In re CVS/Pharmacy & Teamsters Local 727
| Docket Number | 13-UC-266228 |
| Decision Date | 07 January 2022 |
| Parties | CVS/PHARMACY v. TEAMSTERS LOCAL 727 |
| Court | National Labor Relations Board |
UNPUBLISHED
NOTICE TO SHOW CAUSE
Lauren McFerran, Chairman
On February 5, 2021, the National Labor Relations Board issued an order granting review of the Employer's November 5 2020 Request for Review, and it remanded this proceeding to the Regional Director. Chairman McFerran and Members Kaplan and Emanuel participated. The case returned to the Board on May 11, 2021 when the Employer filed a Request for Review of Regional Director's Dismissal of UC Petition. On May 25 2021, the Office of the Executive Secretary issued an order granting the Acting Regional Director's request that the Board transfer the Request for Review to the Regional Director for reconsideration.
Subsequently the Board's Designated Agency Ethics Official (DAEO) determined that Member Emanuel (whose term on the Board has since ended) should have been disqualified from participating in this case, based on an investigation conducted by the Board's Inspector General.[1] The Inspector General concluded that Member Emanuel's participation violated a criminal statute, 18 U.S.C. § 208(a), and its implementing regulations, 5 C.F.R. §2640.201(b)(2)(i), because of his ownership of a conflicting financial interest in a sector mutual fund.[2]
The Board has accepted the DAEO's determination that Member Emanuel should have been disqualified. The presumptively appropriate remedy for Member Emanuel's unlawful participation in this case is to vacate the February 5, 2021 and May 25, 2021 orders and to re-adjudicate the November 5, 2020 Request for Review de novo. See e.g., Berkshire Employees Assn. of Berkshire Knitting Mills v. NLRB, 121 F.2d 235, 239 (3d Cir. 1941); Cinderella Career & Finishing Sch., Inc. v. FTC, 425 F.2d 583, 592 (D.C. Cir. 1970).[3]
NOTICE IS GIVEN that any party seeking to show cause why the Board's orders should not be vacated, and why the Board should not re-adjudicate this case, must do so in writing, filed with the Board in Washington, D.C., on or before January 28, 2022 (with aff i d av i t of s er v i ce on the par t i es to this proceeding).[4] If a response to this Notice to Show Cause is filed, a party may file a reply to the response within 14 days of receipt of the response (with affidavit of service on the parties to this proceeding), but further responses will not be permitted except where there are special circumstances warranting leave to file such a response.
Member Ring, dissenting in part.
My colleagues and I agree that Member Emanuel should not have participated in this case, based on a conflicting financial interest. We also agree that the parties are entitled to an opportunity to be heard before the Board decides whether to vacate its prior order in this case. However, for the reasons stated in my partial dissent in Exxon Mobil Research & Engineering, Case 22-CA-218903 (Jan. 7, 2022) (), I strongly disagree with the majority's decision to hold that the “presumptively appropriate” remedy for Member Emanuel's participation is to vacate the Board's order and re-adjudicate the case de novo. The remedial question posed by Member Emanuel's participation in this case is one of first impression for the Board, and there is no statute or controlling legal precedent directly on point. In my view, the Board should give the parties an opportunity to be heard, not only on whether the order should be vacated, but also on the standard to apply in determining whether vacatur is warranted. I cannot agree with my colleagues' decision to prejudge the latter issue, slanting the playing field in advance by making vacatur the presumptively appropriate remedy.
Furthermore, and also as explained in my opinion in ExxonMobil Research & Engineering, the cases cited by the majority-Cinderella Career & Finishing Sch., Inc. v. FTC, 425 F.2d 583, 592 (D.C. Cir. 1970), and Berkshire Employees Ass'n of Berkshire Knitting Mills v. NLRB, 121 F.2d 235 (3d Cir. 1941)-do not support their premature conclusion that vacatur is presumptively appropriate here. Those cases dealt with instances of actual bias or prejudgment, not with conflicting financial interests. Nor is it at all clear how actual bias or prejudgment can be found in this instance, absent any basis for concluding that Member Emanuel was aware, at the time he participated in the decision in this case, that the Health Care Select Sector SPDR Fund ETF held shares of common stock in CVS Health Corporation. The Supreme Court has held that there is room for consideration of “harmless error committed by busy judges who inadvertently overlook a disqualifying circumstance.”[1] If a presumption in favor of vacatur is not required in order to protect the integrity of the judicial process, it is not clear why such a presumption is required in order to protect the integrity of the Board's processes. In any event, the Board should hear from the parties before it announces the applicable standard. From the majority's refusal to do so, I respectfully dissent.
To: Lori Ketcham Designated Agency Ethics Official
From: David Berry Inspector General
The purpose of this memorandum is to report back to the Designated Agency Ethics Official (DAEO) that the Office of Inspector General (OIG), National Labor Relations Board (NLRB), substantiated an allegation that Member William Emanuel participated in matters in which he had a conflicting financial interest and that he failed to fulfill the commitments he made when he signed his Ethics Agreement.
The investigation involving Member Emanuel was initiated on May 27, 2021, after your staff reviewed Member Emanuel's annual public financial disclosure report. That review disclosed that, in the first part of calendar year 2020, Member Emanuel began investing in sector funds, and one or more funds had equity holdings in entities that were a party to an NLRB case. Your office then reported the matter to the OIG. See, 5 CFR 2638.lO4(c)(9)(i).
To conduct the OIG investigation, we issued subpoenas to the investment companies that managed the sector funds and to the broker that Member Emanuel used to invest in the sector funds. Based on the information in the subpoena returns from the investment companies, we were able to compile a list of all entities in which the fluids held an equity interest and the dates of transactions involving the sale and purchases of the equity interest. The subpoena return from Member Emanuel's broker provided information that documented when Member Emanuel first had an interest in each sector fluid and when that interest exceeded or fell below $50, 000, the regulatory threshold set by the Office of Government Ethics (OGE) to trigger an 18 U.S.C. § 208 financial conflict of interest. See, 5 CFR 2640.201(b)(2)(i).
The documentation provided by the broker also showed that Member Emanuel received monthly statements and that those statements listed his investments, transactions involving the investments, and the beginning and ending value of the investments. The sector fluids are identified as a "sector fluid" in the fund's name. We also reviewed the annual DAEO's notice to Member Emanuel regarding the approval of his Public Financial Disclosure Report. That notice included a paragraph warning Member Emanuel of the $50, 000 threshold for sector funds and that he may not participate in any particular matter involving the underlying holdings of the funds.
We compared our compiled list of entities in which the sector funds held an equity interest, to a list of cases pending before the Board during the period January 1, 2020 to June 17, 2021. For each case that matched with a sector fund equity interest, we then reviewed documentation to determine if Member Emanuel participated in the matter as a Member, if his participation in the matter was both personal and substantial, and whether Member Emanuel held an interest in the sector fund in excess of $50, 000 at the time of his participation. Through that process, we determined that Member Emanuel participated both personally and substantially in five matters involving an entity held by a sector fund and, at the time of that participation, Member Emanuel had a financial interest in the sector fund that exceeded $50, 000. Documentation is provided as attachment (1).
On August 19, 2021, Member Emanuel participated in an interview after being provided assurances that the statements he made could not be used against him in a criminal proceeding. Prior to providing those assurances, the OIG presented the matter to the U.S. Attorney's Office for the District of Columbia. On August 9, 2021, the U.S. Attorney's Office declined prosecution. During the interview, Member Emanuel generally denied knowledge of his sector fund investments and responsibility for his investment decisions. Member Emanuel also denied understanding the ethics agreement that he signed. A copy of the transcript is provided as attachment (2).
Member Emanuel's position that he lacked knowledge of the conflicting financial interest is without merit. As discussed above, Member Emanuel was provided with monthly statements that detailed his financial investments. When questioned about the statements, Member Emanuel acknowledged that he received the monthly statements and that he reviewed them to determine the overall performance of investments. Member Emanuel, however, denied that he reviewed the statements in detail and denied any knowledge of the sector fund investments. Transcript starting at page 23.
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