M & S Bldg. Supplies, Inc. v. Keiler

• Decision Date: 14 June 1983
• Docket Number: Civ. A. No. 81-0357.
• Court: U.S. District Court — District of Columbia
• Parties: M & S BUILDING SUPPLIES, INC., et al., Plaintiffs, v. Joel I. KEILER, Esquire, Defendant.

564 F. Supp. 1566

M & S BUILDING SUPPLIES, INC., et al., Plaintiffs, v. Joel I. KEILER, Esquire, Defendant.

Civ. A. No. 81-0357.

United States District Court, District of Columbia.

June 14, 1983.

Geoffrey P. Gitner, Washington, D.C., for plaintiffs.

Joseph F. Cunningham, Washington, D.C., for defendants.

DECISION AND ORDER

JACKSON, District Judge.

Plaintiff Blake Construction Company ("Blake") is a District of Columbia close corporation engaged in the heavy construction industry, primarily in the Washington, D.C., metropolitan area. Plaintiff M & S Building Supplies, Inc., ("M & S") is also a District of Columbia corporation, formed by Blake principals in 1974 to make wholesale purchases of equipment and supplies for Blake, and is owned and managed in major part by the owners and managers of Blake.¹ Defendant Joel I. Keiler is a lawyer who lives in Virginia but practices in Washington, D.C., specializing in labor law. Plaintiffs have brought this diversity action against Keiler for damages allegedly sustained as a consequence of his legal malpractice in representing them in a labor dispute before the NLRB. Upon the facts found as hereinafter set forth in accordance with Fed.R.Civ.P. 52(a), following trial without a jury, and the conclusions of law drawn therefrom, for the reasons stated the Court will enter judgment for the plaintiff Blake.

I.

In February, 1978, Blake was operating in the third year of a three-year multi-employer collective bargaining agreement ("Agreement") with Local 639 of the Teamsters' Union ("Union") which was due to expire in approximately two months.² Until mid-1977 both Blake and the Union had treated the Agreement as covering only the six or seven truck drivers working at Blake's suburban Maryland storage and equipment facility, known as the "Landover Yard," who were members of the Union. In the summer of 1977, however, the Union's newly elected business agent suggested to Blake that its 40-to-70 other employees at the Yard, collectively referred to as "warehousemen," were also covered by the Agreement and entitled to be paid, as were the truck drivers, at the Union scale. Blake disagreed, and, on January 19, 1978, after Blake had refused to bargain with respect to some 30-odd of the warehousemen who had signed Union authorization cards, the Union filed an unfair labor practice charge with the NLRB.

On February 10, 1978, Blake's then-president, Morton Bender, called Keiler, who had handled isolated miscellaneous labor matters for him in the past, and asked Keiler to come by his office to discuss Blake's labor problem. Following that meeting between Keiler, Blake's president, and, ultimately, other Blake officials, Blake attempted to establish what is known in labor parlance as a "double-breasted" or "dual shop" operation, i.e., a non-union company operating simultaneously and in parallel with a union company within the confines of a commonly-owned enterprise. On February 17th it sub-contracted its Yard operations in toto to M & S, dismissing all of the Blake employees at the Landover Yard — truck drivers and warehousemen alike — on a Friday and hiring them on the M & S payroll (all, including the drivers, at sub-Union scale wages) the following Monday, thus, in theory, circumventing the dispute with the Union as to the coverage of the Agreement to which M & S was not a party. The Union then amended its charge to allege the double-breasted operation to be spurious (and an additional unfair labor practice as well), adding M & S as a respondent, and on March 30, 1978, the NLRB general counsel issued his own complaint.

Keiler defended Blake and M & S at the trial in July and September, 1978, before an administrative law judge ("ALJ") who, in his June, 1979, decision, found M & S to be the alter ego of Blake, the entire double-breasting operation invalid, and Blake guilty of the unfair labor practices charged. The ALJ's proposed remedy, however, somewhat ambiguously appeared to apply only to those Blake/M & S employees who were originally Union members, viz., the truck drivers, but at Keiler's urging and upon his assurance that the situation "could get no worse," Blake authorized an appeal of the ALJ's decision to the NLRB. In September, 1979, the NLRB not only affirmed the ALJ but expressly expanded the bargaining unit as to which Blake would have to deal with the Union to encompass all of the employees at the Yard, presenting the likelihood of what Blake claims to have been an hitherto unanticipated substantial liability for back pay.

In the summer of 1980, Blake dismissed Keiler as its attorney and retained another firm to assess its prospects on an appeal to the U.S. Court of Appeals for the District of Columbia Circuit. Before any decision had been reached, however, the NLRB filed its own petition for enforcement. New counsel abandoned efforts to persuade the court that M & S was not the alter ego of Blake, arguing instead that the expansion of the bargaining unit had been accomplished sua sponte by the NLRB, without adequate notice and opportunity to resist having been accorded Blake, and obtained a modification of the NLRB order restoring the bargaining unit to its original dimensions, at a cost to Blake of nearly $60,000 in additional attorneys' fees. Blake and M & S had in the meantime commenced this action for legal malpractice against Keiler.³

II.

Plaintiffs Blake and M & S contend that Keiler was retained on February 10, 1978, for all purposes in connection with its pending labor dispute with the Union, but, specifically, to defend against the unfair labor charge; that Keiler originated the idea of "double-breasting" and devised the manner in which it would be done, using M & S as the non-union vehicle to avoid having to bargain with the Union, without adequately investigating the likelihood of success; and that he persisted in maintaining for his clients what he knew or should have known, at least by the time of trial, to be an untenable position before the ALJ and thereafter the NLRB, until the moment he was discharged. They allege that Keiler failed to possess or exercise that degree of skill, care, and learning ordinarily possessed and exercised by other labor attorneys in the same or similar circumstances, see Niosi v. Aiello, 69 A.2d 57 (D.C.Mun.App.1949), Wright v. Williams, 47 Cal.App.3d 802, 121 Cal.Rptr. 194 (1975), and that they have sustained damages in the form of attorneys' fees and a substantial liability for back pay as a direct and proximate result of his professional negligence.

Keiler responds that on February 10th he understood he was being "consulted" generally concerning a "labor problem" with the Teamsters Union, but was not "retained" at the time for the purpose of resolving it.⁴ The "labor problem," he was told, was Blake's failure to pay Union scale to its warehousemen at the Landover Yard. Keiler says he studied the Agreement and then informed the Blake officials that, in his opinion, the warehousemen were all "covered" by it and that Blake was "lucky to have gotten away with it this far." Only after his recommendations that the warehousemen be "brought up to scale" until the Agreement expired or that negotiations be started with the Union's new business agent were rejected did the subject of "double-breasting" with M & S come up.

Keiler remembers the subject as being raised initially by one of the Blake officials, at which he observed that the concept would entail forming a "separate" corporation to function as the non-union shop and was told Blake already "had" such a corporation in M & S. Keiler says he was not at the outset asked for and gave no specific advice on how to accomplish the double-breasting using M & S; in fact, he was dubious about it and told the Blake officials that it seemed to him "not much better than doing business with yourself." Once the Blake officials had committed to "double-breasting," however, Keiler acknowledges that he advised that a written subcontract between Blake and M & S be drawn up "so it will look like an arm's length transaction," and then explained how to go about firing Blake's employees the following week by telling them that Blake was "going out of the trucking business" and turning over its warehouse operations to M & S which would accept applications for jobs from former Blake employees. He did not, he says, discuss with the Blake officials the wages M & S would be paying, nor, for that matter, did he discuss in any detail the other indicia of identity between the corporations: the use of the same equipment, offices, telephones, mailing address, and the like. And, although having mentioned that the"most important factor" in determining the independence of commonly-owned union and non-union companies is the degree to which day-to-day labor relations are conducted separately, he apparently saw nothing incongruous in Blake's "yard superintendent" of Friday, February 17th, materializing on Monday the 20th as M & S' "warehouse manager" who would nevertheless continue to report to the same Blake vice president.

The Blake officers who attended the February 10th meeting — Morton Bender, and, later, executive vice president Howard Bender, and Charles Rooney,...