Haley & Haley, Inc. v. N.L.R.B.

• Decision Date: 28 July 1989
• Docket Number: Nos. 88-7303,88-7361,s. 88-7303
• Citation: 880 F.2d 1147
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: 132 L.R.R.M. (BNA) 2119, 112 Lab.Cas. P 11,366 HALEY & HALEY, INC.; Oceanway Transport, Inc., Petitioners-Cross-Respondents, v. NATIONAL LABOR RELATIONS BOARD, Respondents-Cross-Petitioners.

Page 1147

880 F.2d 1147

132 L.R.R.M. (BNA) 2119, 112 Lab.Cas. P 11,366

HALEY & HALEY, INC.; Oceanway Transport, Inc. Petitioners-Cross-Respondents, v. NATIONAL LABOR RELATIONS BOARD, Respondents-Cross-Petitioners.

Nos. 88-7303, 88-7361.

United States Court of Appeals Ninth Circuit.

Argued and Submitted May 3, 1989.

Decided July 28, 1989.

Duane Vergeer, Vergeer, Roehr & Sweek, Portland, Or., for petitioners-cross-respondents.

Aileen A. Armstrong, Deputy Associate Gen. Counsel, and Robert F. Mace, Atty., N.L.R.B., for respondents-cross-petitioners.

Appeal from the National Labor Relations Board.

Before TANG, BOOCHEVER and KOZINSKI, Circuit Judges.

PER CURIAM:

Haley and Haley, Inc., and Oceanway Transport, Inc., petition for review of the National Labor Relations Board's (NLRB) decision finding them in violation of sections 8(a)(1) and 8(a)(5) of the National Labor Relations Act, 29 U.S.C. Secs. 158(a)(1) and (a)(5) (1982), and ordering petitioners to comply with the terms of the collective bargaining agreement between Haley & Haley and Local 3-140 of the International Woodworkers of America (the Union). The NLRB found that Oceanway was an alter ego of Haley & Haley, and therefore bound by the collective bargaining agreement between Haley & Haley and the Union. The NLRB further found that petitioners violated sections 8(a)(1) and 8(a)(5) by transferring employees and equipment from Haley & Haley to Oceanway to avoid their obligations under the collective bargaining agreement. The Board ordered petitioners to cease the transfer, to honor the collectively bargained terms and conditions of the agreement between the Union and Haley & Haley, and to make whole the bargaining unit employees for any losses suffered as a result of petitioners' breach of the collective bargaining agreement. The Board's finding that petitioners violated sections 8(a)(1) and 8(a)(5) will be upheld if supported by substantial evidence. NLRB v. Pacific Grinding Wheel Co., 572 F.2d 1343, 1347 (9th Cir.1978).

Facts

The essential facts are undisputed. Haley & Haley is a closely held, family run corporation engaged exclusively in the business of hauling logs. Its employees are represented by Local 3-140 of the International Woodworkers of America, AFL-CIO. Oceanway is a wholly owned subsidiary of Haley & Haley. It hauls logs as well as general commodities, including heavy equipment. Log-hauling accounts for the majority of Oceanway's business.

In 1985, Champion Paper Co. and International Paper Co., Haley & Haley's chief clients, announced significant reductions in their logging operations. On April 12 of that year, Champion shut down its operations. In addition to curtailing its operations, International announced its intention to contract for log-hauling services only at rates considerably below those charged by Haley & Haley. Champion's termination and International's business curtailment and rate reduction had an immediate and drastic effect upon Haley & Haley. The problem was compounded by Haley & Haley's inability to compete effectively against other non-union log-hauling companies that were not obliged under collective bargaining agreements to pay union scale wages and benefits to their drivers.

On March 30, 1984, partly in response to the declining fortunes of the logging industry, but before the two events described above, Haley & Haley purchased Oceanway in order to acquire its general commodities hauling permit. Shortly thereafter, Oceanway acquired a log-hauling permit. Because Oceanway was not a signatory to a collective bargaining agreement, Larry Haley, Haley & Haley's vice-president, believed it could effectively compete with other non-union trucking companies. For this reason, Larry Haley decided to sell Haley & Haley logging trucks to Oceanway. The first five trucks were sold to Oceanway on February 17, 1985.

Although the evidence suggests that Haley & Haley did not inform the Union of this sale, shortly thereafter Haley & Haley and the Union began to discuss the possibility of the Union granting Haley & Haley mid-contract wage and benefit concessions. During the pendency of these negotiations, Haley & Haley continued to sell its logging trucks to Oceanway. By May 7, 1985, all but four had been sold to Oceanway. On August 8, 1985, after unsuccessfully attempting to negotiate wage and benefit concessions from the Union, Haley & Haley sold its remaining trucks to Oceanway.

The Union filed an amended complaint against Oceanway and Haley & Haley on July 31, 1985, alleging violations of sections 8(a)(1) and 8(a)(5) of the NLRA. The case was first heard before an administrative law judge, who concluded that Oceanway was not a disguised corporation and therefore was not created for the purpose of evading Haley & Haley's obligations under the collective bargaining agreement. The ALJ based this conclusion upon a finding that the two entities did not compete in the same market: Haley & Haley, unlike Oceanway, was contractually bound to pay higher wages and benefits, and therefore could not afford to obtain work at the prevailing trucking rates offered by International or the smaller, independent logging companies. After finding that Oceanway was not an alter ego of Haley & Haley, the ALJ, applying the principles set forth in Milwaukee Spring Division of Illinois Coil Spring Co., 268 N.L.R.B. 601 (1984), aff'd, sub nom. International Union, United Automobile, Aerospace and Agricultural Implement Workers of Am., 765 F.2d 175 (D.C.Cir.1985), ¹ concluded that Haley & Haley had discharged its contractual responsibilities to the Union by bargaining to a good-faith impasse before transferring its assets and employees to Oceanway.

The NLRB reversed the ALJ's decision. The Board found that Oceanway was an alter ego of Haley & Haley, and that the transfer was little more than an attempt by Haley & Haley to avoid its contractual obligations. The Board also found that the Milwaukee Spring analysis was inappropriate, since Haley & Haley's sham transfer of assets to Oceanway did not relieve it of its obligation to honor the wage and benefit conditions contained in the collective bargaining agreement. The Board also found that, even if Milwaukee Spring was applicable, Haley & Haley had failed to bargain in good faith prior to the transfer of its assets.

Discussion

Petitioners contend that Oceanway is not an alter ego of Haley & Haley, and that the Board mischaracterized the nature of the transfer of equipment and employees from Haley & Haley to Oceanway. Petitioners argue that the transfer was an economically motivated business decision akin to a plant relocation or closing, and that the proper inquiry by the Board should have been (a) whether the transfer by Haley & Haley amounted to a modification of the terms or conditions of the collective bargaining agreement, and (b) whether the employer first attempted to bargain in good faith with the Union before unilaterally executing the change in its business. Contrary to the Board's finding, Haley & Haley contends that it bargained in good faith with the Union, and that only after reaching an impasse in bargaining over wages and benefits did it decide to transfer operations from Haley & Haley to Oceanway.

Although the transfer of assets and equipment to an alter ego corporation may bear some facial resemblance to the type of transfer considered in Milwaukee Spring or Otis Elevator Co., 269 N.L.R.B. 891 (1984), the alter ego transfer is in essence a sham transaction, motivated by the employer's desire to avoid its contractual obligations. See, e.g., Howard Johnson Co. v. Hotel & Restaurant Employees Local Joint Executive Bd., Hotel & Restaurant Employees & Bartenders Int'l Union, AFL-CIO, 417 U.S. 249, 259 n. 5, 94 S.Ct. 2236, 2242 n. 5, 41 L.Ed.2d 46 (1974) ("Such cases involve a mere technical change in the structure or identity of the employing entity, frequently to avoid the effect of the labor laws, without any substantial change in its ownership or management."); Advance Electric, Inc., 268 N.L.R.B. 1001, 1002 (1984).

Our inquiry therefore must begin with the Board's determination that Oceanway is an alter ego rather than a bona fide successor of Haley & Haley. The alter ego analysis is crucial in determining whether Oceanway is obliged to comply with the collective bargaining agreement between the Union and Haley & Haley, since a successor company, unlike an alter ego, is generally not bound by the collective bargaining agreement of its predecessor. See, e.g., Dariano & Sons, Inc. v. District Council of Painters No. 33, 869 F.2d 514, 518 (9th Cir.1989). If, on the other hand, the entity is an alter ego, then it is obliged to honor its "predecessor's" contractual obligations. Howard Johnson Co., 417 U.S. at 259 n. 5, 94 S.Ct. at 2242 n. 5. Moreover, such a finding renders unnecessary any inquiry under Milwaukee Spring, since a determination of alter ego status necessarily means that the transfer was little more than a sham intended to disguise corporate control. To put it differently, "[i]n Otis Elevator [and Milwaukee Spring ], the issue is whether there is a duty to bargain over the decision to transfer work out of a unit; in alter ego cases, the issue is whether the work is effectively still in the unit because the allegedly new employer is the same as the former employer." Decision and Order, Haley & Haley, Inc. and Oceanway Transport, Inc., 1987-88 NLRB Dec. (CCH) p 19,941, at 33,770, 33,774.

"The focus of the alter ego test ... is on the existence of a disguised continuance of the same business or an attempt to avoid the obligations of a collective bargaining agreement through a sham transaction or a technical change in operations." Dariano 869 F.2d at 518; accord Gateway Structures, Inc. v. Carpenters 46 N. Cal. Counties Conf. Bd., 779 F.2d 485, 488 (9th Cir.1985); J.M. Tanaka Constr., Inc. v. NLRB, 675 F.2d 1029, 1035 (9th Cir.1982). Four factors must be considered...