Durand v. NLRB

• Decision Date: 13 February 1969
• Docket Number: No. H-68-C-9,H-68-B-5.,H-68-C-9
• Citation: 296 F. Supp. 1049
• Parties: L. E. DURAND, Trustee in Bankruptcy of Turney Wood Products, Inc., Plaintiff, v. NATIONAL LABOR RELATIONS BOARD; John J. A. Reynolds, Jr., Regional Director, Twenty-sixth Region National Labor Relations Board; Melvin Pollack, Trial Examiner; Carpenters Local Union 2746; United Brotherhood of Carpenters and Joiners of America, AFL-CIO; Celia Warren, Horace Vernon Dodson, and Artis Ford, Members of Local 2746, Defendants. Leon Davis, Elliott Davis, P. C. Dixon and Emby Kaye, Intervenors. In the Matter of TURNEY WOOD PRODUCTS, INC., Bankrupt.
• Court: U.S. District Court — Western District of Arkansas

296 F. Supp. 1049

L. E. DURAND, Trustee in Bankruptcy of Turney Wood Products, Inc., Plaintiff, v. NATIONAL LABOR RELATIONS BOARD; John J. A. Reynolds, Jr., Regional Director, Twenty-sixth Region National Labor Relations Board; Melvin Pollack, Trial Examiner; Carpenters Local Union 2746; United Brotherhood of Carpenters and Joiners of America, AFL-CIO; Celia Warren, Horace Vernon Dodson, and Artis Ford, Members of Local 2746, Defendants.

Leon Davis, Elliott Davis, P. C. Dixon and Emby Kaye, Intervenors.

In the Matter of TURNEY WOOD PRODUCTS, INC., Bankrupt.

Nos. H-68-C-9, H-68-B-5.

United States District Court W. D. Arkansas, Harrison Division.

February 13, 1969.

COPYRIGHT MATERIAL OMITTED

Eugene R. Warren and D. D. Panich, Little Rock, Ark., for plaintiff.

Marcel Mallet-Prevost, Asst. General Counsel, N. L. R. B., Washington, D. C., John F. Harrington, Regional Atty., NLRB, Memphis, for NLRB.

Philip E. Kaplan, Little Rock, Ark., for Union and its members.

C. Richard Crockett, Little Rock, Ark., for intervenors.

Memorandum Opinion

HENLEY, District Judge.

Subject litigation represents another phase of a continuing labor controversy involving the affairs of the now bankrupt Turney Wood Products, Inc. of Harrison, Arkansas. The controversy erupted in the spring of 1968 when Turney was adjudicated a voluntary bankrupt and when L. E. Durand was appointed its receiver to continue the operation pending liquidation, as authorized by section 2 a(5) of the Bankruptcy Act. The Receiver, with the approval of the Referee in Bankruptcy, rejected a collective bargaining agreement between Turney on the one hand and Local Union No. 2746, United Brotherhood of Carpenters and Joiners of America, AFL-CIO, on the other hand, and proceeded unilaterally to reduce wages and employee force and to recall persons to work without regard to seniority.

The actions of the Receiver, who later became Trustee and who will be referred to as such, caused the Union to file unfair labor practice charges with the National Labor Relations Board and also to file a suit in this Court under the provisions of section 301 of the Taft-Hartley Act, 29 U.S.C.A. § 185, to compel the Trustee to submit the differences between him and the Union to arbitration as provided by the collective bargaining agreement. The Union also sought review of the order of the Referee authorizing the Trustee to reject the contract. On June 28, 1968, the Court dismissed the section 301 suit and denied the petition for review. Local Union No. 2746 etc. v. Turney Wood Products, Inc., W.D.Ark., 289 F.Supp. 143. There was no appeal from the decision of the Court, and right or wrong it has become final.

Thereafter, the National Labor Relations Board issued its complaint against the Trustee charging that he had been guilty of certain specified unfair labor practices. The case was assigned to a Trial Examiner of the Board who conducted hearings on the complaint over the objection of the Trustee who urged that in view of the pending bankruptcy proceeding the Board was without jurisdiction.

On September 28, 1968, the Trustee commenced in this Court Civil Action No. H-68-C-9 against the Board, its Regional Director, the Trial Examiner, the Union, and three former employees of Turney seeking to enjoin further proceedings before the Board in connection with the unfair labor practices complaint. The defendants in that case deny that the Trustee is entitled to relief.

In October 1968 the Regional Director of the Board filed in the original Turney bankruptcy case, H-68-B-5, what amounts to an application for an order requiring the Trustee to earmark the sum of $80,000 of moneys in his hands as a fund to satisfy any back pay awards that ultimately may be made by the Board in the proceeding before it.

The complaint of the Trustee and the application of the Regional Director were heard together at Harrison on November 25, 1968, and both matters have been submitted on documentary material, briefs, and oral argument. The Court has delayed disposition of the issues presented in the hope that the parties could settle the dispute between them, and while efforts have been made in that direction, they have not been successful.

The questions presented are somewhat unusual and are not without public interest; further, the controversy has produced a significant adverse effect on the economy of the section of North Arkansas in which Turney formerly operated.

For many years prior to March 1968 Turney was engaged in the business of manufacturing and selling church furniture which moved in interstate commerce. There is no question that Turney was an industry "affecting" interstate commerce, and that it was subject to the provisions of the National Labor Relations Act, 29 U.S.C.A., § 151 et seq., and of the Taft-Hartley Act, 29 U.S.C.A. § 185 et seq.

For a number of years the Union which has been identified was the certified collective bargaining agent of Turney's plant employees. Turney and the Union operated under a number of collective bargaining agreements, the last one of which was entered into in 1966 and was to expire in 1969. As is usual, that contract prescribed wage rates and governed conditions of employment; it specified that lay-offs and recalls to work would in general be governed by employee seniority; and it set forth a grievance procedure which included compulsory arbitration as the final step. As of early March 1968 Turney employed about 165 people who were covered by the collective bargaining agreement.

Turney's assets were heavily encumbered. The Small Business Administration held a first mortgage securing a large debt. Messrs. Davis, Kaye, and Dixon of Texas and Oklahoma held a second mortgage which also secured a large obligation, and which covered Turney's accounts receivable as well as the physical assets of the business.

By March 1968 Turney was in straitened financial condition and realized that it could not meet the payroll which fell due on March 15. Management advised the employees of the situation and requested them to work temporarily without pay in the hope that conditions would improve. No significant number of the employees were willing to work gratis, and the plant did not reopen on March 18.

On March 22 Turney filed a voluntary petition in bankruptcy and was immediately adjudicated. It was decided that the plant should be operated pending liquidation, and Mr. Durand was appointed Receiver.¹ He was authorized to reject the collective bargaining agreement as an executory contract as provided by section 70 b of the Bankruptcy Act and to hire employees and fix their compensation, subject to the approval of the Referee.

Durand promptly exercised that authority. He reopened the plant with a substantially reduced force hired at substantially reduced wages. Employees were recalled to work without regard to seniority, and the Trustee notably did not recall to work three individuals, named as defendants in the civil action before the Court, who had substantial seniority and who had been active in Union affairs.

Following the Court's dismissal of the Union's section 301 suit, the Turney plant was sold as a going concern to Independent Stave Co. of Lebanon, Missouri, the sale being made free of liens. Independent paid the Trustee $110,000 in cash and assumed the obligation to SBA amounting to $239,060.33; the Trustee retained the accounts receivable which as stated, are subject to the second mortgage of Davis, Kaye, and Dixon.

The face value of the accounts receivable was $386,107.24. As of November 20, 1968, the Trustee had been able to collect only $67,134.36 on those accounts, and while there have been some additional collections, it is clear to the Court that the accounts still outstanding are essentially valueless and uncollectible.

In addition to selling the plant as a going concern, the Trustee was able to sell certain specific items of personal property and to dispose of certain securities of small value, deriving thereby an additional sum of approximately $20,000.

As of the date of the November 1968 hearing in Harrison, the taking of testimony before the Trial Examiner of the Board had been completed, and he had the unfair labor practices complaint under advisement. In connection with the Regional Director's request in the bankruptcy case for an impounding order, counsel for the Board advised the Court that the Regional Director had concluded tentatively that the potential back pay awards would be subject to mitigation to the extent of about 50 percent, and in open court counsel amended the request for an impounding order so as to reduce the amount sought to be impounded from $80,000 to about $41,000.

On February 2, 1969, the Trial Examiner filed his decision incorporating his findings of fact, conclusions of law, and recommended order. He found that the Trustee had been guilty of certain prohibited unfair labor practices, and his recommendations include back pay awards which, if approved by the Board and enforced by the Court of Appeals, will or may inure to the benefit of about 42 former employees of Turney, including the three individuals mentioned heretofore.

The employees of Turney who worked during the two weeks ending on March 15, 1968, and who were not paid for that work have wage claims which are entitled to second priority under section 64a(2) of the Bankruptcy Act. Two hundred twenty-nine of such claims have been filed, and they total some $79,000. It is to be observed that probably all of the 42 people who might profit from the recommended back pay awards have liquidated second priority claims for the work actually done by them before the closing down of the plant immediately prior to bankruptcy.

The significance of the observation just made lies in the fact that the Regional Director insists that the back pay awards, if established ultimately, will amount to post-bankruptcy "wages," and will be entitled to section 64 a(1) priority as ...