NLRB v. Herman Brothers Pet Supply, Inc.

• Decision Date: 03 December 1963
• Docket Number: No. 15253.,15253.
• Citation: 325 F.2d 68
• Parties: NATIONAL LABOR RELATIONS BOARD, Petitioner, v. HERMAN BROTHERS PET SUPPLY, INC., and Francis Herman d/b/a Herman Brothers Bird Products, and Leon Herman, d/b/a Herman Brothers Seed Merchants, and Julius J. Herman, Respondents.
• Court: U.S. Court of Appeals — Sixth Circuit

325 F.2d 68 (1963)

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. HERMAN BROTHERS PET SUPPLY, INC., and Francis Herman d/b/a Herman Brothers Bird Products, and Leon Herman, d/b/a Herman Brothers Seed Merchants, and Julius J. Herman, Respondents.

No. 15253.

United States Court of Appeals Sixth Circuit.

December 3, 1963.

Seymour Strongin, Atty., N. L. R. B., Washington, D. C. (Stuart Rothman, Gen. Counsel, Dominick L. Manoli, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, Warren M. Davison, Atty., N. L. R. B., Washington, D. C., on the brief), for petitioner.

Louis Rosenzweig, Detroit, Mich., for respondent.

Before CECIL, Chief Judge, and MILLER and PHILLIPS, Circuit Judges.

PHILLIPS, Circuit Judge.

Herman Brothers Pet Supply, Inc., one of the respondents in this proceeding, went out of business and sold all its inventory to the brother and son of its president and principal stockholder. The liquidation of this respondent and the sale of its assets took place immediately after the following sequence of events: A representation election conducted by the National Labor Relations Board in connection with which respondent was guilty of various unfair labor practices; a victory for the union in said election and certification of the union as the exclusive bargaining representative of respondent's employees; declarations by respondent's president and principal stockholder that he would never sign a union contract and would close up before he would admit a union into his business; the filing of unfair labor practice charges which resulted in a settlement stipulation ordering respondent to bargain with the union; and agreement upon the terms of a collective bargaining contract, which respondent thereafter refused to sign.

The Board issued an order against four respondents, viz.: Herman Brothers Pet Supply, Inc., a Michigan corporation (hereinafter called "Pet Supply"), Julius Herman, individually, and Leon Herman (son of Julius) and Francis Herman (brother of Julius), the two transferees to whom the business was sold, finding violations of § 8(a) (1) and (3) of the National Labor Relations Act, 29 U.S.C. § 158(a) (1) and (3), and directing respondents to cease and desist from such unfair labor practices, to reinstate six discharged employees and to post the customary notices. The order of the Board is reported at 138 N.L.R.B. No. 104. The Board has filed a petition in this Court for the enforcement of its order.

The case is somewhat unusual in that there is no real dispute in this Court as to the occurrence of the alleged unfair labor practices and the fact that such practices were committed by Pet Supply. The issue is whether the Board's order can be enforced against the two transferees of Pet Supply, and this, in turn, depends upon whether there was "a true change of ownership * * * or merely a disguised continuance of the old employer." Southport Petroleum Co. v. N. L. R. B., 315 U.S. 100, 106, 62 S.Ct. 452, 455, 86 L.Ed. 718.

Julius Herman, hereinafter referred to as "Julius," was in the pet supply business, both wholesale and retail, and he and his wife were sole owners of all the capital stock of Pet Supply. Julius was president of the corporation and he, his wife and his brother Francis constituted the Board of Directors. The brief of respondents describes the operations of Pet Supply as follows: "Although Pet was a corporation it was a one-man business operated by Julius Herman." Pet Supply employed four people in the retail end of the business and three at its warehouse.

In October 1960, the Detroit Board of Education commenced condemnation proceedings to acquire the property which housed Julius' offices and Pet Supply's retail business. In February 1961, Julius was notified that the acquisition had been completed. He eventually surrendered the premises in June 1961.

In the meantime some of the employees expressed interest in union representation and on February 27, 1961, the union won, by a 5-2 vote, a Board-conducted representation election. On March 7, the Board certified Local 283 of the Teamsters as the exclusive bargaining representative of Pet Supply's employees.

When Julius informed a union official that he would not sign a proposed contract, the union filed unfair labor practice charges against Pet Supply. This resulted in a settlement stipulation, entered June 19, 1961, which, among other things, ordered Pet Supply to bargain with the union. Pursuant to this, Julius met with the union for negotiations, at the conclusion of which Julius offered to sign the contract. At the suggestion of a union official, however, it was decided to postpone signing until the following Friday, June 23, to allow the employees to ratify the contract, and to give Julius time to consult his lawyer. This contract was never signed.

The union official was informed that Julius was ill and repeated attempts to contact him proved futile. When this official returned to the city on July 12, after an absence of two weeks, he was told that Julius had sold his business and that all but one of the employees had been discharged.

Essentially, Julius sold his retail business to his son, Leon, and his wholesale business to his brother, Francis. The latter was engaged in the manufacturing of pet supplies. The Board found that these purported sales were shams to avoid the obligation of bargaining, that the operation of Pet Supply actually continued as theretofore, and that Leon and Francis were, in this context, the "alter egos" of Pet Supply.

The Board found, and it is not disputed, that both before and after the union election Julius interrogated employees at Pet Supply as to who had instigated the union movement and who had signed union cards. He told several employees that he would never sign a union contract, and that he would close his business before admitting the union. These acts clearly constituted a violation of § 8(a) (1). N. L. R. B. v. Flemingsburg Mfg. Co., 300 F.2d 182 (C.A. 6); N. L. R. B. v. Bendix Corp., 299 F.2d 308 (C.A. 6); United Fireworks Mfg. Co. v. N. L. R. B., 252 F.2d 428 (C.A. 6). Having found that Leon and Francis were "a continuation of the old employer," the Board concluded that all the respondents had violated § 8(a) (3) by discharging and refusing to rehire the six employees. Whereupon, the Board issued against all four respondents an order to cease and desist from these practices and to reinstate the discharged employees.

Respondents do not deny the alleged violations but contend that bona fide sales have been consummated and that the new owners are not subject to the Board's order. This contention is correct if there was in fact "a bona fide discontinuance and a true change of ownership — which would terminate the duty of reinstatement created by the Board's order." Southport Petroleum Co. v. N. L. R. B., 315 U.S. 100, 106, 62 S.Ct. 452, ...