author: J. JOSEPH SMITH, Circuit Judge.

text:
    Irving GORDON, Plaintiff-Appellant, v. Robert L. BURR and Elpac, Inc., Defendants-Appellees, and Arnold Lord and Philips, Appel & Walden, Inc. (sued herein as Philips, Appel & Walden), Defendants-Appellees-Appellants.
    Nos. 179, 310 and 311, Dockets 74-1749, 74-1865 and 74-1840.
    United States Court of Appeals, Second Circuit.
    Argued Oct. 9, 1974.
    Decided Nov. 20, 1974.

      John C. Klotz, New York City, (Leonard Loewinthan, New York City, of counsel), for plaintiff-appellant Gordon.
    Michael C. Devine, New York City, (Butowsky, Schwenke & Devine, New York City), for defendant-appellee, cross-appellant Lord.
    Steven H. Lipsitz, New York City, (Bressler, Meislin, Tauber & Lipsitz, Neil M. Berson, New York City, of counsel), for defendant-appellee, cross-appellant Philips, Appel & Walden, Inc.
    Harry Balterman, New York City, for defendant-appellee Elpae, Inc.
    Before KAUFMAN, Chief Judge, and SMITH and TIMBERS, Circuit Judges.
   J. JOSEPH SMITH, Circuit Judge.

Irving Gordon, a purchaser of securities issued by Elpae, Inc., sued for rescission of his purchase and restitution of his $45,000 payment against: Robert L. Burr, as seller of the shares; Arnold Lord, as the salesman; Philips, Appel & Walden, Inc. (P.A.W.), as Lord’s brokerage firm; and Elpae, Inc., as the issuer. After a non-jury trial, Judge Arnold Bauman of the Southern District of New York, in an opinion reported at 366 F.Supp. 156 (1973), accepted Gordon’s claims that Burr and Lord had violated § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), by misrepresenting material facts in the transaction with Gordon and that P.A.W. had violated § 20(a) of the Act, 15 U.S.C. § 78t(a), as a “controlling person” of a § 10(b) violator, Lord. The court rejected Gordon’s attempt to implicate Elpae in the fraud as a controlling person of Burr, Elpac’s president during most of the negotiations preceding Gordon’s purchase and a director alone for the remainder of the period relating to the transaction. Judge Bauman granted the requested rescission relief against Burr but held that as a matter of law such relief was inapplicable to persons not in privity of contract with the defrauded purchaser. Thus, although he went on to find that Lord and P.A.W. had violated the securities laws, Judge Bauman deemed them immune from a rescission remedy. He held that damages, if proven, would lie against Lord and P.A.W., but that Gordon had made no effort to establish damages, despite the indication in the complaint (later orally disavowed) that he would and the court’s invitation at trial to do so. In light of this conscious by-passing of a damages theory at trial, the court then rejected Gordon’s post-trial motions under Fed.R.Civ.P. 59(a), 60(b), to amend the judgment to reflect Lord’s and P.A.W.’s liability to Gordon in damages or, in the alternative, to hold a new trial limited to the issue of damages.

On appeal, Gordon contests the district court’s understanding of rescission as a remedy available only against the fraudulent seller. Alternatively, he renews his request for an opportunity to prove damages against those who fraudulently induced his purchase. In addition, by challenging the court’s conclusion that Elpac was not guilty of securities fraud, Gordon seeks to enlarge the group from which he might recover under either a rescission or damages theory. Burr does not appeal from the judgment against him; Elpac defends the finding in its favor; and Lord and P.A.W. cross-appeal from the adjudication of their violations, which would become relevant in the event that this court either accepts the appellant’s characterization of the scope of rescission relief or orders a new trial on damages.

For the reasons detailed below, we disagree with the district court’s view of the remedy of rescission and find it applicable against persons not in privity with the defrauded purchaser but who are party to the fraud. Because we also differ with the district court as to the liability of P.A.W., this reversal on the issue of rescission adds only Lord to those from whom Gordon may seek restitution of his purchase price. In all other respects, we affirm.

I. THE FACTS

Gordon became interested in purchasing Elpac stock as a result of a fortuitous encounter in June, 1968, with Howard Mann, an old acquaintance who had recently bought 5,000 shares of Elpac. Both Mann and his companion at the time, Lord, spoke highly to Gordon of Elpac stock. Shortly thereafter, Gordon received a telephone call from Lord inviting him to a meeting of prospective purchasers of a new Elpac offering. Gordon attended the select gathering, which included two brokers from P.A.W. in addition to Lord; all present, except Lord, were strangers to Gordon. At the meeting, Burr, president of Elpac at the time, offered to sell 20,000 shares of his holdings in Elpac. He asserted, however, that he would sell no shares to the group unless they agreed to purchase all 20,000. By reference to subsequent events, the district court found that this statement constituted a material misrepresentation in violation of § 10(b) of the 1934 Act. 366 F.Supp. at 164.

The group departed without any commitments made. Within two weeks, however, Lord informed Gordon that the other offerees had already completed documents to expedite their purchase and thus that the ostensibly requisite block purchase awaited only Gordon’s completion of these documents for its speedy realization. This statement, belied by later developments, became a basis for Lord’s § 10(b) liability. 366 F.Supp. at 164.

Approximately one month after Gordon complied with this request, Burr pressed completion of the transaction. On August 20, he offered Gordon by telegram 4,500 shares at $10 per share. After a brief delay, Gordon arranged for the funds to be wired to Burr. On the 22nd, Gordon met with Lord and Burr, who both explained that, despite delays in the arrival of documents approving the sale as well as sundry other apparent irregularities, there were no problems with either the Burr offering or Elpac’s business health in general. They specifically reassured Gordon that the other offerees had already made payment for their shares — a material misrepresentation, in the court’s view. 366 F.Supp. at 164.

Subsequently, Gordon fruitlessly sought to locate Lord in order to inquire about the whereabouts of the documents of approval and, now, his stock certificates as well. When he telephoned and visited P.A.W.’s offices in search of Lord, the firm’s employees indicated only that Lord was not in — not, as was in fact the case, that Lord had left the firm in late 1968. Finally, Gordon managed to reach Lord, who told him that the certificates were at P.A.W. On this second trip to the firm’s offices, Gordon did not find his certificates. He did meet, however, one of the offerees present at the June, 1968, meeting, and the latter informed Gordon that neither he nor any of the others who attended the meeting had purchased stock from Burr. The certificates did arrive shortly after, but Gordon’s attention had turned to procuring a refund of the $45,000 which he had invested in the stock— already a losing venture. Unable to procure the refund by persuasion alone, Gordon brought the instant suit for rescission based on various alleged misrepresentations made to him by Burr and Lord of facts material to his decision to purchase the stock. The court found “at least one determinative misstatement” by each, 366 F.Supp. at 164, but as indicated above, held that Lord’s violation of the 1934 Act did not give rise to relief against him or P.A.W., which he held qualified as a “controlling person” within § 20(a) of the Act.

II. RESCISSION AGAINST PERSONS NOT IN PRIVITY

Although Judge Bauman concluded that Lord and P.A.W. had violated § 10(b) and § 20(a) of the 1934 Act respectively, he found them to be outside the scope of an action for rescission. The court regarded rescission as a remedy available only against the tortfeasor who is party to the contract with the victim of the fraud; under this view, therefore, rescission relief would apply only to Burr, the seller. Where an action for rescission is based on a contract theory — mistake, or breach of contract— this circumscription of the class from whom restitution may be sought is undoubtedly correct. See generally, 3 A. Corbin, Contracts § 613 (1960); 5 id. § 1104. But where such a suit is predicated instead on fraud, the authorities do not adhere to a privity theory with the uniformity which the district court — as one infers from its essentially parenthetical disposition of the issue —apparently assumed. See cases cited infra. As indicated below, we believe that the district court took too narrow a view of its powers as a court of equity and erred in placing a violator of § 10 (b) or § 20(a) beyond the reach of a rescission remedy. Because we resolve this issue in the appellant’s favor, we need not review his alternative claim that the court abused its discretion in not granting his post-trial motions regarding a damages award.

The majority view regarding the availability of rescission against parties not in privity with the defrauded person favors a broad conception of the scope of rescission relief where the theory relied upon is fraud. Thus, the New York courts have long held rescission applicable against a defrauder not in privity of contract with the victim of the fraud. See, Keskal v. Modrakowski, 249 N.Y. 406, 164 N.E. 333 (1928); Kaufman v. Jaffee, 244 App. Div. 344, 279 N.Y.S. 392 (1st Dept. 1935). Iowa’s high court was emphatic to similar effect:

Of course, if the principal makes restoration, there is an end. But if he does not restore, why should not the agent be made to return money that would never have reached the principal if the agent had not, by fraud, induced the one he dealt with to part with the money ?

Peterson v. McManus, 187 Iowa 522, 546, 172 N.W. 460, 469 (1919). See also, Cox v. National Coal & Oil Investment Co., 61 W.Va. 291, 56 S.E. 494 (1907). In Johns Hopkins University v. Hutton, 297 F.Supp. 1165 (D.Md.1968), aff’d in part, rev’d in part & remanded, 422 F.2d 1124 (4th Cir. 1970), 343 F.Supp. 245 (D.Md.1972), aff’d in part, rev’d in part & remanded, 488 F.2d 912 (4th Cir. 1973), cert. denied, 416 U.S. 916, 94 S.Ct. 1622, 1623, 40 L.Ed.2d 118 (1974), the district court granted rescission against the co-partners of W. E. Hutton & Co., a brokerage firm, for misrepresentations made in arranging a sale of oil and gas production payments from Trice Production Company to the plaintiff university. Although the Fourth Circuit reversed portions of both lower court orders, it plainly upheld the lower court’s conception of rescission as a remedy available against persons not in privity of contract with the victim of a fraud. Among the violations of the securities laws to which the court had applied this expansive view of rescission was— as in the instant case — a violation of § 10(b) of the 1934 Act. The First Circuit has also approved the application of rescission against tortfeasors not in privity with the defrauded party. Cady v. Murphy, 113 F.2d 988, 991 (1st Cir.), cert. denied, 311 U.S. 705, 61 S.Ct. 175, 85 L.Ed. 458 (1940) (dictum). Indeed, the only federal or upper-level state court decision we have found to the contrary is Huffman v. Bankers Automobile Insurance Co., 112 Neb. 283, 200 N.W. 994 (1924), an opinion sharply criticized, 3 Neb.L.Bull. 436 (1925), shortly after its rendition. Moreover, this resolution of the problem is indicated by a consideration of the basic equities of the situation.

As between two tortfeasors, one the seller and the other not a privy to the transaction, it is desirable that the seller be the person from whom the purchaser recover; otherwise, the seller will benefit from his fraud to the extent of the purchase price. The choice, then is between returning the seller to the status quo prevailing prior to the fraud or forcing the defrauder not in privity to a worse status than he occupied quo ante. To avoid unjust enrichment, genera] equitable principles indicate the preferability of the purchaser pursuing first the seller, rather than his partner in the fraud. However, as between the innocent purchaser and the wrongdoer who, though not a privy to the fraudulent contract, nonetheless induced the victim to make the purchase, equity requires the wrongdoer to restore the victim to the status quo.

Since the district court erred in its ruling on rescission, we reverse as to the availability of rescission against Lord and P.A.W. insofar as they may be violators of the 1934 Act. Accordingly, their cross-appeals, disputing the court’s finding that they violated the Act, must now be considered.

III. THE CROSS-APPEALS

Judge Bauman held Lord in violation of § 10(b) on the basis of two misrepresentations: shortly after the June, 1968, meeting, Lord advised Gordon that the other offerees had already indicated their intention to purchase by completing certain documents; and the day after Gordon wired Burr the funds, Lord (along with Burr) reassured Gordon that the other offerees had also completed their purchases. On appeal, Lord concedes that the court enunciated the correct standard for determining the presence of a § 10(b) violation. He differs, though, with the court’s application of this standard. Specifically, Lord contends that the representations which Judge Bauman singled out as violative of the 1934 Act were neither false nor material within the meaning of § 10(b) and, in any event, could not have been a proximate cause of Gordon’s purchase of the Elpac stock.

We agree that the court below correctly stated the § 10(b) standard. See generally, List v. Fashion Park, Inc., 340 F.2d 457 (2d Cir.), cert. denied sub nom., List v. Lerner, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965), and find substantial evidence in the record to support its application of the standard to Lord’s two statements. The misrepresentations as to participation of the others were clearly material to one in Gordon’s position contemplating a substantial investment in the venture painted as it was as a simultaneous purchase by all the members of the group. Accordingly, we uphold Lord’s liability to Gordon for violating § 10(b) of the 1934 Act.

If P.A.W. is also liable to Gordon, it must be derivatively — as a “controlling person” of Lord, within the meaning of § 20(a) of the 1934 Act. In Lanza v. Drexel & Co., 479 F.2d 1277, 1299 (2d Cir. 1973) (en banc), we had occasion to comment on the scope of the secondary liability established by § 20(a):

The intent of Congress in adding this section . . . was obviously to
impose liability only on those directors who fall within its definition of control and who are in some meaningful sense culpable participants in the fraud perpetrated by controlled persons.

In light of the evidence marshalled by Judge Bauman relevant to P.A.W.’s culpability as well as his remarks regarding the applicable standard, we are convinced that the court erred in applying too stringent a test of liability to P.A. W. Significantly, Gordon was not a regular customer of the firm and P.A.W. did not manage the Burr transaction; its brokers at the June, 1968, meeting were present in their private capacities, not as representatives of the firm. But the court minimized the importance of “[t]hese facts . . . [for they] only tend to establish that P.A.W. could not be held primarily liable under § 10 (b); the standard under § 20(a) is a far lower one.” 366 F.Supp. at 168 (emphasis added). We fail to find in the record support for a finding that P.A.W. had knowledge of the fraudulent representations or in any meaningful sense culpably participated in them. We conclude that the district court required P.A.W. to vindicate its good faith after a lesser showing by Gordon of P.A.W.’s culpability than § 20(a) demands. See, Lanza v. Drexel & Co., supra; cf. Securities and Exchange Commission v. Lum’s Inc., 365 F.Supp. 1046, 1064-1065 (S.D.N.Y.1973). The court’s conclusion that P.A.W. is liable to Gordon for violating § 20(a) of the 1934 Act must therefore be reversed.

IV. LIABILITY OF ELPAC

Like P.A.W., Elpac stands to be adjudged liable to Gordon in rescission only derivatively — in this instance, for Burr’s violation of § 10(b). The record however, is lacking in evidence that Burr was acting for Elpac in his sale of his own shares or his representations to Gordon.

Though in effect conceding his failure at trial to offer positive proof of Elpac’s culpability, Gordon seeks to predicate § 20(a) liability on the negative inference which the court might have drawn from Elpac’s failure to present certain evidence at trial conceivably within its ability to produce. Plainly, this inference is far less compulsory than Gordon would have it. Kirby v. Tallmadge, 160 U.S. 379. 383, 16 S.Ct. 349, 40 L.Ed. 463 (1896), cited by Gordon as authority and quoted by him at length in his brief, characterizes a failure to produce evidence within one’s control as no more than “a proper subject of comment.” Whatever inference the court below may have drawn from Elpac’s alleged non-production of evidence, it was hardly error for the court not to make this permissible inference. In any event, it appears highly dubious that this inference from non-production of evidence could supply sufficient evidence to hold Elpac liable under § 20(a). We reject Gordon’s claim that Elpac violated § 20(a) of the 1934 Act.

Reversed as to availability of rescission against Lord and as to liability of Philips, Appel & Walden, Inc., and remanded for entry of appropriate judgment ; otherwise affirmed.

      . § 78j. Manipulative and deceptive devices
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
      * * !¡í * *
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

      . § 78t. Liabilities of controlling persons
      (a) Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.

      . It should be noted at the outset that the discussion of the liability of Lord, Elpac and P.A.W. is rendered wholly academic by plaintiff’s choice of the remedy of rescission which is available only against Burr, the seller of the securities.

      . Although Gordon urges Mack v. Latta, 178 N.Y. 525, 71 N.E. 97 (1904), as authority for his position and the appellees dispute its applicability, we need not decide among their competing interpretations of Mach. The appellees argue that Mach holds no more than that a court sitting in equity will permit joinder of an action for damages against tortfeasors not in privity with the defrauded party, and a bill for rescission against the fraudulent seller. Under their view, then, the case deals with a procedural issue (joinder), not the substantive problem of the persons against whom a bill in rescission may lie. This may well capture what the Made court meant. Subsequent to Mach, however, the New York Court of Appeals has made clear that it reads that case for — or at least regards as Mack’s ratio decidendi — the proposition propounded by the appellant. See, Keskal v. Modrakowski, supra. Whatever the court in Mach intended to say, then, is rather beside the point, for the state’s high court has since elucidated in no uncertain terms that New York recognizes the availability of rescission against tortfeasors not in privity with the victim of the fraud.

      . Although Professor Loss seems in a passing reference to resolve availability in the negative, 3 L. Loss, Securities Regulation 1627 (2d ed. 1961), he elsewhere clarifies his position on this issue along the lines which we suggest, 3 id. 1713-15, 1769-70. The Second Restatement of Agency (1958) also offers support for allowing rescission relief against all persons party to a fraud :
      § 339. Other Party Rescinds for Cause Existing at Time of Transaction; Principal Disclosed or Partially Disclosed
      An agent who has received things from another for a disclosed or partially disclosed principal in a transaction conducted by him has a duty to return them or their proceeds if the other rescinds the transaction for a cause existing at the time of their receipt, to the extent that the agent has not, before notice of rescission and in good faith, changed his position.
      * * * * *
      [Comment:]
      f. Change of position. A person who, as agent, receives things from a third person for the principal is not thereby under a duty to return what he has received if, before demand, he has in good faith changed his position.
      ❖ sk
      If the agent has notice that the other has rescinded or, if he learns of facts from which he should realize that the other is entitled to and will demand rescission, as where the agent or principal was fraudulent in inducing the transaction, a subsequent change of position does not relieve him from the duty of returning what he has received. .
      (Emphasis added). See also, Comment, 3 Neb.L.Bull. 436 (1925).

      . Even on its own terms, this claim of non-production of evidence is unconvincing. For at least one piece of allegedly withheld evidence, minutes of a meeting, was in fact proffered by Elpac. Transcript at 258.


source: Caselaw Access Project

author: GARTH, Circuit Judge.

license: Public Domain

text:
    C-B BUICK, INCORPORATED, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 73-2068.
    United States Court of Appeals, Third Circuit.
    Argued Sept. 6, 1974.
    Decided Nov. 14, 1974.

      H. David Rothman, Pittsburgh, Pa., for petitioner.
    William H. DuRoss, III, Atty., Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, Washington, D. C., for respondent.
    Before SEITZ, Chief Judge, and GIBBONS and GARTH, Circuit Judges.
   OPINION OF THE COURT

GARTH, Circuit Judge.

Petitioner C-B Buick, Inc. (Buick) appeals from that portion of the September 17, 1973 order of the NLRB (Board) which held that the petitioner had committed an unfair labor practice by violating Section 8(a)(5) and (1) of the National Labor Relations Act. The violation found by the Board was petitioner’s refusal to furnish certain financial data requested by the Union during collective bargaining sessions. On this appeal we are asked by petitioner to set aside that provision of the Board’s September 17, 1973 order which requires Buick to furnish the Union with the requested data. The Board has filed a cross-petition to enforce its entire order. For the reasons set forth below, we decline to enforce so much of the Board’s order as would require Buick at this time to furnish the financial data previously sought by the Union.

I.

In 1971, the Union was certified as the exclusive bargaining representative for eight service-and-parts department workers employed by Buick. Thereafter, Buick and the Union entered into a one-year collective bargaining agreement which expired on June 30, 1972. Prior to the expiration of this agreement, the Union’s business representative submitted certain demands to Buick relevant to a new agreement. Some four days prior to the first bargaining session (which had been scheduled for July 19, 1972) Buick’s president unilaterally met with the employees and informed them that Buick could not afford the Union’s demands and that if these demands had to be met Buick might be forced to close. This meeting, and a subsequent after-hours meeting at which Buick’s supervisor advised against union representation, led to the finding by the Board that Buick had violated Section 8(a)(5) and (1) of the National Labor Relations Act (Act).

At the first two bargaining sessions held on July 19, 1972 and August 2, 1972, the Union’s demands were discussed. Buiek’s position at both sessions was that it could not afford to meet the various Union proposals. The Union thereupon asked to see Buick’s profit and loss statement, to determine for purposes of further contract negotiations whether Buick’s plea of poverty could be substantiated. Buick denied this request at the same time as it submitted counter proposals. Before the August 2, 1972 session ended however, Buick, without abandoning its position that the Union could not see its books, gave the Union an oral statement of Buick’s “pre-tax profits” for the preceding year. This session, like the first, ended without agreement on any issue.

On August 9, 1972 the Union filed with the NLRB an unfair labor practice charge against Buick, claiming (1) that Buick had bypassed the Union and dealt directly with its employees and had threatened them, and (2) that Buick had refused to disclose to the Union relevant employer financial data after asserting that Buick could not afford the Union contract proposals. The Administrative Law Judge who conducted the NLRB hearing on November 20, 1972, concluded that although Buick violated Section 8 (a)(5) and (1) by its direct dealings with and threats to its employees, Buick had not committed an unfair labor practice in failing to bargain collectively when it refused to provide the Union with the financial data requested during the bargaining sessions. The NLRB’s General Counsel filed limited exceptions to the Law Judge’s conclusions urging the Board to conclude that Buick’s conduct in refusing to furnish the Union with financial information constituted an unfair labor practice. NLRB v. Truitt Mfg. Co., 351 U.S. 149, 76 S.Ct. 753, 100 L.Ed. 1027 (1956). On September 17, 1973, the Board, with one dissent, reversed the Administrative Law Judge’s conclusion and amended his order to require, inter alia, Buick to furnish the Union, “on request and within a reasonable time, that information sought by the Union relating to the respondent’s [Buick’s] claimed inability to pay the wage increases and other benefits requested by the Union.” (see footnote 3, supra).

Between the hearing conducted by the Administrative Law Judge on November 20, 1972 and the Board's order of September 17, 1973, negotiations between Buick and the Union had continued and on March 13, 1973 the parties entered into a new collective bargaining agreement. Buick thereupon petitioned the Board for reconsideration and for a stay of enforcement of the financial disclosure portion of the order, arguing that the signing of a new collective bargaining agreement mooted this issue. Buick’s petition was denied by the Board, with one dissent, on November 15, 1973. Thereupon, Buick sought this review of the Board’s order contending that so much of the order requiring disclosure of financial data should be set aside. Buick argues that the Board erred in finding Buick’s conduct to constitute an unfair labor practice, and that the disclosure issue is now moot in light of the existing collective bargaining agreement. The Board opposes such action and requests enforcement of its September 17, 1973 order.

II.

TRUITT VIOLATION

Buick argues, inter alia, that its refusal to supply the requested financial data was not a violation of the Act inasmuch as the Union was not bargaining in good faith and was the intransigent party. See, e. g., Boston Herald-Traveler Corp. v. NLRB, 223 F.2d 58, 63 (1st Cir. 1955). In support of this contention, Buick relies on the Administrative Law Judge’s finding that the Union, as the “intransigent” caused the breakdown in negotiations. Buick claims that the Board acted arbitrarily and in disregard of the Administrative Law Judge’s credibility determinations when it concluded that the breakdown in negotiations “was not so much due to intransigence on the part of the Union . . . as it was due to Respondent’s [Buick’s] adamancy in refusing to furnish the requested financial data.”

In reviewing Buick’s bargaining posture, the Board correctly recognized that Buick’s refusal to furnish the information requested of it must be examined in light of the Supreme Court’s decision in NLRB v. Truitt Mfg. Co., 351 U.S. 149, 76 S.Ct. 753, 100 L.Ed. 1027 (1956). In Truitt, the Union demanded a 10^ per hour wage increase. Truitt, the respondent, offered a 2^2 0 per hour increase, claiming that it could not afford to pay more and that any amount above 2V2 0 would “put it out of business.” The employer refused to permit an examination of its books when the Union asked for substantiation of its claimed inability to pay. The Supreme Court sustained the Board’s position that “an employer has not bargained in good faith where the employer claims it cannot afford to pay higher wages but refuses requests to produce information substantiating its claim.” 351 U.S. at 150, 76 S.Ct. at 754. In so holding, the Supreme Court stated:

“In their effort to reach an agreement here both the union and the company treated the company’s ability to pay increased wages as highly relevant. The ability of an employer to increase wages without injury to his business is a commonly considered factor in wage negotiations. Claims for increased wages have sometimes been abandoned because of an employer’s unsatisfactory business condition; employees have even voted to accept wage decreases because of such conditions.”
“Good-faith bargaining necessarily requires that claims made by either bargainer should be honest claims. This is true about an asserted inability to pay an increase in wages. If such an argument is important enough to present in the give and take of bargaining, it is important enough to require some sort of proof of its accuracy.”

351 U.S. at 152-153, 76 S.Ct. at 755. (footnote omitted).

This Court has held that it is a per se violation of the Act for an employer to refuse to furnish relevant requested information in the Truitt context. Curtiss-Wright Corp., Wright Aeronautical Division v. NLRB, 347 F.2d 61, 69 (3d Cir. 1965). Buick’s conduct and the record as developed therefore must be examined in light of these principles. The Board’s findings with respect to these facts bearing on its disclosure order will not be set aside if supported by “substantial evidence on the record considered as a whole.” 29 U.S.C. § 160(e). We adhere to this standard even in instances, where as here, the Administrative Law Judge and the Board may differ. International Union of Elec., Radio and Machine Workers, AFL-CIO v. NLRB, 273 F.2d 243, 247 (3d Cir. 1959). The record reveals that the Board’s eonclusion is in accord with law and rests upon findings which are supported by substantial evidence. Hence, on review, we will not disturb the Board’s conclusion that a Truitt violation occurred. NLRB v. Truitt Mfg. Co., supra; see Universal Camera Corp. v. NLRB, 340 U.S. 474, 496, 71 S.Ct. 456, 95 L.Ed. 456 (1951); International Union of Elec., Radio and Machine Workers, AFL-CIO v. NLRB, supra.

Buick, however, is not obliged to disclose to the Union its profit and loss data and its “books” merely because they might be helpful to the Union. See United Furniture v. NLRB, 388 F.2d 880 (4th Cir. 1967). It is only where an employer, in asserting its financial inability to meet the demands of the union refuses to disclose its. relevant financial data that the Truitt doctrine is applicable. Under such circumstances an employer must disclose, and a union must be permitted to know, the factual basis substantiating the employer’s assertion of economic inability. NLRB v. Truitt Mfg. Co., 351 U.S. at 152-153, 76 S.Ct. 753. If it were otherwise, the collective bargaining processes would be frustrated. Here, if the Union could not meaningfully evaluate Buick’s economic claims it could not determine whether the claims of financial inability were valid or spurious. Thus, absent Buick’s compliance with the Truitt mandate, the Board was justified in holding that Buick failed to bargain in good faith.

III.

ENFORCEMENT

Our task, however, has not been completed with our determination that Buick’s refusal to furnish financial information was properly held to constitute a violation of the Act. We must still resolve the question of whether we should presently enforce the Board’s disclosure order.

Our power to enforce Board orders is equitable in nature and is properly invoked only when the relief sought is consistent with principles of equity. NLRB v. Kingston Cake Co., 206 F.2d 604, 611 (3d Cir. 1953). Accordingly, where the power of this Court is to be exercised for the enforcement of a Board order requiring the disclosure of financial data, the order must be appropriate for present enforcement. NLRB v. Eanet, 85 U.S.App.D.C. 371, 179 F.2d 15, 17, 21 (1948), reh. denied, 179 F.2d 17 (1949). See also New Standard Publishing Co., Inc. v. Federal Trade Comm., 194 F.2d 181, 183 (4th Cir. 1952). When enforcing Board orders our function is not to put our stamp of authority automatically upon whatever request is made of us, NLRB v. Eanet, supra, nor should we enter an enforcement decree “ . . . in the absence of any showing whatever, based on reasonably recent inquiry, that a decree of court is appropriate or necessary.” NLRB v. Eanet, 179 F.2d at 22. An order of the Board when judicially confirmed must “ . . . like the injunction order of a court, state with reasonable specificity the acts which the respondent is to do or refrain from doing . . . .” NLRB v. Express Publishing Co., 312 U.S. 426, 433, 61 S.Ct. 693, 698, 85 L.Ed. 930 (1941).

With these teachings in mind, we direct our inquiry first to Buick’s contention of “mootness” and then to the controlling issue of relevance.

IV.

MOOTNESS

Buick asserts that even if it is held to have committed an unfair labor practice in refusing to furnish requested financial data to the Union (as we so hold), the Board’s order requiring disclosure should be denied enforcement. Buick argues that the three-year collective bargaining agreement executed after Buick failed to make disclosure of its books renders present disclosure moot. Buick claims that any information it could be obliged to furnish now has been made stale by the passage of time and can serve no useful purpose to the Union either in its role as a bargaining agent or in its role administering the new collective bargaining agreement.

On the other hand, the Board contends that the subsequent execution of the collective bargaining agreement does not “moot” its disclosure order. The Board argues that the forced production of Buick’s economic information would prevent Buick from profiting from its unfair labor practice. Such information, says the Board, could also be used by the Union in “(1) implementing, enforcing or modifying the current agreement; (2) proposing additional requests; (3) formulating future demands or requests; and/or (4) evaluating and assessing the credibility of Respondent’s assertions and claims or the viability of its bargaining position during future negotiations and meetings.”

We requested additional post argument briefing, concerning the effect of implementing the Board’s proposed order at this time, during the period of the existing agreement; and at its termination.

A Board order, lawful when made, does not become moot solely “because changing circumstances indicate that the need for it may be less than when made.” NLRB v. Pennsylvania Greyhound Lines, 303 U.S. 261, 271, 58 S.Ct. 571, 576, 82 L.Ed. 831 (1938); see also NLRB v. Raytheon Co., 398 U.S. 25, 90 S.Ct. 1547, 26 L.Ed.2d 21 (1970). Indeed, under the circumstances presented here, we reject Buick’s contention that the signing of a collective bargaining agreement subsequent to a Truitt violation by the employer automatically renders moot a Board order under review which pertains to the refusal to furnish relevant information. We regard Buick’s proscribed conduct as being capable of repetition in some relevant context with the Union. Cf. Allee v. Medrano, 416 U.S. 802, 94 S.Ct. 2191, 40 L.Ed.2d 566 (1974); Super Tire Engineering Co. v. McCorkle, 416 U.S. 115, 94 S.Ct. 1694, 40 L.Ed.2d 1 (1974). The significance of the contract execution on March 13, 1973 must therefore be measured by considerations of relevancy (see our discussion infra) rather than by considerations of mootness.

V.

RELEVANCE

An essential ingredient in establishing an unfair labor practice under the doctrine announced in Truitt is that the information withheld be relevant. Relevance, in this case, should be measured with respect to the Union’s statutory functions [the negotiation and administration of the collective bargaining agreement, NLRB v. Acme Indus. Co., 385 U.S. 432, 437, 87 S.Ct. 565, 17 L.Ed.2d 495 (1967); International Tel. & Tel. Corp. v. NLRB, 382 F.2d 366, 371-372 (3d Cir. 1967), cert. denied, 389 U.S. 1039 (1968)] and with respect to the ongoing relations of the parties.

A. Negotiation

Based on the record presented, there is no showing that the information requested during the period of contract negotiations in July and August 1972 is relevant or can be of use to the Union in carrying out its statutory responsibility as an exclusive bargaining agent. While the provision of the Board’s order here challenged does not delineate the period of time for which records must be produced, the Board has conceded in its supplemental brief that its order pertains only to those records of Buick which were in existence and available on or before July 19, 1972. There are no pending bargaining negotiations between Buick and the Union. On this record, we find it difficult to understand how the financial data requested by the Union on July 19, 1972 and on August 2, 1972 is now relevant to a present negotiating or bargaining issue, even though we hold that such relevance once existed. We have not been shown and we will not speculate that the disclosure of Buick’s 1971 or 1972 financial data at this time can serve any useful collective bargaining purpose. Cf. NLRB v. Eanet, supra. In so holding, we reject the Board’s contention that if Buick’s records indicated that Buick could have afforded higher labor costs, the Union could presently modify the existing agreement’s wage or benefit provisions by an action under § 301 of the Act. 29 U.S.C. § 185.

We have been shown no authority where during the term of a collective bargaining agreement, modifications of that agreement’s contractual provisions have been permitted as a result of a pre-contract Truitt violation. § 301 applies to actions for the violation of contracts. An unfair labor practice does not necessarily result in a contract violation which would invoke the jurisdiction of federal courts pursuant to § 301, cf. Adams v. Budd Co., 349 F.2d 368 (3d Cir. 1965); Proctor & Gamble Independent Union v. Proctor & Gamble Manufacturing Co., 312 F.2d 181 (2d Cir. 1962, cert. denied, 374 U.S. 830, 83 S.Ct. 1872, 10 L.Ed.2d 1053 (1963), especially where, as here, no necessary or sufficient connection is shown between the unfair labor practice and the contract. Moreover, nowhere has it been claimed that the Union has sought to modify the present contract, or wage or benefit provisions any time after the execution of the contract on March 13, 1973.

B. Union Administration

The record is also silent with respect to the Union’s needs for such financial information in order to “administer” the collective bargaining agreement. We realize that a union is entitled to information necessary to prosecute grievances, NLRB v. Acme Indus. Co., supra, but there is no showing that the information requested has any present or future relevance to such a situation. Indeed, we are not aware of any grievances past or present pending under the present contract provisions. There is no indication that the Union’s obligation to “administer” the collective bargaining agreement might be affected by the information sought. See International Tel. & Tel. Corp. v. NLRB, 382 F.2d at 371-372. The predictions of the Board as to how such information may be employed by the Union are mere speculation. As such, no demonstration of relevance has been shown. Absent such a showing, we cannot say that present enforcement of the Board’s financial disclosure order would achieve ends “fairly said to effectuate the policies of the Act.” See NLRB v. Kingston Cake Co., 206 F.2d 604, 611 (3d Cir. 1953).

C. During Term of Contract

Although the record discloses no pending grievances or issues, it is conceivable that under the existing agreement a problem may arise in a context where Buiek’s financial information may become relevant. We cannot know at this time: (a) whether Buick will plead economic inability; (b) whether if such plea is made, Buick will then refuse disclosure of its substantiating data; (c) whether under the circumstances then existing Buick’s conduct would constitute an unfair labor practice; (d) whether the records which are subject to the Board’s September 17, 1973 order (i. e., pre-July 1972 records) and the only records with which we are concerned here, would have any relevance whatsoever to the particular issue then disputed; and (e) whether the collective bargaining provisions of the existing contract would have any effect on the dispute. The mere cataloging of the myriad issues to be faced, as to which neither of the parties can have knowledge at this time, fortifies our view that the enforcement of the Board’s order would be inappropriate. We cannot anticipate from Buick’s past conduct that it will take unlawful action in the future, nor will we grant enforcement of an order to restrain the possible future commission of a new violation unrelated to that with which Buick was here charged. See NLRB v. Express Publishing Co., 312 U.S. 426, 435-437, 61 S.Ct. 693, 85 L.Ed. 930 (1941).

In light of this discussion, we refrain from comment on the potential application of the Truitt doctrine to any viable issue that might arise during the course of the present agreement. It is sufficient for our purposes here to recognize that the record is deficient, both with respect to the relevance of a Truitt violation during the term of the contract, and the relevancy of pre-July 1972 financial information to an issue which has not now and may never arise.

D. Termination of Contract

The collective bargaining agreement executed on March 13, 1973 does not expire by its terms until March 1976. We cannot know now whether Buick will claim inability to meet Union demands when and if a renewal of that contract is negotiated. We do not and cannot know from this record whether Buick if asked for financial data, will refuse to furnish such information. “Thus, while the board’s discretion in ordering affirmative action is wide and should not lightly be disturbed, it has its limits. Certainly, a court of appeals has some responsibility for the effects of its own decree . . . .” NLRB v. Kingston Cake Co., 206 F.2d at 611. We cannot, consistent with our equitable role, defer to the Board’s discretion in ordering affirmative action by Buick without knowing the context within which a subsequent violation might arise — or if indeed a subsequent violation will ever occur. (See our discussion under Part, V.C., supra). As a court of equity, we will not engage in such a vain endeavor.

VI.

We are fully cognizant of those cases in which orders have been enforced after a change in circumstances. See, e. g., NLRB v. Raytheon Co., 398 U.S. 25, 90 S.Ct. 1547, 26 L.Ed.2d 21 (1970); NLRB v. Electric Steam Radiator Corp., 321 F.2d 733 (6th Cir. 1963) (enforcement of order despite the employer having discontinued operations and having gone out of business). But an examination of those cases reveal that in each instance the Board’s order provided a “cease-and-desist” sanction which would subject the employer to contempt proceedings if the acts constituting the unfair labor practice were to be resumed. Here, there is no such proposed cease- and-desist sanction in the Board’s remedial order as its respects the production of financial information. As the Board recognizes in its supplemental brief, its order would not subject Buick to contempt proceedings with respect to future collective bargaining conduct. Thus, the Board recognizes, as do we, that under certain limited circumstances a violation of the Act may go unpunished. Our objective, however, is to effectuate the policies of the Act, and not necessarily to impose punitive sanctions where the “punishment” may not be relevant to correct the violation committed.

We emphasize again that our refusal to enforce the Board’s order is prompted by the dilution in relevancy occasioned by the passage of time and the execution of the present collective bargaining agreement. In respect to remedial orders for Truitt violations, it is our view that to effectuate the policies of the Act, the information to be furnished by the employer must have current relevancy both to the Union in the proper performance of its functions and to the issues involved. We consider the execution of the new agreement under the circumstances then existing, to be but one factor in establishing the relevance of the information to be supplied to the Union for carrying out its functions.

Accordingly, so much of the Board’s order as requires the disclosure of Buick’s financial data will be.set aside and enforcement as to that portion of the September 17, 1973 order will be denied. Enforcement will be ordered as to the remainder of the Board’s order. Each party shall bear its own costs.

      . 29 U.S.C. § 158(a)(5) and (1) provides:
      “(a) It shall be an unfair labor practice for an employer—
      (I) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title; . . .
      (5) to refuse to bargain collectively with the representative of his employees, subject to the provisions of section 159(a) of this title.”
      Section 8(d) of the Act, 29 U.S.C. § 158(d), provides:
      “For the purposes of this section, to bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees 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.”

      . The Union is the International Association of Machinists & Aerospace AVorkers, District Local 63, AFL-CIO.

      . The original order was issued by the Administrative Law Judge and in relevant part provided :
      Respondent C-B Buick, Inc., its officers, agents, successors and assigns shall:
      1. Cease and desist from :
      (a) Bypassing the Machinists and dealing directly with its employees concerning the Machinists’ demands for a new contract and threatening them that such demands or a strike to enforce them might cause it to go out of business; telling its employees that they could do better. dealing with it through a supervisor than through their exclusive bargaining agent.
      (b) In any like or related manner interfering with, restraining, or coercing its employees in the exercise of the rights guaranteed them by Section 7 of the Act.
      2. Take the following affirmative action necessary to effectuate the policies of the Act:
      (a) Upon request bargain collectively and exclusively with Machinists as the exclusive bargaining representatives of the unit found appropriate herein concerning rates of pay, wages, hours and terms and conditions of employment and, if agreement is reached, embody such understanding in a written agreement.
      On September 17, 1973, the Board amended the original order by adding paragraph 2(b), which requires Buick to :
      (b) Furnish the Union, on request and within a reasonable time, that information sought by the Union relating to the Respondent’s claimed inability to pay the wage. increases and other benefits requested by the Union.
      Buick does not challenge any provision of the Board’s final order other than paragraph 2(b). The Board seeks enforcement of the order as amended.

      . On this appeal, Buick does not challenge this finding.

      . The Union’s request for Buick’s financial data sought an examination of the profit and loss statement and “the books.” (Tr. 65-66). Though this request was somewhat vague, Buick’s duty to furnish information on the Union’s request is not defeated by the failure to ask for the precise kind of information which the employer has available, as long as the employer has data of a similar nature to that requested by the Union. See NLRB v. Western Wirebound Box Co., 356 F.2d 88 (9th Cir. 1966).

      . The new collective bargaining agreement is for a term of three years. It contains substantially the same provisions as were contained in the preceding one-year contract. The current collective bargaining agreement provides, however, for an increase in wages, holidays and fringe benefits.

      . We have jurisdiction to entertain this matter pursuant to 29 U.S.C. § 160(f).

      . Decision of Administrative Law Judge, JD-33-73, Case No. 6-CA-6244, at 10. (Issued January 30, 1973).

      . C-B Buick, Inc. and International Ass’n of Machinists & Aerospace Workers, District Lodge No. 63, AFL-CIO, 200 NLRB No. 10, 84 LRRM 1173, 1175 (1973).

      . We reject Buick’s contention that its oral statement to the Union of its preceding years “pre-tax profits” sufficed to substantiate its claim of economic inability and sufficed to bar a finding of an unfair labor practice premised upon a Truitt violation. A partial oral presentation of financial data, even if it is of an uncomplicated nature, cannot be held to have satisfied the employer’s duty to furnish information to the Union in a context such as this one. Cf. J. I. Case Co. v. NLRB, 253 F.2d 149 (7th Cir. 1958). Moreover, the information to be furnished must be from current data. See NLRB v. Rybold Heater Co., 408 F.2d 888 (6th Cir. 1969).

      . Counsel for General Counsel’s Opposition to Respondent’s Petition for Reconsideration, For Remand to Adduce Additional Evidence if Necessary and for a Stay of Enforcement, Case No. 6-CA-6244, dated October 29, 1973.

      . Article 3 of the existing collective bargaining agreement provides as follows :
      The Company agrees that it will negotiate with the Union during the term of this Agreement concerning any matter involving the wages, hours and working conditions of the employees which is not specifically provided for in this Agreement. Any disputes which are not settled by negotiations shall be subject to the Grievance and Arbitration Provisions, provided for in this Agreement.
      Article 20 establishes a four-step grievance procedure;
      Article 21 provides for arbitration.

      . We can consider the issue of mootness although it obviously was not raised before the Administrative Law Judge. When after the issuance of an NLRB order, circumstances arise which may affect the propriety of enforcing the order, this Court has discretion to decide the matter itself or to remand it to the Board for further consid-ration. NLRB v. Jones & Laughlin Steel Corp., 331 U.S. 416, 67 S.Ct. 1274, 91 L.Ed. 1575, reh. denied, 331 U.S. 868, 67 S.Ct. 1725, 91 L.Ed. 1872 (1947). We regard the issue before us as essentially one of law, and we do not find it necessary to remand this proceeding for further factual findings.

      . The initial demand for financial data was made in July 1972. The record is silent as to the manner and form of Buick’s record keeping and as to Buick’s fiscal year. Hence, we cannot tell if Buick’s books and records would have reflected monthly or year-end figures through June 1972, or calendar year figures through December 1971, or figures through any other intermediate date.

      . 29 U.S.C. § 185 in pertinent part provides :
      (a) Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

      . In this regard, we note that suits for the breach of a bargaining representative’s duty of fair representation may be brought under section 301(a) only if a sufficient connection is shown between the contract and the breach. See Leskiw v. Local 1470, IBEW, 464 F.2d 721 (3d Cir.), cert. denied, 409 U.S. 1041, 93 S.Ct. 526, 34 L.Ed.2d 490 (1972); International Longshoremen’s & Warehousemen’s Union v. Kuntz, 334 F.2d 165 (9th Cir. 1964).
      The cases to which the Board refers us do not support the Board’s contention that the Union may seek modification of the existing contract. An analysis of Mearns v. Lewis, 168 F.Supp. 134 (N.D.W.Va.1958), aff’d 268 F.2d 427 (4th Cir. 1959) and Local Union No. 600, United Auto Aircraft & Agricultural Implement Workers of America, UAW-CIO v. Ford Motor Co., 113 F.Supp. 834 (E.D. Mich.1953) reveals that both cases involved attempts to rescind collective bargaining agreements on the basis that fraudulent representations were used to induce one of the parties to execute the particular agreement. Absent affirmative showings that the challenged contracts were the result of fraudulent representations, the courts in each case rejected the party’s contentions and upheld the contractual provisions although implicitly recognizing the viability of such a doctrine. Here, there is no claim, nor would the record support such a claim of fraudulent inducement. We do not equate the Truitt conduct of Buick (after which the agreement was executed) with fraudulent activities designed to induce a party to enter into a contract.

      . But cf. General Elec. Co. v. NLRB, 466 F.2d 1177, 1184 (6th Cir. 1972).

      . AVe recognize that the Board is not precluded by tlie grievance and arbitration provisions of the existing collective bargaining agreement from finding that Buick violated its statutory duty to bargain in good faith under section 8(a) (5) and (1) by refusing to furnish the Union with relevant financial data. See NLRB v. Acme Indus. Co., 385 U.S. 432, 437-438, 87 S.Ct. 565, 17 L.Ed.2d 495 (1967). The Board is not required to await an arbitrator’s determination of tlie relevancy of information requested by tlie Union before seeking to enforce the statutory duty to bargain in good faith. Acme, supra. Nor do we hold that a directive to Buick to furnish relevant financial information must necessarily arise through the grievance and arbitration procedures. See Curtiss-Wright, 347 F.2d at 71; cf. NLRB v. Strong, 393 U.S. 357, 360-361, 89 S.Ct. 541, 21 L.Ed.2d 546 (1969); NLRB v. C & C Plywood Corp., 385 U.S. 421, 428-429, 87 S.Ct. 559, 17 L.Ed.2d 486 (1967).

      . In this connection we are mindful of the caution expressed by the Supreme Court:
      “We do not hold, however, that in every case in which economic inability is raised as an argument against increased wages it automatically follows that the employees are entitled to substantiating evidence. Each case must turn upon its particular facts. The inquiry must always be whether or not under the circumstances of the particular case the statutory obligation to bargain in good faith has been met.”
      NLRB v. Truitt Mfg. Co., 351 U.S. at 153-154, 76 S.Ct. at 756 (footnotes omitted).
      Counsel were asked to prepare and submit in their supplemental briefs the form of an order which if enforced would accomplish this quoted principle. No such submission was received. It may be that the Board attempted to resolve the issue of present and future application of its order by limiting the scope of records to be furnished. See p. 1093 Part, V. A., supra.

      . As we analyze the Board’s disclosure order and the affirmative action which it would impose upon Buick, we fail to discern how enforcement of that order at this time can effectuate any policy of the Act. See Virginia Electric Co. v. NLRB, 319 U.S. 533, 539-540, 63 S.Ct. 1214, 87 L.Ed. 1568 (1943).

      . We do not imply here that by entering into a collective bargaining agreement subsequent to the Truitt violation, the Union waived its right to receive the information requested. Such waiver cannot be lightly inferred, but must be clearly and unmistakably established before it can be relied upon as a bar to recovery. Radio Television Tech. School, Inc. v. NLRB, 488 F.2d 457, 461 (3d Cir. 1973); Timken Roller Bearing Co. v. NLRB, 325 F.2d 746 (6th Cir. 1963), cert. denied, 376 U.S. 971, 84 S.Ct. 1135, 12 L.Ed.2d 85 (1964).


author: FEINBERG, Circuit Judge: OAKES, Circuit Judge

text:
    Bernard TOBIN, as father and next friend of Donna Ellen Tobin, a minor, Plaintiff-Appellee, v. Ben J. and Julius SLUTSKY, a partnership doing business as Nevele Country Club, Defendants-Appellants.
    No. 31, Docket 74-1179.
    United States Court of Appeals, Second Circuit.
    Argued Sept. 23, 1974.
    Decided Nov. 7, 1974.

      William F. McNulty, New York City (Anthony J. McNulty, New York City, Leo E. Berson, New York City, on the brief), for defendants-appellants.
    Paul Martin Wolff, Washington, D. C. (Williams, Connolly & Califano, Washington, D. C., Layton & Sherman, Stuart Jay Beck, New York City, on the brief), for plaintiff-appellee.
    Before LUMBARD, FEINBERG and OAKES, Circuit Judges.
   FEINBERG, Circuit Judge:

Once again, at a time when the federal courts of appeals have the highest case load in their history, we must, because of diversity jurisdiction, devote considerable time to deciding whether a federal district judge correctly determined a difficult question of state law. The anomaly is underscored here by an apparent conflict on the precise issue between an opinion of this court and a later, highly-informed commentary by a distinguished group of state judges, discussed below. In the absence of recent definitive state judicial rulings, we feel constrained by our prior decision and uneasily adhere to it. There are two bases for our misgivings: On the issue before us, the state courts should — and will — eventually have the last word, which may well be different from ours. Second, no matter what the state courts may later decide, for the litigants before us our decision, correct or not, will likely be final. Aware that such oddities accompany diversity jurisdiction, we turn to the case before us.

Defendants Ben J. and Julius Slutsky, a partnership doing business as Nevele Country Club, appeal from a $30,000 judgment in favor of plaintiff Bernard Tobin, as father and next friend of Donna Ellen Tobin, a minor. The case was tried before Judge Richard H. Levet in the United States District Court for the Southern District of New York. Judge Levet directed a verdict for plaintiff on the issue of liability but allowed the jury to determine damages. Defendants appeal, arguing principally that the directed verdict for plaintiff on the question of liability was improper. For reasons given below, we hold that defendants’ liability was a question for the jury, and we reverse and remand for a new trial.

I

This lawsuit grows out of an unfortunate incident at the hotel operated by defendants in Ellenville, New York. Mr. and Mrs. Tobin and their 15-year old daughter, Donna, were guests in July 1970. Mr. Tobin paid approximately $500 for a week at what was advertised as “a family resort” with supervised activities for children and teenagers. Despite such claims, four days after the Tobins arrived Donna was assaulted by an employee of the Hotel.

Donna had returned from horseback riding at about 3:00 R.M. and was waiting for an elevator to go to her family’s room. Robert Stevens, an employee of the Hotel who had been sitting in the lobby, came over and stood beside her. When Donna entered the elevator, he followed. Stevens then directed the elevator to the top floor, pulled out a knife 7 to 8 inches long and told Donna that if she said anything he would “slash” her throat. With his knife at her back, Stevens forced Donna down a hallway and toward a door to the roof, which he opened with a key. Once on the roof, Stevens molested Donna, unbuttoning her shirt and unzipping her pants, placing his hands inside her shirt and down into her underwear, and exposed himself. Donna attempted to get away, but Stevens held the knife at her throat and threatened to kill her if she tried to escape. Only after she promised Stevens not to tell anyone about the occurrence did he allow Donna to leave.

Donna testified about the incident, recalling that she cried and shook as it occurred, and was so scared that she could not stop even when Stevens told her he would not let her go until she stopped shaking. Testimony had to be halted as Donna began to cry at the trial while she told of the attack. Mr. and Mrs. To-bin were also trial witnesses, but the judge effectively precluded them from giving much evidence as to the effect of the incident on Donna. There was no medical testimony. Various answers to interrogatories established that Stevens was a service employee at the Hotel, who had been hired three days before the incident through the Louis Employment Agency and after a brief interview by the Hotel’s housekeeper.

At the close of plaintiff’s case, defendants moved to dismiss the complaint. The judge reserved decision on the motion, and defendants put in no evidence. Both sides then moved for a directed verdict on the issue of liability. The judge granted plaintiff’s motion and submitted the issue of damages to the jury, specifically excluding plaintiff’s claim of punitive damages. The jury returned a verdict of $30,000 for plaintiff.

II

Defendants’ principal claim on appeal is that the district judge erred in taking the issue of liability away from the jury and directing a judgment for plaintiff on that question. Defendants also argue that the judge should have directed a verdict for them because there was no showing that the acts of Stevens were within the scope of his employment or that the Hotel was negligent in any way. Finally, defendants claim that the damage award was excessive.

In assessing the standard of care defendants owed plaintiff, the applicable law is that of New York, as both parties concede. Determining the content of that law, however, is no easy matter. The three leading cases in the New York Court of Appeals bearing on the standard of care due a guest from an innkeeper were written over a half-century ago and their import is far from, clear. In DeWolf v. Ford, 193 N.Y. 397, 86 N. E. 527 (1908), a hotel detective entered the plaintiff’s room without her consent and inaccurately accused her of immorality. In reversing a dismissal of the complaint, the Court of Appeals said:

One of the things which a guest for hire at a public inn has the right to insist upon is respectful and decent treatment at the hands of the innkeeper and his servants. That is an essential part of the contract, whether it is express or implied. This right of the guest necessarily implies an obligation on the part of the innkeeper that neither he nor his servants will abuse or insult the guest, or indulge in any conduct or speech that may unnecessarily bring upon him physical discomfort or distress of mind. The innkeeper, it is true, is not an insurer of the safety, convenience, or comfort of the guest. But the former is bound to exercise reasonable care that neither he nor his servants shall, by uncivil, harsh, or cruel treatment, destroy or minimize the comfort, convenience and peace which the latter would ordinarily enjoy if the inn were properly conducted, due allowance being always made for the grade of the inn and the character of the accommodation which it is designed to afford. [Emphasis added.] 193 N.Y. at 404, 86 N.E. at 530.

In Stone v. William M. Eisen Co., 219 N.Y. 205, 114 N.E. 44 (1916), plaintiff alleged that when she went to defendant to have braces fitted to her feet, one of defendant’s employees attempted to have sexual intercourse with her. In affirming an order that denied defendant’s motion for judgment on the pleadings, the Court of Appeals relied upon a seemingly absolute requirement of decent and respectful treatment implied from the confidential relationship, and stated:

The implication arises whenever one person is placed in the control or protection of another. It grows out of peculiar and special relationships. It has been applied between carrier and passenger * * * It has also been applied between innkeeper and guest. DeWolf v. Ford, 193 N.Y. 397 [86 N. E. 527] .... [Emphasis added.] 219 N.Y. at 208-209, 114 N.E. at 45.

A few years later, in Boyce v. Greeley Square Hotel Co., 228 N.Y. 106, 126 N. E. 647 (1920), the Court of Appeals had another case of a house detective breaking into the room of a female guest and verbally abusing her. Although the issue there was primarily the extent of damages which plaintiff could recover, in affirming a jury verdict for plaintiff the court returned to the reasonable care language of DeWolf and stated:

The defendant does not question, under the facts of this case, the conclusions : The acts of the servant were violative of its obligation to refrain and to use reasonable care that its servant refrained from unreasonsonably interfering with the privacy of the plaintiff in the room assigned to her and from abusing or insulting her or indulging in any conduct or speech that might necessarily bring upon her physical discomfort or distress of mind. [Emphasis added.]

228 N.Y. at 109, 126 N.E. at 649. However, later in the opinion, the court compared carriers and innkeepers in a manner reminiscent of the language from Stone, quoted above:

In the instant case the plaintiff asserted the injury of bodily pain. It is not necessary to determine with exact discrimination and accuracy whether the right of action in the case at bar is based upon a violation of a contract between the parties created through implication of the law or upon the infraction of an obligation or duty imposed by the law upon the defendant. The plaintiff was entitled to recover, upon the evidence in her behalf, upon the theory of a tort or a breach of contract by the defendant. Frequently a given state of facts will sustain either theory. . . . As a general rule, mental suffering resulting from a breach of contract is not a subject of compensation. The rule does not obtain, however, as between a common carrier or an innkeeper and an insulted and abused passenger or guest, or the proprietor of a public resort and a patron publicly ejected. [Emphasis added.] Id. at 110-111, 126 N.E. at 649.

These three decisions and others in the lower courts of New York were the subject of careful analysis by this court in McKee v. Sheraton-Russell, Inc., 268 F.2d 669 (2d Cir. 1959), a diversity case similar to this one. In McKee, plaintiff alleged that a hotel bellboy invaded her room while she was undressed, made suggestive remarks, “advanced upon her with hands outstretched” and remained for some 12 to 20 minutes until plaintiff persuaded him to leave. The trial judge had charged the jury (which thereafter returned a verdict of $5,000 compensatory and $5,000 punitive damages) that:

If you find that the employee of the defendant did in fact enter the plaintiff’s room without her permission nor for any justifiable reason, such entry of the room is sufficient to make the defendant liable.

268 F.2d at 671. A panel of this court reversed. Judge Waterman, writing for himself and District Judge Byers, held that under DeWolf v. Ford, supra, this charge was incorrect because it

did not impose the duty of “reasonable care” spelled out in DeWolf, but, instead, imposed a more rigorous one— that of an absolute duty upon the hotel to protect the guest from any improper disturbance.

Id. Accordingly, the case was remanded with the following instructions:

On the new trial the district court should make clear to the jury that the reasonable care which an innkeeper must exercise for the safety, convenience or comfort of its guest will vary with the grade and quality of the accommodations that the innkeeper offers. It would appear there is agreement that the defendant-hotel holds itself out to be a first-class residential hotel. That circumstance should properly be considered by the jury in determining whether defendant took the precautions that the operation of a first-class residential hotel requires. Thus, for instance, the jury may determine, upon adequate instruction, whether defendant, consistent with the standards of care demanded of such operation, took the proper precautions to safeguard its room keys, and if the jury should believe the defendant did not measure up to those standards it would impose liability upon it under the rule of DeWolf v. Ford.

Id. Relying principally on Stone v. William M. Eisen Co., supra, the majority in McKee also held that under New York law the defendant hotel could be held liable even if the bellboy’s actions

were not within the scope of his employment, and there is no showing that defendant ratified them, or no showing that the defendant was negligent in hiring or retaining him.

Id. 268 F.2d at 672. Judge Learned Hand sharply dissented on these propositions, citing many of the same cases relied on by the majority. Since “the bellboy’s conduct was plainly beyond the scope of his authority,” Judge Hand would have limited the issues on retrial to whether the hotel had used due diligence in hiring or supervising its employee. Id. 268 F.2d at 674. Finally, all three members of the panel agreed that in cases of this sort New York law did not allow punitive damages.

Thus, in McKee this court construed the law of New York — at least in 1959 —to demand of the innkeeper a duty to exercise “reasonable care” “for the safety, convenience or comfort” of his guests, commensurate with “the grade and quality of the accommodations” offered. Id., 268 F.2d at 671. We rejected the idea that New York imposed “an absolute duty ... to protect the guest from any improper disturbance,” but said that a guest might recover for an assault by a hotel employee even without proving that the employee was acting within the scope of his employment or that the hotel was negligent “in hiring or retaining him.” Id., 268 F.2d at 672.

Since the McKee decision, there have been no pronouncements on the issue from the New York Court of Appeals, but there has been significant commentary from a committee of state trial judges in a book of Pattern Jury Instructions containing extensive discussion of New York law. Volume 1, first published in 1965, with a second edition in 1974, discusses the liability of an innkeper to his guest and analogizes it to that of a common carrier to its passengers for “breach of an implied condition of the contract establishing the relationship between the employer and plaintiff.” That conclusion, according to the commentary, rests upon the language in Stone v. William M. Eisen Co., quoted at p. 1100 supra, which explicitly compares the carrier-passenger relationship to that of innkeeper-guest. Such a duty is a strict one, under which the innkeeper is absolutely liable for assaults or insults by its employees, unless caused by the guest’s own improper act. The commentary recognizes that “reasonable care” language was used in DeWolf v. Ford, supra, which preceded Stone, and in Boyce v. Greeley Square Hotel Co., supra, which followed it, as well as in McKee, but nonetheless flatly states, “the Stone case appears to be in accord with the weight of authority.”

Thus, we are most uncertain of what the law of New York is — more so than usual in making such an inquiry. Yet, as we have already noted, we must declare it for these parties even though we cannot resolve the issue definitively. Absent a clear trend in subsequent New York state decisions following the Pattern Jury Instructions’ characterization of an innkeeper’s liability, we must follow our own appraisal in McKee. We construe the law of New York to oblige an innkeeper to Use reasonable care, commensurate with the quality of the accommodations offered, to see that his guest is not abused, injured or insulted by his employees. In the case of a first-class family resort, reasonable care would mean a high degree of care. Indeed, examination of the New York cases leads us to believe that this duty of reasonable care has generally been interpreted to be a severe one. We have been able to find only one case where a patron injured by an employee was denied recovery from the establishment. Martinez v. Zoga Rest, Inc., 144 N.Y.S.2d 540 (Sup.Ct. Bronx Co. 1955). And in that case it appears that the plaintiff may have brought the injury upon herself.

No matter how strict the standard, however, the hotel is not an insurer and proof of injury to a guest caused by a hotel employee should not entitle a plaintiff to a directed verdict. In that respect, we believe that the district judge erred here in taking the issue from the jury. Indeed, we have lingered over defendants’ second contention that the verdict should have been directed against, rather than for, plaintiff because there was insufficient proof of lack of reasonable care. But there too we conclude that under New York law a jury issue was created in the circumstances of this case; e. g., was it reasonable to have no policing of the lobby or of the elevators to prevent incidents such as this ?

Accordingly, we remand for a new trial. For the guidance of the district court and the parties, we note that we agree with the judge’s rulings on the record before him that punitive damages could not be recovered and that the compensatory damages awarded by the jury were not excessive.

Judgment reversed and case remanded for further proceedings consistent with this opinion.

OAKES, Circuit Judge

(concurring):

I concur in so much of Judge Feinberg’s opinion as deals with the merits of the case, but, for reasons that need not be detailed here, I do not concur in the implication of the first sentence, if not the first paragraph of the opinion, that diversity jurisdiction should be abandoned. I would hope that the additional light shed on New York hotel owners’ liability by Judge Feinberg’s opinion would be helpful in the future to the New York state courts themselves or perhaps to the New York legislature, since the opinion so sharply points out the difficulty in reconciling the New York cases.

      . Administrative Office of the United States Courts, Preliminary Annual Report of the Director I-1 (1974).

      . For other recent diversity cases where we . have had to decide close issues of New York law, see, e. g., Modave v. Long Island Jewish Medical Center, 501 F.2d 1065 (2d Cir. 1974); East Hampton Dewitt Corp. v. State Farm Mutual Automobile Ins. Co., 490 F.2d 1234 (2d Cir. 1973).

      . See the concurring opinion in United Services Life Ins. Co. v. Delaney, 328 F.2d 483, 485 (5th Cir.), cert. denied, 377 U.S. 935, 84 S.Ct. 1335, 12 L.Ed.2d 298 (1964), where Judge Brown relates the many occasions where various state supreme courts have “reversed” the Fifth Circuit on questions of state law.

      . Mr. Tobin originally sued both individually and as father and next friend of his daughter. 1-Iis individual claim was dropped at the beginning of the trial.

      . Mr. Tobin testified about the Hotel’s advertisement, which he read and relied upon. Such information is admissible as to representations of quality and care made by the Hotel.

      . The judge refused to allow the Tobins to describe examples of how their daughter’s behavior had changed after the assault. These rulings were unduly restrictive.

      . Plaintiff’s action was initially brought against both the Louis Employment Agency and the Slutsky partnership. Prior to trial, the claim against the Agency was dismissed.

      . Plaintiff’s cross appeal, alleging that the ruling on punitive damages was in error, has been withdrawn.

      . Judge Waterman also cited a number of other cases in the lower. New York courts, e. g., Trebitsch v. Goelet Leasing Co., 226 A.D. 567, 235 N.Y.S. 426 (1st Dep’t), aff’d, 252 N.Y. 554, 170 N.E. 140 (1929); McKeon v. Manze, 157 N.Y.S. 623 (Sup.Ct.Erie Co. 1916); and Schell v. Vergo, 166 Misc. 839, 4 N.Y.S.2d 644 (City Ct. of Rochester 1938).

      . Preparation for this book began in 1962 at the suggestion of former New York Court of Appeals Chief Judge Desmond. Then Justice Bernard Meyer was Chairman of the Committee on Pattern Jury Instructions of the Association of Supreme Court Justices which operated under the auspices of the Judicial Conference of the State of New York. The 1974 edition is published through the Office of Court Administration.

      . Pattern Jury Instructions, supra, at 562.

      . Id. at 561-563.

      . Id. at 563.

      . Nor can we say that there is an absolutely clear nationwide trend. Various jurisdictions differ over whether a hotel is (1) only responsible up to a duty of reasonable care, (2) an insurer of a guest’s safety from assaults by hotel employees, or (3) not responsible at all unless the employee is acting within the scope of his employment. E. g., in Danile v. Oak Park Arms Hotel, Inc., 55 Ill.App.2d 2, 203 N.E.2d 706 (1965), a guest was raped by a drunken hotel bellboy. In affirming the jury verdict for plaintiff the court aj)proved an instruction charging the hotel with “a high degree of care,” 203 N.E.2d at 709, and said that evidence regarding protection of the passkey and supervision of the bellboy was sufficient to create a jury question on the issue. A different approach was taken in Crawford v. Hotel Essex Boston Corp., 143 F.Supp. 172 (D. Mass.1956) (Aldrich, T). J.), in which plaintiff recovered from a hotel for an attack by the house detective. The trial judge found that Massachusetts law created a contract right to be free from attacks by hotel employees, in effect making the hotel an insurer against such assaults. Finally, in Cary v. Hotel Rueger, Inc., 195 Va. 980, 81 S.E.2d 421 (1954), a hotel was held not liable in damages when a bellboy shot and killed a guest during an argument about money owed the guest. The act was found not within the scope of the bellboy’s, employment. See also, Dantos v. Community Theaters Co., 90 Ga.App. 195, 82 S.E.2d 260 (1954), where the theater owner was held not responsible for the manager’s act of sodomy upon a 7-year old child since the act was not within the scope of the manager’s duty and allegations of defendant’s knowledge of the manager’s deviant character were insufficient. While these cases indicate how much variation exists, the prevailing view seems in accord with the duty of reasonable care position we have taken here. 28 Ford.L.Rev. 559, 562 (1959) (discussing McKee v. Sheraton-Russell, Inc., supra). See also Annot., 34 A.L.R.2d 372 (1954).

      . We have no such hesitation in rejecting the argument that defendants are not liable because Stevens was not acting within the scope of his employment. MoKes flatly holds the contrary.

      . The standard to be applied here in directing a verdict presents no problem since the New York rule accords with the general formulation. Noonan v. Midland Capital Corp., 453 F.2d 459, 461 (2d Cir.), cert. denied, 406 U.S. 945, 92 S.Ct. 2044, 32 L.Ed.2d 333 (1972).