Paulsen v. Renaissance Equity Holdings, LLC

• Decision Date: 27 March 2012
• Docket Number: No. 12 Civ. 0350(BMC).,12 Civ. 0350(BMC).
• Citation: 849 F.Supp.2d 335
• Parties: James G. PAULSEN, Regional Director of Region 29 of the National Labor Relations Board, Petitioner, v. RENAISSANCE EQUITY HOLDINGS, LLC Renaissance Equity Holdings, LLC A Renaissance Equity Holdings, LLC B Renaissance Equity Holdings, LLC C Renaissance Equity Holdings, LLC D Renaissance Equity Holdings, LLC E Renaissance Equity Holdings, LLC F Renaissance Equity Holdings, LLC G Collectively d/b/a Flatbush Gardens, Respondents.
• Court: U.S. District Court — Eastern District of New York

849 F.Supp.2d 335

James G. PAULSEN, Regional Director of Region 29 of the National Labor Relations Board, Petitioner,

v.RENAISSANCE EQUITY HOLDINGS, LLC Renaissance Equity Holdings, LLC A Renaissance Equity Holdings, LLC B Renaissance Equity Holdings, LLC C Renaissance Equity Holdings, LLC D Renaissance Equity Holdings, LLC E Renaissance Equity Holdings, LLC F Renaissance Equity Holdings, LLC G Collectively d/b/a Flatbush Gardens, Respondents.

No. 12 Civ. 0350(BMC).

United States District Court, E.D. New York.

March 27, 2012.

Aggie Kapelman, Tara O'Rourke, Emily A. Cabrera, National Labor Relations Board, Brooklyn, NY, Ethan P. Davis, United States Department of Justice, Laura T. Vazquez, Washington, DC, for Petitioner.

James M. McGuire, Dechert LLP, New York, NY, Paul D. Clement, H. Christopher Bartolomucci, Viet D. Dinh, Bancroft PLLC, Washington, DC, Stanley L. Goodman, Brian A. Caufield, Fox Rothschild LLP, Roseland, NJ, for Respondents.

MEMORANDUM DECISION

COGAN, District Judge.

Petitioner James G. Paulsen is a Regional Director of the National Labor RelationsBoard (“N.L.R.B.” or “the Board”). He brings this proceeding pursuant to § 10(j) of the National Labor Relations Act, which allows the N.L.R.B. to petition a district court for injunctive relief pending administrative review of an unfair labor practices charge. See29 U.S.C. § 160(j). Respondent Renaissance Equity Holdings, LLC (“Renaissance”) opposes injunctive relief and moves to dismiss the petition, arguing that President Obama's recent appointments to the Board were unconstitutional and the Board therefore lacks the threshold number of members needed to petition this Court. For the reasons stated below, Renaissance's motion to dismiss is denied and petitioner's request for an injunction is granted in part and denied in part.

BACKGROUND

I.

Renaissance owns and operates Flatbush Gardens, a 59–building complex in the East Flatbush section of Brooklyn, New York, that consists of approximately 2,500 rental apartments. Many of the apartments are rent-stabilized or low-income housing. Service Employees International Union Local 32BJ (the “Union”) represents more than 70 porters, handymen, and boilermen employed by Renaissance at the Flatbush Gardens complex. Following a protracted dispute between Renaissance and the Union over the terms of a Collective Bargaining Agreement (“CBA”), Renaissance instituted a lockout against its unionized employees. In turn, the Union filed a charge of unfair labor practices against Renaissance with the N.L.R.B. Petitioner seeks a preliminary injunction from this Court forcing Renaissance to reinstate the unionized workers pending the N.L.R.B.'s final adjudication of the labor dispute.

The most recent CBA between the Union and Renaissance expired on April 20, 2010. Prior to this CBA's expiration, Renaissance began signaling a willingness to begin negotiating a new CBA. The Union, however, was busy negotiating with the Realty Advisory Board (“RAB”), which is a large multiemployer association that bargains with the Union on behalf of many local residential owners. The Union did not want to begin negotiating with Renaissance until it had finalized its agreement with the RAB.

In late May, 2010, Renaissance contacted the Union and expressed an urgent financial need to negotiate a new CBA that would allow Renaissance to cut costs. Negotiations began in June, and the parties conducted between six and ten official bargaining sessions across the next three months. At the first official bargaining session, Renaissance reiterated that it was losing money and demanded: 1.) a 30–40% wage reduction; 2.) that healthcare coverage be limited to full-time employees only; and 3.) the unilateral right cut employees' hours, lay off employees, convert employees from full-time to part-time, and subcontract out union work. Renaissance insisted that these measures were necessary because it was losing millions of dollars per year. When Renaissance presented its last, best, and final offer (the “LBFO”) three months later, each of these terms remained untouched except Renaissance's healthcare provision. (The parties dispute whether the healthcare provision in the LBFO was better or worse than Renaissance's initial healthcare provision.)

Despite Renaissance's pleas of financial hardship, it is undisputed that the Union did not agree to or make a counteroffer that would encompass any decrease in wages. Throughout most of the time that the parties actively bargained, the Union appears to have taken a hardline stance on increased wages and benefits. The Union had achieved an increase in wages in its agreement with the RAB, and therefore insisted that Renaissance meet these “industry standards.” (Renaissance is not a member of the RAB.) There is a “Most Favored Nations Clause” in the Union's contract with the RAB, which would have generally required the Union, absent a waiver from the RAB, to lower the wages of all workers falling under the RAB agreement if the Union had acceded to Renaissance's request for lower wages.

Over the course of bargaining, the Union generally accepted Renaissance's contention that it was operating at a loss but insisted on reviewing Renaissance's books to determine the extent of the losses.¹ The Union's unfair labor practice charges against Renaissance stem in large part from Renaissance's alleged bad-faith response to the Union's request for proof of financial distress. Specifically, the Union alleges that Renaissance failed to provide certain documents that the Union needed to substantiate Renaissance's claims of financial distress and provided misleading documents that understated Renaissance's profit margins.

It is undisputed that Renaissance quickly agreed to let the Union review its books at Renaissance's offices. The Union sent its Director of Finance and Administration, George Reis, to Renaissance's offices for two financial review sessions. At the first session, on July 27, 2010, Reis spent between two and four hours at Renaissance. According to petitioner, he was given access to the general ledgers for the years 2007–2010; general payroll records; and invoices of payments made to vendors. At this meeting, Reis requested audited financial statements and detailed payroll records, but he was told that such documents did not exist because Renaissance does not prepare audited financial statements and has an outside vendor prepare payroll.

After this meeting, Reis, who is a Certified Public Accountant, informed the Union that the information provided by Renaissance showed that Renaissance was suffering economic losses. He also informed the Union that he still had several unanswered questions regarding Renaissance's finances and that he had been unable to conduct a thorough assessment without access to audited financial statements or detailed payroll records. The Union and Reis decided to seek tax returns from Renaissance in lieu of audited financial statements.

On August 19, 2010, Reis went back to Renaissance and again spent a few hours at the office. The parties dispute whether, and to what extent, Renaissance's tax returns were made available to Reis during this meeting. According to petitioner, Reis asked for recent tax returns and was informed that he could not view any full tax returns because the returns contained confidential information regarding entities other than Renaissance. Instead, he was given a one-page summary of a tax return from 2008 and was not permitted to make copies of this document or any of the other documents that he viewed during either review session at Renaissance's offices.

At the second bargaining session, Renaissance provided the Union with a one-page “Statement of Operations” allegedly prepared by its accounting firm based on a review of Renaissance's books and records. The Statement of Operations lists Renaissance's income and expenses for the years 2007, 2008, and 2009. This statement shows multi-million dollar losses in each of the three years, totaling a $28,812,284 loss over three years. The statement contains no information as to how each number was reached, and petitioner claims that some of the figures proved to be false or misleading. For example, the Statement of Operations listed Renaissance's rental income for the year 2009 to be $25,809,836. However, documents submitted by Renaissance in furtherance of a loan modification application showed rental income that is nearly one million dollars greater. Petitioner also argues that the Statement of Operations inaccurately inflated the amount of expenses paid by Renaissance in 2008. Although the Statement of Operations listed expenses in the amount of $3,941,713, the loan modification application lists only $682,982. According to Renaissance, these discrepancies arose because the loan modification application consisted of projected income and expenses, whereas the Statement of Operations listed actual income and expenses.

Petitioner also notes that Renaissance's tax return for 2007, obtained during discovery, showed a property sale of $28,391,653 and a distribution to Renaissance's partners for the same amount. Petitioner argues that a $2.4 million gain was realized from the sale of this property but was excluded from the Statement of Operations. Renaissance claims that this money was derived from a sale of property that was wholly unrelated to Renaissance. According to Renaissance, some of its partners used this “1031 exchange” ( see26 U.S.C. § 1031) to avoid paying taxes on the sale of the unrelated property, and the $28 million merely reflected a pass-through transaction.

In July, 2010, the Union made a written request for copies of the general ledgers. In response to this request, Renaissance provided four pages of unaudited, uncertified financial summaries. According to petitioner, the Union was unable to verify these summaries without copies of the general ledgers and tax returns. During a hearing in front of...