10-3709 (L) SDBC Holdings, Inc. v. NLRB **United States Court of Appeals** FOR THE SECOND CIRCUIT August Term 2011
(Argued: October 21, 2011 Decided: March 28, 2013) 1 2 Docket Nos. 10-3709 (Lead), 10-4230 (XAP) 3 4 SDBC H OLDINGS , I NC ., F / K / A S TELLA D’ ORO B ISCUIT C O ., I NC ., 5 6 Petitioner-Cross-Respondent , 7 8 -v9 10 N ATIONAL L ABOR R ELATIONS B OARD , 11 12 Respondent-Cross-Petitioner

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14 Before: C ABRANES , L IVINGSTON , and C HIN , Circuit Judges

. 15 Petitioner-Cross-Respondent SDBC Holdings, Inc. (“SDBC”) petitions for 16 review of a National Labor Relations Boar d (“NLRB”) decision and order concluding 17 that SDBC engaged in unfair labor practices in connection with its failure to give a 18 union representing some of its employees a 2007 audited financial statement that 19 the union sought during collective barga ining. The NLRB cross-petitions for 20 enforcement of its order. We hold th at SDBC acted lawfully and so grant its 21 petition. The NLRB’s petition is denied. Judge Cabranes concurs in the judgment 22 and in the opinion of the Court and files a separate opinion. 23 1M ARK A. J ACOBY , Weil, Gotshal & Manges LLP, New York, NY (Lawrence J. 1 Baer, on the brief ) for Petitioner-Cross-Respondent. 2

E LIZABETH A. H EANEY , National Labor Relations Board (Julie Broido, 3 Supervisory Attorney; Lafe E. Solomon, Ac ting General Counsel; Celeste J. Mattina, 4 Acting Deputy General Counsel; John H. Ferguson, Associate General Counsel; 5 Linda Dreeben, Deputy Associate General Counsel, on the brief ) for Respondent6 Cross-Petitioner

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L IVINGSTON , C IRCUIT J UDGE : 8 9 Petitioner-Cross-Respondent SDBC Holdings, Inc. (“SDBC”), formerly known 10 as Stella D’oro Biscuit Co., Inc. (“Stella D’oro” or “the Company”), 1 petitions this 11 Court for review of a decision and order by the National Labor Relations Board 12 (“NLRB” or “the Board”), which held that Stella D’oro engaged in unfair labor 13 practices principally by declining to permit Local 50, Bakery, Confectionary, 14 Tobacco Workers and Grain Millers International Union (the “Union” or “Local 50”), 15 to retain a copy of the Company’s 2007 audited financial statement (the “2007 16 Financial Statement” or “Statement”) duri ng the course of collective bargaining. 17 The NLRB cross-petitions for enforcement of its order. For the reasons set forth 18 below, we grant SDBC’s petition and deny the NLRB’s cross-petition. 19
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1 Subsequent to the events giving rise to th is litigation, Stella D’oro Biscuit Co., Inc. changed its name to SDBC Holdings, Inc. The change in nomenclature is irrelevant to the resolution of this case.

2BACKGROUND 1 I. 2 Stella D’oro was a New York corporation engaged in the manufacture of 3 baked goods. It operated a single bak ery plant at 184 West 237th Street in the 4 Bronx. The Union represented employees at this plant. In 2006, Brynwood 5 Partners (“Brynwood”), a private equity investment firm, acquired Stella D’oro from 6 Kraft Foods for about $17 million. Brynw ood’s business model involves purchasing 7 companies (often distressed), improving th eir value, and then selling them at a 8 profit. Brynwood typically holds a company for a period of five to 10 years before 9 selling. Consistent with Brynwood’s overall business model, in the period after 10 Brynwood acquired Stella D’oro, the bakery introduced product and marketing 11 innovations, price increases, and reductions in management staff. Brynwood also 12 provided funding for Stella D’oro’s purch ase of automated packaging equipment at 13 an expense of $3.1 million. 14 At the time Brynwood acquired St ella D’oro, a collective bargaining 15 agreement (“CBA”) existed between Stella D’oro and Local 50. This agreement by 16 its terms governed the relationship between Stella D’oro and Local 50 for a period of 17 three years, from June 29, 2005, through June 29, 2008. On May 30, 2008, Stella 18 D’oro and the Union held their first formal bargaining session to discuss the 19

3renewal of the contract. 2 Present at this meeting were Henk Hartong (“Hartong”), 1 the non-executive chairman of Stella D’oro’ s board of directors as well as a partner 2 at Brynwood, Daniel Myers, Stella D’oro’s Chief Operating Officer, and Mark 3 Jacoby (“Jacoby”), counsel for Stella D’oro. Local 50 was represented by Joyce 4 Alston (“Alston”), President of Local 50, and Calvin Williams (“Williams”), Local 5 50’s Secretary and Treasurer, as well as Mike Filippou (“Filippou”) and several 6 other employees of Stella D’oro who were members of Local 50 (together with Alston 7 and Williams, the “Union Committee”). 8 At the May 30 meeting, Stella D’oro’s representatives presented the Union 9 Committee with a document that set out a variety of figures concerning Stella 10 D’oro’s financial performance and expenses over the last several years (the “May 11 2008 Report”). Notably, between fiscal year 1997 and fiscal year 2007 (the last year 12 for which data were presented), Stella D’oro’s net sales had fallen by over 50 13 percent, from approximately $52 million in FY 1997 to approximately $24 million in 14 FY 2007. The May 2008 Report further showed that prices for some of the 15 ingredients Stella D’oro relied on for its baking, including egg yolks, cake flour, 16 bread flour, and palm shortening, had rise n steadily over many months, as had the 17

2 This first formal session had been pr eceded by an informal meeting between representatives of Brynwood and Local 50 on May 12.

4price of transporting Stella D’oro’s products. The report indicated that, in fiscal 1 year 2007, Stella D’oro posted an operating loss of roughly $1.6 million. 2 Jacoby walked the Union Committee through the May 2008 Report, 3 emphasizing Stella D’oro’s financial difficulties. According to Alston’s testimony in 4 the proceedings before the Administrative Law Judge (“ALJ”), Jacoby explained 5 that Stella D’oro “had to reduce the costs of the labor agreement in order for them to 6 stay in business. . . . [T]hey could not go on with the business unless they were able 7 to further reduce costs.” Hartong related, according to Alston , that Brynwood “had 8 bought a troubled company, that [it] had raised the prices of the product twice, that 9 [it] intended to do so again in September ,” and that Brynwood had also invested in 10 automation. Brynwood wanted to “continue with the company, to help it grow, and 11 become–continue to be a profitable organizati on.” Stella D’oro, however, was losing 12 money and, according to Alston’s notes, Brynwood was “not in the business to 13 sustain losses.” Jacoby testified that he explained to the Union Committee that, 14 while the hourly wages paid by Stella D’oro to those in higher-skilled positions were 15 competitive with the rates pa id by other companies, the ho urly wages paid to those 16 in lower-skilled positions were “well above what the competitive wage rates were for 17 those jobs.” Indicating that these high wages for unskilled workers “contributed to 18 [Stella D’oro’s] very high labor costs,” Jacoby affirmed that in the course of 19 bargaining, Stella D’oro would, among other things, pursue proposals aimed at 20

5“negotiating some change in that,” as well as lengthening the work week and 1 reducing benefit costs. 2 Alston testified that, during the course of the meeting, she indicated that the 3 Union would “need some sort of financial documentation to prove that [Stella D’oro] 4 really [was] losing this kind of money,” before the Union could consider acceding to 5 the sorts of concessions the Company intended to propose. She specifically 6 requested to review financial materials relevant to the 2007 operating losses. 7 Jacoby explained that these losses were reflected in Stella D’oro’s 2007 Financial 8 Statement, which he agreed to brin g to the next bargaining session. Alston 9 consented to this arrangement. 10 At the next session, held on June 4, Stella D’oro proposed terms for a new 11 labor contract. Stella D’oro’s proposal called for, among other changes, wage cuts 12 across the board, a two-thirds reduction in the number of paid sick days, and a cap 13 on the amount of vacation available to employees. Jacoby recalled justifying the 14 wage cuts as lowering wages to “what [Stella D’oro] believe[d] were the competitive 15 rates for different classifications based on different level[s] of skill.” He also 16 explained that Brynwood was prepared to fund losses in the short term, but that it 17 needed a longer contract (five years, as o pposed to three) so th at it could see “light 18 at the end of the tunnel.” According to Filippou, Hartong warned that Brynwood 19

6buys companies to make a profit and that it would “take its toy and . . . leave” if 1 SDBC could not be made profitable. 2 As promised, Jacoby brought a copy of the 2007 Financial Statement, which 3 consisted of only 19 pages, including a title page and table of contents, to the June 4 4 meeting. He showed Alston the document’s single page Statement of Operations, 5 which contained the operating loss figure presented in the May 2008 Report, and 6 told the Union Committee members that they could inspect and take notes on the 7 Statement at the bargaining site “all day,” but that he could no t provide them with 8 a copy to retain. He explained that Stella D’oro did not want the Statement falling 9 into the hands of competitors, vendors, or customers, lest they learn of Stella D’oro’s 10 poor financial condition. Alston offered to sign a confidentiality agreement, but 11 Jacoby demurred, citing difficulty in enforcing such agreements. 12 Jacoby brought the 2007 Financial Statement not only to the June 4 13 bargaining session, but to other sessions as well, and he repeatedly invited Alston 14 to remain after the sessions concluded, both to examine it and to take notes. Jacoby 15 also informed Alston that the Statement wa s available at his office (as well as the 16 bakery), and that the Union’s attorney or accountant could examine and take notes 17 on it there. Alston expressed her agreement with this arrangement at the June 4 18 session. 19

7At the next bargaining session, on June 17, the Union made a 1 counterproposal to Stella D’oro regarding the proposed terms of the new CBA. The 2 Union’s proposal called, inter alia , for specified wage increases, additional employer 3 contributions to the Union pension plan , and an increase in the number of paid 4 personal days. Upon reviewing the Unio n’s proposal, Jacoby informed the Union, 5 according to Alston, that he felt the Union and Stella D’oro “had a long road to go.” 6 Jacoby, according to his own testimony, explained that Stella D’oro was owned by 7 “investor owners who are . . . prepared to make the effort to make this company a 8 company that produces a return on an investment and continues in the business. 9 But we’re not going to get there unless we ca n realign the cost of the business.” His 10 notes reflect that he told the Union Committee that, if Stella D’oro was unable to 11 turn a profit, Brynwood’s alternative option was to close and sell, and that 12 Brynwood was not “going to go on forever funding losses.” 13 Also on June 17, Stella D’oro and the Union extended the terms of the CBA 14 then in effect for approximately one additional month, through July 31, 2008. In 15 addition, Alston offered to visit Jacoby’s o ffice with an accountant or an attorney to 16 review the 2007 Financial Statement. After the June 17 meeting, however, Alston 17 called the Union’s attorney, Louie Nikolaidis (“Nikolaidis”), to in form him that she 18 had agreed to go to Jacoby’s office to review the 2007 Financial Statement. After 19 speaking to Nikolaidis, Alston changed her mind about the arrangement. 20

8The next bargaining session occurred on July 8, 2008. Alston recalled that at 1 this session, Jacoby expressed disappointment that no one from the Union had 2 visited his office to inspect the Statemen t and take notes on it, as promised. Alston 3 now expressed the view that the Union was entitled to its own copy of the 4 document, but stated that she was “prep ared to try to negotiate a contract” 5 notwithstanding the Company’s failure to provide it. Also at the July 8 meeting, 6 Filippou suggested that there were two ways Stella D’oro’s investors could secure a 7 profit from its operations: by closing the Bronx facility and selling the real estate 8 and the Stella D’oro brand, or by obtain ing the sought-after concessions and then 9 selling later for a greater profit. Hartong ag reed that either course of action was 10 possible but indicated that Brynwood wanted Stella D’oro’s business to succeed. 11 The bargaining teams met again on July 22 and 23. Over the course of these 12 sessions, Stella D’oro presented a wage and benefit proposal for the first year of the 13 proposed contract in which, among other things, it would cease participation in the 14 Union pension plan and institute, instead, a 401(k) plan with a three percent 15 employer matching contribution. Jacoby related that Stella D’oro would incur a 16 withdrawal penalty of about $6 million for this change, but explained that 17 Brynwood was prepared to incur this cost “in order to get to a lower cost structure 18 for the future so they could . . . get a return on their investment.” Despite another 19 contract proposal from Stella D’oro and a counterproposal from the Union, however, 20

9little progress was made in the negotiations. Jacoby concluded the July 23 session 1 by stating that his proposal conveyed that day was Stella D’oro’s final proposal, and 2 he asked Alston to take the offer to the Union’s members for a vote. 3 On July 26, 2008, all Stella D’oro employees who were members of Local 50 4 met to determine whether Stella D’oro’s proposed CBA was acceptable. After a 5 presentation by the Union Committee and a question and answer session, the 6 employees voted to reject the propos ed CBA and go on strike. The Union 7 commenced the strike on August 13, 2008. 8 On August 27, Stella D’oro mailed Alston a letter informing her that “[i]n 9 light of the continuing impasse in negoti ations[] and the strike,” Stella D’oro had 10 decided to implement unilaterally the changes to the conditions of employment 11 proposed in its most recent offer. About eight months later, on May 1, 2009, Alston 12 sent a letter to Stella D’oro informing the Company of the Union members’ 13 unconditional willingness “to return to wo rk immediately under the terms of the 14 June 29, 2005 through June 29, 2008 collective bargaining agreement.” 3 Stella 15 D’oro, however, rejected the offer, taking the position that, because Stella D’oro had 16 already altered the conditions of employ ment, the employees’ willingness to return 17

3 Under the NLRA, employees who are on stri ke because of an employer’s unfair labor practice are generally entitled to reinstat ement after making an unconditional offer to return to work. See NLRB v. Koenig Iron Works, Inc. , 681 F.2d 130, 145 (2d Cir. 1982).

10to work under the prior agreement was a conditional offer, not an unconditional 1

one. 2 II. 3 On September 11, 2008, about a month after the commencement of the 4 strike, Local 50 filed a charge against Ste lla D’oro with the NLRB, on the grounds, 5 inter alia , that Stella D’oro impermissibly denied the Union “necessary information 6 . . . during bargaining,” thus engaging in an unfair labor practice in contravention of 7 the National Labor Relations Act (“NLRA” or the “Act”) § 8(a)(1), (3), and (5). On 8 February 17, 2009, and again on May 7, 2009, the Union filed amended charges, 9 with the latter amended charge adding the allegation that Stella D’oro’s failure to 10 reinstate the members of Local 50 in May 2009, when they offered “unconditionally” 11 to return to work, also violated the NLRA. The Regional Director of the NLRB for 12 Region 2 issued a complaint against Stella D’oro on the basis of the Union’s charges, 13 as amended, on May 7, 2009. Stella D’oro answered the complaint a few days later, 14 on May 11, 2009. 15 Over the course of four days in May 2009, a series of witnesses gave evidence 16 before ALJ Steven Davis. On June 30, 2009, the ALJ issued a decision finding that 17 Stella D’oro committed unfair labor pr actices in violation of the NLRA. Stella D’oro 18 Biscuit Co. , 355 N.L.R.B. No. 158, 2010 WL 3446122, at *19 (2010). The ALJ 19 concluded that Stella D’oro had pled an inability (as oppose d to unwillingness) to 20

11pay the wages and benefits demanded by the members of Local 50 during the 1 bargaining sessions. Id. at *37-43. Thus, the ALJ reasoned, under the NLRB’s 2 decision in Nielsen Lithographing Co. , the Union was entitled to access to the 2007 3 Financial Statement on which Stella D’oro’s assertions of inability to pay were 4 based. Stella D’oro Biscuit , 2010 WL 3446122, at *43-46; see Nielsen Lithographing 5 Co. , 305 N.L.R.B. 697 (1991), enforced sub nom. Graphic Commc’ns Int’l Union, 6 Local 508 v. NLRB (Nielsen II) , 977 F.2d 1168 (7th Cir. 1992). The ALJ next 7 concluded that the access furnished by Stella D’oro, in the form of permitting the 8 Union representatives or their agents to inspect the Statement and take notes 9 about it, was inadequate to satisfy Stella D’oro’s obligation to provide the Statement 10 to the Union, thus giving rise to an unfair labor practice on the part of Stella D’oro. 11 Id. at *44. The ALJ also determined that Stella D’oro’s refusal to furnish the 12 Statement to the Union was a “substan tial cause” of the Union’s strike. Id. at *48. 13 Because he concluded that Stella D’or o had unlawfully refused to furnish the 14 Statement to the Union, the ALJ found th at no valid impasse had arisen, and thus 15 Stella D’oro’s unilateral implementation of the changes to the terms of employment 16 in August 2008 constituted another unfair labor practice. Id. at *47. Since Stella 17 D’oro did not have the power unilaterally to alter the conditions of employment, the 18 Union’s May 2009 offer to return to work was indeed unconditional, and Stella 19

12D’oro committed yet another unfair labor pr actice by refusing to reinstate its 1 employees. Id. at *50. 2 In a decision and order issued on August 27, 2010, the NLRB, through a 3 divided three-member panel, affirmed the ALJ’s decision over several exceptions by 4 Stella D’oro. 4 Id. at *1. The NLRB imposed a series of penalties against Stella 5 D’oro, including requiring that Stella D’oro “[m]ake unit employees whole, with 6 interest, for any loss of earnings and other benefits resulting from its unlawful 7 unilateral changes” to the unit employees’ terms and conditions of employment. Id. 8 at *10. 9 Member Peter Schaumber dissented. Member Schaumber concluded that 10 Stella D’oro had not taken the bargaining posi tion that it lacked funds to meet the 11 Union’s contract demands, but only that it was unwilling to do so. Id. at *14-15. 12 The Company, Member Schaumber concluded, “made clear that Brynwood was 13 willing to invest substantial amounts in the Company, with a time horizon for 14 achieving profitability within 5 to 10 years.” Id. at *14. Thus, the Company 15 “plainly was not contending that it lacked funds to meet the Union’s contract 16 demands.” Id. In such circumstances, Stella D’ oro had no obligation to provide the 17 2007 Financial Statement to the Union. Additionally, Member Schaumber 18 concluded that, even assuming Stella D’ oro was required to make the Statement 19

4 The NLRB slightly modified the ALJ’s decision in aspects not relevant on appeal.

13available, “its offer to allow the Union and its experts to view an d take notes on its 1 audited 2007 financial statement satisfied any obligation it had to provide the 2 Union substantiating information.” Id. at *15. 3 Stella D’oro petitioned this Court for review of the NLRB’s decision, and the 4 Board cross-petitioned for enforcement of its order. 5 DISCUSSION 6 Section 8(a) of the NLRA makes it an unfair labor practice for an employer 7 “to refuse to bargain collectively with th e representatives of his employees.” 29 8 U.S.C. § 158(a)(5) (2006). This section is vi olated not only by outright refusal of an 9 employer to come to the bargaining table, but also by an employer’s failure to 10 bargain in good faith. See 29 U.S.C. § 158(d) (“For the purposes of this section, to 11 bargain collectively is the performance of the mutual obligation of the employer and 12 the representative of the employees to m eet at reasonable times and confer in good 13 faith with respect to wages, hours, and other terms and conditions of 14 employment . . . .”); see also NLRB v. Truitt Mfg. Co. , 351 U.S. 149, 149 (1956) (“The 15 National Labor Relations Act makes it an unfair labor practice for an employer to 16 refuse to bargain in good faith with the representative of his employees.”). 5 17

5 The NLRA also places a reciprocal obligation on labor representatives. See 29 U.S.C. § 158(b)(3) (“It shall be an unfair labor practice for a labor organization or its agents . . . to refuse to bargain collectiv ely with an employer . . . .”).

14In assessing whether the record supports the determination that a party has 1 failed to bargain in good faith, we do no t “lightly disregard the [NLRB’s] overall 2 appraisal of the situation.” NLRB v. St. Joseph’s Hosp. , 755 F.2d 260, 263 (2d Cir. 3 1985). “We must enforce the Board’s order if the Board’s legal conclusions have a 4 reasonable basis in law, and if its factua l findings are supported by substantial 5 evidence on the record as a whole.” NLRB v. Windsor Castle Health Care Facilities , 6 13 F.3d 619, 623 (2d Cir. 1994) (internal citations omitted); see 29 U.S.C. § 160(e) 7 (“The findings of the Board with respect to questions of fact if supported by 8 substantial evidence on the record considered as a whole shall be conclusive.”); see 9 also Allentown Mack Sales & Serv., Inc. v. NLRB , 522 U.S. 359, 375 (1998) 10 (“[Administrative] adjudication is su bject to the requirement of reasoned 11 decisionmaking . . . .”). We recognize substantial evidence to mean “more than a 12 mere scintilla” of evidence, or “such relevant evidence as a reasonable mind might 13 accept as adequate to su pport a conclusion.” Torrington Extend-A-Care Emp. Ass’n 14 v. NLRB , 17 F.3d 580, 590 (2d Cir. 1994) (quoting Consol. Edison Co. of N.Y. v. 15 NLRB , 305 U.S. 197, 229 (1938)). 16 Based on the record and relevant case law, we conclude that the Board’s 17 determination that Stella D’oro asserted an inability to pay was not sufficiently 18 supported by the evidence, and that the Bo ard erred in applying established law to 19 the facts in this case. In addition, an d even assuming that Stella D’oro had an 20

15obligation to provide the Union with th e 2007 Financial Statement, we conclude 1 that the Board’s finding that Stella D’oro failed to satisfy this obligation is also 2 insufficiently supported by the evidence. Accordingly, we grant SDBC’s petition 3 and deny the NLRB’s. 4 I. Inability to Pay 5 The refusal of an employer “to attempt to substantiate a claim of inability to 6 pay increased wages,” the Supreme Court has said, “may support a finding of a 7 failure to bargain in good faith” depend ing on the circumstances of a particular 8

case. Truitt , 351 U.S. at 153. But as the NLRB emphatically proclaimed in Nielsen 9 Lithographing , there is a difference–and a “criti cal” one–between the employer who 10 claims a “present” or “prospective inability to pay during the life of the contract 11 being negotiated,” and the employer “who claims only economic difficulties or 12 business losses or the prospect of layoffs.” 305 N.L.R.B. at 700. As this Court 13 explained after Nielsen , “an employer has no duty to turn over financial condition 14 information unless the union can demonstrate a ‘specific need.’” Stroehmann 15 Bakeries, Inc. v. NLRB , 95 F.3d 218, 222 (2d Cir. 1996) (quoting Atlanta Hilton & 16 Tower , 271 N.L.R.B. 1600, 1602 (1984)). And no such need for financial information 17 exists where an employer has professed only an unwillingness to meet the union’s 18 demands, as opposed to, expressly or by i mplication, claiming it cannot do so during 19 the term of the very contract being negotiated. Id. at 222-23. 20

16A. Insufficient Evidence to Support Board Conclusion of Inability to Pay 1 Contrary to the decision of the Board majority, the record is clear that Stella 2 D’oro’s bargaining position was based on its unwillingness, and not its inability, to 3 meet the Union’s contract demands. Ste lla D’oro’s parent company, Brynwood, had 4 invested $3.1 million in Stella D’oro to introduce automated packaging equipment 5 immediately before bargaining began–a fact that Stella D’oro pointed out during the 6 course of its discussions with the Union. Brynwood also expressed its willingness 7 during bargaining to expend an additional $6 million to extricate Stella D’oro from 8 the Union’s pension plan, thus evidencing at the bargaining table itself that Stella 9 D’oro had access to substantial capital from its parent owner. As the Board 10 majority determined, moreover, Stella D’oro’s chief negotiator expressly informed 11 the Union during bargaining that Brynw ood, an investment firm that “purchases 12 companies with the aim of improving their financial condition and then selling them 13 at a profit in 5 to 10 years,” was “prep ared to fund losses.” And Hartong, a 14 Brynwood partner, explicitly told the Un ion Committee that Brynwood’s desire was 15 “to invest in the operation and make it profitable.” Stella D’oro Biscuit , 2010 WL 16 3446122, at *28. Given such evidence, we agree with Member Schaumber that 17 Stella D’oro “plainly was not contending th at it lacked funds to meet the Union’s 18 contract demands.” Id. at *14. Rather, its position was that it would not meet such 19

17demands “if the wage scales and labor costs were not restructured to help achieve 1 profitability.” Id. 2 The NLRB acknowledges that Stella D’oro never expressly pled an inability 3 to pay. The Board majority nevert heless concluded that Stella D’oro impliedly did 4 so, because its negotiators made clear that Stella D’oro was losing money and would 5 be cut off from Brynwood’s supply of cash if the Union did not grant the 6 sought-after concessions. The Board majo rity relied principally on the testimony of 7 Union representatives Alston and Filippou to the effect that Jacoby and Hartong 8 asserted throughout the negotiations that the Company was “not going to be able to 9 survive,” “might have to close the business” and was a “bleeding, distressed asset–a 10 losing proposition.” Id. at *2. These statements, however, must be viewed in 11 context, for Truitt instructs that we should not find inability to pay “in every case in 12 which economic inability is raised as an argument.” Truitt , 351 U.S. at 153; see 13 Atlanta Hilton & Tower , 271 N.L.R.B. 1600, 1602 (1984) (“Although no magic words 14 are required to express an inability to pa y, the words and conduct must be specific 15 enough to convey such a meaning.”). And while Jacoby and Hartong unsurprisingly 16 stressed Stella D’oro’s financial difficulties, they repeatedly characterized their 17 bargaining position in terms of what Brynwood was willing to do with its 18 investment, not what Stella D’oro itself could or could not afford. Thus, in the 19 words of one official, Brynwood made clea r that it would “take [its] toy and . . . 20

18leave” unless it got concessions. Joint App’x at 100. And when pressed by Filippou, 1 Hartong acknowledged that selling Stella D’ oro off immediately to turn a profit was 2 an option, but he reiterated that though “w e could do that at any time . . . it’s not 3 the option that we prefer. The option we prefer is to try to improve the company’s 4 financial condition, return it to profitable condition.” Joint App’x at 241-42. These 5 are statements of unwillingness to pay, not inability to pay, and the record simply 6 does not support the majority’s conclusion to the contrary. 7 Moreover, the Board majority also based its conclusion regarding inability to 8 pay on a factual assertion relied on by th e ALJ that is unsupported in the record. 9 The ALJ determined that, even assuming Brynwood was willing to provide capital 10 to cover Stella D’oro’s losses, it was suppo sedly only willing to do so for the “short 11 term,” which the ALJ characterized as sh orter than the five-year contract that 12 Stella D’oro proposed. The Board alluded to this finding, characterizing Brynwood’s 13 commitment to funding Stella D’oro’s losses as “emphatically ‘short term.’” Stella 14 D’oro Biscuit , 2010 WL 3446122, at *5. However, we are unable to find any 15 evidence in the record, much less substa ntial evidence, to su pport the claim that 16 Brynwood’s time horizon was as the ALJ described. See St. Joseph’s Hosp. , 755 17 F.2d at 263 (noting this Court’s obligation to reject factual findings not supported by 18 substantial evidence). Rather, as Member Schaumber concluded, while Stella D’oro 19 took the position in bargaining that it was losing money and could not go on with 20

19the business unless it reduced costs, it never claimed an inability to pay the wages 1 and benefits sought by the Union during the contract term under negotiation: 2 instead, its statements “merely refl ected the Respondent’s unwillingness to 3 indefinitely continue operating at a loss, and its desire to achieve profitability 4 within 5 to 10 years.” Stella D’oro Biscuit , 2010 WL 3446122, at *15. For this 5 reason, too, we conclude there is insu fficient evidence to support the Board 6 majority’s finding that Stella D’oro pled inability to pay. 7 B. Erroneous Application of Stroehmann and United Stockyards 8 We further conclude that the Board majority acted arbitrarily in its 9 treatment of this Court’s decision in Stroehmann and in its reliance on Sioux City 10 Stockyards , 293 N.L.R.B. 1 (1989) (“ United Stockyards ”), enf’d , 901 F.2d 669 (8th 11 Cir. 1990) (per curiam). The majority fail ed to provide a reasoned explanation as to 12 how this case differs from Stroehmann , involving closely analogous facts, or 13 alternatively, why it disagrees with Stroehmann ’s result. The Board majority 14 purported to rely on its decision in United Stockyards . But United Stockyards is a 15

case predating the Board’s landmark decision in Nielsen –and, moreover, a case not 16 even involving the effect of an employer’s bargaining representations regarding its 17 access to a parent company’s capital on the question whether it has pled inability to 18 pay. In such circumstances, the Board ha s acted arbitrarily and its petition for 19 enforcement must be denied. Cf. Nielsen Lithographing Co. v. NLRB , 854 F.2d 20

201063, 1067 (7th Cir. 1988) (noting that the Board has a duty “to take a stance, to 1 explain which decisions it agree[s] with and why, and to explore the possibility of 2 intermediate solutions” with respect to circuit precedent). 3 Stroehmann , like the present case, involved a bakery represented in 4 bargaining to be suffering losses, but ow ned by a parent company willing to extend 5 capital. 95 F.3d at 220. The Board fo und that Stroehmann’s bargaining posture 6 was that its parent company “would not continue to subsidize the Company [absent 7 concessions], and the Company could not afford to continue the present unit 8 complement and wage scales, let alone a wage increase” without access to the 9 parent company’s funds. Stroehmann Bakeries , 318 N.L.R.B. 1069, 1079 (1995). 10 The Board determined that Stroehmann was therefore asserting an inability to pay, 11 triggering an obligation to provide financ ial information to the union. This Court 12 disagreed: 13 Once Stroehmann conceded that it had access to capital 14 sufficient to continue the Syracuse shipping unit [without change], the 15 Union’s need for financial information to bargain intelligently was 16 virtually nonexistent. . . . Stroehmann did not enter the negotiations 17 with a closed mind but rather offe red proposals in response to the 18 Union’s request for ways to save jobs. It was the Union that refused to 19 bargain after it made a request for financial information better 20 designed to create a legal issue than to inform bargaining. 21 Stroehmann , 95 F.3d at 223. 22

21Here, the Board majority found this Court’s decision in Stroehmann Bakeries 1 inapplicable for two reasons, neither of which withstands analysis. First, according 2 to the majority, the parent company in Stroehmann was a Canadian company that 3 “intended to maintain a foothold in the American baking industry and was 4 therefore willing to bail Stroehmann out financially.” Stella D’oro Biscuit , 2010 WL 5 3446122, at *5 (quotation marks omitted). But this characterization of the 6 Stroehmann parent company, meant to contra st with Brynwood here, omits a 7 crucial fact: namely, that the Board in Stroehmann explicitly found that the parent 8 company’s willingness to subsidize its subsidiary was dependent on concessions . As 9 the ALJ here noted, the parent company in Stroehmann “continued to fund 10 Stroehmann’s losses, but would not continue to do so without certain changes 11 including a drastic reduction in wages and be nefits in order to decrease its financial 12 losses.” Id. at *40. 13 Rather than acknowledging the parallels between Stroehmann and the 14 instant case, the Board majority next pointed out that it was undisputed in 15 Stroehmann , unlike the situation here, that the employer had expressly denied it 16 was claiming an inability to pay. Id. at *3. The union in Stroehmann , however, had 17 charged the company with asserting an inability to pay in a written request for 18 financial information–thus providing an o ccasion for the employer’s express denial 19

22in responding to the union’s request. Stroehmann , 95 F.3d at 221. Such a 1 circumstance was not found to be present in the instant case. 2 More fundamentally, moreover, the Board has not in the past hinged its 3 analysis whether an employer has failed to bargain in good faith by declining to 4 provide financial information on the question whether the employer expressly 5 denied an inability to pay. Instead, the Board in Nielsen placed the burden on the 6 union to establish that the employer’s provision of supporting documentation was 7 necessary to facilitate the bargaining proc ess because the employer was claiming an 8 inability to pay. Nielsen Lithographing , 305 N.L.R.B. at 699 (noting that union 9 “must prove that the requested general financial information is relevant”); see 10 Stroehmann , 95 F.3d at 222 (“Where the union can demonstrate that the employer 11 has asserted an inability to pay as its re ason for refusing union demands, the union 12 is entitled to receive financial informatio n in order to substantiate the employer’s 13 claims.”); see also ConAgra, Inc. v. NLRB , 117 F.3d 1435, 1439 (D.C. Cir. 1997) 14 (reiterating that it is the union’s duty to demonstrate the relevance of financial 15 information in order to require an employer to turn it over). Nor do we find the 16 majority’s cramped interpretation of Stroehmann to be faithful to Stroehmann ’s 17 holding. The Stroehmann Court did not reject the NLRB’s inability-to-pay 18 conclusion because the employer there used “magic words” when explicitly 19 questioned. See Atlanta Hilton & Tower , 271 N.L.R.B. at 1602 (cautioning against 20

23conditioning inability-to-pay analysis on th e invocation of “magic words”). Rather, 1 this Court credited the subsidiary’s a ccess to the parent company’s capital as 2 demonstrative of its ability to pay, noting that both the Board and courts must take 3 care that requests for financial informatio n not serve “as an excuse for unions not to 4 bargain in good faith in the hope that the Board will provide a legal remedy more 5 favorable than any likely negotiated agreement.” Stroehmann , 95 F.3d at 222. 6 In concluding that Stella D’oro pl ed inability to pay, the Board cited United 7 Stockyards for the proposition that only the su bsidiary’s financial condition matters 8 in an inability-to-pay case. The Board expl ained that “it is Stella’s ability to pay, 9 not Brynwood’s, that is at issue here.” Stella D’oro Biscuit , 2010 WL 3446122, at 10 *5. United Stockyards , however, was decided prior to this Court’s decision in 11 Stroehmann and the Board’s landmark decision in Nielsen . Indeed, United 12 Stockyards has been characterized by this Court as an example of pre- Nielsen 13 Board law–law fundamentally altered by the Nielsen decision. See Torrington 14 Extend-A-Care Emp. Ass’n , 17 F.3d at 589. Moreover, even if this were not the case, 15 United Stockyards does not even address bargaining representations regarding a 16 corporate parent’s willingness to provide funding, much less elucidate the effect of 17 such representations on whether a subsid iary has asserted an inability to pay. 18 After the Court of Appeals for the Eighth Circuit enforced the NLRB’s order in 19 United Stockyards without addressing its passing treatment of the parent20

24subsidiary distinction, moreover, the dicta in United Stockyards on which the NLRB 1 now relies has not been followed in any subsequent Board or court of appeals 2 decision. 3 As this Court explained in Stroehmann , the requirement that an employer 4 provide financial information should only extend to information “reasonably related 5 to the rationalization of bargaining.” 95 F.3d at 222. The provision of relevant 6 information furthers the NLRA’s requirement of “good faith” bargaining– i.e. , 7 bargaining that is both honest and inform ed–by “reduc[ing] the likelihood of closed8 mind bargaining and . . . enhanc[ing] th e chances that the parties will reach an 9 agreement suitable to their major needs.” Id. ; see also Truitt , 351 U.S. at 152 10 (“Good-faith bargaining necessarily requires that claims made by either bargainer 11 should be honest claims.”); Nielsen II , 977 F.2d at 1170 (“If [the information 12 requested] is relevant, the union . . . is en titled to it[.]”). But when an employer’s 13 bargaining position is that it is able to fund the union’s demands by reason of its 14 access to a parent’s capital but that it does not want to do so, because these 15 demands are inconsistent with meeting the parent’s financial benchmarks, the 16 provision of the subsidiary’s financial information will not generally further the 17 ends of bargaining. For in such a situation, the question driving bargaining is not 18 what a subsidiary could feasibly afford, but what it s parent company has decided, 19 in its business judgment, that it is willing to do. 20

25The Supreme Court cautioned in Truitt that it does not automatically follow 1 that employees are entitled to substantia ting evidence “in every case in which 2 economic inability is raised as an argume nt against increased wages.” 351 U.S. at 3 153. “Each case must turn upon its particular facts.” Id . To be clear, there is 4 substantial evidence in the record that Stella D’oro’s negotiators informed the 5 Union Committee that Stella D’oro was losing money and that, while Brynwood 6 would fund losses and provide the inve stment necessary to turn the company 7 around, the Bronx plant would likely be sold, along with the Stella D’oro brand, if 8 the parties could not reach an accord. We do not hold that in such circumstances 9 the Board might not conclude that a duty to provide financial information should be 10 triggered, and provide reasons as to why. Yet we read Stroehmann as consistent 11 with the Truitt-Nielsen case law demanding a full consideration of the negotiating 12 situation as well as the parties’ statements, and we follow Stroehmann ’s holding 13 that considering a parent’s desire to f und the struggling subsidiary is important 14 and often indicative of both an ability to pay and a good faith bargaining position 15 premised on this reality. To the extent that the Board insists that United 16 Stockyards provides support for its conclusion and that Stroehmann is not to the 17 contrary, it should clarify its position through reasoned decisionmaking. 18
19
20

26II. Union Review of the Financial Statements 1 There is another reason, moreover, that the NLRB’s petition for enforcement 2 must be denied and SDBC’s petition for revi ew granted. Even assuming that Stella 3 D’oro had an obligation to provide the 2007 Financial Statement to the Union, the 4 record is clear that Stella D’oro fully co mplied with that obligation by affording the 5 Union multiple opportunities to examine and take notes on the 19-page Financial 6 Statement that the Union had requested. As we have explained: 7 The union is not automatically entitled to substantiating 8 information in the exact manner re quested in every case where the 9 employer claims an inability to pa y a wage increase. “Each case must 10 turn upon its particular facts. The inquiry must always be whether or 11 not under the circumstances of the particular case the statutory 12 obligation to bargain in good faith has been met.” 13 St. Joseph’s Hosp. , 755 F.2d at 263-64 (quoting Truitt , 351 U.S. at 153-54). Here, 14 Stella D’oro raised a legitimate confidenti ality concern, as the Board majority has 15 acknowledged, and then “offer[ed] to coop erate with the [U]nion in reaching a 16 mutually acceptable accommodation.” Id. at 265 (quoting Soule Glass & Glazing 17 Co. v. NLRB , 652 F.2d 1055, 1098 (1st Cir. 1981). On this record, the Board 18 majority lacked substantial evidence for its conclusion that only a photocopy could 19 afford the Union sufficient access to the 2007 Financial Statement to substantiate 20 Stella D’oro’s claims regarding its unprofitability. 21

27In upholding the ALJ’s conclusion that Stella D’oro failed to bargain in good 1 faith by refusing the Union a photocopy of the 2007 Financial Statement, the Board 2 majority credited the ALJ’s findings that the volume and nature of the information 3 in the statement, the assurance of accuracy generated by a photocopy, and the 4 comparative cost and convenience to the parties all supported the Union’s need for 5 the photocopy. The Board majority also reasserted the ALJ’s conclusion that Stella 6 D’oro’s legitimate confidentiality concerns could be adequately met by the Union’s 7 promised signature on a confidentiality agreement; it did not address Jacoby’s 8 concerns about the enforceability of such agreements. Finally, the Board majority 9 decided that the 19-page document was too complex and detailed to copy by hand, 10 ostensibly in line with Board cases such as American Telephone & Telegraph Co. 11 and Union Switch & Signal, Inc. See Union Switch & Signal, Inc. , 316 N.L.R.B. 12 1025, 1033 (1995) (finding it too laborious to copy by hand an air-quality study with 13 12 pages of detailed tabulations); Am. Tel. & Tel. Co. , 250 N.L.R.B. 47, 54 (1980), 14 enforced sub nom. Commc ’n Workers of Am. AFL-CIO, Local 1051 v. NLRB , 644 15 F.2d 923 (1st Cir. 1981) (finding over 50 pages of documents plus attachments too 16 lengthy to copy by hand); cf. Abercrombie & Fitch Co. , 206 N.L.R.B. 464, 466-67 17 (1973) (holding that the Company’s refusal to provide a photocopy of three and one18 half pages of documents containing a confe ssion and copies of cash register records 19 was not an unfair labor practice). 20

28The Board’s conclusion does not adequately take into account all of the 1 evidence demonstrating the Company’s willingness to produce the document in 2 multiple venues for the Union to examine an d take notes. In the May 30 meeting, 3 Alston requested to see the information that supported the 2007 losses claimed in 4 Stella D’oro’s financial presentation. Jacoby promised to bring the 2007 Financial 5 Statement reflecting these losses to the ne xt bargaining session, and Alston agreed. 6 At the very next session, Alston reviewed the operating loss data in the audited 7 2007 Financial Statement and was thus able to confirm that Stella D’oro had, in 8 fact, incurred approximately $1.6 million in losses for that year, as asserted by the 9 Company at the first bargaining session. 10 This is not the only way in which Stella D’oro made the requested 11 information available. The Company brought the complete 2007 Financial 12 Statement to multiple bargaining sessions, offering to permit the Union to examine 13 it for as long as Union Committee members desired. Stella D’oro also volunteered, 14 inter alia , to provide the Statement to the Union and its lawyer or accountant at 15 Jacoby’s office. Alston unsurprisingly ag reed to this proposal on two separate 16 occasions because, as Member Schaumber sa id in dissent, “[v]isiting Jacoby’s office 17 to examine the financial statement would ha ve imposed little burden on the Union’s 18 attorney or accountant, as their offices were in midtown Manhattan near Jacoby’s 19 office.” Stella D’oro Biscuit , 2010 WL 3446122, at *16. But after Alston consulted 20

29with Union attorney Nikolai dis, the Union reneged on this arrangement, despite 1 the fact that the 2007 Financial Statement, which we have examined, is a 2 “straightforward and uncomplicated document that could easily be reviewed in one 3 visit.” Id. Indeed, except at the bargaining session on June 4, 2008, the Union did 4
not ever take advantage of multiple opportunities to further examine and take notes 5 on the Statement prior to striking, notw ithstanding the claimed centrality of the 6 2007 Financial Statement to its bargaining position. Such conduct strongly 7 suggests that the Union’s request for the 2007 Financial Statement was “a tactic to 8 strengthen the union’s hand in negotiations,” Stroehmann , 95 F.3d at 222, and an 9 attempt to bolster a possible unfair-labor-practices charge, see id. , rather than a 10 good faith effort to obtain information relevant to bargaining. See also id. 11 (cautioning that “[t]he Board and the courts must take care that . . . demands for 12 [financial] information not be used as an excuse for unions not to bargain in good 13 faith in the hope that the Board will provide a legal remedy”); Nielsen II , 977 F.2d 14
at 1170. 15 In examining the document in full, we also disagree with the Board’s 16 conclusion that the document is analogous to the detailed documents at issue in 17 AT&T and Union Switch & Signal . As discussed, the Union acknowledged that the 18 financial summary that Stella D’oro provided at the first negotiation was drawn 19 from the Statement of Operations, which was a straightforward, one-page summary 20

30within the 2007 Financial Statement shown to Alston at the June 4 meeting. 1 Moreover, at least nine of the 19 pages in the 2007 Financial Statement consist 2 exclusively of accounting su mmary or title pages rather than relevant financial 3 information. There is simply no basis in the record to conclude that this 4 Statement–which could easily have been co pied in a single session–is akin to the 5 complex and highly technical ai r-quality study at issue in Union Switch & Signal or 6 the over-50 pages of employee records at stake in American Telephone & Telegraph

. 7 Rather, this situation is more analogous to Abercrombie & Fitch Co. , where the 8 Board concluded that a photocopy was not necessary because the company did not 9 deny the union an opportunity to take notes, and neither the volume nor the nature 10 of the information warranted requiring the employer to furnish copies. 206 11 N.L.R.B. at 466-67. 12 Lacking substantial evidence for its factual findings, the Board erred in 13 concluding that Stella D’oro’s refusal to give the Union a copy of the Statement 14 constituted an unfair labor practice. Furthermore, because Stella D’oro did not 15 commit an unfair labor practice by declin ing to turn over the Statement, a valid 16 impasse did in fact arise between Stella D’oro and the Union, such that Stella 17 D’oro’s unilateral implementation of change s to the terms of employment in August 18 2008 did not constitute an unfair labor practice either. See Taft Broad. Co., WDAF 19 AM-FM TV , 163 N.L.R.B. 475, 478 (1967) (“[A]fter bargaining to an impasse, . . . an 20

31employer does not violate the [NLRA] by making unilateral changes that are 1 reasonably comprehended within his pre-impasse proposals.”). 2 Finally, Stella D’oro did not commit an unfair labor practice by refusing to 3 reinstate the striking Union members following their offer to return to work in May 4 2009 under the terms of the prior collective bargaining agreement. “It is settled 5 that . . . an employer violates Sectio n 8(a)(3) and (1) of the Act by failing to 6 immediately reinstate strikers [who are opposing an unfair labor practice] upon 7 their unconditional offer to return to work, unless the employer establishes a 8 legitimate and substantial business justification for failing to do so.” Zimmerman 9 Plumbing & Heating Co. , 334 N.L.R.B. 586, 588 (2001); see also NLRB v. Koenig 10 Iron Works, Inc. , 681 F.2d 130, 145 (2d Cir. 1982) (“Employees who . . . strike 11 [because of an employer’s unfair labor practice] are entitled to immediate 12 reinstatement, even if replacements have been hired, provided that they make an 13 unconditional offer to return to work.”). For two reasons, Stella D’oro did not 14 violate this rule. First, as we have already explained, Stella D’oro did not commit 15 an unfair labor practice, and therefore the strikers did not qualify for protection as 16 strikers opposing an unfair labor practice. Cf. Mastro Plastics Corp. v. NLRB , 350 17 U.S. 270, 278 (1956) (“[P]etitioners’ unfair labor practices provide adequate ground 18 for the orderly strike that occurred here. Under those circumstances, the striking 19 employees do not lose their status and are en titled to reinstatemen t . . . .”). Second, 20

32the employees sought to return to work under a collective bargaining agreement 1 that was no longer in force, since the e mployer had already lawfully changed the 2 terms and conditions of employment. Accordingly, the employees’ offer was 3 conditioned on a change (or reversion) in the terms of their employment, and thus 4 Stella D’oro did not commit an unfair labor practice by refusing the Union’s offer. 5 CONCLUSION 6 To summarize, we conclude that: 7 (1) There is insufficient evidence in the record to support the Board’s 8 conclusion that Stella D’oro pled an “inability to pay,” thereby 9 triggering a duty for the Company to substantiate those assertions; 10 moreover, the Board erroneously disregarded settled law in failing to 11 properly apply or distinguish through reasoned decisionmaking 12 Stroehmann Bakeries

. 13 (2) Even if the facts supported a conc lusion that Stella D’oro pled an 14 inability to pay, Stella D’oro adequately substantiated its assertions by 15 making the 2007 Financial Statement available to Union 16 representatives for examination and note-taking, and therefore the 17 Company acted lawfully. 18 Accordingly, SDBC’s petition for review of the NLRB’s decision is GRANTED, 19 and the NLRB’s cross-petition for enforcement of its August 27 order is DENIED. 20

331

J OSE A. C ABRANES , Circuit Judge , concurring: I join Judge Livingston’s well

- reasoned opinio n, which faithfully applies difficult Circuit precedent

. I write separately merely to indicate how, in future cases, the National Labor Relations Board (the “Board”) might align its precedents more closely with the teaching of the Supreme Court
in NLRB v. Truitt Manufacturing Co. , 351 U.S. 149, 153 ( 1956). In my view, the facts in this case could , in principle , support a conclusion that Stella D’oro claimed an “inability to pay” for existing wages and employee benefits when it claimed that its operations were unprofitable. We cannot
enforce the Boar d’s decision to that effect, however, because the Board did not adequately explai n its reasons for not following our decision in Stroehmann Bakeries, Inc. v. NLRB , 95 F.3d 218 (2d Cir. 1996) , which equated the concept of “inability to pay” with insolvency

. When applying the National Labor Relations Act, panels of this Court are bound by the decisions of prior panels unless overruled by the Supreme Court or an en banc panel of this Court, In re Zarnel , 619 F.3d 156, 168 (2d Cir. 2010) , or controverted through “reasoned decisionmaking” of the Board, Allentown Mack Sales & Serv., Inc. v. NLRB , 522 U.S. 359, 37 4 (1998) . As Judge Livingston explains, the Board’s analysis d oes not meet this standard

. In time, the Board may have occasion to revisit this issue and produce a more precise ruling that, in turn, will implicate principles of agency deference, thereby permitting Courts of Appeals to
reconsider the concept of “inability to pay

. ” In this event , the Board should explain that an employer claims an “inability to pay” for particular labor costs , within the meaning of the Supreme
Court’s decision in Truitt

, when the employer asserts in the course of bargaining that it s operations

are unprofitable given those costs

. A. The refusal of an employer “to attempt to substantiate a claim of inability to pay increased wages,” the Supreme Court held in Truitt , “may support a finding of a failure to bargain in good2

faith,” depending on the circumstances of a particular case. 351 U.S. at 153. The Court explained:
Good

- faith bargaining necessarily requires that claims made by either bargainer should be honest claims. This is true about an asserted inability to pay an increase in wages. If such an argumen t is important enough to present in the give and take of bargaining, it is important enough to require some sort of proof of its accuracy. And it would certainly not be farfetched for a trier of fact to reach the conclusion that bargaining lacks good fait h when an employer mechanically repeats a claim of inability to pay without making the slightest effort to substantiate the claim. Id. at 152

– 53 (emphas i s supplied ) ; see als o N.Y. Printing Pressmen & Offset Workers Union No. 51, Int’l Printing v. NLRB , 538 F.2d 496, 499

– 500 (2d Cir. 1976) ( offering a particularly lucid explanation of the duty to substantiate under Truitt ). However, the Supreme Court in Truitt d id not define the term “inability to pay,” and courts
later di sagreed about whether an employer must substantiate an assertion “ that complying with the union’s request would place it at a competitive disadvantage.” Torrington Extend

- A

- Care Emp

. Ass’n v.
NLRB , 17 F.3d 580, 588 (2d Cir. 1994). The Board settled this question in Nielsen Lithographing Co. , 305 N

. L

. R

. B

. 697 (1991), holding that a “claim of competitive disadvantage is not the same as a claim of financial inability to pay,” id. at 699, and that the difference between these two types of claims is “critical” in determin ing whether a n employer has a duty to substantiate, id. at 700; see also
Stroehmann , 95 F.3d at 222

– 23. In short , an employer need not substantiate an assertion that it is not able to “make as much of a profit as it wishe[s]

. ” Nielsen , 305 N

. L

. R

. B

. at 70 1.
The Board’s decision in Nielsen , however, presuppose s (and makes explicit) that an employer
i s “unable to pay” for certain labor costs if doing so would leave the business “unprofitable.” See i d. (“Nothing in the [employer’s] statements to the Union

. . . fairly suggests that the [employer] would be unprofitable and thus unable to pay during the term of the contract under negotiation.” (emphas e s supplied))

. In other words, a s the Board explained two years after deciding Nielsen , a duty to substantiate can arise when an employer asserts in the course of bargaining that it cannot “economically afford” existing labor costs. Shell Co. (Puerto Rico) Ltd. , 313 N

. L

. R

. B

. 133 , 133 (1993) ;3

see also Buffalo Concrete , 276 N

. L

. R

. B

. 839, 840 (1985) (“inability to afford the cost”). By contrast, a duty to substantiate was not triggered in Nielsen because “the employer repeatedly stated that it was still making a profit

.” Shell Co. , 313 N

. L

. R

. B

. at 133 (emphasis supplied). In sum, the doctrin e established by the Supreme Court in Truitt uses “inability to pay” as a term of art that should not be understood literally as applying only when the employer is broke. Rather, “[t]he obligation [to substantiate usually ] arises if the Employer puts in issue its ability to afford the Union’s demands.” 1 N.Y. Printing Pressmen , 538 F.2d at 501 (emphasis supplied).
B. Unfortunately, the Board seems to have confused matters in Nielsen by referring to an employer’s “losses of business to com petitors,” 305 N

. L

. R

. B

. at 697, as “business losses,” id. at 700. The Board explained that “the employer who claims only economic difficulties or business losses or the prospect of layoffs is simply s aying that it does not want to pay,” id. , by which the Board meant that “the employer who claims only economic difficulties or [losses of business to competitors] or the prospect of layoffs is simply s aying that it does not want to pay,” 2 id.

1 C laim s of unprofitability must be “put in issue ,” N.Y. Printing Pressmen , 538 F.2d at 501 , to trigger a duty to substantiate

. See

, e.g. , Atlanta Hilton & Tower , 271 N

. L

. R

. B

. 1600, 1602 (1984) (no asserted “inability to pay” where employer would not confirm or deny that it was profitable). For this reason , an employer’s acknowledgment of prior financial losses “does not necessarily place it in the posture of having pleaded an inability to pay” in the relevant labor negotiation. NLRB v. Harvstone Manufacturing Co. , 785 F.2d 570 , 576 n.5 (7th Cir. 1986) (citing Vore Cinema Corp. , 254 N

. L

. R

. B

. 1288, 1292 (1981)). In Vore , for example, an employer had previously stated that its operations were
u nprofitab le, but these statements were made “in a different context” and “long before [labor] negotiations began” and did not “evidence that [the employer’s] position in negotiations was based on a plea of poverty.” Vore , 254 N

. L

. R

. B

. at 1292 (ALJ opinion) (emphasis supplied).

2 Nielsen , one must recall, involved an employer’s assertions that “wage cuts were necessary if the company was to remain competitive and reverse a trend of losing business to lower

- cost competitors,” Nielsen Lithographing Co. v. NLRB , 854 F.2d 1063, 1065 (7th Cir. 1988) (“ Nielsen I ”) , but the parties agreed that the employer could be profit able in the short term , see id. at 1064. As the Court of Appeals for the Seventh Circuit ( the “Seventh Circuit”) explained in denying the Board’s first petition for enforcement, “[t]here is

. . . no contradiction in a company’s stating on the one hand that it is profitable and on the other hand that its costs are higher than its competitors’ and it wants to reduce them.” Id. The Board in Nielsen also explicitly endorsed the approach taken by the Seventh Circuit in Harvstone , which equated the term “inability to pay” with a company’s “ financial inability to pay,” 785 F.2d at 575, and its inability to “ afford to pay,” id. at 577. The Board dissenting opinion in Nielsen also illustrates the Board’s idiosyncratic use of the term “business losses” to mean “losses of business.” See Nielsen , 305 N

. L

. R

. B

. at 705 (Stephens, Member, dissenting) (equating “business losses” with “loss of business”); id. at 708 (“[T]he [employer] directly placed its economic condition at issue by its repeated references to the specific loss of jobs and business that already had occurred, and by its state ments that additional4

The Board’s use of the term “business losses” to mean “losses of business to competitors”

was unintentionally confusing . In normal parlance, the term “business losses” refers to the depletion of assets (or accumulation of debt) resulting from “a business oper ation where expenditures exceed receipts”

— not losses of a business’s customers or market share. J OHN B LACK

ET AL ., O XFORD D ICTIONARY OF E CONOMICS (3d ed. 2009). In other words, a company earning “profit” cannot also incur “business losses” because in this context those terms are antonyms

. Nonetheless, imprecise use of language does not warrant a change in the relevant legal doctrine

. 3
O ur opinion in Stroehmann Bakeries, Inc. v. NLRB , 95 F.3d 218 (2d Cir. 1996) , suggests that

we may have misundersto od the Board’s idiosyncratic use of the term “business losses.” Pointing to the Board’s decision in Nielsen , we stated that “where an employer claims only general economic difficulties or business losses as the reason for its position, the employer may la wfully refuse to hand over financial information.” Stroehmann , 95 F.3d at 22 2 . It is not entirely clear what we meant, but we likely understood “business losses” to mean financial losses (rather than the Board’s idiosyncratic meaning

— losses of customers and market share).
T he Board need not, and should not , perpetuate that mistake . Instead, it can, and should , clarify that a n employer’s assertion of unprofitability is an assertion of “inability to pay” for labor

costs within the meaning of Truitt . Indee d, the Board made that point explicitly in Nielsen , 305
N

. L

. R

. B

. at 701, as did the Court of Appeals decision enforcing the Board ’s order, Nielsen II , 977

losses would continue to occur in the absence of union concessions.” (emphases supplied)). The Seventh Circuit decision enforcing the Board’s Nielsen order also emphasize d the importance of claims of unprofitability : “I f the employer claims that it cannot afford to pay .

. . the [contested] wage, the union is entitled to demand substantiation.” Graphic Commc’ns Int’l Union, Local 508 O

- K

- I, AFL

- CIO v. NLRB , 977 F.2d 1168, 1170 (7th Cir. 1992) (“ Nielsen II ”); see also ConAgra, Inc., v

. NLRB , 117 F.3d 1435, 1443 (D.C. Cir. 1997) (equating an inability to pay with an inability to afford , and emphasizing that the employer had “stated repeatedly that the company remained profitable”).

3 Administrative adjudication requires “ reasoned decisionmaking , ” Allentown Mack , 522 U.S. at 37 4 , and therefore no weight should be placed on the NLRB’s subsequent statements that “‘[i]nability to pay’ means that the company presently has insufficient assets to pay or that it would have insufficient ass ets to pay during the life of the co ntract that is being negotiated, ” AMF Trucking & Warehousing, Inc. , 342 N

. L

. R

. B

. 1125, 1126 (2004) (emphases supplied). The Board has not explained why “inability to pay” has evolved from meaning that an employer “could not afford ” certain labor costs , see, e.g. , N.Y. Printing Pressmen , 538 F.3d at 499 , to meaning literal insolvency

.5

F.2d at 1170

. And i t defies common sense to think that employees interested in preserving their jobs w ill wait until the ir employer becomes insolvent before they are prepared to discuss, or mak e , significant bargaining concessions. Finally, it is worth stressing that the Supreme Court in Truitt d id not confine the duty to substantiate to assertions of an “inability to pay” for particular labor costs. “There can be no question of the general obligation of an employer to provide information that is needed by the bargaining representative for the proper performance of its duties.” NLRB v. Acme Indus. Co. , 385 U.S. 432, 435

– 36 (1967); see also Stroehmann , 95 F.3d at 222 ( “ Good faith requires that an employer explain its positions on various issues and that obligation in turn may require that it provide relevant back

- up materials, such as financial informat ion. ”)

. Whether an employer’s assertions in bargaining give rise to this “general obligation” to substantiate will always depend on the totality of the circumstances, see Truitt

, 351 U.S. at 153

– 54, and claims of unprofitability can trigger this duty regardless of whether they fall within the scope of the term of art “inability to pay

. ” Indeed, generating profit is indisputably the paramount (and existential) concern of a business entity , and when an employer claims during bargaining that it is unpro fitable, that allegation may be “important enough to require some sort of proof of its accuracy.” Id. at 153. Our decision does not cast doubt

on this principle. 4 If a union faced with an employer’s claim of unprofitability would “give serious

4 I agree with Judge Livingston that Stroehmann adopts a narrow understanding of the term “inability to pay”

— a n interpretation that I encourage the Board to reject along the lines proposed here

. Importantly, however, Stroehmann and Judge Livingston’s opinion do not confine Truitt to assertions of “inability to pay,” thus giving that term talismanic importance . In Stroehmann , no duty to substantiate under Truitt could have applied because the union requested “comprehensive and detailed” financial information with “virtually no relevance to the issues at stake in bargaining” and “better designed to create a legal issue than to inf orm bargaining,” thus indicating that the union rather than the employer was bargain ing in bad faith. 95 F.3d at 223. Moreover, we explained that , although the relevant facility was unprofitable, the totality of the circumstances demonstrated that the em ployer did not place its unprofitability at issue in bargaining

. I

d. ; see also note 1 , ante (assertions must be “ put in issue ” to trigger a duty to substantiate ). And here, because the Board ’s decision is based on a purported claim of “inability to pay,” and because the Board did not offer a reasoned explanation for departing from our interpretation of that term in Stroehmann , I join Judge Livingston’s opinion i n full

.6

consideration to making the concessions the employer is demanding, or at least [to] making some concessions , ” Nielsen I

, 854 F.2d at 1065 , the duty to substantiate can, and generally should, apply.