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Parties Involved:
National Labor Relations Board
Respondent
Pennsylvania Transformer Technology, Inc.
Petitioner
United Steelworkers of America
Intervenor

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 17, 2001 Decided June 29, 2001

No. 00-1388

Pennsylvania Transformer Technology, Inc.,

Petitioner

v.

National Labor Relations Board,

Respondent

United Steelworkers of America,

Intervenor

On Petition for Review and Cross-Application

for Enforcement of an Order of the

National Labor Relations Board

Clare M. Gallagher argued the cause for the petitioner.

Patrick L. Abramowich and Brian Seth Roman were on brief

for the petitioner.

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Eric D. Duryea, Attorney, National Labor Relations

Board, argued the cause for the respondent. Leonard R.

Page, General Counsel, John H. Ferguson, Associate General

Counsel, Aileen A. Armstrong, Deputy Associate General

Counsel, and Charles P. Donnelly, Attorney, National Labor

Relations Board, were on brief.

David R. Jury argued the cause for the intervenor. David

I. Goldman entered an appearance.

Before: Henderson, Tatel and Garland, Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge: The petitioner,

Pennsylvania Transformer Technology, Inc. (PTTI), petitions

the court for review of a decision and order of respondent

National Labor Relations Board (NLRB or Board), reported

at 331 N.L.R.B. No. 151 (Aug. 25, 2000). In that decision, the

Board affirmed and adopted, with modifications, the decision

of the Administrative Law Judge (ALJ), who held that PTTI

violated section 8(a)(1) and 8(a)(5) of the National Labor

Relations Act (NLRA or Act), 29 U.S.C. s 158(a)(1) & (5), by

refusing to recognize the United Steel Workers of America,

AFL-CIO (Union) as the collective-bargaining representative

of PTTI's production and maintenance employees pursuant to

a recognition request made on March 30, 1998. PTTI maintains that the Board erred in determining that it was a

successor to Cooper Industries, Inc. (Cooper) and that it had

hired a substantial and representative complement of employees as of April 1, 1998. The Board cross-applies for enforcement. For the reasons set forth below, we deny PTTI's

petition for review and grant the Board's application for

enforcement.

I. Background

Beginning in 1985, Cooper owned and operated a plant in

Canonsburg, Pennsylvania where it produced core electric

transformers and shell form transformers. Cooper also sold

spare parts to customers. In 1994 Cooper employed between

750 and 880 employees. Its employees were represented by

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different locals of the Union in three separate collectivebargaining units. In April 1994 Cooper announced to the

Union that it planned to close the facility unless a purchaser

could be found by the end of 1994. Although the Union and

its three locals formed a committee to find a buyer, none was

found and on November 22, 1994 the plant closed. Cooper

and the Union entered into a "closing agreement" that provided for recognition of the Union in the event Cooper

reopened within two years. Cooper retained a skeleton crew

to maintain the facility and to provide spare parts to its utility

customers. Several former union presidents, state and local

officials and members of the local Chamber of Commerce

formed a new search committee to find a buyer. Ultimately

the committee helped to bring about the sale of the plant to

Ravindra Nahl Rahangdale.

In 1995 Rahangdale began negotiations to acquire Cooper's

plant and equipment. On August 9, 1996 he acquired all of

the assets of the Canonsburg plant, which he combined with

another company he owned to form PTTI. PTTI commenced

operations in August 1996 and hired its first employees on

September 1, 1996. In January 1997 the company produced

its first transformers, utilizing about one-half of the plant

space previously used by Cooper and most of the same

equipment. PTTI obtained its employees from Bedway Temporary Services (Bedway), which had also assisted Cooper

with staffing. Applicants for employment were interviewed

by PTTI personnel but hired by Bedway. Employees worked

under the supervision of PTTI as probationary employees for

three to six months, at which time they were eligible to

become permanent employees of PTTI.

In a letter dated March 30, 1998, the Union requested

PTTI to recognize and bargain with it as the exclusive

bargaining representative of the company's employee units.

As of that time, approximately 82 production employees

worked at the plant, 58 of whom, or 72 per cent, were former

Cooper employees. Of the 68 production workers on the

company's payroll, 54 were former Cooper employees. PTTI

refused to recognize the Union, prompting the Union to file

an unfair labor practice charge. The Board subsequently

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issued a complaint alleging that, beginning April 1, 1998,

PTTI had unlawfully refused to recognize and bargain with

the Union in violation of sections 8(a)(1) and 8(a)(5) of the

Act. By the time of the hearing, which was held on July 7,

1998, PTTI had hired approximately 100 production and

maintenance employees, a majority of whom were former

Cooper employees.

On September 30, 1998 the ALJ issued his findings of fact

and conclusions of law, finding, in pertinent part, that PTTI

was a successor employer under the Act. The ALJ ordered

PTTI to recognize the Union, to bargain collectively with the

Union and to post an appropriate notice. PTTI filed timely

exceptions to the ALJ's decision. On December 10, 1998

PTTI also filed a motion to reopen the record to introduce

evidence that it had 130 production and maintenance employees, only 62 of whom were former Cooper employees and that

former members of the Cooper production and maintenance

unit became a minority of PTTI's production workers as of

October 29, 1998. JA 409. The Board's General Counsel

filed limited cross exceptions challenging the ALJ's failure to

find specifically that as of April 1, 1998 PTTI had hired a

substantial and representative complement of employees.

The Board denied PTTI's exceptions and its motion to reopen

the record, adopted the ALJ's findings, rulings and order

with slight modifications and corrections and granted the

General Counsel's cross-exceptions. The Board held that (1)

PTTI was a successor to Cooper, (2) PTTI had hired a

substantial and representative complement of employees as of

April 1, 1998 and (3) PTTI violated the Act by refusing to

recognize and bargain with the Union. PTTI challenges all

three determinations.

II. Analysis

A new employer is a successor to a former employer if

there is "substantial continuity" between the enterprises.

Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27,

43 (1987). "Substantial continuity exists when the new company has 'acquired substantial assets of its predecessor and

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continued, without interruption or substantial change, the

predecessor's business operations.' " CitiSteel USA, Inc. v.

NLRB, 53 F.3d 350, 353 (D.C. Cir. 1995) (quoting Golden

State Bottling Co., Inc. v. NLRB, 414 U.S. 168, 184 (1973)).

"The essential inquiry is whether operations, as they impinge

on union members, remain essentially the same after the

transfer of ownership." International Union of Elec., Radio

& Mach. Workers (IUEW) v. NLRB, 604 F.2d 689, 694 (D.C.

Cir. 1979). The analysis is undertaken with an "emphasis on

the employees' perspective." Fall River, 482 U.S. at 43. The

implied statutory goal is to promote "industrial peace." "If

the employees find themselves in essentially the same jobs

after the employer transition and if their legitimate expectations in continued representation by their union are thwarted,

their dissatisfaction may lead to labor unrest." Id. at 43-44.

Thus the union certified as the collective bargaining representative of the predecessor employer's employees presumptively

retains its certification if the majority of employees after the

change of ownership worked for the predecessor employer.

See NLRB v. Burns Int'l Sec. Servs., Inc., 406 U.S. 272, 279

(1972).

We will uphold the Board's "successorship determination

unless it is not supported by substantial evidence or the

Board acted arbitrarily or otherwise erred in applying established law to the facts of the case." CitiSteel, 53 F.3d at 354.

To determine whether a "substantial continuity" exists, courts

and the Board consider

whether the business of both employers is essentially the

same; whether the employees of the new company are

doing the same jobs in the same working conditions

under the same supervisors; and whether the new entity

has the same production process, produces the same

products, and basically has the same body of customers.

Fall River, 482 U.S. at 43 (citations omitted). While the

Board does not afford controlling weight to any single factor,

"[t]he ultimate question is this: Will the employees 'understandably view their job situations as essentially unaltered?' "

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Harter Tomato Prods. Co. v. NLRB, 133 F.3d 934, 937 (D.C.

Cir. 1998) (quotation omitted).

When a new employer is a successor, it has an obligation to

bargain with the certified union so long as "the majority of its

employees were employed by its predecessor." Fall River,

482 U.S. at 41. The Board has adopted the "substantial and

representative complement" rule for fixing the moment that

the determination as to the composition of the successor's

work force is to be made. Id. at 47. In deciding when a

"substantial and representative complement" exists after a

change in employer, the Board examines a number of factors:

It studies "whether the job classifications designated for

the operation were filled or substantially filled and

whether the operation was in normal or substantially

normal production." See Premium Foods, Inc. v.

NLRB, 709 F.2d 623, 628 (9th Cir. 1983). In addition, it

takes into consideration "the size of the complement on

that date and the time expected to elapse before a

substantially larger complement would be at work ... as

well as the relative certainty of the employer's expected

expansion." Id.

Fall River, 482 U.S. at 49; see Sullivan Indus. v. NLRB, 957

F.2d 890, 896 (D.C. Cir. 1992) (separating out five factors set

forth in Fall River).

PTTI complains that the Board erred in determining that it

was a successor to Cooper and in fixing the date of April 1,

1998 as the moment at which it had hired a "substantial and

representative complement" of employees. It alleges numerous factual discrepancies in the Board's findings and charges

that the Board failed to consider evidence that would have led

it to reach a different result. We now examine these claims.

Successorship analysis is "primarily factual in nature and is

based upon the totality of the circumstances of a given

situation." Fall River, 482 U.S. at 43. Accordingly, we

"must examine in detail the facts found by the Administrative

Law Judge (ALJ) and adopted by the Board." CitiSteel, 53

F.3d at 351. Applying the successorship factors enunciated

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in Fall River, we conclude that substantial evidence supports

the Board's determination that PTTI was a successor to

Cooper. First, the business of both employers is essentially

the same. In August 1996 PTTI purchased all of Cooper's

facilities and assets used in the manufacture of electrical

transformers and began production using most of the equipment in January 1997. Although PTTI's workforce is much

smaller than Cooper's, it is in the same line of business

(transformer production). Like Cooper, PTTI also supplies

spare parts for its customers. See Pennsylvania Transformer Tech., Inc., 331 N.L.R.B. No. 151, slip op. at 3 (filed Aug.

25, 2000).

Second, although working conditions are somewhat different at PTTI--significantly fewer job classifications and increased employee responsibility and flexibility--employees

continue to do the same work. They use the same skills and

expertise they used at Cooper and use the same process and

equipment, often under the same supervisors (although there

are fewer supervisors). Significantly, PTTI did not train

workers but instead relied on the experienced workforce left

by Cooper. Id. at 4.

Third, PTTI has a similar production process, produces

similar products and retains many of the same customers.

Although PTTI uses only 45 per cent of Cooper's floor space

and although it sold or removed two ovens, two winding

machines and one or two drill presses used by Cooper, it uses

the same transformer production process to make transformers. Id. at 4. It made few improvements to the physical

plant, which nowhere near approached the $25 million spent

by the alleged successor in CitiSteel (a case on which PTTI

relies) to refurbish and modernize the CitiSteel plant, transforming it from a steel mill to a "minimill." 53 F.3d at 352.

While at the time of the hearing PTTI had not yet begun

production of shell transformers and had produced few large

core transformers (the bread and butter of Cooper's production), PTTI affirmed that it planned to aggressively pursue

both product lines. And although PTTI did not acquire

Cooper's customer or vendor lists, a majority of PTTI's

customers are former Cooper patrons. See Pennsylvania

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Transformer Tech., Inc., 331 N.L.R.B. No. 151, slip op. at 4.

As the Board found, the company "[had] filled a vacuum in a

market left by Cooper and [was] in the process of rapidly

expanding in the manufacture and sale of the same products."

Id. at 1.

Most of the differences noted by PTTI--differences in size,

facilities, work force, managerial philosophy, customer base--

were rejected by this court in Harter, which decision explained that "[p]ointing to differences in size, wages, benefits,

training, customer base, managerial philosophy, and supplier

contracts, among others, ... is unresponsive to the question

we face. We ask not whether [the petitioner's] view of the

facts supports its version of what happened, but rather

whether the Board's interpretation of the facts is 'reasonably

defensible.' " 133 F.3d at 938 (quotation & citation omitted).

Although the differences PTTI points to may support its view

on successorship, we conclude that substantial evidence supports the Board's successorship determination. We arrive at

this conclusion notwithstanding the two-year hiatus between

the time Cooper ceased manufacturing transformers and

PTTI began production.1 A hiatus in operations is "relevant

only when there are other indicia of discontinuity." Fall

River, 482 U.S. at 45; see United Food & Commercial

Workers Int'l Union (UFCW) v. NLRB, 768 F.2d 1463, 1472

(D.C. Cir. 1985). In CitiSteel we found "abundant other

indicia of discontinuity to make the impact of the hiatus on

the workers' expectation of rehire relevant." 53 F.3d at 356.

We do not find such abundant indicia here.2 Unlike in

__________

1 During the hiatus, however, a skeleton crew made the necessary

repairs and supplied parts to former customers. Id. at 4.

2 The facts here are more similar to those in UFCW than those in

CitiSteel. In UFCW, there was an eighteen-month hiatus after

which the successor employer invested $1.3 million in capital improvements, purged most of the former upper management, made

changes to the production process, attracted new customers and lost

others, contracted with new suppliers, and down-sized its operation,

using only a portion of the former facility. Nonetheless we held

that the new employer was a successor because "[t]he focus of the

analysis ... is not on the continuity of the business structure in

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CitiSteel, there were no "significant changes" to the facility

and, although PTTI's production process and customer bases

have differences, they are not as significant as the total

reformation (e.g., extensive plant renovation, formal job training, changed production process and new customer base) that

occurred in CitiSteel. Most importantly, unlike the union in

CitiSteel, which closed its union hall and foresaw "dim possibilities at best for the plant's reopening," id. at 355-56, here

the union actively participated in finding a purchaser to

reopen the facility.3 Based on all the evidence, we conclude

that the Board reasonably determined that, despite the

lengthy hiatus, employees had "legitimate expectations in

continued representation by their union." Fall River, 482

U.S. at 43.

Having concluded that substantial evidence supports the

Board's successorship determination, we now review the

Board's application of the "substantial and representative

complement" rule. Substantial evidence also supports the

Board's finding that PTTI had hired a substantial and representative complement of employees as of April 1, 1998. PTTI

had hired workers for both of its job classifications--transformer technician and apprentice--as of the date of the

recognition demand. See Pennsylvania Transformer Tech.,

__________

general, but rather on the particular operations of the business as

they affect the members of the relevant bargaining unit." UFCW,

768 F.2d at 1470. There, employees used the same skills and worked

under essentially the same conditions. Id. at 1474. We reach the

same conclusion here.

3 PTTI points to a Union press release urging its members to

seek other employment or remain in school while the Union continued its efforts to find a purchaser for the plant. While the press

release shed light on whether the Union thought the plant would

reopen, it also recognized the Union's efforts to recruit prospective

purchasers, lobby representatives of the Commonwealth of Pennsylvania for assistance, persuade Cooper to sell the facility to a

purchaser that would resume operations, assist PTTI in obtaining

financing and encourage its members to apply for employment

while at the same time it kept the community and news media

informed about its campaign. See JA 24-33, 376-79.

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Inc., 331 N.L.R.B. No. 151, slip op. at 2. PTTI had also

begun "substantially normal production" as of April 1, 1998.

It had produced its first transformer in late April 1997 and

between August 1997 and June 1998 PTTI's monthly sales

figures showed signs of relative stability. JA 382. Although

PTTI predicted significant growth between 1999 and 2001,4

the August 1997-June 1998 sales figures indicate that the size

of workforce was sufficiently large to enable the company to

begin normal production of electric transformers. As the

court acknowledged in Fall River in rejecting a "full" complement standard, the expansionist dreams of many entrepreneurs necessitate that the court fix the moment in time when

a business has begun its normal production. 482 U.S. at 51.

Accordingly, we affirm the Board's finding that PTTI had

hired a substantial and representational complement of employees by April 1, 1998. Because as of that date a majority

of PTTI's employees were former Cooper employees, PTTI

had an obligation to recognize the Union as the collective

bargaining representative of its employees. By not doing so,

it violated section 8(a)(1) and (a)(5) of the NLRA.

III. Conclusion

In sum, substantial evidence supports the Board's determination that PTTI was a successor to Cooper and that PTTI

had hired a substantial and representational complement of

employees by April 1, 1998. Accordingly, we deny PTTI's

petition for review and grant the Board's cross-petition for

enforcement.

So ordered.

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4 PTTI refers to non-record material throughout the portion of it

brief, see, e.g., Pet. Br. 15 & n.4, 16-18, yet it did not challenge the

Board's denial of its motion to reopen the record. We also deny

PTTI's motion to supplement the record with a Union pamphlet;

assuming arguendo its materiality, PTTI failed to adduce the

evidence before the Board.

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