National Labor Relations Board v. Killoren

• Decision Date: 11 October 1941
• Docket Number: No. 11839,11875.,11839
• Parties: NATIONAL LABOR RELATIONS BOARD v. KILLOREN.
• Court: U.S. Court of Appeals — Eighth Circuit

122 F.2d 609 (1941)

NATIONAL LABOR RELATIONS BOARD v. KILLOREN.

Nos. 11839, 11875.

Circuit Court of Appeals, Eighth Circuit.

September 3, 1941.

Rehearing Denied October 11, 1941.

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A. Norman Somers, of Washington, D. C. (Robert B. Watts, Gen. Counsel, and Malcolm F. Halliday, Asst. Gen. Counsel, both of Washington, D. C., on the brief), for appellant.

Harry S. Gleick, of St. Louis, Mo. (Jones, Hocker, Gladney & Grand, and Gleick & Strauss, all of St. Louis, Mo., on the brief), for appellee.

Before WOODROUGH, JOHNSEN, and VAN VALKENBURGH, Circuit Judges.

JOHNSEN, Circuit Judge.

The controlling questions are (1) whether a back pay allowance in an order of the National Labor Relations Board, whose enforcement has been directed by the Circuit Court of Appeals, is a provable debt in a subsequent bankruptcy proceeding; (2) if so, whether it is a debt owing to the Board in the sense that the Board is entitled to file and assert a proof of claim therefor; and (3), if it is such a provable debt, owing to the Board, whether it is entitled to a priority under section 64 of the Bankruptcy Act, 52 Stat. 874, 11 U.S.C.A. § 104.

The Hamilton-Brown Shoe Company, on complaint and hearing, was found to have engaged in unfair labor practices under the National Labor Relations Act, 29 U.S. C.A. § 151 et seq., and was ordered by the National Labor Relations Board, among other things, to make whole the employees who had been discriminated against, "by payment to each of them, respectively, of a sum equal to that which each would normally have earned as wages during the period from the date of the discrimination against him to the date of the offer of reinstatement or placement upon the preferential (rehiring) list * * *, less his net earnings during said period." On a petition for review, we affirmed this portion of the Board's order and directed its enforcement. See Hamilton-Brown Shoe Co. v. National Labor Relations Board, 8 Cir., 104 F.2d 49.

After entry of the Board's order, and while the petition for review was pending before this Court, the Company instituted a proceeding for corporate reorganization under Chapter X of the Chandler Act, 11 U.S.C.A. § 501 et seq. Following our affirmance of the Board's order as to reinstatement of employees and back pay allowances, the Company was adjudicated a bankrupt. The Board then filed a proof of claim with the Referee, in the name of the Board, for the back pay allowances, totalling $161,160.17, due 168 employees discriminated against under its order, setting out the name of each and the amount which he was entitled to receive.

On motion of the trustee, the Referee expunged the proof of claim from the record, upon the ground that a back pay allowance under the National Labor Relations Act did not constitute a provable debt or claim in bankruptcy, capable of being asserted by the Board or any one else. His memorandum opinion indicates that he conceived that the sole purpose of the Board's order and its only power under the Act were to prevent the Company "as a going concern from obstructing or again obstructing the flow of interstate commerce", and that, since the Company had gone into bankruptcy, "there is no reason for affirmative remedial action to carry out the purposes of the Act", and "the payment of so-called back pay * * * is not now required by the Act".

On the Board's petition for review, the District Court approved and confirmed the Referee's order, and the Board has appealed.

We think the Referee and the District Court erred.

The validity of the Board's allowance of back pay and the enforcibility thereof were conclusively settled by our order affirming it and directing its enforcement. Such a valid allowance was, under the provisions of the Act, not a punitive but a remedial action. Its purpose was, not by way of penalty against the particular employer, but in furtherance of the policies of the Act, to restore as nearly as possible the status quo which would have existed, if the discriminating wrong had not been committed. National Labor Relations Board v. Remington Rand Co., 2 Cir., 94 F.2d 862, 872. "Making the workers whole for losses suffered on account of an unfair labor practice is part of the vindication of the public policy which the Board enforces." Phelps Dodge Corporation v. National Labor Relations Board, 313 U.S. 177, 197, 61 S.Ct. 845, 854, 85 L.Ed. 1271, 133 A.L.R. 1217. It is self-evident, we think, that it would materially aid in effectuating the policies of the Act, for the workmen in industry generally to feel assured that they would be protected, as fully as soundly possible, not merely in the exercise of their right of self-organization and designation of representatives of their own choosing, but against the economic consequences of a legitimate assertion of those rights. The experience of the Board, as reflected in its decisions, demonstrates the need for this assurance.

There could be no real force in such an assurance, however, if the Board's order awarding back pay in a particular case would not actually be made effectual. An unvindicated or paper decree would hardly tend to encourage self-organization efforts and peaceful industrial relations. And so, public policy cannot permit such a valid order of the Board to be thwarted or escaped, if there is any sound way to prevent it. The mere fact that an employer may cease to do business certainly does not end the public interest involved in seeing that a back pay award under the Act is satisfied.¹ The public wrong that has been done cannot be regarded as being righted by the simple expedient of the employer's resort to bankruptcy, so that it can be judicially declared that payment of the back pay award will no longer serve any useful purpose in effectuating the policies of the Act, as was assumed by the Referee and the District Court.

The order of this Court, affirming and directing payment of the back pay award, stamped it with finality as a definite and enforcible obligation against the employer. 29 U.S.C.A. § 160(e); Myers v. Bethlehem Shipbuilding Corporation, 303 U.S. 41, 48, 49, 58 S.Ct. 459, 82 L.Ed. 638; In re National Labor Relations Board, 304 U.S. 486, 495, 58 S.Ct. 1001, 82 L.Ed. 1482. From that time on at least, it became for all applicable legal purposes, a retroactive and accumulating "indebtedness due to the Board for and on behalf of the * * * employees." National Labor Relations Board v. Carlisle Lumber Co., 9 Cir., 108 F.2d 188, 189.

It was an indebtedness arising out of an obligation imposed by statute; hence was quasi contractual in nature; constituted therefore a claim on an implied contract under section 63, sub. a(4) of the Bankruptcy Act, 11 U.S.C.A. 103, sub. a (4); and so was a provable debt in bankruptcy. United States v. Bernstein, 8 Cir., 16 F.2d 233, 235; Brown v. O'Keefe, 300 U.S. 598, 606, 57 S.Ct. 543, 81 L.Ed. 827; National Labor Relations Board v. Piqua Munising Wood Products Co., 6 Cir., 109 F.2d 552, 556.

It was an obligation or indebtedness of a public character, which the Board alone was authorized to enforce.² Amalgamated Utility Workers v. Consolidated Edison Co., 309 U.S. 261, 265, 266, 60 S.Ct. 561, 84 L.Ed. 738; National Labor Relations Board v. Hearst, 9 Cir., 102 F.2d 658, 664; Agwilines, Inc., v. National Labor Relations Board, 5 Cir., 87 F.2d 146, 150. "The Board acts in a public capacity to give effect to the declared public policy of the Act * * *." National Licorice Co. v. National Labor Relations Board, 309 U.S. 350, 362, 60 S.Ct. 569, 576, 84 L.Ed. 799. The Board's status with respect to the back pay allowances was, as to the employees entitled to the benefits of the order, in the nature of a plenary trusteeship.³ Since the Act constituted it the only party entitled to seek enforcement, it could properly be said to hold the full legal title to the obligations which the order created, within any technical concept that might be necessary in the situation. The Board was therefore a creditor under the Bankruptcy Act, within the definition of § 1(11), 11 U.S.C.A. § 1(11), providing that "`Creditor' shall include anyone who owns a debt, demand, or claim provable in bankruptcy, and may include his duly authorized agent, attorney, or proxy". Such a recognition is not in conflict, but in harmony, with the provisions of the National Labor Relations Act and its public purposes. The fact that under the terms of the Board's order, the employer might have discharged his legal obligation, by making payment to the employees direct, does not, as the trustee in bankruptcy attempts to argue, affect the Board's right to seek enforcement in its own name, where no such satisfaction has in fact occurred.

Nor is there any merit in the trustee's contention that the amount of the claim was undeterminable, for provable purposes in bankruptcy, because no offer of reinstatement ever had been or could now be made to the employees. The claim was a cumulating one, up to the time of bankruptcy at least, and, if the effect of that proceeding was to nullify, or render incapable of enforcement, the reinstatement obligation, it certainly did not wipe out or make undeterminable the amount of back pay, payable to that date. The right to back pay, under a valid order of the Board, obviously does not depend upon whether the reinstatement obligation is satisfied. If reinstatement becomes impossible, the back pay obligation is nevertheless enforcible for the period, during which the right to reinstatement existed.⁴ Under 11 U.S.C.A. § 638, the adjudication in bankruptcy in this case was effective from the date the reorganization proceedings had been instituted, and the Board clearly had the right to compute and file a claim, as it did, for the back pay that had accumulated to that date.

The Board urges that its claim should be given priority under § 64, sub. a(5) of the Bankruptcy Act,⁵ 11 U.S.C.A. § 104, sub. a(5), as a debt owing to the...