A.J. Mechanical, Inc.

National Labor Relations Board - Board Decisions

Jul 23, 2008

352 N.L.R.B. 874 (N.L.R.B. 2008)

DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
352 NLRB No. 108
874
A.J. Mechanical, Inc., William A. Greene a/k/a Ar-
nold Greene and Cynthia D. Greene and Car-
penters and Millwrights, Local Union #2471, af-
filiated with United Brotherhood of Carpenters
and Joiners of America. Cases 15–CA–15350,
15–CA–15388, 15–CA–15598, and 15–CA–15618
July 23, 2008
SECOND SUPPLEMENTAL DECISION AND ORDER
BY CHAIRMAN SCHAUMBER AND MEMBER LIEBMAN
Procedural History
On April 14, 2000, in the underlying unfair labor prac-
tice proceeding, the National Labor Relations Board
found that the Respondent A.J. Mechanical, Inc. (A.J.
Mechanical) violated Section 8(a)(1), (3), and (5) of the
Act in various respects and ordered the Respondent to
make certain employees whole.1
During the subsequent compliance proceedings, the
parties disputed the amount of backpay due under the
Board’s Order. In addition, by the time of the compli-
ance proceeding, the Respondent’s principal sharehold-
ers, William A. (Arnold) Greene and James Sanders, had
dissolved A.J. Mechanical and distributed the corporate
assets to themselves. Consequently, the General Counsel
sought to pierce the corporate veil and, as relevant here,
impose personal liability on Arnold Greene and his wife,
Cynthia D. Greene, for A.J. Mechanical’s backpay obli-
gations.2
The administrative law judge found that A.J. Mechani-
cal owed backpay to the employees in the amounts al-
leged in the compliance specification. In addition, apply-
ing White Oak Coal, 318 NLRB 732 (1995), enfd. mem.
81 F.3d 150 (4th Cir. 1996), which sets forth the two-
prong test for determining whether the Board should
pierce the corporate veil and find a party personally li-
able, the judge imposed personal liability on Arnold and
Cynthia Greene.
On August 26, 2005, the Board issued a supplemental
decision, addressing the parties’ exceptions to the judge’s

1 330 NLRB No. 178 (not reported in Board volumes). Respondent
A.J. Mechanical failed to answer the complaint, and the Board granted
summary judgment. On October 23, 2000, the United States Court of
Appeals for the Eleventh Circuit issued an unpublished judgment en-
forcing the Board’s Order in full.
2 In a series of payments beginning in February 1999, the financial
assets of A.J. Mechanical were distributed to its two shareholders,
Arnold Greene and James Sanders. The company ceased operations in
September 1999 and, in June 2000, the Respondent’s corporate exis-
tence was formally dissolved. In February 2002, Sanders and his wife
entered into a settlement agreement with the Board holding them harm-
less against personal liability for backpay in exchange for a payment of
$112,500. In October 2002, Arnold and Cynthia Greene were named
individually as Respondents.
decision in the compliance proceeding.3 The Board
adopted the judge’s findings regarding the amount of
backpay the Respondent owed to the discriminatees, but
reversed the judge’s decision to pierce the corporate veil
and impose personal liability for backpay on the Gree-
nes.
The Board filed with the United States Court of Ap-
peals for the District of Columbia Circuit an application
for enforcement of its supplemental decision, affirming
the backpay judgment against the Respondent. The
Charging Party-Union cross-petitioned the court for re-
view of the Board’s refusal to pierce the corporate veil
and impose personal liability on the Greenes. On March
16, 2007, the court summarily enforced the uncontested
backpay judgment against Respondent A.J. Mechanical,
but granted the Union’s petition for review. The court
vacated the Board’s decision insofar as it had refused to
pierce the corporate veil and remanded the case to the
Board for further proceedings.4
In the court’s view, the Board failed to cite evidence
sufficient to support the findings on which it based its
refusal to pierce the corporate veil. Specifically, the
court found that the scope and nature of the unfair labor
practices were such that Greene would have foreseen
possible financial consequences for the Respondent re-
sulting from such actions, even before charges were
filed. Further, the court found insufficient support for
the Board’s conclusion that the decision to terminate A.J.
Mechanical’s operations preceded the commencement of
extraordinary shareholder distribution payments in Feb-
ruary 1999. The court thus found inadequate support for
the Board’s conclusion that the shareholder distribution
payments that began in February 1999 were made pursu-
ant to a previous, legitimate determination to dissolve the
corporation. Having found that the Board failed to set
forth an adequate evidentiary basis to support its conclu-
sion that the second prong of White Oak Coal had not
been met, the court set aside that portion of the Board’s
Order and remanded the case to the Board for further
proceedings.5

3 345 NLRB 295.
4 Carpenters & Millrights Local 2471 v. NLRB, 481 F.3d 804 (D.C.
Cir. 2007).
5 Upon remand and in response to the Board’s request for statements
of position, the Respondents resubmitted the exceptions and supporting
brief that they filed with the Board in 2003, as well as a cover letter
asserting that their due process rights had been prejudiced. The due
process argument stems from the 2002 compliance specification. In
response to that specification, the Greenes moved for a continuance of
the scheduled October 30, 2002 compliance hearing, asserting that 28
days was insufficient time to prepare their defense and that their coun-
sel had scheduling conflicts. The Board’s associate chief administra-
tive law judge denied the motion, citing a failure to establish the par-
ticulars of the Greenes’ hearing preparation difficulties and counsel’s
A.J. MECHANICAL, INC. 875
Having accepted the court’s remand as the law of the
case, we now reexamine application of the White Oak
Coal test consistent with the court’s findings.6 As more
fully explained herein, doing so, we find that the corpo-
rate veil should be pierced and personal liability imposed
on both Arnold and Cynthia Greene.7
Analysis
Pursuant to White Oak Coal, supra, the Board will
pierce the corporate veil when: (1) there is such unity of
interest, and lack of respect given to the separate identity
of the corporation by its shareholders, that the personali-
ties and assets of the corporation and the individuals are
indistinct; and (2) adherence to the corporate form would
sanction a fraud, promote injustice, or lead to an evasion
of legal obligations.
A. Prong One
Under the first prong of the White Oak Coal test,
which the Board assumed to be satisfied in its prior deci-
sion, the factors to be considered are the degree to which
corporate legal formalities were maintained and the de-
gree to which individual and corporate funds, other as-
sets, and affairs were commingled.8 Specifically, the
Board examines: (1) whether the corporation is operated
as a separate entity; (2) the commingling of funds and
other assets; (3) the failure to maintain adequate corpo-
rate records; (4) the nature of the corporation’s owner-
ship and control; (5) the availability and use of corporate
assets, the absence of same, or undercapitalization; (6)
the use of the corporate form as a mere shell, instrumen-
tality or conduit of an individual or another corporation;
(7) disregard of corporate legal formalities and the failure

scheduling conflicts, and he also denied the subsequent motion for
reconsideration of this ruling. The Greenes appeared at the hearing on
October 30 with substitute counsel who moved for a continuance, as-
serting his unfamiliarity with the case and the Greenes’ October 28,
2002 bankruptcy filing. The judge granted counsel the opportunity to
contact the Greenes’ bankruptcy attorney regarding the impact of a
proposed settlement. The counsel declined the judge’s offer. In these
circumstances, we find that the Respondent has not established that the
judge abused his discretion by denying the continuance motion or oth-
erwise violated the Respondents’ due process rights.
6 Effective midnight December 28, 2007, Members Liebman,
Schaumber, Kirsanow, and Walsh delegated to Members Liebman,
Schaumber, and Kirsanow, as a three-member group, all of the Board’s
powers in anticipation of the expiration of the terms of Members Kir-
sanow and Walsh on December 31, 2007. Pursuant to this delegation,
Chairman Schaumber and Member Liebman constitute a quorum of the
three-member group. As a quorum, they have the authority to issue
decisions and orders in unfair labor practice and representation cases.
See Sec. 3(b) of the Act.
7 We have corrected certain inadvertent errors in the judge’s pro-
posed Order to properly reflect the amount of backpay due certain
individuals.
8 White Oak Coal, supra at 735, citing NLRB v. Greater Kansas City
Roofing, 2 F.3d 1047 (10th Cir. 1983).
to maintain an arm’s-length relationship among related
entities; (8) diversion of the corporate funds or assets to
noncorporate purposes; and (9) transfer or disposal of
corporate assets without fair consideration.9
The record evidence demonstrates that the principals
of A.J. Mechanical disregarded corporate formalities and
structure with respect to a variety of procedural and op-
erational practices. In this regard, the Respondent’s
principals failed to keep adequate records on corporate
structure, operation, and finances. As to corporate struc-
ture, the record shows that Arnold Greene and James
Sanders formed A.J. Mechanical in 1993.10 Aside from a
2-page document entitled “Joint Special Meeting of the
Board of Directors and Shareholders,” reflecting the de-
cision by Greene and Sanders to dissolve the corporation,
along with a “Statement of Intent to Dissolve,” both
dated December 2, 1999, there is no evidence that any
formal board or shareholder meetings were held at any
other time during A.J. Mechanical’s existence. In addi-
tion, while Greene testified that by laws for A.J. Me-
chanical had been drawn up, he did not produce them nor
could he recall where they might have been kept or were
currently located.
Regarding operations, the Respondent’s principals
only loosely adhered to corporate formalities with re-
spect to business decisionmaking. Although the record
indicates that Greene and Sanders may have discussed
major issues, they did not document the process or record
these discussions. In addition, there is no evidence that
corporate decisions were the result of mutual consulta-
tions and decisions by the two-member corporate board.
Instead, for the most part, Greene and Sanders each over-
saw individual projects independently and simply kept
each other informed.
Further, regarding the documentation of corporate fi-
nances, the record establishes that Greene made loans to
the corporation from his personal accounts. However,
there is no evidence that the loans adhered to accepted
commercial or business standards regarding terms for
repayment or interest. Specifically, there appears to have
been no loan agreements, promissory notes, or paper-
work of any type documenting what the loan was for or
its terms.
Thus, aside from the initial incorporating documents
and the final papers marking its dissolution, the Respon-
dent’s principals failed to keep adequate records of cor-
porate structure, operations, decisionmaking, and finan-
cial transactions.

9 Id.
10 A copy of A.J. Mechanical’s articles of incorporation, filed Janu-
ary 29, 1993, was submitted into the record.
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD876
In addition, the record demonstrates that the principals
of A.J. Mechanical improperly commingled personal and
corporate assets and property. While there is no docu-
mentation to verify the amount of the corporation’s ini-
tial capitalization,11 the judge found that it was under-
capitalized from its inception, which necessitated loans
from the principals to pay even basic corporate obliga-
tions. The judge’s finding in this regard is supported by
the fact that, on an unspecified number of occasions, the
Greenes made the above-mentioned informal, undocu-
mented loans to the corporation from their personal ac-
counts to satisfy payroll obligations and other operating
expenses.12
Further suggestive of the blended identities of the cor-
poration and its principals is that there was little distinc-
tion between personal and corporate property. In this
regard, Arnold and Cynthia Greene’s home served as
A.J. Mechanical’s primary office and mailing address.13
The Greenes also shared their home telephone and fax
numbers with the business and occasionally stored com-
pany equipment on their residential property. In addi-
tion, the corporation paid for Arnold Greene’s leased
vehicle, which he drove almost exclusively, on a daily
basis, asserting that “I worked all the time.” This admis-
sion further suggests that Greene did not consciously
separate his business and personal interests.
Finally, the record establishes that the principals trans-
ferred corporate assets to themselves without fair consid-
eration. Although the principals did not decide to dis-
solve the corporation until December 1999, Greene and
Sanders each received over $1,800,000 in shareholder

11 Greene testified that there was no documentation as to those initial
payments and that he could not remember the exact amount of their
contributions, but that he was sure that he and Sanders provided the
same amount, estimated as “somewhere around $20,000.” The Board
adopted the judge’s findings discrediting Greene except where his
testimony was otherwise corroborated or constituted an admission
against interest. We find that Greene’s testimony regarding the lack of
adherence to formal business practices and the casualness of his rela-
tionship with A.J. Mechanical from the very beginning may fairly be
characterized as an admission against interest.
12 For example, Cynthia Greene described a July 12, 1999 check she
had signed, in her bookkeeping role, on Respondent A.J. Mechanical’s
account in the amount of $46,000, payable to Arnold Greene, as re-
payment with interest, to herself and her husband, for a loan they had
jointly made to the company. Cynthia could not identify what the
particular loan was for, describing it only as “probably a credit card
bill” and that she “thought” her husband told her to make the interest
rate 8 percent. Describing the procedure for making the loan, Cynthia
testified, “so we went to our bank, used our credit card, basically, to get
money so we could make payroll or whatever the reason was. Then
when the money in the account got back up we repaid ourselves . . . we
were shuffling our money to make payroll.”
13 While the Greenes’ residence was the corporation’s primary of-
fice, Sanders testified that at various times the corporation also listed
his home address as its own.
distributions from the corporation in the year before the
dissolution. There is no evidence suggesting that these
distributions were for valid corporate purposes or repre-
sented fair consideration.
Thus, Greene and his wife, Cynthia, engaged in a cas-
ual sharing of property between themselves and the cor-
poration. In addition, without following minimal ac-
counting procedures or accepted business practices, the
Greenes engaged in substantial financial transactions
with the corporation, commingling personal and corpo-
rate assets.
Based on the foregoing, we find a sufficient unity of
interest and lack of respect for the separate identity of the
corporation and its shareholders to conclude, as the
Board assumed in its initial decision, that the personali-
ties and assets of A.J. Mechanical and the Greenes are
indistinct, and that the first prong of White Oak Coal has
been satisfied.14
B. Prong Two
Under the second prong of White Oak Coal, we must
determine whether adhering to the corporate form and
not holding the Greenes liable for backpay would permit
a fraud, promote injustice, or lead to an evasion of legal
obligations. In this regard, the showing of inequity must
flow from the misuse of the corporate form, and the indi-
viduals charged personally must be found to have par-
ticipated in the fraud, injustice, or inequity. White Oak
Coal, supra at 735.
Having accepted the court’s decision as the law of the
case, we must analyze the second prong in light of the
court’s rejection of the evidence previously cited by the
Board in finding that the second prong had not been sat-
isfied. Doing so, we find that the remaining record evi-
dence supports the conclusion that adherence to the cor-
porate structure would unjustly result in the evasion of
A.J. Mechanical’s backpay obligations, and that the
Greenes should be held personally liable for those obli-
gations.
Arnold Greene owned half of the corporation, held the
title of president, and was a member of the board of di-
rectors. He played a hands-on role in the daily operation
of the business, not only making decisions about the
work that the company would undertake, but also di-
rectly participating in and overseeing its performance.

14 In the Board’s prior decision, Chairman Schaumber noted that,
due to the small, closely-held nature of the corporation, it was not sur-
prising that the Respondent’s principals did not rigidly observe corpo-
rate formalities. However, after full consideration of the evidence, he
agrees that the principals failed to adhere to virtually any corporate
formalities and improperly blurred the line between personal and cor-
porate assets satisfying prong one. Accordingly, Chairman Schaumber
agrees that prong one has been satisfied.
A.J. MECHANICAL, INC. 877
He personally committed a number of serious unfair la-
bor practices. And it was he (along with co-owner Sand-
ers) who decided to cease operations, sell the corporate
assets, and transfer substantial funds from A.J. Mechani-
cal into his personal holdings. Thus, he clearly played an
active role in the corporation and the diversion of its as-
sets to his direct personal benefit.
Cynthia Greene also played an active role in the corpo-
ration and participated in and benefited from the diver-
sion of A.J. Mechanical’s assets. While Cynthia did not
work in a paid position for A.J. Mechanical at the time of
the events in this case, she regularly performed uncom-
pensated bookkeeping and clerical duties for the busi-
ness. In this capacity, she was authorized to write checks
on the corporation’s checking account to pay bills. In
addition, after she and her husband extended their
jointly-held credit to A.J. Mechanical’s use, her signature
authorized repayment to her husband and herself, with
interest, through a check written on the corporate ac-
count. Thus, while Cynthia’s day-to-day role in the cor-
poration’s operation was less significant than her hus-
band’s, she nevertheless was knowledgeable of and
played an important function in the handling of A.J. Me-
chanical’s finances.
Cynthia also played a direct and substantial role in the
dissipation of the corporation’s assets. She wrote three
shareholder distribution checks during 1999, payable to
Arnold Greene, among them the single largest share-
holder distribution payment of $500,000.15 Added to-
gether, those three checks accounted for over $800,000
in A.J. Mechanical’s funds that would otherwise been
available to satisfy its backpay liability. Although Cyn-
thia testified that she wrote those checks at the direction
of her husband, it is clear from the record that Arnold
placed those funds directly into an account he held
jointly with Cynthia. And, as has been maintained by
both Arnold and Cynthia Greene, they shared all assets
equally, throughout the course of their marriage.16 Thus,
Cynthia Greene’s signature authorized the transfer of
corporate funds to her husband that inured directly to
their mutual personal benefit.

15 Cynthia Greene’s authorizing signature appears on checks, pay-
able to Arnold Greene, in the amounts of $100,000 on April 13, 1999,
$500,000 on June 10, 1999, and $217,500 on November 4, 1999.
16 In this regard, Cynthia and Arnold Greene were emphatic and mu-
tually corroborative. Each of them admitted that throughout the course
of their marriage (approximately 16 years at the time of the supplemen-
tal hearing) they held all their assets jointly. Arnold Green stated that
he regularly deposited money received from the business, including the
1999 shareholder distribution checks, into the joint checking account he
held with his wife. He stated further that when he took funds from that
account to make purchases or other investments, those assets, too, were
held jointly with Cynthia Greene.
We contrast the evidence regarding Cynthia Greene
with that concerning two individuals on whom the Board
declined to impose personal liability in SRC Painting,
LLC, 346 NLRB 707 (2006), finding that they (unlike
four other family members) had played no active role in
any of the respondent corporations—i.e., “[t]hey did not
even perform routine clerical functions.”17
The Board explained:
. . . a person’s passive receipt of benefits that derive
from a diversion of corporate assets for noncorporate
purposes does not, by itself, demonstrate participation
in the fraud, injustice, or inequity sufficient to establish
individual liability under the second prong of the White
Oak analysis [citations omitted].”18
By contrast, Cynthia Greene’s conduct amounted to more
than “passive receipt of benefits.” She both played an active
and ongoing role in the corporation and also participated in
the dissipation of its assets for noncorporate reasons.
In summary, Arnold and Cynthia Greene blurred the
separate corporate identity of A.J. Mechanical with their
personal identities and misused the corporate assets and
form, particularly by transferring significant amounts of
the assets of the corporation to themselves for personal
gain, without fair consideration. These actions foreseea-
bly resulted in the corporation’s diminished ability to
satisfy its statutory remedial obligations. Accordingly,
we find that the second prong of the White Oak Coal test
has also been satisfied, and that there is sufficient basis
to pierce the corporate veil and hold both Arnold and
Cynthia Greene personally liable for A.J. Mechanical’s
outstanding backpay obligations.
ORDER
The Respondents William A. Greene and Cynthia D.
Greene shall make whole the following individuals by
paying each of them the sum of money set forth opposite
their names, plus interest minus tax withholdings, if any,
required by Federal and State laws:
James R. Adams $ 14,828.97
Darryl L. Henderson 9,605.00
Eddy Lee Jordan 10,014.04
William G. Krajewski 7,942.46
Jeremy P. McCall 4,789.00
Ronald W. Morrell 11,423.99
David J. North 12,055.60
John P. Schifko 10,726.93
Scottie B. Steele 5,728.40
Frank Tournabene 6,072.00

17 346 NLRB at 708.
18 Id.
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD878
Matthew R. Weaver 15,201.41
Garry B. West $ 15,567.60
The Respondents William A. Greene and Cynthia D.
Greene shall make whole the following individuals by
paying each of them the sum of $2,992.00, plus interest
minus tax withholdings, if any, required by Federal and
State laws:
Abernathy, Jerry Graham, Luther
Adams, Timothy E. Graham, Marvin
Baker, James B. Grantland, John
Baker, Jason L. Green, Ronald A.
Barahona, Rolando L. Hall, Michael W.
Best, Tracey C. Harper, Michael C.
Black, Joel L. Harrelson, Cecil Jr.
Bradshaw, Randall S. Harrison, Robert D.
Brooks, Byron S. Hawthorne, James L.
Cameron, Andrew Henriquez, Juan F.
Caraway, Robert B. Hicks, Kenneth S.
Carnley, James C. Hill, Marshal D.
Carnley, Sherral P. Holley, Junior
Chessher, Jerry D. Jackson, Darryl J.
Chessher, Terry L. Johnson, Glen Jr.
Cleary, William R. Joiner, Charles W.
Cooey, Clay W. Judson, Shane P.
Copeland Barry E. Kirchharr, James E.
Cowart, Douglas R. Knight, James E.
Crow, Terry C. Lambert, Raymond T.
Davidson, Wade N. Land, W. Roger
Davis, Diane W. Lazar, Harry J.
Dick, Richard J. Lee, James. H.
Durdin, Quillie Lee, Roger M.
Ellis, Pamela A. Lee, Ronald W.
Evans, Marcus D. Lukkar, Mark T.
Ford, Christopher Madden, Stephen
Foster, Aaron D. Mason, John W.
Maxson, Dennis. M. Rodrigues, Julio Ceasa
Mayton, Deborah L. Scarborough, Daniel E.
Miller, George M. Schachle, Vincent C.
Millins, Phillip O. Shachle, Paul F.
Millwood, Robert M. Shields, Douglas A.
Mosley, Ronald R. Steeverson, Gregory J.
Nguyen, Su Van Stough, David A.
Nichols, Christopher S. Stroud, Robert K.
Nix, Randall S. Taylor, Paul
Nunnally, Patrick E. Tyra, Ron
Nunnally, Troy A. Vick, Armon R.
Odom, Curtis L. Walker, Christina J.
Odom, Jakie E. Walker, Lisa M.
Owen, Cecil R. Walker, Michael
Pedicord, Brian K. Ward, Ivy
Pennington, David E. Ward, Tim
Petty, Jimmy D. Whitson, Carl R.
Phillips, Donald W. Williams, Clinton S.
Phillips, Douglas W. Williams, Donald
Phillips, Gail A. Willis, James R.
Phillips, Jason C. Wolfe, Theodore D.
Raines, Mary R. Woods, Kelly B.
Revill, Charles W. Wynn, Edward L.
Roberts, Glenn Young, Cornelius L.
The Respondents William A. Greene and Cynthia D.
Greene shall make whole the flowing individuals by pay-
ing them the sum of money set forth opposite their
names, plus interest minus tax withholdings, if any, re-
quired by Federal and State laws:
Brumley, Bradley S. $1,760
Maddox, Frankie 3,604