LOCAL UNION NO. 5741, UNITED MINE WORKERS OF AMERICA, PETITIONER V. NATIONAL LABOR RELATIONS BOARD No. 88-2132 In The Supreme Court Of The United States October Term, 1989 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Sixth Circuit Brief For The National Labor Relations Board In Opposition TABLE OF CONTENTS Question Presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW The opinion of the court of appeals (Pet. App. 1-14) is reported at 865 F.2d 733. The decision and order of the Board (App., infra, 1a-3a), and the decision of the administrative law judge (App., infra, 4a-19a), are reported at 284 N.L.R.B. No. 47. JURISDICTION The judgment of the court of appeals was entered on January 10, 1989. A petition for rehearing was denied on March 29, 1989. The petition for a writ of certiorari was filed on June 27, 1989. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether the National Labor Relations Board reasonably found that Local 5741 was a successor to Local 9639 and liable for the unpaid backpay obligation resulting from the latter's unfair labor practice. STATEMENT 1. On February 27, 1981, following a hearing, the National Labor Relations Board found that Local Union No. 9639, United Mine Workers of America, had violated Sections 8(b)(1)(A) and 8(b)(2) of the National Labor Relations Act (29 U.S.C. 158(b)(1)(A) and 158(b)(2)), by striking at Beth-Elkhorn Corporation's mines to force the discharge of an employee for refusing to join the union. The Board's order required Local 9639 to pay the employee backpay for the earnings he lost as a result of its unfair labor practice. Local 9639's backpay liability was stipulated to be $12,327.65, plus interest, and the Court of Appeals for the Sixth Circuit enforced that order by consent of the parties. Pet. App. 2; App., infra, 4a-5a. About two weeks later, Local 9639 filed a petition under Chapter 7 of the Bankruptcy Code (11 U.S.C. 701 et seq.), in an effort to discharge its backpay obligation. In response, the Board filed a proof of claim on behalf of the employee, and the bankruptcy court awarded him all of Local 9639's monetary assets -- about $2100. The bankruptcy court did not discharge the balance of the debt. Pet. App. 2. In the meantime, Local 9639 filed a motion with the bankruptcy court for authority to continue to operate. But after learning that its backpay obligation would not be discharged, Local 9639 withdrew its motion and simply ceased to operate. Subsequently, Local 9639 surrendered its charter to the UMW. Pet. App. 2. At the time it ceased operations, Local 9639 represented the employees of two Beth-Elkhorn mines, all of whom were required to remain affiliated with a single local under the United Mine Workers' constitution. The UMW District Representative with responsibility for the area advised Local 9639's membership to consider joining petitioner, the next closest local, and after discussion among themselves, the Local 9639 members decided to do so. Between October 21 and November 9, 1982, all of the approximately 55 working members of Local 9639 transferred their membership to petitioner. By November 23, approximately 190 of Local 9639's 243 idle or retired members also transferred into petitioner, and an additional 29 inactive members transferred by July 21 of the following year. The UMW District Representative helped facilitate the membership transfers. Pet. App. 2-3; App., infra, 2a n.1, 6a, 7a, 9a-10a. At the time of these transfers, petitioner concedes that it knew, through its president, that "Local 9639 had been found in violation of the National Labor Relations Act by causing the constructive discharge of (a non-union miner) by Beth-Elkhorn and was under an order to pay backpay to (the miner), and that as a result of that financial liability, had filed bankruptcy and ceased to function" (App., infra, 7a). Petitioner was an older UMW local than Local 9639 and had approximately 132 active and 356 inactive members at the time of the transfers. The UMW constitution gave petitioner no choice but to accept transfers from other locals, and it received no transfer fees from the new members. It similarly received no money or property from Local 9639, given the latter's insolvency. App., infra, 7a, 10a n.2. Petitioner began representing the former members of Local 9639 without any break in service. Although no Local 9639 officers became officers of petitioner, it did reappoint four former Local 9639 members to mine committees responsible for adjusting disputes at the mines previously represented by Local 9639. Petitioner also reappointed four former Local 9639 members to safety committees responsible for inspecting the former Local 9639 mines for health and safety. The reconstituted mine and safety committees handled grievances, including several that were pending at the time of the transfer. Pet. App. 4; App., infra, 8a, 10a. At the same time that petitioner assumed representation of the former Local 9639 members at Beth-Elkhorn, it also began receiving those members' monthly dues. The former Local 9639 members did not execute new dues deduction authorization cards in behalf of petitioner. Instead, Beth-Elkhorn continued to remit dues to UMW District 30 in the name of Local 9639. These dues were not returned to the employer; rather, Local 9639's share was turned over to petitioner. District 30 ultimately advised Beth-Elkhorn that the Local 9639 miners had transferred into petitioner and that future dues should be submitted to District 30 in petitioner's name. Pet. App. 3; App., infra, 7a-8a. At the time of the transfer, the dues for working members were $32 per month, which were divided evenly among the local, the district, and the International. In 1985, the dues were increased to about $40 per month. 2. On December 4, 1985, the Board's Regional Director, noting that "questions of fact had arisen concerning the relationship between Local 9639 and (petitioner)" (App., infra, 5a-6a), directed that a hearing be held on whether petitioner should be made liable for the unpaid backpay. In that proceeding, the Administrative Law Judge, "(c)onsidering all the foregoing" circumstances, was "persuaded that (petitioner) is a successor to Local 9639" (App., infra, 17a): (Petitioner) succeeded to the only shown asset of Local 9639, the future dues obligation of its membership. Moreover, it succeeded to the representation obligations of Local 9639 in the same bargaining unit of the same employees operating at the same location of the same employer. (Petitioner) assumed Local 9639's jurisdiction under the same international union in the same district subdivision. It succeeded, too, in administering the same collective-bargaining agreement with no changes whatsoever and apparently without any hiatus in representation. It even processed grievances originally filed with Local 9639. While the officers of (petitioner) were not the same as those of the other local, some continuity in leadership was maintained in the retention and reappointment of essentially the same mine committees and safety committees at both Beth-Elkhorn's mines 21 and 22. The Board agreed that petitioner had become "a successor to the Respondent Local 9639 with knowledge of its backpay liability" and "adopt(ed) the (administrative law) judge's reasoning in all respects" (App., infra, 2a n.1). /1/ 3. The court of appeals, Judge Duggan dissenting, upheld the Board's decision and enforced its order. Pet. App. 11. Citing Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973), the court explained that "(t)he Board's remedial powers under (Section) 10(c) of the Act include the power to order a bona fide successor employer who has not committed an unfair labor practice to reinstate and provide back pay to an employee wrongfully discharged by the predecessor employer" (Pet. App. 5). "The decision whether to impose such liability involves striking a balance between the conflicting interests of the innocent successor, the public, and the victimized employee, * * * and the Board is uniquely qualified to make that kind of judgment" (id. at 5-6). The court concluded that the principles of Golden State Bottling Co. apply to a successor union. Pet. App. 5. /2/ On the facts of this case, the court could not "say that the NLRB erred in holding (petitioner) liable as a successor" (id. at 8). Reviewing the record, the court concluded that "(t)he indicia of continuity between Local 9639 and (petitioner) are more numerous and more substantial than the indicia of discontinuity" (ibid.). /3/ From the perspective of the victimized employee, "nothing in the employing industry had changed -- and the need for remedying the unfair labor practice had not dissipated" (id. at 9). The court rejected the argument that imposition of successorship liability was inappropriate because petitioner became Local 9639's successor involuntarily. Although the court thought "it (was) probably true" (Pet. App. 9) that petitioner did not become Local 9639's successor voluntarily, it reasoned that the Board properly balanced this factor against other factors in finding that "an imposition of liability would be equitable on the facts of this case" (id. at 10). The court noted that "there has been no real change in the employing industry insofar as the victim of the unfair labor practice is concerned" and "(t)he need for remedying the unfair labor practice remains undiminished" (id. at 10-11). It further noted that petitioner "did succeed to the dues obligations of the former members of Local 9639," and "the transfer of this source of revenue is at least analogous to a transfer of income-producing assets from a predecessor employer to a successor employer" (id. at 11). The court concluded that "(t)he judgment call that the NLRB had to make in this case was not an easy one," but "(h)ere, as in similar cases, the courts 'cannot say that the Board has erred in thus "striking (the) balance to effectuate national labor policy"'" (ibid. (quoting Golden State Bottling Co., 414 U.S. at 187 (quoting NLRB v. Truck Drivers Local No. 449, Int'l Bhd. of Teamsters, 353 U.S. 87, 96 (1957))). Judge Duggan dissented. In his view, "(t)he courts' tacit assumption, in the Golden State and Perma Vinyl opinions, is that the application of successor liability is inequitable unless the successor voluntarily agreed to assume the position of its predecessor, including the predecessor's liabilities" (Pet. App. 12-13). He deemed it "unjust to burden (petitioner) with the financial obligations of (Local 9639)" (id. at 13), because it had no choice in accepting the transfer of former Local 9639 members. ARGUMENT The Board reasonably found petitioner to be a successor to Local 9639 and liable for the latter's unpaid backpay obligation even if petitioner did not become a successor voluntarily. This Court's decision in Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973), which upheld the Board's authority to impose liability for unfair labor practices on bona fide successor employers, does not -- contrary to petitioner's submission -- bar imposition of liability on involuntary successors. In fact, the Board's decisions have imposed successor liability in circumstances in which the successor did not assume such liability voluntarily, and neither this Court nor any court of appeals has questioned that practice. Moreover, national labor policy requires the imposition of liability on involuntary successors in certain situations in order to strike an equitable balance among the conflicting interests of the successor, the public, and the victimized employee. The case is thus one turning on its particular facts, which, as the court below held, amply support the Board's determination. 1. In Golden State Bottling Co., this Court upheld the Board's Perma Vinyl rule /4/ and recognized the Board's broad discretion to issue "reinstatement and backpay orders against bona fide successors when the Board has properly found such orders to be necessary to protect the public interest in effectuating the policies of the Act." 414 U.S. at 177. In finding that the Board in that case had struck an appropriate "balance between the conflicting legitimate interests of the bona fide successor, the public, and the affected employee" (id. at 181), the Court explained (id. at 184) that when a successor employer has acquired substantial assets of its predecessor and continued, without interruption or substantial change, the predecessor's business operations, those employees who have been retained will understandably view their job situation as essentially unaltered. Under these circumstances, the employees may well perceive the successor's failure to remedy the predecessor employer's unfair labor practices arising out of an unlawful discharge as a continuation of the predecessor's labor policies. To the extent that the employees' legitimate expectation is that the unfair labor practices will be remedied, a successor's failure to do so may result in labor unrest as the employees engage in collective activity to force remedial action. Similarly, if the employees identify the new employer's labor policies with those of the predecessor but do not take collective action, the successor may benefit from the unfair labor practices due to a continuing deterrent effect on union activities. The Court reasoned that imposition of liability on otherwise innocent successors would achieve "(a)voidance of labor strife, prevention of a deterrent effect on the exercise of (Section 7) rights, * * * and protection for the victimized employee -- all important policies" under the Act -- "at a relatively minimal cost to the bona fide successor" (id. at 185). The Court surmised that (ibid. (quoting Perma Vinyl Corp., 164 N.L.R.B. at 969)): Since the successor must have notice before liability can be imposed, "his potential liability for remedying the unfair labor practices is a matter which can be reflected in the price he pays for the business, or he may secure an indemnity clause in the sales contract which will indemnify him for liability arising from the seller's unfair labor practices." 2. The Board and the court below concluded that the principles articulated in Golden State Bottling Co. are as applicable to successor unions as they are to successor employers. /5/ Petitioner does not dispute that general proposition, but insists that it was inequitable to impose liability on it for Local 9639's unfair labor practice because it had no choice in accepting transfer of members from Local 9639 and therefore cannot be said to have met "the knowledge requirement articulated in Golden State" (Pet. 9). Petitioner maintains that the notice required by Golden State Bottling Co. really means voluntary assumption of liability, because notice is meaningless if a party cannot act on it. In petitioner's view, Golden State Bottling Co. and Section 10(c) of the NLRA, 29 U.S.C. 160(c), implicitly contain a per se rule barring imposition of liability on involuntary successors. That contention is in error. a. The Golden State Bottling Co. Court did not make successor liability contingent upon the availability of compensation or indemnification. While the Court required "notice before liability can be imposed" (414 U.S. at 185), it plainly placed "emphasis upon protection for the victimized employee" (id. at 181) above the interests of the bona fide successor. Compensation and indemnity merely reduced the cost of extending that protection and effectuating the purposes of the labor act. The Court did not hold that protection was extended because the cost would be minimal in most cases. To the contrary, because the availability of compensation and indemnification affects the burden on bona fide successors, it is a matter for the Board to take into the calculus when it balances the competing equities and arrives at a result that will best effectuate the policies of the Act. Indeed, Golden State Bottling Co.'s explanation of the mechanics of compensation and indemnification makes clear that innocent successors will not always be able fully to protect themselves. For example, unfair labor practices committed after the parties have contracted to sell the enterprise but before ownership has been transferred may not be reflected in the terms of sale, leaving the successor without contractual protection. For similar reasons, sale of a financially troubled company before backpay has been specified -- the situation in Golden State Bottling Co. itself (414 U.S. at 170 & n.1) -- may leave the successor unable to seek indemnification and insufficiently informed to adjust the purchase price accurately. b. Consistent with Golden State Bottling Co., the Board has found employers to be successors when they had little choice as to whether they would take over an enterprise, and no realistic possibility of indemnifying themselves. In Ponn Distributing, Inc., 232 N.L.R.B. 312, 314 (1977), enforcement denied on other grounds sub nom. NLRB v. Cott Corp., 578 F.2d 892, 895 n.6 (1st Cir. 1978), and All State Factors, 205 N.L.R.B. 1122, 1124, 1126-1127 (1973), secured creditors took over failing businesses only to protect their threatened security interests. In both cases, the creditors unsuccessfully argued that they should not be found to be successors since, as a practical matter, they had no way to recoup their added liability from the assets they would obtain from the financially troubled predecessor. As these cases illustrate, the need to protect the victimized employee and further the purposes of the national labor laws makes it reasonable for the Board to impose successor liability on employers -- even in circumstances in which they did not assume those obligations voluntarily. The same considerations also justify imposing liability on successor unions irrespective of the voluntariness of the successorship. c. National labor policy precludes wholesale exemption of involuntary successors because it would give employers and unions a blueprint for minimizing the consequences of their unfair labor practices. Accepting petitioner's view would allow unions to organize themselves into small, judgment-proof units that would become insolvent whenever an individual local was found to have committed an unfair labor practice. While the victimized employee would be without a remedy, the defunct local's members would transfer to another local that would assume its predecessor's collective-bargaining responsibilities without missing a dues payment. /6/ In sum, the decision below does not conflict with any decision of this Court or any other court, and raises no question of policy that warrants further review. 3. Since involuntary successors enjoy no blanket exemption from the imposition of liability, the present case turns entirely on its particular facts, and on those facts the record amply supports the Board's determination. As indicated above, petitioner reconstituted Local 9639's mine and safety committees, processed preexisting grievances, collected dues designated for its predecessor, and took up the representation of Local 9639's miners where Local 9639 had left off. Under these circumstances, "the employees may well perceive the successor's failure to remedy the predecessor('s) * * * unfair labor practices * * * as a continuation of the predecessor's labor practices" (Golden State Bottling Co., 414 U.S. at 184). For this reason, petitioner may well have profited from its predecessor's unfair labor practice by maintaining an implicit threat against failures to join the union. Indeed, the manner in which petitioner stepped into its predecessor's role casts doubt on the assumption that its successorship was truly "involuntary," and this doubt is underscored by the fact that it is the UMWA's constitution, not federal law, that required petitioner to accept inter-local membership transfers. /7/ 4. Finally, in addition to the "traditional factors, other equitable concerns do not counsel against the imposition of successor liability." Bates v. Pacific Maritime Ass'n, 744 F.2d 705, 711 (9th Cir. 1984). Even if petitioner did not assume successor liability voluntarily, it achieved some measure of compensation in the form of future dues of Local 9639's former members. The parties' stipulation (JX 4, para. 5) shows that petitioner would receive $10.70 per month per employee, from 1982 through January 1985; $13.35 per month until October 1985; and $13.60 per month thereafter. /8/ Thus, the active, working members of Local 9639 who transferred to petitioner paid dues to petitioner at the annual rate of $3852, $4806, and $4896, respectively, during the three periods. In addition, the stipulation reveals (ibid.) that inactive members who transferred paid dues to petitioner at the rate of $3 per year, providing an additional $660 per year to petitioner from the 220 inactive transfers (id. para. 1). In total, petitioner received between $4500 and $5500 per year in additional revenues, to be balanced against the approximately $10,000 liability that it inherited as Local 9639's successor. Moreover, equal amounts were received by District 30 and by the International, and it is within their power to relieve petitioner of any remaining financial burden. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General JOSEPH E. DESIO Acting General Counsel D. RANDALL FRYE Associate General Counsel ROBERT E. ALLEN Associate General Counsel NORTON J. COME Deputy Associate General Counsel LINDA SHER Assistant General Counsel National Labor Relations Board AUGUST 1989 /1/ The Board further agreed that a successorship finding was appropriate based on (App., infra, 2a n.1): (1) (petitioner's) assumption of Local 9639's representation obligations with respect to the same employees at the same location; (2) (petitioner's) administration of the same collective-bargaining agreement without any hiatus; (3) the maintenance of some continuity of leadership by (petitioner's) retention of essentially the same mine and safety committees; (4) the expression of Local 9639's members' desires by their requests to transfer to (petitioner); and (5) (petitioner's) succession to the only shown asset of Local 9639 -- the future dues obligations of its former members. /2/ The court noted that in NLRB v. Local Union No. 46, Metallic Lathers, 727 F.2d 234 (1984), the Second Circuit refused to enforce the imposition of liability upon a successor union. See Pet. App. 7. The Lathers court did not quarrel with the Board's finding that a Carpenters local "was the Lathers successor," nor did it hold the successor doctrine inapplicable to unions. Instead, it found that the successor union, unlike petitioner in this case, had no knowledge of the unfair labor practices at the time of the succession. Pet. App. 7. /3/ The court explained (Pet. App. 8-9): The 55 active employees who transferred to (petitioner) continued to work in the same mines without interruption or dislocation. The mine and safety committees remained in place with the same members. Dues continued to be checked off and remitted to District 30 of the UMWA without interruption. Grievances filed before the dissolution of Local 9639 were processed by (petitioner), and District 30 continued to be substantially involved in the grievance process, just as it had been before. (Petitioner) took over representation of Local 9639's former members without any hiatus and administered the same contract previously administered by Local 9639. /4/ In Perma Vinyl Corp., 164 N.L.R.B. 968, 969 (1967), enforced sub nom. United States Pipe & Foundry Co. v. NLRB, 398 F.2d 544 (5th Cir. 1968), the Board held that when a successor employer takes over the employing enterprise, with notice of the predecessor's unfair labor practices, it is jointly and severally liable to remedy those unfair labor practices. /5/ Several district courts have recognized successor union liability under Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq. See Boieru v. Cuyahoga County Library Union, 46 Empl. Prac. Dec. (CCH) Paragraph 38,059, at 52,522-52,523 (N.D. Ohio 1988) (denying union's challenge to a Title VII plaintiff's theory of successor union liability and applying same principles applicable to successor employer liability under the NLRA); EEOC v. Sheet Metal Workers Int'l Ass'n, Local Union No. 10, 46 Empl. Prac. Dec. (CCH) Paragraph 37,846, at 51,322 (S.D.N.Y. 1988) ("(T)he union (defendant in this Title VII race discrimination case) argues that the general principles for a determination of successorship which have been applied to corporations are not applicable to unions. This argument is without merit."); Burwell v. Eastern Air Lines, Inc., 394 F. Supp. 1361, 1369 (E.D. Va. 1975) (finding a "genuine issue of material fact as to the successor status" of a union local in an action under Title VII for a violation allegedly committed by its predecessor). Our research has not discovered any decision in which a court has rejected union successor liability. /6/ The risks in automatically exculpating involuntary successors are illustrated by the background and subsequent history of Local 28, Sheet Metal Workers' Int'l Ass'n v. EEOC, 478 U.S. 421 (1986). Local 28 had been found guilty of egregious violations of Title VII by discriminating against nonwhite workers in recruitment, selection, training, and admission to the union. This Court affirmed the lower courts' orders providing for substantial race-conscious relief. On remand (EEOC v. Sheet Metal Workers Int'l Ass'n, Local Union No. 10, 46 Empl. Prac. Dec. (CCH) Paragraph 37,846 (S.D.N.Y. 1988)), another union local -- Local 10, which had also been found guilty of violating Title VII -- merged into Local 28 by order of the International union. When the beneficiaries of the judgment against Local 10 sought relief against Local 28 as a successor union, Local 28 countered that the merger of Local 10 into it was involuntary and stemmed from actions by the International union -- just as petitioner argues in this case. The district court rejected the argument (id. at 51,328) on grounds of policy: If I were to accept Local 28's argument that it is not the successor to Local 10, the victims of Local 10's alleged conduct would be subjected to the extinguishment of substantial rights. * * * Such a course of action would undermine Title VII and afford any union in a similar situation an easy out. All they would need do is be merged into an "innocent" local, claim the merger was forced upon them, and contend that they had no notice. /7/ As the court below noted (Pet. App. 9), although "(t)he Landrum-Griffin Act guarantees equal rights to all persons who have fulfilled union membership requirements, 29 U.S.C. (Sections) 402(o), 411(a)(1)," it "does not prevent unions from reserving discretionary power to refuse membership, Gavin v. Structural Iron Workers Local No. 1, 553 F.2d 28, 30-31 (7th Cir. 1977)." The International presumably is free, if it desires, to accord its locals some discretion in accepting transfers, in which case successor liability could have been avoided. There is thus no merit to petitioner's contention (Pet. 10) that it would have violated federal law had it not accepted the Local 9639 transferees as members. /8/ Not per year, as the dissent assumed (Pet. App. 13-14) in calculating that petitioner only would receive $800 per year from the former Local 9639 members. APPENDIX