N.L.R.B. v. Laborers' Intern. Union of North America, AFL-CIO, AFL-CIO

• Decision Date: 08 September 1989
• Docket Number: No. 84-4035,AFL-CI,AFL-CIO,No. 38,R,No. 350,38,350,84-4035
• Citation: 882 F.2d 949
• Parties: 132 L.R.R.M. (BNA) 2357, 113 Lab.Cas. P 11,533 NATIONAL LABOR RELATIONS BOARD, Petitioner, v. LABORERS' INTERNATIONAL UNION OF NORTH AMERICA,; and Pipeline Workers Local Union, affiliated with Laborers' International Union of North America, , Respondents, and Pipeline Workers Local Union, affiliated with Laborers International Union of North America, ; and Rollin P. Vinall, Additional Respondents in Contempt.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 949

882 F.2d 949

132 L.R.R.M. (BNA) 2357, 113 Lab.Cas. P 11,533

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. LABORERS' INTERNATIONAL UNION OF NORTH AMERICA, AFL-CIO; and Pipeline Workers Local Union No. 38,

affiliated with Laborers' International

Union of North America,

AFL-CIO, Respondents,

and

Pipeline Workers Local Union No. 350, affiliated with

Laborers International Union of North America,

AFL-CIO; and Rollin P. Vinall,

Additional Respondents in Contempt.

No. 84-4035.

United States Court of Appeals, Fifth Circuit.

Sept. 8, 1989.

Joseph A. Oertel, Arleen Armstrong, William Wachter, Deputy Assoc. Gen. Counsel, N.L.R.B., Sue Dishuck Gunter, Asst. Gen. Counsel, Stanley R. Zirkin, Deputy Asst. Gen. Counsel, Contempt Litigation Branch, N.L.R.B., Karen Cordry and Paul D. Boynton, Attys., Washington, D.C., for petitioner.

Marvin Menaker, Dallas, Tex., Orren Baird, Connerton, Ray & Simon, Washington, D.C., for respondents.

Michael Dunn, Director, Reg. 16, N.L.R.B., Fort Worth, Tex., for other interested parties.

Petition for Adjudication in Civil Contempt and for other Civil Relief.

Before GARZA, REAVLEY, and POLITZ, Circuit Judges.

GARZA, Circuit Judge:

Background

Pipeline Workers Local Union 38 ("Local 38"), until its bankruptcy on June 3, 1985, operated a nonexclusive referral system under successive collective bargaining agreements between the Laborer's International Union of North America and the Pipeline Contractors Association. On February 21, 1980, the National Labor Relations Board ("Board") issued a decision and order finding that Local 38 had unlawfully refused to refer certain employees because of their political opposition to the Local 38 business manager. The Board ultimately found Local 38 liable for about $248,000, and the International liable for about $5,600, in backpay and welfare and pension benefits. On December 17, 1984, the Fifth Circuit issued a decision enforcing the Board's order. See NLRB v. Laborers' International, 748 F.2d 1001 (5th Cir.1984). The International paid its share of the judgment, but Local 38 did not, and instead filed a writ of certiorari to appeal the Fifth Circuit decision.

The Supreme Court denied certiorari, at which point the Board demanded payment from Local 38 of backpay plus the interest due, which totalled about $408,000. Local 38 filed for bankruptcy on July 3, 1985; at that point, the backpay and interest award comprised more than 96% of Local 38's liabilities.

Prior to Local 38's filing for bankruptcy, the Vice-President of the Laborers' International Union of North America ("International") requested that a new local be chartered with the same jurisdiction (Texas, Oklahoma, Southern New Mexico) as Local 38. The International approved this request, and on June 26, 1985 it directed that the entire membership of Local 38 (about 365 persons) be involuntarily transferred into the yet to be chartered Pipeline Workers Local Union No. 350 ("Local 350"). The provisional charter was finally issued on August 5, 1985, retroactive to June 26, 1985.

In bankruptcy court, the Board filed a proof of claim on August 2, 1985, and attended a creditors meeting a few weeks later. The discriminatees for whom the Board was fighting ended up, in the trustee's Report of Proposed Final Distributions filed December 24, 1986, getting about 14% of what they were entitled. Local 38 did not receive a discharge from its debts, since only individuals, not entities, are entitled to such discharges under 11 U.S.C. Sec. 727(a)(1). However, since Local 38's entire membership had been transferred to Local 350, it had no source of income (dues) and, therefore, there was no practical hope of collecting from it in the future.

Realizing it wasn't going to get much, the Board began to depose officers of Local 38, Local 350, and the International in order to investigate the possibility of holding them liable for the judgment. On June 8, 1987, the NLRB Contempt Branch notified counsel for Local 350 and the International that, as a result of its investigation, it had concluded that Local 350 was liable for the unsatisfied portion of Local 38's backpay liability. It also charged that the actions of the International and Locals were designed to frustrate attempts of the judgment issued by the Court of Appeals.

On November 17, 1987, the Board filed a petition to adjudicate the International and Local 350 in civil contempt for refusing to comply with the backpay judgment entered by the Court of Appeals. The Board alleged that the Respondents had acted in concert to render Local 38 judgment-proof by creating an alter ego and disguised continuance, namely Local 350. The Respondents denied that they had sought to evade or frustrate the judgment, and the case went to an evidentiary hearing before a Special Master on October 6 & 7, 1988. The Special Master's report was issued on January 19, 1989, recommending that the Board's allegations be dismissed in their entirety.

Liability of Local 350

The Board first argues that the master's report should have found Local 350 liable for the judgment against Local 38 under a theory of alter ego or disguised continuance. The master held, in part, that Local 350 was not an alter ego of Local 38 because the assets, books, and records of the two entities were maintained separately. Moreover, the master reasoned that since Local 350 did not have a viable existence until after Local 38 filed its petition in bankruptcy, it could not be an alter ego. The master specifically declined to rule on the question of whether Local 350 was a successor union because the Board did not raise this theory in the contempt proceedings and because this issue should be decided in the first instance by the Board. Because we conclude that Local 350 was the successor of Local 38, we do not reach the alter ego issue.

The successor liability doctrine was first applied to labor unions, as opposed to employers, in Local Union No. 46, Metallic Lathers (Cement League), 259 NLRB 70 (1981), enforcement denied in pertinent part, 727 F.2d 234, 237-38 (2d Cir.1984), in which the Board noted that victims of unfair labor practices by unions need a meaningful remedy just as much as victims of unfair labor practices by employers. The Second Circuit in Cement League refused to enforce the imposition of liability on the Carpenter's Union, the alleged successor, not because it considered the successor doctrine inapplicable to unions, but because it found that the Carpenters had no knowledge of the unfair labor practices at the time of the succession. 727 F.2d at 237-38.

In Local Union No. 5741, United Mine Workers v. NLRB, 865 F.2d 733 (6th Cir.1989), the Sixth Circuit considered a case that is remarkably similar to the case at bar. That case involved Local Union 9639, which owed a worker a $12,000 judgment as the result of an unfair labor practice. Two weeks after enforcement was granted by the Sixth Circuit, Local 9639 filed a petition under Chapter 7 of the Bankruptcy Code. Local 9639 was not granted a discharge by the bankruptcy court, and as a result the local simply ceased to function, and ultimately surrendered its charter to the UMW. The ex-members of Local 9639 transferred their memberships to another nearby local, Local 5741. Local 5741 had been in existence long prior to the incidents leading to Local 9639's bankruptcy, instead of being specially chartered to receive the ex-members of Local 9639. In addition, the court did not find that Local 5741 solicited the ex-members of Local 9639 to transfer their memberships; rather, the transfers were prompted by informal word of mouth between local miners, who discussed the proximity of Local 5741.

The Sixth Circuit held that Local 5741 was the successor of Local 9639, and therefore responsible for the unfair labor practice judgment against Local 9639. In reaching that holding, the court considered a "laundry list" of factors which are relevant to a finding of successorship. ¹

Although the special master did not specifically address the liability of Local 350 on a successorship theory, when one compares his factual findings with the facts of Local Union No. 5741, one cannot avoid the conclusion that Local 350 was a successor of Local 38. The territorial jurisdiction assigned to Local 350 by the International was exactly the same territory that Local 38 had exercised jurisdiction over prior to its bankruptcy. Local 350 members performed the same type of work and policed the same pipeline agreement that Local 38 had previously performed. After Local 350 received its charter, it functioned under the same Uniform Local Constitution under which Local 38 had previously operated. When the membership of Local 38 was administratively transferred to Local 350, the members did not have to pay new initiation fees when they joined Local 350. Moreover, the dues structure for Local 350 was the same as in Local 38, and former members of Local 38 were given credit for any excess. Some, but not all, of the members of the Executive Board and some of the employees of Local 350 had previously served in the same capacities in Local 38.

In light of the above facts, we are convinced that a clear case of successorship is presented. In fact, the case for holding that Local 350 is a successor to Local 38 is even stronger than the case before the Sixth Circuit in Local Union No. 5741. Not only did Local 350 know about the judgment against Local 38, it was created for the express purpose of accepting Local 38's membership after it filed for bankruptcy. Moreover, the transfer of members was administrative, and the ex-members of Local 38 did not have to pay initiation fees at Local 350.

Once the Board has made a prima facie case of noncompliance with the order, the burden is on the respondent to show, plainly and unmistakably, that it is unable to comply. Donovan v. Sovereign Security, Ltd., 726 F.2d 55, 59 (2d Cir.1984); NLRB v. Trans Ocean Export Packing, Inc., ...