Court Opinion

ID: 9474104
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:48:17.968925+00
Date Added: 2024-06-11T17:43:54.528181
License: Public Domain

TORRUELLA, Circuit Judge
(Dissenting).
The central issue presented by this appeal is whether the National Labor Relations Board (Board) has contravened N.L.R.B. v. Burns International Security Services, 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972) in ruling that Fall River is a “successor employer” to Sterlingwale and was thus bound to recognize and negotiate with the labor organization that represented Sterlingwale’s employees. Underlying the resolution of this question are two Board-promulgated theories: (1) the “continuing demand” concept, whereby a union’s demand for recognition, once made and rejected by an employer, is considered to be continuing in nature, see Aircraft Magnesium, 265 N.L.R.B. 1344, 1345 n. 9 (1982), enforced, 730 F.2d 767 (9th Cir. 1984), and (2) the “substantial and representative complement” standard, under which the determination of whether a new employer is a successor is postponed until his workforce reaches a substantial complement, representative of the number and type of employees that will ultimately constitute the appropriate bargaining unit. Aircraft Magnesium, 265 N.L.R.B. at 1345; Premium Foods, Inc. v. N.L.R.B., 709 F.2d 623, 628 (9th Cir.1983). These issues are unavoidably intertwined and are of first impression in this circuit.
At the outset, it must be recognized that “[t]he judicial role is narrow: The rule[s] which the Board adopts [are] judicially reviewable for consistency with the Act, and for rationality, but if [they] satisf[y] those criteria, the Board’s application of the rule[s], if supported by substantial evidence on the record as a whole, must be enforced.” Beth Israel Hospital v. N.L.R.B., 437 U.S. 483, 501, 98 S.Ct. 2463, 2473, 57 L.Ed.2d 370 (1978). See also § 10(e), N.L.R.A., 29 U.S.C. § 160(e); Administrative Procedure Act, 5 U.S.C. § 706(2)(E); Universal Camera Corp. v. N.L.R.B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951). In my opinion the Board has failed to meet all of these tests and is promoting concepts that are clearly contrary to the Labor Management Relations Act (Act) and to Supreme Court precedent.
In the area of successorship there are few broad governing principles and thus, there exists considerable uncertainty. N.L.R.B. v. Band-Age, Inc., 534 F.2d 1, 2 (1st Cir.1976). See also Note, The Bargaining Obligations of Successor Employers, 88 Harv.L.Rev. 759, 760 (1975) (hereinafter cited as Bargaining Obligations); Comments, Criteria For Determining Employer Successorship-Factor Analysis, Burns and the Need For a New Standard, 11 Wake Forest L.Rev. 437, 446, 457 (1975) (hereinafter cited as Criteria). In light of the difficulty of the successorship question, it is especially appropriate to focus on the particular facts of each case. Howard Johnson Co. v. Detroit Local Joint Executive Board, Hotel and Restaurant Employees Union, 417 U.S. 249, 256 (1974); Band-Age, Inc., supra.
In the present case, the facts upon which the Board’s action is predicated are essentially undisputed. I will restate them, however, in the context of various items apparently glossed over by the Board in reaching its successorship conclusion.
On February 12, 1982, Sterlingwale shut down its textile dyeing and finishing operation and indefinitely laid off all of its production and maintenance employees. These employees were represented since 1968 by the United Textile Workers of *435America, AFL-CIO, Local 292 (Union). A series of collective bargaining agreements had been negotiated, the last of which was due to expire on April 1, 1982, and eventually did so expire without further extension by the parties. Notwithstanding the existence of a grievance and arbitration procedure, the Union did not challenge Sterlingwale’s actions, as it was patently clear that the terminations were not motivated by anything except Sterlingwale’s dire economic circumstances involving the loss of millions of dollars.
After February 12th, Sterlingwale entered a period of liquidation during which it retained a skeleton crew until the Summer of 1982, when the business ceased activities altogether. An assignment was made for the benefit of creditors and a foreclosure was made on the premises occupied by Sterlingwale. Thereafter, Sterlingwale’s property was sold at auction. The real property was acquired in late August 1982 by Macramy Sales Corp. (Macramy), who then leased part of these premises to Fall River. Fall River moved into this locale in September 1982. Fall River also acquired at auction most of Sterlingwale’s machinery, furniture, and fixtures, and part of Sterlingwale’s remaining materials and inventory. It is significant to note that these purchases were made at public auction, not through direct private sales.
Fall River acquired no other former Ster-lingwale assets such as its trade name, good will, or customer lists, nor did Fall River assume any of Sterlingwale’s liabilities. Additionally, there is no evidence that Fall River obtained any of Sterlingwale’s employee lists or personnel records.
Thereafter, Fall River publicly advertised employment opportunities in the local newspapers. On September 20, 1982, after hiring its first new employees, it commenced preliminary start-up operations in one of three former Sterlingwale buildings. Fall River proposed to engage solely in commission work, which consists of the dyeing and finishing of fabric belonging to others for a commission, in contrast with Sterlingwale, whose business had been approximately 60-70% processing its own fabric and only 30-40% commission finishing.
On October 19, 1982, the Union sent Fall River a letter stating that, “pursuant to the Agreement between Sterlingwale” and the Union, the Union demanded recognition. It then indicated that on October 28th at 1:00 PM a Union representative would call upon Fall River “for the purpose of negotiating a collective bargaining agreement.” At the time of this demand Fall River had 21 employees on the payroll, 18 of whom were former Sterlingwale employees. Fall River’s initial production goal was to have a one-shift operation of 55 to 60 employees, and then to expand fully to a two-shift operation totaling 106-109 employees by April 1983.
On October 21, 1982, in a letter written by its counsel, Fall River indicated that it did “not intend to comply with [the Union’s] request; and further ... that there was no legal basis for same.”
On November 1, 1982, the Union filed an unfair labor practice charge with the Board, claiming that Fall River had violated Sections 8(a)(1) and (5) of the Act. By mid-November, Fall River had hired employees in virtually all job classifications. They were engaged in start-up operations, cleaning and repairing machines for the first 4-6 weeks, and carrying out experimental production on old Sterlingwale inventory during the next 4-5 weeks.
After investigation, the Regional Director of the Board on December 21, 1982 issued a complaint charging Fall River with violation of Sections 8(a)(1) and (5) of the Act because “[o]n or about October 21, 1982, and at all times thereafter, Respondent did refuse and continues to refuse to meet and bargain collectively, with the Union as the exclusive representative of all the employees in the unit.” A hearing was set for May 2, 1983.
On January 4,1983, Fall River answered the complaint, the substance of which was a denial that it was a successor employer to Sterlingwale or that it had violated Sections 8(a)(1) and (5) of the Act.
*436In mid-January, 1983, the first shift was in full operation and a second shift was begun, with a total complement of 55 employees, approximately 36 of whom were former Sterlingwale employees. Furthermore, Fall River’s Vice-President and Secretary, Herbert Chance, had formerly served as Vice-President of Sterlingwale until February, 1982. Over half of the dollar volume of Fall River’s commission dyeing and finishing work came from customers who had also done business with Sterlingwale.
Fall River continued to expand until it reached its goal of a full complement of employees in mid-April 1983, with two 10-hour shifts employing approximately 106 to 109 persons. By March 24, 1983, former Sterlingwale employees were a minority of the employees in the production and maintenance unit.
The hearing before the administrative law judge began on May 2nd. The judge held in substance that the Union’s October 19th demand was a continuing one that Fall River was bound to comply with at such time as its operations reached a “representative complement, not full complement.” He then ruled “that the duty to bargain with the Union attached for [Fall River] in mid-January 1983,” and ordered Fall River, upon request of the Union, to bargain.
A majority of the Board, with one dissenting vote, adopted the decision in toto, enforcement of which is now before us.
There are three distinct but related reasons why enforcement should be denied.
I
The Board’s “representative complement” rule contravenes the “full complement” rule enunciated by the Supreme Court in N.L.R.B. v. Burns International Detective Agency, supra. See Criteria, 11 Wake Forest L.Rev. at 449, 457. In Burns the Court was faced with a changeover of employers in an ongoing operation. Wack-enhut Corporation, the initial employer, had a contract to provide security services to the Lockheed Aircraft Company. A majority of Waekenhut’s employees voted in a Board-supervised election to be represented by a union and, thereafter, Wackenhut and the union negotiated a collective bargaining agreement. Approximately four months later Wackenhut’s contract with Lockheed expired without renovation. Instead, Lockheed contracted with the Burns Detective Agency for these services. At the time of Burns’ takeover, Burns employed 27 of Wackenhut’s guards directly from the certified unit, in addition to which it completed the unit by bringing in 15 of its own guards from other Burns’ locations. No hiatus occurred in the provision of services to Lockheed between the Wackenhut and Burns’ operations. After the takeover Burns refused the union’s request for recognition and compliance with the labor contract and the Board thereafter found Burns in violation of Sections 8(a)(1) and (5) of the Act as a successor of Wackenhut.
In sustaining the Board’s findings regarding successorship, the Court stated:
In an election held but a few months before, the union had been designated bargaining agent for the employees in the unit and a majority of these employees had been hired by Burns for work in the identical unit. It is undisputed that Burns knew all the relevant facts in this regard and was aware of the certification and of the existence of a collective-bargaining contract. In these circumstances, it was not unreasonable for the Board to conclude that the union certified to represent all employees in the unit still represented a majority of the employees and that Burns could not reasonably have entertained a good-faith doubt about that fact, Burns’ obligation to bargain with the union over terms and conditions of employment stemmed from its hiring of Wackenhut’s employees and from the recent election and Board certification. It has been consistently held that a mere change of employers or of ownership in the employing industry is not such an “unusual circumstance” as to affect the force of the Board’s certification within the normal operative period if a majority of employees after the *437change of ownership or management were employed by the preceding employer.
406 U.S. at 278-79, 92 S.Ct. at 1577.
The Court then considered the Board’s findings that Burns had violated the Act by unilaterally changing working conditions of the employer. The Court, in ruling against the Board stated:
Although a successor employer is ordinarily free to set initial terms on which it will hire the employees of a predecessor, there will be instances in which it is perfectly clear that the new employer plans to retain all of the employees in the unit and in which it will be appropriate to have him initially consult with the employees’ bargaining representative before he fixes terms. In other situations, however, it may not be clear until the successor employer has hired his full complement of employees that he has a duty to bargain with a union, since it will not be evident until then that the bargaining representative represents a majority of the employees in the unit as required by § 9(a) of the Act, 29 U.S.C. § 159(a). Here, for example, Burns’ obligation to bargain with the union did not mature until it had selected its force of guards late in June. The Board quite properly found that Burns refused to bargain on July 12 when it rejected the overtures of the union.
406 U.S. at 294-95, 92 S.Ct. at 1585-86 (emphasis supplied).
The present case is precisely one of the “other situations” referred to by the court in Bums, particularly when we consider the substantial differences between Burns and Fall River that militate in favor of Fall River: the lack of any expression of union preference by the employees for many years (Fall River) versus a recent election and certification (Burns), the non-existence of a labor contract (Fall River) in contrast
to one in effect (Burns), the start up of a new business entity after a substantial hiatus following the liquidation of the original employer (Fall River) versus a continuity of operations (Burns).
The court’s reference to Section 9(a) of the Act in its ruling is of special relevance as it is this part of the Act that provides for selection of the employee’s representatives “for the purpose of collective bargaining by the majority of the employees.”1 This provision establishes a strong public policy favoring free choice of a bargaining agent by the employees which should not lightly be frustrated. Schmerler Ford, Inc. v. N.L.R.B., 424 F.2d 1335, 1339 (7th Cir.1970). It is because of this self-evident principle that four justices dissented in Burns against any application of the suc-cessorship principle to even the strong factual situation in Burns, concluding “that the Board and the Court of Appeals stretched that concept beyond the limits of its proper application”. 406 U.S. at 296, 92 S.Ct. at 1586. As the dissent indicates, “the successorship doctrine, carried to its ultimate limits, runs counter to other equal-, ly well-established principles of labor law. Industrial peace is an important goal of the Labor Management Relations Act.” Id. at 302, 92 S.Ct. at 1589. “But Congress has plainly been unwilling to purchase industrial peace at the price of substantial curtailment of free collective bargaining by the freely chosen representatives of the employees with their employer.” Id. at 303, 92 S.Ct. at 1590.
The dissent, in concluding that the application of the successorship doctrine was not authorized by the Act, stated:
The rigid imposition of a prior-existing labor relations environment on a new employer whose only connection with the old employer is the hiring of some of the latter’s employees and the performance of some of the work which was previously performed by the latter, might well tend to produce industrial peace of a *438sort. But industrial peace in such a case would be produced at a sacrifice of the determination by the Board of the appropriateness of bargaining agents and of the wishes of the majority of the employees which the Act was designed to preserve. These latter principles caution us against extending successorship, under the banner of industrial peace, step by step to a point where the only connection between the two employing entities is a naked transfer of employees.
Id., at 306-07, 92 S.Ct. at 1591-92 (emphasis supplied). See also Bargaining Obligations, 88 Harv.L.Rev. at 763; Criteria, 11 Wake Forest L.Rev. at 457.
Although normally a dissent may be considered weak support upon which to base an opinion, the dissent in Burns buttresses the soundness of the majority’s “full complement” requirement and its reliance on Section 9(a) of the Act for that proposition. Although the majority in Burns was not willing to set aside the successorship finding, it did so because it concluded that Burns’ employees, already operating at full complement, and shortly after having freely expressed their collective bargaining preference, were not being denied their rights under the Act. By requiring a full complement of employees, all employees to be affected by the Board’s actions were given a choice. The Board’s contention that the “full complement” requirement in Bums constitutes mere dicta which it is cavalierly free to disregard, is hardly an approach that this court should be eager to follow. See Pacific Hide & Fur Depot, Inc. v. N.L.R.B., 553 F.2d 609 (9th Cir.1977); N.L.R.B. v. Pre-Engineered Building Products, 603 F.2d 134 (10th Cir.1979).
In the present case the Board’s bureaucratic legalese deprives the employees of their right to express a free choice, a result totally contrary to the most fundamental purposes of the Act. It is, therefore, not entitled to enforcement. Beth Israel Hospital, supra.
II
In the seminal case of Universal Camera v. N.L.R.B., supra, the Court laid down the rule for review of Board actions by courts of appeal:
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.
340 U.S. at 488, 71 S.Ct. at 464. “The substantiality of the evidence must take into account whatever in the record fairly detracts from its weight.” Id. The cumulative impact of multiplication of minutiae cannot be regarded as substantial evidence to support a finding by the Board. N.L.R.B. v. United Parcel Service, Inc., 317 F.2d 912, 914 (1st Cir.1963). “Substantial evidence” means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Coppus Engineering Corp. v. N.L.R.B., 240 F.2d 564, 570 (1st Cir.1957); N.L.R.B. v. Local 776, IATSE (Film Editors), 303 F.2d 513, 517 n. 3 (9th Cir.1962), cert. denied, 371 U.S. 826, 83 S.Ct. 47, 9 L.Ed.2d 65 (1962). Such evidence, however, is not substantial if it appears in isolation rather than is viewed in proper perspective. Id. Substantiality of evidence is measured by consideration of all the evidence and not merely that which supports the Board’s conclusions. M.R. & R. Trucking Co. v. N.L.R.B., 434 F.2d 689 (5th Cir.1970).
Accepting, as we must, this framework for review, I do not hesitate to find that the Board’s conclusion that Fall River is a “successor employer” is not supported by substantial evidence. See Note, The Successor Employer’s Obligation to Bargain: Current Problems In The Presumption of a Union’s Majority Status, 8 Fordham Urb.L.J. 429, 442-44 (1980) (hereinafter cited as Current Problems).
The traditional test for determining suc-cessorship is whether there is substantial continuity between the employing enterprises. Burns, 406 U.S. at 279-81, 92 *439S.Ct. at 1577-79. In making this determination we look to whether there has been a change in the essential nature of the enterprises. Burns, id.; Band-Age, Inc., supra, 534 F.2d at 3; N.L.R.B. v. Middleboro Fire Apparatus, 590 F.2d 4, 6 (1st Cir.1978). This question, as we have previously indicated, is highly fact specific. Howard Johnson, supra.
There is no question in my mind but that there has been no continuity between the operations of Sterlingwale and Fall River. It is undisputed that Sterlingwale ceased operations and went out of business for economic reasons. It is also undisputed that Fall River is a separate legal entity to Sterlingwale, with different ownership, financing, etc., e.g. the Board does not make any claim that Fall River is an alter ego of Sterlingwale. Fall River leases one of Sterlingwale’s three buildings from a company, totally unrelated to Sterlingwale, who purchased it on the open market. Although Fall River uses machinery and equipment which at one time belonged to Sterlingwale, they also were purchased on the open market. Thus the fact that the building and machinery were once Sterling-wale’s property should be totally irrelevant to the successorship determination. Fall River acquired no trade name, good will or other assets from Sterlingwale. It assumed none of Sterlingwale’s liabilities. There was no transfer of employee or personnel records between Sterlingwale and Fall River and more importantly, no transfer of any employees or personnel. Those persons hired by Fall River who were former employees, supervisors, or executives of Sterlingwale were also hired from the open market after advertisement. Such new employment took place after at least a seven-month period had passed since their termination by Sterlingwale. The nature of Fall River’s business is different from that of Sterlingwale’s, commission work versus processing, thus bring about substantial changes in Fall River’s operation when compared to Sterlingwale: a smaller manufacturing plant, less employees, less work shifts, longer working hours.2 There was no transfer of customer lists or customers between Sterlingwale and Fall River, thus any former Sterlingwale customers who also became Fall River customers were presumably acquired in the open market. Last but not least, if the proper Burns standard is used, when Fall River reached full capacity, a majority of its employees were “new” employees. See Current Problems, 8 Fordham Urb.L.J. at 447.
This record, rather than substantially supporting the Board’s conclusion of suc-cessorship, should mandate a ruling against it. The situation was stated in more appropriate language by Chief Judge Campbell in his dissent in Band-Age:
The premise of the National Labor Relations Act is industrial democracy, requiring an employer to bargain with the representative of a majority of its employees. This democratic principle must, of course, yield to practicality and the need for industrial peace, as rules limiting the frequency of elections illustrate. But such rules, presuming the continuity of majority sentiment, evolved within the frame of a single enterprise. While they may be appropriately extended to genuine successor entities, they should not apply where the original bargaining unit and nature of the enterprise have been radically altered. I fear that the enlargement of the successorship doctrine to accommodate such a case may sweep aside the requirement that the Union have roots in the actual wishes of the employees. Here it would be simple to require an expression of the wishes of the 37 current employees rather than to presume, somewhat woodenly, that the earlier-expressed wishes of a different group of employees working for a different employer remain effective.
534 F.2d at 7 (citations omitted).
Ill
This Court in Middleboro Fire Apparatus, a case involving the successorship doctrine held:
*440Simply stated, if the Board finds on the totality of the circumstances that a change in ownership did not affect the “essential nature” of the former business, then the new enterprise must recognize and bargain with the union that represented the employees of the former business. The exception to this rule relevant here permits the new employer not to bargain with the union if the employer could “reasonably have entertained a good-faith doubt” about the union’s continued majority status.
590 F.2d at 6. (Emphasis supplied. Citations and footnotes omitted).
The facts of this case as evidenced by both the Board majority and dissent leave no question as to Fall River’s good faith doubt3 in denying union recognition. See Current Problems, 8 Fordham Urb.L.J. at 431, 448.
On October 19, 1982, when recognition and bargaining was requested, the Board concluded that the union was not legally entitled to compliance with this request. As a matter of law, Fall River would have violated Section 8(a)(2) of the Act if it had acceded. 29 U.S.C. 158(a)(2), see Hedstrom Co. v. N.L.R.B., 558 F.2d 1137, 1146-48 (3d Cir.1977), cert. denied, 450 U.S. 996, 101 S.Ct. 1699, 68 L.Ed.2d 196 (1981). The Board also conceded that Fall River was correct on October 21, when it formally denied the Union’s request. If we continue this line of reasoning, when the Union filed its charge on November 1, even if Fall River had accepted these allegations, the Board would also have been legally bound to rule, as it did in its decision, that the Union did not at that point represent Fall River’s employees. This hypothesis is equally applicable to December 21, when the Regional Director issued a complaint, and even as late as January 4, 1983 when Fall River answered the same. By what logic or reasoning can events that took place thereafter retroactively be made to transform these good faith rejections by Fall River into illegal conduct? At best the Board’s ambiguous criteria create an unacceptable uncertainty in the standard of conduct required of “successors.” See Current Problems, 8 Fordham Urb.L.J. at 447-449; Bargaining Obligations, 88 Harv.L.Rev. at 760, 764; Criteria, 11 Wake Forest L.Rev. at 446, 457. This court should not place upon it the imprimatur of legality by enforcing the Board’s order.
The issue presented is in reality two-pronged: (1) do these circumstances objectively justify a good faith doubt by Fall River in mid-January, 1983, and (2) is it permissible {e.g., rational) to allow the Board to presume continued Union majority support under the facts of this case in view of the requirements of Section 9 of the Act?
I believe the proper answer to both questions to be in the negative.
If the Board found Fall River to be free from any illegal conduct when the demand was made on October 19, when rejected on October 21, when the complaint issued on December 21st, and when it was answered on January 4, it cannot follow that by the mere “running [of] one shift at full capacity” in mid-January 1983, this fact triggered a duty to bargain with the Union. An objective view of this situation, particularly considering the dynamic circumstances under which they developed, cannot justify the hanging of a bad faith label on Fall River. The factual basis for the presumption of continued majority support for the Union is lacking.
Stated differently, given the facts of this case, there is no rational basis for having an illegal demand {e.g., one which if complied with by Fall River would have subjected it to violation of Section 8(a)(2) of the Act) carryover ad infinitum, thus permitting the imposition of a union on employees who have not expressed a free choice since 1968. Such a rule is clearly contrary to the purposes of the Act as stated in Section 9.
*441It is ironic, to say the least, that the Board order enforced today requires Fall River to bargain with the Union upon request. Yet this minimal effort is dispensed with in deciding the merits of this case.
This Court should not be eager to embrace doctrines fraught with perceptions that run contrary to the spirit and letter of the Act, and which radically depart from logic and common sense.
For the above-stated reasons, I dissent.

. 29 U.S.C. 159(a):
Representatives designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes, shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employ- . ment: ...

. There are no findings regarding similarity of wages and fringe benefits, factors which would have been relevant to demonstrate continuity.

. "In its simplest form, the phrase implies breach of faith, wilful failure to respond to plain, well-understood statutory or contractual obligations.” N.L.R.B. v. Knoxville Pub. Co., 124 F.2d 875, 883 (6th Cir.1942); Hurry v. Jones, 560 F.Supp. 500, 507 (D.R.I.1983).