Goodman, In re
| Citation | 873 F.2d 598 |
| Decision Date | 20 April 1989 |
| Docket Number | D,P,AFL-CI,Nos. 814-816,s. 814-816 |
| Parties | 131 L.R.R.M. (BNA) 2129, 57 USLW 2630, 111 Lab.Cas. P 11,116, 22 Collier Bankr.Cas.2d 1159, 19 Bankr.Ct.Dec. 835, Bankr. L. Rep. P 72,862 In re James M. GOODMAN, Debtor. NATIONAL LABOR RELATIONS BOARD and Road Sprinkler Fitters Union Local 669, a Constituent Unit of United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada,laintiffs-Appellants-Cross-Appellees, v. James M. GOODMAN and Goodman Automatic Sprinkler Corp., Defendants-Appellees-Cross-Appellants. ockets 88-5033, 88-5039 and 88-5041. |
| Court | U.S. Court of Appeals — Second Circuit |
Diane Rosse, N.L.R.B., Washington, D.C. (Rosemary M. Collyer, Gen. Counsel, Robert E. Allen, Assoc. Gen. Counsel, Margery E. Lieber, Asst. Gen. Counsel, N.L.R.B., Washington, Natl. Labor Relations Bd., on the brief), for plaintiff-appellant-cross-appellee N.L.R.B.
William W. Osborne, Jr., Washington, D.C. (Kathleen T. Quinn, Beins, Axelrod & Osborne, Washington, D.C., on the brief), for plaintiff-appellant-cross-appellee Road Sprinkler Fitters Local Union 669.
Bruce R. Zirinsky, New York City (Pamela J. Corrie, Weil, Gotschal & Manges, New York City; Douglas J. Lustig, Rochester, N.Y., on the brief), for defendants-appellees-cross-appellants.
Before OAKES, Chief Judge, and NEWMAN, Circuit Judge, and HAIGHT, District Judge. *
This appeal involves the interplay between bankruptcy and labor law, and requires us to chart the jurisdictional boundaries between the National Labor Relations Board and the Bankruptcy Court. The NLRB and the Road Sprinkler Fitters Union Local 669 ("the Union" or "Local 669") have filed unfair labor practice charges against James M. Goodman and his company, Goodman Automatic Sprinkler Corp. ("GASC"). They claim that Goodman and GASC, as "alter egos" of two defunct companies that committed unfair labor practices, have succeeded to their predecessors' labor law liability. In a counter-attack, Goodman and GASC obtained an order from the Bankruptcy Court for the Western District of New York (Edward D. Hayes, Judge) barring the Labor Board proceedings on the ground that Goodman's discharge under Chapter 7 of the Bankruptcy Code, 11 U.S.C. Sec. 727 (1982), and the Code's "fresh start" policy shield him from liability for the labor law violations of the predecessor companies. In re Goodman, 81 B.R. 786 (Bankr.W.D.N.Y.1988). The District Court for the Western District of New York (Michael A. Telesca, Judge) affirmed the Bankruptcy Court ruling in part, reversed in part, and remanded in part for reconsideration of whether Goodman and GASC were successors of the two defunct companies. NLRB v. Goodman, 90 B.R. 56 (W.D.N.Y.1988).
The NLRB and Local 669 appeal from the District Court's remand order, contending that the NLRB has primary jurisdiction over the successorship issue. Goodman and GASC cross-appeal, contending that the Bankruptcy Court correctly decided both that Goodman and GASC were not successors and that they should not be subject to the NLRB proceedings.
We agree with the Labor Board and the Union that the NLRB has primary jurisdiction over the successorship issue and that the Bankruptcy Court's order barring the NLRB proceedings should be lifted. We therefore reverse in part and remand.
In 1973, appellant Goodman founded and subsequently became the sole shareholder of E.G. Sprinkler Corp. ("EG"), a company that installed, maintained, and repaired fire protection and control systems. EG entered into a collective bargaining agreement with Local 669 in 1979, effective through March 31, 1982. In May 1981, Goodman's wife formed a new company, Goodman Piping Products, Inc. ("GPP"), with Mrs. Goodman serving as sole stockholder, director, and officer. On December 3, 1981, EG ceased operations and liquidated virtually all of its assets. Shortly thereafter, Goodman began working on the installation and maintenance of fire protection equipment through GPP, but GPP refused to adhere to the collective bargaining agreement negotiated by EG.
The NLRB brought unfair labor practice charges against GPP, alleging that GPP was an alter ego of EG and therefore had succeeded to EG's duty to recognize and bargain with the Union and to honor and implement the collective bargaining agreement. The Board order required that GPP: (1) recognize and bargain with Local 669, (2) honor and implement all terms of the 1979 collective bargaining agreement, (3) reimburse Local 669 for payments to benefits funds due under the collective bargaining agreement, and (4) give backpay to Union employees for losses suffered during the period when EG and GPP did not honor the agreement. On review by this Court, we enforced the Board's order. Goodman Piping Products, Inc. v. NLRB, 741 F.2d 10 (2d Cir.1984).
In December 1984, several months after our decision in Goodman Piping Products, GPP ceased operations. That same month, Goodman filed an individual voluntary petition for relief under Chapter 7 of the Bankruptcy Code. Goodman listed the NLRB as an unsecured creditor for a disputed and undetermined amount of employee wages and benefits. On March 16, 1985, the Bankruptcy Court entered an order discharging Goodman of all dischargeable debts pursuant to section 523 of the Code.
EG and GPP also filed in bankruptcy under Chapter 7 in April, 1985. They each listed the NLRB as an unsecured creditor holding a disputed claim for employee wages and benefits. The NLRB filed proofs of claim on May 21, 1985. A trustee appointed by the Bankruptcy Court found that the EG and GPP had no assets, and the Court entered an order closing the estates of the two companies on August 16, 1985.
Meanwhile, in July, 1985, the NLRB issued a supplemental decision assessing the backpay and trust fund obligations owed by EG and GPP. This Court granted the NLRB's application for summary enforcement of the supplemental order in April, 1987.
Prior to the close of the EG and GPP bankruptcies, Goodman formed yet another company, GASC, in which he was again the sole shareholder, and which also engaged in the installation, repair, and maintenance of automatic sprinkler and fire protection systems. GASC began operations in September, 1985. On November 21, 1986, the NLRB issued a complaint and notice of hearing against EG, GPP, Goodman, and GASC. The Labor Board charged that Goodman, GASC, and GPP were all alter egos of EG, and that they all had committed or were committing unfair labor practices by: (1) failing to comply with the 1984 NLRB order, (2) failing to comply with the terms of the 1979 collective bargaining agreement, (3) refusing to bargain with Local 669, and (4) failing to produce information requested by the Union. The NLRB later amended the complaint to eliminate all pre-petition monetary claims against Goodman as an individual arising from the 1984 Board order against EG and GPP.
On July 20, 1987, Goodman and GASC filed a complaint with the Bankruptcy Court alleging that the actions of the Union and the NLRB were violating Goodman's Chapter 7 discharge. The complaint sought (1) a declaration that the NLRB and Local 669 were seeking to enforce against Goodman and GASC claims that had been discharged in bankruptcy and (2) a permanent injunction prohibiting the NLRB and the Union from commencing or continuing actions to enforce the pre-petition obligations.
On August 3, on cross-motions for summary judgment, the Bankruptcy Court issued a decision and order granting the relief sought by Goodman. 1 The Bankruptcy Judge found that any claims against Goodman arising from the EG collective bargaining agreement had been discharged in Goodman's Chapter 7 proceeding and therefore could not be pursued by the NLRB and the Union. The Bankruptcy Court ruled that GASC was not entitled to invoke the Bankruptcy Court's jurisdiction directly, because GASC was a non-debtor and had never been discharged, but that GASC was Goodman's after-acquired property and therefore was shielded by Goodman's discharge. 81 B.R. at 790. The Court rejected on the merits the NLRB's claim that GASC was an alter ego of EG and GPP. The Court found that GASC had succeeded to none of the assets, employees, or business opportunities of EG and GPP, and that GASC was thus a distinct entity acquired post-petition by Goodman and was protected by Goodman's discharge against all obligations having their genesis prior to his Chapter 7 filing. Id. at 793. The Bankruptcy Judge did not consider the NLRB's claim that Goodman himself was an alter ego of EG and GPP.
The NLRB and Local 669 appealed the Bankruptcy Court's order to the District Court. The District Court affirmed in part and reversed and remanded in part. Judge Telesca affirmed the Bankruptcy Court's ruling that GASC, as a non-debtor, had no direct standing to invoke the Court's jurisdiction. 90 B.R. at 63. He also ruled that Goodman's Chapter 7 petition and discharge entitled Goodman to reject any pre-petition obligations he had individually under the collective bargaining agreement. Id. at 62. But the District Judge said that if Goodman's post-petition conduct made Goodman an alter ego of EG and GPP, his discharge would not shield him from liability for EG's and GPP's past unfair labor practices and from an order to bargain with the Union. Id.
The District Court ruled that the Bankruptcy Court had jurisdiction to decide whether Goodman and GASC were alter egos of EG and GPP, because the question was collateral to the bankruptcy proceeding. Id. at 60-61. The District Judge remanded the alter ego issue to the Bankruptcy Court, however, saying that the Bankruptcy Judge had not applied the appropriate criteria in finding that GASC was not an alter ego. Id. at 63-64.
Ordinarily, a remand to the bankruptcy court by a district court is not a final,...
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