Stardyne, Inc. v. N.L.R.B.
| Decision Date | 06 December 1994 |
| Docket Number | 94-3056 and 94-3096,AFL-CIO-CL,Nos. 94-3054,I,s. 94-3054 |
| Citation | 41 F.3d 141 |
| Parties | 147 L.R.R.M. (BNA) 3028, 63 USLW 2379, 129 Lab.Cas. P 11,241 STARDYNE, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, United Steelworkers of America,ntervenor-Respondent. JOHNSTOWN CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, The United Steelworkers of America,ntervenor-Respondent. NATIONAL LABOR RELATIONS BOARD, Petitioner, v. JOHNSTOWN CORPORATION, and its alter ego, Stardyne, Inc., Respondent, United Steelworkers of America,ntervenor-Respondent. |
| Court | U.S. Court of Appeals — Third Circuit |
Mark E. Scott (Argued), Bridgeville, PA, for Stardyne, Inc.
Clare M. Gallagher (Argued), Doepken Keevican Weiss & Medved Professional Corp., Pittsburgh, PA, for Johnstown Corp.
Frederick C. Havard (Argued), Supervising Atty., Marilyn O'Rourke, Atty., N.L.R.B., Washington, DC, Frederick L. Feinstein, Gen. Counsel, Linda Sher, Acting Associate Gen. Counsel, Aileen A. Armstrong, Deputy Associate Gen. Counsel, for N.L.R.B.
David I. Goldman (Argued), Asst. Gen. Counsel, United Steelworkers of America, Pittsburgh, PA, for intervenor.
Before: STAPLETON, ALITO, and LEWIS, Circuit Judges.
Johnstown Corporation ("Johnstown") and Stardyne, Inc. ("Stardyne") have petitioned for review of an order of the National Labor Relations Board ("the Board"), holding that they violated Section 8(a)(1) and (5) of the National Labor Relations Act ("the Act"), 29 U.S.C. Sec. 158(a)(1) and (5), and the Board has cross-petitioned for enforcement of its order. The Board's order was predicated on the conclusion that Johnstown and Stardyne were "alter egos." In reaching this conclusion, the Board did not disturb a finding by the administrative law judge ("ALJ") that Stardyne was not created to evade Johnstown's responsibilities under the Act. In addition, the Board found it unnecessary to decide whether Johnstown and Stardyne constituted a "single employer."
In their petition for review, Johnstown and Stardyne contend, first, that the Board's conclusion that they are alter egos is inconsistent with the ALJ's undisturbed finding that Stardyne was not created for the purpose of evading Johnstown's obligations under the Act. We disagree with this argument. Johnstown and Stardyne next argue that the Board's holding on the alter ego question is not supported by substantial evidence. Again, we disagree. Finally, Johnstown and Stardyne contend that the Board's alter ego holding is inconsistent with Board precedent to the effect that the alter ego doctrine is a "subset" of the single employer doctrine. We find this argument meritorious. We therefore grant the petition for review in part, and we deny the Board's cross-petition for enforcement in part. We remand to the Board for clarification of its precedents concerning the relationship between the alter ego and single employer doctrines.
In 1988, Johnstown, a manufacturer of steel products, established an innovative laser welding operation at its main facility in Johnstown, Pennsylvania. Scientists affiliated with Pennsylvania State University headed the project, and Johnstown also assigned ten of its production and maintenance employees to work on the laser operation. These employees were members of a bargaining unit represented by the United Steelworkers of America (the "union"), and they continued to be covered by Johnstown's collective bargaining agreement with the union when they were transferred to the laser operation.
By 1989, the laser operation was experiencing significant financial problems. Although Johnstown believed that the operation could become profitable, the company was not prepared to spend any more money on it. Moreover, the scientists who were working on the project were demanding a share of the operation. In order to address these problems, Johnstown decided to sell the laser operation for approximately $2,550,000 to Stardyne, a newly created corporation that was jointly owned by Johnstown and officers of the new company. 1 To finance the purchase, Stardyne borrowed three million dollars. After the arrangements for the spin-off had been made, management representatives met with the Johnstown production and maintenance employees who were interested in continuing to work on the laser operation. All but one of these employees accepted a job with Stardyne, but under terms different from those contained in Johnstown's collective bargaining agreement.
After learning that management had negotiated directly with and hired production and maintenance employees from Johnstown, the union wrote a letter to Stardyne requesting that Stardyne recognize the union as the collective bargaining representative for these employees. Stardyne, however, refused this request, and the union filed unfair labor practice charges with the Board. In response to these charges, the General Counsel filed a complaint alleging that Johnstown and Stardyne were a "single employer" and/or "alter egos," or at a minimum, that Stardyne was a "successor" to Johnstown. The complaint charged that Johnstown and Stardyne had violated Section 8(a)(1) and (5) of the Act, 29 U.S.C. Sec. 158(a)(1) and (5), by bargaining individually with employees represented by the union, by imposing new working conditions on these employees, and by repudiating its collective bargaining agreement with the union.
After notice and a hearing, an ALJ held that Johnstown and Stardyne were guilty of the unfair labor practices charged in the complaint. The ALJ turned first to the question whether Johnstown and Stardyne constituted a single employer or alter egos. When two entities are found to be a single employer, one entity's collective bargaining agreement covers the other entity as well, provided that the two entities' employees constitute a single appropriate bargaining unit. See South Prairie Constr. Co. v. Local No. 627, Int'l Union of Operating Engineers, 425 U.S. 800, 805, 96 S.Ct. 1842, 1844, 48 L.Ed.2d 382 (1976). However, if two entities are found to be alter egos, a collective bargaining agreement covering one entity is automatically deemed to cover the other. Howard Johnson Co. v. Detroit Local Joint Executive Bd. Hotel & Restaurant Employees, 417 U.S. 249, 259 n. 5, 94 S.Ct. 2236, 2242 n. 5, 41 L.Ed.2d 46 (1974); NLRB v. Omnitest Inspection Services, Inc., 937 F.2d 112, 122 (3d Cir.1991).
The ALJ listed the determinative criteria for a single employer finding as "interrelations of operations, common management, centralized control of labor relations and common ownership." 313 N.L.R.B. 170, 178 (1993). The ALJ found that there was common ownership but no interrelation of operations, and he found that the evidence was unclear regarding the participation of Johnstown's management in day-to-day operations and labor relations decisionmaking at Stardyne. Id. at 180. On balance, the ALJ refused to hold that Johnstown and Stardyne were a single employer.
By contrast, the ALJ found that Johnstown and Stardyne were alter egos. The ALJ observed that "[t]he Board's criteria for finding that two entities are alter egos are somewhat broader than its standards for finding a single employe relationship." Id. In addition to the factors considered in deciding whether two entities constitute a single employer, the ALJ noted, other relevant factors in making an alter ego determination include "substantially identical business purposes, operations, equipment, customers and supervision." Id. "A further consideration," the ALJ noted, "is whether the new company was created 'to evade responsibilities under the Act.' " Id. (quoting Fugazy Continental Corp., 265 N.L.R.B. 1301 (1982)). In this case, the ALJ found that Johnstown and Stardyne had substantially identical ownership, business purposes, operations, equipment, customers, supervision, and employees. Id. The ALJ refused to find that Stardyne was created to evade Johnstown's obligations under the Act, 2 but the ALJ nevertheless concluded, based on the totality of the factors, that Johnstown and Stardyne were alter egos. Id. at 181. Relying on these same factors, the ALJ also concluded that Stardyne was Johnstown's successor and was therefore obligated to recognize and bargain with the union that represented Johnstown's employees. 3 Id.
Turning to the substance of the charges in the complaint, the ALJ held that the two companies had violated Section 8(a)(1) and (5) of the Act, 29 U.S.C. Sec. 158(a)(1) and (5), when management representatives bypassed the union, dealt directly with the Johnstown employees assigned to the laser project, and induced them to enter into separate employment agreements. The ALJ further held that the companies had violated Section 8(a)(1) and (5) by unilaterally altering these employees' working conditions. The ALJ therefore recommended that the companies be ordered to recognize and bargain with the union, to abide by the terms of the collective bargaining agreement, and to reimburse any employees who had been injured as a result of any failure to abide by this agreement. Id. at 183.
Both Johnstown and Stardyne filed exceptions to the ALJ's decision with the Board, but the Board adopted the ALJ's recommended order. The Board concluded that it was unnecessary to review the ALJ's determination that Johnstown and Stardyne were a single employer, because the ALJ was correct in finding that "Stardyne is a successor to Johnstown [ ] as well as an alter ego." Id. at 171. The Board so held even though it agreed with the ALJ that "there [was] not sufficient evidence to establish that Stardyne was created so that Johnstown could 'evade responsibilities under the Act.' " Id. (citation omitted).
Johnstown and Stardyne independently petitioned this court for review, and the Board filed a cross-application for enforcement of its order. In their ...
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