Court Opinion

ID: 9479193
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:10:53.462916+00
Date Added: 2024-06-11T17:46:52.632070
License: Public Domain

KRAVITCH, Circuit Judge,
dissenting:
In order to hold Hardin’s liable to the terms of Flowers of Birmingham’s labor contract, the majority reasons that Hardin’s must be deemed a “successor corporation” of Flowers of Birmingham. Because there was no “substantial continuity of the workforce,” the majority concludes that Hardin’s was not a successor corporation.
The majority disregards an issue that distinguishes this case from Fall River Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S. 27, 107 S.Ct. 2225, 96 L.Ed.2d 22 (1987); Howard Johnson Co. v. Detroit Local, 417 U.S. 249, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974); N.L.R.B. v. Burns International Security Services, 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972); and John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964).1 As developed in these Supreme *1549Court cases, the successor-corporation doctrine determines whether labor contracts continue to exist after a transaction involving two economically independent employers. See Fall River, 107 S.Ct. at 2230 (corporation purchased assets of liquidated corporation); Howard Johnson, 417 U.S. at 250, 94 S.Ct. at 2237 (corporation made bona fide purchase of assets of restaurant and motor lodge); Burns, 406 U.S. at 275, 92 S.Ct. at 1576 (corporation was an independent contractor hired after principal determined not to contract with former independent contractor); John Wiley, 376 U.S. at 545, 84 S.Ct. at 912 (two formerly independent companies merged for genuine business reasons). In the instant case, by contrast, one wholly owned subsidiary merely transferred operations to a sister corporation, another wholly owned subsidiary, without payment of consideration. The question here presented is whether a company can rid itself of a bothersome set of labor obligations merely by arranging for its management employees to execute a few legal documents; the majority’s statement that no evidence showed the parent corporation’s “manipulation” of its subsidiaries, ante note 6, disregards the fact that a wholly owned subsidiary is completely subservient to the desires of its parent.
The transaction under scrutiny was an intra-company rearrangement — only on paper did one corporation succeed another; ownership and control remained in Flowers Industries throughout. See Southport Petroleum Co. v. N.L.R.B., 315 U.S. 100, 106, 62 S.Ct. 452, 456, 86 L.Ed. 718 (1942) (“If there was merely a change in name or in apparent control there is no reason to grant the petitioner relief from the Board’s order of reinstatement; instead there is added ground for compelling obedience.... [A] bona fide discontinuance and a true change of ownership ... would terminate the duty of reinstatement created by the Board’s order_”). Contrary to Supreme Court authority, the majority’s holding permits a corporation to absolve itself of labor obligations through clever bookkeeping; this result seriously impairs the mutuality of obligation in labor law. See Howard Johnson, 417 U.S. at 259 n. 5, 94 S.Ct. at 2242 n. 5 (in cases that “involve a mere technical change in the structure or identity of the employing entity, frequently to avoid the effect of the labor laws, without any substantial change in its ownership or management^] ... the courts have had little difficulty holding that the successor is in reality the same employer and is subject to all the legal and contractual obligations of the predecessor”). Although the majority notes that transactions between two Flowers companies are labelled “sales” and “purchases” rather than “debits” and “credits,” and that the subsidiaries are responsible for labor relations in their local market, these are slender reeds to support a finding that Flowers of Birmingham and Hardin’s functioned as independent economic entities for the purpose of resolving the important issue of labor-contract continuity. Moreover, in light of the Howard Johnson Court’s recognition that an occasional corporation will undergo a “mere technical change” in order “to avoid the effect of the labor laws,” I think it highly relevant that the arbitrator found Hardin’s transfer of the thrift stores to have been driven by anti-union animus. Cf. ante p. 1547.
I doubt that the Supreme Court’s reasoning in Howard Johnson even speaks to the question of workforce continuity under the present circumstances. See id., 417 U.S. at 263, 94 S.Ct. at 2244 (“continuity of identity in the business enterprise necessarily includes, we think, a substantial continuity in the identity of the work force across the change in ownership”) (emphasis supplied). In Howard Johnson, the union sought ultimately to force the employer to hire union employees discharged after Howard Johnson purchased the assets of an indepen*1550dently owned franchise. The Court responded as follows:
What the Union seeks here is completely at odds with the basic principles this Court elaborated in Burns. We found there that nothing in the federal labor laws “requires that an employer ... who purchases the assets of a business be obligated to hire all of the employees of the predecessor though it is possible that such an obligation might be assumed by the employer.” [Citations]. Bums emphasized that “[a] potential employer may be willing to take over a moribund business only if he can make changes in corporate structure, composition of the labor force, ... and nature of supervision.” [Citations],
417 U.S. at 261, 94 S.Ct. at 2243. Unlike Howard Johnson (or Fall River, Bums, or John Wiley), the transaction here under review was not conducted at arm’s length and the problem of the white knight’s willingness to rescue a failing corporation is not present. Flowers Industries had a substantial economic interest in making the Birmingham operation more profitable; this interest would continue whether or not the Birmingham operation was bound by a labor contract.
I therefore respectfully dissent.

. Because I conclude as a matter of federal law that Hardin’s was responsible for the labor obligations of Flowers of Birmingham, I do not address the question presented in Part II of the majority opinion.