Beverly CA Corp v. NLRB , 253 F.3d 291 ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 99-4121 & 00-3881
Beverly California Corporation, formerly
known as Beverly Enterprises and its
Operating Divisions, Wholly Owned Subsidiaries
and Individual Facilities and Each of Them,
Petitioner/Cross-Respondent,
v.
National Labor Relations Board,
Respondent/Cross-Petitioner.
On Petition for Review and Cross-Application
for the Enforcement of an Order
of the National Labor Relations Board.
Nos. 6-CA-20188 et al.
Argued March 26, 2001--Decided June 8, 2001
Before Flaum, Chief Judge, and Bauer and
Rovner, Circuit Judges.
Bauer, Circuit Judge. The National Labor
Relations Board ("NLRB") honored Janet
Glenn’s and Debra Wiley’s request to
disregard the settlement agreement in
which they waived their right to any
backpay the Board might award for Beverly
California Corporation’s violation of
their rights under the National Labor
Relations Act ("NLRA"). After a hearing,
the ALJ awarded Glenn $19,169 and Wiley
$29,903. Beverly asks us to reverse the
NLRB and find that the settlement
precluded the backpay award. We enforce
the Board’s order.
I. Background
Glenn and Wiley, members of the United
Food and Commercial Workers Local 917,
were discharged in 1987 from employ at
the Sycamore Village Health Center, owned
by Beverly. Glenn and Wiley were
plaintiffs in two separate charges
against Beverly--an NLRA charge and a
civil rights claim--which progressed
simultaneously. First, on behalf of
Glenn, Wiley, and others, the Union
charged Beverly with violating the
National Labor Relations Act, 29 U.S.C.
sec. 158(a)(1) & (3), and the NLRB’s
General Counsel filed a complaint against
Beverly. Without the General Counsel’s
consent, the Union and employees agreed
with Beverly to settle the suit for
$1,000, which Beverly paid. However, the
ALJ refused to honor the settlement and
in August of 1991, without deciding the
backpay issue, the ALJ determined that
Beverly violated the Act. Beverly
appealed this decision. Second, during
the same time frame that the labor charge
was pending, Glenn and Wiley filed a
civil rights charge against Beverly with
the Indiana Civil Rights Commission
("ICRC").
Glenn, Wiley, and Beverly treated the
labor and civil rights charges
separately, using different sets of
attorneys to handle each suit. Todd
Ponder handled the civil rights case for
Beverly while Glenn and Wiley relied on
ICRC attorney Frederick Bremer.
Similarly, the NLRB General Counsel
handled Glenn and Wiley’s NLRA charge and
Beverly relied on an unnamed fourth
attorney. Ponder and Bremer became aware
of the NLRB proceeding and the ALJ’s
liability decision while deposing Glenn
regarding the civil rights case.
Believing that the NLRB would hold
Beverly responsible for some amount of
backpay, Ponder endeavored to settle the
civil rights suit in a way which would
minimize the amount. The settlement
provided Glenn and Wiley with some
backpay for the labor violation, which
the attorneys determined using ICRC,
rather than NLRB, procedures. Taking into
account wages that Glenn earned and the
unemployment benefits she received after
being fired, a mutually agreed-upon
formula for determining the wages Wiley
earned after her termination, and the
$1,000 Beverly already paid each woman,
the attorneys figured Glenn and Wiley
should receive $4,000 and $5,000 in
backpay respectively. Beverly also
offered to reinstate both plaintiffs, an
option both declined.
Beverly conditioned the settlement in a
document labeled a "Supplemental
Settlement Agreement": Glenn and Wiley
agreed to treat the amounts they received
as full backpay and relinquish their
right to any additional backpay from the
NLRA charge. Both attorneys understood
that the intended effect of the language
was to foreclose the employees’ right to
backpay from the NLRA charge. Neither
attorney and neither of the employees
notified the Union or NLRB General
Counsel about this settlement until it
was final. Glenn and Wiley, both confused
by the above language, asked Bremer if
the Supplemental Settlement Agreement
waived their right to any backpay the
NLRB may award. According to the
employees, whose version of the facts the
ALJ credited, Bremer assured them that
they would be able to collect any backpay
the NLRB might award.
Subsequently, the ALJ held a hearing to
determine, inter alia, whether Glenn and
Wiley were entitled to backpay. The ALJ
applied the Independent Stave factors and
struck down the settlement. She found
that neither the Union nor the General
Counsel approved the settlement agreement
before it was final and that upon
learning of it, the General Counsel
vigorously opposed it. Further, the ALJ
stated that the level of backpay was not
reasonable given the low level of risk in
the NLRB litigation due to the ALJ’s
previous finding of an illegal action by
Beverly. Finally, the ALJ found that both
Beverly’s attorney Ponder and ICRC attor
ney Bremer misrepresented aspects of the
settlement to Glenn and Wiley; Ponder by
placing the official ICRC caption on two
of the three settlement documents
andhaving the ICRC deliver the documents
to the women although the ICRC was not a
party to the settlement; and Bremer, by
fraudulently misrepresenting that the
settlement still allowed Glenn and Wiley
to collect any further backpay that the
NLRB may award. Moreover, both attorneys
represented that Glenn and Wiley were
getting "full" backpay without telling
them that they would be entitled to much
more using NLRB calculation methods.
Applying the NLRB’s formula for
calculating backpay, the ALJ found that
Glenn was entitled to $19,169 offset by
the $4,000 Beverly already paid and that
Wiley was entitled to $29,903 less the
$5,000 Beverly already paid. Beverly
appealed to the NLRB, which adopted the
ALJ’s findings, except the finding of
fraud by Bremer. Beverly now appeals,
arguing that the ALJ and NLRB misapplied
Independent Stave. The NLRB cross-
petitions for enforcement of its order.
II. Discussion
The sole issue in this case is whether
the NLRB correctly applied its four-part
test when it determined that it was not
bound to honor the settlement agreement.
We defer to the NLRB’s factual decisions
as long as they are supported by
"substantial evidence." See Beverly
California Corp. v. N.L.R.B., 227 F.3d
817, 829 (7th Cir. 2000). Substantial
evidence constitutes evidence which a
reasonable fact finder would consider
adequate to support the conclusion. See
id. (quoting Consolidated Edison Co. v.
N.L.R.B., 305 U.S. 197, 229 (1938));
American Grain Trimmers, Inc. v. Office
of Workers’ Comp. Programs, 181 F.3d 810,
817-18 (7th Cir. 1999). As long as
substantial evidence supports the Board’s
decision, the presence of contradicting
evidence is not of consequence. See
Beverly California Corp., 227 F.3d at
830.
The NLRB is not statutorily obligated to
honor settlement agreements. See N.L.R.B.
v. Int’l Bhd. of Elec. Workers, 992 F.2d
990, 992 (9th Cir. 1993). Exercising its
discretion, the NLRB upholds settlements
unless a "settlement . . . is at odds
with the [NLRA] or . . . with the Board’s
policies." Independent Stave, 287
N.L.R.B. 740, 741. In making this
determination, the Board considers all
the circumstances surrounding the
settlement, including:
(1) whether the charging party(ies), the
respondent(s), and any of the individual
discriminatee(s) have agreed to be bound,
and the position taken by the General
Counsel regarding the settlement; (2)
whether the settlement is reasonable in
light of the nature of the violations
alleged, the risks inherent in
litigation, and the stage of the
litigation; (3) whether there has been
any fraud, coercion, or duress by any of
the parties in reaching the settlement;
and (4) whether the respondent has
engaged in a history of violations of the
Act or has breached previous settlement
agreements resolving unfair labor
practice disputes.
Id. at 743. In this case, the ALJ
considered only the first three factors.
The ALJ weighed the first factor in
favor of scuttling the settlement, noting
that neither the General Counsel nor the
Charging Party (the Union) were consulted
about the settlement before Glenn and
Wiley signed it. Upon learning of the
settlement, the General Counsel expressly
disapproved it. The ALJ acknowledged that
Wiley, Glenn, and Beverly approved the
settlement. Beverly urges us to discount
the relevancy of the General Counsel’s
and Union’s opinion because the
settlement did not impact their ability
to proceed with the violation charge or
seek other relief. It only affected the
amount of backpay Beverly had to pay
Glenn and Wiley. Further, Beverly argues
that because the Union approved a prior
settlement for $1,000, it would
undoubtedly approve this settlement as
well.
A review of NLRB decisions reveals that
the agency considers a General Counsel’s
and Charging Party’s opposition to a
settlement to be a powerful reason to
disregard the settlement unless the NLRB
considers the reasons behind the
opposition to be illegitimate. See Int’l
Bhd. of Elec. Workers, 992 F.2d at 992-
93 (basing decision to disregard
settlement in part on General Counsel’s
adamant opposition to a settlement
regarding amount of backpay);
Fischbach/Lord Elec. Co., 300 N.L.R.B.
474, 476-77 (1990) (giving weight to
General Counsel’s refusal to approve
settlement agreement); Oil, Chem. &
Atomic Workers Int’l, 288 N.L.R.B. 20, 22
(1988) (emphasizing that both the General
Counsel and the Charging Party opposed
the settlement). Further, both the
General Counsel and the Union were
completely circumvented in this
settlement process. Substantial evidence
supported the ALJ’s and Board’s decision
to weigh the first factor in favor of
disregarding the settlement. The fact
that the Union previously approved a
settlement for $1,000 is evidence in
Beverly’s favor, but does not undermine
the basis for the Board’s decision.
The ALJ also found the second factor,
the reasonableness of the settlement in
light of the risk involved, to weigh in
favor of disregarding the settlement.
Although the backpay hearing had not yet
taken place, the issue of liability had
already been decided in the employees’
favor. We acknowledge that the employees
still encountered various risks in the
backpay determination process, see Am.
Pac. Concrete Pipe Co., 290 N.L.R.B. 623,
624 (1988) (discussing risks inherent in
backpay hearings), and that Beverly
appealed the liability finding, but the
litigation risks that Glenn and Wiley
faced were substantially reduced. The
settlement provided the employees with a
strikingly smaller amount of money than
the Board decided they could collect, 15%
of the Board-determined amount for Wiley
and 17% for Glenn. Beverly contends that
the backpay amount was reasonable because
it was calculated according to the ICRC’s
formula. However, the Board commonly
looks to the amount of backpay employees
could recover according to its own
calculations to determine the
reasonableness of the settlement. See,
e.g., Frontier Foundries, Inc., 312
N.L.R.B. 73, 74 (1993) (considering that
settlement provided only for 6% of full
backpay as determined by the Board); Am.
Pac. Concrete Pipe Co., 290 N.L.R.B. at
624. In comparison to the amount the
Board unanimously determined Glenn and
Wiley could recover, the settlement
provides a paltry amount. Given the
reduced litigation risk the employees
faced, (even Beverly’s attorney realized
that the company would likely pay some
backpay) the ALJ deemed the amount to be
unreasonable. This decision was supported
by substantial evidence.
Analysis regarding the third factor is
more complex, and we will not delve into
it. The first and second Independent
Stave factors alone justify the NLRB’s
decision not to honor the settlement
agreement. We Enforce the Board’s order
requiring Beverly to pay Glenn and Wiley
additional backpay.