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Parties Involved:
Lakeland Bus Lines, Inc.
Respondent
National Labor Relations Board
Petitioner

Document Text:

Notice: This opinion is subject to formal revision before publication in the

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 15, 2003 Decided November 4, 2003

Nos. 02-1260

& 02-1302

LAKELAND BUS LINES, INC.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

On Petition for Review and Cross-Application

for Enforcement of an Order of the

National Labor Relations Board

Richard J. Delello argued the cause and filed the briefs for

petitioner. Alan I. Model entered an appearance.

David A. Fleischer, Senior Attorney, argued the cause for

respondent. With him on the brief were Arthur F. Rosenfeld, General Counsel, John H. Ferguson, Associate General

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

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Counsel, Aileen A. Armstrong, Deputy Associate General

Counsel, and Charles P. Donnelly, Supervisory Attorney.

Before: EDWARDS, RANDOLPH, and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge EDWARDS.

EDWARDS, Circuit Judge: Petitioner Lakeland Bus Lines,

Inc. (‘‘Lakeland’’ or ‘‘the Company’’) is a private bus company

whose drivers are represented by the Amalgamated Transit

Union, Local 1614, AFL-CIO (‘‘the Union’’). In late 1996,

Lakeland and the Union entered into negotiations over a new

collective bargaining contract. The parties’ existing agreement expired on January 31, 1997. In February 1997, when

negotiations failed to produce a new agreement, the Company

gave a final offer to the Union. On the same day, Lakeland’s

President sent a letter to bargaining unit employees detailing

the Company’s bargaining position and financial difficulties.

Shortly thereafter, the Union requested that the Company

provide financial information to verify that it could not afford

any contract terms that exceeded the costs of its final offer.

Company representatives refused to furnish any of the requested information, clarifying that Lakeland had never

based its bargaining position on an inability to pay. Lakeland’s employees subsequently rejected the Company’s final

offer. Lakeland then unilaterally implemented the terms of

its final offer.

The Union filed unfair labor practice (‘‘ULP’’) charges

against the Company with the National Labor Relations

Board (‘‘NLRB’’ or ‘‘the Board’’) in March 1997, claiming that

Lakeland had failed to bargain in good faith in violation of the

National Labor Relations Act (‘‘NLRA’’ or ‘‘the Act’’). Following issuance of a complaint, the matter was heard by an

Administrative Law Judge (‘‘ALJ’’). The ALJ dismissed the

complaint, finding that Lakeland had never asserted an inability to pay. The Board reversed the ALJ’s decision. Although it largely agreed with the ALJ’s findings of fact, the

Board concluded that the letter from Lakeland’s President

implicitly asserted an inability to pay that the Company never

effectively retracted. The Board therefore concluded that

Lakeland had engaged in unfair labor practices by refusing to

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furnish the requested information and by unilaterally implementing its final offer in the absence of a valid impasse.

Lakeland petitioned this court for review, arguing that the

Board’s conclusions are not supported by substantial evidence

on the record as a whole. The Board filed a cross-application

for enforcement.

The Board’s decision is not supported by substantial evidence. Viewing the record as a whole, it cannot be found that

Lakeland asserted an inability to pay. It is absolutely clear

in the record that any statements from the Company that

arguably implied an inability to pay were unequivocally clarified and that the Union understood the clarification. We

therefore hold that the Board erred in concluding that Lakeland committed ULPs in refusing to furnish the disputed

information and in unilaterally implementing its final offer.

Accordingly, we grant Lakeland’s petition for review and

deny the Board’s cross-application for enforcement.

I. BACKGROUND

The Board found that the relevant facts are not in dispute.

See Lakeland Bus Lines, Inc., 335 N.L.R.B. 322, 322 (2001)

(‘‘Order’’). We will briefly summarize the facts before turning to the issues presented by the petition for review.

Petitioner Lakeland operates a commuter bus service between western New Jersey and New York City. The Company has had a collective-bargaining relationship with the Union

for more than 20 years. With a collective bargaining agreement set to expire in January 1997, Lakeland and the Union

commenced negotiations for a new agreement in November

1996. The parties held 11 bargaining sessions. Lakeland’s

bargaining position during these negotiations was heavily

influenced by the recent institution of a commuter rail service

by the State of New Jersey that overlapped some of the

routes operated by Lakeland. As a consequence of this new

competition, Lakeland faced significant losses in ridership and

revenue.

In light of these claimed losses, the Company requested

several concessions from the Union in the new contract.

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Negotiations focused in particular on Lakeland’s request for

an extended wage freeze and for a modification of the Company’s rules regarding ‘‘spread time,’’ which determined the

availability of overtime pay for bus drivers. Lakeland repeatedly stated that it needed these concessions because of

the revenue losses it had incurred as a result of the new rail

service. On February 21, 1997, the parties met for what

proved to be their final bargaining session. Lakeland proposed a one-time payment of $500 per employee in exchange

for the Union’s acceptance of its proposals. The Union would

not agree to the modification of the spread time rules and the

parties failed to reach an agreement.

On February 25, 1997, Lakeland submitted its final offer to

the Union. The offer included the wage freeze, the new

spread time rules, and the $500 bonus payment. In addition,

the president of the Company sent a letter to bargaining unit

employees urging their acceptance of the final offer. The

letter stated in relevant part:

[A]s you know, we have lost 7500 riders per week to

New Jersey Transit Rail. However, we are attempting to do it with minimal impact on each of the

members of our family, i.e., YOU.

TTTT

[As] those of you who have been around for a

while know, I am not one to ‘‘cry wolf.’’ I believe in

being honest, and that is just what I am trying to do.

Simply stated, we are trying to bring the bottom line

back into the black and we are doing this by increasing charters, reducing liability insurance costs and

negotiating with NJT for additional lines to utilize

our manpower and equipment.

We are simply all doing what must be done, and

now, we are asking for help from our LAKELAND

FAMILY so we may retain your jobs and get back

in the black in the short term and continue to share

our good fortune as we have in the past.

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Therefore, I ask you to give the enclosed Final

Offer your serious consideration and vote YES to

ratify it. The future of Lakeland depends on it.

Letter from Lakeland President to Lakeland Employees

(Feb. 25, 1997), quoted in Order, 335 N.L.R.B. at 322 (alterations in original). The next day, Union attorney John Craner

wrote a letter to Lakeland attorney Desmond Massey expressing confusion over the Company’s position and requesting that the Company verify its claims by providing financial

information to the Union. The letter stated:

The Union is having a great deal of difficulty in

understanding the position of the company. On the

one hand it talks about its financial woes and looks

for all types of give-backs and at the same time

offers the employees a $500 bonus amounting to

approximately $40,000. To the Union, none of this

makes sense. And, the reason it doesn’t make sense

is because the Union has been accepting the representations of the Company as to the extent of the

losses it claims are due to the loss of passengers as a

result of the rail line which now competes with

Lakeland on its 24 lines.

Accordingly, since the [spread time issue] seems

so critical and the company contends it is sustaining

substantial losses, the Union now feels it is imperative to ascertain the extent of this loss, if any and

wants to have its accountant inspect the company

books and records before any further negotiations

take place or any ‘‘final offers’’ are put on the table.

Letter from Craner to Massey (Feb. 26, 1997), quoted in

Order, 335 N.L.R.B. at 334. In response, Massey denied that

the Company had any obligation to disclose the requested

financial information. And, in an effort ‘‘[t]o set the record

straight,’’ Massey made it expressly clear

that the Company was losing money, not that the

company’s financial condition precluded it from

agreeing to the Union wage proposal. No claim of

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financial inability, explicit or implicit, was made by

myself or any company official.

Letter from Massey to Craner (Mar. 11, 1997), quoted in

Order, 335 N.L.R.B. at 334. Craner and Massey subsequently exchanged another set of letters to similar effect. Massey

again reiterated that ‘‘[a]t no time did I or any Company

official claim a present inability to pay or a prospective

inability to pay during the life of the contract being negotiated.’’ Letter from Massey to Craner (Mar. 27, 1997), quoted

in Order, 335 N.L.R.B. at 335.

On March 28, 1997, following the employees’ rejection of

the Company’s final offer, Lakeland unilaterally implemented

the terms of its final offer. This included the modification of

the spread time rules and the $500 per employee payment.

See Order, 335 N.L.R.B. at 335. In October 1997, the bargaining unit employees went on strike. During the strike,

the Union distributed a leaflet to customers apologizing for

any inconvenience associated with the work stoppage. The

Union’s leaflet also stated that,

[w]hen [the Union] requested an audit of their

books, Lakeland refused, admitting that they were

not, in fact, under any hardship from a loss of

revenue, but instead, chose not to offer any increases in wages.

See Union Leaflet to Customers (Oct. 28, 1997), quoted in

Order, 335 N.L.R.B. at 335.

The Union filed charges with the Board on March 27, 1997,

contending that Lakeland had violated the NLRA by refusing

to supply the requested financial information and by failing to

bargain in good faith. On May 26, 1998, NLRB General

Counsel issued a complaint. The General Counsel charged

Lakeland with violating § 8(a)(1) and (5) of the Act by

refusing to disclose its financial information or to bargain in

good faith. The General Counsel also charged that this

refusal had precluded the parties from reaching a valid

impasse in negotiations, so that Lakeland’s unilateral implementation of its final offer also violated the Act.

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In proceedings before the ALJ, the General Counsel conceded that Lakeland had never expressly claimed an inability

to pay. Rather, the General Counsel argued that the Company’s statements during the course of bargaining amounted to

an implicit claim. See Order, 335 N.L.R.B. at 332. The

General Counsel further conceded – and the Board does not

dispute – that ‘‘but for the alleged refusal to furnish information, a valid impasse was reached and therefore the Company

would have been within its rights in implementing its last

offer.’’ See id.

The ALJ dismissed the complaint. In the ALJ’s view,

Lakeland’s disputed assertions during bargaining related

solely to loss of revenue and ridership, not an inability to pay.

The ALJ held that such assertions did not trigger any duty to

disclose the requested financial information. The ALJ further found that even if Lakeland had implicitly asserted an

inability to pay, Massey’s exchange of letters with Craner

retracted the claim and discharged any obligation the Company may have incurred. See id. at 338.

The Board rejected the ALJ’s conclusions and found that

Lakeland had violated the Act by failing to produce the

financial information. The Board relied almost exclusively

upon the February 25 letter from the Company’s President to

bargaining unit employees urging the adoption of the final

offer. In particular, the Board found that the President’s

statements that the Company was ‘‘trying to bring the bottom

line back into the black,’’ that acceptance of the final offer

would enable the Company to ‘‘retain [employee] jobs and get

back in the black in the short term,’’ and that the ‘‘future of

Lakeland depends on’’ acceptance of the final offer conveyed

an inability to pay. Id. at 324-25. The Board further concluded that Lakeland had not effectively retracted this claim.

Massey’s statements, the Board reasoned, constituted a denial that the Company was claiming an inability to pay. According to the Board, an effective retraction would first

require acknowledgment of the claim to be retracted. Consequently, a denial logically could not accomplish a retraction.

See id. at 326. Accordingly, the Board found that Lakeland

had unlawfully refused to furnish its financial information.

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This refusal to bargain prevented the parties from reaching a

valid impasse. Absent a valid impasse, Lakeland’s unilateral

implementation of its final offer also violated the Act. See id.

Lakeland filed this petition for review, and the Board crosspetitioned for enforcement of its decision.

II. ANALYSIS

Sections 8(a)(5) and 8(d) of the NLRA make it an unfair

labor practice for an employer to refuse to bargain collectively and in good faith with the representatives of its employees.

See 29 U.S.C. § 158(a)(5), (d) (1998). This obligation to bargain in good faith requires that employers and unions exchange relevant information when necessary to substantiate

assertions made during collective bargaining. See NLRB v.

Truitt Mfg. Co., 351 U.S. 149, 152-53 (1956). In Truitt, the

Supreme Court held that when an employer bases its bargaining position on an asserted inability to pay, information

about the employer’s finances becomes relevant to the negotiations. See id. In this situation, a union may be entitled to

examine the company’s books in order to verify the claim.

See id. at 153. A company that asserts an inability to pay

and then refuses to furnish substantiating financial information upon request from a union fails to bargain in good faith.

See id.; see also ConAgra, Inc. v. NLRB, 117 F.3d 1435,

1438-39 (D.C. Cir. 1997). Truitt emphasized, however, that it

does not automatically follow that a union is entitled to

substantiating evidence in every case in which economic

inability is raised as an argument against increased wages.

Truitt, 351 U.S. at 153. Rather, ‘‘[e]ach case must turn upon

its particular facts.’’ Id.

In ConAgra, we recognized that the Board’s application of

Truitt’s mandate has been evolving. 117 F.3d at 1439-42.

Prior to 1991, the Board construed Truitt to oblige an employer to provide financial information to a union upon request even when the employer asserted only a ‘‘competitive

disadvantage.’’ Id. at 1439. In Nielsen Lithographing Co.,

the Board changed its course and ruled that a claim of

competitive disadvantage is not the same as a claim of

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financial inability to pay. 305 N.L.R.B. 697, 699 (1991), aff’d

sub nom. Graphic Communications Int’l Union v. NLRB,

977 F.2d 1168 (7th Cir. 1992). Subsequent decisions, both

from the Board and this court, have emphasized a distinction

between asserting an inability to pay, which triggers the duty

to disclose, and asserting a mere unwillingness to pay, which

does not. See, e.g., United Steelworkers v. NLRB, 983 F.2d

240, 244 (D.C. Cir. 1993); Beverly Cal. Corp., 310 N.L.R.B.

222, 226-27 (1993), enforced in part, Torrington Extend-ACare Employee Ass’n v. NLRB, 17 F.3d 580 (2d Cir. 1994).

Even where an employer’s statements suggest an inability

to pay, no duty to disclose arises if that employer clarifies

that it did not intend to plead financial inability. See Fairhaven Props., Inc., 314 N.L.R.B. 763, 769 (1994). This rule

cogently reflects the rationale underlying the Truitt obligation to disclose financial information. A refusal to disclose,

the Supreme Court noted, could amount to a failure to

bargain in good faith where ‘‘an employer mechanically repeats a claim of inability to pay without making the slightest

effort to substantiate the claim.’’ Truitt, 351 U.S. at 153. In

this same vein, the Board has made it clear that a mere

disclaimer of an asserted inability to pay is not dispositive.

Shell Co., 313 N.L.R.B. 133, 134 n.7 (1993). However, if an

employer obliquely, unintentionally, or momentarily implies

an inability to pay, the failure to substantiate this claim is not

bad faith where the balance of the employer’s representations

disavow any such claim. Cf. Truitt, 351 U.S. at 153-54 (‘‘The

inquiry must always be whether or not under the circumstances of the particular case the statutory obligation to

bargain in good faith has been met.’’).

In this case, the Board determined that certain phrases in

the employer’s February 25 letter to bargaining unit employees implied that the concessions the Company demanded

from the Union were necessitated by the Company’s inability

to pay. The Board further concluded that Lakeland never

effectively retracted this claim. In its petition for review to

this court, Lakeland’s principal claim is that the Board’s

decision is not supported by substantial evidence. We will

now turn to this claim.

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‘‘A reviewing court sets aside decisions of the Board only

when the Board has acted arbitrarily or otherwise erred in

applying established law to the facts, or when its findings of

fact are not supported by ‘substantial evidence’ in the record

considered as a whole.’’ ConAgra, 117 F.3d at 1438. Normally, we will reverse a Board decision for lack of substantial

evidence ‘‘only when the record is ‘so compelling that no

reasonable factfinder could fail to find’ to the contrary.’’

United Steelworkers, 983 F.2d at 244 (quoting INS v. EliasZacarias, 502 U.S. 478, 484 (1992)). As the Supreme Court

has explained, however, ‘‘[t]he substantiality of evidence must

take into account whatever in the record fairly detracts from

its weight.’’ Universal Camera Corp. v. NLRB, 340 U.S. 474,

488 (1951). Accordingly, we may not find substantial evidence ‘‘merely on the basis of evidence which in and of itself

justified [the Board’s decision], without taking into account

contradictory evidence or evidence from which conflicting

inferences could be drawn.’’ Id. at 487.

Applying these principles, it is clear that the Board’s

decision in this case fails to take account of contradictory

evidence and is not supported on the record as a whole. The

Board based its decision on three statements in the employer’s February 25 letter. In that letter, Lakeland’s President

‘‘stated that [the Company] was ‘trying to bring the bottom

line back into the black,’ that acceptance of the final offer

would enable [Lakeland] to ‘retain your jobs and get back in

the black in the short term,’ and that ‘[t]he future of Lakeland depends on it.’ ’’ Order, 335 N.L.R.B. at 324-25. Analogizing to a previous holding that statements that a company’s

business condition was ‘‘bad’’ and ‘‘a matter of survival’’

implicitly asserted an inability to pay, the Board concluded

that Lakeland’s statements ‘‘reasonably conveyed a present

inability to pay.’’ Id. at 325 (citing Shell Co., 313 N.L.R.B.

133 (1993)).

It is debatable whether these three statements, viewed in

isolation, imply an inability to pay, as opposed to a mere

unwillingness to pay. When considered in light of the record

as a whole, however, it is absolutely clear that the statements

do not provide a sufficient basis for the Board’s decision.

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The Board purports to consider the letter ‘‘in context.’’ Order, 335 N.L.R.B. at 325, 326. Indeed, its own precedents

require that it do so. See, e.g., Burruss Transfer, Inc., 307

N.L.R.B. 226, 228 (1992) (holding that an employer’s statement that he did not ‘‘feel that he could afford’’ the union’s

proposals did not trigger a duty to disclose because ‘‘the

overall context of bargaining’’ did not suggest an inability to

pay). Nevertheless, the Board decision focuses principally on

the February 25 letter to support its conclusion.

The Board also references Lakeland’s ‘‘repeated assertions

during negotiations about its loss of ridership and revenue.’’

Order, 335 N.L.R.B. at 326. But these assertions involve

nothing more than claims of short-term business losses. The

Board and courts have distinguished between claims of business losses and competitive disadvantage versus claims that

the employer cannot pay. See, e.g., ConAgra, 117 F.3d at

1443; Beverly Cal. Corp., 310 N.L.R.B. at 227. As the Board

noted in Nielsen:

The employer who claims a present inability to pay,

or a prospective inability to pay during the life of the

contract being negotiated, is claiming essentially

that it cannot pay. By contrast, the employer who

claims only economic difficulties or business losses

or the prospect of layoffs is simply saying that it

does not want to pay.

Nielsen, 305 N.L.R.B. at 700. Thus, the case law makes it

clear that claims regarding business losses are not equivalent

to claims of inability to pay and they alone do not trigger the

Truitt obligation to substantiate an asserted inability to pay.

See, e.g., Stroehmann Bakeries, Inc. v. NLRB, 95 F.3d 218,

222 (2d Cir. 1996) (‘‘[W]here an employer claims only general

economic difficulties or business losses as the reason for its

position, the employer may lawfully refuse to hand over

financial information.’’).

The Board’s only other reference to ‘‘context’’ relates to

statements that Lakeland failed to make regarding its continued profitability. See Order, 335 N.L.R.B. at 325-26. Obviously, if a company asserts that it is profitable, this may serve

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to negate any suggestion that the company has asserted an

inability to pay. See ConAgra, 117 F.3d at 1443. Therefore,

it is hardly surprising that the Board has found assertions of

profitability relevant in cases of this sort. See Nielsen, 305

N.L.R.B. at 700-01. However, the Board has never held that

the absence of evidence on profitability is determinative.

In this case, during collective bargaining negotiations, the

Company claimed only short-term business losses, not an

inability to pay. Then, in the February 25 letter, an issue

arose as to whether the Company had asserted an inability to

pay by stating that it needed to get ‘‘back in the black in the

short term.’’ But the Company quickly defused any confusion over this matter by explicitly disclaiming any intention to

assert an inability to pay. In this context, the Company’s

failure to positively assert that it was profitable cannot be

determinative.

Rather than the clipped view of the record it chose to take,

the Board should have fully considered the entire course of

negotiations in determining whether the Company was truly

pleading an inability to pay. For example, when the Union

initially requested that the Company turn over its books,

Lakeland’s attorney responded: ‘‘[T]o set the record straight,

I advised that the Company was losing money, not that the

company’s financial condition precluded it from agreeing to

the Union wage proposal. No claim of financial inability,

explicit or implicit, was made by myself or any company

official.’’ Letter from Massey to Craner (Mar. 11, 1997),

quoted in Order, 335 N.L.R.B. at 334. And when the Union

persisted in requesting the information, Lakeland’s attorney

again wrote that ‘‘[a]t no time did I or any Company official

claim a present inability to pay or a prospective inability to

pay during the life of the contract being negotiated.’’ Letter

from Massey to Craner (Mar. 27, 1997), quoted in Order, 335

N.L.R.B. at 335.

In view of these clarifying statements, the Board could not

plausibly conclude that Lakeland asserted an inability to pay.

See Georgia-Pacific Corp., 305 N.L.R.B. 112, 116 (1991) (holding that a subsequent letter made it ‘‘clear that Respondent

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[was] not pleading poverty or an inability to retain the

contractual ‘status quo,’ simply an unwillingness to continue

to pay fringe benefits or wages that would make competition

more difficult’’). Indeed, the Union understood as much. In

the leaflet distributed to Lakeland customers during the

October 1997 strike, the Union related details of the bargaining process and the Union’s request for financial information.

In the Union’s view, after Lakeland refused to disclose the

requested material, the Company ‘‘admitt[ed] that they were

not, in fact, under any hardship from a loss of revenue, but

instead, chose not to offer any increases in wages.’’ Union

Leaflet to Customers (Oct. 28, 1997), quoted in Order, 335

N.L.R.B. at 335 (emphasis added). Despite the inferences

the Board attempts to extract from the February 25 letter,

the record as a whole shows that Lakeland simply did not

rest its bargaining position on an inability to pay. Accordingly, no Truitt obligation to disclose financial information arose.

In its decision, the Board opted to split its inquiry into two

steps, asking first whether it could discern any statements

from the employer that triggered a duty to disclose. Having

concluded that the February 25 letter, coupled with repeated

claims during negotiations about loss of ridership and revenue, asserted an inability to pay, the Board then considered

whether any subsequent statement from the employer adequately retracted the initial claim such that the obligation to

produce financial information was discharged. A similar approach was followed in Fairhaven Properties. See 314

N.L.R.B. at 769. Even adopting this approach, the Board’s

decision is not supported by substantial evidence. As noted

above, in the exchange of letters between Company and

Union counsel, Lakeland repeatedly stated that at no time

had it claimed an inability to pay. These statements indisputably disavowed any contrary impression Lakeland’s statements during bargaining and in the February 25 letter might

have left regarding the Company’s position. The Board ruled

otherwise, reasoning that, by definition, one could not ‘‘retract’’ a statement without first acknowledging having made

it. The letters from Lakeland’s attorney denied making the

assertion and therefore, in the Board’s view, logically could

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not have constituted a retraction. See Order, 335 N.L.R.B. at

326. This argument is unavailing. Lakeland responded precisely to the Union’s request for financial information by

making it unmistakably clear that it did not rely on an

inability to pay to justify its bargaining position. There is

nothing in the Board’s order or the ALJ’s findings to suggest

that these disavowals were made disingenuously or in bad

faith. Cf. Shell Co., 313 N.L.R.B. at 134 n.7, 138 (finding that

an express retraction was not dispositive where the company

‘‘was playing semantical games’’). The record therefore does

not support the Board’s conclusion.

Because Lakeland did not assert an inability to pay, it

incurred no obligation to disclose the requested financial

information. Its refusal to do so therefore did not constitute

a refusal to bargain. The finding that the parties had otherwise reached an impasse thus stands unrefuted. See Order,

335 N.L.R.B. at 332. The Company therefore did not violate

the Act by unilaterally implementing the terms of its final

offer. See Am. Fed’n of Television & Radio Artists v.

NLRB, 395 F.2d 622, 624 (D.C. Cir. 1968).

III. CONCLUSION

We grant the Company’s petition for review and deny the

Board’s cross-application for enforcement.

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