N.L.R.B. v. Bolivar-Tees, Inc.

• Decision Date: 04 June 2008
• Docket Number: No. 07-2334.,07-2334.
• Citation: 551 F.3d 722
• Parties: NATIONAL LABOR RELATIONS BOARD, Petitioner, v. BOLIVAR-TEES, INC; Screen Creations, Ltd.; Screen Creations de Mexico; Screen Creations de Celaya; Single Employers; Allan Heller, Respondents.
• Court: U.S. Court of Appeals — Eighth Circuit

551 F.3d 722

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. BOLIVAR-TEES, INC; Screen Creations, Ltd.; Screen Creations de Mexico; Screen Creations de Celaya; Single Employers; Allan Heller, Respondents.

No. 07-2334.

United States Court of Appeals, Eighth Circuit.

Submitted: February 15, 2008.

Filed: June 4, 2008.

William Maurice Bernstein, argued, National Labor Relations Board, Washington, DC, for petitioner.

Terry L. Potter, St. Louis, MO, for respondents.

Before MELLOY, GRUENDER and SHEPHERD, Circuit Judges.

GRUENDER, Circuit Judge.

The National Labor Relations Board ("Board") held that Bolivar-Tees, Inc. ("Bolivar") committed unfair labor practices in violation of the National Labor Relations Act ("NLRA") and ordered the corporation to provide backpay to five former employees. However, when the United States Court of Appeals for the District of Columbia Circuit enforced the order, Bolivar was dissolved and had disposed of all of its assets. In a subsequent compliance proceeding, an administrative law judge ("ALJ") recommended that Screen Creations, Ltd. ("Screen Creations"), Screen Creations de Mexico, Screen Creations de Celaya and Allan Heller be held jointly and severally liable with Bolivar because the corporations constituted a single employer and because the corporate veil should be pierced to allow collection from Heller personally. The Board filed a petition for the enforcement of its Supplemental Decision and Order ("Order"), which adopted the recommendations of the ALJ. We grant the petition and enforce the Order.

I. BACKGROUND

Screen Creations, incorporated in Missouri by Heller's father, made custom, screen-printed tee-shirts. Upon receiving a tee-shirt order from a customer, Screen Creations would purchase the fabric and contract with another entity to cut and sew the fabric into a tee-shirt. The contracted entity would then provide the finished garment to Screen Creations, which would screen print the tee-shirt and ship the final product to the customer. Heller became sixty percent owner of Screen Creations while his father maintained a forty percent interest in the corporation. Heller also exercised overall managerial control of the corporation's operations and was its only officer and director from 1999 to 2003, except for 2002, when the company's annual report also listed Heller's father as one of the directors. Heller drew an average annual salary from Screen Creations of approximately $192,000 from 1990 to 1997, and approximately $120,000 from 2000 to 2003.¹

In an effort to consolidate the production process, Heller incorporated Bolivar in March 1990 to cut and sew fabric into tee-shirts exclusively for Screen Creations. Heller was Bolivar's sole owner, officer and director. At Bolivar's inception, Heller borrowed $170,000 from Screen Creations in return for a promissory note dated March 26, 1990. He used the money to purchase cutting and sewing equipment from one of Screen Creations' subcontractors. Heller then had Bolivar purchase this equipment from him with its promissory note for $170,000. Both promissory notes provided for ten percent interest, payments starting on December 31, 1990, and payment of the remaining principal balance by 1995. Throughout its existence, Bolivar purchased additional equipment, using $501,218 of its own funds.

Bolivar consistently suffered financial difficulties. The amount Bolivar charged Screen Creations for the tee-shirts it manufactured did not cover its basic operating costs. As a result, Bolivar made no payments to Heller on the promissory note, and Heller similarly made no payments to Screen Creations. With interest accruing on the promissory note, Bolivar's books indicated that it owed Heller $357,438 by 2000. Screen Creations, which was generally profitable, also regularly advanced operating funds to Bolivar. By 2001, Bolivar's books also reflected that it owed $202,741 to Screen Creations.

Even beyond the advances, Screen Creations and Bolivar were closely connected financially. In 1997, Screen Creations revised its profit-sharing plan to include Bolivar's employees. From 1999 to 2001, the two corporations were insured under an insurance policy issued to Screen Creations. The policy covered Bolivar's equipment in the amount of $550,000. Finally, Screen Creations, and not Bolivar, provided Heller with a salary and insurance benefits.

In 1998, charges were brought against Bolivar for unfair labor practices. After a hearing, an ALJ found that Bolivar unlawfully suspended and discharged five employees in violation of section 8(a)(1) and (3) of the NLRA, 29 U.S.C. § 158(a)(1), (3). The Board issued an order requiring Bolivar to reinstate the former employees and to make those employees "whole for any loss of earnings and other benefits suffered as a result of the discrimination." Bolivar Tee's Mfg. Co., 334 N.L.R.B. 1145, 1159 (2001) (affirming the ALJ's September 24, 1998 decision). The United States Court of Appeals for the District of Columbia Circuit granted the Board's petition for the enforcement of that order. Bolivar Tee's Mfg. Co. v. NLRB, 61 Fed.Appx. 711 (D.C.Cir.2003) (unpublished per curiam). The Board has since calculated the amount of lost earnings and benefits due to the five discriminatees, concluding that Bolivar owes $96,399.15 in backpay. Bolivar-Tees, Inc., 349 N.L.R.B. No. 70, at *4 (2007).

According to Heller, the North American Free Trade Agreement ("NAFTA") made textile manufacturing unprofitable in the United States but economically advantageous in Mexico. In 1999, Heller began moving Bolivar's equipment to Mexico. In February 2000, Heller incorporated Screen Creations de Mexico, a Mexican corporation, and was a fifty percent owner, the president and a member of its board of directors. By October 20, 2000, Heller had moved all of Bolivar's equipment to Screen Creations de Mexico. Screen Creations de Mexico never paid Bolivar for the equipment or for its use of the equipment.

Heller claims that he transferred the legal title of Bolivar's equipment to Screen Creations and that Screen Creations paid for the equipment by reducing the debt Bolivar owed it on January 1, 2001. Heller did not have Bolivar's equipment appraised at the time of the transfer and did not provide any documentation regarding the change in legal title. Although Bolivar purchased the equipment for $671,218 and it was insured for $550,000, Bolivar's 2001 tax return recorded the transfer as a sale of the equipment in the amount of $225,000, a figure that Heller claims he and his accountant arrived upon after "we went through various scenarios and talked about market conditions, book value and other issues." Screen Creations never actually paid Bolivar. Instead, Heller asserts that the transfer was a "paper transaction," where Bolivar's debt to Screen Creations was reduced by $225,000. However, according to Bolivar's 2001 tax return, Bolivar's debt to Screen Creations was reduced by $122,573, not the full $225,000. With respect to the $102,427 difference, Heller asserts that Screen Creations must have advanced an additional $102,427 during the 2001 tax year. Heller, however, did not provide any documentary evidence supporting this claim.

Bolivar's equipment was its only asset. With no assets left, Bolivar ceased operations in July 2001. In October 2004, the State of Missouri officially dissolved Bolivar for failure to file a 2004 annual registration report. In November 2004, Screen Creations de Mexico also ceased operations. Heller then sent the Bolivar equipment to a Mexican corporation named Confecciones Guanajuanto ("Confecciones"). Heller had no ownership interest in Confecciones, and Confecciones paid no compensation for the use of the equipment. However, Heller hoped to receive future compensation from Confecciones through commissions on product sales.

Screen Creations' operations also moved to Mexico. In November 2001, Heller incorporated Screen Creations de Celaya to conduct the custom screen printing. Heller was a sixty-five percent owner, the president and a member of its board of directors. Heller transferred eighty to ninety percent of Screen Creations' equipment to Screen Creations de Celaya, although the title to the equipment remained with Screen Creations. Screen Creations de Celaya did not pay any compensation for the use of the equipment. Heller claims that Screen Creations de Celaya forwarded a portion of its profits to Screen Creations, although no agreement existed for such payments and no evidence was presented that Screen Creations de Celaya actually made such payments.

By April 2003, Screen Creations ceased all production work and became a service business that engaged in sales and technical assistance to Screen Creations de Mexico and Screen Creations de Celaya, although it has not been compensated for these services. In October 2004, the State of Missouri administratively dissolved Screen Creations for failure to file a 2004 annual registration report. Nonetheless, Screen Creations continues to operate, and Heller is the corporation's only remaining employee. Heller claims that he has loaned more than $300,000 to Screen Creations between 2001 and 2004.

Before Heller transferred Bolivar's assets, Bolivar did not attempt to satisfy the unfair labor practice award against it. In an attempt to collect on the backpay due, the Board issued a compliance specification against Bolivar, Screen Creations, Screen Creations de Mexico, Screen Creations de Celaya and Heller. See Bolivar-Tees, Inc., 349 N.L.R.B. No. 70, at *5. The compliance specification alleged that the corporations and Heller should be held jointly and severally liable for the backpay award against Bolivar because the corporations constituted a single employer² and because the corporate veil should be pierced to allow collection from Heller personally. An ALJ conducted a hearing regarding the allegations of the compliance specification and recommended that...