Source: https://supreme.justia.com/cases/federal/us/414/168/
Timestamp: 2019-04-19 11:03:45+00:00

Document:
Petitioner All American Beverages, Inc. (All American), purchased the soft drink bottling and distribution business of petitioner Golden State Bottling Co. (Golden State) after the National Labor Relations Board (NLRB) had ordered Golden State, "its officers, agents, successors, and assigns" to reinstate with backpay a driver-salesman whose discharge by Golden State was found to have been an unfair labor practice. In a subsequent back-pay specification proceeding to which both firms were parties, upon finding that All American, after the acquisition, continued the business without interruption or substantial change in operations, employee complement, or supervisory personnel, and that, hence, All American, having acquired the business with knowledge of the outstanding NLRB order, was a "successor" for purposes of the National Labor Relations Act (NLRA) liable for the reinstatement of the driver-salesman with backpay, the NLRB ordered All American to reinstate him and both firms jointly or severally to pay him a specified sum of backpay. The Court of Appeals enforced the order.
1. The Court of Appeals did not err in determining that, on the record as a whole, substantial evidence supported the NLRB's finding that All American purchased the business with knowledge of the unfair labor practice litigation, since it cannot be said on the basis of the record that the Court of Appeals "misapprehended or grossly misapplied" the standard of review. Universal Camera Corp. v. NLRB, 340 U. S. 474. Pp. 340 U. S. 172-174.
2. The issuance of a reinstatement and backpay order against a bona fide successor that did not itself commit the unfair labor practice does not exceed the NLRB's remedial powers under § 10(c) of the NLRA, since such powers include broad discretion to fashion and issue such an order in order to achieve the ends and effectuate the policies of the Act. Pp. 414 U. S. 175-177.
3. Federal Rule Civ.Proc. 65(d), which provides that injunctions and restraining orders shall be binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order, does not bar judicial enforcement of the NLRB order running to All American, since a bona fide successor, acquiring, with knowledge that the wrong remains unremedied, the employing enterprise which was the locus of the unfair labor practice, may be considered in privity with its predecessor for purposes of Rule 65(d). Pp. 414 U. S. 177-181.
4. The NLRB properly exercised its discretion in issuing the order against All American by striking an equitable balance among the conflicting legitimate interests of the bona fide successor, the public, and the affected employee for purposes of effectuating the national labor policies of avoiding labor strife, preventing a deterrent effect on the exercise of rights guaranteed employees by § 7 of the NLRA, and protecting the victimized employee, such policies being achieved at a relatively minimal cost to the bona fide successor. Pp. 414 U. S. 181-185.
5. The NLRB did not err in ordering both firms jointly or severally to pay the driver-salesman a specified sum of backpay, since an offending predecessor employer should at least be required to make the dischargee whole for any loss of pay suffered by reason of the discharge until such time as he secures substantially equivalent employment, since joint and several liability will more fully insure that the employee is fully recompensed by protecting him against, e.g., the successor's insolvency, and since the possibility that the successor will unjustifiably delay reinstatement to the predecessor's prejudice can be met by a protective provision in the contract of sale. Pp. 414 U. S. 186-187.
6. The fact that the driver-salesman, but for his discharge as an ordinary employee would, under Golden State's policy, have become a distributor about a year later, and, as an independent contractor, would have been excluded from NLRA coverage, did not preclude the NLRB from including in the gross backpay computation the dischargee's putative earnings as a distributor, since a reinstatement and backpay order is aimed at restoring the status quo that would have obtained but for the employer's unfair labor practice. Pp. 414 U. S. 187-189.
All American reinstate Baker and that Golden State and All American jointly or severally pay Baker a specified sum of net backpay. 187 N.L.R.B. 1017 (1971). The Court of Appeals for the Ninth Circuit, one judge dissenting, enforced the order, 467 F.2d 164 (1972). We granted certiorari, 410 U.S. 953 (1973). We affirm.
"offered substantial support for the Board's finding that All American purchased [the bottling business] with knowledge of the unfair labor practice litigation."
"Whether on the record as a whole there is substantial evidence to support agency findings is a question which Congress has placed in the keeping of the Courts of Appeals. This Court will intervene only in what ought to be the rare instance when the standard appears to have been misapprehended or grossly misapplied. 340 U. S. v.
NLRB, 340 U. S. 474, 340 U. S. 491 (1951). (Emphasis added.)"
On this state of the record, there is no justification for this Court's intervention, since Universal Camera precludes us from substituting our judgment for that of the Court of Appeals.
"This is not the place . . . to reverse a Court of Appeals because, were we in its place, we would find the record tilting one way, rather than the other. . . ."
NLRB v. Pittsburgh S.S. Co., 340 U. S. 498, 340 U. S. 503 (1951); see Central Hardware Co. v. NLRB, 407 U. S. 539, 407 U. S. 548 (1972).
"[n]o provision of the [National Labor Relations] Act authorizes the Board to impose the responsibility for remedying unfair labor practices on persons who did not engage therein."
Id. at 348. Finally, in 1967, in yet another turnabout, the Board overruled Symns Grocery Co. in Perma Vinyl, supra, and announced that, in circumstances there defined, see n 2, supra, remedial orders would be imposed upon bona fide successors for the unfair labor practices of their predecessors.
"If upon the preponderance of the testimony taken, the Board shall be of the opinion that any person named in the complaint has engaged in . . . any such unfair labor practice, then the Board . . . shall issue and cause to be served on such person an order requiring such person to cease and desist from such unfair labor practice, and to take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of this Act. . . ."
(Emphasis added.) The Board's restrictive view in Symns Grocery Co. of its remedial powers derived from a limitation perceived to inhere in the words "any person named in the complaint has engaged in . . . any such unfair labor practice"
"broad administrative power . . . to frame such remedial orders . . . not, of course, restricted to requiring remedial action by the offending employer alone,"
164 N.L.R.B. at 969, as were necessary to further the public interest subserved by the Act. See NLRB v. Colten, 105 F.2d 179 (CA6 1939).
"'in appropriate circumstances . . . , [to] those to whom the business may have been transferred, whether as a means of evading the judgment or for other reasons.'"
orders running to the offending employer's successors and assigns who have acquired the business as a means of evading the Board order, we do not see how those words may be read to bar the Board from issuing reinstatement and backpay orders against bona fide successors when the Board has properly found such orders to be necessary to protect the public interest in effectuating the policies of the Act. The Board's orders run to the evader and the bona fide purchaser, not because the act of evasion or the bona fide purchase is an unfair labor practice, but because the Board is obligated to effectuate the policies of the Act. Construing § 10(c) thus to grant the Board remedial power to issue such orders results in a reading of the section, as it should be read, in the light of "the provisions of the whole law, and . . . its object and policy.'" Mastro Plastics Corp. v. NLRB, 350 U. S. 270, 350 U. S. 285 (1956); see NLRB v. Lion Oil Co., 352 U. S. 282, 352 U. S. 288 (1957).
"binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise."
transferred, whether as a means of evading the judgment or for other reasons.' . . ."
"We do not undertake to decide whether or under what circumstances any kind of successor or assign will be liable for violation of a Labor Board order. . . . [W]hether one brings himself in contempt as a 'successor or assign' depends on an appraisal of his relations and behavior, and not upon mere construction of terms of the order."
324 U.S. at 324 U. S. 14-15.
Plainly then, Regal Knitwear recognizes that Rule 65(d) is not a bar to enforcement of all Board orders running to successors or assigns not themselves offending employers. The Court simply left open the question of whether the Rule precludes the enforcement of remedial orders running to a successor who is a bona fide purchaser. We answer that question today by holding that the Rule is not a bar to judicial enforcement of the Board order entered against the bona fide successor in this case.
"is derived from the common law doctrine that a decree of injunction not only binds the parties defendant, but also those identified with them in interest, in 'privity' with them, represented by them or subject to their control."
Regal Knitwear, 324 U.S. at 324 U. S. 14. Persons acquiring an interest in property that is a subject of litigation are bound by, or entitled to the benefit of, a subsequent judgment, despite a lack of knowledge. Restatement of Judgments § 89, and comment c (1942); see 1 J. Story, Equity Jurisprudence § 536 (14th ed.1918). This principle has not been limited to in rem or quasi in rem proceedings. Restatement of Judgments, supra, § 89, comment d; see ICC v Western N.Y. & P. R. Co., 82 F.192, 194 (WD Pa. 1897). We apply that principle here in order to effectuate the public policies of the Act.
do, go much farther both to give and withhold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved."
Virginian R. Co. v. System Federation, 300 U. S. 515, 300 U. S. 552 (1937); see Walling v. James v. Reuter, Inc., 321 U.S. at 321 U. S. 674-675. We hold that a bona fide purchaser, acquiring, with knowledge that the wrong remains unremedied, the employing enterprise which was the locus of the unfair labor practice, may be considered in privity with its predecessor for purposes of Rule 65(d). Cf. United States v. Hall, 472 F.2d 261, 266-267 (CA5 1972); Rivera v. Lawton, 35 F.2d 823 (CA1 1929); United States v. Dean Rubber Mfg. Co., 71 F.Supp. 96 (WD Mo.1946); United Gilpin Corp. v. Wilmore, 100 Colo. 453, 68 P.2d 34 (1937); 7 J. Moore, Federal Practice ¦ 65.13, p. 109 and n. 1 (2d ed.1973).
"order[s] or injunction[s] so broad as to make punishable the conduct of persons who act independently and whose rights have not been adjudged according to law."
"without affording [it] a full opportunity at a hearing, after adequate notice, to present evidence on the question of whether it is a successor which is responsible for remedying a predecessor's unfair labor practices. The successor [will] also be entitled, of course, to be heard against the enforcement of any order issued against it."
In this case, All American has no complaint that it was denied due notice and a fair hearing. It was made a parry to the supplemental backpay specification proceeding, given notice of the hearing, and afforded full opportunity, with the assistance of counsel, to contest the question of its successorship for purposes of the Act and its knowledge of the pendency of the unfair labor practice litigation at the time of purchase.
"The ultimate problem is the balancing of the conflicting legitimate interests. The function of striking that balance to effectuate national labor policy is often a difficult and delicate responsibility, which the Congress committed primarily to the National Labor Relations Board, subject to limited judicial review."
NLRB v. Teamsters Local 4, 353 U. S. 87, 353 U. S. 96 (1957).
"Especially in need of help, it seems to us, are the employee victims of unfair labor practices who, because of their unlawful discharge, are now without meaningful remedy when title to the employing business operation changes hands."
"Employees . . . ordinarily do not take part in negotiations leading to a change in corporate ownership. The negotiations will ordinarily not concern the wellbeing of the employees, whose advantage or disadvantage, potentially great, will inevitably be incidental to the main considerations. The objectives of national labor policy, reflected in established principles of federal law, require that the rightful prerogative of owners independently to rearrange their businesses and even eliminate themselves as employers be balanced by some protection to the employees from a sudden change in the employment relationship."
406 U. S. 291. Similarly, the Court refused to bind the union, since it might have made bargaining concessions with the previous employer which it would not necessarily agree to in negotiations with the successor. Id. at 414 U. S. 288.
intent on suppressing union activity may select for discharge those employees most actively engaged in union affairs, so that a failure to reinstate may result in a leadership vacuum in the bargaining unit. Cf. Phelps Dodge Corp. v. NLRB, 313 U. S. 177, 313 U. S. 193 (1941). Further, unlike Burns, where an important labor policy opposed saddling the successor employer with the obligations of the collective bargaining agreement, there is no underlying congressional policy here militating against the imposition of liability.
"his potential liability for remedying the unfair labor practices is a matter which can be reflected in the price he pays for the business, or he may secure an indemnity clause in the sales contract which will indemnify him for liability arising from the seller's unfair labor practices."
"should be ordered to pay to Baker back pay he would have earned as a driver-salesman in Golden State's employ from the date of this wrongful termination until the date of sale of the bottling company by Golden State, January 31, 1968."
Brief for Petitioners 60. [Footnote 8] The Court of Appeals declined to consider this argument because Golden State had agreed orally and in the contract of sale to indemnify All American for any backpay paid Baker by All American, and therefore was "liable for such wages by virtue of its agreement, whether or not it would also be liable absent that agreement." 467 F.2d at 166. But Golden State's contractual obligation may be subject to contractual defenses, and, for that reason, may not, in fact, be the equivalent of the liability imposed upon Golden State by the order. We shall therefore decide Golden State's challenge to the validity of the imposition of joint and several liability upon Golden State. We find no merit in the challenge.
responsibility for remedying his own unfair labor practices by simply disposing of the business. If he has unlawfully discharged employees before transferring ownership to another, he should at least be required to make whole the dischargees for any loss of pay suffered by reason of the discharges until such time as they secure substantially equivalent employment with another employer."
subsequent to October 1, 1964, on the basis of what he would have earned as a distributor after that date.
"However, it is undisputed that, when Baker was discriminatorily discharged he was an ordinary employee. The Act's remedies are not thwarted by the fact that an employee who is within the Act's protections when the discrimination occurs would have been promoted or transferred to a position not covered by the Act if he had not been discriminated against. NLRB v. Bell Aircraft Corp., 206 F.2d 235, 236-237 (2d Cir.1953)."
obtained but for Baker's wrongful discharge, it was also proper to compute what he would have earned after October 1, 1964, on the basis of his net profits as a distributor. Cf. NLRB v. Rice Lake Creamery Co., 124 U.S.App.D.C. 355, 358, 365 F.2d 888, 891 (1966); NLRB v. Mooney Aircraft, Inc., 375 F.2d 402 (CA5 1967).
On June 10, 1964, the Board found that Golden State violated §§ 8(a)(3) and (1) of the National Labor Relations Act, 49 Stat. 452, as amended, 29 U.S.C. §§ 158(a)(3) and (1), by discharging Baker, on August 16, 1963, because of union activities, and ordered Baker's reinstatement with backpay. 147 N.L.R.B. 410. O n December 2, 1965, the Court of Appeals for the Ninth Circuit enforced the Board's order with respect to Baker. 353 F.2d 667. Due to a delay in the Court of Appeals' disposition of the Board's petition for rehearing on a portion of the court's decision unrelated to Baker, a final decree was not entered until November 27, 1968, see 401 F.2d 454.
"To further the public interest involved in effectuating the policies of the Act and achieve the 'objectives of national labor policy, reflected in established principles of federal law,' we are persuaded that one who acquires and operates a business of an employer found guilty of unfair labor practices in basically unchanged form under circumstances which charge him with notice of unfair labor practice charges against his predecessor should be held responsible for remedying his predecessor's unlawful conduct."
"In imposing this responsibility upon a bona fide purchaser, we are not unmindful of the fact that he was not a party to the unfair labor practices, and continues to operate the business without any connection with his predecessor. However, in balancing the equities involved, there are other significant factors which must be taken into account. Thus,"
"It is the employing industry that is sought to be regulated and brought within the corrective and remedial provisions of the Act in the interest of industrial peace."
"When a new employer is substituted in the employing industry, there has been no real change in the employing industry insofar as the victims of past unfair labor practices are concerned, or the need for remedying those unfair labor practices. Appropriate steps must still be taken if the effects of the unfair labor practices are to be erased and all employees reassured of their statutory rights. And it is the successor who has taken over control of the business who is generally in the best position to remedy such unfair labor practices most effectively. The imposition of this responsibility upon even the bona fide purchaser does not work an unfair hardship upon him. When he substituted himself in place of the perpetrator of the unfair labor practices, he became the beneficiary of the unremedied unfair labor practices. Also, his potential liability for remedying the unfair labor practices is a matter which can be reflected in the price he pays for the business, or he may secure an indemnity clause in the sales contract which will indemnify him for liability arising from the seller's unfair labor practices."
164 N.L.R.B. 968, 969 (footnotes omitted).
See, e.g., Interstate Circuit, Inc. v. United States, 306 U. S. 208, 306 U. S. 226 (1939); NLRB v. Dorn's Transp. Co., Inc., 405 F.2d 706, 713 (CA2 1969).
A short answer to petitioners' argument might appear to be that, because the Board's supplemental order to All American required only reinstatement and backpay, and not that All American cease and desist from future unlawful activity, no injunctive relief was ordered, and therefore Rule 65(d) need not be considered. But we have previously found Rule 65(d) applicable to mandatory injunctions, and have noted that the courts of appeals have applied it "not only to prohibitory injunctions, but to enforcement orders and affirmative decrees as well." International Longshoremen's Assn. v. Philadelphia Marine Trade Assn., 389 U. S. 64, 389 U. S. 75 and n. 14 (1967); see generally Developments in the Law -- Injunctions, 78 Harv.L.Rev. 994, 1061-1063 (1965).
In not requiring the bona fide purchaser to cease and desist, the Board followed prior practice. See Thomas Engine Corp., 179 N.L.R.B. 1029 and n. 4 (1970), enforced sub nom. UAW v. NLRB, 442 F.2d 1180 (CA9 1971). This approach seems consistent with the fact that the successor's obligations do not arise out of its own unfair labor practices. The Board's practice after its earlier decision in Alexander Milburn Co., 78 N.L.R.B. 747 (1947), had been to order the bona fide purchaser to cease and desist. This may account for decisions of the courts of appeals, e.g., NLRB v. Birdsall-Stockdale Motor Co., 208 F.2d 234, 236 (CA10 1953), opposing the Board's position in Alexander Milburn, which eventually led to the Board's overruling of that decision in Symns Grocery Co., 109 N.L.R.B. 346 (1954). See DuRoss, Protecting Employee Remedial Rights Under the Perma Vinyl Doctrine, 39 Geo.Wash.L.Rev. 1063, 1089 (1971).
"where the new employer purchases a part or all of the assets of the predecessor employer, NLRB v. Interstate 65 Corp., 453 F.2d 269 (CA6 1971); [and] where the entire business is purchased by the new employer, NLRB v. McFarland, 306 F.2d 219 (CA10 1962). . . ."
NLRB v. Burns International Security Services, Inc., 406 U. S. 272, 406 U. S. 306 (1972) (opinion of REHNQUIST, J.); see id. at 406 U. S. 291 (opinion of the Court). The refusal to adopt a mode of analysis requiring the Board to distinguish among mergers, consolidations, and purchases of assets is attributable to the fact that, so long as there is a continuity in the "employing industry," the public policies underlying the doctrine will be served by its broad application. Cf. NLRB v. Colten, 105 F.2d 179, 183 (CA6 1939).
A purchasing company cannot be obligated to carry out under § 10(c) every outstanding and unsatisfied order of the Board. For example, because the purchaser is not obligated by the Act to hire any of the predecessor's employees, see NLRB v. Burns International Security Services, Inc., supra, at 406 U. S. 280 n. 5, the purchaser, if it does not hire any or a majority of those employees, will not be bound by an outstanding order to bargain issued by the Board against the predecessor or by any order tied to the continuance of the bargaining agent in the unit involved. Id. at 406 U. S. 280-281.
The only court of appeals panel which has considered the Perma Vinyl decision, other than the Fifth Circuit in enforcing the Board's order in that case, United States Pipe & Foundry Co. v. NLRB, 398 F.2d 544, and the Ninth Circuit in the decision under review, 467 F.2d 164, has expressed its approval. UAW v. NLRB, 442 F.2d at 1183 (Tuttle, J.). Commentators have generally concurred. See DuRoss, supra, n 4; Goldberg, The Labor Law Obligations of a Successor Employer, 63 Nw.U.L.Rev. 735 (1969); Comment, Successor Employer's Obligation to Remedy Unfair Labor Practices, 68 Col.L.Rev. 1602 (1968); Comment, 42 N.Y.U.L.Rev. 1202 (1967); Comment, 47 N.C.L.Rev. 459 (1969); Comment, 41 Temp. L.Q. 156 (1967); Comment, 13 Vill.L.Rev. 232 (1967).
Although the original order of the Board required Golden State to reinstate Baker, 147 N.L.R.B. at 412, the Board concedes that the sale to All American terminated Golden State's reinstatement obligation. See NLRB v. New Madrid Mfg. Co., 215 F.2d 908 (CA8 1954).
Golden State's reliance on Textile Workers v. Darlington Mfg. Co., 380 U. S. 263 (1965), is misplaced. In Darlington, it was held that an employer's liquidation of its entire business, even if motivated by anti-union animus, would not be an unfair labor practice. Id. at 380 U. S. 273-274. But Golden State committed an unfair labor practice over four years prior to the sale of the bottling business to All American, and, in that circumstance, the sale could not terminate its continuing liability for backpay.
It is apparent that, had Golden State already reinstated Baker with backpay before the sale of its business, and thereby fully complied with the Board's order, All American would have had no more obligation to employ him in the continuing business than it had to employ any of Golden State's other employees. See n 6, supra.
Golden State Bottling Company, Inc.

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