Case Name: NATIONAL LABOR RELATIONS BOARD v. DEENA ARTWARE, INC., et al.
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1960-02-23
Citations: 361 U.S. 398
Docket Number: No. 46
Parties: NATIONAL LABOR RELATIONS BOARD v. DEENA ARTWARE, INC., et al.
Judges: Mr. Justice Stewart took no part in the consideration or decision of this case.
Reporter: United States Reports
Volume: 361
Pages: 398–415

Head Matter:
NATIONAL LABOR RELATIONS BOARD v. DEENA ARTWARE, INC., et al.
No. 46.
Argued December 8, 1959.
Decided February 23, 1960.
Ralph S. Spritzer argued the cause for petitioner. With him on the brief were Solicitor General Rankin, Stuart Rothman, Thomas J. McDermott and Dominick L. Manoli.
James G. Wheeler argued the cause for respondents. With him on the brief were Mervin N. Bachman, Thomas J. Marshall, Jr. and Sidney R. Zatz.

Opinion:
Mr. Justice Douglas
delivered the opinion of the Court.
This litigation has been long and drawn out and the present case is merely a small segment of it. In 1949 petitioner found that respondent Deena Artware, Inc. (Artware), had violated the National Labor Relations Act, 61 Stat. 136, 29 U. S. C. § 158 (a), by discharging and refusing to reinstate 66 employees who had engaged in a strike (86 N. L. R. B. 732, 95 N. L. R. B. 9); and it ordered Artware "and its officers, agents, successors, and assigns" to offer reinstatement to those employees and to make them whole for any loss of pay suffered by them as a result of the discriminating action. The Court of Appeals in 1952 affirmed the Board's decision with respect to 62 of the 66 employees and entered a decree enforcing the Board's order, 198 F. 2d 645, remanding the case to the Board to determine the amounts due the individual employees. In 1953 Artware offered reinstatement to all of these employees but shortly closed its plant (which was located in Kentucky), never resumed operations, and never paid any back pay to the employees in question.
It appears that Weiner, one of the respondents, created a series of corporations, at the top of which was Deena Products, Inc. (Products), an Illinois corporation. Beneath it was a group of. subsidiaries — formed under Kentucky law — Artware, Deena of Arlington, Inc., Sippi Products Co., Inc., and Industrial Realty Co., Inc. — all of whose shares, except for qualifying shares, were owned by Products. Weiner owned all the shares of Products, except for qualifying shares; and all the officers and directors of Products and the several subsidiaries were .Weiner, his wife, his son, and his secretary. Weiner was president and treasurer of Products and of each of the subsidiaries, including Artware.
Artware in 1949 gave Products a promissory note secured by a mortgage on Artware's property, allegedly for advances made. In 1952 Artware made an assignment to Products in partial satisfaction, of its indebtedness. In 1953 the Board applied to the Court of Appeals for an order restraining that assignment. It also asked for an order of discovery, alleging that the affairs of Products and Artware were being conducted in such a way as to dissipate Artware's assets and to avoid making the back wage payments. The court denied these motions, holding that, until the amount of back pay was liquidated and payment of the fixed sum refused, there was no warrant for granting that relief (207 F. 2d 798), the court, adding that if upon liquidation of Artware "any financial inability" on its part to pay the awards was shown to be "the result of improper actions on its part in the meantime, appropriate contempt action can then- be taken." Id., at 802.
At that time, the Board had not issued an order determining the specific amounts of back pay owed the individual employees. In 1955 — nearly two years later — it made that determination and entered an order, directing payment of back pay totaling about $300,000; and the Court of Appeals' ordered Artware, "its officers, agents, successors and assigns" to pay that amount to specified employees. 228 F. 2d 871. That' was on December 16, 1955.
In 1957 the Board moved the Court of Appeals for discovery, inspection, and depositions, naming Artware, Weiner, Products, and the other subsidiaries of Products. It alleged that Weiner had caused the assets of Artware to be siphoned off through the other corporations under his control for the purpose of evading the back pay obligation. The Court of Appeals denied the motion, 251 F. 2d 183, holding that a contempt proceeding, rather than discovery, was the proper procedure.
On August 20, 1958, the Board petitioned the Court of Appeals to hold Artware, Weiner, Products and the other subsidiaries in civil contempt for failure to pay the amounts due employees under the back pay order. On October 11, 1958, the Board renewed its motion for discovery, inspection, and the taking of depositions from Artware, the affiliated corporations, and Weiner and other officers of these corporations.
In its petition the Board made charges of dealings between these corporations and between them and Weiner occurring from 1949 to 1955 which, it maintained, showed both (1) fraud and wrongdoing for the purpose of frustrating the back pay order and (2) the operation of these various corporations "as 'a single enterprise," each of the corporations performing "a particular function, as a department or division of the one enterprise in the manufacture, sale- and distribution of the common product." The allegations (which are summarized in the opinion below, 261 F. 2d 503, 506-507) need not be repeated here, as the Court of Appeals merely held that, although the enforcement order was entered July 30, 1952, it was not made specific as to amounts owed until December 16, 1955. It, therefore, concluded that prior to the latter date the decree was "not sufficiently definite and mandatory to serve as the basis for contempt proceedings." Id., at 510. It, therefore, dismissed the Board's petition for adjudication in civil contempt. It also denied the Board's motion for discovery, inspection, and depositions. 261 F. 2d 503, 510. The case is here on a petition for certiorari, 359 U. S. 983, which we granted in order to consider the validity of the action of the Court of Appeals in dismissing the petition insofar as it charged the existence of "a single enterprise."
The Court of Appeals dismissed the petition without considering the second group of allegations made by the Board, viz., that these various corporations were in fact "a single enterprise." And it denied the motion for discovery even as it pertained to that alternative theory of liability. It may have done so because it thought that the issues tendered in the petition related solely to inter-company transactions alleged to be conveyances in fraud of creditors or preferences in favor of some creditors. That seemed to be its preoccupation, as is evident by its references to possible causes of action under Kentucky law to set those transactions aside. Id., at 509.
We do not stop to consider what would be a proper formulation of a rule of law governing liability in contempt for frustration of a decree. The Court of Appeals may have considered the transactions and assignments as if they were made between separate and distinct corporations. If they are viewed in that light, we cannot say they are so colorable as to warrant us in reversing the Court of Appeals. But we think the Board is entitled to show that these separate corporations are not what they appear to be, that in truth they are but divisions or departments of a "single enterprise."- That is the alternative theory of liability which the Court of Appeals did not consider. We think that the Board is entitled to a hearing un that alternative theory and to discovery in aid of it.
The question whether the corporations under Weiner's ownership were only departments or divisions in one single enterprise is in a different category than those that arise under either 13 Eliz. or the modern law of preferences. Whether one corporation is liable for the obligations of an affiliate turns on other considerations. The insulation of a stockholder from the debts and obligations of his corporation is the norm, not the exception. See Pullman Car Co. v. Missouri Pacific R. Co., 115 U. S. 587, 597. Yet as Mr. Justice Cardozo said in Berkey v. Third Avenue R. Co., 244 N. Y. 84, 95, 155 N. E. 58, 61, "Dominion may be so complete, interference so obtrusive, that by the general rules of agency the parent will be a principal and the subsidiary an agent. Where control is less than this, we are remitted to the tests of honesty and justice." That is not a complete catalogue. The several companies may be represented as one. Apart from that is the question whether in fact the economic enterprise is one, the corporate forms being largely paper arrangements that do not reflect the business realities. One company may in fact be operated as-a division of another; one may be only a shell, inadequately financed; the affairs of the group may be so intermingled "that no distinct corporate lines are maintained. These are some, though by no means all, of the relevant considerations, as the authorities recognize. See Lattin on Corporations (1959) ch. 2, § 13, 14; Stevens on Corporations (1949) § 17; Berle, The Theory of Enterprise Entity, 47 Col. L. Rev. 343.
We do not intimate an opinion on the merits of this alternative theory of liability. The authorities we have cited merely indicate the range of inquiry which the petition of the Board presented. Discovery is useful in determining what the facts are. It is, indeed, necessary to determine whether the decree of the court enforcing the Board's order should run to any of the affiliated corporations or their stockholders. When the facts are resolved, it will be time enough to consider what further enforcement decree, if any, would be appropriate.
The petition should be reinstated insofar as it charges the existence of "a single enterprise," and the motion for discovery should be granted so that the Board will have an opportunity to prove those allegations.
Reversed.
Mr. Justice Stewart took no part in the consideration or decision of this case.
See Platt v. Bradner Co., 131 Wash. 573, 230 P. 633. Cf. American Nat. Bank v. National Wall-Paper Co., 77 F. 85, 91.
See Foard Co. v. Maryland, 219 F. 827, 829; Portsmouth Cotton Oil Corp. v. Fourth Nat. Bank, 280 F. 879; Dillard & Coffin Co. v. Richmond Cotton Oil Co., 140 Tenn. 290, 296, 204 S. W. 758; Costan v. Manila Electric Co., 24 F. 2d 383, 384-385. Cf. United States v. Delaware, L. & W. R. Co., 238 U. S. 516, 529; Chicago, M. & St. P. R. Co. v. Minneapolis Civic Assn., 247 U. S. 490, 500-502; Erickson v. Minnesota & Ontario Power Co., 134 Minn. 209, 213-215,158 N. W. 979, 980-981.
See Luckenbach S. S. Co. v. W. R. Grace & Co., 267 F. 676, 681; Oriental Investment Co. v. Barclay, 25 Tex. Civ. App. 543, 554-557, 64 S. W. 80, 86-87. For discussion of the situation where a company is "deliberately kept judgment-proof" see Weisser v. Mursam Shoe Corp., 127 F. 2d 344, 346.
See The Willem van Driel, 252 F. 35, 38; Wichita Falls & N. W. R. Co. v. Puckett, 53 Okla. 463, 502-505, 157 P. 112, 124-125. Cf. United States v. Lehigh Valley R. Co., 220 U. S. 257, 272-274.
Cf. Union Sulphur Co. v. Freeport Texas Co., 251 F. 634, 661-662; Harlan Public Service Co. v. Eastern Constr. Co., 254 Ky. 135, 143, 71 S. W. 2d 24, 29.
Cf. Regal Knitwear Co. v. Labor Board, 324 U. S. 9, 16.