Opinion ID: 185443
Heading Depth: 1
Heading Rank: 3

Heading: Sham Sales & Reestablishment Order

Text: 33 Petitioner DFC specifically objects to the NLRB's finding that all of its sales of hot trucks and catering routes were sham sales motivated by an intent to prevent DFC unionization. DFC also challenges the restoration order issued by the NLRB to redress this alleged unfair labor practice. While anti-union animus may well have motivated the decision to sell the hot trucks and routes, there is not substantial evidence to support the NLRB's conclusion that the sales were sham transactions. The Board's findings are incomplete and there is inadequate attention to aspects of the sales which cast doubt on the sham characterization. Even were the NLRB's findings adequate in this regard, we have grave doubts that the restoration order could be upheld. We have no doubt, however, that this portion of the Board's remedy cannot be justified on the current record and must be vacated. 34 This Court generally defers to the factual findings of the NLRB, as discussed above. See supra Part II. However, this Court does not merely rubber-stamp NLRB decisions, Avecor, 931 F.2d at 928, as we must consider not only the evidence supporting the Board's decision but also 'whatever in the record fairly detracts from its weight,'  Schaeff, Inc. v. NLRB, 113 F.3d 264, 266 (D.C. Cir. 1997) (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951)). Where the NLRB adopts a conclusion that is without support in the record, or which conflicts with the record considered as a whole, we may reverse. See 29 U.S.C. 160(e) (Board conclusions of fact are conclusive if supported by substantial evidence on the record considered as a whole). 35 DFC sold all of the hot trucks and routes between October 1996 and March 1997. Douglas Foods, 330 NLRB No. 124, slip op. at 16. Although neither the ALJ nor the Board catalogs all of the sales, the ALJ's decision reports that all of the trucks were initially sold to former DFC employees or supervisors. All of the truck drivers and cooks employed on the trucks at the time of the sales, save for Debra Beck, were hired by the truck purchasers. Id. The timing of the sales, DFC management's anti-union sentiments, and the nature of the transactions themselves led the ALJ to conclude that all of the sales were not arms-length transactions and were 'shams' motivated in large part by DFC's desire to thwart the Union's efforts to overturn the results of the August 1996 election and obtain a bargaining order from the NLRB. Id. On this basis the ALJ ordered DFC to reacquire the sold trucks and routes, and reinstate those employees who were terminated from DFC as a result of the sales. Reacquisition would not be difficult, the ALJ reasoned, because it would only require paper transactions. Id. at 25. The Board adopted this conclusion without comment. 36 Reviewing the sham sale determinations is difficult, as an initial matter, due to the ALJ's incomplete treatment of the subject. The ALJ discusses several of the truck and route sales at length. Others, the ALJ does not discuss at all. According to the ALJ, DFC had twelve hot trucks and routes, and sold all of them as part of one plan to eliminate the bargaining unit. Id. at 18. Yet the ALJ does not identify the basis for this conclusion with respect to all of the truck sales, leaving us to wonder what it was about the nature of the transactions themselves that led the ALJ to its conclusion that all of the sales were sham transactions. 37 The incomplete analysis is significant because, despite their similarities, the sales were not identical, cookie-cutter transactions. Different trucks and routes were sold on different terms. As with lease operators, different purchasers paid different monthly installments. While most purchasers signed supply agreements with DFC, Sheila Thomas did not, id. at 18 & n.37, and Merollis was also released from the supply agreement covering the three trucks she purchased as well, id. at 18. With further respect to Merollis the ALJ found and the Board affirmed that she has her own workers compensation insurance, product liability insurance, accountant, tax identification number, and other indicia of independence from DFC. Without further reasoning or explanation, the ALJ proceeded to conclude, and the Board to affirm, that the totality of the record indicates that the sale to her was a sham transaction motivated in large part by DFC's desire to thwart the Union. Id. We are not required to rubberstamp a conclusory reference to totality of the record without some further expressed reasoning or other record support for the otherwise inexplicable conclusion. See Peoples Gas Sys., Inc. v. NLRB, 629 F.2d 35, 42 (D.C. Cir. 1980). 38 The present case is easily distinguishable from prior instances in which we have upheld NLRB findings of sham transactions motivated by anti-union animus. In Fugazy Continental Corp. v. NLRB, 725 F.2d 1416 (D.C. Cir. 1984) and O'Dovero v. NLRB, 193 F.3d 532 (D.C. Cir. 1999), we affirmed NLRB findings of sham transactions motivated by anti-union animus. In each of these cases, the transactions occurred between the employer and an alter-ego that allowed the disguised continuance of the employer's operations. Fugazy, 725 F.2d at 1419. Such a finding of alterego status can be based upon substantial identity of management, business purpose, operation, equipment, customers, supervision and ownership between the old entity and its successor. Fugazy, 725 F.2d at 1419. While common ownership is not an absolute prerequisite to a finding of alter ego status, id. at 1420, it weighs heavily in the alter ego determination. In O'Dovero, for example, the employer controlled two companies and closed one to prevent unionization, while shifting its business to the other. 39 Neither the ALJ nor the Board found that the trucks and routes were purchased by an alter ego of DFC. On the present record, such a finding could not be sustained. Several factors point strongly against such a finding. In both Fugazy and O'Dovero, there was little evident purpose to the transaction other than to rid the employer of pro-union employees without altering the employer's underlying business. Here, however, DFC's employees retained their jobs-albeit with different employers--and DFC altered the nature of its business, eliminating retail functions. 40 While it is likely that the lack of a record-supported alterego finding would alone render the NLRB's restoration order reversible, the Board's failure to consider the feasibility and impact of the remedial order makes it certain. While the ALJ and NLRB are convinced that the truck and route sales were no more than paper transactions, a review of the transactional documents makes clear that ownership and control of the trucks changed hands. The ALJ notes that [o]ne must assume that the purchasers received something of value in exchange for [their] weekly payments. Douglas Foods, 330 NLRB No. 124, slip op. at 25. Precisely. It is called title. Whatever the motivation for the sales, it is uncontestable that title has passed to new owners for at least some of the sold trucks. This alone suggests the sales, or at least some of them, were not sham transactions. Cf. Naperville Ready Mix, Inc. v. NLRB, 242 F.3d 744, 753 (7th Cir. 2001) (noting Board did not invoke sham transaction doctrine where legal transfer of title was undisputed). It is also sufficient to require remand of the restoration order. 41 Neither the ALJ nor the NLRB ever considered whether reacquisition of the sold trucks and routes is factually possible, nor whether an order for their reacquisition is within the legal authority of the Board--a proposition which we frankly doubt. The NLRB's casual treatment of the implications of its order is startling. Even if the truck sales were motivated by anti-union animus, title passed to the truck purchasers, many of whom were among the employees the Board is purporting to protect. Be that as it may, we return to the more fundamental question of the Board's lawful authority to enter the remedy at all. 42 When the NLRB orders an employee to be reinstated, its order typically requires that the company offer reinstatement, as DFC is required to do here for those employees laid off as a result of the sales. This is the limit of the NLRB's equitable power--it may order the employer to reinstate a former employee, but it cannot order the employee to take back the position and return to work. It seems that the analogous result here would be for the NLRB at most to order DFC to offer to repurchase trucks and routes, not to require restoration of the status quo ante. Here, the NLRB ordered DFC to restore and resume [its] hot truck catering operations as they existed prior to October 1, 1996 within fourteen days of the order, Douglas Foods, 330 NLRB No. 124, slip op. at 6, without any explanation of its authority to enter such order or DFC's ability to carry it out. 43 In its brief, the NLRB argues for the first time that the contracts contained boiler-plate language excusing either party from obligations due to intervening circumstances, such as actions or proceedings against one of the parties or the enactment of regulation. Brief for the NLRB at 58. We do not consider this argument as it was not relied upon by the Board or ALJ. We cannot sustain agency action on grounds other than those adopted by the agency in the administrative proceedings. MacMillan Publ'g Co. v. NLRB, 194 F.3d 165, 168 (D.C. Cir. 1999). Even were this language referred to in either the ALJ or NLRB opinion, it would seem insufficient to allow for the forced sale of trucks and routes to DFC. Even in its brief, the NLRB cites no authority for this proposition. 44 The NLRB portrays this part of its order as a run-of-themill requirement that the employer undo the effects of discriminatorily motivated changes. Yet the NLRB cites no case in which similar relief was ordered in similar circumstances. In O'Dovero, there was no dispute that the closed business was never formally dissolved and could resume a project 'tomorrow' if it so chose. 193 F.3d at 537. As this Court concluded, the Board's order require[d] no more than a return to the status quo ante with respect to 'work assignment decisions.'  Id. at 539 (citation omitted). This is hardly analogous to the forced repurchase of independently owned assets. With the exception of Beck, all of DFC's former drivers and cooks are now either truck owneroperators or their employees, Douglas Foods, 330 NLRB No. 124, slip op. at 16, and the NLRB has substantial authority to address DFC's unfair labor practices through more traditional forms of relief. For these reasons, we vacate the Board's finding that the truck and route sales were sham transactions along with the Board's restoration order.