Continental Web Press, Inc. v. N.L.R.B.

• Decision Date: 06 September 1985
• Docket Number: Nos. 83-2124,83-2422,P,AFL-CI,s. 83-2124
• Citation: 767 F.2d 321
• Parties: 119 L.R.R.M. (BNA) 3125, 103 Lab.Cas. P 11,534 CONTINENTAL WEB PRESS, INC., Petitioner, Cross-Respondent, v. NATIONAL LABOR RELATIONS BOARD, Respondent, Cross-Petitioner, v. CHICAGO LOCAL 245, GRAPHIC ARTS INTERNATIONAL UNION,arty-Intervenor- Respondent. In re Application of CONTINENTAL WEB PRESS, INC.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 321

767 F.2d 321

119 L.R.R.M. (BNA) 3125, 103 Lab.Cas. P 11,534

CONTINENTAL WEB PRESS, INC., Petitioner, Cross-Respondent, v. NATIONAL LABOR RELATIONS BOARD, Respondent, Cross-Petitioner, v. CHICAGO LOCAL 245, GRAPHIC ARTS INTERNATIONAL UNION, AFL-CIO, Party-Intervenor- Respondent.

In re Application of CONTINENTAL WEB PRESS, INC.

Nos. 83-2124, 83-2422.

United States Court of Appeals Seventh Circuit.

Submitted Dec. 24, 1984.

Decided June 25, 1985.

Rehearing and Rehearing En Banc Denied Sept. 6, 1985.

Elliott Moore, N.L.R.B., Washington, D.C., for petitioner, cross-respondent.

Jerry Kronenberg, Borovsky, Ehrlich & Kronenberg, and Eugene Cotton, Cotton, Watt, Jones, King & Bowlus, Chicago, Ill., for respondent, cross-petitioner.

Before POSNER and COFFEY, Circuit Judges, and KELLAM, Senior District Judge. ^*

POSNER, Circuit Judge.

After we set aside the Labor Board's order on August 30, 1984, see Continental Web Press, Inc. v. NLRB, 742 F.2d 1087 (7th Cir.1984), Continental Web Press applied to us for an award of roughly $18,000 in attorney's fees and related expenses under the Equal Access to Justice Act, 28 U.S.C. Sec. 2412(d)(1)(A), which allows such awards if the government's position is not "substantially justified." The Board does not argue that its position was substantially justified, but it opposes the application on other grounds that raise issues of some novelty; and though the Act expired shortly after our decision (the expiration does not affect this application, however), it is expected to be reenacted in some form, and a discussion of the issues raised by the Board may be helpful to Congress in deciding what form that shall be.

To be entitled to attorney's fees under the Act, a firm must have either a net worth no greater than $5 million or no more than 500 employees. 28 U.S.C. Sec. 2412(d)(2)(B). The Board argues that the disjunctive form was unintentional--that both criteria must be met--and there is much support for this argument, see Unification Church v. INS, 762 F.2d 1077, 1083-1091 (D.C.Cir.1985), but we need not resolve the issue since in any event Continental Web Press meets both criteria, as we shall see. The Board concedes that Continental Web Press has no more than 500 employees, but not that it has a net worth of no more than $5 million. After depreciation, the company's net worth is well below $5 million; but before depreciation, it is well above $5 million, and the Board argues that depreciation ought not be subtracted in computing the company's net worth. At first glance, the argument seems ridiculous. A company's "net worth" (the statutory term) is the difference between its assets and its liabilities, and accumulated depreciation is either a liability or a reduction in the value of the assets. Either way it is no phantom--at least it need not be, as an example will show. Suppose a firm in 1965 buys a printing press for $1 million dollars that is expected to last 20 years. In 1984, when the press has another year of life, as it were, it would be unrealistic to say that the company had a printing press worth $1 million; for unless there has been an enormous increase in the price of printing presses over the period, no one will pay $1 million for a press that is about to wear out. Of course firms sometimes depreciate equipment faster than it actually wears out or obsolesces. Often there are tax incentives to do this, though sometimes the company will have separate depreciation schedules for tax and ordinary business purposes so that rapid depreciation for tax purposes will not create an unrealistic picture of the current value of the firm's assets. And of course if prices are increasing over the life of a particular asset it may be worth more at any point during its life than its depreciated original cost. But this is just to say that a balance sheet only approximates economic reality, and does not reflect it perfectly. It would be arbitrary to say that because depreciation may sometimes result in understating a company's net worth it should be disregarded, and the company valued as if every piece of its capital equipment were brand-new, which is the Board's position.

The Board's entire support for its position is the following sentence in the legislative history of the Equal Access to Justice Act: "In determining the value of assets, the cost of acquisition rather than fair market value should be used." H.R.Rep. No. 1418, 96th Cong., 2d Sess. 15 (1980), U.S.Code Cong. & Admin.News 1980, pp. 4953, 4994; S.Rep. No. 253, 96th Cong., 1st Sess. 17 (1979). All this means to us is that the net worth figure must be derived from the company's books rather than from an appraisal. There is no indication that Congress meant by "the cost of acquisition" the undepreciated cost of acquisition. As the Board acknowledges, subtracting accumulated depreciation from the cost of acquisition "is a generally accepted accounting practice." No reason is given why Congress might have wanted to reject it.

Congress did not define the statutory term "net worth." It seems a fair guess that if it had thought about the question, it would have wanted the courts to refer to generally accepted accounting principles. What other guideline could there be? Congress would not have...