1 United States Court of Appeals

Fifth Circuit



## FILED

July 1, 2003

Charles R. Fulbruge III

Clerk UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 02-60030

J. VALLERY ELECTRIC, INC.; VALLERY ELECTRIC, INC.,

Petitioners-Cross-Respondents,

VERSUS

NATIONAL LABOR RELATIONS BOARD,

Respondent-Cross-Petitioner.

Petitions for Review for Enforcement of the

Order of the National Labor Relations Board

Before WIENER, BENAVIDES, and DENNIS, Circuit Judges.

JAMES L. DENNIS, Circuit Judge.

J. Vallery Electric, Inc. and Vallery Electric, Inc. petition

for review of the decision and order of the National Labor

Relations Board (“Board”). The Board found that the companies are

alter egos and/or constitute a si ngle employer and that they

violated section 8(a)(1), (5) of the National Labor Relations Act

(“NLRA”), 29 U.S.C. § 158(a)(1), (5)

, by withdrawing recognition of

their employees’ collective bargaining representative and by

failing to abide by the terms of the collective bargaining2

agreement. The Board cross-petitions for enforcement of its order.

We DENY the e mployers’ petitions and GRANT enforcement of the

Board’s order.

I.

Jimmy Vallery (“Vallery”) formed Vallery Electric in 1975 as

a sole proprietorship offering residential and commercial

electrical contracting services in Monroe, Louisiana. In 1993, he

incorporated his business as Vallery Electric, Inc. (“VE”). He and

his wife, Bobbie, each owned 50 of VE’s 100 shares. Vallery served

as VE’s president; his father, A.J. Vallery, was its vice

president; and Bobbie Vallery its secretary/treasurer. Together,

the three constituted VE’s board of directors.

On September 1, 1992, VE signed a letter of assent authorizing

the Quachita Valley chapter of the National Electrical Contractors

Association (“NECA”), a trade association, to serve as VE’s

representative for current and future collective bargaining

agreements (“CBA”) with the International Brotherhood of Electrical

Workers Local 446, AFL-CIO (“IBEW”). In granting this authority to

NECA, VE “agree[d] to comply with, and be bound by, all of the

terms a nd conditions contained” in the CBAs negotiated with the

IBEW. VE also

agree[d] that if a majority of its employees authorize[d]

the [IBEW] to represent them in collective b argaining,

[VE would] recognize the [IBEW] as the NLRA Section 9(a)

collective bargaining agent for all employees performing

electrical construction work within the jurisdiction of1 Section 9(a) of the NLRA provides that “Representatives

designated or selected for the purposes of collective bargaining by

the majority of the employees in a unit appropriate for such

purposes, shall be the exclusive representatives of all the

employees in such unit for the purposes of collective bargaining in

respect to rates of pay, wages, hours of employment or other

conditions of employment.” 29 U.S.C. § 159(a).

3 [the IBEW] on all present and future jobsites. 1

After VE signed the letter of assent, the IBEW began referring

its members to VE for commercial jobs. VE paid these workers

according to the union scale. With the knowledge of the IBEW’s

business manger, Lonnie Shows, however, VE used nonunion labor

compensated at nonunion wages for its residential projects. Shows

later testified that the long-standi ng practice among local

electrical contractors was to utilize union lab or only for

commercial jobs.

In July 1995, John Hopkins replaced Shows as the IBEW’s

business manager. By letter dated October 4, 1995, Hopkins

informed loca l contractors, including VE, that the IBEW and NECA

had negotiated a new CBA covering the period of September 1, 1995,

through August 31, 1997. Hopkins’ letter disavowed any side

agreements made by Shows:

Any verbal or written agreeme nts made by the prior

administration with [NECA] or any individual contractors

will not be honored by this administration. Only signed

agreements by this administration will be honored.

Twice in 1996 Hopkins met with Vallery to complain about VE’s use

of nonunion labor for residential jobs . On June 18, 1996, VE

entered into a voluntary recognition agreement with the IBEW,4

pursuant to § 9(a) of the NLRA, through which it recognized that

the IBEW represented a majority of its employees “in the bargaining

unit described in the current collective bargaining agreement” and

t hat the IBEW was “the exclusive collective bargaining agent for

all employees within . . . the bargaining unit.”

In January 199 7, Hopkins complained to NECA that VE was

working a comme rcial job using nonunion employees. Hopkins’

complaint prompte d a meeting between Hopkins, Vallery, and the

president of NECA, at which Vallery agreed to make appropriate

payments to the IBEW’s apprenticeship fund to resolve the matter.

Following the meeting Vallery told the NECA presiden t that he

intended “to separate” from VE because of the high cost of union

labor. He further said that he had already discussed the matter

with a lawyer and was in the process of developing his strategy.

In February 1997, VE transferred title to a warehouse it owned

to Jimmy and Bobbie Vallery without compensation. On March 21,

1997, the Vallerys incorporated a new electrical contra cting

business, J. Vallery Electric, Inc. (JVE), of which they owned all

the stock. Jimmy Vallery served as JVE’s president; Bobbie Vallery

was secretary/treasurer; and Todd Vallery, their son, its vice

preside nt. Together, the three formed JVE’s board of directors.

On the same day that JVE was incorporated, Vallery resigned as

president of VE, and he and his wife transferred their VE stock to

A.J. Vallery without compensation.

JVE began doing business in May 1997. It operated out of the5

same facility that VE had used since 1993. It took title to three

of VE’s five trucks, as well as other pieces of VE’s equipment,

without compensatio n. It employed five of VE’s seven employees.

And it took over VE’s residential work, as well as at least one of

VE’s commercial jobs. Of JVE’s first 68 jobs, 55 were residential

and 13 were comme rcial. JVE’s yellow-pages advertisement, which

closely resembled VE’ s, announced that JVE performed both

commercial and residential work and had been in business since

1965.

VE moved to a new location, where it was run by A.J. Vallery.

It performed only commercial work. After several months, it ceased

active operat ions. By January 1998 VE’s two remaining employees

sought work through the union hall. At the time of the hearing, VE

had no jobs and did not employ any electricians.

By letter dated June 9, 1997, Hopkins complained to Vallery

that “[VE was] operating a

. . . non-union company, known as J.

Vall ery Electric.” He demanded that Vallery “supply [the IBEW]

with information concerning VE’s relationship w ith the nonunion

company.”

On November 18, 1997, the IBEW and NECA reached a new CBA

covering the period between September 1, 1997, and August 31, 1999.

JVE did not apply the new CBA to any of its employees.

On December 8 , 1997, the IBEW charged that VE and JVE were

alter egos and/or a single employer and that the company committed

unfair labor practices, in violation of § 8(a)(1), (5) of the NLRA,2 It is an unfair labor practice under § 8(a)(1) of the NLRA

for an employer “to interfere with, restrain, or coerce employees

in the exercise of the rights guaranteed in section 157 of this

title,” namely to organize, join, and bargain through unions. 29

U.S.C. § 158(a)(1); see also id. § 157 (“Employees shall have the

right to self-organization, to form, join, or assist labor

organizations, to bargain collectively through representatives of

their own choosing, and to engage in other concerted activities for

the purpose of collective bargaining or other mutual aid or

protection

. . . .”). I t is an unfair labor practice under

§ 8(a)(5) for an employer “to refuse to bargain collectively with

the representatives of his employees, subject to the provisions of

section 159(a) of this title.” Id. § 158(a)(5).

6 by failing and refusing to bargain with the exclusive collective

bargaining representative of its employees. 2 By letter to the IBEW

dated April 9, 1999, Vallery denied that JVE was the alter ego of

VE or that the IBEW represe nted JVE’s employees. On April 21,

1999, the IBEW filed a second charge, stating that the company

committed unfair labor practices by failing to apply the terms and

conditions of the CBA to its employees and by withdrawing

recognition of the IBEW as the exclusive bargaining representative

of its employees.

The charges were consolidated and a hearing was held. An

administrative law judge (“ALJ”) issued a decision and recommended

order, finding the violations as alleged. On review, the Board

adopted the ALJ’s findi ngs and recommended order with minor

technical modifications.

The Board’s order requires JVE/VE to cease and desist from the

unfair labor practices found. It requires JVE/VE to apply the

terms and conditions of the 1997-1999 CBA and to recognize the IBEW3 Valmont Ind us., Inc. v. NLRB , 244 F.3d 454, 463 (5th Cir.

2001)

.

4 Universal Camera Corp. v. NLRB

, 340 U.S. 474, 477 (1951),

quoted in NLRB v. Thermon Heat Tracing Serv., Inc. , 143 F.3d 181,

185 (5th Cir. 1998).

5 Thermon Heat T racing , 143 F.3d at 185, q uoted in Valmont

Indus. , 244 F.3d at 463.

6 29 U.S.C. § 160(e); Southport Petroleum Co. v. NLRB

, 3 1 5

U.S. 100, 106 (1942).

7 as the exclusive collective-bargaining representative of the unit

consisting of “[a]ll employees performing electrical work.” It

further requires JVE/VE to make its employees whole for any loss of

earnings and other benefits suffered as a result of unfair labor

practices; to bargain with the IBEW, upon request, and to embody

the terms of any understanding that is reached in a written

agreement; and to post a remedial notice.

II.

We will upho ld a decision of the Board “if it is reasonable

and supported by substantial evidence on the record considered as

a whole.” 3 Substantial evidence is “such relevant evidence as a

reasonable mind would accept to support a con clusion.” 4

“Recognizing the Board’s expertise in labor law, we will defer to

plausible inferences it draws from the evidence, even if we might

reach a contrary result were we deciding the case de novo .” 5 Our

deference extends to our review of both the Board’s findings of

fact and its application of the law. 6 It does not, however, extend

to the Board’s legal conclusions, including its interpretation of7 See Valmont Indus.

, 244 F.3d at 463; J ones Dairy Farm v.

NLRB , 909 F.2d 1021, 1028 (7th Cir. 1990).

8 Jones Dairy , 909 F.2d at 1028.

9 Carpenters Loca l Union No. 1846, United Bhd. of Carpenters

& Joiners of Am., AFL-CIO v. Pratt-Farnsworth, Inc.

, 690 F.2d 489,

507 (5th Cir. 1983) (quoting Southport Petroleum

, 315 U.S. at 106).

8 a collective bargaining agreement, whic h we review d e novo

. 7

Still, we are “mindful of the Board’s considerable e xpertise in

interpreting collective bargaining agreements.” 8

III.

The Board made three key determinations in this case. First,

it found that VE and JVE are alter egos and/or together constitute

a single employer. It then concluded that the appropriate

bargaining unit under the 1997-1999 CBA was “Al l employees

performing electrical work.” Based on these determinations, it

found that JVE/VE had commi tted unfair labor practices, in

violation of § 8(a)(1), (5) of the NLRA, by failing to apply the

terms and conditions of the CBA to its employees beginning on March

21, 1997, the day on which JVE was incorporated, and by withdrawing

r ecognition of the IBEW on April 9, 1999, the date of Vallery’s

letter denying that the IBEW represented JVE’s employees.

A.

A n employer cannot evade its obligations to its employe e s

under a CBA “by setting up what appears to be a new company, but is

in reality a ‘disguised continuance’ of the old one.” 9 “Although

a bona fide successor is not in general bound by a prior collective10 Id. (citing NLRB v. Tricor Prods., Inc.

, 636 F.2d 266, 269-

70 (10th Cir. 1980)).

11 Howard Johnson v. Detroit Local Joint Executive Bd.

, 417

U.S. 249, 259 n.5 (1974) (citing Southport Petroleum , 315 U.S. at

106).

12 See Southport Petroleum , 315 U.S. at 106.

13 Carpenters Local , 690 F.2d at 507.

14 Id.

9 bargaining agreement, an alter ego will be so bound.” 10 Hence, when

a successor corporation is merely the alter ego of its predecessor,

“the courts have had little difficulty holding that the successor

is in reality the same employer and is subject to all the legal and

contractual obligations of the predecessor.” 11

Whether two companies are alter egos is a question of fact

answered through two inquiries. 12 First, the Board must determine

“whether the two enterprises have substantially identical

management, business purpose, operation, equipment, customers,

supervision, and ownership.” 13 Second, it must gauge whether there

was an unlawful motive behind the creation of the new business

entity, determining whether there was a “disguised continuance” or

“attempt to avoid the obligations of [an existing] collective

bargaining agreement through a sham transaction or technical change

in operations.” 14

We find that there is substantial evidence sho wing that JVE

and VE are identical. First and foremost, Jimmy and Bobbie Vallery15 Because the alter ego doctrine contemplates the existence

of a predecessor corporation and a successor corporation, a single

person need not own, manage, or supervise both corporations at the

same time. The doctrine would be rendered useless if an employer

could avoid liability by simply washing his hands of one company

and starting a new one. S ee Carpenters Local

, 690 F.2d at 507-08;

see also NLRB v. Omnitest Inspection Servs., Inc.

, 937 F.2d 112,

113 (3d Cir. 1991) (“When an employer attempts to avoid its labor

obligations by pretending to cease operations and then resuming the

same operations through another employer, the other employ er is

held to be the ‘alter ego’ of the old employer, and is ‘subject to

all the legal and contractual obligati ons of the predecessor.’”

(citations omitted)).

16 See NLRB v. Dane County Dairy

, 795 F.2d 1313, 1322 (7th Cir.

1986) (“Familial control constitutes common ownership and

control.”); Goodman Piping Products, Inc. v. NLRB

, 741 F.2d 10, 11-

1 2 (2d Cir. 1984) (finding common ownership when the predeces sor

was corporation wholly owned by the husband and the successor

corporation by the wife); J.M. Tanaka Constr., Inc. v. NLRB

, 675

F.2d 1029, 1035 (9th Cir. 1982) (finding that ownershi p of

businesses by members of the same family was one indication of

alter ego status).

17 See Advance Elec., Inc. v. IBEW Local No. 124, Int’l Bhd of

Elec. Workers, AFL-CIO

, 268 NLRB 1001, 1002 (1984) (holding that an

employer that performed only residential work and an employer that

performed both residential and commercial work had “substantially

identical” business purposes and modes of operation).

10 owned bot h the predecessor and successor corporations. 1 5 Their

transfer of VE to A.J. Vallery , Jimmy’s father, without

compensation is also indicative of common ownership. 16 There is

s ubstantial proof of that JVE and VE had substantially identi cal

business purposes and operations. Both companies offered

residentia l and commercial electrical services. Although JVE

focused its bus iness on residential projects, it advertised its

commercial services and 13 of its first 68 jobs were commercial. 17

Moreover, JVE took all VE’s pending and current residential jobs,18 See Carpenters Local

, 690 F.3d at 508 (“[A]n alter ego case

frequently contains specific findings on the substantial continuity

of the work force from the union to the nonunion employer.”).

19 See Central States, S.E. & S.W. Areas Pension Fund v. Sloan

, 902 F.2d 593, 597 (7th Cir. 1990) (holding that the transfer of

ownership of four trucks “without a d ollar changing hands” is

considered a sham transfer of assets).

11 as well as at least one commercial one. Vallery successively

managed VE and JVE and successively supervised the e mployees of

each. As for equipment, facilities, and employees, JVE took over

the building VE had used; took possession of three of VE’s five

trucks; and became the employer of five of VE’s seven employees. 18

JVE even took ove r the design of VE’s advertisement in the local

telephone book. In short, there is substantial evidence that JVE

held itself out as a continuation of VE.

We also find that there is substantial evidence of an unlawful

motive in the creation of JVE. VE’s transfer of personal and real

property, as well as stock, to Vallery or JVE without any

consideration shows that there was not even a pretense of an arm’s

length relationship b etween JVE, VE, and the principals of each

during the formation of JVE. 19 We flatly reject the argument that

JVE was innocently incorporated as a part of A.J. Vallery’s estate

planning. Because A.J. Vallery had no ownership interest in VE

prior to March 21, 1997, this argument lacks any factual support

whatsoever. On the contrary, the record clearly shows that Vallery

openly expressed his concerns about VE’s obligation s to the IBEW

and admitted his intention to start a new corporation specifically20 Contrary to VE ’s and JVE’s insistence, neither Vallery’s

past support of unions nor his intent to make money in forming JVE

is relevant to the question of whether JVE was created with an

unlawful motive. S ee Goodman Piping

, 741 F.2d at 12 (explaining

that while “anti-union animus may be ‘germane,’” it is not

necessary “for imposing alter ego status” (citing Tricor

, 636 F.2d

at 270)); Tricor , 636 F.2d at 269 (holding that the establishment

of a successor company for economic gain is “irrelevant” in

determining whether the purpose of creating that company was also

to avoid labor law obligations).

21 Because we uphold the Board’s alter-ego finding, we need not

consider its alternative finding that JVE and VE are a single

employer within the meaning of the NLRA.

22 The conclusion of law reads: “The appropriate unit as

described in paragraph 8 of the collective-bargaining agreement for

the period from September 1, 1997, to August 31, 1999, as set out

in article II, section 3 is as follows: ‘All employees performing

electrical work.’”

12 to avoid paying union wages. 20

Applying our highly deferential standard of review, we

conclude that the Board’s adopti on of the ALJ’s factual finding

that JVE was the alter ego of VE is supported by substantial

evidence. 21

B.

The Board adopted the ALJ’s conclusi on that the appropriate

bargaining unit for the period covered by the 1997-1999 CBA was

“[a]ll employees performing electrical work.” 22 JVE/VE argues that

the IBEW and the local contractors represented by NECA previously

agreed to narrow, and thus to modify, the scope of the bargaining

unit to “all

. . . employees perform ing c ommercial electrical

work.”

We find no evidence of any intent to modify the bargaining13

unit description. Indeed, all evidence is to the contrary. The

modification JVE/VE says happened was neither memorialized during

the pendency of any CBA nor written into any new CBA. It certainly

was not expressly made part of the 1997-1999 CBA at issue. Had

there been an intent to narrow the unit description at some point,

the new description would have appeared in the first CBA after the

modification. Indeed, given the importance the IBEW and NECA

attached to written documentation (as demonstrated by the CBA

provision requiring changes be in writing), it is highly unlikely

that they intended to modify the unit description but then failed

to memorialize their agreement in subsequent CBAs.

Furthermore, even if at some earlier point the IBEW and NECA

had tacitly agreed to narrow the unit description while Shows was

the IBEW’s business manager, any such modification lasted only as

long as the CBA then in effect. In this respect the evidence is

unequivocal that, regardless of what had happened previously, there

was no agreement to alter the unit description during the pendency

of any CBA negotiated by Hopkins. When Hopkins announced the 1995-

1997 CBA, for example, he c learly announced his intention to

enforce the bargaining unit described in the CBA and expressly

disavowed contrary arrangements made by Shows. He reiterated his

position to Vallery on more than one occasion dur ing 1996 in the

context of complaints that VE was using nonunion workers.

Indeed, VE’s own conduct reveals no intent to narrow the unit

description beyond what is included in the CBA. In June 1996, VE23 For this reason, JVE/VE’s reliance on B onnell/Tredegar

Indus., Inc. v. NLRB

, 46 F.3d 339, 344 (4 t h Cir. 1995), is

misplaced. In that case the Fourth Circuit held that the company’s

past practice of calculating an identified holiday benefit pursuant

to an unidentified but long-standing formula had become an implied

term of the CBA, such t hat the formula could not be unilaterally

altered during the pendency of the CBA. In the present case, there

was no on-going past practice that affected the 1997-1999 CBA.

14 recognized the IBEW as the representative of its employees “in the

b argaining unit described in the current collective bargaining

agreement.” It made no attempt to qualify its recognition to

account for the supposed modification. And in January 1997, VE

made a contribution to the IBEW apprenticeship fund to settle a

complaint about VE’s use of nonunion workers, effectively conceding

the scope of the unit description. In short, the evidence in no

way indicates any agreement to modify the unit description included

in the CBAs at issue or allows a reasonable inference of such an

agreement.

We also reject, for two reasons, JVE/VE’s alternative argument

that the use of nonunion workers for residential jobs became an

implied term of the 1997-1999 CBA through the course of past

practice. First, as stated above, the evidence shows that the

practice did not continue once Hopkins became the IBEW’s business

manager in July 1995. Hence, at the time the 1997-1999 CBA went

into effect in September 1997, there was no on-going past practice

of allowing contractors to use nonunion labor on residential jobs. 23

Second, there is no evidence that the IBEW waived its right to

negotiate the scope of the ba rgaining unit. As a matter of law,24 See Road Sprinkler Fitters Local Union No. 669 v. NLRB

, 676

F.2d 826, 831 (D.C. Cir. 1982) (quoting Fibreboard Paper Prods.

Corp. v. NLRB

, 379 U.S. 203, 209 (1964)); see also Local 666, Int’l

Alliance of Thea trical Stage Employees & Moving Pictures Mach.

Operators of the United States & Cana da v. NLRB , 904 F.2d 47, 48

(D.C. Cir. 1990) (citing 29 U.S.C. § 158(a)(5), (d)).

25 Road Sprinkler Fitters , 676 F.2d at 833.

15 the scope of a bargaining unit is a term and condition of

employment and, thus, is a mandatory subject of bargaining absent

“clear and unmistak able” waiver. 2 4 To the extent that the IBEW,

under Shows’s leadership, tacitly agreed to divert residential work

away from union labor, such acquiescence does not constitute a

waiver of the IBEW’s right to bargain the unit description. 25

Accordingly, the unit description was neither modified by agreement

n or narrowed through past practice. The unit description is

exactly as stated: “all employees performing electrical work.”

C.

The Board found that JVE/VE had committed an unfair labor

practice by failing to apply the terms and conditions of the CBA to

its employees beginning on March 21, 1997. Because the unit

description encompassed both residential and commercial work, and

because JVE/VE did not apply the CBA to any employee of JVE, we

find that this finding is supported by substantial evidence.

Likewise, the Board’s finding that JVE/VE committed an unfair

labor practice by withdrawing recognition of the IBEW necessarily

follows from Vallery’s letter of April 9, 1999. In that letter,

Vallery denied that the IBEW represented JVE’s employees. Because16

JVE and VE are alter egos, Vallery’s letter constitutes substantial

evidence that JVE/VE withdrew recognition of the IBEW on April 9,

1999.

IV.

For the foregoing reasons, we DENY the petitions for review,

and GRANT enforcement of the Board’s order.

PETITIONS FOR REVIEW DENIED; ENFORCEMENT GRANTED.