Carpenters and Millwrights v. N.L.R.B.

• Decision Date: 16 March 2007
• Docket Number: No. 05-1416.,No. 06-1098.,05-1416.,06-1098.
• Parties: CARPENTERS AND MILLWRIGHTS, LOCAL UNION 2471, affiliated with United Brotherhood of Carpenters and Joiners of America, Petitioner v. NATIONAL LABOR RELATIONS BOARD, Respondent A.J. Mechanical, Inc., et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

481 F.3d 804

CARPENTERS AND MILLWRIGHTS, LOCAL UNION 2471, affiliated with United Brotherhood of Carpenters and Joiners of America, Petitioner v. NATIONAL LABOR RELATIONS BOARD, Respondent

A.J. Mechanical, Inc., et al., Intervenors.

No. 05-1416.

No. 06-1098.

United States Court of Appeals, District of Columbia Circuit.

Argued October 19, 2006.

Decided March 16, 2007.

On Petitions for Review of an Order of the National Labor Relations Board.

Osnat K. Rind argued the cause and filed the briefs for petitioner.

Ruth E. Burdick, Attorney, National Labor Relations Board, argued the cause for respondent. With her on the brief were Ronald E. Meisburg, General Counsel, John H. Ferguson, Associate General Counsel, Aileen A. Armstrong, Deputy Associate General Counsel, and Julie B. Broido, Senior Attorney.

William H. Andrews was on the brief for intervenors A.J. Mechanical, Inc., et al.

Before: RANDOLPH, GARLAND, and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge.

The National Labor Relations Board found that a company and its two owners committed a series of flagrant violations of the National Labor Relations Act. Although the Board ordered the company to provide backpay to the victims of its unfair labor practices, by that time the co-owners had distributed all of the company's funds to themselves. In a subsequent compliance proceeding, an administrative law judge pierced the corporate veil and imposed personal liability on one of the owners. The Board, however, reversed. Because the Board failed to cite evidence sufficient to support the findings upon which it based its refusal to pierce the veil, and further failed to explain why it disregarded significant contrary evidence, we set aside that aspect of the Board's order.

I

A.J. Mechanical, Inc. was a Florida company that specialized in refurbishing gas turbines. William A. Greene and James Sanders founded the company and were its sole stockholders and directors. Throughout their stewardship of A.J. Mechanical, Greene and Sanders commingled their personal funds and assets with those of the company, disregarded corporate formalities and procedures, failed to maintain separate corporate records, and kept the company in an undercapitalized state.¹

In late 1998, petitioner Carpenters and Millwrights, Local Union 2471 launched a campaign to organize the employees of A.J. Mechanical. The company actively opposed the union's organizing efforts through a variety of tactics, many of which were clear violations of the National Labor Relations Act (NLRA), 29 U.S.C. § 151 et seq. As the National Labor Relations Board (NLRB) subsequently found, those violations included: barring employees from speaking about the union; interrogating employees about their membership in and support for the union; promising benefits for ceasing pro-union activity and threatening reprisals for continuing such activity; threatening employees with plant closure, loss of jobs, loss of benefits, and discharge because of their activities on behalf of the union; and laying off or firing employees, and refusing to consider job applicants, because of their support for the union. The company's unlawful conduct began in October 1998 and continued through May 1999. Much of it took place between December 1998 and early February 1999, and much of it involved Greene and Sanders personally.

In the midst of their battle against the union, Greene and Sanders wrote themselves a series of checks on the company's bank account. In the first distribution, made on February 16, 1999, each received $225,000. Over the next ten months, both Greene and Sanders received nine additional distributions. The total paid to each man exceeded $1.8 million.

On May 24, 1999, the union filed the first of a series of charges with the NLRB, alleging that A.J. Mechanical had committed unfair labor practices in violation of the NLRA. In July 1999, the union prevailed in a representation election and was certified as the representative of a unit of A.J. Mechanical employees. Later that month, the NLRB's General Counsel issued the first of two complaints against the company.

On or about September 11, 1999, A.J. Mechanical ceased all operations. Immediately thereafter, it auctioned off all of its property and equipment. Greene and Sanders executed a resolution to liquidate the company on December 2, 1999, and filed articles of dissolution with Florida's Secretary of State on June 16, 2000.

Meanwhile, A.J. Mechanical failed to answer the General Counsel's unfair labor practice complaints. After several months of silence, the General Counsel moved for summary judgment, and the NLRB issued a notice to show cause why that motion should not be granted. The company again failed to respond. On April 14, 2000, the Board found that A.J. Mechanical had engaged in the above-described unfair labor practices, and that Greene and Sanders were personally involved in many of them. The Board ordered the company to provide backpay to its employees to make them whole for the losses they sustained as a result of the company's unlawful conduct. The United States Court of Appeals for the Eleventh Circuit enforced the Board's order in full. See Decision and Order, A.J. Mechanical, Inc., 330 NLRB No. 178 (Apr. 14, 2000), enforced, No. 00-146281 (11th Cir. Oct. 23, 2000) (unpublished judgment).

Thereafter, disputes arose over the amount of backpay due under the Board's order and whether Greene, Sanders, and their wives (who shared equally in the distributions) were personally liable for the company's obligations. In February 2002, Sanders and his wife agreed to pay $112,500 to settle any backpay claims against them. The Greenes did not settle. In October, the Board's Regional Director initiated a compliance proceeding to determine two issues: (1) "the amount of backpay due employees who suffered financial consequences as a result of the unfair labor practices of the now-defunct" company; and (2) whether Greene and his wife "should be held personally liable for such backpay." Supplemental Decision and Order, A.J. Mechanical, Inc., 345 NLRB No. 22, at 1 (Aug. 26, 2005). Although the company failed to answer the compliance specification, the Greenes appeared personally and testified at the compliance hearing.

Following the hearing, the administrative law judge (ALJ) issued a supplemental decision, in which he determined that the total amount of backpay owed was $462,755 and that Greene and his wife were personally liable for repayment. Supplemental Decision, A.J. Mechanical, Inc., 345 NLRB No. 22, at 6-12 (Jan. 23, 2002). In deciding to "pierce the corporate veil," the ALJ applied the test adopted by the Board in White Oak Coal Co.:

[T]he corporate veil may be pierced when: (1) the shareholder and corporation have failed to maintain separate identities, and (2) adherence to the corporate structure would sanction a fraud, promote injustice, or lead to an evasion of legal obligations.

318 NLRB 732, 732 (1995). After reviewing Greene's "misuse of the corporate assets and form" and the large cash distributions that he received in 1999, the ALJ found that both prongs of the White Oak test were satisfied. 345 NLRB No. 22, at 10-11. The ALJ concluded: "the Greenes along with James Sanders, engaged in blurring the separate corporate entity of A.J. Mechanical, Inc.[,] and their misuse of the corporate assets and form[] is unfair, unjust, and has resulted in an evasion of A.J. Mechanical's remedial and backpay obligations for unfair labor practices that . . . Greene and others[] committed." Id. at 11. In reaching this decision, the ALJ determined that Greene "was not credible," and stated that he did "not credit any of [Greene's] testimony, except that which other, credited, evidence corroborates or that which constitutes an admission against interest." Id. at 9.

On appeal, the Board's supplemental decision and order affirmed the backpay judgment against the company, but reversed the ALJ's decision to hold the Greenes personally liable. Supplemental Decision and Order, A.J. Mechanical, Inc., 345 NLRB No. 22, at 1-5 (Aug. 26, 2005); see Revised Supplemental Order, A.J. Mechanical, Inc. (NLRB Mar. 17, 2006) (unpublished). The Board did not question the ALJ's credibility determinations. 345 NLRB No. 22, at 1 n. 1. And it accepted "arguendo the judge's conclusion . . . that the separate legal identity of Respondent A.J. Mechanical, Inc. had not been maintained under the first prong of the White Oak Coal standard." Id. at 3. Nonetheless, the Board concluded that the second prong of the White Oak test was not satisfied, disagreeing with the ALJ that "adhering to the corporate form would permit a fraud, promote injustice, or lead to an evasion of legal obligations." Id. (internal quotation marks omitted).

Specifically, the Board held that "the timing of the corporate distributions does not support the judge's conclusion that adherence to the corporate form would lead to the evasion of legal obligations." Id. The Board noted that "[t]he unfair labor practice charges were filed in May 1999 and the complaint was issued in July 1999," and found that "it was not until these dates that . . . Greene was aware that the [company's] actions were being challenged and that monetary liability could result." Id. It also found that "the process of closing down (and the attendant distribution of assets to shareholders) began before those dates." Id. Hence, in the Board's view, the distributions did not constitute an evasion of the company's legal obligations.

This matter is before us on the Board's application for enforcement of its August 26, 2005 supplemental decision and order against A.J. Mechanical, and the union's petition for review of the veil-piercing component of that decision and order. We will not waste ink on the Board's application for enforcement against the company. A.J. Mechanical did not contest the...