Cape Girardeau Care Center, Inc.

National Labor Relations Board - Board Decisions

Mar 18, 1986

278 N.L.R.B. 1018 (N.L.R.B. 1986)

1018 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Cape Girardeau Care Center , Inc. and Teamsters
Local Union No . 574, a/w International Broth-
erhood of Teamsters , Chauffeurs , Warehouse-
men and Helpers of America , Petitioner. Case
14-RC-9810
18 March 1986
DECISION ON REVIEW AND
DIRECTION
BY CHAIRMAN DOTSON AND MEMBERS
DENNIS AND JOHANSEN
On 19 January 1984 the Regional Director for
Region 14 issued a Decision and Direction of Elec-
tion in which he rejected the Employer's conten-
tion that it is a political subdivision of Cape Girar-
deau County, Missouri, because Cape Girardeau
County created the Employer to fulfill a statutory
function of the County and controls the appoint-
ment and dismissal of the Employer's board of di-
rectors. The Regional Director therefore asserted
jurisdiction over the Employer.
The Employer filed a timely request for review
of the Regional Director's decision. By telegraphic
order dated 15 February 1984, the Board granted
the Employer's request for review.' Thereafter, the
Employer filed a brief with the Board.
On 2 August 1984 the Board remanded the case
to the Regional Director for Region 14 to reopen
the record to receive' additional evidence, includ-
ing, but not limited to, 11 questions which were
deemed relevant in determining whether the em-
ployer is a political subdivision of Cape Girardeau
County, Missouri. On 6 September 1984 the record
in this proceeding was reopened and, although
both parties introduced additional evidence at the
hearing, neither party filed a supplemental brief
with the Board.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has reviewed the entire record in this
case, including the evidence introduced at the re-
opened hearing, and makes the following findings.
A physician, owning a nursing home in Cape
Girardeau, Missouri, contacted Victor Katt, presi-
dent of Health Care Development Company
(Health Care), for assistance in selling the nursing
home. Katt had the physician transfer the nursing
home to RBNH, Inc. (RBNH), one of Katt's cor-
porations. On 26 August 1982 Katt had the Em-
ployer incorporated -in Missouri as a general not-
for-profit corporation to purchase the nursing
home from RBNH and then to convey it to Cape
' An election was conducted on 14 February 1984, but the ballots
were impounded pending the Board's Decision on Review.
Girardeau County (County) as a future gift. On 30
September' 1982 the County adopted a resolution
accepting the nursing home as a future gift. The
resolution stated that the County approved the
Employer's formation and its proposed board of di-
rectors and the Employer's issuance of first mort-
gage gross revenue bonds to purchase the nursing
home, which would then be tendered as a gift to
the County in the year 2007 when the bonds would
be paid off. On 23 December 1982 the County rati-
fied its 30 September 1982 resolution and approved
the Employer's issuance of first mortgage gross
revenue bonds and the form and content of the in-
denture of mortgage and deed of trust from the
Employer to Mercantile Trust Company, National
Association (Mercantile), which would hold title to
the nursing home in trust until the 'bonds were paid
off. The resolution also stated that the "said Inden-
ture . . . contains nothing which would impose
any kind of obligation, burden, or imposition on
the County." On 27 and 28 December 1982 RBNH
conveyed the nursing home to the Employer,
which in turn conveyed the nursing home to the
County, with Mercantile holding title in trust pend-
ing full payment of the bonds. The Employer then
signed a management contract with Health Care to
provide for the nursing home's daily operation.
The Regional Director concluded that the Em-
ployer was not, a political subdivision of the
County because it satisfied neither of the Board's
two tests for a political subdivision.2 The Employ-
er did not satisfy the first test of NLRB v. Natural
Gas Utility District of Hawkins County, 402 U.S. 600
(1971), because the evidence demonstrated that nei-
ther Missouri nor any of its political subdivisions or
agencies created the Employer. Instead, the Em-
ployer was organized on 26 August 1982 as a not-
for-profit corporation, 1 month before the County's
30 September 1982 resolution approving the forma-
tion of the Employer. The Employer did not satis-
fy the second test of Hawkins County because, al-
though the County approved the Employer's board
of directors by its 30 September 1982 resolution,
such approval was simply ministerial. The Regional
Director also noted that Missouri law does not
2 Sec. 2(2) of the Act excludes from the Act's definition of employer
"any state or political subdivision thereof" While the term "political sub-
division" is not defined in the Act, the Board has consistently applied a
two-part test to determine whether an employer is a "political subdivi-
sion" : (I) whether the employer was "created directly by the State, so as
to constitute a department or administrative arm of the government," or
(2) whether the employer "is administered by individuals who are respon-
sible to public officials or to the general public " NLRB v. Natural Gas
Utility District of Hawkins County, 402 U S 600, 604-605 (1971). See also
Rosenberg Library Assn, 269 NLRB 1173, 1174 (1984); Pennsylvania State
Assn of Boroughs, 267 NLRB 71, 72 (1983), St Jude Industrial Park
Board, 265 NLRB 597, 598 (1982), petition for review denied 119 LRRM
2144 (8th Cir 1985)
278 NLRB No. 143
CAPE GIRARDEAU CARE CENTER 1019
give the County the authority to appoint or
remove directors of Missouri profit or not-for-
profit corporations.
The Employer does not meet the first test of
Hawkins County because, as the Regional Director
found, the Employer was organized as a private,
general not-for-profit corporation under Missouri
law on 26 August 1982 to operate a nursing home.
It was in existence 1 month before the County
passed a resolution approving its formation on 30
September 1982. The record evidence clearly dem-
onstrates that the County, approved the Employer's
formation so the Employer could issue tax-exempt
bonds under Revenue Ruling 63-20 to finance the
purchase of the nursing home from the physician
and not to create the Employer as a department or
administrative arm of the County.3 Kim Moore,
the attorney who organized the Employer, and J.
Patrick O'Loughlin, president of the Employer's
board of directors, admitted that it was not neces-
sary for the County to approve the Employer's for-
mation for the Employer to come into existence;
that the Employer would have continued in exist-
ence had the County not approved its formation;
that the Employer could have purchased the nurs-
ing home without any County involvement, but
could not have financed the purchase with tax-
exempt bonds; and that County approval was
sought because the Employer's organizers were in-
terested in obtaining the most advantageous means
to finance the purchase of the nursing home. Be-
cause Katt, not the County, created the Employer
and sought County approval of the Employer's
creation simply to obtain tax-exempt bonds to fi-
nance the sale of the nursing home, the Employer
has not shown it is a department or administrative
arm of Cape Girardeau County, Missouri . St. Jude
Industrial Park Board v. NLRB, 119 LRRM 2144,
2146 (8th Cir.' 1985) ("although the city ratified the
creation of the Park Board by adopting an ordi-
nance, the City did not create the Park Board `to
constitute [a], department . . . or administrative
arm . . . of the government"'). See also Morris-
town-Hamblen Hospital Assn., 226 NLRB 76 (1976),
and Grey Nuns of the Sacred Heart, 221 NLRB
1215 (1975) (that a county issues its own bonds to
S Revenue Ruling 63-20 provides that a nonprofit corporation may
issue tax-exempt bonds on behalf of a political subdivision if the follow-
ing requirements are met ( 1) the corporation must engage in activities
which are essentially public in nature , (2) the corporation must be one
which is not organized for profit (except to the extent of retiring indebt-
edness), (3) the corporate income must not inure to the benefit of a pri-
vate party , (4) a state or political subdivision must have a beneficial inter-
est in the corporation while the indebtedness remains outstanding, and it
must obtain full legal title to the property of the corporation with respect
to which the indebtedness was incurred on the retirement of such indebt-
edness; and (5) the corporation must have been approved by such state or
political subdivision, either of which must also have approved the specif-
ic obligations issued by the corporation.
build and equip a medical facility is insufficient, by
itself, to cause an otherwise private nonprofit cor-
poration to become a political subdivision).
Nor has the Employer shown it satisfies the
second test of Hawkins County. To`support a claim
of exemption under this test, an entity must demon-
strate that its policy-making officials have "direct
personal accountability" to public officials or to the
general public. Truman Medical Center v. NLRB,
641 F.2d 570, 573 (8th Cir. 1981). See also Commu-
nity Health & Home Care, 251 NLRB 509 (1980),
and Northern Community Mental Health Center, 241
NLRB 323 (1979) (board of directors is accounta-
ble to and appointed by the public officials in the
towns served by the agency). The record evidence
demonstrates that the County did not appoint the
Employer's directors, but simply approved their
appointment, and that County approval was not
pursuant to a Missouri statute or County ordinance,
but was a further effort to insure tax-exempt fi-
nancing of the sale of the nursing home . Katt testi-
fied he asked an acquaintance to serve on the Em-
ployer's board of directors and, when he agreed,
asked that he find two others to 'serve with him as
directors.4 County officials did not formally inter-
view the Employer's board of directors before ap-
proving them because, as County Clerk Rodney
Miller testified, the County officials knew them
personally and that this was expected because "the
representatives of the [Employer] were trying to
sell the County on accepting the project. Attor-
ney Moore admitted there is no written agreement
giving the County authority to remove any board
member, and that the County had no greater au-
thority to remove one of the Employer's board
members than to remove a board member of any
other nonprofit corporation. Although the Employ-
er's articles of incorporation state that the County
would appoint board members as vacancies occur,
Moore testified that incumbent directors would ac-
tually select their successors subject to County ap-
prova1 5
Because the County's approval of the Employ-
er's board of directors was purely ministerial and
there is no evidence'that the Employer's board of
directors have "direct personal accountability" to
4 Under Missouri law , a nonprofit corporation must have at, least three
directors
s We also note that the County lacks control over the Employer. The
Employer is not a County nursing home, and the County provides no
funds or other support to the Employer The Employer determines its
own fee schedules and budgets and is not required to submit these docu-
ments to the County. The County has no control over the Employer's
daily operations or its labor relations policies The Employer 's board of
directors and employees are not on the County's payroll and have differ-
ent health insurance and pension plans from those of the County employ-
ees. The Employer has no power of eminent domain or subpoena power
and pays property taxes to the County.
1020 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
the County 's public officials or to the general this Decision on Review and Direction, serve on
public , we agree with the Regional Director that the parties a tally of the ballots previously im-
the Board should assert jurisdiction in this case. pounded in this case and thereafter take such fur-
ther appropriate action as required by Section
DIRECTION 102.69 of the Board 's Rules and Regulations.
IT IS DIRECTED that the Regional Director for
Region 14 shall, within 10 days from the date of