Trafford Distr Ctr v. NLRB , 478 F.3d 172 ( 2007 )

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
2-26-2007
Trafford Distr Ctr v. NLRB
Precedential or Non-Precedential: Precedential
Docket No. 05-3765
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2007
Recommended Citation
"Trafford Distr Ctr v. NLRB" (2007). 2007 Decisions. Paper 1534.
http://digitalcommons.law.villanova.edu/thirdcircuit_2007/1534
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2007 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
Nos. 05-3765 and 05-4198
__________
TRAFFORD DISTRIBUTION CENTER,
Petitioner in No. 05-3765
v.
NATIONAL LABOR RELATIONS BOARD,
Respondent
_________
NATIONAL LABOR RELATIONS BOARD,
Petitioner in No. 05-4198
v.
LIBERTY SOURCE W, LLC AND ITS ALTER EGO,
TRAFFORD DISTRIBUTION CENTER,
Respondent
__________
On Petitions for Review and Enforcement of a
Decision and Order of the
National Labor Relations Board
(NLRB Case Nos. 6-CA-33661 and 6-CA-33729)
Administrative Law Judge: Paul Bogas
__________
Argued on December 4, 2006
BEFORE: RENDELL, and AMBRO, Circuit Judges,
and BAYLSON*, District Judge
(Filed February 26, 2007)
__________________
* Honorable Michael M. Baylson, Judge of the United
States District Court for the Eastern District of
Pennsylvania, sitting by designation.
2
John B. Bechtel [ARGUED]
Sunshine R. Fellows
Bechtel & Lee
925 Liberty Avenue, 2nd Floor
Pittsburgh, PA 15222
Counsel for Petitioner
Trafford Distribution Center
Aileen A. Armstrong
Fred B. Jacob
National Labor Relations board
1099 14th Street, NW
Washington, DC 20570
Usha Dheenan [ARGUED]
National Labor Relations Board
Contempt Litigation Branch
1099 14th Street, NW, Suite 10700
Washington, DC 20570
Counsel for Respondent
National Labor Relations Board
__________
OPINION OF THE COURT
__________
3
RENDELL, Circuit Judge.
Before the Court is a petition for review of an decision
by the National Labor Relations Board (“NLRB”) holding
that Trafford Distribution Center (“Trafford”) is the alter ego
of Liberty Source W, LLC (“Liberty”). Liberty, whose
primary business was printing and digital services, also
provided a small amount of warehousing services. When
Liberty fell on hard times financially, the secured lender took
possession of its assets. Thereafter several former employees
continued the warehousing business under the auspices of a
new entity, Trafford. After Trafford formed, it declared that it
would not honor the collective bargaining agreements that
existed between Liberty and two unions, the Federation of
Independent Salaried Unions (“the Federation”) and the
International Union of Electronic, Electrical, Salaried,
Machine and Furniture Workers-Communications Workers of
America, Local 601, AFL-CIO (“the IUE”). The unions
brought an action before the NLRB based on alleged
violations of the National Labor Relations Act (“NLRA”).
The Board affirmed the holding of the ALJ that
Trafford was the alter ego of Liberty, and that as a result
Trafford was bound by the collective bargaining agreements
in place between Liberty and the unions. Trafford petitions
for review, arguing that the decision by the Board lacked
substantial evidence and contained an error of law with regard
to the application of the alter ego test. Having reviewed both
4
challenges and found them unavailing, we will affirm the
decision of the Board.
FACTUAL AND PROCEDURAL HISTORY
A. Factual History
Liberty was formed by Joseph Wortley in 1998. It at
one time employed 120 people, had sales in excess of $17
million, and was the second-largest printer in the Pittsburgh
region. Liberty had other divisions in addition to its printing
division. It offered “e-source” (i.e. digital) services, including
web design and CD-ROM production, in addition to software
development. A small part of its business was also devoted to
warehousing (“the warehouse/fulfillment operation”).
Customers such as Heinz Co. shipped materials to be held at
Liberty’s warehouse and Liberty shipped them out as orders
and invoices were received. Roughly 98% of Liberty’s
business was devoted to printing or e-source services; 1-2%
of the business was devoted to warehousing. Approximately
6 of the 120 people who worked at Liberty at its inception
worked in the warehouse operation. App. 89.
The employees were represented by two unions, the
Federation and the IUE. The salaried employees were
represented by the Federation; the IUE represented the hourly
workforce. Beginning in 2002, Liberty began experiencing
financial difficulties. It was unable to repay its debt and
5
eventually its principal lender, Independence Community
Bank (“Bank”), filed a complaint in mortgage foreclosure
seeking over $1.8 million from Liberty. Liberty ultimately
surrendered all of its assets to the Bank on September 2, 2003.
The next day, September 3, 2003, the managers at
Liberty were notified by Liberty President Richard Carmody
that the assets had been surrendered, and that Liberty was to
halt all operations and send the employees home. The unions
did not receive advance notice that Liberty was going to
terminate employees and cease operations. Nor were the
unions given the opportunity to negotiate over those actions
or their effects. Meanwhile, the CFO of Liberty, Patrick
Manderfield, advised the Bank that Liberty’s value as a going
concern was greater than its liquidation value, hoping that the
Bank would continue operating Liberty. The Bank declined
to do so and chose to liquidate the company. Most of
Liberty’s assets were auctioned off.
After the surrender of assets, the printing and e-source
business quickly disappeared. However, Heinz Co. inquired
whether Liberty could keep its inventory at the Trafford, PA
facility and resume the fulfillment services there. Joseph
Wortley notified Liberty’s former management staff that if
they could create a viable business comprised solely of
warehouse/fulfillment services, he would sell it to them for
$1. The staff declined. But they agreed to formulate a
business plan for operating a warehouse/fulfillment business.
6
Sometime later, Barbara Wortley, wife of Joseph Wortley,
agreed to back the endeavor with a $25,000 equity
investment. She later extended a $17,000 loan to the new
entity, Trafford.
Trafford, needing equipment, relied on an appraiser
(Graphtek, Inc.) to assess the value of the items in the hands
of the Bank that were located at the Trafford, PA site.
Trafford ultimately paid the Bank $27,000 for rack shelving,
hand trucks, cabinets, office chairs, desks, pictures, and
computer equipment. App. 367-68.1 The Trafford facility
resumed operations on September 9, 2003, before Trafford
itself was even incorporated. App. 23. Three of Liberty’s
four managers constituted the management at Trafford. Ten
of the twelve Trafford employees were previously employed
by Liberty. Nearly all of Trafford’s initial customers were
former Liberty customers. Liberty’s non-warehouse
customers did not become customers of Trafford. Trafford
also began a new service: leasing out portions of its facility to
1
The ALJ’s decision found that the purchase of the
equipment was not finalized until May 2004. Additionally, it
found that the $27,000 was not to be paid in cash, but was to
be deducted from an amount Trafford’s employees Leonard
Manganello and Pat Manderfield stated the Bank owed them
for services rendered. The ALJ stated that the “record does
not clarify what services Manganello and Manderfield had
rendered to the Bank or why the Bank owed Trafford for
space.” App. 23.
7
AGX International. Trafford’s leasing service accounted for
less than one percent of Trafford’s business. App. 23.
Shortly after Trafford was created, former Liberty
employees Leonard Manganello (former manager of the plant)
and Pat Manderfield (former CFO) began hiring Trafford’s
employees. The employees were selected without regard to
the seniority provisions in Liberty’s contracts with the unions.
Trafford established new wage rates, benefit levels, and other
conditions of employment. The unions demanded that
Trafford abide by the duties set forth in the collective
bargaining agreements to which Liberty was a party. Trafford
refused and the unions filed charges against Liberty and
Trafford alleging violations of Sections 8(a)(1) and 8(a)(5) of
the NLRA. Specifically, the unions claimed that Liberty and
Trafford were alter egos and that they violated the NLRA by
failing to bargain before ceasing operations, terminating the
employment of union-represented individuals without
bargaining, and setting new wages and terms and conditions
of employment for recalled workers.
At the time of the ALJ proceeding, Trafford had a total
of twelve employees. Ten were full-time and two were part-
time. Ten of the twelve were previously employed by
Liberty. App. 24. Liberty never officially dissolved, nor did
it file for bankruptcy. App. 23.
B. Procedural History
8
The ALJ heard evidence in the case on July 19 and
July 20, 2004. He issued his decision in November 2004.
After describing the factual history, he noted the well-settled
principle that employers may not avoid their duties under
their employment contracts by “forming what appears to be a
new company but is in fact a ‘disguised continuance’ or alter
ego of the old company.” App. 25 (quoting Mar-Kay Cartage,
277 N.L.R.B. 1335, 1340 (1985)). The ALJ then described
the Crawford Door test, see Crawford Door Sales Co., 226
N.L.R.B. 1144 (1976), for finding that two companies are
alter egos:
In order to decide if two facially independent
employers are alter egos, the Board considers
whether the two entities have substantially
identical ownership, management, supervision,
business purposes, operation, equipment and
premises, and customers. The Board also looks
to whether the purpose behind the creation of
the alleged alter ego was legitimate or whether,
instead, its purpose was to evade responsibilities
under the Act. No single one among these
factors is determinative of alter ego status and
not all the indicia need be present for the Board
to conclude that a finding of alter ego status is
appropriate.
9
App. 25 (citations and quotations omitted).
The ALJ proceeded to analyze the workings of Liberty
and Trafford in light of these enumerated factors.
1. Management, Supervision, and Ownership
The ALJ noted that Trafford was wholly owned by
Barbara Wortley, wife of Joseph Wortley, the owner of
Liberty, and that the circumstances indicated that a true
transfer of control did not result from Barbara Wortley’s
interposition. He noted that Joseph Wortley was the one who
initiated discussions about continuing the
warehouse/fulfillment operation in some form, and that
Joseph Wortley arranged for a bank to provide special
financing to Trafford on the basis of (yet unrealized) accounts
receivable. The ALJ found that “the totality of the
circumstances confirms that the real control of Trafford was
with J. Wortley, not his wife. A strong showing of common
ownership of Liberty and Trafford has been made.” App. 25.
The ALJ concluded that the record established that
Liberty and Trafford had substantially identical management
and supervision. He noted that three of Liberty’s four
managers became the management team at Trafford and that
their supervisory duties did not change. “Every one of
Trafford’s managers had been a Liberty manager on
September 3,” the day Liberty informed its staff it would
10
cease operations. App. 26. The ALJ found these facts to
constitute a “strong showing” of substantial identity in
management. Id.
2. Equipment and Customers
The ALJ concluded that there was substantial identity
of equipment and customers. Trafford used the same
premises Liberty had occupied until September 3, 2003;
Trafford purchased from the Bank the same exact equipment
that Liberty’s warehouse had used; all of Trafford’s initial
customers were Liberty customers; and 98% of Trafford’s
revenues over the first eight months were from companies
formerly doing warehousing business with Liberty. The ALJ
accordingly found that Liberty and Trafford shared
substantially identical equipment and customers.
3. Motivation
The ALJ first noted that a showing of improper motive
is not necessary to a finding of alter ego status under A&P
Brush Mfg. Corp., 323 N.L.R.B. 303 (1997). The ALJ also
considered it “implausible that J. Wortley would sacrifice the
printing and e-source operations that constituted over 90
percent of Liberty’s business for the purpose of freeing the
warehouse/fulfillment operation from its labor law
11
responsibilities.” App. 26.2 But the ALJ did take note of how
Trafford came into existence. The ALJ noted that the
decision to create Trafford as the vehicle for continuing the
business could have been motivated by a desire to avoid the
obligations of the collective bargaining agreements.
The ALJ also stated that he had little evidence upon
which to base a decision as to the purpose in forming
Trafford. Joseph Wortley did not testify, nor did Barbara
Wortley or Richard Carmody, the President of Liberty, and
the ALJ drew an adverse inference from the failure of the
Wortleys to testify.3 The ALJ noted what he called the
“transparent ploy” of designating Barbara Wortley the owner.
And he saw evidence of an improper motive in Liberty’s
failure to inform the union about the decision to suspend
Liberty’s operations and surrender assets, as well as the
failure to bargain over the effects of ceasing Liberty’s
operations. The ALJ also pointed to the fact that Carmody
refused to accept or process labor grievances as the President
of Liberty after September 3, 2003. These factors led the ALJ
to conclude that “a desire to avoid labor law obligations was a
motivation for those actions.” App. 27. He noted that it
might have been just one of several desires of Liberty and
2
The ALJ added, “As Respondent’s counsel suggested
during trial, that would not be the tail wagging the dog, but
the ‘tip of the tail’ wagging the dog.” App. 26.
3
No claim was made that they were unavailable.
12
Wortley in continuing Trafford, but it was a legally significant
desire all the same. App. 27 n.12.
4. Business Purposes and Operations4
The ALJ deemed the question of substantially identical
business purposes and operations a closer call. It noted that
the warehouse business was a small portion of Liberty’s
overall portfolio (1-2% of the total). But the entirety of
Trafford’s business consisted of continuing Liberty’s
warehouse/fulfillment component. Additionally, Liberty’s
operation remained complete and functioning during the
transition from Liberty to Trafford, “without a significant
hiatus.” App. 26. “The record shows that on September 8,
Trafford simply took over the same work, on the same orders,
for all the same customers that Liberty’s
warehouse/fulfillment operation had serviced until September
3.” Id.The ALJ was “given pause” by the fact that Trafford
continued only a very small part of Liberty’s overall business,
4
The parties, the ALJ, and the Board analyzed “business
purposes and operations” as a single factor and given no
reason to deviate from that approach, we will do the same.
See NYP Acquisition Corp., 332 N.L.R.B. 1041 (2000)
(noting that in the usual case, business purpose will be
“similar to business operation”).
13
and stated that neither party “has identified any decisions
where the Board has considered whether under such
circumstances substantial identity of business purpose and
operation exists for purposes of the alter ego analysis.” App.
26. But the ALJ found roughly analogous precedent in cases
involving successorship, where it noted that the Board “found
sufficient commonality of ownership where even a small
portion of the original company’s business is transferred to
the new enterprise, but a majority of the new enterprise’s
employees are from the predecessor’s bargaining unit.” Id.Based on that precedent and the facts available, the ALJ
found that Trafford and Liberty had substantially similar
business purposes and operations.
The ALJ concluded his analysis by stating that on the
basis of these factors, he found that Trafford and Liberty are
alter egos. “To sum up, the evidence shows that J. Wortley
closed the warehouse\fulfillment business he owned late on a
Wednesday, and resumed that warehouse\fulfillment business
on the following Monday as a new enterprise at the same
location with the same clients, and essentially the same
managers, but without recognizing the Unions or applying the
existing collective bargaining agreements.” App. 27.
In a portion of the ALJ opinion not appealed by
Trafford, the ALJ then found that Trafford had violated
sections 8(a)(5) and 8(a)(1) of the NLRA. He based his
holding on the actions taken by Liberty before, during, and
14
after Liberty’s cessation of operations, as well as on the
actions taken by Trafford in failing to meet the obligations of
Liberty’s labor agreements with the unions.
C. NLRB Decision
In a July 22, 2005 decision by the NLRB Board (a
panel comprised of Chairman Battista and Members Liebman
and Schaumber), the Board affirmed the ALJ ruling. The
panel stated that in “agreeing with the [ALJ] that Trafford is
an alter ego, Chairman Battista, and Member Schaumber find
it unnecessary to pass on the judge’s finding that Trafford and
Liberty Source had substantially identical business purposes
and operations.” App. 16 n.1. Similarly, the panel stated that
in affirming the ALJ’s finding as to the purpose behind the
creation of Trafford, it was not relying on the adverse
inference the ALJ drew from the failure by Trafford to call
the Wortleys to testify. The decision by the panel noted that
one of the panel members, Chairman Battista, “adheres to his
position that the General Counsel must show, inter alia, an
intent to avoid legal obligations under the Act in order to
prove alter ego status. However, recognizing that under
extant Board law, unlawful motivation is not a necessary
element of alter ego finding . . . Chairman Battista concurs
with his colleagues in the finding of alter ego.” App. 16.
After affirming that finding and the ALJ’s finding that
Trafford and Liberty engaged in unfair labor practices, the
15
Board imposed an order designed to remedy the harm caused.
This included an obligation to pay terminated employees back
pay, reinstate certain employees, and comply with the terms
of the collective bargaining agreements.
PETITION FOR REVIEW
Trafford timely appealed the Board’s decision.
Trafford’s challenge to the Board’s decision is confined to the
alter ego issue. Specifically, Trafford claims that the alter ego
finding lacked substantial evidence, and that the Board
committed legal error by failing to consider whether Trafford
and Liberty had substantially identical business purposes.
Trafford does not attack the findings regarding violations of
sections 8(a)(1) and 8(a)(5).
In challenging the alter ego finding, Trafford argues
that the companies are not owned by the same individual; that
the composition of the Trafford management, though it
overlaps with the Liberty management, performs different
jobs; that there was no purpose to evade labor law obligations;
and that “[m]ost importantly, the character and nature of the
two businesses is substantially and materially different.”
Petr.’s Br. 15. Trafford also argues that the Board failed to
apply the proper legal standard when it refused to consider
16
whether Trafford and Liberty had substantially identical
business purposes and operations.5
JURISDICTION
The Board had jurisdiction over the case pursuant to
Section 10(a) of the NLRA. 29 U.S.C. § § 151, 160(a). We
have jurisdiction over the appeal from the Board’s decision
pursuant to Sections 10(e) and 10(f) of the Act. 29 U.S.C. §
160(e)-(f).
STANDARD OF REVIEW
The Court reviews the decision of the Board to
determine whether there is substantial evidence in the record
as a whole supporting the its finding. Stardyne, Inc. v. NLRB,
41 F.3d 141, 151 (3d Cir. 1994) (“[W]e must . . . accept the
Board’s factual determinations and reasonable inferences
derived from factual determinations if they are supported by
substantial evidence.”); see also Universal Camera Corp. v.
5
The NLRB filed a cross-application for enforcement of the
Board’s order. With respect to Liberty, the NLRB claims that
the Board is entitled to summary enforcement against Liberty
because it failed to file an answer to the complaint, appear at
the Board hearing, file exceptions to the ALJ decision, or file
an answer or brief with the Third Circuit. We will grant
enforcement, as noted below.
17
NLRB, 340 U.S. 474 (1951). “Where the Board adopts the
ALJ’s findings of fact and conclusions of law, it is the ALJ’s
determinations that we review.” SCA Tissue N. Am. LLC v.
NLRB, 371 F.3d 983, 988 (7th Cir. 2004). Where the Board
has adopted the ALJ’s decision in part, the Court reviews
both. See NLRB v. Greensburg Coca-Cola Bottling Co., 40
F.3d 669, 670 (3d Cir. 1994).
DISCUSSION
Trafford acknowledges that the key factors in an alter
ego analysis are whether the two organizations have
substantially identical “management, business purpose,
operation, equipment, customers and supervision, as well as
ownership.” Crawford Door Sales Co., 226 N.L.R.B. 1144,
1144 (1976). Our decision in Stardyne, Inc. v. NLRB, 41 F.3d
141 (3d Cir. 1994), noted that “[t]he Board does not require
the presence of each factor to conclude that alter ego status
should be applied.” Id. at 146. We conclude that the relevant
factors, taken in the aggregate, weigh against Trafford.6
6
Trafford argues that both the ALJ and the Board failed to
recognize and evaluate an additional “important factor,” the
negotiations and formalities surrounding the transactions
creating the new entity, and that as a result, the alter ego
finding is not supported by substantial evidence. Petr.’s Br.
24. While the NLRB has on occasion considered negotiations
and formalities when weighing alter ego, see, e.g., United
Bhd. of Carpenters and Joiners of Am., Local No. 745, 312
18
A. Management, Supervision, and Ownership
Trafford acknowledges that substantially identical
ownership may be found where two enterprises are owned by
members of the same family. It also acknowledges that the
management and ownership of Trafford is “similar to that of
Liberty.” Petr.’s Br. 27. But Trafford argues that this is
“insufficient by itself to support an alter ego finding,” id.,which is essentially an irrelevant point because the Board did
not rely solely on the management and ownership of Trafford.
The role of Mrs. Wortley as owner weighs against Trafford.
The ALJ held that “most of the management team that
ran Liberty became managers of Trafford, and every one of
Trafford’s managers had been a Liberty manager on
September 3. This constitutes a strong showing of substantial
identity in management.” App. 26. Trafford claims that the
Board failed to consider substantial evidence indicating that
the tasks performed by its managers are different from those
performed when they were at Liberty. The thrust of this claim
is that Trafford is a small “mom and pop business” where
N.L.R.B. 903, 909 (1993); A-1 Schmidlin Plumbing &
Heating Co., 284 N.L.R.B. 1506, 1513 (1987), it is not a
required factor in the alter ego framework. Moreover, in this
case the overwhelming weight of the factors articulated by the
NLRB in Crawford Door, supra, supports the result reached
by the Board.
19
managers also work in the warehouse area shipping the
materials, and that even if the managers are the same and bear
the same titles, they should be considered different from
Liberty because their tasks are different. The task distinctions
did not alter the supervisory duties of the managers, nor does
Trafford cite to any case where the NLRB or a court found
that the management–despite being composed of the same
management personnel–was different for alter ego purposes
due to changes in tasks performed. The management and
supervision factors weigh against Trafford.
B. Equipment and Customers
Trafford points to the differences between its business
and the printing and e-source services Liberty performed in an
attempt to draw a distinction between Trafford and Liberty’s
customers and equipment. It also attempts to ignore the fact
that the equipment used in running Trafford’s
warehouse/fulfillment business and Liberty's
warehouse/fulfillment business is not only substantially
identical but in many cases is the very same equipment.
Trafford’s current business is run with the equipment
purchased from the Bank that Liberty had turned over as its
assets (equipment which never left the Trafford site and was
purchased by Trafford). There was also evidence that
Trafford did not pay for the equipment for many months, as
well as evidence that Trafford did not have to pay rent to lease
20
the premises for several months. This evidence weighs
against Trafford’s contentions.
Trafford also takes issue with the portion of the
Board’s decision in which it “erroneously assumed that the
relevant time frame for comparing Liberty and Trafford’s
respective customers is limited to the days immediately
following Liberty’s closure and Trafford’s start up.” Petr.’s
Br. 23. Trafford believes that it is more appropriate to focus
on the “entire period following Trafford’s creation.” Id.
However, it presents no evidence indicating that this broader
period would be different. Nor does Trafford dispute the
ALJ’s finding that 98% of Trafford’s customers were
formerly Liberty customers, and that Trafford’s new venture
(which differed from Liberty’s warehousing business model)
comprised less than one percent of its revenues. App. 23.
The NLRB aptly notes that “Trafford never moved to
supplement the record with evidence showing that its
customer base had changed substantially since the hearing.”
Respondent’s Br. 22. The factors of equipment and
customers weigh against Trafford.
C. Motivation
Trafford contends that there is no evidence that
Trafford was formed with anti-union purpose. “Trafford was
not created as a disguise. It was not formed to evade any
labor obligations.” Petr.’s Br. 25. Trafford claims that the
21
“fact that Liberty was irrefutably in default at the time that it
ceased operations and turned over its assets to the Bank” also
weighs against a finding of alter ego. None of these facts
suggest that the ALJ’s decision lacked substantial evidence.
Trafford also argues that the factor of motivation is a “critical
variable” under NLRB v. Omnitest Inspection Services, Inc.,
937 F.2d 112 (3d Cir. 1991), and that “the Board’s
unwillingness to even consider this factor strongly suggests
that its findings are not supported by substantial evidence.”
Petr.’s Br. 27. In fact, it is clear that the Board did affirm the
finding as to improper motivation. The only aspect of the
ALJ’s decision as to motivation that the Board rejected was
the inference drawn from the lack of testimony by the
Wortleys. This factor weighs against Trafford, if only
slightly.
D. Business Purposes and Operations
The business purposes and operations factor is one
which gives us pause, as it did the ALJ and the Board.
Trafford calls the Board’s “most glaring error” the Board’s
failure to “recognize the undeniable fact that the business
purpose of Trafford is separate of that of Liberty. Liberty was
a printing operation. Trafford is a warehousing company.
Trafford does no printing.” Petr.’s Br. 20. Trafford cites to
our decision in Stardyne, Inc., v. NLRB, 41 F.3d 141 (3d Cir.
1994) for its statement that the “main focus of the inquiry is to
determine whether the two employers are the same business in
22
the same market,” id. at 151,7 and Trafford’s claim boils down
to the assertion that because Trafford bears a resemblance
only to a tiny portion of Liberty’s overall business portfolio,
Trafford is not “the same business in the same market.”
Therefore, Trafford contends, it cannot be considered
Liberty’s alter ego.
The Board found that substantial evidence supported
the finding that Trafford and Liberty are alter egos even
without taking into consideration the ALJ’s finding that the
two entities have substantially identical business purposes.
App. 16. Under the alter ego jurisprudence, “[t]he Board does
not require the presence of each factor to conclude that alter
ego status should be applied.” Stardyne, 41 F.3d at 146.
Accordingly, the Board’s finding did not need to rely on this
factor, nor would it mean victory for Trafford had this factor
7
The Board has in prior cases described this factor as
referring to whether the two entities “shared substantially the
same business purpose in whole or in part.” Metro.
Teletronics Corp., 303 N.L.R.B. 793, 798 (1991) (emphasis
added); see also Better Bldg. Supply Corp., 283 N.L.R.B. 93,
95 (1987) (“[A] reduction in the scope of operations has . . .
been held ineffective [to deem the businesses legally distinct],
(i.e., when the alter ego conducts far less business, a portion
of the former business, serves a smaller market, etc.).”)
(footnote omitted); William B. Allen, 267 N.L.R.B. 700, 705
(1983) (standard is “whether the ‘new’ business is
substantially the same, in whole or in part”).
23
been decided in Trafford’s favor. Thus, Trafford faces the
burden of showing that by deeming it “unnecessary to pass
on” the ALJ’s business purposes finding, the Board’s decision
lacks substantial evidence.8
The very cases Trafford cites for support of its
argument that, by not “pass[ing] on” the business purpose
question, the Board lacked substantial evidence, undercut that
argument. As we stated in Stardyne and the NLRB stated in
Sobeck Corp. & Roof Pro, Inc., the presence of each alter ego
factor is not necessary to conclude that an alter ego
relationship exists. See Stardyne, 41 F.3d at 146 (“The Board
does not require the presence of each factor to conclude that
alter ego status should be applied.”); Sobeck Corp. & Roof
Pro, Inc, 321 N.L.R.B. 259, 266 (1996) (“Roof Pro and
Sobeck Corp. share six of the seven criteria delineated . . . .”).
8
The Board stated that “[i]n agreeing with the judge that
Trafford is an alter ego, Chairman Battista and Member
Schaumber find it unnecessary to pass on the judge's finding
that Trafford and Liberty Source had substantially identical
business purposes and operations.” App. 16. We take this to
mean that the holding by the Board neither affirms nor rejects
the finding by the ALJ on that factor. The Board used more
specific language when it stated that it “did not rely on the
adverse inference the judge drew from the failure of the
Respondents to call” the Wortleys to testify. Id.Accordingly, we read the Board as neither rejecting nor
affirming the business purpose finding.
24
Even if the Board’s decision rejected the identical business
purpose finding by the ALJ (and it is not clear that it did, see
n.8 supra), the evidence regarding ownership control, motive,
equipment, customers, the facts of the transition period, and
the composition of management personnel were sufficient in
the Board’s eyes to support the alter ego finding. Trafford
cites to no precedent that holds that a specific finding as to
business purposes is essential to the alter ego finding; indeed,
Stardyne explicitly says that the presence of each factor is not
necessary. Stardyne, 41 F.3d at 146.
Our canvass of NLRB decisions involving partially
reconstituted businesses has uncovered cases where alter ego
was found to be present despite a significant change in scope
of the business. See, e.g., NLRB v. Scott Printing Corp., 612
F.2d 783 (3d Cir. 1979); Metro. Teletronics Corp., 303
N.L.R.B. 793 (1991); Better Bldg. Supply Corp., 283
N.L.R.B. 93, 94 (1987); William B. Allen, 267 N.L.R.B. 700(1983); Custom Mfg. Co., 259 N.L.R.B. 614 (1981). We do
acknowledge that we have found no case with facts as stark as
these. Nevertheless, we agree with the Board and the ALJ
that there is substantial evidence for the alter ego finding in
light of analysis as to the other factors: the similarity in
customers, managers, equipment, and warehouse location; the
brevity of the transition period; and the anti-union inferences.
While on a different set of facts an entity with such a minimal
overlap in business purposes might appropriately be deemed
outside the definition of alter ego, on these facts, where all the
25
remaining alter ego factors point in a single direction, we
have no difficulty affirming the Board’s decision.
The Board has never used a bright-line test to quantify
and assess the amount of business overlap. Instead it has
looked to the facts on a case-by-case basis and balanced
business purposes together with evidence of other similarities
between the companies. The Board has latitude under
Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), to adopt
a test for alter ego, see Stardyne, 41 F.3d at 147-49 (finding
the Board’s alter ego test–which lacks a requirement of proof
of anti-union intent–to be a reasonable interpretation of the
NLRA under Chevron), and Trafford has not argued that the
test is inconsistent with the NLRA under Chevron. Thus, we
conclude that the Board’s application of existing law to the
facts of this case was supported by substantial evidence.
CONCLUSION
The decisions by the ALJ and the Board are supported
by substantial evidence and the petition for review will be
DENIED.
The NLRB has requested summary enforcement
against Liberty in light of the fact that Liberty did not file an
answer to the complaint, appear at the Board hearing, file
exceptions to the ALJ decision, or appeal its decision. Under
Rule 15(b)(2) of the Federal Rules of Appellate Procedure,
26
“[w]ithin 20 days after the application for enforcement is
filed, the respondent must serve on the applicant an answer to
the application and file it with the clerk.” Fed. R. App. P.
15(b)(2). There is no indication that Liberty answered the
NLRB’s cross-petition for enforcement of the Board’s order,
and on that basis the petition for enforcement will be
GRANTED.
_________________
27