Source: http://openjurist.org/158/f3d/782/coronet-foods-incorporated-v-national-labor-relations-board
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158 F3d 782 Coronet Foods Incorporated v. National Labor Relations Board | OpenJurist
158 F. 3d 782 - Coronet Foods Incorporated v. National Labor Relations Board Home
158 F3d 782 Coronet Foods Incorporated v. National Labor Relations Board 158 F.3d 782
159 L.R.R.M. (BNA) 2605
CORONET FOODS, INCORPORATED, Petitioner,v.NATIONAL LABOR RELATIONS BOARD, Respondent.NATIONAL LABOR RELATIONS BOARD, Petitioner,v.CORONET FOODS, INCORPORATED, Respondent.
Nos. 97-1087, 97-1247.
Argued Oct. 29, 1997.Decided Oct. 22, 1998.
ARGUED: Arthur B. Muchin, Laner, Muchin, Dombrow, Becker, Levin & Tominberg, Ltd., Chicago, Illinois, for Petitioner. Fred Barry Jacob, National Labor Relations Board, Washington, D.C., for Respondent. ON BRIEF: Neil P. Stern, Robert T. Bernstein, Laner, Muchin, Dombrow, Becker, Levin & Tominberg, Ltd., Chicago, Illinois, for Petitioner. Frederick L. Feinstein, General Counsel, Linda Sher, Associate General Counsel, Aileen A. Armstrong, Deputy Associate General Counsel, Peter Winkler, Supervisory Attorney, Meredith L. Jason, National Labor Relations Board, Washington, D.C., for Respondent.
Before WILKINS and MOTZ, Circuit Judges, and CAMPBELL, Senior Circuit Judge of the United States Court of Appeals for the First Circuit, sitting by designation.
Enforcement granted in part and denied in part by published opinion. Senior Judge CAMPBELL wrote the opinion, in which Judge WILKINS and Judge DIANA GRIBBON MOTZ joined.
This appeal arises from a petition by Coronet Foods, Inc. ("Coronet") to review, and the cross-application of the National Labor Relations Board ("NLRB" or the "Board") to enforce, the NLRB's Second Supplemental Decision and Order issued against Coronet. The NLRB had earlier found, in proceedings enforced by the D.C. Circuit, that Coronet's replacement of its in-house transportation department with an outside contractor was in retaliation for its employees' union activities and constituted unfair labor practices. The NLRB then held a compliance proceeding resulting in orders that Coronet restore the abolished transportation department and pay backpay in specific amounts to illegally terminated employees. In this review petition Coronet contends that restoration will place an undue burden on Coronet, and that the backpay awards should be set aside as excessive and improperly computed.
Coronet is a West Virginia corporation with its principal place of business there. Its business consists of procuring, processing and cutting fresh vegetable produce like onions, peppers, cucumbers, radishes and lettuce to its customers' specifications. Its customers include fast food chains like McDonald's and Domino's. Part of Coronet's services include trucking the finished product to its customers' distribution centers over long distances, providing deliveries on a 24-hour seven-days-a-week basis. Because the products are perishable, fast and on-time deliveries are essential. Prior to 1989, Coronet owned and operated its own trucks and trailers, using its own drivers and mechanics, within a so-called transportation department. Its vehicles then included 11 tractors, 13 trailers and 6 or 7 "straight" trucks.
In 1987, employees in Coronet's in-house transportation department sought to join the local chapter of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO (the "Union"). Coronet's management responded, as later found by the NLRB, infra, by threatening to close the department if it unionized. Transportation department employees nonetheless voted, in April 1988, to join the Union. Soon afterwards, Coronet laid off six of the department's employees and discharged one more who had participated in union activities. In May 1989, Coronet shut down its transportation department, laid off the mechanics and drivers within the department, and contracted with Ryder, an outside trucking company, to fulfill its transportation and delivery requirements.
Coronet's closure of the department and related actions were challenged before the NLRB as being in retaliation for its employees' union affiliation. Coronet responded, in defense, that its in-house trucking operation was inefficient and outmoded, and that its vice-president, Thomas Padden, who was hired in 1986, had made a business judgment to replace it with an outside operator. According to Coronet, unionization concerns were not the primary reason it had eliminated the department.
On March 22, 1990, an Administrative Law Judge ("ALJ") found that Coronet had violated § 8(a)(1) of the National Labor Relations Act ("NLRA")1 by threatening to close the transportation department if the employees unionized and by giving the impression that management was conducting surveillance of the employees' efforts to unionize. See Coronet Foods, Inc., 305 N.L.R.B. 79, 1991 WL 203802, at * 6-* 10 (1991) (ALJ decision). The ALJ also concluded that Coronet had violated NLRA §§ 8(a)(3)2 and (1) by closing its transportation department and by laying off and discharging employees who supported the Union. See id. at * 11-* 19. Coronet's failure to negotiate with the Union regarding the department closing was held to violate NLRA §§ 8(a)(5)3 and (1). See id. at * 19-* 21.
Although the ALJ found credible Padden's testimony that he wished Coronet to get out of the trucking business as early as 1986 for legitimate business reasons, the ALJ determined that it was only in 1989, after unionization became an issue, that Coronet decided to close the in-house operation. The ALJ also found that the company's owner and founder, Edward Long, not Padden, had the authority to make the closure decision; that Long authorized the purchase of new trucks in 1987; and that it was only when the union appeared that closure was ordered.
For relief, the ALJ recommended that Coronet be ordered to restore the transportation department and reinstate with backpay the employees it had laid off and discharged. See id. at * 21-* 22. The ALJ found no evidence in the record that "resumption of[Coronet's] transportation operations would cause it undue hardship." Id. at * 26. The ALJ's recommendations were adopted in September 1991, with only minor alterations by the NLRB's three-member panel. See id. at * 1-* 2 (panel decision). The panel's order was reviewed and enforced by the United States Court of Appeals for the District of Columbia. See Coronet Foods, Inc. v. NLRB, 981 F.2d 1284 (D.C.Cir.1993). In its opinion, the Court of Appeals stated that Coronet "utterly failed to carry" its burden of production and persuasion on its defense that restoration of the transportation department would cause an undue burden on the company. Id. at 1288.4
The NLRB's General Counsel then instituted the compliance proceedings now before us. These were undertaken to consider further Coronet's objections to the NLRB's restoration order and to determine the amount of backpay due. On February 10, 1994, the NLRB's Regional Director for Region Six issued a compliance specification that set out the amount of backpay owed by Coronet to each terminated employee. In its answer, Coronet contested the various remedies. First, it asserted that the NLRB failed to toll backpay as of the date that Coronet would have laid off the employees for nondiscriminatory reasons. Second, it alleged that the NLRB was using the incorrect backpay formula. Third, it contended that restoration of its transportation department would impose an undue burden upon Coronet.
An ALJ held an eight-day hearing and, on April 19, 1996, issued a supplemental decision in which he found for the NLRB, with only minor exceptions. See Coronet Foods, Inc., 322 N.L.R.B. 837, 1997 WL 11274, at * 4 (1997) (ALJ's supplemental decision). While the Board had ordered restoration in the original unfair labor practice proceeding and the D.C. Circuit had rejected the undue burden defense, supra, both the D.C. Circuit and the Board acknowledged that the restoration order could be further litigated in the compliance proceeding, and this occurred, resulting in the ALJ's reaffirmation that Coronet must restore its in-house transportation department. See id. at * 4-* 5. The ALJ found insufficient support for Coronet's claim that resuscitating the department would cause undue hardship. See id. The ALJ also found that the General Counsel had used the correct backpay formula. See id. at * 7-* 8. The ALJ tolled a few backpay awards for times during which particular employees had been unavailable for work, had failed to engage in a reasonably diligent search for work, or had been employed part-time, but rejected most of Coronet's objections to individual claimant's backpay figures. See id. at * 8-* 16. The NLRB's three-member panel subsequently issued its Second Supplemental Decision and Order, in which it adopted the ALJ's conclusions and recommended order, with minor exceptions.5 See id. at * 1-* 2. Coronet seeks review of, and the NLRB seeks to enforce, the NLRB's Second Supplemental Decision and Order dated January 10, 1997.
Coronet concedes, as it must, the finality of the Board's 1991 unfair labor practice decision, enforced in 1993 by the D.C. Circuit. That decision held that Coronet's closure of its transportation department in 1989, and its discharge of drivers and mechanics in that department, were illegal. Restoration of the department and backpay were also ordered at that time. However, the D.C. Circuit and Board acknowledged that these remedy issues would remain for reconsideration in the subsequent compliance proceedings now under review. We accordingly focus in this opinion solely on remedy.
We turn first to the propriety of the Board's order that Coronet restore its in-house transportation department rather than continue to contract for trucking services as it has been doing since 1989. Coronet initially contracted with a national provider of trucking services, Ryder, in May of 1989. A year later it became briefly involved with a trucking contractor known as TCC. Coronet canceled that arrangement in favor of LMI, the contractor it has since engaged, with complete satisfaction, for its trucking needs.
While we shall return later to some of the specific case law, it is helpful to review at the outset some of the guiding standards. We start with the fact that the NLRB has broad but not unlimited authority under NLRA § 10(c) to remedy unfair labor practices. See NLRB v. Seven-Up Bottling Co., 344 U.S. 344, 346, 73 S.Ct. 287, 97 L.Ed. 377 (1953); see also Ultrasystems Western Constructors, Inc. v. NLRB, 18 F.3d 251, 258 (4th Cir.1994). We must enforce the Board's chosen remedy unless it is "arbitrary, capricious, or manifestly contrary to the statute," Fieldcrest Cannon, Inc. v. NLRB, 97 F.3d 65, 82 (4th Cir.1996).
The Board is expressly authorized by statute to order the reinstatement of improperly discharged workers and to award backpay. 29 U.S.C. § 160(c). In addition, the Supreme Court has held that the Board may, in an appropriate case, order an employer to restore a department closed as the result of anti-union animus. See Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 215-17, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964). When an employer closes a department in retaliation for its employees' union activities, an order mandating restoration of the department is presumptively appropriate and should be overturned only if the employer shows that restoration would either impose "an undue or unfair burden on it," Fibreboard, 379 U.S. at 216, 85 S.Ct. 398, or threaten its viability as a company. See Power, Inc. v. NLRB, 40 F.3d 409, 425 (D.C.Cir.1994); Mid-South Bottling Co. v. NLRB, 876 F.2d 458, 461 (5th Cir.1989). While restoration is presumptively appropriate, however, the question of remedy is "closely tied to the facts of each case" and "[n]o per se rule can be stated." Mid-South Bottling Co., 876 F.2d at 460.
It is the employer's burden to demonstrate the affirmative defense of undue hardship, Woodline Motor Freight, Inc. v. NLRB, 843 F.2d 285, 291 (8th Cir.1988), and the employer must, as with any affirmative defense, demonstrate undue hardship by a "preponderance of the evidence." NLRB v. Transportation Management Corp., 462 U.S. 393, 395, 103 S.Ct. 2469, 76 L.Ed.2d 667 (1983). The NLRB's findings of fact must stand if "supported by substantial evidence on the record considered as a whole." 29 U.S.C. § 160(f). And it has been held by the Supreme Court that the Board's choice of remedy, resting on the Board's "fund of knowledge all its own," must be given special respect by reviewing courts. NLRB v. Gissel Packing Co., 395 U.S. 575, 612, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969).
While the "substantial evidence" standard requires that we give due deference to the Board's findings, "it does not follow ... that the findings of the [Board] are to be mechanically accepted." Flack v. Cohen, 413 F.2d 278, 279 (4th Cir.1969). "Rather, we are obligated to scrutinize the whole record, taking into account whatever fairly detracts from the evidence relied upon by the Board." NLRB v. Consolidated Diesel Elec. Co., 469 F.2d 1016, 1021 (4th Cir.1972); see also NLRB v. Brown, 380 U.S. 278, 291, 85 S.Ct. 980, 13 L.Ed.2d 839 (1965) (reviewing courts are not "to stand aside and rubber stamp" Board determinations that are contrary to the tenor of the Act).
While we may not "lightly substitute [our] own judgment on 'how to best undo the effects of unfair labor practices,' " NLRB v. Sandpiper Convalescent Ctr., 824 F.2d 318, 323 (4th Cir.1987) (quoting Sure-Tan, Inc. v. NLRB, 467 U.S. 883, 899, 104 S.Ct. 2803, 81 L.Ed.2d 732 (1984)), we must ensure that the Board's findings "are not based on speculation or suspicion, as these register no weight on the substantial evidence scale." NLRB v. Peninsula Gen. Hosp. Med. Ctr., 36 F.3d 1262, 1269 (4th Cir.1994) (citing NLRB v. Instrument Corp. of Am., 714 F.2d 324, 328 (4th Cir.1983)). As the Supreme Court has stated:
Congress has ... made it clear that a reviewing court is not barred from setting aside a Board decision when it cannot conscientiously find that the evidence supporting that decision is substantial, when viewed in the light that the record in its entirety furnishes, including the body of evidence opposed to the Board's view.
Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 95 L.Ed. 456 (1951). Courts enforce remedial orders that are based upon the Board's careful consideration of the factual circumstances and the Board's special competence in fashioning appropriate remedies. As the D.C. Circuit has explained:
A remedial order should recognize the competing considerations which are potentially affected by the remedy chosen, be grounded in factual determinations rather than speculation, and explain how, in light of present circumstances its remedy can be expected to effectuate the purposes of the Act.
Peoples Gas System, Inc. v. NLRB, 629 F.2d 35, 45 (D.C.Cir.1980).
We turn next to an outline of the record evidence relating to Coronet's undue burden argument and the reasoning underlying the ALJ's decision to uphold restoration.
B. Coronet's Undue Burden Contention
Coronet did not furnish financial data showing that restoration would impose higher costs than contracting does. Nor has Coronet shown that it is in a precarious financial position making it unable to withstand the costs of restoration, whatever they are. Hence Coronet has not established that restoration will cause undue hardship because of cost per se.
Coronet makes a different sort of undue hardship argument. It contends that restoration will cause undue hardship by forcing it to forego contract trucking services, standard in its industry, that now fully meet its needs and satisfy its customers, replacing them with the problematic services of an untested, in-house alternative that it must construct from whole cloth. The record demonstrates that Coronet's last in-house transportation department, closed in 1989, was plagued with problems. Coronet has presented the testimony of two witnesses--Coronet's president, Thomas Padden and William Jaquith,6 an expert transportation consultant, both uncontradicted in the record and both credited by the ALJs, that Coronet lacks the experience and expertise to run a satisfactory in-house trucking service.1. Testimony of William Jaquith
William Jaquith testified that Coronet's former in-house transportation department had been poorly operated. Jaquith testified that Coronet had poor record-keeping and regulatory compliance procedures, frequent breakdowns with no long-term arrangement for service, insufficient garage space for a truck fleet, inadequate expertise to maintain equipment, and an aging fleet. Jaquith described the condition of Coronet's fleet in 1989 as comparable to fleets that existed in the 1950s and 1960s. According to Jaquith, Coronet's poor recordkeeping, sloppy maintenance, and overall lack of expertise and experience in operating a trucking department resulted in an operation that was wholly inefficient. Indeed, as to Coronet's trucking talents, Jaquith stated bluntly: "They are not good truckers. They're not even mediocre truckers."
Hence, according to Jaquith, if Coronet wished to resume its in-house department today it would have to structure it in a much different, more sophisticated, way. To operate a private fleet, Jaquith testified that Coronet would have to retain a transportation consultant; terminate the contract with LMI; and replacing LMI's services by: (a) negotiating for equipment (trucks, tractors and trailers) with a national leasing firm such as Penske; (b) securing a source for fuel and emergency breakdown service; (c) hiring a transportation management team; (d) acquiring insurance; (e) instituting driver training and drug testing; (f) purchasing a computer system comparable to LMI's (for record-keeping) to control costs; (g) locating a terminal; and (h) arranging for a back-up carrier to prevent service failures during the six-month transition period; and (i) hiring management personnel to run its private fleet, including a general manager, terminal manager, clerk and several dispatchers.7
Even if all these innovations and improvements could be realized, however, Jaquith opined that Coronet should not resume operation of its private fleet. He testified that Coronet's in-house transportation department was structured in a now-obsolete manner. As a private operator, Jaquith testified that Coronet lacked the necessary regulatory authority to develop "backhauls"--loads that fill the otherwise empty miles back from where a truck has made its delivery. Jaquith testified that companies had not operated in this manner for decades:
The fleet as it operated in those days was typical of what we found in the '60's and '70's; it was being run in a private fleet one way with finished product and came back empty. You can't do that any more and stay competitive.
Jaquith testified that a resumption of Coronet's private fleet operation would "penalize them to the tune of about $460,000, because that's what the backhaul credits ... amount to right now."8
Jaquith opined that dedicated carriers, which have the necessary approvals to engage in backhauls, could make the company a better deal financially. He concluded that it would simply make no sense for Coronet to revert to its previous private fleet operation with no backhauls. Such fleets, he said, "are basically being eliminated all over the country." Jaquith testified that private fleets "may have made some sense in the days of regulation, when the opposing carrier rates were $3 to $4 a mile. They don't now, when a dedicated fleet can come in at a price these people do."
Jaquith testified that in order to develop backhaul business and remain competitive, Coronet would have to operate as a common carrier. To do this, it would have to both take all of the above steps necessary to run a private fleet and also apply for interstate and intrastate operating authorities, and workers' compensation insurance, and obtain a sales-oriented general manager to solicit backhaul traffic. Jaquith further testified that accounting and regulatory requirements would also necessitate some corporate restructuring; he stated that Coronet would have to create a separate division or corporate subsidiary for the trucking operation. Jaquith testified that the transition to common carrier status would take approximately six months. During that