprise is one in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties. See, e. g., Los Angeles Trust Deed & Mortgage Exch. v. SEC, 9 Cir., 1961, 285 F.2d 162, 172, cert. denied, 366 U.S. 919, 81 S.Ct. 1095, 6 L.Ed.2d 241.

      . We note that under the laws of three states defendants’ promotions have been held to be securities: Hurst v. Dare To Be Great, Inc., D.Ore. (Civ.No. 71-160, Jan. 12, 1972); State of Idaho v. Glenn Turner Enterprises, Inc., Dist.Ct. 4th Jud. Dist.Ida. (Civ. No. 47773, March 28, 1972); Frye v. Taylor, Dist. Ct. of Appeal, 4th Dist. Fla., 1972, 263 So.2d 835.

      . See, e. g., Georgia Market Centers, Inc. v. Fortson, 1969, 225 Ga. 854, 171 S.E.2d 620; Gallion v. Alabama Market Centers, Inc., 1968, 282 Ala. 679, 213 So.2d 841. Compare State of Hawaii v. Hawaii Market Center, 1971, 485 P.2d 105.

      . See Coffey, The Economic Realities of a “Security”: Is There a More Meaningful Formula?, 18 W.Res.R.Rev. 367 (1967) wherein Professor Coffey proposes new guidelines for determining the existence of a security.


text:
    Walter F. HURST, Plaintiff-Appellee, v. DARE TO BE GREAT, INC., a corporation, et al., Defendants-Appellants. Walter F. HURST, Plaintiff-Appellant, v. DARE TO BE GREAT, INC., a corporation, et al., Defendants-Appellants.
    Nos. 72-1720, 72-1662.
    United States Court of Appeals, Ninth Circuit.
    Feb. 1, 1973.

      John J. Haugh (argued), of O’Con-nell, Goyak & Haugh, Portland, Or., for Walter F. Hurst.
    William E. Hanson (argued), Charles R. Mowry, of Dardano, Mowry & Hanson, Portland, Or., for Dare To Be Great, Inc.
    John H. Socolofsky, Asst. Atty. Gen. (argued), Lee Johnson, Atty. Gen. Salem, Or., for amicus curiae.
    Before DUNIWAY, HUFSTEDLER and TRASK, Circuit Judges.
   DUNIWAY, Circuit Judge:

In this case, plaintiff Hurst bought from Dare To Be Great, Inc. (Dare) its Adventure IV, which is described in our opinion in SEC v. Glenn W. Turner Enterprises, Inc., 9 Cir., 1973, 474 F.2d 476, filed today. Disillusioned with what he got, Hurst sued for the return of his money under the diversity jurisdiction. The trial judge held that Adventure IV is an investment contract within the meaning of Oregon Revised Statutes, eh. 59, and gave judgment for Hurst. Both parties appeal.

1. The appeal of Dare.

The trial judge held that purchasers of Adventure IV were contributing sufficiently to the product development and promotion of Dare to bring the case within the ambit of State ex rel. Healy v. Consumer Business System, Inc., Or.App., 1971, 482 P.2d 549, which adopted for Oregon the risk capital test of Silver Hills Country Club v. Sobieski, 1961, 55 Cal.2d 811, 13 Cal.Rptr. 186, 361 P.2d 906. He so held notwithstanding the fact that Dare had a “product” in being when it began soliciting business in Oregon.

In diversity cases, where state law controls, we will not overrule the district court’s interpretation of state law unless it is clearly wrong, particularly if the highest state court has not passed on the matter. Turnbull v. Bonkowski, 9 Cir., 1969, 419 F.2d 104, 106; Insurance Company of North America v. Thompson, 9 Cir., 1967, 381 F.2d 677, 681. We owe, and we give deference to the local judge’s opinion as to the law of his state. To do so here is particularly appropriate because Judge Goodwin is a former member of the Oregon Supreme Court. We are not persuaded that Judge Goodwin’s opinion as to the Oregon law is wrong.

2. The appeal of Hurst.

The action was for rescission. Hurst paid Dare $5,000, and sought to recover that sum. The court awarded $4,300, finding that Hurst had received benefits worth $700. This finding we hold to be clearly erroneous. All that Hurst received were the “kits” for Adventures I and II plus attendance at a 6-day “school” in Reno. The record demonstrates that these are worthless. Hurst paid his own expenses for the Reno trip; he got nothing of value from it. He had previously taken another trip to Reno, before he bought Adventure IV. He did not pay for it, but neither did Dare. It was paid for by another of Dare’s victims, who had become a “salesman.” If the tape recorder and carrying case that Hurst received have value, it is more than offset by the cost of his second trip to Reno to take the “course” for which he had paid. Judgment should have been for the full $5,000.

On the issue of damages, the judgment is vacated, and the case is remanded with directions to give judgment for $5,000 damages. In all other respects, the judgment is affirmed.