N.L.R.B. v. Edward Cooper Painting, Inc.

Decision Date06 November 1986
Docket NumberNo. 85-5735,85-5735
Parties123 L.R.R.M. (BNA) 2905, 55 USLW 2315, 105 Lab.Cas. P 12,089, Bankr. L. Rep. P 71,520 NATIONAL LABOR RELATIONS BOARD, Petitioner, v. EDWARD COOPER PAINTING, INC., and Cooper & Cooper Painting, an alter ego, Respondent.
CourtU.S. Court of Appeals — Sixth Circuit

Elliott Moore, Deputy Associate General Counsel, N.L.R.B., Karen Cordry (argued), Washington, D.C., Emil C. Farkas, Director, Region 9, N.L.R.B., Cincinnati, Ohio, for petitioner.

John C. Anggelis, W. Thomas Bunch (argued), Bunch & Brock, Lexington, Ky., C. Hunter Daugherty, Nicholasville, Ky., for respondent.

Before ENGEL and RYAN, Circuit Judges and CONTIE *, Senior Circuit Judge.

RYAN, Circuit Judge.

This case involves an NLRB petition to enforce a decision and order finding unfair labor practices against respondent Edward Cooper Painting, Inc. (the Corporation), and its alleged alter ego, Cooper & Cooper Painting (the Partnership). The NLRB unfair labor practice proceeding was filed because the Corporation unilaterally terminated the collective bargaining agreement it had with the International Brotherhood of Painters and Allied Trades of the United States and Canada, Local 768 (the Union). After the NLRB proceeding was initiated, the Corporation filed for bankruptcy. The three primary issues presented are: (1) whether this court has jurisdiction to determine whether the automatic stay of judicial proceedings created by 11 U.S.C. Sec. 362(a)(1) when the Corporation filed for bankruptcy applied to the NLRB proceeding; (2) whether the NLRB proceeding was stayed by operation of Sec. 362(a)(1); and (3) whether the NLRB's order is enforceable against the Corporation, or against the Partnership, its alleged alter ego.

For reasons discussed more fully below, we conclude: (1) we have jurisdiction to determine whether the automatic stay applied to the NLRB proceeding; (2) the proceeding was excepted from the stay by operation of 11 U.S.C. Sec. 362(b)(4); and (3) the NLRB's order is enforceable against both the Cooper corporation and the Cooper & Cooper partnership. Therefore, the NLRB's decision is affirmed.

The findings of fact of the NLRB are conclusive if supported by substantial evidence. 29 U.S.C. Sec. 160(e). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)). The following facts are adopted from the Board's decision, and are supported by substantial evidence.

Henry Edward Cooper was the only shareholder and sole manager of the Corporation, which did business in Lexington, Kentucky. In 1981, he employed as many as six people, including his son, David Cooper, who was working foreman of the Corporation's painting operations. Prior to 1981, the Corporation negotiated and signed two collective bargaining agreements with the Union. 1 Each agreement had a term of two years, and expired on March 31, 1980, and March 31, 1982, respectively. In 1981, when one of its major customers decided to accept non-union bids for painting jobs, the Corporation experienced financial difficulty. By July 23, 1981, business was declining and the firm had only three employees, Henry Edward Cooper, David Cooper, and Walter Young, Jr.

On July 24, 1981, the Corporation unilaterally terminated both collective bargaining agreements effective August 1, 1981. This action violated the agreements and was an unfair labor practice in violation of the National Labor Relations Act. Henry Cooper informed Walter Young, Jr., that he could continue to work if he was willing to work under non-union conditions. Young declined the offer, and the Union filed an unfair labor practice complaint with the NLRB. On September 17, 1981, the NLRB filed unfair labor practice charges against the Corporation, seeking backpay on behalf of Walter Young, Jr., and other unnamed employees, as well as equitable relief.

After termination of its relationship with the Union, the Corporation continued in the painting business. The business was operated essentially the same as before the union agreement was terminated, except that non-union employees replaced union employees. The offices, secretary, and telephone number of the business remained the same. The same type of painting work was performed. David Cooper continued as foreman, and Henry Edward Cooper remained owner and operator.

In November of 1981, Henry Edward and David Cooper began operating their business as a partnership under the name Cooper & Cooper Painting. After this organizational change, David Cooper received a salary instead of an hourly wage, participated in partnership decisions, and shared in the Partnership's profits on a forty percent basis. The Partnership continued the painting business previously carried on by the Corporation.

On December 4, 1981, the Corporation filed a petition in bankruptcy under Chapter 11 of the Bankruptcy Code. Although the Board had filed proof of claims with the bankruptcy court in the aggregate amount of $120,296, representing backpay due Walter Young, Jr., and other unnamed employees, the Corporation had been liquidated and the estate closed by order of the bankruptcy court by the time the Board rendered its decision and order on February 12, 1985.

On May 17, 1982, Henry Edward Cooper, an individual, filed for bankruptcy under Chapter 7 of the Bankruptcy Code and was discharged in bankruptcy on December 30, 1982, prior to the Board's decision and order. While the NLRB had notice of Henry Edward Cooper's personal bankruptcy, the Partnership did not raise his bankruptcy as a defense to enforcement of the NLRB's order.

The Cooper & Cooper partnership ended operations on November 4, 1982. Apparently, its business has been taken over by a new corporation.

The Board's order 2 requires the Corporation, and its alter ego, the Partnership, to: (1) cease and desist certain unfair labor practices, including abrogation of the terms of the collective bargaining agreement the Corporation had with the Union and termination of employees solely because they were members of the Union; (2) recognize and bargain with the Union as the designated bargaining representative in a bargaining unit defined in the Board's order; (3) abide by the terms of the abrogated collective bargaining agreement; (4) reimburse all employees and the Union for any losses suffered; (5) reinstate Walter Young, Jr., with backpay; and (6) post NLRB-drafted notice of the foregoing.

I.

The first issue for consideration is whether this court, or the bankruptcy court, has jurisdiction to determine whether the automatic stay provision of 11 U.S.C. Sec. 362(a)(1) applies to the NLRB proceeding. The automatic stay provision of the Bankruptcy Code, 11 U.S.C. Sec. 362, provides, in pertinent part:

"(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title ... operates as a stay, applicable to all entities, of--

"(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

"(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;

* * *

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"(b) The filing of a petition under section 301, 302, or 303 of this title ... does not operate as a stay--

* * *

* * *

"(4) under subsection (a)(1) of this section, of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power;

"(5) under subsection (a)(2) of this section, of the enforcement of a judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power...."

When the Corporation filed for bankruptcy, Sec. 362(a)(1) automatically stayed "the commencement or continuation ... of a judicial, administrative, or other proceeding against the debtor...." In addition, Sec. 362(a)(2) prohibited the enforcement of any judgment against the Corporation which was obtained prior to the filing of the petition in bankruptcy. However, Sec. 362(b)(4) provides that the automatic stay does not affect "an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power...." Finally, Sec. 362(b)(5) allows governmental units to enforce any judgment obtained in the exercise of their police or regulatory power, with the exception of a money judgment.

Respondent contends that the bankruptcy court has exclusive jurisdiction to determine the coverage, modification, or termination of the automatic stay. Therefore, respondent argues, we should "remand" this case to the bankruptcy court for a determination of whether the NLRB proceeding was excepted from the stay. We disagree, because the applicability of the automatic stay to an unfair labor practice proceeding is an issue of law within the competence of this court. See In re Baldwin-United Corp. Litigation, 765 F.2d 343, 347 (2d Cir.1985).

Respondent cites our decision in NLT Computer Services Corp. v. Capital Computer Systems, Inc., 755 F.2d 1253 (6th Cir.1985) for the proposition that only the bankruptcy court has jurisdiction to determine the applicability of the exceptions to the automatic stay. Respondent places particular reliance on our statement in NLT Computer that "[t]he stay provisions of section 362 are automatic and self-operating and those who have knowledge...

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